10-K

FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File Number:  1-8610

AT&T INC.

Incorporated under the laws of the State of Delaware

I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas, 75202

Telephone Number 210-821-4105

Securities registered pursuant to Section 12(b) of the Act: (See attached Schedule A)

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]   No [   ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ]   No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act.

Large accelerated filer [X]	Accelerated filer [   ]
Non-accelerated filer [   ]	Smaller reporting company [   ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ]   No [X]

Based on the closing price of $33.69 per share on June 30, 2008, the aggregate market value of our voting and non-voting common stock held by non-affiliates was $198.5 billion.

At January 31, 2009, common shares outstanding were 5,893,307,211.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of AT&T Inc.’s Annual Report to Stockholders for the fiscal year ended December 31, 2008 (Parts I and II).

(2) Portions of AT&T Inc.’s Notice of 2009 Annual Meeting and Proxy Statement dated on or about March 11, 2009 to be filed within the period permitted under General Instruction G(3) (Parts III and IV).

SCHEDULE A

Securities Registered Pursuant To Section 12(b) Of The Act:

	Name of each exchange
Title of each class	on which registered
Common Shares (Par Value $1.00 Per Share)	New York Stock Exchange
6.375% Forty-Nine Year AT&T Inc.	New York Stock Exchange
Senior Notes, Due February 12, 2056
6.125% AT&T Inc.
Global Notes, Due April 2, 2015	New York Stock Exchange

TABLE OF CONTENTS

Item		Page
	PART I
1.	Business	1
1A.	Risk Factors	9
2.	Properties	10
3.	Legal Proceedings	10
4.	Submission of Matters to a Vote of Security Holders	10
	Executive Officers of the Registrant	11
	PART II
5.	Market for Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities	12
6.	Selected Financial Data	12
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
7A.	Quantitative and Qualitative Disclosures about Market Risk	12
8.	Financial Statements and Supplementary Data	12
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13
9A.	Controls and Procedures	13
9B.	Other Information	13
	PART III
10.	Directors, Executive Officers and Corporate Governance	14
11.	Executive Compensation	14
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	15
13.	Certain Relationships and Related Transactions, and Director Independence	16
14.	Principal Accountant Fees and Services	16
	PART IV
15.	Exhibits and Financial Statement Schedules	16

AT&T Inc.

PART I

ITEM 1. BUSINESS

GENERAL

AT&T Inc. (“AT&T,” “we” or the “Company”) is a holding company incorporated under the laws of the State of Delaware in 1983 and has its principal executive offices at 208 S. Akard St., Dallas Texas, 75202 (telephone number 210-821-4105). We maintain an Internet website at www.att.com. (This website address is for information only and is not intended to be an active link or to incorporate any website information into this document.)  We make available, free of charge, on our website our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). We also make available on that website, and in print, if any stockholder or other person so requests, our code of business conduct and ethics entitled “Code of Ethics” applicable to all employees and Directors, our “Corporate Governance Guidelines,” and the charters for all committees of our Board of Directors, including the Audit, Human Resources and Corporate Governance and Nominating. Any changes to our Code of Ethics or waiver of our Code of Ethics for senior financial officers, executive officers or Directors will be posted on that website.

History

AT&T, formerly known as SBC Communications Inc. (SBC), was formed as one of several regional holding companies created to hold AT&T Corp.’s (ATTC) local telephone companies. On January 1, 1984, we were spun-off from ATTC pursuant to an anti-trust consent decree, becoming an independent publicly traded telecommunications services provider. At formation, we primarily operated in five southwestern states. Our subsidiaries merged with Pacific Telesis Group in 1997, Southern New England Telecommunications Corporation in 1998 and Ameritech Corporation in 1999, thereby expanding our wireline operations as the incumbent local exchange carrier (ILEC) into a total of 13 states. In November 2005, one of our subsidiaries merged with ATTC, creating one of the world’s leading telecommunications providers. In connection with the merger, we changed the name of our company from “SBC Communications Inc.” to “AT&T Inc.”  In December 2006, one of our subsidiaries merged with BellSouth Corporation (BellSouth) making us the ILEC in an additional nine states. With the BellSouth acquisition, we thereby acquired BellSouth’s 40 percent economic interest in AT&T Mobility LLC (AT&T Mobility), formerly Cingular Wireless LLC, and BellSouth’s 34 percent economic interest in YELLOWPAGES.COM (YPC), resulting in 100 percent ownership of AT&T Mobility and YPC. Our services and products are marketed under the AT&T brand name, including alliances such as AT&T Yahoo! and AT&T | DIRECT TV.

Scope

We rank among the leading providers of telecommunications services in the United States and the world. We offer our services and products to consumers in the U.S. and services and products to businesses and other providers of telecommunications services worldwide.

The services and products that we offer vary by market, and include: wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, wholesale services and directory advertising and publishing. We group our operating subsidiaries as follows, corresponding to our operating segments for financial reporting purposes:

·   wireless subsidiaries provide both wireless voice and data communications services across the U.S. and, through roaming agreements, in a substantial number of foreign countries,

·   wireline subsidiaries provide primarily landline telecommunications and video services to residential customers in 22 states and to business and governmental customers, throughout the U.S. and internationally,

·   advertising & publishing subsidiaries provide services related to directory advertising and publishing,

·   other subsidiaries provide results from Sterling Commerce, Inc. (Sterling), all corporate and other operations.

Our traditional wireline local exchange subsidiaries operate in 22 states: Alabama, Arkansas, California, Connecticut, Illinois, Indiana, Florida, Georgia, Kentucky, Louisiana, Kansas, Michigan, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin (22-state area). Our wireline local exchange services are provided through regulated subsidiaries which operate within authorized regions subject to regulation by each state in which they operate and by the Federal Communications Commission (FCC). Wireless service providers are regulated by the FCC. Additional information relating to regulation is contained under the heading “Government Regulation” below and in the Annual Report under the heading “Operating Environment and Trends of the Business,” and is incorporated herein by reference pursuant to General Instruction G(2).

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AT&T Inc.

With the expansion of our company through acquisitions and the resulting ownership consolidation of AT&T Mobility, and with continuing advances in technology, we plan to offer new services that combine our traditional wireline and wireless services, thereby making our customers’ lives more convenient and productive and fostering competition and further innovation in the communications and entertainment industry. In 2009, we plan to focus on the areas discussed below.

Wireless

AT&T Mobility began operations in October 2000 as a joint venture between us and BellSouth and, in 2004, acquired AT&T Wireless Services, Inc. Upon our acquisition of BellSouth, AT&T Mobility became a wholly-owned subsidiary.

Our Universal Mobile Telecommunications System/ High-Speed Downlink Packet Access third generation (3G) network technology covers most major metropolitan areas of the U.S. This technology provides superior speeds for data and video services, as well as operating efficiencies, using the same spectrum and infrastructure for voice and data on an IP-based platform. Our wireless networks also rely on digital transmission technologies known as Global System for Mobile Communication, General Packet Radio Services and Enhanced Data Rates for GSM Evolution for data communications. As of December 31, 2008, we served approximately 77 million customers and were a leading provider of mobile wireless voice and data communications services in the U.S.

As the wireless industry continues to mature, we believe that future wireless growth will become increasingly dependent on our ability to offer innovative services that will encourage existing customers to upgrade their services and will attract customers from other providers as well as our ability to minimize turnover of our existing customer base (customer churn). We intend to accomplish these goals by continuing to expand our network coverage, improve our network quality and offer a broad array of products and services, including exclusive devices such as the Apple iPhone and free mobile-to-mobile calling among our wireless customers. The effective management of customer churn is critical to our ability to maximize revenue growth and to maintain and improve our operating margins.

Business Customers

As we continue to integrate the operations of BellSouth and ATTC, we expect to continue to strengthen the reach and sophistication of our network facilities and our ability to offer a variety of communications services, both wireless and wireline, to large businesses and wholesale customers worldwide. We expect to offer similar services to small- and medium-businesses and to increase the attractiveness of our services to governmental customers. We also expect to extend our wholesale business offerings to other service products and systems integration services.

Data/Broadband

As the communications industry continues to move toward internet-based technologies that are capable of blending traditional wireline and wireless services, we plan to offer services to take advantage of these new and more sophisticated technologies. In particular, we intend to continue to focus on deploying our AT&T U-verse sm high-speed broadband and TV services and on developing internet protocol-based services that allow customers to unite their home or business wireline services with their wireless service.

U-verse Services We are continuing to expand our deployment of our U-verse services. In December 2008, we added our millionth U-verse video customer, ending the year with approximately 1,045,000 customers.  As of December 31, 2008, we have passed approximately 17 million living units (constructed housing units as well as platted housing lots) and are marketing the services to almost 65 percent of those units. Our deployment strategy is to enter each new area on a limited basis in order to ensure that all operating and back-office systems are functioning successfully and then expand within each area as we continue to monitor these systems. In these expansions, we expect to continue to use contracted outside labor in addition to our employees as installers; our rate of expansion will be slowed if we cannot hire and train an adequate number of qualified contractors and technicians to keep pace with customer demand or if we cannot obtain all required local building permits in a timely fashion. We also continue to work with our vendors on improving, in a timely manner, the requisite hardware and software technology. Our deployment plans could be delayed if we do not receive required equipment and software on schedule.

We believe that our U-verse TV service is subject to federal oversight as a “video service” under the Federal Communications Act. However, some cable providers and municipalities have claimed that certain IP services should be treated as a traditional cable service and therefore subject to the applicable state and local cable regulation. Certain municipalities have delayed our request or have refused us permission to use our existing right-of-ways to deploy or activate our U-verse-related services and products, resulting in litigation. Pending negotiations and current or threatened litigation involving municipalities could delay our deployment plans in those areas. In July 2008, the U.S. District Court for Connecticut affirmed its October 2007 ruling that AT&T’s U-verse TV service is a cable service in Connecticut. We have appealed that decision on the basis that state legislation rendered the case moot. If the courts having jurisdiction where we have significant deployments of our U-verse services were to decide that federal, state and/or local cable regulation were applicable to our U-verse services, it could have a material adverse effect on the cost, timing and extent of our deployment plans.

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Voice over Internet Protocol  VoIP is generally used to describe the transmission of voice using Internet-Protocol-based technology rather than a traditional wire and switch-based telephone network. A company using this technology often can provide voice services at a lower cost because this technology uses bandwidth more efficiently than a traditional network and because this technology has not been subject to traditional telephone industry regulation. While the development of VoIP has resulted in increased competition for our wireline voice services, it also presents growth opportunities for us to develop new products for our customers.

BUSINESS OPERATIONS

Operating Segments

Our segments are strategic business units that offer different products and services and are managed accordingly. We analyze our various operating segments based on segment income. Interest expense, interest income and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in the calculation of each segment’s percentage of our total segment income. We have four reportable segments:  (1) wireless; (2) wireline; (3) advertising & publishing; and (4) other.

Additional information about our segments, including financial information, is included under the heading “Segment Results” on pages 25 through 33 and in Note 4 of the Annual Report and is incorporated herein by reference pursuant to General Instruction G(2).

Wireless

Wireless consists of our subsidiary, AT&T Mobility, which operates as a wireless provider to both business and consumer customers. Our wireless segment provided approximately 39% of 2008 total segment operating revenues and 46% of our 2008 total segment income. At December 31, 2008, we had more than 77 million wireless subscribers.

Services and Products

We offer a comprehensive range of high-quality nationwide wireless voice communications services in a variety of pricing plans, including postpaid and prepaid service plans. Our voice offerings are tailored to meet the communications needs of targeted customer segments, including youth, family, active professionals, small businesses, government and major national corporate accounts.

Service – Our voice service is generally offered on a contract basis for one or two year periods, referred to as postpaid. Under the terms of these contracts, service is billed and provided on a monthly basis according to the applicable rate plan chosen. Our wireless services include basic local wireless communications service, long-distance service and roaming services. Roaming services enable our subscribers to utilize other carriers’ networks when they are “roaming” outside our network footprint. We also charge fees to other carriers for providing roaming services to their customers when their customers utilize our network. Additionally, we offer prepaid service to meet the demands of distinct consumer segments, such as the youth market, families and small business customers, who prefer to control usage or pay in advance.

Wireless data revenues continue to be a growing area of our business, representing an increasing share of our overall subscriber revenue. We are experiencing solid growth from both consumer and enterprise wireless data services, as an increasing number of our subscribers have upgraded their handsets to more advanced handsets, including the Apple iPhone. We continue to upgrade our network and coordinate with equipment manufacturers and applications developers in order to further capitalize on the continued growth in the demand for wireless data services. At December 31, 2008 we were a leading provider of wireless data in the U.S. wireless industry based on subscribers.

Equipment – We sell a wide variety of handsets and personal computer wireless data cards manufactured by various suppliers for use with our voice and data services. We also sell accessories, such as carrying cases, hands-free devices, batteries, battery chargers and other items, to consumers, as well as to agents and other third-party distributors for resale. Like other wireless service providers, we often provide postpaid contract subscribers substantial equipment subsidies to initiate or upgrade service.

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Additional information on our wireless segment is contained in the Annual Report in the “Operating Environment Overview” section under the heading “Expected Growth Areas,” “Wireless” beginning on page 34 and is incorporated herein by reference pursuant to General Instruction G(2).

Wireline

Our Wireline subsidiaries provide both retail and wholesale communication services domestically and internationally. Our wireline segment provided approximately 55% of 2008 segment operating revenues and 47% of our 2008 total segment income. We divide our wireline services into three product-based categories: voice, data and other.  Revenues from our traditional voice services have been declining as customers have been switching to wireless, cable and other internet-based providers. In addition, the deteriorating U.S. economy has caused wireline customers to terminate their residential phone service and rely instead on their wireless service for voice communication.  We have responded by offering packages of combined voice and data services, including broadband and video and intend to continue this strategy during 2009.

Services and Products

Voice – Voice includes traditional local and long-distance service provided to retail customers and wholesale access to our network and individual network elements provided to competitors. At December 31, 2008, our wireline subsidiaries served approximately 31 million retail customer access lines, 22 million retail business access lines and 3 million wholesale access lines. We also have a number of integrated voice and data services, such as integrated network connections, that provide customers the ability to integrate access for their voice and data services, the data component of which is included in the data category. Additionally, voice revenues do not include any of our VoIP revenues, which are included in data revenues.

Long distance consists of traditional long distance and international long distance for customers that select us as their primary long-distance carrier. Long distance also includes services provided by calling card, 1-800 services and conference calling. These services are used in a wide variety of business applications, including sales, reservation centers or customer service centers. We also provide wholesale switched access service to other service providers.

Voice also includes calling features, fees to maintain wire located inside customer premises and other miscellaneous voice products. Calling features are enhanced telephone services available to retail customers such as Caller ID, Call Waiting and voice mail. These calling features services are generally more profitable than basic local phone service.

Data - Data includes traditional products, such as switched and dedicated transport, Internet access and network integration, and data equipment sales. Additionally, data products include high-speed connections such as private lines, packet, dedicated Internet and enterprise networking services, as well as products such as DSL/broadband, dial-up Internet access and WiFi (local radio frequency commonly known as wireless fidelity). We also provide businesses voice applications over IP-based networks (i.e., Enhanced Virtual Private Networks or “EVPN”). Over the past several years, we have built out our new multi protocol label switching/asynchronous transfer mode, or MPLS/ATM network, to supplement, and eventually replace, our other extensive global data networks. These products allow us to provide highly complex global data networks.

Private line uses high-capacity digital circuits to transmit from point-to-point in multiple configurations and allows customers to create internal data networks and to access external data networks.

Switched Transport services transmit data using switching equipment to transfer the data between multiple lines before reaching its destination. Dedicated Transport services use a single direct line to transmit data between destinations. DSL is a digital modem technology that converts existing twisted-pair telephone lines into access paths for multimedia and high-speed data communications to the Internet or private networks. DSL allows customers to simultaneously make a phone call and access information via the Internet or an office local area network. Digital Services use dedicated digital circuits to transmit digital data at various high rates of speed.

Network integration services include installation of business data systems, local area networking and other data networking offerings. Internet access services include a wide range of products for residences and businesses,. Internet services offered include basic dial-up access service, dedicated access, web hosting, e-mail and high-speed access services.

Packet services consist of data networks using packet switching and transmission technologies, including traditional circuit-based, and IP connectivity services. Packet services enable customers to transmit large volumes of data economically and securely and are used for local area network interconnection, remote site, point of sale and branch office communications. High speed packet services are used extensively by enterprise (large business) customers.

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AT&T Inc.

Dedicated Internet services are designed to meet the needs of all types of commercial and governmental enterprises, including small and medium sized businesses. Our managed Internet services provide customers with dedicated high speed access to the Internet managed by us.

Enterprise networking services provide comprehensive support from network design, implementation and installation to ongoing network operations and management for networks of varying scales, including local area networks, wide area networks, and virtual private networks. These services include applications such as e-mail, order entry systems, employee directories, human resource transactions and other database applications.

We also provide local, interstate and international wholesale networking capacity to other service providers. We offer a combination of high volume transmission capacity and conventional dedicated line services on a regional, national and international basis to wireless carriers, interexchange carriers, Internet service providers (ISPs) and facility-based and switchless resellers. Our wholesale customers are primarily large ISPs, wireless carriers, competitive local exchange carriers, regional phone companies, interexchange carriers, cable companies and systems integrators. We also have sold dedicated network capacity through indefeasible rights-of-use agreements under which capacity is furnished for contract terms as long as 25 years.

Other - Other includes managed web hosting, application management, security service, integration services, customer premises equipment, outsourcing, directory and operator assistance services, government-related services, our U-verse and satellite video services.

Our managed web-hosting services for businesses provide network, server and security infrastructure as well as built-in data storage and include application performance management, database management, hardware and operating system management. Our hosting services also provide customers with secure access to detailed reporting information about their infrastructure and applications. Security services include business continuity and disaster recovery services as well as premise and network based security products.

Customer premises equipment and other equipment sales range from single-line and cordless telephones to sophisticated digital PBX systems. PBX is a private telephone switching system, typically used by businesses and usually located on a customer’s premises, which provides intra-premise telephone services as well as access to our network.

Advertising & Publishing

Advertising & Publishing includes our directory operations, which publish Yellow and White Pages directories and sell directory advertising and Internet-based advertising and local search. The advertising & publishing segment provided approximately 4% of total segment operating revenues and 7% of our 2008 total segment income. This segment sells advertising services throughout the United States, with our print directory operations primarily covering our 22-state area.

Other

Our other segment includes operations from Sterling, our business integration software and services subsidiary, corporate and other operations. The other segment provided approximately 2% of total segment operating revenues and less than 1% of our 2008 total segment income.  We also include in this segment the equity income (loss) from our investments in Telmex, America Movil and Telmex Internaccional.

Sterling provides “multi-enterprise collaboration” services to businesses in various industries, including retail, financial services, manufacturing, healthcare and telecom. In recent years, Sterling has completed a number of acquisitions in order to provide end-to-end order fulfillment for customers.

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AT&T Inc.

MAJOR CLASSES OF SERVICE

The following table sets forth the percentage of consolidated total reported operating revenues by any class of service that accounted for 10% or more of our consolidated total operating revenues in any of the last three fiscal years.

	Percentage of Total
	Consolidated Operating Revenues
	2008			2007			2006
Wireless Segment
Wireless service		36	%		33	%	-	%
Wireline Segment
Voice		31	%		35	%	53	%
Data		20	%		20	%	29	%

Prior to our December 2006 acquisition of BellSouth, our wireless segment revenues were reported in equity in net income of affiliates in our consolidated financial statements due to our equity accounting for the joint venture. We accounted for our 60 percent economic interest in AT&T Mobility under the equity method of accounting since we shared control equally with our 40 percent economic partner in the joint venture. We held equal voting rights and representation on the board of directors that controlled AT&T Mobility. Accordingly, our consolidated results included wireless results in the “Equity in Net Income of Affiliates” line. We did not report wireless revenues in our consolidated financial statements. However, when analyzing our segment results, we evaluated wireless results on a stand-alone basis. The table below shows the effect on our other classes of services (shown in the above table) if we include 100% of AT&T Mobility’s revenues added to our total segment operating revenues.

	Percentage of Total
	Segment Operating Revenues (including 100% of AT&T Mobility)
	2008			2007			2006
Wireless Segment
Wireless service		36	%		33	%	34	%
Wireline Segment
Voice		31	%		35	%	34	%
Data		20	%		20	%	18	%

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GOVERNMENT REGULATION

Wireless communications providers must be licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. Additionally, while wireless communications providers’ prices and service offerings are generally not subject to regulation, the federal government and an increasing number of states are considering new regulations and legislation relating to various aspects of wireless services.

Our wireline subsidiaries are subject to regulation by state commissions which have the power to regulate intrastate rates and services, including local, long-distance and network access services. These subsidiaries are also subject to the jurisdiction of the FCC with respect to interstate and international rates and services, including interstate access charges. Access charges are designed to compensate our wireline subsidiaries for the use of their networks by other carriers.

Our subsidiaries operating outside the U.S. are subject to the jurisdiction of national and supranational regulatory authorities in the market where service is provided. Regulation is generally limited to operational licensing authority for the provision of enterprise services.

Additional information relating to regulation of our subsidiaries is contained in the Annual Report under the heading “Operating Environment Overview” beginning on page 34 and is incorporated herein by reference pursuant to General Instruction G(2).

IMPORTANCE, DURATION AND EFFECT OF LICENSES

Certain of our subsidiaries own or have licenses to various patents, copyrights, trademarks and other intellectual property necessary to conduct business. We actively pursue patents, trademarks and service marks to protect our intellectual property within the U.S. and abroad. We maintain a global portfolio of more than 5,000 trademark and service mark registrations. We have also entered into agreements that permit other companies, in exchange for fees and subject to appropriate safeguards and restrictions, to utilize certain of our trademarks and service marks. We periodically receive offers from third parties to obtain licenses for patent and other intellectual rights in exchange for royalties or other payments. We also receive notices asserting that our products or services infringe on their patents and other intellectual property rights. These claims, whether against us directly or against third-party suppliers of products or services that we, in turn, sell to our customers, such as wireless handsets, could require us to pay damages, royalties, stop offering the relevant products or services and/or cease other activities. While the outcome of any litigation is uncertain, we do not believe that the resolution of any of these infringement claims or the expiration or non-renewal of any of our intellectual property rights would have a material adverse effect on our results of operations.

MAJOR CUSTOMER

No customer accounted for 10% or more of our consolidated revenues in 2008, 2007 or 2006.

COMPETITION

Information relating to competition in each of our operating segments is contained in the Annual Report under the heading “Competition” beginning on page 36, and is incorporated herein by reference pursuant to General Instruction G(2).

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RESEARCH AND DEVELOPMENT

The majority of our research activities are related to our wireline segment, performed at our subsidiary AT&T Labs. AT&T Labs’ scientists and engineers conduct research in a variety of areas, including IP; advanced network design and architecture; network operations support systems; data mining technologies and advanced speech technologies. The majority of the development activities are performed by AT&T Services. The developers within AT&T Services work with our business units and AT&T Labs to create new services and invent tools and systems to manage secure and reliable networks for us and our customers. We also have a research agreement with Telcordia Technologies, formerly Bell Communications Research, Inc. Research and development expenses were $832 in 2008, $985 in 2007 and $577 million in 2006.

EMPLOYEES

As of January 31, 2009, we employed approximately 301,000 persons. Approximately 60 percent of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. The five largest collective bargaining agreements between the CWA and our subsidiaries, covering approximately 80,000Wireline employees, expire April 4, 2009. A separate collective bargaining agreement between the CWA and our Wireless subsidiary covering 21,000 employees expired February 7, 2009.

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ITEM 1A. RISK FACTORS

Information required by this Item is included in the Annual Report under the heading “Risk Factors” on page 46 through page 47 which is incorporated herein by reference pursuant to General Instruction G(2).

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

·   Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments.

·   Changes in available technology and the effects of such changes including product substitutions and deployment costs.

·   Increases in our benefit plans’ costs including increases due to adverse changes in the U.S. and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates, and adverse medical cost trends.

·   The final outcome of Federal Communications Commission proceedings and reopenings of such proceedings and judicial review, if any, of such proceedings, including issues relating to access charges, broadband deployment, unbundled loop and transport elements and wireless services.

·   The final outcome of regulatory proceedings in the states in which we operate and reopenings of such proceedings, and judicial review, if any, of such proceedings, including proceedings relating to interconnection terms, access charges, universal service, unbundled network elements and resale and wholesale rates, broadband deployment including our U-verse services, performance measurement plans, service standards and traffic compensation.

·   Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments.

·   Our ability to absorb revenue losses caused by increasing competition and economic pressure, including offerings using alternative technologies (e.g., cable, wireless and VoIP), and our ability to maintain capital expenditures.

·   The extent of competition and the resulting pressure on access line totals and wireline and wireless operating margins.

·   Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.

·   The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).

·   The timing, extent and cost of deployment of our U-verse services (our Lightspeed initiative); the development of attractive and profitable service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

·   The outcome of pending or threatened litigation including patent claims by or against third parties.

·   The impact on our networks and business of major equipment failures, severe weather conditions, natural disasters or terrorist attacks.

·   The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.

·   The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations; and the resolution of disputes with any taxing jurisdictions.

·   Our ability to adequately fund our wireless operations, including access to additional spectrum; network upgrades and technological advancements.

·   Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, to respond to competition and regulatory, legislative and technological developments.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

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ITEM 2. PROPERTIES

Our properties do not lend themselves to description by character and location of principal units. At December 31, 2008, approximately 85% of our property, plant and equipment was owned by our wireline subsidiaries and approximately 14% was owned by our wireless subsidiaries. Central office equipment represented 34%; network access lines represented approximately 33% of our telephone plant; other equipment, comprised principally of furniture and office equipment and vehicles and other work equipment, represented 16%; land and buildings represented 12%; and other miscellaneous property represented 5%.

Substantially all of the installations of central office equipment are located in buildings and on land we own. Many garages, administrative and business offices, and telephone centers and retail stores are in leased quarters.

ITEM 3. LEGAL PROCEEDINGS

We are a party to numerous lawsuits, regulatory proceedings and other matters arising in the ordinary course of business. Additional information regarding litigation is included in the Annual Report under the headings  “Retiree Phone Concession Litigation,” “NSA Litigation” and“Prepaid Calling Card Patent Litigation” on pages 39 through 40, which is incorporated herein by reference pursuant to General Instruction G(2). As of the date of this report, we do not believe any pending legal proceedings to which we or our subsidiaries are subject are required to be disclosed as material legal proceedings pursuant to this item.

We are subject from time to time to judicial and administrative proceedings brought by various governmental authorities under federal, state or local environmental laws.  We are required to discuss in our Forms 10-Q and 10-K two of these proceedings, (which are listed below), because each could result in monetary sanctions (exclusive of interest and costs) of one hundred thousand dollars or more.  However, we do not believe that any of them currently pending will have a material adverse effect on our results of operations.

(a) The City of Philadelphia notified AT&T Corp. on December 12, 2008 that it would seek civil penalties for alleged violations of state and local air emissions control requirements and permit terms applicable to back-up power generators at an AT&T Corp. facility. AT&T Corp. expects to settle this matter on terms that would include civil penalties of less than one hundred twenty-five thousand dollars.

(b) The U.S. Environmental Protection Agency (EPA) is seeking civil penalties from AT&T Mobility in connection with alleged violations of federal environmental statutes in connection with management of back-up power systems at AT&T Mobility facilities. The EPA’s allegations include noncompliance with requirements to obtain air emission permits for

generators and to prepare spill prevention plans for fuel storage tanks. We expect to settle this matter on terms that would include civil penalties in the range of 1 to 3 million dollars.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of stockholders in the fourth quarter of the fiscal year covered by this report.

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AT&T Inc.

EXECUTIVE OFFICERS OF THE REGISTRANT

(As of January 20 , 2009)

Name	Age		Position	Held Since
Randall L. Stephenson	48	Chairman of the Board, Chief Executive Officer and President		6/2007
William A. Blase Jr.	53	Senior Executive Vice President – Human Resources		6/2007
James W. Callaway	62	Senior Executive Vice President – Executive Operations		5/2007
James W. Cicconi	56	Senior Executive Vice President – External and Legislative Affairs, AT&T Services, Inc.		11/2008
Catherine M. Coughlin	51	Senior Executive Vice President and Global Marketing Officer		6/2007
Ralph de la Vega	57	President and Chief Executive Officer, AT&T Mobility and Consumer Markets		10/2008
Richard G. Lindner	54	Senior Executive Vice President and Chief Financial Officer		5/2004
Forrest E. Miller	56	Group President – Corporate Strategy and Development		6/2007
Ronald E. Spears	60	President and Chief Executive Officer, AT&T Business Solutions		11/2008
John T. Stankey	46	President and Chief Executive Officer, AT&T Operations, Inc.		10/2008
Wayne Watts	55	Senior Executive Vice President and General Counsel		6/2007
Rayford Wilkins, Jr.	57	Chief Executive Officer – AT&T Diversified Businesses		10/2008

All of the above executive officers have held high-level managerial positions with AT&T or its subsidiaries for more than the past five years. Executive officers are not appointed to a fixed term of office.

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AT&T Inc.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange. The number of stockholders of record as of December 31, 2008 and 2007 was 1,541,767 and 1,663,676. The number of stockholders of record as of February 20, 2009 was 1,531,236. We declared dividends, on a quarterly basis, totaling $1.61 per share in 2008 and $1.47 per share in 2007.

During 2008, non-employee directors acquired shares of common stock pursuant to the Non-Employee Director Stock and Deferral Plan. Under the plan, a director may make an annual election to receive all or part of his or her annual retainer or fees in the form of shares or deferred stock units (DSUs) that are convertible into cash or shares. Each director also receives an annual grant of DSUs. The plan provides that DSUs (and dividends earned thereon) acquired during 2007 and thereafter would be convertible in the form of cash only. During 2008, an aggregate of 24,802 shares and DSUs (from pre-2007 accruals) were acquired by non-employee directors at prices ranging from $26.77 to $39.90, in each case the fair market value of the shares on the date of acquisition. The issuances of shares and DSUs were exempt from registration pursuant to Section 4(2) of the Securities Act.

Other information required by this Item is included in the Annual Report under the headings “Quarterly Financial Information” on page 75, “Selected Financial and Operating Data” on page 22, “Issuer Equity Repurchases” on page 45, and “Stock Trading Information” on the back cover, which are incorporated herein by reference pursuant to General Instruction G(2).

ITEM 6. SELECTED FINANCIAL DATA

Information required by this Item is included in the Annual Report under the heading “Selected Financial and Operating Data” on page 22, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Information required by this Item is included in the Annual Report on pages 23 through 48, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is included in the Annual Report under the heading “Market Risk” on page 43 through page 45, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this Item is included in the Annual Report on pages 49 through 75, which is incorporated herein by reference pursuant to General Instruction G(2).

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AT&T Inc.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

During our two most recent fiscal years, there has been no change in the independent accountant engaged as the principal accountant to audit our financial statements and the independent accountant has not expressed reliance on other independent accountants in its reports during such time period.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the SEC’s rules and forms. The Chief Executive Officer and Chief Financial Officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of December 31, 2008. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2008.

Internal Control Over Financial Reporting

(a)  Management’s Annual Report on Internal Control over Financial Reporting

The management of AT&T is responsible for establishing and maintaining adequate internal control over financial reporting. AT&T’s internal control system was designed to provide reasonable assurance as to the integrity and reliability of the published financial statements. AT&T management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on its assessment, AT&T management believes that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on those criteria.

 (b)  Attestation Report of the Registered Public Accounting Firm

The registered public accounting firm that audited the financial statements included in the annual report containing the disclosure required by this Item, Ernst & Young LLP, has issued an attestation report on the Company’s internal control over financial reporting. The attestation report issued by Ernst & Young LLP is included in the Annual Report on page 78, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 9B. OTHER INFORMATION

There is no information that was required to be disclosed in a report on Form 8-K during the fourth quarter of 2008 but was not reported.

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AT&T Inc.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure at the end of Part I of this report since the registrant did not furnish such information in its definitive proxy statement prepared in accordance with Schedule 14A. Information regarding directors required by Item 401 of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s definitive proxy statement, dated on or about March 11, 2009 (Proxy Statement) under the heading “Election of Directors.”

There is no disclosure in this Form 10-K of reporting person delinquencies in response to Item 405 and the registrant, at the time of filing this Form 10-K, has reviewed the information necessary to ascertain, and has determined that Item 405 disclosure is not expected to be contained in this Form 10-K or incorporated by reference.

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the committee are Messrs. Aldinger, Chico Pardo, Kelly, Madonna and Ms. Martin. The additional information required by Item 407(d)(5) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Audit Committee.”

The registrant has adopted a code of ethics entitled “Code of Ethics” that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer, or controller or persons performing similar functions. The additional information required by Item 406 of Regulation S-K is provided in this report under the heading “General” under Part I, Item 1. Business.

ITEM 11. EXECUTIVE COMPENSATION

Information required by Item 402(k) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Compensation of Directors.”  Information regarding officers is included in the registrant’s Proxy Statement on the pages beginning with the heading “Compensation Discussion and Analysis” and ending with, and including, the last page under the heading “Potential Payments upon Termination or Change in Control” which are incorporated herein by reference pursuant to General Instruction G(3). Information required by Item 407(e)(5) of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Compensation Committee Report” and is incorporated herein by reference pursuant to General Instruction G(3) and shall be deemed furnished in this annual report on Form 10-K and will not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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AT&T Inc.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by Item 403 of Regulation S-K is included in the registrant’s Proxy Statement under the heading “CommonStock Ownership,” which is incorporated herein by reference pursuant to General Instruction G(3).

Information required by Item 201(d) of Regulation S-K is provided below:

Equity Compensation Plan Information

The following table provides information as of December 31, 2008, concerning shares of AT&T common stock authorized for issuance under AT&T’s existing equity compensation plans.

Equity Compensation Plan Information (1)

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	73,988,252   (1)	$38.20	124,766,032  (2)
Equity compensation plans not approved by security holders	61,741,355  (3)	$39.93	-
Total	135,729,607  (4)	$39.15	124,766,032

(1) Includes the issuance of stock in connection with the following stockholder approved plans: (a) 48,689,664 stock options under the 1996 Stock and Incentive Plan, 2001 Incentive Plan, Stock Savings Plan (SSP), and Stock Purchase and Deferral Plan (SPDP), (b) 2,802,401 phantom stock units under the SSP and 3,026,813 phantom stock units under the SPDP, and (c) 14,766,743 target number of stock-settled performance shares under the 2001 Incentive Plan and 2006 Incentive Plan. At payout, the target number of performance shares may be reduced to zero or increased by up to 150% (348,207 of the performance shares may be increased by up to 200%). Each phantom stock unit and performance share is settleable in stock on a 1-to-1 basis. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.The SSP was approved by stockholders in 1994, and was amended by the Board of Directors in 2000 to increase the number of shares available for purchase under the plan (including shares from the company match and reinvested dividend equivalents) and shares subject to options. Stockholder approval was not required for the amendment. To the extent applicable, the amount shown for approved plans in column (a), in addition to the above amounts, includes 3,087,593 phantom stock units (computed on a first-in-first-out basis) and 1,615,038 stock options that were approved by the Board in 2000. Under the SSP, shares could be purchased with payroll deduction and reinvested dividend equivalents by mid-level and above managers and limited company partial matching contributions. No new contributions may be made to the plan. In addition, participants received approximately 2 options for each share purchased with employee payroll deductions. The options have a 10-year term and a strike price equal to the fair market value of the stock on the date of grant.

 (2) Includes 16,246,215 shares that may be issued under the SPDP, 78,193,745 shares that may be issued under the 2006 Incentive Plan, and up to 4,250,944 shares that may be purchased under the SSP.

 (3) Includes 61,741,355 stock options under the 1995 Management Stock Option Plan (1995 MSOP), which has not been approved by stockholders.  The 1995 MSOP provides for grants of stock options to management employees (10-year terms) subject to vesting requirements and shortened exercise terms upon termination of employment. No further options may be issued under this plan.

 (4) Does not include certain stock options issued by companies acquired by AT&T that were converted into options to acquire AT&T stock. As of December 31, 2008, there were 91,839,198 shares of AT&T common stock subject to the converted options, having a weighted-average exercise price of $39.82.  Also, does not include 756,005 outstanding phantom stock units that were issued by companies acquired by AT&T that are convertible into stock on a 1-to-1 basis, along with up to 92,109 shares that may be purchased with reinvested dividend equivalents (applies only to 112,008 of the outstanding phantom stock units). These units have no exercise price. No further phantom stock units, other than reinvested dividends, may be issued under the assumed plans. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.

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AT&T Inc.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by Item 404 of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Related Party Transactions,” which is incorporated herein by reference pursuant to General Instruction G(3). Information required by Item 407(a) of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Independence of Directors,” which is incorporated herein by reference pursuant to General Instruction G(3).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this Item is included in the registrant’s Proxy Statement under the heading “Principal Accountant Fees and Services,” which is incorporated herein by reference pursuant to General Instruction G(3).

Part IV

ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as a part of the report:

		Page
(1)	Report of Independent Registered Public Accounting Firm	*
	Financial Statements covered by Report of Independent Registered Public Accounting Firm:
	Consolidated Statements of Income	*
	Consolidated Balance Sheets	*
	Consolidated Statements of Cash Flows	*
	Consolidated Statements of Stockholders’ Equity	*
	Notes to Consolidated Financial Statements	*

 * Incorporated herein by reference to the appropriate portions of the registrant’s annual report to stockholders for the fiscal year ended December 31, 2008. (See Part II.) 

		Page
(2)	Financial Statement Schedules:
	II - Valuation and Qualifying Accounts	22

Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.

(3)  Exhibits:

Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.

Exhibit

Number                         

3-a Restated Certificate of Incorporation, filed with the Secretary of State of Delaware on July 28, 2006. (Exhibit 3 to Form 10-Q filed for June 30, 2006.)

3-b Bylaws amended June 29, 2007. (Exhibit 3 to Form 8-K dated July 2, 2007.)

4-a Certificate of Designations for Perpetual Cumulative Preferred Stock of SBC Communications Inc., filed with the Secretary of State of the State of Delaware on November 18, 2005. (Contained in Restated Certificate of Incorporation filed as Exhibit 3-a.)

4-b No instrument which defines the rights of holders of long-term debt of the registrant and all of its consolidated subsidiaries is filed herewith pursuant to Regulation S-K, Item 601b)(4)(iii)(A), except for the instruments referred to in 4-c, 4-d, 4-e,  4-f, 4-g and 4-h below. Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument not filed herewith to the SEC upon request.

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AT&T Inc.

4-c Guaranty of certain obligations of Pacific Bell Telephone Co. and SBC Communications Inc. (Exhibit 4-c to Form 10-K for 2007.)

4-d Guaranty of certain obligations of Ameritech Capital Funding Corp., Illinois Bell Telephone Co., Indiana Bell Telephone Co. Inc., Michigan Bell Telephone Co., The Ohio Bell Telephone Co., Pacific Bell Telephone Co., Southern New England Telecommunications Corp., The Southern New England Telephone Co., Southwestern Bell Telephone Co., Wisconsin Bell, Inc. (Exhibit 4-c to Form 10-Q for September 30, 2005.)

4-e Guarantee of certain obligations of AT&T Corp. (Exhibit 4-e to Form 8-K dated December 16, 2005.)

4-f Guarantee of certain obligations of BellSouth. (Exhibit 4.3 to Form 8-K dated December 29, 2006.)

4-g Cingular Third Supplemental Indenture. (Exhibit 4.1 to Form 8-K dated December 29, 2006.)

4-h Indenture dated as of November 1, 1994 between SBC Communications Inc. and The Bank of New York, as Trustee.

10-a Short Term Incentive Plan, dated November 18, 2005.

10-b Supplemental Life Insurance Plan, amended and restated January 29, 2009.

10-c Supplemental Retirement Income Plan, amended and restated December 31, 2008.

10-d Senior Management Deferred Compensation Plan (effective for Units of Participation Having a Unit Start Date Prior to January 1, 1988).

10-e Senior Management Deferred Compensation Program of 1988 (effective for Units of Participation Having a Unit Start Date of January 1, 1988 or later).

10-f Officer Disability Plan, formerly the Senior Management Long Term Disability Plan, amended and restated January 1, 2007. (Exhibit 10-f to Form 10-K for 2006.)

10-g Salary and Incentive Award Deferral Plan, dated December 31, 2004. (Exhibit 10-g to Form 10-K for 2006.)

10-h AT&T Inc. Health Plan, formerly the Executive Health Plan, amended and restated January 1, 2009.

10-i Retirement Plan for Non-Employee Directors. (Exhibit 10-i to Form 10-K for 2007.)

10-j Form of Indemnity Agreement, effective July 1, 1986, between SBC (now AT&T Inc.) and its directors and officers. (Exhibit 10-j to Form 10-K for 2007.)

10-k Administrative Plan, amended and restated January 1, 2009.

10-l Stock Savings Plan, dated December 31, 2004. (Exhibit 10-l to Form 10-K for 2006.)

10-m Pacific Telesis Group Supplemental Cash Balance Plan, amended as of July 1, 1996. (Exhibit 10-lll to Form 10-K for 2007.)

10-n 1996 Stock and Incentive Plan, dated November 2, 2002.

10-o Non-Employee Director Stock and Deferral Plan, amended and restated June 26, 2008. (Exhibit 10-f  to Form 10-Q filed for June 30, 2008.)

10-p Pacific Telesis Group Deferred Compensation Plan for Nonemployee Directors. (Exhibit 10-p to Form 10-K for 2007.)

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AT&T Inc.

10-p(i)  Resolutions amending the Plan, effective November 21, 1997. (Exhibit 10-p(i) to Form 10-K for 2007.)

10-q Pacific Telesis Group Outside Directors’ Deferred Stock Unit Plan. (Exhibit 10-q to Form 10-K for 2007.)

10-r Pacific Telesis Group 1996 Directors’ Deferred Compensation Plan. (Exhibit 10-r to Form 10-K for 2007.)

10-r(i) Resolutions amending the Plan, effective November 21, 1997. (Exhibit 10-r(i) to Form 10-K for 2007.)

10-s Transition Agreement by and between BellSouth Corporation and Rafael de la Vega, dated December 29, 2003. (Exhibit 10-s to Form 10-K for 2007.)

10-t 2001 Incentive Plan, dated November 18, 2005.

10-u Pacific Telesis Group 1996 Executive Deferred Compensation Plan, amended November 20, 2008.

10-v AT&T Inc. Change in Control Severance Plan, amended and restated, June 26, 2008. (Exhibit 10-c to Form 10-Q filed for June 30, 2008.)

10-w 1995 Management Stock Option Plan, dated November 16, 2001.

10-x Non-Employee Director Stock Purchase Plan, effective June 27, 2008. (Exhibit 10-e to Form 10-Q filed for June 30, 2008.)

10-y Concession Program for Directors, dated July 1, 2004. (Exhibit 10-bb to Form 10-Q for March 31, 2004.)

10-z Pacific Telesis Group Executive Deferral Plan, amended November 20, 2008.

10-aa Five Year Credit Agreement. (Exhibit 10 to Form 8-K dated July 12, 2006.)

10-bb Stock Purchase and Deferral Plan, amended and restated November 20, 2008.

10-cc Cash Deferral Plan, amended and restated November 20, 2008.

10-dd Master Trust Agreement for AT&T Inc. Deferred Compensation Plans and Other Executive Benefit Plans and subsequent amendments dated August 1, 1995 and November 1, 1999. (Exhibits 99.1-a, 99.1-b and 99.1-c to Schedule 13-D/A filed on December 28, 2004.)

10-ee 2005 Supplemental Employee Retirement Plan, amended and restated December 31, 2008.

10-ff AT&T Corp. 1997 Long Term Incentive Program, dated March 14, 2000. (Exhibit 10-gg to Form 10-K for 2005.)

10-gg AT&T Corp. 2004 Long Term Incentive Program. (Exhibit 10-hh to Form 10-K for 2005.)

10-hh AT&T Corp. Executive Deferred Compensation Plan (formerly known as AT&T Corp. Senior Management Incentive Award Deferral Plan), amended and restated January 1, 2008.

10-ii 2006 Incentive Plan, dated June 26, 2008.

10-jj Pension Benefit Makeup Plan #1, amended December 31, 2008.

10-kk BellSouth Corporation Executive Incentive Award Deferral Plan, as amended and restated effective January 1, 2008. (Exhibit 10-kk to Form 10-K for 2007.)

 

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AT&T Inc.

10-ll BellSouth Corporation Nonqualified Deferred Compensation Plan, dated January 1, 2005. (Exhibit 10-ll to Form 10-K for 2006.)

10-mm BellSouth Officer Compensation Deferral Plan. (Exhibit 10q to Form 10-K for 2004 of BellSouth Corporation (File No. 1-8607).)

10-nn BellSouth Corporation Deferred Compensation Plan for Non-Employee Directors, dated March 9, 1984. (Exhibit 10-nn to Form 10-K for 2006.)

10-oo BellSouth Corporation Director’s Compensation Deferral Plan, as amended and restated effective as of January 1, 2005. (Exhibit 10-a to Form 10-Q for September 30, 2007.)

10-pp BellSouth Corporation Stock Plan, dated April 24, 1995. (Exhibit 10-pp to Form 10-K for 2006.)

10-qq BellSouth Corporation Stock and Incentive Compensation Plan. (Exhibit 10v-3 to Form 10-Q for June 30, 2004 of BellSouth Corporation (File No. 1-8607).)

10-qq(i) First Amendment to BellSouth Corporation Stock and Incentive Compensation Plan. (Exhibit 10ii to Form 10-Q for September 30, 2005 of BellSouth Corporation (File No. 1-8607).)

10-qq(ii) Second Amendment to BellSouth Corporation Stock and Incentive Compensation Plan.

10-rr Cingular Wireless Long Term Compensation Plan, amended and restated effective November 1, 2007. (Exhibit 10-rr to Form 10-K for 2007.)

10-ss Master Trust Agreement for AT&T Corp. Deferred Compensation Plans and Other Executive Benefit Plans, effective January 13, 1994. (Exhibit 10-ss to Form 10-K for 2006.)

10-ss(i) First Amendment to Master Trust Agreement, effective December 23, 1997. (Exhibit 10-ss(i) to Form 10-K for 2006.)

10-tt Non-Employee Director Non-Qualified Stock Option Terms and Conditions (for options granted under the BellSouth Corporation Stock and Incentive Compensation Plan). (Exhibit 10-qq to Form 8-K dated September 30, 2004 of BellSouth Corporation (File No. 1-8607).)

10-uu BellSouth Corporation Amended And Restated Trust Under Board Of Directors Benefit Plan(s), effective October 11, 2006. (Exhibit 10-u to Form 10-K for 2006.)

10-vv BellSouth Non-Employee Directors Charitable Contribution Program, effective February 29, 1992. (Exhibit 10-vv to Form 10-K for 2006.)

10-vv(i) First Amendment to the Non-Employee Directors Charitable Contribution Program, effective January 27, 1997. (Exhibit 10-vv(i) to Form 10-K for 2006.)

10-vv(ii) Second Amendment to the Non-Employee Directors Charitable Contribution Program, effective February 25, 2002. (Exhibit 10-vv(ii) to Form 10-K for 2006.)

10-ww AT&T Management Relocation Plan. (Exhibit 10-a to Form 10-Q for June 30, 2007.)

10-ww(i)  Amendment to AT&T Management Relocation Plan, dated November 20, 2008.

10-xx AT&T Corp, Senior Management Long Term Disability and Survivor Protection Plan, amended December 31, 2008.

10-yy Cingular Wireless Cash Deferral Plan, effective November 1, 2001. (Exhibit 10-yy to Form 10-K for 2007.)

10-zz BellSouth Corporation Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2008. (Exhibit10-b to Form 10-Q filed for September 30, 2008.)

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AT&T Inc.

10-aaa BellSouth Supplemental Life Insurance Plan, amended  December 31, 2008.

10-bbb BellSouth Compensation Deferral Plan, as amended and restated effective January 1, 2005. (Exhibit 10-bbb to Form 10-K for 2007.)

10-ccc Cingular Wireless BLS Executive Transition Benefit Plan. (Exhibit 10-ccc to Form 10-K for 2007.)

10-ddd Cingular Wireless  SBC Executive Transition Benefit Plan. (Exhibit 10-ddd to Form 10-K for 2007.)

10-eee BellSouth Nonqualified Deferred Income Plan, as amended and restated effective January 1, 2005.

10-fff AT&T Mobility 2005 Cash Deferral Plan. (Exhibit 10-fff to Form 10-K for 2007.)

10-ggg AT&T Corp. Non-Qualified Pension Plan, as amended and restated effective December 31, 2008.

10-hhh AT&T Corp. Excess Benefit and Compensation Plan, as amended and restated effective December 31, 2008.

10-iii BellSouth Split-Dollar Life Insurance Plan, as amended December 31, 2008, and restated effective January 1, 2005.

12 Computation of Ratios of Earnings to Fixed Charges.

13 Portions of AT&T’s Annual Report to Stockholders for the fiscal year ended December 31, 2008. Only the information incorporated by reference into this Form 10-K is included in the exhibit.

21 Subsidiaries of AT&T Inc.

23 Consent of Ernst & Young LLP, independent registered public accounting firm for AT&T.

24 Powers of Attorney.

31 Rule 13a-14(a)/15d-14(a) Certifications

31.1  Certification of Principal Executive Officer

31.2  Certification of Principal Financial Officer

32 Section 1350 Certification

We will furnish to stockholders upon request, and without charge, a copy of the annual report to stockholders and the proxy statement, portions of which are incorporated by reference in the Form 10-K. We will furnish any other exhibit at cost.

  20

Schedule II - Sheet 1

AT&T INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Allowance for Uncollectibles

Dollars in Millions

COL. A		COL. B		COL. C						COL. D			COL. E
				Additions
				(1)		(2)		(3)
	Balance at Beginning of Period			Charged to Costs and Expenses (a)		Charged to Other Accounts (b)		Acquisitions (d)		Deductions (c)		Balance at End of Period
Year 2008		$	1,364		1,796		929		-		2,819		$	1,270
Year 2007		$	1,276		1,617		366		-		1,895		$	1,364
Year 2006		$	1,176		586		101		410		997		$	1,276

__________________

(a) Excludes direct charges and credits to expense on the statements of income and reinvested earnings related to interexchange carrier receivables.

(b) Includes amounts previously written off which were credited directly to this account when recovered and amounts related to long-distance carrier receivables which were billed by AT&T.

(c)   Amounts written off as uncollectible.

(d)   Acquisition of BellSouth in December 2006.

21 

Schedule II - Sheet 2

AT&T INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Accumulated Amortization of Intangibles

Dollars in Millions

COL. A		COL. B		COL. C						COL. D			COL. E
				Additions
					(1)	(2)		(3)
	Balance at Beginning of Period			Charged to Costs and Expenses		Charged to Other Accounts		Acquisitions (a)		Deductions		Balance at End of Period
Year 2008		$	9,896		4,570		-		-		386		$	14,080
Year 2007		$	3,997		5,952		-		-		53		$	9,896
Year 2006		$	986		1,033		-		1,978		0		$	3,997

__________________

(a)   Consolidation of AT&T Mobility due to the December 2006 acquisition of BellSouth.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 25th day of February, 2009.

AT&T INC.

/s/ Richard G. Lindner

Richard G. Lindner

Senior Executive vice President

and Chief Financial Officer 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Principal Executive Officer:

Randall Stephenson*

Chairman of the Board, Chief Executive Officer

and President

Principal Financial and Accounting Officer:

Richard G. Lindner

Senior Executive Vice President

and Chief Financial Officer

/s/ Richard G. Lindner

Richard G. Lindner, as attorney-in-fact

and on his own behalf as Principal

Financial Officer and Principal

Accounting Officer

February 25, 2009 

Directors:
Randall L. Stephenson*	Jon C. Madonna*
William F. Aldinger III*	Lynn M. Martin*
Gilbert F. Amelio*	John B. McCoy*
Reuben V. Anderson*	Mary S. Metz*
James H. Blanchard*	Joyce M. Roché*
August A. Busch III* Jaime Chico Pardo*	Laura D’Andrea Tyson* Patricia P. Upton*
James P. Kelly*

* by power of attorney

EX-4.H

Execution Copy

SBC COMMUNICATIONS INC.

as Issuer and Registrant of Securities

AND

THE BANK OF NEW YORK

Trustee

____________________

INDENTURE

Dated as of November 1, 1994

___________________

Providing for Issuance of Securities in Series

INDENTURE dated as of November 1, 1994 between SBC COMMUNICATIONS INC., a Delaware corporation ("SBC"), and THE BANK OF NEW YORK, a New York banking company duly organized and validly existing under the laws of the State of New York ("Trustee").

RECITALS OF SBC

SBC has duly authorized the execution and delivery of this Indenture for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness ("Securities") as herein provided.

All things necessary to make this Indenture a valid agreement of SBC, in accordance with its terms, have been done.

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the Holders of the Securities:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01  Definitions.

"Affiliate" means any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, SBC.

"Agent" means any Paying Agent, Registrar, or co-Registrar.

"Authorized Newspaper" means a newspaper of general circulation, in an official language of the country of publication or in the English language, customarily published on days other than Legal Holidays, as defined in Section 10.07, in such country.  Whenever successive weekly publications in an Authorized Newspaper are required hereunder, they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or different Authorized Newspapers.

"Board of Directors" means the Board of Directors of SBC, or any duly authorized committee thereof.

"Board Resolution" means a copy of a resolution of the Board of Directors, certified by the Secretary or an Assistant Secretary of SBC to have been duly adopted by the Board of Directors and to be in full force and effect.

"Default" means any event which is, or after notice or passage of time would be, an Event of Default.

"Depository" means, with respect to the Securities of any Series issuable or issued in whole or in part in the form of one or more Global Securities, the person designated as Depository by SBC pursuant to Section 2.02.

"Global Security" means a Security in the form prescribed in Section 2.02 evidencing all or part of a Series of Securities, issued to the Depository for such series or its nominee, and registered in the name of such Depository or nominee.

"Holder" or "Securityholder" means the bearer of an Unregistered Security or of a coupon appertaining thereto or the person in whose name a Registered Security is registered on the Registrar's books.

"Indenture" means this Indenture as amended or supplemented from time to time including, for all purposes of this instrument and any such amendment or supplement, the provisions of the TIA that are deemed to be a part of and govern this instrument and any such amendment or supplement, respectively.  The term "Indenture" shall also include the forms and terms of a particular Series of Securities established as contemplated hereunder.

"Officer" means the Chairman of the Board of Directors, any Vice Chairman of the Board of Directors, the President, any Vice-President, the Treasurer or the Secretary of SBC.

"Officers' Certificate" means a certificate signed by two Officers or by any Officer and an Assistant Treasurer or an Assistant Secretary of SBC.

"Opinion of Counsel" means a written opinion of legal counsel who is acceptable to SBC and the Trustee.  Counsel may be an employee of or counsel to SBC or the Trustee.

"Order" means an order in the name of SBC signed by two Officers or by any Officer and an Assistant Treasurer or an Assistant Secretary of SBC.

"Original Issue Discount Security" means any Security which provides for an amount less than the stated principal amount thereof to be due and payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.02.

"Principal" of a debt security means the principal of the security plus, when appropriate, the premium, if any, on the security.

"Registered Security" means any Security issued hereunder and registered by the Registrar.

"Responsible Officer", when used with respect to the Trustee, shall mean the chairman or any vice-chairman of the board of directors or trustees, the chairman or any vice-chairman of the executive committee of the board of directors or trustees, the president, any vice-president, the treasurer, the secretary, any trust officer, any second or assistant vice-president or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject.

"SBC" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and thereafter means the successor.

"SEC" means the Securities and Exchange Commission.

"Series" or "Series of Securities" means a series of Securities.

"Securities" means the debentures, notes or other obligations of SBC issued, authenticated and delivered under this Indenture.

"Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by SBC or by one or more other of its Subsidiaries, or by SBC and one or more other of its Subsidiaries.  For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

"TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.  

"Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and thereafter means the successor and if, at any time, there is more than one Trustee, "Trustee" as used with respect to the Securities of any Series shall mean the Trustee with respect to that Series.

"U.S. person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or a political subdivision thereof, or an estate or trust the income of which is subject to United States Federal income taxation regardless of its source.

"United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and all other areas subject to its jurisdiction.

"Unregistered Security" means any Security issued hereunder which is not a Registered Security.

"Yield to Maturity" means the yield to maturity, calculated by SBC at the time of issuance of a Series of Securities or, if applicable, at the most recent determination of interest on such Series in accordance with accepted financial practice.

SECTION 1.02   Other Definitions.

Term	Section
"Bankruptcy Law"	6.01
"Custodian"	6.01
"Event of Default"	6.01
"Legal Holiday"	10.07
"Paying Agent"	2.04
"Registrar"	2.04
"U.S. Government Obligations"	8.01

SECTION 1.03   Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this Indenture have the following meanings:

"Commission" means the SEC.

"indenture securities" means the Securities.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Trustee.

"obligor" on the indenture securities means SBC.

All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings assigned to them therein.

SECTION 1.04   Rules of Construction.

Unless the context otherwise requires:

(1)  a term has the meaning assigned to it;

(2)  an accounting term not otherwise defined has the meaning assigned to it in accordance with accounting principles generally accepted in the United States of America.

(3)  "or" is not exclusive; and

(4)  words in the singular include the plural, and words in the plural include the singular.

ARTICLE 2

THE SECURITIES

SECTION 2.01   Issuable in Series.

The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.  The Securities may be issued in one or more Series.  There may be Registered Securities and Unregistered Securities within a Series and the Unregistered Securities may be subject to such restrictions, and contain such legends, as may be required by United States laws and regulations.  Except as provided in the foregoing sentence or as otherwise provided by or pursuant to the Board Resolution referred to in Section 2.02, all Securities of a Series shall be identical in all respects.  Securities of different Series may differ in any respect; provided that all Series of Securities shall be equally and ratably entitled to the benefits of this Indenture.

SECTION 2.02   Establishment of Terms and Form of Series of Securities.

(a)  At or prior to the issuance of any Series of Securities, the following shall be established either by or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or by an indenture supplemental hereto:

(1)  the title of the Securities of the Series (which title shall distinguish the Securities of the Series from the Securities of all other Series and from all other securities issued by SBC);

(2)  any limit upon the aggregate principal amount of the Securities of the Series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the Series pursuant to Section 2.08, 2.09, 2.12, 3.06 or 9.05);

(3)  the date or dates on which the principal of the Securities of the Series is payable;

(4)  the rate or rates at which the Securities of the Series shall bear interest, if any, or the method of calculating such rate or rates of interest, the date or dates from which such interest shall accrue, the dates on which such interest shall be payable and, with respect to Registered Securities, the record date for the interest payable on any interest payment date;

(5)  the place or places where the principal of and interest on Registered and any Unregistered Securities of the Series shall be payable;

(6)  the period or periods within which, the price or prices at which, and the terms and conditions upon which, Securities of the Series may be redeemed, in whole or in part, at the option of SBC;

(7)  the obligation, if any, of SBC to redeem or purchase Securities of the Series pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Securities of the Series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;

(8)  if in other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the Series shall be issuable;

(9)  if other than the principal amount thereof, the portion of the principal amount of Securities of the Series which shall be payable upon declaration or acceleration of the maturity thereof pursuant to Section 6.02;

(10)  whether Securities of the Series shall be issuable as Registered Securities or Unregistered Securities (with or without interest coupons), or both, and any restrictions applicable to the offering, sale or delivery of Unregistered Securities and whether, and the terms upon which, Unregistered Securities of a Series may be exchanged for Registered Securities of the same Series and vice versa;

(11)  whether and under what circumstances SBC will pay additional amounts on the Securities of that Series held by a person who is not a U.S. person in respect of taxes or similar charges withheld or deducted and, if so, whether SBC will have the option to redeem such Securities rather than pay such additional amounts;

(12)  the currency or currencies, including composite currencies, in which payment of the principal of and interest on the Securities of the Series shall be payable (if other than the currency of the United States of America);

(13)  if the amount or payments of principal of or interest on the Securities of the Series may be determined with reference to an index, the manner in which such amounts shall be determined;

(14)  the obligation, if any, of SBC to permit the conversion or exchange of the Securities of the Series into other securities (whether or not issued by, or the obligation of, SBC), and the terms and conditions upon which such conversion or exchange shall be effected (including, without limitation, the initial conversion or exchange price or rate, the conversion or exchange period and any other provisions in addition to or in lieu of those set forth in this Indenture relative to such obligation;

(15)  whether the Securities of the Series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depository for such Global Security or Securities, which Depository shall be a clearing agency registered under the Securities Exchange Act of 1934, as amended;

(16)  any other terms of the Series (which terms shall not be inconsistent with the provisions of this Indenture), including any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Securities of that Series;

(17)  the form of the Securities (or forms thereof if Unregistered and Registered Securities shall be issuable in such Series, including such legends as may be required by United States laws or regulations, the form of any coupons or temporary global Security which may be issued and the forms of any certificates which may be required hereunder or under United States laws or regulations in connection with the offering, sale, delivery or exchange of Unregistered Securities); and

(18)  the CUSIP number, if any.

(b)  If the terms and form or forms of any Series of Securities are established by or pursuant to a Board Resolution, SBC shall deliver a copy of such Board Resolution to the Trustee at or prior to the issuance of such Series with (1) the form or forms of Security which have been approved attached thereto, or (2) if such Board Resolution authorized Officers to approve the terms and form or forms of the Securities, an Officers' Certificate approving the terms and form or forms of Security with such form or forms of Securities attached thereto.

SECTION 2.03   Execution, Authentication and Delivery.

(a)  Securities shall be executed on behalf of SBC by its Chairman of the Board of Directors or a Vice-Chairman of the Board of Directors or its President or a Vice-President, and its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary.  Signatures shall be manual or facsimile.  SBC's seal shall be reproduced on the Securities and may, but need not, be attested.  The coupons of Unregistered Securities shall bear the facsimile signature of the Treasurer or an Assistant Treasurer of SBC.

(b)  If an Officer, an Assistant Treasurer or an Assistant Secretary of SBC whose signature is on a Security or coupon no longer holds that office at the time the Security is authenticated, the Security or coupon shall be valid nevertheless.

(c)  A Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent and no coupon shall be valid until the Security to which it appertains has been so authenticated.  Such signature shall be conclusive evidence that the Security has been authenticated under this Indenture.  Each Registered Security shall be dated the date of its authentication, and each Unregistered Security shall be dated as provided in connection with the establishment of the Series thereof.

(d)  The Trustee shall at any time, and from time to time, authenticate and deliver Securities of any Series executed and delivered by SBC for original issue in an aggregate principal amount not in excess of the principal amount authorized for such Series, upon receipt by the Trustee of (i) an Order for the authentication and delivery of such Securities, (ii) if the terms and form or forms of the Securities of such Series have been established by or pursuant to a Board Resolution as permitted by Section 2.02, a copy of such Board Resolution and any Officers' Certificate that may be required pursuant to Section 2.02(b), and (iii) an Opinion of Counsel stating,

(1)  if the form of such Securities has been established by or pursuant to a Board Resolution as permitted by Section 2.02, that such form has been established in conformity with the provisions of this Indenture;

(2)  if the terms of such Securities have been established by or pursuant to a Board Resolution as permitted by Section 2.02, that such terms have been established in conformity with the provisions of this Indenture; and

(3)  that such Securities, when authenticated and delivered by the Trustee and issued by SBC in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of SBC entitled to the benefits of the Indenture.

Notwithstanding the provisions of Section 2.02 and of the preceding paragraph, if all Securities of a Series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 2.02(b) or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such Series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued.

If the terms and form or forms of such Securities have been established by or pursuant to a Board Resolution as permitted by Section 2.02, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will adversely affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.

Notwithstanding the foregoing, until SBC has delivered an Officers' Certificate to the Trustee and the Registrar stating that, as a result of the action described, SBC would not suffer adverse consequences under the provisions of United States law or regulations in effect at the time of the delivery of Unregistered Securities, (i) delivery of Unregistered Securities by the Trustee or Registrar will be made only outside the United States and (ii) Unregistered Securities will be released by the Trustee or Registrar in definitive form to the person entitled to physical delivery thereof only upon presentation of a certificate in the form prescribed by SBC.

(e)  If SBC shall establish pursuant to Section 2.02 that the Securities of a Series are to be issued in whole or in part in the form of one or more Global Securities, then SBC shall execute and the Trustee shall, in accordance with this Section and SBC's Order with respect to such Series, authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of outstanding Securities of such series to be represented by one or more Global Securities; (ii) shall be registered in the name of the Depository for such Global Security or Securities or the nominee of such Depository, (iii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instruction and (iv) shall bear a legend substantially to the following effect:  "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository.  Unless and until it is exchanged in whole or in part for Securities in definitive form in accordance with the provisions of the Indenture and the terms of the Securities, this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository."

Each depository designated pursuant to Section 2.02 for a Global Security must, at the time of its designation and at all times while it serves as Depository, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation.

(f)  The Trustee may appoint an authenticating agent to authenticate Securities.  An authenticating agent may authenticate Securities whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights as an Agent to deal with SBC or an Affiliate thereof.

SECTION 2.04   Registrar and Paying Agent.

SBC shall maintain in the Borough of Manhattan, The City of New York, State of New York, an office or agency where Registered Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where (subject to Sections 2.05(c) and 2.08(b)) Securities may be presented for payment or for exchange ("Paying Agent").  With respect to any Series of Securities issued in whole or in part as Unregistered Securities, SBC shall maintain one or more Paying Agents located outside the United States and shall maintain such Paying Agents for a period of two years after the principal of such Unregistered Securities has become due and payable.  During any period thereafter for which it is necessary in order to conform to United States tax law or regulations, SBC will maintain a Paying Agent outside the United States to which the Unregistered Securities or coupons appertaining thereto may be presented for payment and will provide the necessary funds therefor to such Paying Agent upon reasonable notice.  The Registrar shall keep a register with respect to each Series of Securities issued in whole or in part as Registered Securities and to their transfer and exchange.  SBC may appoint one or more co-Registrars acceptable to the Trustee and one or more additional Paying Agents for each Series of Securities and SBC may terminate the appointment of any co-Registrar or Paying Agent at any time upon written notice.  The term "Registrar" includes any co-Registrar.  The term "Paying Agent" includes any additional Paying Agent.  SBC shall notify the Trustee of the name and address of any Agent not a party to this Indenture.  If SBC fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.

SBC initially appoints the Trustee as Registrar and Paying Agent.

SECTION 2.05   Payment on Securities.

(a)  Subject to the following provisions, SBC will pay to the Trustee the amounts, in such coin or currency as is at the time legal tender for the payment of public or private debt, in the manner, at the times and for the purposes set forth herein and in the text of the Securities for each Series, and SBC hereby authorizes and directs the Trustee from funds so paid to it to make or cause to be made payment of the principal of and interest, if any, on the Securities and coupons of each Series as set forth herein and in the text of such Securities and coupons.  The Trustee will arrange directly with any Paying Agents for the payment, or the Trustee will make payment, from funds furnished by SBC, of the principal and interest, if any, on the Securities and coupons of each Series by check drawn upon a bank in The City of New York.

(b)  Interest, if any, on Registered Securities of a Series shall be paid on each interest payment date for such Series to the Holder thereof at the close of business on the relevant record dates specified in the Securities of such Series.  SBC may pay such interest by check mailed to such Holder's address as it appears on the register for Securities of such Series.  Principal of Registered Securities shall be payable only against presentation and surrender thereof at the office of the Paying Agent in New York, New York, unless SBC shall have otherwise instructed the Trustee in writing.

(c)  To the extent provided in the Securities of a Series, (i) interest, if any, on Unregistered Securities shall be paid only against presentation and surrender of the coupons for such interest installments as are evidenced thereby as they mature and (ii) original issue discount (as defined in Section 1273 of the Internal Revenue Code of 1986, as amended), if any, on Unregistered Securities shall be paid only against presentation and surrender of such Securities, in either case at the office of a Paying Agent located outside of the United States, unless SBC shall have otherwise instructed the Trustee in writing.  Principal of Unregistered Securities shall be paid only against presentation and surrender thereof as provided in the Securities of a Series.  If at the time a payment of principal of or interest, if any, or original issue discount, if any, on an Unregistered Security or coupon shall become due the payment of the full amount so payable at the office or offices of all the Paying Agents outside the United States is illegal or effectively precluded because of the imposition of exchange controls or other similar restrictions on the payment of such amount in the United States currency, then SBC may instruct the Trustee to make such payments at the office of a Paying Agent located in the United States, provided that provision for such payment in the United States would not cause such Unregistered Security to be treated as a "registration-required obligation" under United States law and regulations.

SECTION 2.06   Paying Agent to Hold Money in Trust.

SBC will require each Paying Agent for any Series of Securities other than the Trustee to agree in writing that it will hold all sums held by it for the payment of principal of and interest on Securities of that Series in trust for the benefit of the persons entitled thereto until such sums are paid to such persons or otherwise disposed of as herein provided, and that the Paying Agent will notify promptly the Trustee of any default by SBC in making any such payment.  While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee.  If SBC acts as Paying Agent, it shall segregate the money held by it for the payment of principal of and interest on any Series of Securities and hold such money as a separate trust fund.  SBC at any time may require a Paying Agent to pay all money held by it to the Trustee.  Upon so doing the Paying Agent shall have no further liability for the money so paid.

SECTION 2.07   Securityholder Lists; Ownership of Securities.

(a)  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list received by or furnished to it of the names and addresses of Holders of Securities.  If the Trustee is not the Registrar or if Unregistered Securities are outstanding under the Indenture, SBC shall furnish to the Trustee semiannually on or before the last day of June and December in each year, and at such other times as the Trustee may request in writing, a list, in such form and as of such date as the Trustee may reasonably require, containing all the information in the possession or control of the Registrar, any co-Registrar, SBC or any of its Paying Agents other than the Trustee as to the names and addresses of Holders of Securities.

(b)  Ownership of Registered Securities of a Series shall be proved by the register for such Series kept by the Registrar.  Ownership of Unregistered Securities may be proved by the production of such Unregistered Securities or by a certificate or affidavit executed by the person holding such Unregistered Securities or by a depository with whom such Unregistered Securities were deposited, if the certificate or affidavit is satisfactory to the Trustee.  SBC, the Trustee, and any agent of SBC may treat the bearer of any Unregistered Security or coupon and the person in whose name a Registered Security is registered as the absolute owner thereof for all purposes.

(c)  Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent SBC, the Trustee or any agent of SBC or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depository or impair, as between a Depository and holders of beneficial interests in any Global Security, the operation of customary practices governing the exercise of the rights of the Depository as Holder of such Global Security.  None of SBC, the Trustee, any Paying agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

SECTION 2.08   Registration of Transfer and Exchange.

(a)  When Registered Securities of a Series are presented to the Registrar with a request to register their transfer or to exchange them for an equal principal amount of Registered Securities of the same Series and of like tenor of other authorized denominations, the Registrar shall register the transfer or make the exchange if its customary requirements for such transactions are met.

(b)  If both Registered and Unregistered Securities are authorized for a Series of Securities and the terms of such Securities permit, Unregistered Securities may be exchanged for an equal principal amount of Registered or Unregistered Securities of the same Series and of like tenor in any authorized denominations upon delivery to the Registrar (or a Paying Agent, if the exchange is for Unregistered Securities) of the Unregistered Security with all unmatured coupons and all matured coupons in default appertaining thereto and if all other requirements of the Registrar (or such Paying Agent) and such Securities for such exchange are met.

Notwithstanding the foregoing, the exchange of Unregistered Securities for Registered Securities will be subject to the satisfaction of the provisions of United States law and regulations in effect at the time of such exchange, and no exchange will be made until SBC has notified the Trustee and the Registrar that, as a result of such exchange, SBC would not suffer adverse consequences under such law or regulations.

(c)  To permit registrations of transfers and exchanges, the Trustee shall authenticate Securities upon surrender of Securities for registration of transfer or for exchange as provided in this Section.  SBC will not make any charge for any registration of transfer or exchange but may require the payment by the party requesting such registration of transfer or exchange of a sum sufficient to cover any tax or other governmental charge payable in connection therewith, but not for any exchange pursuant to Section 2.12, 3.06 or 9.05.

(d)  Neither SBC nor the Registrar shall be required (i) to issue, register the transfer of or exchange Securities of any Series for the period beginning at the opening of business 15 days immediately preceding the selection of any such Securities to be redeemed and ending at the close of business on the day of first publication of the relevant notice of redemption or, if there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange Securities of any Series selected, called or being called for redemption as a whole or the portion being redeemed of any such Securities selected, called or being called for redemption in part.

(e)  Unregistered Securities or any coupons appertaining thereto shall be transferable by delivery.

(f)  Notwithstanding the foregoing, any Global Security shall be exchangeable pursuant to this Section 2.08 for Securities registered in the names of Persons other than the Depository for such Security or its nominee only if (i) such Depository notifies SBC that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (ii) SBC executes and delivers to the Trustee an Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities.  Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Securities registered in such names as such Depository shall direct.

Notwithstanding any other provision in this Indenture, a Global Security may not be transferred except as a whole by the Depository with respect to such Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository.

(g)  If at any time the Depository for the Securities of a Series notifies SBC that it is unwilling or unable to continue as Depository for the Securities of such Series or if at any time the Depository for the Securities of such Series shall no longer be eligible under Section 2.03, SBC shall appoint a successor Depository with respect to the Securities of such Series. If a successor Depository for the Securities of such Series is not appointed by SBC within 90 days after SBC receives such notice or becomes aware of such ineligibility, SBC's election pursuant to Section 2.02(15) shall no longer be effective with respect to the Securities of such series and SBC will execute, and the Trustee, upon receipt of the Order for the authentication and delivery of definitive Securities of such Series, will authenticate and deliver, Securities of such Series in definitive form in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Series in exchange for such Global Security or Securities.

SBC may at any time and in its sole discretion determine that the Securities of any series issued in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities.  In such event SBC will execute, and the Trustee, upon receipt of the Order for the authentication and delivery of the definitive Securities of such Series, will authenticate and deliver, Securities of such Series in definitive form and in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Series in exchange for such Global Security or Securities.

If (a) there shall have occurred and be continuing an Event of Default (as defined in Section 6.01) or an event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default with respect to a Series of Securities issued in the form of one or more Global Securities, or (b) if specified by SBC pursuant to Section 2.02 with respect to a Series of Securities, the Depository for such Series of Securities may surrender a Global Security for such Series of Securities in exchange in whole or in part for Securities of such Series in definitive form.  Thereupon, SBC shall execute, and the Trustee shall authenticate and deliver, without service closing charge:

(i)  to each person specified by such Depository a new Security or Securities of the same series, of any authorized denomination as requested by such person in aggregate principal amount equal to and in exchange for such person's beneficial interest in the Global Security; and

        (ii)  to such Depository a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities delivered to Holders thereof.

In any exchange provided for in any of the preceding three paragraphs, SBC will execute and the Trustee will authenticate and deliver Securities in definitive registered form in authorized denominations.

Upon the exchange of a Global Security for Securities in definitive form, such Global Security shall be canceled by the Trustee.  Registered Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depository for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee.

SECTION 2.09   Replacement Securities.

(a)  If a mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee, SBC shall issue and the Trustee shall authenticate and deliver in exchange therefor a replacement Registered Security, if such surrendered security was a Registered Security, or a replacement Unregistered Security with coupons corresponding to the coupons appertaining to the surrendered Security, if such surrendered Security was an Unregistered Security, of the same Series and of like tenor, if the Trustee's requirements are met.

(b)  If the Holder of a Security claims that the Security or any coupon appertaining thereto has been lost, destroyed or wrongfully taken, SBC shall issue (and the Trustee shall authenticate) a replacement Registered Security of like tenor, if such Holder's claim pertains to a Registered Security, or a replacement Unregistered Security of like tenor with coupons corresponding to the coupons appertaining to the lost, destroyed or wrongfully taken Unregistered Security or the Unregistered Security to which such lost, destroyed or wrongfully taken coupon appertains, if such Holder's claim pertains to an Unregistered Security, of the same Series and of like tenor, if the Trustee's requirements are met; provided, however, that the Trustee or SBC may require any such Holder to provide to the Trustee and SBC security or indemnity sufficient in the judgment of SBC and the Trustee to protect SBC, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Security or any coupon appertaining thereto is replaced.  SBC may charge the party requesting a replacement Security for its expenses in replacing a Security.

(c)  Every replacement Security is an additional obligation of SBC.

(d)  The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons.

SECTION 2.10   Outstanding Securities.

(a)  Securities outstanding at any time are all Securities authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section as not outstanding.

(b)  If a Security is replaced pursuant to Section 2.09, it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.

(c)  If a Paying Agent (other than SBC) holds on a redemption date or maturity date money sufficient to pay all amounts due on Securities of any Series on that date, then on and after that date all Securities of such Series due on such date cease to be outstanding and interest on them ceases to accrue, provided that if the Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made.

(d)  A Security does not cease to be outstanding because SBC or an Affiliate holds the Security.

(e)  In determining whether the Holders of the requisite principal amount of Securities of any Series have concurred in any direction, waiver or consent, (i) the principal amount of an Original Issue Discount Security  that shall be deemed to be outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the maturity thereof pursuant to Section 6.02 and (ii) the principal amount of a Security denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security.

SECTION 2.11   Treasury Securities.

In determining whether the Holders of the requisite principal amount of Securities of any Series have concurred in any direction, waiver or consent, Securities of such Series owned by SBC or an Affiliate shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities of such Series which the Trustee knows are so owned shall be so disregarded.  Securities of such Series owned by SBC or which have been pledged in good faith may be considered by the Trustee if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to so act with respect to such Securities and that the pledgee is not SBC or an Affiliate.

SECTION 2.12   Temporary Securities.

(a)  Until definitive Registered Securities of any Series are ready for delivery, SBC may prepare and execute and the Trustee shall authenticate temporary Registered Securities of such Series.  Temporary Registered Securities of any Series shall be substantially in the form of definitive Registered Securities of such Series but may have variations that SBC considers appropriate for temporary Securities.  Every temporary Registered Security shall be executed by SBC and authenticated by the Trustee, and registered by the Registrar, upon the same conditions, and with like effect, as a definitive Registered Security.  Without unreasonable delay, SBC shall prepare and the Trustee shall authenticate definitive Registered Securities of the same Series and of like tenor in exchange for temporary Registered Securities.

(b)  Until definitive Unregistered Securities of any Series are ready for delivery, SBC may prepare and execute and the Trustee shall authenticate one or more temporary Unregistered Securities, which may have coupons attached or which may be in the form of a single temporary global Unregistered Security of that Series without coupons.  The temporary Unregistered Security or Securities of any Series shall be substantially in the form approved by or pursuant to a Board Resolution and shall be delivered to one of the Paying Agents located outside the United States or to such other person or persons as SBC shall direct against such certifications as SBC may from time to time prescribe.  The temporary Unregistered Security or Securities of a Series shall be executed by SBC and authenticated by the Trustee upon the same conditions, and with like effect, as a definitive Unregistered Security of such Series, except as provided herein or in the Board Resolution or supplemental indenture relating thereto.  A temporary Unregistered Security or Securities shall be exchangeable for definitive Unregistered Securities of like tenor at the time and on the conditions, if any, specified in the temporary Security.

Upon any exchange of a part of a temporary Unregistered Security of a Series for definitive Unregistered Securities of such Series and of like tenor, the temporary Unregistered Security shall be endorsed by the Trustee or Paying Agent to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of the definitive Unregistered Securities of such Series and of like tenor so exchanged and endorsed.

SECTION 2.13   Cancellation.

SBC at any time may deliver Securities and coupons to the Trustee for cancellation.  The Registrar and the Paying Agent shall forward to the Trustee any Securities and coupons surrendered to them for registration of transfer, for exchange or for payment.  The Trustee shall cancel all Securities and coupons surrendered for registration of transfer, exchange, payment or cancellation and may dispose of cancelled Securities and coupons as SBC directs; provided, however, that any Unregistered Securities of a Series delivered to the Trustee for exchange prior to maturity shall be retained by the Trustee for reissue as provided herein or in the Securities of such Series.  SBC may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation, provided that the Trustee shall not be required to destroy cancelled Securities but may be required to deliver such Securities to SBC upon demand.

SECTION 2.14  Defaulted Interest.

If SBC defaults on a payment of interest on a Series of Securities, SBC shall pay the defaulted interest as provided in such Securities or in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed and acceptable to the Trustee.  With respect to Registered Securities, the Trustee may pay the defaulted interest, plus any interest payable on the defaulted interest, to the Holders of such Registered Securities on a subsequent special record date.  SBC shall fix the record date and the payment date.  At least 15 days before the record date SBC shall mail to such Holders a notice that states the record date, the payment date and the amount of interest to be paid.

SECTION 2.15  CUSIP Numbers.

SBC in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

ARTICLE 3

REDEMPTION

SECTION 3.01   Notice to Trustee.

SBC may, with respect to any Series of Securities, reserve the right to redeem and pay such Series of Securities or any part thereof, or may covenant to redeem and pay the Series of Securities or any part thereof, before maturity at such time and on such terms as provided for in such Securities.  If a Series of Securities is redeemable and SBC wants or is obligated to redeem all or part of the Series of Securities pursuant to the terms of such Securities, it shall notify the Trustee of the redemption date and the principal amount of the Series of Securities to be redeemed.  SBC shall give such notice at least 75 days before the redemption date (or such shorter notice as may be acceptable to the Trustee).

SECTION 3.02   Selection of Securities to be Redeemed.

If less than all the Securities of a Series are to be redeemed, the Trustee, not more than 75 days prior to the redemption date, shall select the Securities of the Series to be redeemed pro rata or by lot or in such other manner as the Trustee shall deem fair and appropriate.  The Trustee shall make the selection from Securities of the Series that are outstanding and that have not previously been called for redemption.  Securities of the Series and portions of them selected by the Trustee shall be in amounts of $1,000 or integral multiples of $1,000 or, with respect to Securities of any Series issuable in other denominations pursuant to Section 2.02(a)(8), in amounts equal to the minimum principal denomination for each such Series and integral multiples thereof.  Provisions of this Indenture that apply to Securities of that Series called for redemption also apply to portions of Securities of that Series called for redemption.  The Trustee shall promptly notify SBC in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

SECTION 3.03  Notice of Redemption.

(a)  At least 30 days but not more than 60 days before a redemption date, SBC shall mail a notice of redemption by first-class mail to each Holder of Registered Securities that are to be redeemed.

(b)  If Unregistered Securities are to be redeemed, notice of redemption shall be published in an Authorized Newspaper in each of The City of New York, London and, if such Securities to be redeemed are listed on the Luxembourg Stock Exchange, Luxembourg twice in different calendar weeks, the first publication to be not less than 30 nor more than 60 days before the redemption date.

(c)  All notices shall identify the Series of Securities to be redeemed and shall state:

(1)  the redemption date;

(2)  the redemption price;

(3)  if less than all the outstanding Securities of a Series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed;

(4)  the name and address of the Paying Agent;

(5)  that Securities of the Series called for redemption and all unmatured coupons, if any, appertaining thereto must be surrendered to the Paying Agent to collect the redemption price; and

(6)  that interest on Securities of the Series called for redemption ceases to accrue on and after the redemption date.

At SBC's request, the Trustee shall give the notice of redemption in SBC's name and at its expense.

SECTION 3.04   Effect of Notice of Redemption.

Once notice of redemption is mailed or published, Securities of a Series called for redemption become due and payable on the redemption date at the redemption price.  Upon surrender to the Paying Agent of such Securities together with all unmatured coupons, if any, appertaining thereto, such Securities shall be paid at the redemption price plus accrued interest to the redemption date, but installments of interest due on or prior to the redemption date will be payable, in the case of Unregistered Securities, to the bearers of the coupons for such interest upon surrender thereof and, in the case of Registered Securities, to the Holders of such Securities of record at the close of business on the relevant record dates.

SECTION 3.05   Deposit of Redemption Price.

On or before the redemption date, SBC shall deposit with the Trustee money sufficient to pay the redemption price of and (unless the redemption date shall be an interest payment date) interest accrued to the redemption date on all Securities to be redeemed on that date.

SECTION 3.06   Securities Redeemed in Part.

Upon surrender of a Security that is redeemed in part, SBC shall issue and the Trustee shall authenticate for the Holder of that Security a new Security or Securities of the same Series and like tenor and the same form in authorized denominations equal in aggregate principal amount to the unredeemed portion of the Security surrendered.  If a Global Security is so surrendered, such new Security so issued shall be a new Global Security.

ARTICLE 4

COVENANTS

SECTION 4.01   Payment of Securities.

SBC shall pay or cause to be paid the principal of and interest on the Securities on the dates and in the manner provided herein and in the Securities.

SBC shall pay interest on overdue principal of a Security of any Series at the rate of interest (or, in the case of Original Issue Discount Securities, Yield to Maturity) borne by the Securities of that Series, and, to the extent lawful, it shall pay interest on overdue installments of interest at the same rate.

SECTION 4.02   Reports by SBC.

SBC agrees:

(a)  to file with the Trustee, within 15 days after SBC is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which SBC may be required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if SBC is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;

(b)  to file with the Trustee and the SEC, in accordance with the rules and regulations prescribed from time to time by the SEC, such additional information, documents, and reports with respect to compliance by SBC with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; and

(c)  to transmit by mail to all Holders of Registered Securities, as the names and addresses of such Holders appear on the register for each Series of Securities, to such Holders of Unregistered Securities as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose and to all Holders of Securities whose names and addresses have been furnished to the Trustee pursuant to Section 2.07, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the SBC pursuant to subsections (a) and (b) of this Section 4.02 as may be required by rules and regulations prescribed from time to time by the SEC.

SECTION 4.03  Statement as to Compliance.

SBC will deliver to the Trustee annually, commencing March 1, 1998, a certificate, from its principal executive officer, principal financial officer or principal accounting officer, stating whether or not to the best knowledge of the signer thereof the Company is in compliance (without regard to periods of grace or notice requirements) with all conditions and covenants under this Indenture, and if SBC shall not be in compliance, specifying such non-compliance and the nature and status thereof of which such signer may have knowledge.

SECTION 4.04  Calculation of Original Issue Discount.

SBC shall file with the Trustee promptly at the end of each calendar year a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year.

ARTICLE 5

SUCCESSORS

SECTION 5.01   When SBC May Merge, etc.

 SBC may not consolidate with, or merge into, or be merged into, or transfer or lease its properties and assets substantially as an entirety to, any person, unless the person is a corporation organized under the laws of the United States, any State thereof or the District of Columbia, the person assumes by supplemental indenture all the obligations of SBC under this Indenture and the Securities and any coupons appertaining thereto, shall have provided for conversion or exchange rights in accordance with the terms of any Securities contemplating conversion or exchange pursuant to Section 2.01(a)(14),  and, after giving effect thereto, no Default or Event of Default shall have occurred and be continuing.  The surviving, transferee or lessee corporation shall be the successor to SBC and SBC, except in the case of a lease, shall be relieved of all obligations under this Indenture and the Securities.

ARTICLE 6

DEFAULTS AND REMEDIES

SECTIONS 6.01   Events of Default.

An "Event of Default" occurs with respect to the Securities of any Series if:

(1)  SBC defaults in the payment of interest on any Security of that Series when the same becomes due and payable and the Default continues for a period of 90 days;

(2)  SBC defaults in the payment of the principal of any Security of that Series when the same becomes due and payable at maturity, upon redemption or otherwise;

(3)  SBC fails to comply with any of its other agreements in the Securities of that Series, or in any supplemental indenture under which the Securities of that Series may have been issued or in the Indenture (other than an agreement included solely for the benefit of Series of Securities other than that Series) and the Default continues for the period and after the notice specified below;

(4)  SBC pursuant to or within the meaning of any Bankruptcy Law:

(A)  commences a voluntary case,

(B)  consents to the entry of an order for relief against it in an involuntary case,

(C)  consents to the appointment of a Custodian of it or for all or substantially all of its property, or

(D)  makes a general assignment for the benefit of its creditors; or

(5)  a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A)  is for relief against SBC in an involuntary case,

(B)  appoints a Custodian of SBC or for all or substantially all of its property, or

(C)  orders the liquidation of SBC, and the order or decree remains unstayed and in effect for 60 days.

The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.  The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

A Default under clause (3) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of all the outstanding Securities of that Series notify SBC (and the Trustee in the case of notification by such Holders) of the Default and SBC does not cure the Default within 90 days after receipt of the notice.  The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default".

Upon receipt by the Trustee of any Notice of Default pursuant to this Section 6.01 with respect to Securities of a Series all or part of which is represented by a Global Security, a record date shall be established for determining Holders of outstanding Securities of such Series entitled to join in such Notice of Default, which record date shall be at the close of business on the day the Trustee receives such Notice of Default.  The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such Notice of Default, whether or not such Holders remain Holders after such record date; provided, that unless Holders of at least 10% in principal amount of the outstanding Securities of such Series, or their proxies, shall have joined in such Notice of Default prior to the day which is 90 days after such record date, such Notice of Default shall automatically and without further action by any Holder be canceled and of no further effect.  Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new Notice of Default identical to a Notice of Default which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.01.

SECTION 6.02   Acceleration.

If an Event of Default occurs with respect to the Securities of any Series and is continuing, the Trustee, by notice to SBC, or the Holders of at least 25% in principal amount of all of the outstanding Securities of that Series, by notice to SBC and the Trustee, may declare the principal (or, if any of the Securities of that Series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of, and any accrued interest on, all the Securities of that Series to be due and payable.  Upon such declaration, such principal (or, in the case of Original Issue Discount Securities, such specified amount) and any accrued interest shall be due and payable immediately.  The Holders of a majority in principal amount of all of the Securities of that Series, by notice to SBC and the Trustee, may rescind such acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that have become due solely because of the acceleration.

Upon receipt by the Trustee of any declaration of acceleration, or rescission thereof, with respect to Securities of a Series all or part of which is represented by a Global Security, the Trustee shall establish a record date for determining Holders of outstanding Securities of such Series entitled to join in such declaration of acceleration, or rescission, as the case may be, which record date shall be at the close of business on the date the Trustee receives such declaration of acceleration, or rescission, as the case may be.  The Holders on such record date, or their duly designated proxies, and only such persons, shall be entitled to join in such declaration of acceleration, or rescission, as the case may be, whether or not such Holders remain Holders after such record date; provided, that unless such declaration of acceleration, or rescission, as the case may be, shall have become effective by virtue of the requisite percentage having been obtained prior to the day which is 90 days after such record date, such declaration of acceleration, or rescission, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect.  Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new declaration of acceleration, or rescission thereof, as the case may be, that is identical to a declaration of acceleration, or rescission thereof, which has been canceled pursuant to the proviso to the preceding sentence, in which even a new record date shall be established pursuant to the provisions of this Section 6.02.

SECTION 6.03   Other Remedies Available to Trustee.

(a)  If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and interest on the Securities of the Series that is in Default or to enforce the performance of any provision of the Securities of that Series or this Indenture.

(b)  The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.  To the extent permitted by law no remedy is exclusive of any other remedy and all available remedies are cumulative.

SECTION 6.04   Waiver of Existing Defaults.

The Holders of a majority in principal amount of any Series of Securities by notice to the Trustee may waive an existing Default with respect to that Series and its consequences except a Default in the payment of principal of or interest on any Security.

SBC may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder.  If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, whether or not such Holders remain Holders after such record date; provided, that unless such majority in principal amount shall have waived such default prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be canceled and of no further effect.

SECTION 6.05   Control by Majority.

The Holders of a majority in principal amount of the Securities of each Series affected (with each such Series voting as a class) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it with respect to Securities of that Series.  However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that is unduly prejudicial to the rights of the Securityholders of that Series.

Upon receipt by the Trustee of any such direction with respect to Securities of a Series all or part of which is represented by a Global Security, the Trustee shall establish a record date for determining Holders of outstanding Securities of such Series entitled to join in such direction, which record date shall be at the close of business on the day the Trustee receives such direction.  The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such direction, whether or not such Holders remain Holders after such record date; provided, that unless such majority in principal amount shall have been obtained prior to the day which is 90 days after such record date, such direction shall automatically and without further action by any Holder be canceled and of no further effect.  Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new direction identical to a direction which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.05.

SECTION 6.06   Limitation on Suits by Securityholders.

A Securityholder may pursue a remedy with respect to this Indenture or the Securities of any Series only if:

(1)  the Holder gives to the Trustee written notice of a continuing Event of Default with respect to Securities of that Series;

(2)  the Holders of at least 25% in principal amount of the Securities of that Series make a written request to the Trustee to pursue the remedy;

(3)  such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be, or which may be, incurred by the Trustee in pursuing the remedy;

(4)  the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

(5)  during such 60-day period, the Holders of a majority in principal amount of the Securities of that Series do not give the Trustee a direction inconsistent with the request.

A Securityholder of any Series may not use this Indenture to prejudice the rights of another Securityholder of that Series or any other Series or to obtain a preference or priority over another Securityholder of that Series or any other Series.

SECTION 6.07   Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of and (subject to Section 2.14) interest on the Security (whether at maturity or upon redemption), on or after the respective due dates expressed in the Security, the right of any Holder of a Security of a Series the terms of which provide for conversion or exchange as contemplated in Section 2.01(a)(14) to have the Security be converted or exchanged as so provided, and the right of any Holder of a coupon to receive payment of (subject to Section 2.14) interest due as provided in such coupon, or to bring suit for the enforcement of any such payment on or after such respective dates or any such conversion or exchange right, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08   Collection Suits by Trustee.

If an Event of Default specified in Section 6.01(1) or (2) occurs with respect to Securities of any Series and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against SBC for the whole amount of the principal of and interest on Securities of that Series remaining unpaid.

SECTION. 6.09   Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable, and take any and all actions authorized under the TIA, in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relating to SBC (or any other obligor upon the Securities), its creditors or its property.

SECTION 6.10   Priorities.

If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

FIRST:  to the Trustee for amounts due under Section 7.07;

SECOND:  to Holders of Securities in respect of which or for the benefit of which such money has been collected for amounts due and unpaid on such Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively; and

THIRD:  to SBC.

The Trustee may fix a record date (with respect to Registered Securities) and payment date for any such payment to Holders of Securities.

SECTION 6.11   Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable attorneys' fees, against any party litigant in the suit, in the manner and to the extent provided in the TIA.  This Section does not apply to a suit by SBC, the Trustee, a Holder pursuant to Section 6.07, or a Holder or Holders of more than 10% in principal amount of the Securities of any Series.

ARTICLE 7

TRUSTEE

SECTION 7.01   Duties of Trustee.

(a) The duties and responsibilities of the Trustee shall be as provided by the TIA.  If an Event of Default has occurred and is continuing, the Trustee shall exercise such of its rights and powers under this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(b)  Except during the continuance of an Event of Default:

(1)  Subject to the provisions of the TIA, the Trustee need perform only those duties that are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee.

(2)  In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture.  However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c)  The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1)  This paragraph does not limit the effect of paragraph (b) of this Section.

(2)  The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(3)  The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

(d)  Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e)  The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense.

(f)  The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with SBC.  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g)  Except as expressly provided herein, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

SECTION 7.02   Rights of Trustee.

(a)  The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person.  The Trustee need not investigate any fact or matter stated in the document.

(b)  Before the Trustee acts or refrains from acting, it may consult with counsel of its selection after consultation with SBC or require an Officers' Certificate or an Opinion of Counsel.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on a Board Resolution, an Officers' Certificate, an Opinion of Counsel or the advice of counsel selected in consultation with SBC.

(c)  The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d)  The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

(e)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

SECTION 7.03   Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with SBC or an Affiliate with the same rights it would have if it were not Trustee.  Any Agent may do the same with like rights.  However, the Trustee is subject to Sections 7.10 and 7.11.

SECTION 7.04   Trustee's Disclaimer.

The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, shall not be accountable for SBC's use of the proceeds from the Securities and shall not be responsible for any statement in the Securities other than its certificate of authentication.

SECTION 7.05   Notice of Defaults.

If a Default occurs and is continuing with respect to the Securities of any Series and if it is known to the Trustee, the Trustee shall mail to each Holder of a Security of that Series entitled to receive reports pursuant to Section 4.02(c) (and, if Unregistered Securities of that Series are outstanding, shall cause to be published at least once in an Authorized Newspaper in each of The City of New York, London and, if Securities of that Series are listed on the Luxembourg Stock Exchange, Luxembourg) notice of the Default as and to the extent provided by the TIA.  Except in the case of a Default in payment on the Securities of any Series, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding such notice is in the interests of Securityholders of that Series.

SECTION 7.06   Reports by Trustee to Holders.

(a)  Within 60 days after each anniversary date of the first issue of a Series of Securities, the Trustee shall mail to each Securityholder of that Series entitled to receive reports pursuant to Section 4.02(c) a brief report, dated as of such date, that complies with TIA Section 313(a).  The Trustee also shall comply with TIA Section 313(b)(2).

(b)  At the time that it mails such a report to Securityholders of any Series, the Trustee shall file a copy of that report with the SEC and with each stock exchange on which the Securities of that Series are listed.  SBC shall provide written notice to the Trustee when the Securities of any Series are listed on any stock exchange.

SECTION 7.07   Compensation and Indemnity.

(a)  SBC shall pay to the Trustee from time to time such compensation as SBC and the Trustee shall from time to time agree in writing for all services rendered by the Trustee hereunder.  The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust.  SBC shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it in connection with the performance of its duties under this Indenture.  Such expenses shall include the reasonable compensation and out-of-pocket expenses of the Trustee's agents and counsel.

(b)  SBC shall indemnify each of the Trustee or any successor Trustee for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense, including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of the Trustee's powers or duties hereunder, except to the extent that such loss, damage, claim, liability or expense is due to the Trustee's own negligence or bad faith.  The Trustee shall notify SBC promptly of any claim for which it may seek indemnity.  SBC shall defend the claim and the Trustee shall cooperate in the defense.  The Trustee may have separate counsel and SBC shall pay the reasonable fees and expenses of such counsel.  SBC need not pay for any settlement made without its consent.

(c)  SBC need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its negligence or bad faith.

(d)  To secure the payment obligations of SBC pursuant to this Section, the Trustee shall have a lien prior to the Securities of any Series on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Securities of a Series.

(e)  If the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(4) or (5) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law.

(f)  The provisions of this Section 7.07 shall survive termination of this Indenture and the resignation or removal of the Trustee.

SECTION 7.08   Replacement of Trustee.

(a)  The resignation or removal of the Trustee and the appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.

(b)  The Trustee may resign with respect to the Securities of any Series by so notifying SBC.  The Holders of a majority in principal amount of the Securities of any Series may remove the Trustee with respect to that Series by so notifying the Trustee and SBC.  SBC may remove the Trustee with respect to Securities of any Series if:

(1)  the Trustee fails to comply with Section 7.10;

(2)  the Trustee is adjudged a bankrupt or an insolvent;

(3)  a receiver or public officer takes charge of the Trustee or its property; or

(4)  the Trustee becomes incapable of acting.

(c)  If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason with respect to Securities of any Series, SBC shall promptly appoint a successor Trustee for such Series.  Within one year after a successor Trustee with respect to the Securities of any Series takes office the Holders of a majority in principal amount of Securities of that Series may appoint a successor Trustee with respect to the Securities of that Series to replace the successor Trustee appointed by SBC.

(d)  If a successor Trustee with respect to the Securities of any Series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, SBC or the Holders of at least 10% in principal amount of the Securities of the applicable Series may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such Series.

(e)  If the Trustee with respect to the Securities of any Series fails to comply with Section 7.10, any Securityholder of the applicable Series may petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee.

(f)  A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and SBC.  Thereupon, the resignation or removal of the retiring Trustee for any Series of Securities shall become effective, and the successor Trustee shall have all the rights, powers and duties of the retiring Trustee with respect to all Series of Securities for which the successor Trustee is to be acting as Trustee under this Indenture.  The retiring Trustee shall promptly transfer all property held by it as Trustee with respect to such Series of Securities to the successor Trustee subject to the lien provided for in Section 7.07.  SBC shall give notice of each appointment of a successor Trustee for any Series of Securities by mailing written notice of such event by first-class mail to the Holders of Securities of such Series entitled to receive reports pursuant to Section 4.03(c) and, if any Unregistered Securities are outstanding, by publishing notice of such event once in an Authorized Newspaper in each of The City of New York, London, and, if Securities of that Series are listed on the Luxembourg Stock Exchange, Luxembourg.

(g)  All provisions of this Section 7.08 except subparagraphs (b)(1), (e) and (h) and the words "subject to the lien provided for in Section 7.07" in subparagraph (f) shall apply also to any Paying Agent located outside the United States and its possessions and required by Section 2.04.

(h)  In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) Series, SBC, the retiring Trustee and such successor Trustee shall execute and deliver a supplemental indenture wherein such successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, such successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those Series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those Series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

SECTION 7.09   Successor Trustee, Agents by Merger, etc.

If the Trustee or any Agent consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business assets to, another corporation, the successor corporation, without any further act, shall be the successor Trustee or Agent, as the case may be.

SECTION 7.10   Eligibility; Disqualification.

This Indenture shall always have a Trustee with respect to each Series of Securities which satisfies the requirements of TIA Section 310(a)(1).  The Trustee shall always have a combined capital and surplus of at least $100,000,000, as set forth in its most recent published annual report of condition.  If the Trustee has or shall acquire a conflicting interest within the meaning of the TIA, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the TIA and this Indenture.  To the extent permitted by the TIA, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one Series or a trustee under all indentures now or hereafter existing pursuant to which indenture securities have been issued on which SBC is an obligor and which may be excluded under the proviso of TIA Section 310(b)(1).

SECTION 7.11   Preferential Collection of Claims Against SBC.

If and when the Trustee shall be or become a creditor of SBC (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against SBC (or any such other obligor).

ARTICLE 8

DISCHARGE OF INDENTURE

SECTION 8.01   Termination of SBC's Obligations.

(a)  SBC reserves the right to terminate all of its obligations under (i) this Indenture and the Securities, or (ii) the Securities of any Series if SBC irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient to pay, when due, the principal of and any interest on all the Securities or all the Securities of that Series, as the case may be, to maturity or redemption and if all other conditions set forth in the Securities of that Series are met.  However, SBC's obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.15, 4.01, 7.07, 7.08, 8.03 and 8.04 shall survive until the Securities are no longer outstanding.  Thereafter SBC's obligations in Sections 7.07, 8.03 and 8.04 shall survive.  Unless otherwise provided in the terms of Securities of a Series that are convertible or exchangeable as contemplated in Section 2.01(a)(14), SBC shall not be entitled to terminate its obligations under the Securities of that Series pursuant to this Section 8.01.

(b)  Before or after a deposit SBC may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3.

(c)  After a deposit by SBC in accordance with this Section in respect of the Securities of a Series, the Trustee upon request shall acknowledge in writing the discharge of SBC's obligations under the Securities of the Series in respect of which the deposit has been made and this Indenture with respect to the Securities of that Series except for those surviving obligations specified above.

(d)  In order to have money available on a payment date to pay principal of and interest on the Securities of any Series, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money.

(e)  "U.S. Government Obligations" means:

(i)  direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America are pledged; or

(ii)  obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America;

provided, however, that U.S. Government Obligations shall not be callable at the issuer's option.

SECTION 8.02   Application of Trust Money.

The Trustee shall hold in trust all money or U.S. Government Obligations deposited with it pursuant to Section 8.01.  It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities of each Series in respect of which the deposit shall have been made.

SECTION 8.03   Repayment to SBC.

(a)  The Trustee and the Paying Agent shall promptly pay to SBC upon request any excess money or securities held by them at any time.

(b)  The Trustee and the Paying Agent shall pay to SBC upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after such principal or interest became due.  After payment to SBC, Securityholders entitled to the money must look to SBC for payment as general creditors unless an applicable abandoned property law designates another person.

SECTION 8.04   Indemnity for Government Obligations.

SBC shall pay and shall indemnify the Trustee and each Securityholder of each Series in respect of which the deposit shall have been made against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such obligations.

ARTICLE 9

AMENDMENTS AND WAIVERS

SECTION 9.01   Without Consent of Holders.

SBC and the Trustee may enter into one or more supplemental indentures without consent of any Securityholder for any of the following purposes:

(1)  to cure any ambiguity, defect or inconsistency herein or in the Securities of any Series;

(2)  to provide for the issuance of and establish the form and terms and conditions of Securities of any Series as provided in Section 2.02, and to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or any Series of Securities;

(3)  to secure the Securities pursuant to Section 4.02;

(4)  to comply with Section 5.01 or 5.02;

(5)  to provide for uncertificated Securities in addition to or in place of certificated Securities;

(6)  to add to the rights of the Holders of any Series of Securities or to surrender any right or power herein conferred on SBC;

(7)  to make provision with respect to the conversion or exchange rights of Holders pursuant to the requirements of the terms of Securities of a Series that is convertible or exchangeable as contemplated in Section 2.01(a)(14); or

(8)  to make any change that does not adversely affect the rights of any Securityholder.

SECTION 9.02   With Consent of Holders.

(a)  With the written consent of the Holders of a majority in principal amount of the outstanding Securities of each Series affected by such supplemental indenture (with each Series voting as a class), SBC and the Trustee may enter into a supplemental indenture to add any provisions to or to change or eliminate any provisions of this Indenture or of any supplemental indenture or to modify, in each case in any manner not covered by Section 9.01, the rights of the Securityholders of each such Series.  The Holders of a majority in principal amount of the outstanding Securities of each Series affected by such waiver (with each Series voting as a class), by notice to the Trustee, may waive compliance by SBC with any provision of this Indenture, any supplemental indenture or the Securities of any such Series except a Default in the payment of the principal of or interest on a Security.  However, without the consent of each Securityholder affected, an amendment or waiver may not:

(1)  reduce the amount of Securities whose Holders must consent to an amendment or waiver;

(2)  reduce the rate of or change the time for payment of interest on any Security;

(3)  reduce the principal of or change the fixed maturity of any Security;

(4)  waive a Default in the payment of the principal of or interest on any Security;

(5)  make any Security payable in currency other than that stated in the Security;

(6)  adversely affect the right to convert or exchange, as provided in the terms thereof, any Security that is convertible or exchangeable as contemplated in Section 2.01(a)(14); or

(7)  make any change in Section 6.04, 6.07 or 9.02(a) (third sentence).

(b)  SBC may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto.  If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect.

(c)  It is not necessary under this Section 9.02 for the Security- holders to consent to the particular form of any proposed supplemental indenture, but it is sufficient if they consent to the substance thereof.

(d)  Promptly after the execution by SBC and the Trustee of any supplemental indenture pursuant to the provisions of this Section 9.02, SBC shall transmit by mail a notice, setting forth in general terms the substance of such supplemental indenture, to all Holders of Registered Securities, as the names and addresses of such Holders appear on the register for each Series of Securities, and to such Holders of Unregistered Securities as are entitled to receive reports pursuant to Section 4.02(c).  Any failure of SBC to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 9.03   Compliance with Trust Indenture Act.

Every amendment to this Indenture or the Securities of one or more Series shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

SECTION 9.04   Revocation and Effect of Consents.

Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security.  However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective.  After an amendment or waiver becomes effective, it shall bind every Securityholder of each Series affected by such amendment or waiver.

SECTION 9.05   Notation on or Exchange of Securities.

The Trustee may place an appropriate notation about an amendment or waiver on any Security of any Series thereafter authenticated.  SBC in exchange for Securities of that Series may issue and the Trustee shall authenticate new Securities of that Series that reflect the amendment or waiver.

SECTION 9.06   Trustee Protected.

The Trustee need not sign any supplemental indenture that is reasonably likely to adversely affect its rights.

SECTION 9.07  Execution of Supplemental Indentures.

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10

MISCELLANEOUS

SECTION 10.01   Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies or conflicts with another provision of the TIA that is required under the TIA to be a part of and govern this Indenture, the latter provision shall control.  If any provision of this Indenture modifies or excludes any provision of the TIA which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be.

SECTION 10.02   Notices.

(a)  Any notice or communication by SBC or the Trustee to the other is duly given if in writing and delivered in person or mailed by first-class mail:

if to SBC to:

SBC Communications Inc.

175 E. Houston Street

San Antonio, Texas 78205-4105

Attention:Assistant Treasurer-Corporate Finance

if to the Trustee to:

The Bank of New York

101 Barclay Street

Floor 21 West

New York, New York  10286

Attention:  Corporate Trust Administration

(b)  SBC or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

(c)  Any notice or communication to Holders of Securities entitled to receive reports pursuant to Section 4.02(c) shall be mailed by first-class mail to the addresses for Holders of Registered Securities shown on the register kept by the Registrar and to addresses filed with the Trustee for other Holders.  Failure to so mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Holders of Securities of that or any other Series entitled to receive notice.

(d)  If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

(e)  If SBC mails a notice or communication to Securityholders, it shall mail a copy to the Trustee and to each Agent at the same time.

(f)  If it shall be impractical in the opinion of the Trustee or SBC to make any publication of any notice required hereby in an Authorized Newspaper, any publication or other notice in lieu thereof which is made or given with the approval of the Trustee shall constitute a sufficient publication of such notice.

(g)  All other notices or communications will be in writing.

(h)  All notices or other communications given to the Trustee shall be effective when actually received by the Trustee.

SECTION 10.03   Communication by Holders with Other Holders.

The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the TIA.

SECTION 10.04   Certificate and Opinion as to Conditions Precedent.

Upon any request or application by SBC to the Trustee to take any action under this Indenture, SBC shall furnish to the Trustee:

(1)  an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2)  an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 10.05   Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall comply with the requirements of the TIA and shall include:

(1)  a statement that the person making such certificate or opinion has read such covenant or condition and related definitions;

(2)  a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3)  a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4)  a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

SECTION 10.06   Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or a meeting of Securityholders of one or more Series.  The Paying Agent or Registrar may make reasonable rules and set reasonable requirements for its functions.

SECTION 10.07   Legal Holidays.

A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open.  If a payment date or a date for conversion or exchange is a Legal Holiday at a place of payment, conversion or exchange, then such payment, conversion or exchange may be made at such place on the next succeeding day this is not a Legal Holiday with the same force and effect as if made on such date, and no interest shall accrue for the intervening period.

SECTION 10.08   Governing Law.

The laws of the State of New York shall govern this Indenture, the Securities and any coupons appertaining thereto without regard to principles of conflicts of laws.

SECTION 10.09   No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan or debt agreement of SBC or any Affiliate.  No such indenture, loan or debt agreement may be used to interpret this Indenture.

SECTION 10.10   No Recourse Against Others.

No director, officer, employee or stockholder, as such, of SBC shall have any liability for any obligation of SBC under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation.  Each Securityholder by accepting a Security waives and releases all such liability.  The waiver and release are part of the consideration for the issue of the Securities.

SECTION 10.11  Acts of Holders.

(a)  Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to SBC.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and SBC, if made in the manner provided in this Section.

(b)  The fact and date of the execution by any Person of any such instrument or writing may be provided by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof.  Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.  The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

(c)  The ownership of Unregistered Securities may be proved by the production of such Unregistered Securities or by a certificate executed by any trust company, bank, banker or other depository, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person has on deposit with such depository, or exhibited to it, the Unregistered Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Unregistered Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory.  The Trustee and SBC may assume that such ownership of any Unregistered Security continues until (i) another such certificate or affidavit bearing a later date issued in respect of the same Unregistered Security is produced, (ii) such Unregistered Security is produced to the Trustee by some other Person, (iii) such Unregistered Security is surrendered in exchange for a Registered Security or (iv) such Unregistered Security is no longer outstanding.  The ownership of Unregistered Securities may also be proved in any other manner which the Trustee deems sufficient.

(d)  The ownership of Registered Securities shall be proved by the Registrar.

(e)  Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or SBC in reliance thereon, whether or not notation of such action is made upon such Security.

SECTION 10.12   Execution in Counterparts.

This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one instrument.

SBC COMMUNICATIONS INC.

 By:   /s/ Donald E. Kiernan

Title:  Senior Vice President, 

Treasuer and Chief

Financial Officer  

(SEAL)

ATTEST:

/s/Wayne Wirtz

Title:  Assistant Secretary

THE BANK OF NEW YORK

 By:   /s/ Remo Reale

Title:  Assistant Vice President

(SEAL)

ATTEST:

/s/Mary LaGumina

Title: Assistant Vice President

EX-10.A

Exhibit 10-a

SHORT TERM INCENTIVE PLAN

Plan Effective:  January 1, 1984

                   Revisions Effective:  November 18, 2005

SHORT TERM INCENTIVE PLAN

1. Purpose.  The purpose of the Short Term Incentive Plan (the "Plan") is to provide Eligible Employees with incentive compensation based upon the achievement of financial, service, and operating performance levels and management effectiveness.

2. Definitions.  For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

Award Year.  "Award Year" shall mean the calendar year for which performance is used to determine one's award under the Plan.

Chairman.  "Chairman" shall mean the Chairman of the Board of AT&T Inc.

Committee.  "Committee" shall mean the Human Resources Committee of the Board of AT&T Inc.

Eligible Employee.  "Eligible Employee" shall mean an Officer and any other individual who is participating in the Plan as of September 1, 2005.  Notwithstanding the foregoing, the CEO of AT&T Inc. (CEO) may, from time to time, exclude any Officer or group of Officers from being an Eligible Employee under this Plan.  Further, an employee of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as eligible by the CEO.

Officer. "Officer" shall mean an individual who is designated as an officer of AT&T or of any AT&T subsidiary for compensation purposes on AT&T’s records.

Retirement. "Retirement" shall mean the termination of an Eligible Employee's employment with AT&T or any of its subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date a participant has attained age 55, and, for an individual who becomes a participant on or after January 1, 2002, has five (5) years of service, or (2) the date the Eligible Employee has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, 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

With respect to an Eligible Employee who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan - Nonbargained Program ("AT&TPBP") upon termination of Employment, the term "Retirement" shall include such Eligible Employee's termination of employment.

Termination Under EPR.  In determining whether an Eligible Employee’s termination of employment under the Enhanced Pension and Retirement Program (EPR) is a Retirement for purposes of this Plan, five years shall be added to each of age and net credited service (NCS).  If with such additional age and years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement Eligible according to the AT&T Supplemental Retirement Income Plan (SRIP) or (2) the Eligible Employee upon such termination of employment under EPR has attained one of the following combinations of age and service,

Actual NCS + 5 Years	Actual Age +5 Years
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

then such termination of employment shall be a Retirement for all purposes under this Plan and the Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a termination of employment which is a Retirement.

AT&T.  "AT&T" shall mean AT&T Inc.

3. Eligibility. Each Eligible Employee who during an Award Year was in active service may be eligible for an award under the Plan, as provided under Section 4 below.  Employees are not rendered ineligible by reason of being a member of the Board.

4. Awards. The Committee with respect to Officers, or the Chairman with respect to non-Officer Eligible Employees, shall approve a Target Award for each employee eligible for an award under the Plan for each Award Year that the Committee or the Chairman, as applicable, intends to make awards.

The Target Award applicable to an employee otherwise eligible for an award under the Plan for an Award Year shall be prorated over the Award Year or the employee shall be ineligible for an award, as follows:

(1)  become eligible or ineligible for an award under Plan or change from one eligible position to another after the beginning of the Award Year	prorate according to time of active service in each eligible position  to the nearest half month
(2)  inter-company transfers	prorate for each respective entities’ performance according to time of active service at each entity to the nearest half month
(3)  receipt of  Disability Benefits for more than three months in an Award Year	prorate to the day based on service while not receiving Disability Benefits
(4)  receipt of  Disability Benefits for three months or less in an Award Year	no reduction is applicable Target Award
(5)  Retirement	prorate to date of Retirement
(6)  leave of absence	prorate to date leave commences and from date leave ceases unless otherwise provided by the Committee or the Chairman, as applicable
(7)  death during an Award Year	prorate to date of death
(8)  dismissal for cause during or after an Award Year	no award
(9)  termination with severance payment	prorate to date of termination
(10)  resignation with no severance payment	no award
(11)  mandatory termination at age 65	Prorate to date of termination

A percentage of the Target Award for each Award Year to be distributed to the award recipient will be determined by the Committee, or Chairman, for Officers and non-Officer Eligible Employees, respectively, based upon achievement of performance levels during such Award Year of criteria established by the Committee, or the Chairman, respectively.

The criteria established by the Committee for Officers, or the Chairman with respect to non-Officer Eligible Employees, upon which the percentages of the Target Awards referred to above are determined shall give due regard, as the Committee, or the Chairman, as applicable, deems appropriate, to one or more of the following for the Award Year:

(a) Financial performance of AT&T, individual operating entities thereof and/or AT&T and its consolidated subsidiaries.

(b) Service performance of AT&T and of individual operating entities; or other appropriate operating performance criteria for entities where service performance is not relevant.

(c) Other criteria in lieu of or in addition to the above as determined by the Committee or the Chairman, as applicable.

The Committee then with respect to Officers, or the Chairman with respect to non-Officer Eligible Employees, shall determine the payout of Awards in such amounts and to such of the Eligible Employees as each may determine in its sole discretion.  Awards shall be paid in cash in the calendar year the awards are determined, except to the extent that an Eligible Employee has made an election to defer the receipt of such award pursuant to the AT&T Salary and Incentive Award Deferral Plan or other AT&T deferred compensation plan.

The award to be distributed to an individual may be more or less in the Committee's or the Chairman's discretion, as applicable, including no award, than the percentage of the Target Award determined for such individual; for example, the Committee or the Chairman, as applicable, may approve an award greater than the Target Award, adjusted for performance, based on individual performance.

5.         Adjustments.

(a) In order to assure the incentive features of the Plan and to avoid distortion in the operation of the Plan, the Committee or the Chairman, as applicable, may make adjustments in the criteria established for any Award Year, whether before or after the end of the Award Year, to the extent the Committee or the Chairman, as applicable, deems appropriate, to compensate for or reflect any extraordinary changes which may have occurred during the Award Year which significantly alter the basis upon which performance levels were determined.  Such changes may include, without limitation, changes in accounting practices, tax laws, or other laws or regulations, or economic changes not in the ordinary course of business cycles.

(b) In the event of any change in outstanding shares of AT&T by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee or the Chairman, as applicable, shall make such adjustments, if any, that the Committee or the Chairman, as applicable, deems appropriate in the performance levels established for any Award Year.

(c) The Senior Executive Vice President-Human Resources (or his or her successor) may approve a new Target Award for any Eligible Employee whose position is modified by changes in job responsibilities, reorganization, or otherwise; provided, however, such authority may not be exercised for positions with a total compensation market rate exceeding $2.0 million (in such a case the new Target Award shall be approved by the Committee).

6.             Other Conditions.

(a) No person shall have any claim to be granted an award under the Plan and there is no obligation for uniformity of treatment of Eligible Employees under the Plan.  Awards under the Plan may not be assigned or alienated.

(b) Neither the Plan nor any action taken hereunder shall be construed as giving to any employee the right to be retained in the employ of AT&T or any subsidiary thereof.

(c) AT&T or subsidiary thereof, as applicable, shall have the right to deduct from any award to be paid under the Plan any federal, state or local taxes required by law to be withheld with respect to such payment.

(d) Unless otherwise provided by the Committee, awards under the Plan shall be excluded in determining benefits under any pension, retirement, savings, disability, death, or other benefit plans of AT&T except where required by law.

7. Designation of Beneficiaries.  An Eligible Employee may designate pursuant to AT&T's Rules for Employee Beneficiary Designations as may hereafter be amended from time-to-time ("Rules"), which Rules shall apply hereunder and are incorporated herein by this reference, a beneficiary or beneficiaries to receive in case of the employee’s death all or part of the awards which may be made to the employee under the Plan.  A designation of beneficiary may be replaced by a new designation or may be revoked by the employee at any time.  A designation or revocation shall be on a form to be provided for the purpose and shall become effective only when filed with AT&T during the employee's lifetime with written acknowledgement of receipt from AT&T.  In case of the employee’s death, an award made under the Plan with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be paid to the designated beneficiary or beneficiaries.  Any award made to an employee who is deceased and not subject to such a designation shall be distributed in accordance with the Rules.

8.             Plan Administration.

(a) The Committee or the Chairman, as applicable, shall have full power to administer and interpret the Plan and to establish rules for its administration.  Awards under the Plan shall be conclusively determined by the Committee or the Chairman, as applicable.  Any determinations or actions required or permitted to be made by the Committee or the Chairman, as applicable, may be delegated by the Committee or the Chairman in its sole discretion.  The Committee or the Chairman, as applicable, or any delegate thereof, in making any determinations under or referred to in the Plan shall be entitled to rely on opinions, reports or statements of officers or employees of AT&T and/or of any subsidiary thereof and of counsel, public accountants and other professional or expert persons.

(b) The Plan shall be governed by the laws of the State of Texas and applicable Federal law.

9.   Modification or Termination of Plan.  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.  A modification may affect present and future Eligible Employees.

SHORT TERM INCENTIVE PLAN

ADMINISTRATIVE GUIDELINES

1. Purpose.  The purpose of these Guidelines is to outline the procedures to be followed in administering AT&T's Short Term Incentive Plan (the "Plan").

2. Award Process.  The Committee shall approve a Target Award for each eligible Officer.  The Chairman shall approve a Target Award for each non-Officer Eligible Employee.  These Target Awards are based on market-based rates established for each Eligible Employee and shall generally be established in January of the Award Year.

Annual financial and/or other performance objectives for Officers for an Award Year shall be approved by the Committee each year, generally in January of the Award Year.  Objectives for non-Officer Eligible Employees shall be approved by the Chairman.  Annual financial and/or other performance results (upon which the payment of Awards for Officers shall be based), maximum funding levels, and payout recommendations requiring Committee approval, will be submitted to and approved by the Committee after the Award Year is completed.  Results for non-Officer Eligible Employees shall be approved by the Chairman.

An individual’s Target Award will be prorated over the Award Year, if applicable, according to Section 4 of the Plan.

Target Awards will be adjusted for distribution based upon achievement during the Award Year, of the financial and/or other performance criteria established by the Committee or the Chairman, as applicable.  Discretionary awards may also be granted as described in Section 5, to be paid out of funds from the Discretionary Pools.

3. Performance Criteria.  The performance criteria established by the Committee or the Chairman, as applicable, may be one or more of the following:

·   Financial Performance Criteria

Achievement of Value Added objectives or other financial objectives (e.g., gross contributions, revenues, net income, operating contribution, etc.) will be used as financial performance criteria for all entities.

Value Added shall be a measure of earnings above a return required by investors (i.e., generally, net operating contribution less a capital charge).

Value Added or other financial measurement’s performance is determined after adjustment in accordance with the following:

In order to assure the incentive features of the Plan and to avoid distortion in the operation of the Plan, the Committee or the Chairman, as applicable, shall make adjustments in the criteria established for any Award Year, whether before or after the end of the Award Year to compensate for or reflect any extraordinary changes which may have occurred during the Award Year which alter the basis upon which performance levels were determined.  Such changes include the following:  accounting changes, extraordinary items, income from discontinued operations, and the impact of material events that have been publicly disclosed.

·   Other Performance Criteria

Other performance criteria may include, but are not limited to, Value Drivers, i.e., quantifiable operational and other indicators, such as revenue growth, customer or subscriber growth, operating margin, etc., that are tied to the strategy of the operating entity and are key barometers of value creation.

4. Funding.  Each year, a maximum funding level of 1.0 percent of reported AT&T net income (before any extraordinary loss and/or cumulative effect of changes in accounting principles) minus amounts paid as Key Executive Officer Short Term Award(s) pursuant to the 1996 Stock and Incentive Plan and/or the 2001 Incentive Plan shall be available to payment or awards under the Plan with respect to the preceding Award Year.

5. Distribution of Awards.  Awards for the preceding Award Year will generally be distributed after completion of the Award Year in accordance with the following paragraphs.  Distribution of all awards is subject to approval by the Committee or the Chairman, as applicable, generally obtained in January following the completion of an Award Year.

Formula-Driven Awards - -

The Committee, or the Chairman, as applicable, shall establish financial and/or other performance objectives for AT&T and such other entities as deemed appropriate by the Committee or the Chairman, as applicable.

A percentage of the Target Award for the preceding Award Year is paid to Officers and to non-Officer Eligible Employees in each entity based on the achievement of applicable financial and/or other performance results of their entity.

Discretionary Pools - -

After determination of formula-driven awards, the Committee for Officers and the Chairman for non-Officer Eligible Employees may establish Discretionary Pools to reward individuals and/or entities for exceptional performance.  Maximum funding available for Discretionary Pools is the maximum funding level described in Section 4 less the formula-driven amounts distributed.

The Committee or the Chairman, as applicable, will determine funding for each pool and provide guidelines for distribution of awards.  The following are examples of factors that may be considered:

·   Financial results above objective

·   Outstanding customer service results

·   Advancement of workforce diversity

·   Outstanding individual contribution

The Chairman will recommend to the Committee the discretionary awards for officers reporting directly to the Chairman.

6. Changes/Exceptions.  Changes in these Guidelines and exceptions to their provisions may be authorized by the Committee.

EX-10.B

SUPPLEMENTAL LIFE INSURANCE PLAN

Effective:  January 1, 1986

Revisions Effective: January 1, 2008

Revisions Effective:  January 29, 2009

SUPPLEMENTAL LIFE INSURANCE PLAN

1.   Purpose.  The purpose of the Supplemental Life Insurance Plan  ("Plan") is to allow for provision of additional survivor benefits for Eligible Employees.

2.   Definitions.  For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

Annual Base Salary or Annual Salary or Salary.

"Annual Base Salary" or "Annual Salary" or "Salary" shall mean an Eligible Employee's annual base salary rate determined by AT&T, excluding (1) all differentials regarded as temporary or extra payments and (2) all payments and incentive awards and distributions made either as a long term award or as a short term award; and such Salary shall be as before reduction due to any contribution pursuant to any deferred compensation plan or agreement provided by AT&T, including but not limited to compensation deferred in accordance with Section 401(k) of the Internal Revenue Code.  Annual Salary or Salary shall mean an annualized amount determined from an Eligible Employee's Annual Base Salary rate.

Beneficiary.  "Beneficiary" shall mean any beneficiary or beneficiaries designated by the Eligible Employee pursuant to the AT&T Rules for Employee Beneficiary Designations as may hereafter be amended from time-to-time ("Rules").

BSLIP Offset.  "BSLIP Offset" shall equal the sum of the amounts (1) and (2) described below:

an amount of level death benefit that would be paid under the participant’s BellSouth Supplemental Life Insurance Plan ("BSLIP") policy(ies) as if the participant had restructured such policy(ies) based on the December 31, 2008 cash value to provide a level death benefit assuming no additional premium payments to the policy(ies), as calculated by the BSLIP administrator during 2008 and communicated to each active officer;

or,

an amount of level death benefit that would be paid under the participant’s Cingular Wireless BLS Executive Transition Supplemental Life Insurance Plan policy(ies) as if the participant had restructured such policy(ies) based on the December 31, 2007 cash value to provide a level death benefit assuming no additional premium payments to the policy(ies), as calculated by the BSLIP administrator during 2008 and communicated to each active officer;

and

an amount equal to the death benefit provided under the participant’s BellSouth Split Dollar Life Insurance Plan policy(ies) as of December 31, 2008 and Cingular Wireless BLS Executive Transition Split Dollar Life Insurance Plan policy(ies) as of December 31, 2007.

This sum is applied as an offset to this Plan as described in Section 4, regardless of whether or not the participant actually restructured his policy or made other decisions regarding such BellSouth and Cingular policy(ies).

BSLIP Retiree Offset.  "BSLIP Retiree Offset" shall equal the sum of the amounts (1) and (2) described below:

an amount equal to the death benefit provided under the participant’s BellSouth Supplemental Life Insurance Plan policy(ies) as if the participant died on December 31, 2008;

and

(2)an amount equal to the death benefit that was provided under the participant’s BellSouth Split Dollar Life Insurance policy(ies) as if the participant died on his BSLIP retirement date.

This amount is applied as an offset to this Plan as described in Section 4.

Chairman.  "Chairman" shall mean the Chairman of the Board of AT&T Inc.

Committee.  "Committee" shall mean the Human Resources Committee of the Board of AT&T Inc.

Eligible Employee.  "Eligible Employee" shall mean an Officer and any other individual who is participating in the Plan as of September 1, 2005.  Notwithstanding the foregoing, the CEO may, from time to time, exclude any Officer or group of Officers from being an "Eligible Employee" under this Plan.  Further, an employee of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as eligible by the CEO.

ELIP Offset.  "ELIP Offset" shall equal an amount of level death benefit that would be paid under the participant’s AT&T Supplemental Life Insurance Program (“ELIP”) policy as if the participant had restructured his ELIP policy based on the December 31, 2007 cash value to provide a level death benefit assuming no additional premium payments to the policy, as calculated by the ELIP administrator during 2007 and communicated to each active officer participating in ELIP.  This amount is applied as an offset to this Plan as described in Section 4, regardless of whether or not the participant actually restructured his policy or made other decisions regarding such ELIP policy.  

Insurance Contract.  "Insurance Contract" shall mean a contract(s) of life insurance insuring the life of the Eligible Employee entered into by AT&T.

Officer.  "Officer" shall mean an individual who is designated as an officer of AT&T or of any AT&T subsidiary for compensation purposes on AT&T’s records.

Retirement. "Retirement" shall mean the termination of an Eligible Employee's employment with AT&T or any of its subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date a participant has attained age 55, and, for an individual who becomes a participant on or after January 1, 2002, has five (5) years of service, or (2) the date the Eligible Employee has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, 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

With respect to an Eligible Employee who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan - Nonbargained Program ("ATTPBP") upon termination of Employment, the term "Retirement" shall include such Eligible Employee's termination of employment.

Termination Under EPR.  In determining whether an Eligible Employee’s termination of employment under the Enhanced Pension and Retirement Program (“EPR”) is a Retirement for purposes of this Plan, five years shall be added to each of age and net credited service (“NCS”).  If with such additional age and years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement Eligible according to the AT&T Supplemental Retirement Income Plan (“SRIP”) or (2) the Eligible Employee upon such termination of employment under EPR has attained one of the following combinations of age and service,

Actual NCS + 5 Years	Actual Age +5 Years
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

then such termination of employment shall be a Retirement for all purposes under this Plan and the Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a termination of employment which is a Retirement.

AT&T.  "AT&T" shall mean AT&T Inc.

3.   Eligibility. Each Eligible Employee shall be eligible to participate in the Plan

4.   Pre-Retirement Benefits and Post-Retirement Benefits.

Basic Death Benefit

While this plan is in effect, the Beneficiary who is designated by the Eligible Employee shall be entitled to receive as a Basic Death Benefit from the proceeds of the Insurance Contract an amount equal to the result of multiplying the Eligible Employee's Annual Salary rounded to the next higher $1,000 by the following amounts:

Chief Executive Officer	2
Other Eligible Employees	1

This amount shall be reduced (but not below zero) by any amount payable under any group term life insurance covering the Eligible Employee which is maintained by AT&T, which amount of group term life insurance will be limited to a maximum of $50,000.

In addition, the Basic Death Benefit will be reduced (but not below zero) by the ELIP Offset amount, BSLIP Offset amount or BSLIP Retiree Offset amount.

Furthermore, any officer who becomes eligible to participate in this Plan on or after the date that an ELIP Offset, BSLIP Offset or BSLIP Retiree Offset has been determined by the ELIP or BSLIP plan administrator, as applicable, will have his Basic Death Benefit reduced accordingly by such offset amount.

The amount of Basic Death Benefit payable hereunder will automatically increase if pay increases.

At Retirement, the pre-retirement benefit converts to a post-retirement benefit.  This benefit is equal to one times Salary rounded to the next higher $1,000 (at the time of retirement) and shall be reduced (but not below zero) by any amount payable under any group term life insurance covering the Eligible Employee which is maintained by AT&T, which amount of group term life insurance will be limited to a maximum of $50,000; provided, however, for an executive who first becomes a Plan participant on or after January 1, 1998, this post-retirement death benefit shall be reduced by 10% of its original post-retirement amount each year for five years beginning at the later of the date the Eligible Employee attains age 65 or Retirement.

Optional Supplementary Benefit

Subject to the limitations in the remaining paragraphs in this section describing optional supplementary benefits, each Eligible Employee may also purchase optional supplementary pre-retirement life insurance coverage from AT&T in an amount equal to one times the Eligible Employee’s Annual Salary rounded to the next higher $1,000, and an additional amount of such insurance in an amount equal to another one times such amount (for a total of two times the Annual Salary rounded to the next higher $1,000), which insurance shall be payable from the proceeds of the Insurance Contract.  Each such amount of insurance ("one times salary") continued until such employee reaches age 65, by continuing to contribute for it, shall entitle the beneficiary under the Insurance Contract to receive an amount from the proceeds of such Insurance Contract equal to one times the Eligible Employee’s final Annual Salary rounded to the next higher $1,000, when such Eligible Employee dies after Retirement.

No ELIP Offset, BSLIP Offset, nor BSLIP Retiree Offset will reduce the amount of Optional Supplementary Benefit for any participant.

To elect this optional supplementary coverage, the Eligible Employee must complete an enrollment form on which he or she specifies the amount of coverage he or she wishes to purchase and authorizes his or her employing company to deduct his or her contributions for coverage from his or her salary.

An Eligible Employee may not elect this coverage while receiving disability benefits under any Company disability benefit plan.

An Eligible Employee must make his or her election to purchase optional supplementary coverage within three calendar months of being declared eligible to participate in the Plan; except any Eligible Employee who was declared an Eligible Employee before October 1, 1997, shall have until December 31, 1997 to enroll for such optional supplementary coverage or to increase such coverage.

The optional supplementary life insurance is effective upon AT&T's binding of life insurance coverage for the Eligible Employee pursuant to an Insurance Contract.

Effective January 1, 1998, once an Eligible Employee enrolls for optional supplementary coverage, he or she can later decrease or terminate such coverage but never increase or reinstate such coverage.

Regardless of the amount of coverage elected, the amount in force will automatically increase if Salary increases.  The cost for this coverage will increase accordingly.

This optional supplementary life insurance is paid for on a contributory basis by those Eligible Employees who enroll in the coverage.  The cost of coverage, and therefore, how much an Eligible Employee contributes, depends on age and the amount of coverage and shall be as determined by AT&T.  There will be no periodic waiver of premium payments.

In the event of death, the Eligible Employee’s optional supplementary life insurance benefit will be paid to the Eligible Employee’s Beneficiary or Beneficiaries in a lump sum, unless the Salary Continuation Death Benefit form of payment was elected on the Eligible Employee’s enrollment form.  The option to elect other than a lump sum payment is limited to an Eligible Employee who became an Eligible Employee on or before January 1, 1998.  If the Eligible Employee has no surviving beneficiaries, the benefit will be paid in a lump sum in accordance with the Rules.

The optional supplementary life insurance coverage hereunder will automatically continue while an Eligible Employee is receiving disability benefits under any AT&T disability benefit plan, provided the Eligible Employee continues his or her contributions.

If an Eligible Employee terminates employment with AT&T or any of its subsidiaries for any reason other than Retirement, this coverage will stop at the end of the month of termination; provided, however, Eligible Employees who are 65 at the time of their termination will continue to have non-contributory unreduced coverage after age 65.

Alternate Death Benefit

Alternate death benefit coverage shall only be available to an Eligible Employee who became an Eligible Employee before January 1, 1998.  Such Eligible Employees shall be entitled to elect to receive alternate death benefit life insurance coverage; provided such election is made before January 1, 1998.

Under such coverage, an Eligible Employee’s Beneficiary or Beneficiaries will be entitled to receive from the proceeds of the Insurance Contract a payment equal to the Eligible Employee’s final Annual Salary upon his or her death.  This benefit will not be rounded to the next higher $1,000.  The amount of insurance in force will automatically increase if salary increases.  Coverage applies to death from any cause, except with respect to an on-the-job accident for which an Eligible Employee is protected while an active employee by any Accident Death Benefit feature of the ATTPBP.

By enrolling in this coverage, an Eligible Employee automatically waives his or her eligibility for any Sickness Death Benefit and Pensioner Death Benefits otherwise payable under the ATTPBP.

The coverage provided by the alternate death benefit life insurance coverage will continue after Retirement.

To elect this coverage, an Eligible Employee must complete an irrevocable enrollment and waiver form.

AT&T pays the full cost of the alternate death benefit life insurance coverage.

The insurance benefit provided under this alternate death benefit life insurance will be paid in a lump sum, unless otherwise elected on the Eligible Employee's enrollment form.

Alternate death benefit coverage ceases upon an Eligible Employee's Termination of Employment other than a Retirement.  This alternate death benefit life insurance may not be converted to an individual policy.

Salary Continuation Death Benefit.

The salary continuation death benefit shall only be available under the conditions specified hereunder, to an Eligible Employee who became an Eligible Employee before January 1, 1998.

By a written election filed with AT&T before January 1, 1998, an Eligible Employee may terminate his or her rights to a Basic Death Benefit and/or to Optional Supplementary Coverage (if any) and/or to an Alternate Death Benefit (if any).

If such an election is filed, and the Eligible Employee dies on or after the first day of the calendar year following the year in which such election is filed and prior to the termination of coverage pursuant to Section 7, the Eligible Employee's Beneficiary or Beneficiaries theretofore named shall be paid by AT&T an amount per annum for ten (10) years which amounts, in the aggregate, have a net present value, using an eleven percent (11%) discount rate, equal to one hundred eight-five percent (185%) of the (i)Basic Death Benefit amount and/or (ii) the amount elected as Optional Supplementary coverage(if any) and/or  (iii) the amount elected as an Alternate Death Benefit (if any)  which would be payable to his or her Beneficiary or Beneficiaries as of the date of the Eligible Employee's  death, and no other benefit shall be payable hereunder as either a Basic Death Benefit, Optional Supplementary Coverage or Alternate Death Benefit . Such payment(s) shall commence no later than sixty (60) days following the date of the Eligible Employee's death.

On or after January 1, 1998, an Eligible Employee who has elected death benefits in the form of salary continuation pursuant to this Section may cancel such election and have his or her Beneficiaries receive death benefits as insurance in a lump-sum but, an Eligible Employee who cancels his or her salary continuation election may not thereafter re-elect such option.

Survivor Annuity Equivalent

Additionally, each Eligible Employee who is not eligible for the Immediate Automatic Pre-retirement Survivor Annuity of the ATTPBP (or equivalent thereof) shall be eligible hereunder for a Survivor Annuity Equivalent benefit of one times salary payable to the surviving spouse of such Eligible Employee.  Such benefit shall be paid as follows: an amount per annum for ten (10) years shall be paid to the Eligible Employee's surviving spouse which amounts, in the aggregate, shall have a net present value, using an eleven percent (11%) discount rate, equal to one hundred eighty-five percent (185%) of one times the Eligible Employee's salary at the time of his or her death; provided, however, no such Survivor Annuity Equivalent payments will be made on or after the date of death of the surviving spouse.  Such payments shall commence no later than sixty (60) days following the date of the Eligible Employee's death.

For the purposes of the Survivor Annuity Equivalent, the Eligible Employee's surviving spouse means a spouse legally married to the Eligible Employee at the time of the Eligible Employee's death.

Eligibility for the Survivor Annuity Equivalent shall automatically cease on the date of termination of the Eligible Employee's employment.  If the Eligible Employee becomes totally disabled prior to Retirement, the Eligible Employee shall continue to be eligible for the Survivor Annuity Equivalent until the expiration of disability benefits.  If the Eligible Employee is granted a leave of absence, other than for military service of more than four weeks, the Eligible Employee shall continue to be eligible for the Survivor Annuity Equivalent during such leave of absence.

The Eligible Employee shall cease to be eligible for the Survivor Annuity Equivalent at the conclusion of the day immediately preceding the date the Eligible Employee becomes eligible for the Immediate Automatic Pre-retirement Survivor Annuity of the ATTPBP.

5.   Incidents of Ownership.  AT&T will be the owner and hold all the incidents of ownership in the Insurance Contract, including the right to dividends, if paid.  The Eligible Employee may specify in writing to AT&T, the Beneficiary or Beneficiaries and the mode of payment for any death proceeds not in excess of the amounts payable under this Plan.  Upon receipt of a written request from the Eligible Employee, AT&T will immediately take such action as shall be necessary to implement such Beneficiary appointment. Any balance of proceeds from the Insurance Contract not paid as either a Basic Death Benefit or otherwise pursuant to the Plan shall be paid to AT&T.

6.   Premiums.  All premiums due on the Insurance Contract shall be paid by AT&T.  However, the Eligible Employee agrees to reimburse AT&T by January 31 following the date of each premium payment in an amount such that, for Federal Income Tax purposes the reimbursement for each year is equal to the amount which would be required to be included in the Eligible Employee's income for Federal Income Tax purposes by reasons of the "economic benefit" of the Insurance Contract provided by AT&T; provided, however, that AT&T, in its sole discretion, may decline to accept any such reimbursement and require the inclusion of such "economic benefit" in the Eligible Employee's  income.  In its discretion AT&T may deduct the Eligible Employee's portion of the premiums from the Eligible Employee's pay. For purposes of this Plan, the value of the “economic benefit” shall be determined based on the insurers published premium rates available to all standard risks for initial issue one-year term insurance in compliance with Revenue Rulings 66-110 and 67-154 issued by the Internal Revenue Service.

7.   Termination of Coverage.  An Eligible Employee's coverage under this Plan shall terminate immediately when the Eligible Employee realizes an "Event of Termination" which shall mean any of the following:

(a)   Termination of an Eligible Employee's employment with his or her employing company for any reason other than (i) death, (ii) Disability as such term is defined in the SRIP, or (iii) Retirement.

(b)   In the case of an Eligible Employee who terminates employment by reason of a disability but who does not realize an Event of Termination because of Section 7a(ii) above, a termination of the Eligible Employee's total Disability that is not accompanied by either a return to employment with his or her employing company or the Eligible Employee's death or Retirement.

(c)   Except in the case of an Eligible Employee who has theretofore terminated employment for a reason described in Section 7a(ii) or (iii) above, AT&T elects to terminate the Eligible Employee's coverage under the Plan by a written notice to that effect given to the Eligible Employee.  AT&T shall have no right to amend the Plan or terminate the Eligible Employee's coverage under the Plan with respect to an Eligible Employee who has theretofore terminated employment for a reason described in Section 7a(ii) or (iii) above without the written consent of the Eligible Employee.

8.   Non-Competition.  Notwithstanding any other provision of this Plan, no coverage shall be provided under this Plan with respect to any Eligible Employee who shall, without the written consent of AT&T, and while employed by AT&T or any subsidiary thereof, or within three (3) years after termination of employment from AT&T or any subsidiary thereof, engage in competition with AT&T or any subsidiary thereof or with any business with which a subsidiary of AT&T or an affiliated company has a substantial interest (collectively referred to herein as "Employer business").  For purposes of this Plan, engaging in competition with any Employer business shall mean engaging by Eligible Employee in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business.  Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business.  However, engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business.  Accordingly, coverage shall not be provided under this Plan if, within the time period and without the written consent specified, Eligible Employee either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties the Eligible Employee takes and regardless of whether or not the employing company, or the company that Eligible Employee becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

9.   Restriction on Assignment.  The Eligible Employee may assign all or any part of his or her right, title, claim, interest, benefits and all other incidents of ownership which he or she may have in the Insurance Contract to any other individual or trustee, provided that any such assignment shall be subject to the terms of this Plan; except neither the Eligible Employee nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable  as a Salary Continuation Death Benefit hereunder , which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable as a Salary Continuation Death Benefit hereunder shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Eligible Employee or any other person, nor be transferable by operation of law in the event of the Eligible Employee's or any other person’s bankruptcy or insolvency.  Except as provided in this Section 8, no assignment or alienation of any benefits under the Plan will be permitted or recognized.

10.   Unsecured General Creditor.  Except to the extent of rights with respect to the Insurance Contract in the absence of an election to receive benefits in Salary Continuation Death Benefit form, the Eligible Employee and his or her Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of AT&T, nor shall they be beneficiaries, or have any rights, claims or interests in, any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by AT&T ("Policies"); such Policies or other assets of AT&T shall not be held under any trust for the benefit of the Eligible Employee , his or her designated beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of AT&T under this Agreement; any and all of AT&T’s assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of AT&T; AT&T shall have no obligation to acquire any Policies or any other assets; and AT&T’s obligations under this Agreement shall be merely that of an unfunded and unsecured promise of AT&T to pay money in the future.

11.   Employment Not Guaranteed.  Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving the Eligible Employee any right to be retained in the employ of any AT&T company.

12.   Protective Provisions.  The Eligible Employee will cooperate with AT&T by furnishing any and all information requested by AT&T, in order to facilitate the payment of benefits hereunder, taking such physical examinations as AT&T may deem necessary and taking such other relevant action as may be requested by AT&T, in order to facilitate the payment of benefits hereunder.  If the Eligible Employee refuses so to cooperate, the Eligible Employee's participation in the Plan shall terminate and AT&T shall have no further obligation to the Eligible Employee or his or her designated Beneficiary hereunder.  If the Eligible Employee commits suicide during the two-year period beginning on the date of eligibility under the Plan, or if the Eligible Employee makes any material misstatement of information or nondisclosure of medical history, then no benefits will be payable by reason of this Plan to the Eligible Employee or his or her designated Beneficiary, or in AT&T’s sole discretion, benefits may be payable in a reduced amount.

13.   Change in Status.  In the event of a change in the employment status of an Eligible Employee to a status in which he or she is no longer an Eligible Employee under the Plan, such Eligible Employee shall immediately cease to be eligible for any benefits under this Plan; provided, however, such survivor benefits as would be available to such employee by reason of his or her new status but which do not automatically become effective upon attainment of such new status shall continue to be provided under this Plan until such benefits become effective or until such employee has had reasonable opportunity to effectuate such benefits but has failed to take any requisite action necessary for such benefits to become effective.

14.   Named Fiduciary.  If this Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA), AT&T is the "named fiduciary" of the Plan.

15.   Applicable Law.  This Plan and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Texas to the extent such law is not preempted by ERISA.

16.   Administration of the Plan.  The Committee shall be the sole administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms.  The Committee shall further establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan.  All decisions of the Committee shall be binding.

17.   Relation to Prior Plans.  This Plan supersedes and replaces prior Senior Management Survivor Benefit, Senior Management Supplementary Life Insurance, and Senior Management Alternate Death Benefit Life Insurance Plans as in effect prior to January 1, 1986, except such plans shall continue to apply to Eligible Employees who retired before January 1, 1986; provided, however, that with respect to those Eligible Employees who retired during calendar year 1986 by reason of the fact of attaining age 65, the Post-Retirement Benefit provided pursuant to the  Senior Management Survivor Benefit Plan as in effect prior to January 1, 1986, shall continue to apply and the post-retirement benefit provided under the Basic Death Benefit portion hereof shall not apply.

Effective January 1, 2008, this Plan supersedes and replaces the Cingular Wireless SBC Executive Transition Life Insurance Plan (the “Cingular Plan”), and all policies issued under the Cingular Plan shall be transferred to and governed by the Plan.

18.   Amendments and Termination.  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations. A modification or Plan termination may affect present and future Eligible Employees; provided, however, that no modification shall be made to this Plan with respect to an Eligible Employee who terminates employment for reason of disability or Retirement), nor shall a termination of the Plan operate so as to be applicable to such an individual, without the written consent of the Eligible Employee.

EX-10.C

Exhibit 10-c

SUPPLEMENTAL RETIREMENT INCOME PLAN

Effective:  January 1, 1984

Revisions Effective:  December 31, 2008

SUPPLEMENTAL RETIREMENT INCOME PLAN

1   Purpose.

The purpose of the Supplemental Retirement Income Plan ("Plan") is to provide Eligible Employees with retirement benefits to supplement benefits payable pursuant to AT&T's qualified group pension plans.

Except as provided in this paragraph, no benefits shall accrue under this Plan after December 31, 2004.  The Plan shall be applied and interpreted consistent with Treasury Regulations issued under Code Section 409A(e)(1) so that no benefit hereunder is an amount deferred after December 31, 2004 and the Plan is not subject to the provisions of Code Section 409A; provided, however, a Participant’s Age shall be determined as of December 31, 2008, or, if earlier, the Participant’s Termination of Employment.  The Administrative Committee shall have discretionary authority to interpret this Plan consistent with this Section 1, and the Committee’s determination shall be final and conclusive.

A Participant’s accrued benefit hereunder as of December 31, 2004 shall equal the present value as of December 31, 2004 of the amount to which a Participant would be entitled under this Plan assuming the Participant voluntarily terminated employment without cause on December 31, 2004 and received a full payment of his or her SRIP benefits on the earliest possible date allowed hereunder following such deemed Termination of Employment, but only to the extent such SRIP benefits are earned and vested as of December 31, 2004.  For purposes of such calculation, a Participant’s Years of Service and Final Average Earnings shall be determined as of December 31, 2004, and a Participant’s Age shall be determined as of December 31, 2008, or, if earlier, the Participant’s Termination of Employment.

2   Definitions.

For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

Administrative Committee. "Administrative Committee" means a Committee consisting of the Senior Executive VicePresident-Human Resources and two or more other members designated by the Senior Executive Vice President-Human Resources who shall administer the Plan.

Agreement.  "Agreement" means the written agreement (substantially in the form attached to this Plan as Attachment A) that shall be entered into between AT&T by the Senior Executive Vice President-Human Resources and a Participant to carry out the Plan with respect to such Participant.  Entry into a new Agreement shall not be required upon amendment of the Plan or upon an increase in a Participant's Retirement Percent (which increase shall nevertheless be utilized to determine the Participant's benefits hereunder even though not reflected in the Participant's Agreement), except entry into a new Agreement shall be required in the case of an amendment which alters, to the detriment of a Participant, the benefits described in this Plan as applicable to such Participant (See Section 6.5).  Such new Agreement shall operate as the written consent required by Section 6.5 of the Participant to such amendment.

Beneficiary.  "Beneficiary" shall mean any beneficiary or beneficiaries designated by the Eligible Employee pursuant to the AT&T Rules for Employee Beneficiary Designations as may hereafter be amended from time-to-time ("Rules").

Chairman.  "Chairman" shall mean the Chairman of the Board of AT&T Inc.

Disability.  "Disability" means any Termination of Employment prior to being Retirement Eligible (without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older) that the Administrative Committee, in its complete and sole discretion, determines is by reason of a Participant's total and permanent disability.  The Administrative Committee may require that the Participant submit to an examination by a competent physician or medical clinic selected by the Administrative Committee.  On the basis of such medical evidence, the determination of the Administrative Committee as to whether or not a condition of total and permanent disability exists shall be conclusive.

Earnings.  "Earnings" means for a given calendar year the Participant's: (1) bonus earned as a short term award during the calendar year but not exceeding 200% of the target amount of such bonus (or such other portion of the bonus or target bonus as may be determined by the Human Resources Committee of the Board of AT&T), plus (2) base salary before reduction due to any contribution pursuant to any deferred compensation plan or agreement provided by AT&T, including but not limited to compensation deferred in accordance with Section 401(k) of the Internal Revenue Code.  Notwithstanding anything herein to the contrary, “Earnings” shall not include any amounts earned or paid on or after January 1, 2005.

Eligible Employee. "Eligible Employee" means an Officer or a non-Officer employee of any AT&T company who is designated by the Chairman as eligible to participate in the Plan.  Effective on and after July 1, 1994, only an Officer may become an Eligible Employee.  Notwithstanding the foregoing, the Chairman, may, at any time and from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this plan.

Final Average Earnings.  "Final Average Earnings" means the average of the Participant's Monthly Earnings for the thirty-six (36) consecutive months out of the one hundred twenty (120) months next preceding January 1, 2005 which yields the highest average earnings.  If the Participant has fewer than thirty-six (36) months of employment prior to January 1, 2005, the average shall be taken over his or her period of employment prior to January 1, 2005.

GAAP Rate.  "GAAP Rate" means the interest rate used for valuing Plan liabilities on the immediately preceding December 31 and periodic pension expense for the calendar year for purposes of AT&T's financial statement reporting requirements for the referenced period.

Immediate Annuity Value. "Immediate Annuity Value" means the annual amount of annuity payments that would be paid out of a plan on a single life annuity basis if payment of the plan's benefit was commenced immediately upon Termination of Employment, notwithstanding the form of payment of the plan's benefit actually made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such benefit.

Mid-Career Hire.  “Mid-Career Hire” means an individual (i) initially hired or rehired at age 35 or older into a position eligible for benefits under this Plan or (ii) initially hired or rehired at age 35 or older who is subsequently promoted to a position eligible for benefits under this Plan.

Monthly Earnings.  "Monthly Earnings" means one-twelfth (1/12) of Earnings.

Mortality Tables.  "Mortality Tables" means the mortality tables as defined by Code Section 417(e) for valuing minimum lump sum benefits payable from qualified pension plans for the referenced period.

Officer. "Officer" shall mean an individual who is designated as an officer level Employee for compensation purposes on the records of AT&T.

Participant.  A "Participant" means an Eligible Employee who has entered into an Agreement to Participate in the Plan.

Retire or Retirement.  "Retire" or "Retirement" shall mean the Termination of Employment of an Eligible Employee for reasons other than death, on or after the earlier of the following dates:  (1) the date the Eligible Employee is Retirement Eligible or (2) the date the Eligible Employee has attained one of the following combinations of age and service at Termination of Employment on or after April 1, 1997, 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

With respect to an Eligible Employee who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan - Nonbargained Program ("ATTPBP") upon Termination of Employment, the term "Retirement" shall include such Eligible Employee's Termination of Employment.

Retirement Eligible.  "Retirement Eligible" or "Retirement Eligibility" means that a Participant has attained age 55 and, for an individual who becomes a Participant on or after January 1, 2002, has five (5) Years of Service. Note:  Any reference in any other AT&T plan to a person being eligible to retire with an immediate pension pursuant to the AT&T Supplemental Retirement Income Plan shall be interpreted as having the same meaning as the term Retirement Eligible.

Retirement Percent.  "Retirement Percent" means the percent specified in the Agreement with the Participant which establishes a Target Retirement Benefit (see Section 3.1) as a percentage of Final Average Earnings.

AT&T.  "AT&T" means AT&T Inc.

Service Factor.  "Service Factor" means, unless otherwise agreed in writing by the Participant and AT&T, either (a) a deduction of 1.43 percent, or .715 percent for Mid-Career Hires, multiplied by the number by which (i) thirty-five (or thirty in the case of an Officer) exceeds (ii) the number of Years of Service of the Participant determined as of December 31, 2004, or (b) a credit of 0.715 percent multiplied by the number by which (i) the number of Years of Service of the Participant determined as of December 31, 2004 exceeds (ii) thirty-five (or thirty in the case of an Officer).  For purposes of the above computation, a deduction shall result in the Service Factor being subtracted from the Retirement Percent whereas a credit shall result in the Service Factor being added to the Retirement Percent.

Termination of Employment.  "Termination of Employment" means the ceasing of the Participant's employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily.

Year.  A "Year" is a period of twelve (12) consecutive calendar months.

Years of Service.  "Years of Service" means the number of each complete years of continuous, full-time service as an employee beginning on the date when a Participant first began such continuous employment with any AT&T company and on each anniversary of such date, including service prior to the adoption of this Plan.

3   Plan ("SRIP") Benefits.

    3.1   Termination of Employment/Vesting.

With respect to (1) a person who becomes a Participant prior to January 1, 1998, or (2) a person who prior to January 1, 1998 is an officer of a Pacific Telesis Group ("PTG") company and becomes a Participant after January 1, 1998, upon such a Participant's Termination of Employment, AT&T shall pay to such Participant a SRIP Benefit in accordance with Section 3.3.  The amount of such SRIP Benefit is calculated as follows:

    Final Average Earnings

x  Revised Retirement Percentage

= Target Retirement Benefit

 - Immediate Annuity Value of any AT&T/PTG Qualified Pensions as of December 31, 2004

 - Immediate Annuity Value of any other AT&T/PTG Non-Qualified Pensions as of December 31, 2004

= Target Benefit

-  Age Discount

= Annual Value of Life with 10 Year Certain SRIP Benefit immediately payable upon Termination of Employment

With respect to a person who is appointed an Officer and becomes a Participant on or after January 1, 1998, upon such a Participant's Termination of Employment, AT&T shall pay to such Participant a SRIP Benefit in accordance with Section 3.3.  The amount of such SRIP Benefit is calculated as follows:

Final Average Earnings

x  Revised Retirement Percentage

= Target Retirement Benefit

-  Age Discount

= Discounted Target Benefit

 - Immediate Annuity Value of any AT&T/PTG Qualified Pensions as of December 31, 2004

- Immediate Annuity Value of any AT&T/PTG Non-Qualified Pensions, as of December 31, 2004

=  Annual Value of Life with 10 Year Certain SRIP Benefit immediately payable upon Termination of Employment

Where in both of the above cases the following apply:

 (a) Revised Retirement Percentage = Retirement Percent + Service Factor.

(b) For purposes of determining the Service Factor, the Participant's actual Years of Service as of the earlier of the date of Termination of Employment or December 31, 2004, to the day, shall be used.

(c)  For purposes of determining the Final Average Earnings, the Participant's Earnings history prior to January 1, 2005 shall be used.

(d)  Age Discount means the Participant's SRIP Benefit shall be decreased by five-tenths of one percent (.5%) for each month that December 31, 2008, or, if earlier, the Participant’s Termination of Employment, precedes the date on which the Participant will attain age 60.

Notwithstanding the foregoing, if, at the earlier of the time of Termination of Employment or December 31, 2004, the Participant is, or has been within the one year period immediately preceding Participant's Termination of Employment, an Officer with 30 or more Years of Service such Participant's Age Discount shall be zero.

Except to true up for an actual short term award paid following Termination of Employment and prior to December 31, 2004, there shall be no recalculation of the value of a Participant's SRIP Benefit following a Participant's Termination of Employment.

If a Participant who has commenced payment of his or her SRIP Benefit dies, his or her Beneficiary shall be entitled to receive the remaining SRIP Benefit in accordance with the Benefit Payout Alternative elected or deemed elected by the Participant or to make the same elections that the Participant could have made as of the day immediately preceding the Participant’s death.  If the Participant had elected a lump sum benefit, such Beneficiary may make an election under Section 3.6.  If a Participant dies while in active service, Section 4 shall apply.

Notwithstanding any other provision of this Plan, upon any Termination of Employment of the Participant for a reason other than death or Disability, AT&T shall have no obligation to the Participant under this Plan if the Participant has less than 5 Years of Service at the time of Termination of Employment.

3.2   Disability.

Upon a Participant's Disability and application for benefits under the Social Security Act as now in effect or as hereinafter amended, the Participant will continue to accrue Years of Service during his or her Disability until the earliest of his or her:

 (a) Recovery from Disability,

(b)  Retirement (determined without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older), or

(c)  Death.

Upon the occurrence of either (a) Participant's recovery from Disability prior to his or her Retirement Eligibility if Participant does not return to employment, or (b) Participant's Retirement (determined without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older), the Participant shall be entitled to receive a SRIP Benefit in accordance with Section 3.1.

For purposes of calculating the foregoing benefit, the Participant's Final Average Earnings shall be determined using his or her Earnings history as of the date of his or her Disability.

If a Participant who continues to have a Disability dies prior to his or her Retirement Eligibility (without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older), the Participant will be treated in the same manner as if he or she had died while in employment (See Section 4.1).

3.3   Benefit Payout Alternatives.

The normal form of a Participant's benefits hereunder shall be a Life with 10-Year Certain Benefit as described in Section 3.3(a).  However, a Participant may elect in his or her Agreement or in a subsequently filed election to convert his or her benefits hereunder, into one of the Benefit Payout Alternatives described in Section 3.3(b), 3.3(c) or 3.3(d).

 (a) Life with a 10-Year Certain Benefit.  An annuity payable during the longer of (i) the life of the Participant or (ii) the 10-year period commencing on the date of the first payment and ending on the day next preceding the tenth anniversary of such date (the "Life With 10-Year Certain Benefit").  If a Participant who is receiving a Life with 10-Year Certain Benefit dies prior to the expiration of the 10-year period described in this Section 3.3(a), the Participant's Beneficiary shall be entitled to receive the remaining Life With 10-Year Certain Benefit installments which would have been paid to the Participant had the Participant survived for the entire such 10-year period.

(b)  Joint and 100% Survivor Benefit.  A joint and one hundred percent (100%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to one hundred percent (100%) of the amount payable during the Participant's life, for life (the "Joint and 100% Survivor Benefit").

(c)  Joint and 50% Survivor Benefit.  A joint and fifty percent (50%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to fifty percent (50%) of the amount payable during the Participant's life, for life (the "Joint and 50% Survivor Benefit").

(d)  Lump Sum Benefit.  Effective for a Termination of Employment on or after June 19, 2001, if the Participant has attained the age of fifty-five years as of his or her Termination of Employment, the Participant is eligible to receive a lump sum benefit as described in Section 3.4.

The Benefit Payout Alternatives described in Section 3.3(b), 3.3(c) and 3.3(d) shall be the actuarially determined equivalent (as determined by the Administrative Committee in its complete and sole discretion) of the Life With 10-Year Certain Benefit that is converted by such election.

Any election made pursuant to this Section 3.3 may be made in the Participant's Agreement or in a timely filed benefit payout election form. A Participant may elect in his or her Agreement or in a timely filed benefit payout election form to defer the time by which he or she is required to elect one of the foregoing forms of Benefit Payout Alternatives.  A benefit payout election form is timely filed only if it is delivered by the Participant, in writing, telecopy, email or in another electronic format, to the Administrative Committee no later than the last day of the calendar year preceding the calendar year in which the Participant's Termination of Employment takes place or other benefit payment under this Plan commences.

If a Participant's Agreement or benefit payout election form fails to show an election of a Benefit Payout Alternative, or if the Participant having chosen to defer his or her benefit payout election, fails to make a timely election of benefits, such Participant shall be deemed to have elected and such Participant's form of benefit shall be the Life With 10-Year Certain Benefit which is described in Section 3.3(a).

Notwithstanding the foregoing, in the event of the death of a designated annuitant during the life of the Participant, the Participant's election to have a Benefit Payout Alternative described in Section 3.3(b) or 3.3(c) shall be deemed to be revoked, in which event, subject to the conditions and limitations specified in the immediately preceding paragraph, or within the ninety-day period following the death of the annuitant if such period would end later than the time allowed for an election by the immediately preceding paragraph, the Participant may elect to have his or her benefit, or remaining benefit, under the Plan, as the case may be, paid in any of the forms described in Sections 3.3(a), 3.3(b) or 3.3(c).  In the event the Participant's designated annuitant predeceases the Participant and the Participant fails to make a timely election in accordance with the provisions of the immediately preceding sentence, the Participant's benefit, or remaining benefit, as the case may be, shall be paid or reinstated, as the case may be, in the form of a Life With 10-Year Certain Benefit as described in Section 3.3(a).  Any conversion of benefit from one form to another pursuant to the provisions of this paragraph shall be subject to actuarial adjustment (as determined by the Administrative Committee in its complete and sole discretion) such that the Participant's new benefit is the actuarial equivalent of the Participant's remaining prior form of benefit.  Payments pursuant to Participant's new form of benefit shall be effective commencing with the first monthly payment for the month following the death of the annuitant.

Notwithstanding any other provision of this Plan to the contrary, payment in the form of a Benefit Payout Alternative described in Section 3.3(b) or 3.3(c), with a survivor annuity for the benefit of the Participant's spouse as Beneficiary, may be waived by the annuitant with the consent of the Participant in the event of the divorce (or legal separation) of said annuitant from said Participant.  In such event, the Participant's benefit shall be reinstated to the remainder of the Life with 10-Year Certain Benefit as described in Section 3.3(a) (i.e., the 10-Year period as described in Section 3.3(a) shall be the same 10-year period as if such form of benefit was the form of benefit originally selected and the expiration date of such period shall not be extended beyond its original expiration date) effective commencing with the first monthly payment following receipt of the waiver and Participant consent in a form acceptable to the Administrative Committee.  A waiver of the type described in this paragraph shall be irrevocable.

3.4   Lump Sum Benefit Election.

(a)  A Participant who has attained the age of fifty-five (55) years as of his or her Termination of Employment and whose Termination of Employment occurs after December 31, 2001 shall be eligible to make an election for a lump sum benefit.  A lump sum benefit election may be made in or after the calendar year immediately preceding the calendar year in which the Participant attains age fifty-five (55); provided, however, such election shall not be effective unless the Participant attains age fifty-five on or before such Participant's Termination of Employment, and, in such event, the Participant shall be deemed to have elected the Benefit Payout Alternative described in Section 3.3(a).

The amount of such Participant's lump sum benefit shall be calculated as of the Participant's Termination of Employmentapplying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment, but using the Participant’s age as of the Participant’s Termination of Employment.

(b)  A Participant who was eligible to receive a lump sum benefit at Retirement, but who elected (or is deemed to have elected) one of the Benefit Payout Alternatives described in Section 3.3(a), 3.3(b) or 3.3(c), may elect to convert such annuity distribution to a lump sum benefit in a timely filed election.  The Beneficiary of a deceased Participant shall be eligible to make such conversion election to the same extent the Participant was eligible to make such election as of the day immediately preceding the Participant’s death.  An election to convert an annuity benefit into a lump sum benefit is timely filed only if it is delivered by the Participant (or the Beneficiary), in writing, telecopy, email or in another electronic format, to the Administrative Committee no later than December 31 of the calendar year following the calendar year in which the Participant’s Termination of Employment occurred.  The value of the lump sum benefit resulting from the conversion of a previously elected annuity benefit, shall be the Participant’s lump sum benefit valued as of the Participant’s Termination of Employment, less the payments, adjusted for interest (using the same GAAP Rate that was used to calculate the Lump Sum Benefit as of the Participant’s Termination of Employment), that were received prior to the effective date of the conversion.  If a Participant (or his or her Beneficiary) makes a timely election to convert an annuity benefit into a lump sum benefit, such election shall be effective on or about March 1st of the calendar year immediately following the calendar year in which such election is made, and the annuity benefit shall continue to be paid through such March 1st, whereupon the lump sum benefit election shall become effective.  If an election to convert an annuity benefit into a lump sum benefit is not timely filed, the annuity benefit shall continue to be distributed in the form elected (or deemed elected) by the Participant.

(c)  A Participant or Beneficiary who elects a lump sum benefit under Section 3.3(d) and/or Section 3.4 must, contemporaneous with such Lump Sum Benefit election, elect to defer all or a portion of the lump sum benefit (including any interest accrued thereon as provided in Section 3.5) in accordance with a payment schedule timely elected by the Participant (or Beneficiary); provided, however,

(i) with respect to a lump sum benefit effective at Retirement, the Participant must defer the receipt of one hundred percent (100%) of such lump sum benefit (including any interest thereon) until the later of:

(A)   his or her Termination of Employment; or

(B)   March 1 of the calendar year in which the Participant realizes a Termination of Employment;

(ii) the Participant must defer the receipt of at least seventy percent (70%) of such lump sum benefit (excluding any interest accrued thereon as provided in Section 3.5) until at least the third (3rd) anniversary of such Participant’s Termination of Employment; provided, however, if the Participant attained the age of sixty (60) as of his or her Termination of Employment, the Participant is not required to defer receipt of such Lump Sum Benefit if he or she agrees, in writing, substantially in the form provided in Attachment B, not to compete with an Employer Business within the meaning of Section 7.2 for a period of three (3) years from such Participant’s Termination of Employment and further agrees that if he or she fails to abide by such agreement, the non-compete agreement is challenged or the non-compete agreement is unenforceable, he or she shall forfeit all benefits hereunder and repay the Lump Sum Benefit to AT&T; and

(iii)  the Participant (or Beneficiary) may not defer the receipt of all or any portion of such lump sum benefit, including any interest accrued thereon, beyond the twentieth (20th) calendar year after the Participant’s Termination of Employment.

The payment schedule elected by a Participant or Beneficiary must comply with the rules for payment schedules as adopted by the Administrative Committee (as determined by the Administrative Committee in its sole and absolute discretion), which, for example, may require payment of principal to be made no more frequently than once per calendar year.

If a Participant who, as of his or her Retirement, timely elected to defer the receipt of a lump sum benefit under this Section fails to timely elect a payment schedule or if such Participant's timely filed payment schedule does not comply with the rules for payment schedules, (i) thirty percent (30%) of such Participant’s lump sum benefit shall be paid to the Participant upon the later of (A) such Participant’s Termination of Employment, or (B) March 1 of the calendar year in which the Participant realizes a Termination of Employment, and (ii) the remaining seventy percent (70%) (plus any interest accrued thereon as provided in Section 3.5) shall be paid to the Participant on the third (3rd) anniversary of such Participant’s Termination of Employment.  If a Participant who timely elects to defer the receipt of a lump sum benefit resulting from the conversion of an annuity benefit, fails to timely elect a payment schedule or if such Participant's timely filed payment schedule does not comply with the rules for payment schedules, (i) thirty percent (30%) of such Participant’s lump sum benefit shall be paid to the Participant on or about March 1st of the calendar year following the year in which the conversion election is made, and (ii) the remaining seventy percent (70%) (plus any interest accrued thereon as provided in Section 3.5) shall be paid to the Participant on the third (3rd) anniversary of such Participant’s Termination of Employment.  

3.5   Lump Sum Benefit Account Balance.

The Administrative Committee shall maintain a lump sum benefit account balance on its books and records for each Participant (or Beneficiary) that elects a lump sum benefit.  During such period of time that all or any portion of a Participant’s lump sum benefit is not paid, interest shall be credited using the same methodology used by AT&T for financial accounting purposes using the GAAP Rate that was used to calculate such Participant’s lump sum benefit.  Payments of principal and interest shall be deducted from the lump sum benefit account balance.

3.6   One-Time Acceleration of Deferred Lump Sum Benefit.

Participants who realize a Termination of Employment on or after June 19, 2001 who timely elected a lump sum benefit under Section 3.3(d) and/or Section 3.4 (and their Beneficiary) may make a one-time, irrevocable election to accelerate the payment of their unpaid lump sum benefit, if any, subject to the following conditions and limitations. The Participant's (or Beneficiary’s) election to accelerate his unpaid lump sum benefit, if any, must be received by the Administrative Committee on or before the last day of the calendar year immediately preceding the calendar year in which such unpaid portion of the lump sum benefit distribution is to be made.  Such distribution shall be made on March 1 of the calendar year immediately following the calendar year in which such acceleration election is made (the “Accelerated Distribution Date”); provided, however, a Participant who makes a lump sum benefit acceleration election pursuant to this Section 3.6 whose Termination of Employment occurred within three (3) years of the Accelerated Distribution Date shall receive thirty percent (30%) of such lump sum benefit on the Accelerated Distribution Date and the remaining seventy percent (70%) of such lump sum benefit (plus accrued interest as provided in Section 3.5) on the third (3rd) anniversary of such Participant’s Termination of Employment; provided, further, however, if the Participant attained the age of sixty (60) as of his or her Termination of Employment, the Participant may accelerate the distribution of 100% of his or her unpaid lump sum benefit if he or she agrees, in writing substantially in the form provided in Attachment B, not to compete with an Employer Business within the meaning of Section 7.2 for a period of three (3) years from such Participant’s Termination of Employment and further agrees that if he or she fails to abide by such agreement, the non-compete agreement is challenged or the non-compete agreement is unenforceable, he or she shall forfeit all benefits hereunder and repay the Lump Sum Benefit to AT&T.  

4   Death Benefits.

4.1   Death.

If a Participant dies prior to his or her Retirement, a pre-retirement death benefit will be calculated and paid as though the Participant had Retired  (determined without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older) on the day prior to the date of death.  Notwithstanding the provisions of Section 3.3, if a Participant's Agreement or benefit payout election form fails to show an election of a Benefit Payout Alternative, or if the Participant, having chosen to defer his benefit election, failed to make a timely election of a Benefit Payout Alternative prior to his or her death, the form of the pre-retirement death benefit shall, at the option of the Participant's Beneficiary, be either the Life With 10-Year Certain Benefit form of the Participant's benefit, a Beneficiary Life Annuity (as such term is hereinafter described) based on the life expectancy of the Beneficiary, or, if the Participant was eligible to make a Lump Sum Benefit election as of his or her date of death, a Lump Sum Benefit (calculated in the manner described in this Section 4.1).  If paid as a Beneficiary Life Annuity based on the Life of the Beneficiary, such benefit shall be the actuarially determined equivalent (as determined by the Administrative Committee in its complete and sole discretion) of the Life With 10-Year Certain Benefit; provided, however, should the Beneficiary die prior to the payment to the Beneficiary of the total dollar amount of the Life with 10-Year Certain Benefit, the remaining dollar balance of such Life With 10-Year Certain Benefit shall be paid in accordance with the Participant's beneficiary designation and the Rules at the same monthly rate of payment as would have been the monthly payment pursuant to the 10-year payment schedule had the Life With 10-Year Certain Benefit been selected.   For purposes of this Section 4.1, a Lump Sum Benefit shall be calculated in the same manner as provided in Section 3.4 as if the Participant were alive; e.g., calculated as of the Participant's Death applying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Death, but using the Participant’s age as of the Participant’s date of death.

4.2   Disability.

In the event that a Participant terminates employment prior to Retirement by reason of a Disability that entitles the Participant to continue to accrue Years of Service until Retirement Eligibility pursuant to Section 3.2 and thereafter dies after attaining Retirement Eligibility (without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older), the Employer shall pay to the Participant's Beneficiary the Death Benefit specified in Section 4.1 based on the Participant's Monthly Earnings for the twelve (12) months preceding his or her Disability.  No death benefit shall be payable if the Participant dies prior to attaining Retirement Eligibility (without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older).

4.3   Termination of Employment.

If a Participant terminates employment other than by reason of Disability prior to Retirement Eligibility (without regard to the 5 Years of Service requirement otherwise applicable to certain Participants age 55 or older), no death benefit shall be payable to the Participant's Beneficiary.

5   Payment.

5.1   Commencement of Payments.

Notwithstanding the designation of a specific date for payment of a distribution hereunder, commencement of payments under this Plan may be delayed for administrative reasons in the discretion of the Administrative Committee, but shall begin not later than sixty (60) days following the occurrence of an event which entitles a Participant (or a Beneficiary) to payments under this Plan.

5.2   Withholding; Unemployment Taxes.

(a) A payment may be made from the Plan to reflect the payment of state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to a Participant (the “State, Local, or Foreign Tax Amount”).  Such payment may not exceed the amount of such taxes due as a result of participation in the Plan.  Such payment may be made by distributions to the Participant in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by distribution directly to the Participant.  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 as a result of the payment of the State, Local, or Foreign Tax Amount and to pay the additional income tax at source on wages attributable to such additional Code Section 3401 wages and taxes.  However, the total payment under this Section (a) shall not exceed the aggregate of the State, Local, or Foreign Tax Amount and the income tax withholding related to such State, Local, or Foreign Tax Amount.

(b) A payment may be made from the Plan to pay the Federal Insurance Contributions Act tax imposed by Code Sections 3101, 3121(a), and 3121(v)(2) on compensation deferred under the Plan (the “FICA Amount”).  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA Amount and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes.  However, the total payment under this Section (b) shall not exceed the aggregate of the FICA Amount and the income tax withholding related to such FICA Amount.

5.3   Recipients of Payments; Designation of Beneficiary.

All payments to be made under the Plan shall be made to the Participant during his or her lifetime, provided that if the Participant dies prior to the completion of such payments, then all subsequent payments under the Plan shall be made to the Participant's Beneficiary or Beneficiaries.

In the event of the death of a Participant, distributions/benefits under this Plan shall pass to the Beneficiary (ies) designated by the Participant in accordance with the Rules.

5.4   Additional Benefit.

The reduction of any benefits payable under the AT&T Pension Benefit Plan ("ATTPBP"), which results from participation in the AT&T Senior Management Deferred Compensation Program of 1988, will be restored under this Plan.

5.5   No Other Benefits.

No benefits shall be paid hereunder to the Participant or his or her Beneficiary except as specifically provided herein.

5.6   Small Benefit.

Notwithstanding any election made by the Participant, the Administrative Committee in its sole discretion may pay any benefit in the form of a lump sum payment if the lump sum equivalent amount is or would be less than $10,000 when payment of such benefit would otherwise commence.

5.7   Special Increases.

5.7.1   1990 Special Increase.

Notwithstanding any other provision of this Plan to the contrary:

(a) Effective July 1, 1990, the monthly pension benefit amount then being paid hereunder to a retired Participant whose Plan payments began before January 1990 shall be increased by 1/30 of 5.0% for each month from and including January 1988 or the month in which said Participant's pension payments began, whichever is later, through and including June 1990, inclusive.

(b) Effective July 1, 1990, the present and/or future monthly payment hereunder of a surviving annuitant of a Participant whose Plan payments began before January 1990 or of a Participant who died in active service before January 1990, shall be increased by the same percentage as the related pension was or would have been increased under the provisions of Paragraph (a) of this Section 5.7.1.

5.7.2   Enhanced Management Pension (EMP) Flow-Through for Participant Receiving Other than an ATTPBP "Cash Balance" Benefit.

Notwithstanding any other provision of this Plan to the contrary:

(a) Effective December 30, 1991, a Participant who as of the date of his or her Retirement satisfies the requirements for a service pension under the terms of the ATTPBP as it existed prior to December 30, 1991, shall have his or her SRIP Benefit determined without subtracting any increase in his or her ATTPBP (or successor plan) pension amount attributable to the Enhanced Management Pension ("EMP") provisions thereof, i.e., EMP benefits will "flow-through" to the Participant; provided, however, such additional benefit amounts corresponding to term of employment extending beyond age 65 through application of the EMP provisions shall be subtracted.

(b)  EMP flow-through shall not apply in the case of any person who becomes an Eligible Employee after December 31, 1997.

5.7.3   1993 Special Increase and Subsequent Special Increases.

Notwithstanding any other provision of this Plan to the contrary:

(a)Effective July 1, 1993, the monthly pension benefit amount then being paid hereunder to (1) all retired Participants whose Plan payments began before July 1, 1993, (2) then current and contingent annuitants of such retired Participants who elected one of the Plan’s survivor annuities and (3) then current annuitants of employees who before July 1, 1993 died in active service shall be increased in the same percentages as the ATTPBP ad hoc pension increase percentages effective July 1, 1993.

(b)Any time after July 1, 1993 that the ATTPBP is amended to provide for an ad hoc pension increase for ATTPBP nonbargained participants, the same percentage increase shall apply to Plan benefit amounts.

6   Conditions Related to Benefits.

6.1   Administration of Plan.

The Administrative Committee shall be the sole administrator of the Plan and will, in its discretion, administer, interpret, construe and apply the Plan in accordance with its terms.  The Administrative Committee shall further establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan.  All decisions of the Administrative Committee shall be final and binding unless the Board of Directors should determine otherwise.

6.2   No Right to AT&T Assets.

Neither a Participant nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of any AT&T company whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which AT&T, in its sole discretion, may set aside in anticipation of a liability hereunder, nor in or to any policy or policies of insurance on the life of a Participant owned by AT&T.  No trust shall be created in connection with or by the execution or adoption of this Plan or any Agreement, and any benefits which become payable hereunder shall be paid from the general assets of AT&T.  A Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of AT&T.

6.3   Trust Fund.

AT&T shall be responsible for the payment of all benefits provided under the Plan.  At its discretion, AT&T may establish one or more trusts, for the purpose of providing for the payment of such benefits.  Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of AT&T's creditors.  To the extent any benefits provided under the Plan are actually paid from any such trust, AT&T shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by AT&T.

6.4   No Employment Rights.

Nothing herein shall constitute a contract of continuing employment or in any manner obligate any AT&T company to continue the service of a Participant, or obligate a Participant to continue in the service of any AT&T company and nothing herein shall be construed as fixing or regulating the compensation paid to a Participant.

6.5   Modification or Termination of Plan.

This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations; provided, however, the Plan shall not be materially modified (within the meaning of Section 885(d)(2)(B) of the American Jobs Creation Act of 2004) after October 3, 2004 unless such modification is consistent with the guidance issued under Section 885(f) of the American Jobs Creation Act of 2004 so that such amendment is not a material modification of the Plan.  A modification may affect present and future Eligible Employees.   AT&T also reserves the sole right to terminate at any time any or all Agreements.  In the event of termination of the Plan or of a Participant's Agreement, a Participant shall be entitled to benefits hereunder, if prior to the date of termination of the Plan or of his or her Agreement, such Participant has attained 5 Years of Service, in which case, regardless of the termination of the Plan/Participant's Agreement, such Participant shall be entitled to benefits at such time as provided in and as otherwise in accordance with the Plan and his or her Agreement, provided, however, Participant's benefit shall be computed as if Participant had terminated employment as of the date of termination of the Plan or of his or her Agreement.  No amendment, including an amendment to this Section 6.5, shall be effective, without the written consent of a Participant, to alter, to the detriment of such Participant, the benefits described in this Plan as applicable to such Participant as of the effective date of such amendment.  For purposes of this Section 6.5, an alteration to the detriment of a Participant shall mean a reduction in the amount payable hereunder to a Participant to which such Participant would be entitled if such Participant terminated employment at such time, or any change in the form of benefit payable hereunder to a Participant to which such Participant would be entitled if such Participant terminated employment at such time.  Any amendment which reduces Participant's benefit hereunder to adjust for a change in his or her pension benefit resulting from an amendment to any company-sponsored defined benefit pension plan which changes the pension benefits payable to all employees, shall not require the Participant's consent.  Written notice of any amendment shall be given to each Participant.

6.6   Offset.

If at the time payments or installments of payments are to be made hereunder, a Participant or his or her Beneficiary or both are indebted to any AT&T company, then the payments remaining to be made to the Participant or his or her Beneficiary or both may, at the discretion of the Board of Directors, be reduced by the amount of such indebtedness; provided, however, that an election by the Board of Directors not to reduce any such payment or payments shall not constitute a waiver of such AT&T company's claim for such indebtedness.

6.7   Change in Status.

In the event of a change in the employment status of a Participant to a status in which he is no longer an Eligible Employee, the Participant shall immediately cease to be eligible for any benefits under this Plan except such benefits as had previously vested.  Only Participant's Years of Service and Earnings history prior to the change in his employment status shall be taken into account for purposes of determining Participant's vested benefits hereunder.

7   Miscellaneous.

7.1   Nonassignability.

Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt of the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

7.2   Non-Competition.

Notwithstanding any other provision of this Plan, all benefits provided under the Plan with respect to a Participant shall be forfeited and canceled in their entirety if the Participant, without the consent of AT&T and while employed by AT&T or any subsidiary thereof or within three (3) years after termination of such employment, engages in competition with AT&T or any subsidiary thereof or with any business with which AT&T or a subsidiary or affiliated company has a substantial interest (collectively referred to herein as "Employer business") and fails to cease and desist from engaging in said competitive activity within 120 days following receipt of written notice from AT&T to Participant demanding that Participant cease and desist from engaging in said competitive activity.  For purposes of this Plan, engaging in competition with any Employer business shall mean engaging by the Participant in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business.  Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business. However, engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business.  Accordingly, benefits shall not be provided under this Plan if, within the time period and without the written consent specified, Participant either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties the Participant takes and regardless of whether or not the employing company, or the company that Participant becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

7.3   Notice.

Any notice required or permitted to be given to the Administrative Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by certified mail, to the principal office of AT&T, directed to the attention of the Senior Vice President-Human Resources.  Any notice required or permitted to be given to a Participant shall be sufficient if in writing and hand delivered, or sent by certified mail, to Participant at Participant's last known mailing address as reflected on the records of his or her employing company or the company from which the Participant incurred a Termination of Employment, as applicable.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for certification.

7.4   Validity.

In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this plan.

7.5   Applicable Law.

This Plan shall be governed and construed in accordance with the laws of the State of Texas to the extent not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder ("ERISA").

7.6   Plan Provisions in Effect Upon Termination of Employment.

The Plan provisions in effect upon a Participant's Termination of Employment shall govern the provision of benefits to such Participant.  Notwithstanding the foregoing sentence, the benefits of a Participant whose Retirement occurred prior to February 1, 1989, shall be subject to the provisions of Section 3.3 hereof.

7.7   Plan To Be Interpreted and Applied So As Not To Be Subject To Code Section 409A.

Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted and applied so that amounts deferred under the Plan are not subject to the provisions of Section 409A of the Code and any provision that would conflict with such requirements shall be applied and construed, as determined by the Administrative Committee in its complete discretion, consistent with the foregoing.  The Administrative Committee’s determination, as provided herein, shall be final and conclusive.  

SUPPLEMENTAL RETIREMENT INCOME PLAN AGREEMENT

THIS AGREEMENT is made and entered into at San Antonio, Texas as of this _____ day of _______________, by and between AT&T Inc. ("AT&T") and ­__________ (" Participant").

WHEREAS, AT&T has adopted a Supplemental Retirement Income Plan (the "Plan"); and

WHEREAS, the Participant has been determined to be eligible to participate in the Plan; and

WHEREAS, the Plan requires that an agreement be entered into between AT&T and Participant setting out certain terms and benefits of the Plan as they apply to the Participant;

NOW, THEREFORE, AT&T and the Participant hereby agree as follows:

1.The Plan is hereby incorporated into and made a part of this Agreement as though set forth in full herein.  The parties shall be bound by, and have the benefit of, each and every provision of the Plan as set forth in the Plan.

2.The Participant was born on ___________, and his or her present employment began on _____________,

3.The Participant's "Retirement Percent" which is described in the Plan shall be ________ percent (__%)

4.Election as to Form of Benefits.  The Participant elects the Benefit Payout Alternative as shown on the Supplemental Retirement Income Plan (SRIP) Benefit Election form attached hereto and incorporated herein for all purposes (the "Form"). The Participant may change this election at any time prior to the end of the calendar year immediately preceding the Participant's Termination of Employment, and the Participant's election in effect at the time will control the distribution of benefit under the Plan.  If the Participant has not elected a Benefit Payout Alternative prior to the end of the calendar year immediately preceding the Participant's Termination of Employment, the Participant's form of benefit under the Plan shall be the Life With 10-Year Certain Benefit.

This Agreement supersedes all prior Supplemental Retirement Income Plan Agreements between AT&T and Participant, and any amendments thereto, and shall inure to the benefit of, and be binding upon, AT&T, its successors and assigns, and the Participant and his or her Beneficiaries.

IN WITNESS WHEREOF, the parties hereto have signed and entered into this Agreement on and as of the date first above written.

AT&T INC.:

By:Senior Executive Vice President-Human Resources

PARTICIPANT:

Due Date:

Form SRIP-4 (9/01)

Supplemental Retirement Income Plan (SRIP)

Payment Election

Name:                                                                           Social Security Number:

1.  Form of Payment

I hereby elect the following form of benefit for my SRIP benefit in accordance with and subject to the terms of the

Plan:

a.   ____Life with 10-Year Certain Benefit.  Complete Section 4.

b.   ____Joint and 100% Survivor Benefit.  Complete Section 4.

c.   ____Joint and 50% Survivor Benefit.  Complete Section 4.

d.   ____Lump Sum.  Complete Section 2. (Only available if age 54 or older at time of election and age 55 or older at Termination of Employment).

e.   ____Defer making an election until no later than the last day of the calendar year preceding the calendar year in which my Termination of Employment takes place or my SRIP benefit commences. Complete Section 4.

Default Distribution: If a payment election is not on file as of the last day of the year prior to your retirement or termination, the form of benefit shall be the Life with10-Year Certain Benefit.

2.  SRIP Lump Sum Deferral Amount

You must defer the receipt of at least seventy percent (70%) of your lump sum (excluding accrued interest thereon) until at least the third anniversary of your retirement (the "70% Rule").  Please indicate below the portion of your lump sum that you wish to defer:

I wish to defer _______% (not less than 70%).  Any portion not deferred will be paid within 60 days following my Termination of Employment.  Complete Section 3.

Note:  You have a one-time right to accelerate the distribution of your deferred balance by making an election prior to the first day of the calendar year in which you desire to receive an accelerated distribution of your deferred balance.

3.  Distribution Election for Deferred Lump Sum and Accrued Interest ("Deferred Balance")

Please indicate how you would like your deferred balance distributed.

·   Complete Section 3a if you wish to receive monthly interest only payments. You must also complete Section 3b to elect how to receive your remaining deferred balance.

·   Complete Section 3b to specify distribution of your deferred balance. Subject to the 70% Rule, payment will begin within 60 days of your retirement date if you elect distribution in your year of retirement.

·   The deferred balance must be distributed no later than the 20th anniversary of your retirement.

·   If applicable, the dates you complete in Section a and b cannot overlap.

a.   Interest Paid Monthly

          Please distribute interest on my deferred balance paid monthly commencing

______________(month/year) through ______________(month/year).

Note:  Also complete Section 3b to elect payment of deferred balance.

b.   Ratable Distribution Over a Period of Years

          Please make an annual payment of my deferred balance on March 1st of each year paid for ________

(insert number from 1 through 20) year(s) commencing ___________(insert year).  Please choose one distribution method as follows:

r   Paid ratably for the period(s) selected in 3b.  (e.g. 1/20th, 1/19th, 1/18th …. If payment is requested over 20 years).

r   Paid in equal annual installments for the period(s) selected in 3b.

Note:  You may not request more than 30% of your lump sum within 36 months following retirement.

Complete Section 4.

4.  Authorization

I hereby authorize and make the above elections.

Signature	Date
	Please return to Executive Compensation Staff
	175 E. Houston, 3-N-1, San Antonio, Texas 78205

EX-10.D

Exhibit 10-d

SBC Communications Inc.

Senior Management

Deferred Compensation Plan

(8 Year Units)

Effective For Units of Participation

Having a Unit Start Date Prior to

January 1, 1988

Effective: January 1, 1984

As amended through April 1, 2002

Senior Management

Deferred Compensation Plan

Section 1 Statement of Purpose.  The purpose of the Senior Management Deferred Compensation Plan is to provide retirement, death, or termination-of-employment benefits to a select group of highly compensated or management employees consisting of Senior Managers of SBC Communications Inc. (the “Company”) and its Subsidiaries (“Participating Companies”).

Section 2 Definitions.  For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

1. Administrative Committee.  “Administrative Committee” means a committee of three or more members, at least one of whom is a Senior Manager, who shall be designated by the Senior Vice President-Human Resources to administer the Plan pursuant to Section 3.

2. Agreement.  “Agreement” means the written agreement entitled “Senior Management Deferred Compensation Plan Agreement” (substantially in the form attached to this Plan) that shall be entered into by the Employer and a Participant with respect to each Unit of Participation to carry out the Plan with respect to such Participant.

3. Annualized Total Unit Deferral Amount.  The “Annualized Total Unit Deferral Amount” means the Total Unit Deferral Amount divided by eight years.

4. Beneficiary. “Beneficiary” means the person or persons designated as such in accordance with Section 7.

5. Board.  “Board” means the Board of Directors of SBC Communications Inc.

6. Compensation.  “Compensation” means the Participant's monthly base salary as of the Participant's Unit Start Date, but before reduction for compensation deferred pursuant to this Plan or any Plan of the Employer whereby compensation is deferred including but not limited to a plan whereby compensation is deferred in accordance with Section 401(k) of the Internal Revenue Code.

7. Deferral Amounts For All Units of Participation. “Deferral Amounts for all Units of Participation” means the aggregate amount of Compensation deferred in a given calendar year with respect to all Units of Participation as specified in Exhibit A of a Participant's Agreements.

8. Deferred Compensation Account.  “Deferred Compensation Account” means the account maintained on the books of account of the Employer for each Participant pursuant to Section 5.1.

9. Disability. “Disability” means a disability as defined in the SBC Communications Inc. Sickness and Accident Disability Benefit Plan and the SBC Communications Inc. Senior Management Long Term Disability Plan covering the Participant.

10. Early Retirement.  “Early Retirement” means the termination of a Participant’s employment with Employer for reasons other than death on or after Participant attains age 55.

11. Election Form.  The Election Form” means an Eligible Employee's written election to participate in the Plan with respect to each Unit of Participation in accordance with Section 4.

12. Eligible Employee.  “Eligible Employee” means an Employee of the Employer who (a) is in active service, (b) has an employment status which has been approved by the Board or its Chairman to be eligible to participate in this Plan, and (c) who continuously maintains the employment status upon which such approval was based.

13. Employee. “Employee” means any person employed by the Employer on a regular full-time salaried basis.

14. Employer.  “Employer” means SBC Communications Inc. and any of its Subsidiaries.

15. Normal Retirement.  “Normal Retirement” means termination of a Participant’s employment with Employer for reasons other than death on or after the date Participant attains age 65.

16. Participant.  “Participant” means an Eligible Employee who has entered into an Agreement to participate in the Plan in accordance with the provisions of Section 4.

17. Plan Year.  “Plan Year” means the calendar year.

18. Rotational Work Assignment Company (“RWAC”)” shall mean Bell Communications Research, Inc. (“Bellcore”), formerly the Central Services Organization, Inc., and/or any other entity with which SBC Communications Inc. or any of its Subsidiaries may enter into an agreement to provide an employee for a rotational work assignment.

19.   SBC Communications Inc. Savings Plan for Salaried. Employees.  “SBC Communications Inc. Savings Plan for Salaried Employees” means the SBC Communications Inc. Savings Plan for Salaried Employees and any successor plan adopted by the Employer.

20. Subsidiary.  A “Subsidiary” of the Company is any corporation, partnership, venture or other entity in which the Company has, either directly or indirectly, at least a 10% ownership interest.

21. Total Unit Deferral Amount.  “Total Unit Deferral Amount” means the sum of all amounts of Compensation deferred during the Unit Deferral Period with respect to a Unit of Participation, as shown in Exhibit A of Participant's Agreement for that Unit of Participation.

22. Unit Deferral Period.  “Unit Deferral Period” means the number of months the Participant elects to reduce his Compensation with respect to a Unit of Participation, as shown in Exhibit A of Participant's Agreement for that Unit of Participation.

23. Unit of Participation.  A “Unit of Participation” consists of a stated Total Unit Deferral Amount and associated Employer contributions which provide stated benefits in accordance with the Participant's Agreement for that Unit of Participation.

24.   Unit Start Date.  “Unit Start Date” means the date shown in Exhibit A of a Participant's Agreement for a given Unit of Participation which follows an Eligible Employee's election to commence a Unit of Participation under the Plan.  For years subsequent to the first year as an Eligible Employee, the Unit Start Date will be January 1, unless the Administrative Committee, in its sole discretion deems that another date is allowable.  A Unit of Participation may not commence if the employee cannot complete eight (8) years of participation prior to age 65, unless otherwise permitted by the Administrative Committee.

Section 3 Administration of the Plan.

3.1 Administration of Plan.  The Administrative Committee shall be the sole administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms. The Administrative Committee shall further establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Administrative Committee shall be final and binding unless the Board of Directors should determine otherwise.

Section 4 Participation.

4.1   Election to Commence a Unit Of Participation.  Any Eligible Employee may elect to commence deferral of Compensation with respect to a Unit of Participation in the Plan by filing a completed Election Form with the Administrative Committee prior to the beginning of the Unit Start Date. Pursuant to said Election Form, the Eligible Employee shall elect a Total Unit Deferral Amount and a Unit Deferral Period to be specified in Exhibit A of Participant's Agreement with respect to such Unit.

The Deferral Amount For All Units of Participation cannot exceed one hundred percent (100%) of Compensation during any calendar year.  In order to participate in the Plan, a Participant must defer a minimum of six percent (6%) of his Compensation at the time of commencement of his first Unit of Participation in the Plan.  Subsequent additional Units of Participation require a minimum annual Participant deferral of $1,000. The sum of the Participant's contributions, if any, to the Southwestern Bell Savings Plan for Salaried Employees plus the Annualized Total Unit Deferral Amounts for all Units of Participation in a given year may not exceed thirty percent (30%) of a Participant's Compensation for that year.

4.2 Termination Of Election.  A Participant's election to defer Compensation is irrevocable upon the filing of his Election Form with the Administrative Committee, provided, however, that the election may be terminated with respect to Compensation not yet paid by mutual agreement in writing between the Participant and the Administrative Committee. Such termination if approved shall be effective beginning the first day of the month following the execution of such mutual agreement.

Section 5 Deferred Compensation.

5.1 Deferred Compensation Account.  The Administrative Committee shall establish and maintain a separate Deferred Compensation Account for each Participant for each Unit of Participation. Each of a Participant's Deferred Compensation Accounts will be credited from time to time with interest on the balance compounded at an eight percent (8%) annual rate.

5.2 Total Unit Deferral Amount.  The Participant's Total Unit Deferral Amount is deferred in equal amounts on a monthly basis over the Unit Deferral Period or as otherwise may be permitted by the Administrative Committee. The amount deferred each month with respect to a given Unit of Participation shall be credited by the Employer to the Participant's Deferred Compensation Account for that Unit of Participation on the last day of such month.

The Participant will be permitted to complete deferrals of the Total Unit Deferral Amount on an accelerated basis over a shorter period than the original Unit Deferral Period at such times and in such manner as may be permitted by the Administrative Committee. In this connection the Administrative Committee may permit a Participant to defer an additional amount or percent of his Compensation and/or all or a portion of his Short Term Incentive Award, subject to the limitations contained in Section 4.1.  Any acceleration in deferrals by a Participant with respect to a given Unit of Participation shall not increase the Total Unit Deferral Amount and shall not cause any change in the amounts of the benefits payable pursuant to Section 6 on account of such Unit of Participation or any change in the maximum Employer Contribution pursuant to Section 5.3 for the year, but shall be applied proportionally as a credit against the Total Unit Deferral Amount and Equivalent Employer Contribution Shortfall and shorten the length of the Unit Deferral Period for such Unit of Participation.  In no event shall any such increase in deferrals by a Participant result in any reduction in the amounts by which the Participant's Compensation is reduced in subsequent years pursuant to Exhibit A to the Participant's Agreement with respect to such Unit of Participation prior to completion of deferral of the Total Unit Deferral Amount for such Unit of Participation.  Equivalent Employer Contribution Shortfall shall mean an amount equal to the Employer Contribution that would be associated with the accelerated deferral if said deferral amount was deferred in the manner as originally agreed upon as timely.  Amounts credited against Equivalent Employer Contribution Shortfall shall be immediately vested.

5.3 Employer Contribution.  Participation in this Plan does not preclude participation in the SBC Communications Inc. Savings Plan for Salaried Employees.  For a given year, the aggregate Employer contribution to both the Savings Plan for Salaried Employees and this Plan on behalf of a Participant will be an amount equal to the Company Match Rate Expressed as a Percent* as in effect during all or portions of that year times the Participant's Compensation as in effect during all or portions of that year which is contributed or deferred during that year in accordance with each Plan, respectively.  Any amount of Employer contribution not allocated to the Savings Plan for Salaried Employees will be credited to the Participant's Deferred Compensation Accounts.  The amount or percent of a Participant's Compensation to be allocated to Basic Allotments in the Savings Plan for Salaried Employees shall be specified in Paragraph 3 of his Agreement.

5.4 Vesting of Deferred Compensation Account.  A Participant's interest in his Deferred Compensation Account shall vest at the same rate and in the same manner as it would under the SBC Communications Inc. Savings Plan for Salaried Employees, as in effect from time to time, had both the amount of the Participant's Deferral Amount and the Employer contribution with respect to that Participant's Deferral Amount for any given Unit of Participation been contributed instead to the Savings Plan for Salaried Employees.  For this purpose all years of previous participation under the Savings Plan for Salaried Employees, for purposes of determining a Participant's vested interest under that Plan, shall be taken into account in determining the Participant's vested interest under this Plan.

*         The Company Match Rate Expressed as a Percent means the maximum percent of salary that can be received as Employer matching contribution under the SBC Communications Inc. Savings Plan for Salaried Employees, e.g., a match of 66 2/3% of the amount of basic allotment (up to 6%) of salary results in a Company Match Rate Expressed as a Percent of .667 x 6% = 4%.

Section 6 Benefits.

6.1 Normal Retirement.  Upon Normal Retirement, Employer shall pay to Participant the amount per month specified in Paragraph 6 of his Agreement for a period of one hundred eighty (180) months (“Standard Retirement Benefit”).  Alternatively, a Participant may elect to receive the present value equivalent of his Standard Retirement Benefit (“Alternative Retirement Benefit”). He may elect in his Agreement to receive this Alternative Retirement Benefit as (i) a lump sum payment, (ii) sixty (60) monthly installments, or (iii) one hundred twenty (120) monthly installments.  Any such election once made shall be irrevocable.

Notwithstanding the foregoing, a Participant may elect in his Agreement to defer the time by which he is required to elect the manner of payment of any Alternative Retirement Benefit until no later than the last day of the calendar year preceding the calendar year in which Normal Retirement takes place.  Any such deferred election must be made in writing to the Administrative Committee.  If a Participant's Agreement fails to show an election of a manner of payment of an Alternative Retirement Benefit, or if the Participant, having chosen to defer his election, fails to make a timely election, such Participant will receive the Standard Retirement Benefit upon his Normal Retirement.

In the event that a final determination shall be made by the Internal Revenue Service or any court of competent jurisdiction that by reason of Normal Retirement a Participant has recognized gross income for Federal Income tax purposes in excess of the Standard or Alternative Retirement Benefit actually paid by the Employer to which such gross income is attributable, the Employer shall deem the Participant to have elected a lump sum payment of his Alternative Retirement Benefit effective as of his Normal Retirement.  Under these circumstances, the Employer shall pay to the Participant in one lump sum, within sixty (60) days of such final determination, an amount equal to the excess of (a) the lump sum Alternative Retirement Benefit that would have been payable to the Participant had the Participant so elected such an Alternative Retirement Benefit in his Agreement plus interest thereon of 10% per annum, compounded annually, from a Participant's Normal Retirement until receipt of such lump sum payment, less (b) any amounts of Standard or Alternative Retirement Benefit theretofore paid to such Participant plus interest thereon at 10% per annum, compounded annually from the date of receipt of each such amount to the date a Participant received such lump sum payment.  If a benefit is payable to a Participant pursuant to this paragraph, no other Standard or Alternative Retirement Benefit shall be payable under the Plan.

If a Participant who is entitled to either a Standard or Alternative Retirement Benefit dies after his Normal Retirement, his Beneficiary shall be entitled to receive the remaining installments, if any, of such Standard or Alternative Retirement Benefit.

6.2 Early Retirement.  Upon Early Retirement after deferral of a Participant's Total Unit Deferral Amount, Employer shall pay to Participant commencing on the date he attains age sixty-five (65) the Standard or Alternative Retirement Benefit as specified in Paragraphs 6 and 7 of his Agreement.

A Participant may elect in his Agreements to commence payment, following his Early Retirement and completion of deferral of his Total Unit Deferral Amount, of any Standard or Alternative Retirement Benefit at a date prior to the Participant's attainment of age sixty-five (65), but no earlier than eight years following the Unit Start Date.  However, in such event, the amount of the Standard Retirement Benefit shall be reduced by the result of multiplying (i) fifty one-hundredths of one percent (0.50%) of such Early Retirement Benefit by (ii) the number of whole and fractional months between the Participant's age on the date of commencement of benefits and the date on which the Participant will attain age sixty-five (65).  The amount of any Alternative Retirement Benefit payable pursuant to this paragraph shall be the actuarial equivalent of the Standard Retirement Benefit payable pursuant to this paragraph.  Any such election in any Agreement once made shall be irrevocable.

Notwithstanding the foregoing, a Participant may elect in his Agreement to defer the time by which he is required to elect commencement of payment of Standard Retirement Benefit or Alternative Retirement Benefit until no later than the last day of the calendar year preceding the calendar year in which the Participant's Early Retirement takes place.  Any such deferred election must be made in writing to the Administrative Committee.  If a Participant's Agreements fail to show an election as to timing of commencement of payment of a Standard or Alternative Early Retirement Benefit, or if the Participant, having chosen to defer his election, fails to make a timely election, such Participant's Standard or Alternative Retirement Benefit, if any, shall commence as of the date he reaches age sixty-five (65) in accordance with the first paragraph of this Section 6.2.

In the event that a final determination shall be made by the Internal Revenue Service or any court of competent jurisdiction that by reason of Early Retirement a Participant has recognized gross income for Federal income tax purposes prior to the actual payment to such Participant of the Standard or Alternative Retirement Benefit to which such gross income is attributable, the Employer shall deem the Participant to have elected a Standard or Alternative Retirement Benefit commencing on the date as of which such Participant is determined to have recognized his first payment of Standard or Alternative Retirement Benefit.  Under these circumstances, the Employer shall pay to the Participant in one lump sum within sixty (60) days following such final determination an amount equal to the sum of (a) the excess of (i) the aggregate of the payments that would have been made to the Participant through such date had the Participant so elected such a Standard or Alternative Retirement Benefit over (ii) any amounts of Standard or Alternative Retirement Benefits theretofore paid to such Participant and (b) 10% per annum interest, compounded annually, on such payments from the date each would otherwise have been made had such Standard or Alternative Retirement Benefit been elected until the date of actual payment. Thereafter, the Employer shall pay to the Participant the remaining installments of Standard or Alternative Retirement Benefit in accordance with the deemed Standard or Alternative Retirement Benefit election described in the preceding two sentences.  If a benefit is payable to a Participant pursuant to this paragraph, no other Standard or Alternative Retirement Benefit shall be payable under the Plan.

If a Participant dies subsequent to commencement of payment of a Standard or Alternative Retirement Benefit, his Beneficiary shall be entitled to receive the remaining installments of Standard or Alternative Retirement Benefit, if any.

If a Participant dies after his Early Retirement or eligibility for Early Retirement and after his eligibility to commence payments of his Standard or Alternative Retirement Benefit, his Beneficiaries will receive his Standard or Alternative Retirement Benefit as if payments had commenced on the date of the Participant's death.

If a Participant dies after his Early Retirement or eligibility for Early Retirement but prior to is eligibility to commence payments of his Standard or Alternative Retirement Benefit, his Beneficiaries will receive a Pre-Retirement Survivor Benefit in accordance with Section 6.4.

6.3 Termination Benefit.

a. Termination of Employment Before Attaining Age 55 or After Attaining Age 55 but Prior To Completion of Deferral of Total Unit Deferral Amount.  Upon any termination of employment of the Participant for reasons other than death before the Participant attains age fifty-five (55), or after the Participant attains age fifty-five (55) but before the Participant completes deferral of his Total Unit Deferral Amount, the Company shall pay to the Participant, with respect to each Unit of Participation if Participant terminates employment before attaining age fifty-five (55), or with respect to each Unit of Participation for which deferrals have not been completed if Participant terminates employment after attaining age fifty-five (55) but before completing deferral of his Total Unit Deferral Amount, as Compensation earned for services rendered prior to his termination of service, a lump sum equal to the vested portion of the amounts standing credited to his Deferred Compensation Account as of the date of such termination of service (“Termination Benefit”).

b. Termination of a Unit of Participation.  A Participant may discontinue a Unit of Participation while continuing in the service of the Employer. Notwithstanding any other provision of the Plan, upon such discontinuance, the Participant shall immediately cease to be eligible for any benefits other than his Termination Benefit with respect to that Unit of Participation.  No other benefit shall be payable with regard to his Unit of Participation to either the Participant or any Beneficiary of such Participant.  The Participant shall continue to be credited with interest on the amounts standing credited to his Deferred Compensation Accounts as provided under Section 5.1 and to vest in such amounts as provided under Section 5.4 while he remains in employment with the Employer until payment of his Termination Benefit.  However, no further Participant deferrals or Employer contributions shall be made pursuant to Sections 5.2 or 5.3 with respect to a Unit of Participation after a Participant discontinues or terminates such Unit of Participation.

A Participation shall terminate a Unit of Participation if he terminates his election to defer Compensation with the approval of the Administrative Committee pursuant to Section 4.2.

6.4 Pre-Retirement Survivor Benefit.  If the Participant dies prior to his eligibility for Early Retirement while in service with the Employer, the Employer shall pay to the Participant’s Beneficiary the amount per month specified in paragraph 5 of his Agreement for the greater of one hundred twenty (120 months or the number of months from the date of Participant’s death until he would have been age 65 (“Pre-Retirement Survivor Benefit”).

6.5 Additional Benefit.  The reduction of any benefit payable under the SBC Communications Inc. Management Pension Plan, which results from participation in this Plan, will be restored as an additional benefit under this Plan or any other comparable deferral plan. The Company shall have the option to pay in a lump sum the present value equivalent of the pension retirement benefit (life annuity).

6.6 Survivor Spouse Benefit.  If a Participant dies subsequent to eligibility to commence payment of a Standard or Alternative Retirement Benefit, and has a surviving spouse, the Employer shall pay to the spouse commencing on the later of (a) the sixteenth (16th) year after commencement of payment of any Standard or Alternative Retirement Benefit or (b) the first of the month following the Participant's death, an amount per month for the life of the spouse equal to sixty-six and two-thirds percent (66-2/3%) of the Standard Retirement Benefit.  If the spouse is more than three (3) years younger or older than the Participant on the date of Participant's death, the amount of such benefit shall be actuarially adjusted based on standard mortality tables.

6.7 Disability.  In the event that a Participant suffers a Disability, amounts that otherwise would have been credited to the Deferred Compensation Accounts of the Participant in accordance with Sections 5.2 and 5.3 will continue to be credited to such Deferred Compensation Accounts at the same times and in the same amounts as they would have been credited if the Participant had not suffered a Disability.  During such Disability, deferrals shall continue to be made by the Participant in accordance with Section 5.2 for as long as he is eligible to receive monthly disability benefits equal to 100 percent of his monthly base salary at the time of his Disability.  If the Participant is no longer eligible to receive monthly disability benefits equal to 100 percent of his monthly base salary at the time of his Disability, the deferrals which would otherwise have been made by the Participant in accordance with Section 5.2 shall be contributed by the Employer.  Employer contributions shall continue to be made by the Employer in accordance with Section 5.3.

If the Participant recovers from his Disability and returns to employment with the Employer in an employment status which would make him eligible to participate in this Plan or another similar Deferred Compensation Plan of the Employer, the Participant shall resume making deferrals in accordance with Section 5.2 and shall thereafter repay any amounts which were previously contributed by the Employer in lieu of deferrals which would otherwise have been made by the Participant in accordance with Section 5.2.  Such repayment shall be made following the end of the Unit Deferral Period in monthly amounts equal to the Amount Deferred per Month during the Unit Deferral Period as shown on Exhibit A, or such larger amounts as the Participant may elect.  The amounts to be repaid by the Participant shall be equal to the amounts contributed by the Employer which would otherwise have been deferred by the Employee pursuant to Section 5.2, compounded at an eleven percent (11%) annual rate on all such amounts from the date of crediting such amounts to the Participant's Deferred Compensation Account until repaid.

All Participant deferrals and Employer contributions shall cease upon the happening of the earliest of the following:

(a) the Participant's death;

(b) the Participant's attainment of age 65; or

(c) the Participant's election to take Early Retirement under the Plan.

If a Participant's Disability terminates by reason of his death, the rights of his Beneficiary shall be those pursuant to whichever of Section 6.1, 6.2, 6.4, 6.5, or 6.6 would have been applicable if the Participant had not been disabled but rather had been in service on the date of his death and either died or retired on such date, whichever would be most advantageous to such Beneficiary.  If a Participant's Disability terminates by reason of (b) above, the Participant shall be treated as having a Normal Retirement upon the attainment of age 65 and shall be entitled to a Normal Retirement Benefit determined pursuant to Section 6.1, subject to reduction as provided below in the following paragraph.  If a Participant's Disability terminates by reason of (c) above, the Participant shall be treated as having an Early Retirement on the date elected by the Participant and shall be entitled to an Early Retirement Benefit determined pursuant to Section 6.2, subject to reduction as provided below in the following paragraph.

A reduction shall be made in the Normal Retirement or Early Retirement Benefit paid to the Participant or his Beneficiary, with respect to any Unit of Participation for which a portion of the Total Unit Deferral Amount required under Section 5.2 has been contributed by the Employer rather than from deferrals by the Employee, unless such amount has been repaid by the Employee as described in the second paragraph of this Section 6.7.  Each payment of the Normal or Early Retirement Benefit shall be reduced by the amount necessary to amortize over such payments an amount equal to the sum of (i) the amounts contributed by the Employer which would otherwise have been deferred by the Employee pursuant to Section 5.2 plus (ii) the amounts contributed by the Employer pursuant to Section 5.3 which are matching contributions based on amounts described in (i) above, compounded at an eleven percent (11%) annual rate on all such amounts from the date of crediting such amounts to the Participant's Deferred Compensation Account until deducted from amounts paid to the Participant.

6.8   Emergency Benefit.  In the event that the Administrative Committee, upon written petition of the Participant, determines in its sole discretion, that the Participant has suffered an unforeseeable financial emergency, the Employer shall pay to the Participant, as soon as practicable following such determination, an amount necessary to meet the emergency not in excess of the Termination Benefit to which the Participant would have been entitled pursuant to Section 6.3 if he had a termination of service on the date of such determination (the “Emergency Benefit”).  For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence. Cash needs arising from

foreseeable events such as the purchase of a house or education expenses for children shall not be considered to be the result of an unforeseeable financial emergency. The amount of the benefit otherwise payable under Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6 or 6.7 shall thereafter be actuarially adjusted to reflect the early payment of the Emergency Benefit.

6.9 Withholding; Unemployment Taxes.  To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government.

6.10 Commencement of Payments.  Except as otherwise provided in this Plan, commencement of payments under this Plan shall begin sixty (60) days following the event which entitles a Participant (or a Beneficiary) to payments under the Plan, or at such earlier date as may be determined by the Administrative Committee.

6.11 Change in Status.  In the event of a change in the employment status of a Participant to a status in which he is no longer an eligible employee under this Plan, but is an eligible employee under the Management Deferred Compensation Plan or another similar deferred compensation plan of the Employer, the Participant and all of his Units of Participation under this Plan shall automatically be transferred to such other deferred compensation plan for which he is then an eligible employee, unless otherwise determined by the Administrative Committee.  In the event of any such transfer, the provisions of the other deferred compensation plan to which the Participant transfers shall thereafter determine the rights and benefits of the Participant with respect to all of his Units of Participation, unless otherwise determined by the Administrative Committee. The Employer may, but shall not be required to, enter into revised Agreements with the Participant to carry out the provisions of this Section.

6.12 Transfer to RWAC.  Effective August 1, 1990, if a Participant transfers to a RWAC prior to completion of a Unit of Participation, deferrals which would otherwise have been made by the Participant in accordance with Section 5.2 shall continue to be made by the Employer until the Participant resumes employment with the Employer but for a maximum period not to exceed 5 years.  Contributions which would have been made by the Employer in accordance with Section 5.3 shall also continue to be made by the Employer during such period as Participant contributions are continued in accordance with the preceding sentence.  Benefits applicable during the period of employment at a RWAC (not to exceed 5 years) and the methods used for crediting the Deferred Compensation Account and repaying amounts contributed by the Employer and reducing the Normal Retirement or Early Retirement Benefit paid to the Participant or his Beneficiary shall be the same as those applicable pursuant to Section 6.7 in the case of Disability, i.e., employment at a RWAC shall be deemed a Disability for the purpose of making determinations pursuant to Section 6.7.  If the Participant has not resumed employment with the Employer or has not completed a Unit of Participation as result of Employer Contributions within 5 years from date of transfer, a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Account at the date of transfer shall be paid upon termination of employment with a RWAC or the expiration of such 5 year period whichever is earlier.

6.13 Leave of Absence.  Effective January 1, 1985, if a Participant absents himself from employment on a formally granted leave of absence (i.e., the absence is with formal permission in order to prevent a break in the continuity of the Employee's term of employment which permission is granted in conformity with the rules of the Employer which employs the individual, as adopted from time to time) prior to completion of a Unit of Participation, deferrals which would otherwise have been made by the Participant in accordance with Section 5.2 shall continue to be made by the Employer until the Participant resumes employment with the Employer but for a maximum period not to exceed 6 months.  Contributions which would have been made by the Employer in accordance with Section 5.3 shall also continue to be made by the Employer during such period as Participant contributions are continued in accordance with the preceding sentence.

Benefits applicable during the leave of absence (not to exceed 6 months) and the methods used for crediting the Deferred Compensation Account and repaying amounts contributed by the Employer and reducing the Normal Retirement or Early Retirement Benefit paid to the Participant or his Beneficiary shall be the same as those applicable pursuant to Section 6.7 in the case of Disability, i.e., the leave of absence shall be deemed a Disability for the purpose of making determination pursuant to Section 6.7, except in the case of a political leave (i.e., to campaign for or serve when elected to political office, to serve if appointed to public office or for non-candidate employees to participate in campaigns of candidates for political office) the only benefit payable if the Participant dies during such leave shall be a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Account on the date of commencement of the leave which shall be payable to the Participant's Beneficiary.  If the Participant has not resumed employment with the Employer within 6 months from the commencement of the leave of absence, a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Account at the commencement of the leave of absence shall be paid to the Participant.

Section 6.7 of this Plan and not this Section 6.13 shall apply with respect to any period during which a Participant is suffering a Disability and such period of Disability shall not be included under this Section 6.13 as a portion of a period of leave of absence.

6.14 Ineligible Participant.  Notwithstanding any other provisions of this Plan to the contrary, if any Participant is determined not to be a “management or highly compensated employee” within the meaning of the Employee Retirement Income Security act of 1974, as amended (ERISA) or Regulations thereunder, such Participant will not be eligible to participate in this Plan and shall receive an immediate lump sum payment equal to the vested portion of the amounts standing credited to his Deferred Compensation Accounts with interest on the balance compounded at an eight percent (8%) annual rate. Upon such payment no survivor benefit or other benefit shall thereafter by payable under this Plan either to the Participant or any Beneficiary of the Participant, except as provided under Section 6.5.

Section 7 Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both primary as well as contingent) to whom payment under this Plan shall be made in the event of his death prior to complete distribution to Participant of the benefits due him under the Plan.  Each Beneficiary designation shall become effective only when filed in writing with the Administrative Committee during the Participant's lifetime on a form prescribed by the Administrative Committee with written acknowledgment of receipt.

The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of Beneficiary or Beneficiaries other than the spouse.

If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Administrative Committee shall direct the distribution of such benefits to the Participant's estate.

Section 8 Termination, Amendment.

8.1 Employer’s Right to Terminate Plan.  The Board may at any time terminate the Plan. Termination of the Plan shall mean that (1) Base Salary shall prospectively cease to be deferred with respect to all Units of Participation for the then Plan Year and thereafter; and (2) all then currently existing Units of Participation shall be treated as follows:

The Participant's Deferred Compensation Accounts shall be 100% vested. The Participant shall receive or continue to receive all benefits under this Plan at such time as provided in and pursuant to the terms and conditions of his Agreement(s) and as described in this Plan, provided however, any benefits payable under a Unit of Participation that is not completed due to a termination of the Plan under this Section 8.1 shall be prorated based upon the amount in the Deferred Compensation Account for that Unit of Participation as of said Plan termination divided by the Total Unit Deferral amount for that Unit of Participation.

8.2 Amendment.  The Board may at any time amend the Plan in whole or in part, provided however, that no amendment, including an amendment to this Section 8, shall be effective, without the written consent of a Participant, to alter, to the detriment of such Participant, the benefits described in this Plan as applicable to a Unit of Participation of the Participant or to decrease amounts standing credited to such Participant's Deferred Compensation Accounts under the Plan.  For purposes of this Section 8.2, an alteration to the detriment of a Participant shall mean a reduction in the period of time over which benefits are payable under a Participant's Agreement, subject however to the pro-ration provisions of Section 8.1 hereof, or any change in the form of benefits payable to a Participant under the Participant's Agreement. Written notice of any amendment shall be given to each Participant.

Section 9 Miscellaneous.

9.1 Unsecured General Creditor.  Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of Employer, nor shall they be Beneficiaries of, or have any rights, claims, or interests in any life insurance policies, annuity contracts, or the proceeds therefrom owned or which may be acquired by Employer (“Policies”).  Any such Policies or other assets of Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of Employer under this Plan.  Any and all of the Employer's assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of Employer. Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future.

9.2 Trust Fund.  The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Company may establish one or more trusts, for the purpose of providing for the payment of such benefits.  Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer's creditors.  To the extent any benefits provided under the Plan are actually paid from any such trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of and shall be paid by, the Employer.

9.3 Obligations to Employer.  If a Participant becomes entitled to a distribution of benefits under the Plan, the Employer may offset against the amount of benefits otherwise distributable any claims to reimbursement for intentional wrongdoing by the Participant against the Employer or an affiliate.  Such determination shall be made by the Administrative Committee.

9.4   Nonassignability.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

9.5 Employment Not Guaranteed.  Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Employee any right to be retained in the employ of the Employer or to serve as a director.

9.6 Protective Provisions.  A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Employer may deem necessary and taking such other relevant action as may be requested by the Employer.  If a Participant refuses so to cooperate, the Employer shall have no further obligation to the Participant under the Plan.  If a Participant commits suicide during the two-year period beginning on the Unit Start Date for a given Unit of Participation or if the Participant makes any material misstatement of information or non-disclosure of medical history, then no benefits will be payable with respect to that Unit of Participation to such Participant or his Beneficiary, or in the Employer's sole discretion, benefits may be payable in a reduced amount.

9.7 Gender, Singular and Plural.  All pronouns and any variations thereof shall be deemed to refer to the masculine or feminine, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

9.8 Waiver of Benefits.  No benefit shall be payable under the provisions of this Plan with respect to any Participant who is or was a member of a group of employees designated by an Employer as eligible to waive such benefit if such Participant has waived such benefit under this Plan unless the Employer by which such Participant is or was last employed has authorized the revocation of such waiver and such Participant has revoked such waiver.

9.9 Captions.  The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.

9.10 Applicable Law.  This Plan shall be governed and construed in accordance with the laws of the State of Missouri.

9.11 Validity.  In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.

9.12 Notice.  Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of the Employer, directed to the attention of the Vice President-Human Resources of the Employer.  Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

9.13 Termination With Retirement Eligibility/Involuntary Termination.  Notwithstanding any other provisions of the Plan, if after November 17, 1995, a Participant’s employment terminates before the Participant attains age fifty-five, and if such termination is involuntary (which shall be deemed to include termination by reason of death), and is for a reason other than for cause (i.e., willful and gross misconduct on the part of the Participant that is materially and demonstrably detrimental to the Company or any entity in which the Company has at least a 50% ownership interest), and is on or after the date Participant is within five years of being pension eligible, i.e., would be within five years of being eligible to retire with a service pension under the rules for service pension eligibility as in effect under the SBC Pension Benefit Plan, and/or is a Senior Manager within five years of being eligible to retire with an immediate pension based on the eligibility rules of the SBC Senior Management Supplemental Retirement Income Plan, whether or not actually a participant in either such plan, then the provisions of this Section 9.13 shall govern and control with respect to the distribution of the Plan’s benefits if the benefits offered by this Section 9.13 are elected.  In such case, the Participant, or the Participant’s Beneficiary(ies) if the Participant’s employment terminates by reason of the Participant’s death, may irrevocably elect in writing, in a Waiver Agreement, as described below, filed with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor Benefit, as applicable, with respect to any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an “Alternative Termination Benefit.”

Such Alternative Termination Benefit for a Unit shall be the Unit as described in the Participant’s Agreement, provided in accordance with and governed in all respects by the terms of the Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such Unit as if the Participant had remained in employment and retired upon or after attaining age fifty-five, regardless of Participant’s actual termination date.  For purposes of applying the Plan and the Agreement, Normal Retirement shall be the Participant’s sixty-fifth birthday and Early Retirement shall be the date specified by the Participant as Participant’s Early Retirement date, which date shall be specified at the time the Waiver Agreement, as described below, is filed with the Company, and which date may be no earlier than Participant’s fifty-fifth birthday.  In the event of Participant’s death prior to age fifty-five, the Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or Participant’s Beneficiary(ies), shall be determined, as described below, by applying the Plan and Agreement with respect to such Unit as if the Participant had died upon reaching age fifty-five.

Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this Section 9.13, in the event a Participant elects an Alternative Termination Benefit in lieu of the Termination Benefit for a Unit, or a Beneficiary(ies) elects to receive an Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a Unit, survivor benefits for such Unit shall be determined as follows:  (a)  If Participant dies on or after the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) shall receive the remaining installments of Participant’s retirement benefit; or (b)  If Participant dies on or after age fifty-five but prior to the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) will receive survivor benefits in accordance with the next to the last paragraph in Section 6.2, i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon or after attainment of age fifty-five; or (c)  If Participant’s death occurs prior to age fifty-five, Participant’s Beneficiary(ies) will receive at such time as Participant would have attained age fifty-five, survivor benefits in accordance with the next to the last paragraph in Section 6.2, i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon attainment of age fifty-five; and (d)  Finally, the benefit described in Section 6.6 shall apply commencing on the later of the sixteenth year after commencement of payments pursuant to the Alternative Termination Benefit or the first of the month following Participant’s death.

For purposes of computing the Vested Benefits (as such term is used in rabbi trusts (“Trusts”) established by the Company for the purpose of providing for the payment of benefits under the Plan) corresponding to an Alternative Termination Benefit, for all Trust purposes, including for purposes of determining the Trust funding level applicable for such Alternative Termination Benefit, the Participant shall be treated for each such Alternative Termination Benefit Unit as if continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five or until the date of Participant’s death if Participant dies after attaining age fifty-five or until reaching the Participant’s Early Retirement date for such Unit as selected by the Participant if Participant survives until such date, i.e., the Trust funding for any such Unit and the security afforded.

Participant or Participant’s Beneficiary(ies) thereby shall be no different as a result of this Section 9.13 than they would have been had Participant continued in employment in the absence of this Section 9.13 and lived until at least age fifty-five.

Waiver of a Termination Benefit with respect to a Unit by a Participant, or of a Pre-Retirement Survivor Benefit with respect to a Unit by a Beneficiary(ies), and in either case, receipt of an Alternative Termination Benefit in lieu thereof, shall be conditioned upon the agreement in writing by the Participant, or Participant’s Beneficiary(ies), as applicable, at the time of Participant’s termination of employment, to provisions substantially as attached.

9.14 Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant’s employment terminates before the Participant attains age fifty-five, and if such termination is as an EPR Terminee under the Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit Plan-Nonbargained Program ("SBC PBP") or as a Deceased Electing Employee under EPR and is on or after the date Participant is within five years of being pension eligible, i.e., would be within five years of being eligible to retire with a service pension under the rules for service pension eligibility as in effect under the SBC PBP, and/or is a Senior Manager within five years of being eligible to retire with an immediate pension based on the eligibility rules of the SBC  Supplemental Retirement Income Plan, whether or not actually a participant in either such plan, or a Participant who is age 55 or over terminates employment under EPR, then the provisions of this Section 9.14 shall govern and control with respect to the distribution of the Plan’s benefits if the benefits offered by this Section 9.14 are elected.  In such case, the Participant, or the Participant’s Beneficiary(ies) if the Participant’s employment terminates by reason of the Participant’s death, may irrevocably elect in writing, in an EPR special election form accompanied by a Waiver Agreement, as described below, filed with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor Benefit or the Early Retirement Benefit, as applicable, with respect to any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an “EPR Alternative Termination Benefit.”

Such an EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the Participant’s Agreement, provided in accordance with and governed in all respects by the terms of the Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the Participant had remained in employment and retired upon the Participant's Early Retirement Date specified in his EPR special election form applicable to such Unit of Participation, regardless of Participant’s actual termination date.  For purposes of applying the Plan and the Agreement, Normal Retirement shall be the Participant’s sixty-fifth birthday and Early Retirement shall be the date specified by the Participant as Participant’s Early Retirement date, which date shall be specified at the time the Waiver Agreement, as described below, is filed with the Company, and which date may be no earlier than Participant’s fifty-fifth birthday.  In the event of Participant’s death prior to age fifty-five, the EPR Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or Participant’s Beneficiary(ies), shall be determined, as described below, by applying the Plan and Agreement with respect to such Unit as if the Participant had died upon or after reaching age fifty-five.

Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this Section 9.14, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the Termination Benefit or the Early Retirement Benefit for a Unit, or a Beneficiary(ies) elects to receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a) If Participant dies on or after the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) shall receive the remaining installments of Participant’s retirement benefit; or (b)  If Participant dies on or after age fifty-five but prior to the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) will receive survivor benefits in accordance with the next to the last paragraph in Section 6.2, i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon or after attainment of age fifty-five; or (c)  If Participant’s death occurs prior to age fifty-five, Participant’s Beneficiary(ies) will receive at such time as Participant would have attained age fifty-five, survivor benefits in accordance with the next to the last paragraph in Section 6.2, i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon attainment of age fifty-five; and (d)  Finally, the benefit described in Section 6.6 shall apply commencing on the later of the sixteenth year after commencement of payments pursuant to the EPR Alternative Termination Benefit or the first of the month following Participant’s death.

For purposes of computing the Vested Benefits (as such term is used in rabbi trusts (“Trusts”) established by the Company for the purpose of providing for the payment of benefits under the Plan) corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for purposes of determining the Trust funding level applicable for such EPR Alternative Termination Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five or until the date of Participant’s death if Participant dies after attaining age fifty-five or until reaching the Participant’s Early Retirement date for such Unit as selected by the Participant if Participant survives until such date, i.e., the Trust funding for any such Unit and the security afforded Participant or Participant’s Beneficiary(ies) thereby shall be no different as a result of this Section 9.14 than they would have been had Participant continued in employment in the absence of this Section 9.14 and lived until at least age fifty-five.

Waiver of a Termination Benefit or Early Retirement Benefit with respect to a Unit by a Participant, or of a Pre-Retirement Survivor Benefit with respect to a Unit by a Beneficiary(ies), as applicable, and receipt of an EPR Alternative Termination Benefit in lieu thereof, shall be conditioned upon the agreement in writing by the Participant, or Participant’s Beneficiary(ies), as applicable, at the time of Participant’s termination of employment, to provisions substantially as provided in Exhibit C, hereto.

SBC COMMUNICATIONS INC.

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN AGREEMENT

THIS AGREEMENT is made and entered into at St. Louis, Missouri as of the 31st day of December, 1983, by and between SBC COMMUNICATIONS INC. (“Company”), and ____________________ (“Senior Manager”).

WHEREAS, the Company has adopted a Senior Management Deferred Compensation Plan (the “Plan”); and

WHEREAS, the Senior Manager has been determined to be eligible to participate in the Plan; and

WHEREAS, the Plan requires that an agreement be entered into between the Company and the Senior Manager setting out certain terms and benefits of the Plan as they apply to the Senior Manager;

NOW, THEREFORE, the Company and the Senior Manager hereby agree as follows:

1. The Plan is hereby incorporated into and made a part of this Agreement, as though set forth in full herein.  The parties shall be bound by, and have the benefit of, each and every provision of the Plan, including without limitation the restrictions on assignability set forth in the Plan.

2. The Senior Manager was born on ________________________.

3. The Senior Manager's basic allotment percentage in the SBC Communications Inc. Savings Plan for Salaried Employees is ____ percent (__%) of his Compensation.  Any subsequent change in this level of participation by the Senior Manager will void this Agreement and require that a new Agreement be entered into between the Employer and the Senior Manager.

4. The Senior Manager's Compensation during a calendar year shall be reduced in accordance with Exhibit A attached to this Agreement.

5. The amount per month of Pre-Retirement Survivor Benefit in accordance with Section 6.4 of the Plan is $__________, payable for the greater of ten (10) years or the number of years from the date of Participant's death until he would have been age 65.

6. The amount per month of Standard Retirement Benefit in accordance with Section 6.1 of the Plan is $__________, payable for a period of 180 months commencing the first day of the month following Participant's 65th birthday.

7. Upon Normal or Early Retirement, the Participant hereby elects: (please initial (a), (b) or (c))

(a) ______ To receive a Standard Retirement Benefit, payable for a period of one hundred eighty (180) months.

(b) ______ To receive an Alternative Retirement Benefit to be paid in accordance with one of the following payment modes: (please initial one of the following:)

(i) _____ In a lump sum payment.

(ii) _____ In equal monthly installments for a period of sixty (60) months.

(iii) _____ In equal monthly installments for a period of one hundred twenty (120) months.

(c) ______ The Participant elects to defer the making of an election as to whether to receive a Standard Retirement Benefit or an Alternative Retirement Benefit until no later than the last day of the calendar year preceding the calendar year in which Normal or Early Retirement takes place.

8. The Participant hereby elects to receive any Early Retirement Benefit as follows (please initial one of the following):

(a) ______ Commencing at age 65.

(b) ______ Commencing at Early Retirement.

(c) ______ The Participant elects to defer the making of an election as to the time of commencement of Standard or Alternative Retirement Benefit until no later than the last day of the calendar year preceding the calendar year in which the Participant's Early Retirement takes place.

9. This Agreement shall inure to the benefit of, and be binding upon, the Company, its successors and assigns, and the Senior Manager and his Beneficiaries.

IN WITNESS WHEREOF, the parties hereto have signed and entered into this Agreement on and as of the date first above written.

THE COMPANY:      By ______________________________________

Its Senior Vice President-Human Resources

SENIOR MANAGER

_________________________                                                                                               ____________

Signature                                                                Date

Exhibit A

SBC COMMUNICATIONS INC.

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN AGREEMENT

19____ Unit of Participation

Unit Start Date: ________________, 19____  Unit Deferral Period: ____ Months

Annual Amount (1)

Year                                                                                               Deferred

1.           Unit Start Date:

1984           (commencing the first day

 of the month of ________) $_____________

2.       1985                                                                                               _____________

3.       1986                                                                                               _____________

4.       1987                                                                                               _____________

5.       1988                                                                                               _____________

6.       1989                                                                                               _____________

7.       1990                                                                                               _____________

8.       1991                                                                                               _____________

9.       1992           (ending the last day of

 the month of __________)                                                _____________

Total Unit

Deferral Amount    $   _____________

________________________________________________________________________

(1)           This amount will be deferred in equal amounts on a monthly basis.

Exhibit C

AGREEMENT AND RELEASE OF CLAIMS- MANAGER RETIRING UNDER THE

ENHANCED PENSION AND RETIREMENT PROGRAM ("EPR")

WITH AN 8-YEAR UNIT UNDER THE

MANAGEMENT DEFERRED COMPENSATION PLAN ("PLAN")

In consideration for treatment under the EPR provisions of the Plan, Participant agrees as follows:

1.           Participant agrees that Participant shall not, without the written consent of Participant's SBC Communications Inc. ("SBC") employing company ("Company"), and while employed by the Company or within three (3) years after termination of employment from Company, engage in competition with SBC or any Subsidiary thereof or with any business with which a Subsidiary of SBC or an affiliated company has a substantial interest (collectively referred to herein as "Employer business").  For purposes of this Agreement, engaging in competition with any Employer business shall mean engaging by Participant in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business.  Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business.  However, it is hereby specifically agreed that engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business in a judicial, regulatory, legislative or administrative proceeding and Participant hereby specifically agrees not to engage in any such conduct.  Participant also specifically agrees that a breach of this provision would result if, within the time period and without the written consent specified, Participant either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any Subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties the Participant takes and regardless of whether or not the employing company, or the company that Participant becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

Participant may submit a description of proposed employment in writing to Company and Company shall advise Participant in writing within ten business days whether such proposed employment would constitute engaging in competition with an Employer business.

2.           Participant acknowledges that, as a result of Participant's employment by the Company, Participant had and continued to have until Participant's termination, access to trade secrets, intellectual property, proprietary information, and private non-public information including technological, legal, financial, marketing, personnel and other information (including this Agreement and the Release of Claims contained herein) relating to litigation, the business and contemplated business of the Company and SBC and other matters, all of which is confidential and proprietary to SBC and the Company ("Confidential Information"); and Participant agrees that Participant did not before and will not after Participant's termination, divulge or in any way make available to others through public statements, voluntary testimony, or otherwise, or make use of, alone or in concert with others, any Confidential Information.  The aforesaid obligations regarding Confidential Information will not apply to information that is now in or hereafter enters the public domain without a breach of this Agreement and the Release of Claims contained herein, nor shall they apply to information required to be delivered pursuant to a subpoena or similar legislative, judicial or administrative requirement; provided, however, Participant will notify the Company upon receipt of any such subpoena or similar request, and give the Company a reasonable opportunity to contest or otherwise oppose the subpoena or similar request.

Participant may represent himself or herself as a retiree of Company (if Participant is actually Service Pension eligible) or as a former employee who voluntarily terminated employment for a reason other than cause (if Participant is not actually Service Pension eligible); but otherwise Participant agrees that Participant will not make, nor cause to be made any public statements, disclosures or publications which relate in any way, directly or indirectly to Participant's cessation of employment with the Company without prior written approval by the Company. Participant also agrees that Participant will not make, nor cause to be made any public statements, disclosures or publications which portray unfavorably, reflect adversely on, or are derogatory or inimical to the best interests of, the Company, SBC, their Subsidiaries, directors, officers, employees and agents, past, present or future.

3.           Participant agrees that during the three (3) year period immediately after termination of Participant's employment with Company, Participant will not solicit any customer of any SBC company on behalf of Participant or any other person or entity or solicit any employee of any SBC company to seek or accept employment with any other person or entity, or disclose confidential information about such employee to any prospective employer or employer other than an SBC company.  Participant acknowledges that even an unsuccessful solicitation of an employee of any SBC company will negatively impact the morale, commitment and performance of the employee in question.  Participant further acknowledges that any solicitation of either a customer or an employee of any SBC company will result in immediate and irreparable harm to the SBC company, for which there will be no adequate remedy at law, and that the SBC company will be entitled to equitable relief to restrain Participant from violating the terms of this Paragraph 3, in addition to any other remedies available to the SBC Company.  In any action brought by any SBC company to enforce the provisions of this Paragraph 3, the prevailing party shall be entitled to recover costs, including, but not limited to, reasonable and actual attorneys' fees.

4.           Participant shall forfeit Participant's Alternative Termination Benefit(s) under the EPR provisions of the Plan, for any breach by Participant of the provisions of Paragraph 1 hereof, or of Paragraph 2 hereof (except to the extent disclosure of any Confidential Information is specifically required by law), or of Paragraph 3 hereof, or of the Release of Claims contained herein. In the event of any such forfeiture of any Alternative Termination Benefit(s), Participant shall receive the Termination Benefit corresponding to such Unit of Participation pursuant to the Plan, that would have been paid in the absence of this Agreement, less any amounts previously paid to Participant as part of the corresponding Alternative Termination Benefit.

5.           Company hereby expressly advises Participant to seek personal legal advice prior to executing this Agreement and the Release of Claims contained herein and Participant by Participant's signature below, hereby expressly acknowledges that Participant was given at least forty-five (45) days in which to seek such advice and decide whether or not to enter into this Agreement and the Release of Claims contained herein.  The parties agree that any changes to this Agreement or to the Release of Claims contained herein made after the initial draft of this Agreement and Release of Claims is presented to Participant, whether material or immaterial, do not restart the running of said forty-five (45) day period.

6.           Participant may revoke this Agreement and the Release of Claims contained herein within seven (7) days of Participant's execution of this Agreement and the Release of Claims contained herein by giving notice, in writing, by certified mail, return receipt requested, to the Company c/o the Executive Compensation Group, 175 East Houston Street, Room 3-J-4, San Antonio, Texas, 78205.  Proof of such mailing within said seven (7) day period shall suffice to establish revocation pursuant to this Paragraph. In the event of any such revocation, this entire Agreement and the Release of Claims contained herein shall be null and void.

7.           Participant agrees that for any breach or threatened breach of any of the provisions of this Agreement and the Release of Claims contained herein by Participant, the Company shall have no adequate legal remedy, and in addition to any other remedies available, a restraining order and/or an injunction may be issued against Participant to prevent or restrain any such breach, in addition to any other rights the Company may have.

8.           In the event any provision of this Agreement or the Release of Claims contained herein is held invalid, void, or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement or said Release of Claims, except that should said Release of Claims be held to be invalid as applicable to and as asserted by Participant with regard to any claim or dispute covered thereunder, or should any part of the provisions of Paragraphs 1, 2 or 3 of this Agreement be held invalid, void or unenforceable as applicable to and as asserted by Participant, this Agreement and the Release of Claims contained herein, at the Company's option, may be declared by the Company null and void. If this Agreement and the Release of Claims contained herein are declared null and void by Company pursuant to the provisions of this Paragraph, Participant shall return to Company all consideration previously received pursuant to this Agreement and the Release of Claims contained herein less any of said consideration Participant would have received in the absence of entering into this Agreement and the Release of Claims contained herein.

RELEASE OF CLAIMS

Participant hereby fully waives and forever releases and discharges Company, SBC, any and all other Subsidiaries of Company and of SBC, their officers, directors, agents, servants, employees, successors and assigns and any and all employee benefit plans maintained by SBC or any Subsidiary thereof and/or any and all fiduciaries of any such plan from any and all common law and/or statutory claims, causes of action or suits of any kind whatsoever arising from or in connection with Participant's past employment by Company and/or Participant's separation therefrom, including but not limited to claims, actions, causes of action or suits of any kind allegedly arising under the Employee Retirement Income Security Act (ERISA), as amended, 29 USC §§ 1001 et seq.; the Rehabilitation Act of 1973, as amended, 29 USC §§ 701 et seq.; the Civil Rights Acts of 1866 and 1870, as amended, 42 USC §§ 1981, 1982 and 1988; the Civil Rights Act of 1871, as amended, 42 USC §§ 1983 and 1985; the Civil Rights Act of 1964, as amended, 42 USC § 2000d et seq.; the Americans With Disabilities Act, as amended, 42 USC §§ 12101 et seq., and the Age Discrimination in Employment Act of 1967 (ADEA), as amended, 29 USC §§ 621 et seq., known and unknown.  In addition, Participant agrees not to file any lawsuits or other claims seeking monetary damage or other relief in any state or federal court or with any administrative agency against any of the aforementioned parties in connection with or relating to any of the aforementioned matters.  Provided, however, by executing this Release of Claims, Participant does not waive rights or claims that may arise after the date of execution. Provided further, however, this Release of Claims shall not affect Participant's right to receive or enforce through litigation, any indemnification rights to which Participant is entitled as a result of Participant's past employment by the Company.  And, provided further, except as agreed herein, this Agreement and Release of Claims shall not affect the ordinary distribution of benefits/entitlements, if any, to which Participant is entitled upon termination from Company; it being understood by Participant that said benefits/entitlements, if any, will be subject to and provided in accordance with the terms and conditions of their respective governing plan.

Participant (Signature)

Participant (Print name)

Participant SSN

Date

EX-10.E

Exhibit 10-e

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN

OF 1988

(4 Year Units)

Effective For Units of Participation

Having A Unit Start Date Of

January 1, 1988 Or Later And

Prior To January 1, 1991

Effective: January 1, 1988

As amended through April 1, 2002

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN OF 1988

Section 1 Statement of Purpose.  The purpose of the Senior Management Deferred Compensation Plan of 1988 is to provide retirement, death, or termination-of-employment benefits to a select group of management employees consisting of Eligible Employees of SBC Communications Inc. (the “Company”) and its Subsidiaries (“Participating Companies”).

Section 2 Definitions.  For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise.

1.           Administrative Committee.  “Administrative Committee” means a committee of three or more members, at least one of whom is a Senior Manager, who shall be designated by the Vice President-Human Resources to administer the Plan pursuant to Section 3.

2.           Agreement.  “Agreement” means the written agreement entitled “Senior Management Deferred Compensation Plan of 1988 Agreement” (substantially in the form attached to this Plan) that shall be entered into by the Employer and a Participant with respect to each Unit of Participation to carry out the Plan with respect to such Participant.

3.           Annualized Total Unit Deferral Amount.  The “Annualized Total Unit Deferral Amount” means the Total Unit Deferral Amount divided by four.

4.         Base Salary.  “Base Salary” means the Participant's annual base salary before reduction pursuant to this Plan or any plan of the Employer whereby compensation is deferred, including but not limited to a plan whereby compensation is deferred in accordance with Section 401(k) of the Internal Revenue Code.

5.           Beneficiary.  “Beneficiary” means the person or persons designated as such in accordance with Section 9.

6.           Board.  “Board” means the Board of Directors of SBC Communications Inc.

7.           Compensation.  “Compensation” means the Participant's monthly Base Salary plus any other compensation that is normally matched in the SBC Communications Inc. Savings Plan for Salaried Employees before reduction for compensation deferred pursuant to this Plan or any plan of the Employer whereby compensation is deferred, including but not limited to a plan whereby compensation is deferred in accordance with Section 401(k) of the Internal Revenue Code.

8.           Declared Rate.  “Declared Rate” means with respect to any Plan Year the interest rate which will be credited during such Plan Year on a Participant's Deferred Compensation Accounts for Units of Participation which have not yet commenced benefit payments.  The Declared Rate for each Plan Year will be determined by the Administrative Committee, in its complete and sole discretion, and will be announced on or before January 1 of the applicable Plan Year; provided that in no event will the Declared Rate for any Plan Year be less than the Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investor's Service, Inc. (or any successor thereto) for the month of September before the Plan Year in question, or, if such yield is no longer published, a substantially similar average selected by the Administrative Committee.

9.           Deferral Amount.  “Deferral Amount” means an amount of Base Salary deferred with respect to a Unit of Participation under this Plan.

10.           Deferred Compensation Account.  “Deferred Compensation Account” means the account maintained on the books of account of the Employer for each Participant for each Unit of Participation pursuant to Section 5.1.

11.           Disability.  “Disability” means a disability as defined in the SBC Communications Inc. Sickness and Accident Disability Benefit Plan or the SBC Communications Inc. Senior Management Long Term Disability Plan covering the Participant, as applicable.

12.           Intentionally Omitted.

13.           Intentionally Omitted.

14.           Intentionally Omitted.

15.           Early Retirement.  “Early Retirement” means the termination of a Participant's employment with Employer for reasons other than death prior to Normal Retirement and on or after the date Participant attains age 55.

16.           Election Form.  The “Election Form” means an Eligible Employee's written election to participate in the Plan with respect to each Unit of Participation in accordance with Section 4.

17.           Eligible Employee.  “Eligible Employee” means an Employee of the Employer who (a) is in active service, (b) is a Senior Manager or has an employment status which has been approved by the Board or its Chairman to be eligible to participate in this Plan, and (c) who continuously maintains the employment status upon which eligibility to participate in this Plan was based.

18.           Employee.  ”Employee” means any person employed by the Employer on a regular full-time salaried basis.

19.           Employer.  “Employer” means SBC Communications Inc. or any of its Subsidiaries.

20.           Normal Retirement.  “Normal Retirement” means attainment of age 65 during a Participant's employment with Employer irrespective of whether there is a termination of Participant's employment with Employer.

21.           Participant.  “Participant” means an Employee participating in the Plan in accordance with the provisions of Section 4.

22.           Plan Year.  “Plan Year” means the calendar year.

23.       Projected Employer Contribution.  “Projected Employer Contribution” means for purposes of computing the Pre-Retirement Survivor Benefit with respect to a Unit of Participation pursuant to Section 6.6(a), the product of (i) the Company Match Rate Expressed as a Percent* as in effect at the time of the Unit Start Date, times the Participant's annual Base Salary at the Unit Start Date minus (a) any Employer matching contribution determined as of the Unit Start Date associated with said Base Salary at the Unit Start Date which is then being contributed or is to be contributed to the Salaried Savings Plan and minus (b) any Employer matching contribution which has previously been allocated to a Unit of Participation under this or any other Employer deferred compensation plan and (ii) the number of years in the Unit Deferral Period for the Unit of Participation.

24.        Rotational Work Assignment Company (‘RWAC”). shall mean Bell Communications Research, Inc. (“Bellcore”), formerly the Central Services Organization, Inc., and/or any other entity with which SBC Communications Inc. or any of its Subsidiaries may enter into an agreement to provide an employee for a rotational work assignment.25.      Retirement Benefit Option.  “Retirement Benefit Option” means with respect to any Unit of Participation the Retirement Benefit payment option described in Section 6.

25.           Senior Manager.  “Senior Manager” means an individual employed by Employer in a position having a Salary Grade of 29 or above or equivalent.

26.           SBC Communications Inc. Savings Plan for Salaried Employees.  “SBC Communications Inc. Savings Plan for Salaried Employees” or “Salaried Savings Plan” means the SBC Communications Inc. Savings Plan for Salaried Employees or any successor plan to such plan adopted by the Employer. Participants from any Subsidiary, permitted to participate in this Plan, shall be treated as participating in the SBC Communications Inc. Savings Plan for Salaried Employees for purposes of calculating any matching Employer contributions.

* The Company Match Rate Expressed as a Percent means the maximum percent of salary that can be received as Employer matching contribution under the SBC Communications Inc. Savings Plan for Salaried Employees, e.g., a match of 66 2/3% of the amount of basic allotment (up to 6%) of salary results in a Company Match Rate Expressed as a Percent of .667 x 6% -- 4%.

27.           Subsidiary.  A “Subsidiary” of the Company is any corporation, partnership, venture or other entity in which the Company has, either directly or indirectly, at least a 10% ownership interest.

28.           Total Unit Deferral Amount.  “Total Unit Deferral Amount” means the sum of all amounts of Base Salary deferred during the Unit Deferral Period with respect to a Unit of Participation, as shown in Exhibit A of Participant's Agreement for that Unit of Participation.

29.           Unit Deferral Period.  “Unit Deferral Period” means the number of months the Participant elects to reduce his Base Salary with respect to a Unit of Participation, as shown in Exhibit A of Participant's Agreement for that Unit of Participation. The Unit Deferral Period for a Unit of Participation will commence on the Unit Start Date and end upon the earliest to occur of the following: (i) the last day of the forty-eight (48) month period which commenced with the Unit Start Date, or (ii) when the Participant terminates employment, terminates the Unit of Participation or ceases to be an Eligible Employee as described in Section 6.4 of the Plan. In no event shall the Unit Deferral Period for a Unit of Participation end later than forty-eight (48) months after the Unit Start Date.

30.           Unit of Participation.  “Unit of Participation” means a stated Total Unit Deferral Amount and associated Employer contributions which provide stated benefits pursuant to Section 6 in accordance with the Participant's Agreement for that Unit of Participation.

31.           Unit Start Date.  “Unit Start Date” means the date for commencement of deferrals shown in Exhibit A of a Participant's Agreement for a given Unit of Participation. The Unit Start Date will be January 1, unless the Administrative Committee, in its sole discretion permits a new Participant to elect a Unit Start Date within 30 days after such Participant first becomes an Eligible Employee.

Section 3 Administration of the Plan.  The Administrative Committee shall be the sole administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms. The Administrative Committee shall further establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Administrative Committee shall be final and binding.

Section 4 Participation.

4.1           Election to Commence a Unit of Participation.  Any Eligible Employee may elect to commence deferral of Base Salary with respect to a Unit of Participation under the Plan by filing a completed Election Form with the Administrative Committee prior to the beginning of the Unit Start Date. Pursuant to said Election Form, the Eligible Employee shall elect a Total Unit Deferral Amount and a Unit Deferral Period to be specified in Exhibit A of Participant's Agreement with respect to such Unit of Participation.

The combination of deferrals from all of the Participant's Units of Participation including the Unit of Participation with respect to which the Participant is electing to commence deferrals and from Units of Participation under the SBC Communications Inc. Senior Management Deferred Compensation Plan (“SBC DCP”), must be at least six percent (6%) of Participant's Base Salary at the Unit Start Date for the Unit of Participation with respect to which the Participant is electing to commence deferrals. A Unit of Participation shall require a minimum Annualized Total Unit Deferral Amount of $1,000. The sum of the Participant's contributions, if any, to the SBC Communications Inc. Savings Plan for Salaried Employees plus the Annualized Total Unit Deferral Amounts for all Units of Participation under this Plan and under the SBC DCP in a given Plan Year may not exceed thirty percent (30%) of a Participant's Compensation for that Plan Year.

4.2           Termination of Election.  A Participant's election to defer Base Salary is irrevocable upon the filing of his Election Form with the Administrative Committee, provided, however, that the election may be terminated with respect to Base Salary not yet paid by mutual agreement in writing between the Participant and the Administrative Committee. Such termination if approved shall be effective beginning the first day of the month following the execution of such mutual agreement.

Section 5 Deferred Compensation.

5.1           Deferred Compensation Account.  The Administrative Committee shall establish and maintain a separate Deferred Compensation Account for each Participant for each Unit of Participation.  The amount by which a Participant's Base Salary is reduced each month pursuant to Section 4.1 and the amount of Employer contribution allocated to the Participant's Units of Participation pursuant to Section 5.3 with respect to any Unit of Participation shall be credited by the Employer to the Participant's Deferred Compensation Account for such Unit of Participation no later than the first day of the following month, and such Deferred Compensation Account shall be debited by the amount of any payments made by the Employer to the Participant or the Participant's Beneficiary with respect to such Unit of Participation pursuant to this Plan.

With respect to each Unit of Participation, the Deferred Compensation Account of a Participant shall be deemed to bear interest from the date such Deferred Compensation Account was established through the date of commencement of benefit payments at a rate equal to the applicable Declared Rate for the particular Plan Year on the balance from month-to-month in such Deferred Compensation Account.  Interest will be credited monthly to the Deferred Compensation Account at one-twelfth of the annual Declared Rate, compounded annually.  Following the commencement of benefit payments with respect to a Unit of Participation, a Participant's Deferred Compensation Account shall be deemed to bear interest on the balance in such Deferred Compensation Account from month-to-month at a rate equal to one-twelfth of the average of the annual Declared Rates for the five (5) Plan Years ending prior to commencement of benefit payments (or, if the Plan has been in operation for less than five (5) Plan Years, the average of the Declared Rates for all Plan Years ending prior to commencement of benefit payments).

5.2           Participant Deferrals.  The Participant's Total Unit Deferral Amount is deferred in equal amounts on a monthly basis over the Unit Deferral Period or as otherwise may be permitted by the Administrative Committee.  The amount deferred each month with respect to a given Unit of Participation shall be credited by the Employer to the Participant's Deferred Compensation Account for that Unit of Participation no later than the first day of the following month.

The Participant will be permitted to defer an additional amount equal to all or a portion of his Short Term Incentive Award. A Participant shall not be permitted to “defer” into the Plan any monies that are not compensation paid by Employer. Any additional deferrals by a Participant with respect to a given Unit of Participation shall not affect Total Unit Deferral Amount and shall not result in any change in the maximum Employer contribution pursuant to Section 5.3 for the Plan Year during which the additional deferral is made.  In no event shall any such additional deferral by a Participant result in any reduction in the amounts by which the Participant's Base Salary is reduced pursuant to Exhibit A to the Participant's Agreement with respect to such Unit of Participation prior to completion of deferral of the Total Unit Deferral Amount for such Unit

of Participation. Participant's election to defer all or a portion of his Short Term Incentive Award shall be filed with the Administrative Committee (on a form to be provided by said Committee for such purpose) prior to the beginning of the fiscal year during which such Award is earned.

Such additional deferral amount shall be considered a separate part of Participant's Deferred Compensation Account, shall be subject to the terms thereof except survivor benefits, and shall be paid out in the same manner as the rest of such Deferred Compensation Account.

5.3           Employer Contribution.  Participation in this Plan does not preclude participation in the SBC Communications Inc. Savings Plan for Salaried Employees.  For a given Plan Year, the aggregate Employer contribution to both the SBC Communications Inc. Savings Plan for Salaried Employees and this Plan on behalf of a Participant will be an amount equal to the Company Match Rate Expressed as a Percent as in effect during all or portions of that Plan year times the Participant's Compensation as in effect during all or portions of that Plan Year which is contributed or deferred for that Plan Year by the Participant in accordance with each plan, respectively.  Any such amount of Employer contribution not allocated to the SBC Communications Inc. Savings Plan for Salaried Employees will be credited to the Participant's Deferred Compensation Accounts, as applicable.  The amount or percent of a Participant's Base Salary to be allocated to Basic Allotments in the SBC Communications Inc. Savings Plan for Salaried Employees shall be specified in Paragraph 3 of a Participant's Agreement.

5.4           Vesting of Deferred Compensation Account.  A Participant's interest in his Deferred Compensation Account shall vest at the same rate and in the same manner as it would under the SBC Communications Inc. Savings Plan for Salaried Employees, as in effect from time to time, had both the Deferral Amount and the Employer contribution to this Plan with respect to that Deferral Amount for any given Unit of Participation been contributed instead to the SBC Communications Inc. Savings Plan for Salaried Employees.  For this purpose all years of service recognized under the SBC Communications Inc. Savings Plan for Salaried Employees, for purposes of determining a Participants vested interest under that plan, shall be taken into account in determining the Participant's vested interest under this Plan.

5.5           Valuation of Accounts.  The value of a Deferred Compensation Account as of any date shall equal the amounts theretofore credited to such account plus the interest on such account credited in accordance with Section 5.1 through the day preceding such date.

5.6           Statement of Accounts.  Each Participant will receive annual statements in such form as the Administrative Committee deems desirable setting forth the balance standing to the credit of each of the Participant's Deferred Compensation Accounts.

Section 6 Retirement Benefits.  Section 6 shall apply to all Units of Participation under this Plan. The benefits specified in this Section 6 shall be provided under the Retirement Benefit Option.

6.1           Normal Retirement.  Upon Normal Retirement, with respect to a Unit of Participation, the Employer shall pay to the Participant an equal amount each month for one hundred eighty (180) months, beginning on the first day of the month next following the date of Normal Retirement, which will amortize over such one hundred eighty (180) equal monthly payments the sum of (a) the value of the Deferred Compensation Account for such Unit of Participation as of the date of commencement of benefit payments, plus (b) the interest that will accrue on the unpaid balance in such Deferred Compensation Account during such one hundred eighty (180) month period pursuant to Section 5.1 (“Standard Retirement Benefit”). Alternatively, a Participant may elect in the Agreement for any Unit of Participation to receive an alternative retirement benefit in lieu of the Standard Retirement Benefit (“Alternative Retirement Benefit”) for such Unit of Participation either in a lump sum payment or in sixty (60) or one hundred twenty (120) equal monthly payments, with the amount of each monthly payment to be calculated in accordance with the principle stated in the preceding sentence.

6.2           Early Retirement.  Upon Early Retirement, with respect to a Unit of Participation, the Employer shall pay to the Participant an equal amount each month for one hundred eighty (180) months, beginning on the first day of the month next following the date of Early Retirement, which will amortize over such one hundred eighty (180) equal monthly payments the sum of (a) the value of the Deferred Compensation Account for such Unit of Participation as of the date of commencement of benefit payments, plus (b) the interest that will accrue on the unpaid balance in such Deferred Compensation Account during such one hundred eighty (180) month period pursuant to Section 5.1 (“Standard Retirement Benefit”). Alternatively, a Participant may elect in the Agreement for any Unit of Participation to receive an alternative retirement benefit in lieu of the Standard Retirement Benefit (“Alternative Retirement Benefit”) for such Unit of Participation either in a lump sum payment or in sixty (60) or one hundred twenty (120) equal monthly payments, with the amount of each monthly payment to be calculated in accordance with the principle stated in the preceding sentence.  A Participant may further elect in the Agreement for any Unit of Participation to have the Early Retirement Benefit for such Unit of Participation commence when he attains age 65.

6.3           Provisions Relating to Manner and Time of Payments.  If a Participant's Agreement fails to show an election of a manner of payment of a Normal or Early Retirement Benefit such Participant will receive the Standard Normal or Early Retirement Benefit in accordance with Section 6.1 or Section 6.2, respectively.

In the event that a final determination shall be made by the Internal Revenue Service or any court of competent jurisdiction that by reason of Normal or Early Retirement a Participant has recognized gross income for Federal income tax purposes in excess of the Standard or Alternative Retirement Benefit actually paid by the Employer to which such gross income is attributable, the Employer shall make a lump sum payment to the Participant of the remaining balance of his Deferred Compensation Accounts for any affected Units of Participation.  If a benefit is payable to a Participant pursuant to this paragraph for any Unit of Participation, no other benefits shall thereafter be payable under this Plan with respect to such Unit of Participation.

Notwithstanding any election made by the Participant, the Administrative Committee will pay the Participant's Standard or Alternative Retirement Benefit in the form of a lump sum payment if the value of his Deferred Compensation Account for a Unit of Participation is less than $10,000 when payment of a Normal or Early Retirement Benefit with respect to the Unit of Participation would otherwise commence.

6.4           Termination Benefit.

(a) Termination of Employment Before Attaining Age 55.  Upon any termination of employment of the Participant for reasons other than death or Disability before the Participant attains age fifty-five (55), the Company shall pay to the Participant, with respect to a Unit of Participation, as compensation earned for services rendered prior to his termination of service, a lump sum equal to the vested portion of the amounts standing credited to his Deferred Compensation Account for such Unit of Participation as of the date of such termination of service (“Termination Benefit”).

(b) Termination of a Unit of Participation.  A Participant may discontinue a Unit of Participation while continuing in the service of the Employer. Notwithstanding any other provision of the Plan, upon such discontinuance, the Participant shall immediately cease to be eligible for any benefits other than his Termination Benefit with respect to that Unit of Participation except as provided under Section 8.1.

No other benefit shall be payable with regard to such Unit of Participation to either the Participant or any Beneficiary of such Participant. The Participant shall continue to be credited with interest on the amounts standing credited to his Deferred Compensation Accounts as provided under Section 5.1 and to vest in such amounts as provided under Section 5.4 while he remains in employment with the Employer until payment of his Termination Benefit. However, no further Participant deferrals or Employer contributions to this Plan shall be made pursuant to Sections 5.2 or 5.3 with respect to a Unit of Participation after a Participant discontinues or terminates such Unit of Participation.

A Participant shall terminate a Unit of Participation if he terminates his election to defer Base Salary with the approval of the Administrative Committee pursuant to Section 4.2.

(c) Loss of Eligibility. In the event that the Participant ceases to be an Eligible Employee by reason of a change to an employment status which is not eligible to participate in this Plan, except as provided under Section 8.1, the Participant shall immediately cease to be eligible for any benefits other than a modified Termination Benefit which shall consist of a lump sum equal to the vested amounts standing credited to his Deferred Compensation Accounts as of the date of such loss of eligibility, provided the Participant shall continue to be credited with interest on such amounts as provided under Section 5.1 and to vest in such amounts as provided under Section 5.4 while he remains in employment with the Employer. However, no further Participant deferrals or Employer contributions shall be made to this Plan pursuant to Sections 5.2 or 5.3 subsequent to the date of such loss of eligibility.  Each such lump sum Termination Benefit shall be payable upon the Participant's termination of employment by the Employer, whether by death, Normal Retirement, Early Retirement or any other means. The provisions of this subparagraph 6.4(c) shall not apply if the Participant in his new employment status is an eligible employee under another similar deferred compensation plan of the Employer. In such event the provisions of Section 8.6 of this Plan shall apply.

(d) No Other Benefits Payable.  When a Participant terminates employment, terminates a Unit of Participation or ceases to be an Eligible Employee under circumstances in which Section 6.4(a), (b) or (c) applies, no Survivor Benefit or other benefit shall thereafter be payable under this Plan to either the Participant or any Beneficiary of the Participant with respect to such Unit of Participation except as provided under Section 8.1.

6.5           Disability.  In the event that a Participant suffers a Disability, Participant deferrals and Employer contributions that otherwise would have been credited to the Deferred Compensation Accounts of the Participant in accordance with Sections 5.2 and 5.3 will continue to be credited to such Deferred Compensation Accounts at the same time and in the same amounts as they would have been credited if the Participant had not suffered a Disability for as long as he is eligible to receive monthly disability benefits equal to 100 percent of his monthly base salary at the time of his Disability.  At such time as the Participant is not eligible to receive monthly disability benefits equal to 100 percent of his monthly base salary at the time of his Disability, Participant deferrals and Employer contributions that otherwise would have been credited to the Deferred Compensation Accounts of the Participant in accordance with Section 5.2 and 5.3 shall cease.

If the Participant recovers from his Disability and returns within sixty (60) days thereafter to employment with the Employer in an employment status which would make him eligible to participate in this Plan and prior to the end of the original Unit Deferral Period, the Participant shall continue or resume making deferrals, as the case may be, in accordance with Section 5.2 and the Employer shall continue or resume making contributions, as the case may be, in accordance with Section 5.3 until the end of the original Unit Deferral Period.

If the Participant recovers from his Disability, the Participant shall be treated as terminating service with the Employer on the date of his recovery, unless within sixty (60) days thereafter he returns to employment with the Employer in an employment status which makes him eligible to participate in this Plan.

If a Participant's Disability terminates by reason of his death, the rights of his Beneficiary shall be determined pursuant to Section 6.6 as if the Participant had not been disabled but rather had been in service on the date of his death and either died or retired on such date, whichever would be most advantageous to such Beneficiary.  If a Participant's Disability terminates by reason of attainment of age 65, the Participant shall upon the attainment of age 65 be entitled to a Normal Retirement Benefit determined pursuant to Section 6.1.  If a Participant's Disability terminates by reason of the Participant's election to take Early Retirement under the Plan, the Participant shall be treated as having an Early Retirement on the date elected by the Participant and shall be entitled to an Early Retirement Benefit determined pursuant to Section 6.2.

6.6           Survivor Benefits.

(a) If a Participant dies while in service with the Employer (or while suffering from a Disability prior to attaining age 55) prior to eligibility for Early Retirement with respect to a Unit of Participation, upon the Participant's death the Employer will pay to the Participant's Beneficiary with respect to each Unit of Participation an amount per month, as specified in paragraph 6 of his Agreement, equal to the greater of (i) [(50% of the sum of the Total Unit Deferral Amount plus the Projected Employer Contribution for such Unit of Participation) divided by 12] or (ii) the balance in the Deferred Compensation Account (excluding any Short Term Incentive Award deferred pursuant to Section 5.2 and excluding any interest earned on the Short Term Incentive Award) divided by the number of months payments are to be made as stated below, plus interest in accordance with the interest methodology of Section 6.2. Payments are to be made for the greater of one hundred twenty (120) months or the number of months from the date of Participant's death until he would have been age 65 (“Pre-Retirement Survivor Benefit”).

In addition, the Participant's Beneficiary will receive any Short Term Incentive Award associated with such Unit of Participation, deferred pursuant to Section 5.2, plus corresponding interest earned on the Short Term Incentive Award, paid out over the same period as the Pre-Retirement Survivor Benefit and in accordance with the interest methodology of Section 6.2.

(b) If a Participant dies while in service after eligibility for Early Retirement with respect to a Unit of Participation, but prior to commencement of payment of an Early or Normal Retirement Benefit with respect to such Unit of Participation, the Employer will pay to the Participant's Beneficiary the greater of (i) the benefit that such Participant's Beneficiary would have received with respect to such Unit of Participation had the Participant retired and commenced to receive an Early Retirement Benefit on the day prior to such Participant's death or (ii) a benefit equal to the Pre-Retirement Survivor Benefit.  The Administrative Committee shall determine which benefit is greater on a present value basis using such interest rate as the Administrative Committee may determine in its sole discretion.  Payments will commence upon the Participant's death, irrespective of when Early Retirement Benefit payments would have commenced if the Participant had survived. Such payments shall be made in accordance with the method of payment which the Participant had elected for payment of his Normal or Early Retirement Benefit.

(c) If a Participant dies after Early or Normal Retirement but before commencement of payment of an Early or Normal Retirement Benefit with respect to a Unit of Participation, the Employer will pay to the Participant's Beneficiary the installments of any such benefit that such Participant's Beneficiary would have received with respect to such Unit of Participation had the Participant commenced to receive an Early or Normal Retirement Benefit on the day prior to such Participant's death.  Payments will commence upon the Participant's death, irrespective of when Early or Normal Retirement Benefit payments would have commenced if the Participant had survived. Such payments shall be made in accordance with the method of payment which the Participant had elected for payment of his Normal or Early Retirement Benefit.

(d) If a Participant dies after the commencement of payment of an Early or Normal Retirement Benefit with respect to a Unit of Participation, the Employer will pay to the Participant's Beneficiary the remaining installments of any such benefit that would have been paid to the Participant had the Participant survived.

(e) As an additional benefit, if a Participant dies subsequent to eligibility to commence payment of a Standard or Alternative Retirement Benefit, and has a surviving spouse, the Employer shall pay to the spouse commencing on the later of (a) the sixteenth (16th) year after commencement of payment of any Standard or Alternative Retirement Benefit or (b) the first of the month following the Participant's death, an amount per month for the life of the spouse equal to sixty-six and two-thirds percent (66-2/3%) of the Standard Retirement Benefit.  If the spouse is more than three (3) years younger or older than the Participant on the date of Participant's death, the amount of such benefit shall be actuarially adjusted based on standard mortality tables.

6.7           Termination with Retirement Eligibility/Involuntary Termination.  Notwithstanding any other provisions of the Plan, if after November 17, 1995, a Participant’s employment terminates before the Participant attains age fifty-five, and if such termination is involuntary (which shall be deemed to include termination by reason of death), and is for a reason other than for cause (i.e., willful and gross misconduct on the part of the Participant that is materially and demonstrably detrimental to the Company or any entity in which the Company has at least a 50% ownership interest), and is on or after the date Participant is within five years of being pension eligible, i.e., would be within five years of being eligible to retire with a service pension under the rules for service pension eligibility as in effect under the SBC Pension Benefit Plan, and/or is a Senior Manager within five years of being eligible to retire with an immediate pension based on the eligibility rules of the SBC Senior Management Supplemental Retirement Income Plan, whether or not actually a participant in either such plan, then the provisions of this Section 6.7 shall govern and control with respect to the distribution of the Plan’s benefits if the benefits offered by this Section 6.7 are elected.  In such case, the Participant, or the Participant’s Beneficiary(ies) if the Participant’s employment terminates by reason of the Participant’s death, may irrevocably elect in writing, in a Waiver Agreement, as described below, filed with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor Benefit, as applicable, with respect to any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an “Alternative Termination Benefit”.

Such Alternative Termination Benefit for a Unit shall be the Unit as described in the Participant’s Agreement, provided in accordance with and governed in all respects by the terms of the Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such Unit as if the Participant had remained in employment and retired upon or after attaining age fifty-five, regardless of Participant’s actual termination date.  For purposes of applying the Plan and the Agreement, Normal Retirement shall be the Participant’s sixty-fifth birthday and Early Retirement shall be the date specified by the Participant as Participant’s Early Retirement date, which date shall be specified at the time the waiver Agreement, as described below, is filed with the Company, and which date may be no earlier than Participant’s fifty-fifth birthday.  In the event of Participant’s death prior to age fifty-five, the Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or Participant’s Beneficiary(ies), shall be determined, as described below, by applying the Plan and Agreement with respect to such Unit as if the Participant had died upon reaching age fifty-five.

Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this Section 6.7, in the event a Participant elects an Alternative Termination Benefit in lieu of the Termination Benefit for a Unit, or a Beneficiary(ies) elects to receive an Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a Unit, survivor benefits for such Unit shall be determined as follows:  (a)  If Participant dies on or after the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) shall receive the remaining installments of Participant’s retirement benefit; or (b)  If Participant dies on or after age fifty-five but prior to the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) will receive survivor benefits in  accordance with Section 6.6(b), i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon or after attainment of age fifty-five, or  (c)  If Participant’s death occurs prior to age fifty-five, Participant’s Beneficiary(ies) will receive at such time as Participant would have attained age fifty-five, survivor benefits in accordance with Section 6.6(b), i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon attainment of age fifty-five; and  (d)  Finally, the benefit described in Section 6.6(e) shall apply commencing on the later of the sixteenth year after commencement of payments pursuant to the Alternative Termination Benefit or the first of the month following Participant’s death.

For purposes of computing the Vested Benefits (as such term is used in rabbi trusts (“Trusts”) established by the Company for the purpose of providing for the payment of benefits under the Plan) corresponding to an Alternative Termination Benefit, for all Trust purposes, including for purposes of determining the Trust funding level applicable for such Alternative Termination Benefit, the Participant shall be treated for each such Alternative Termination Benefit Unit as if continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five or until the date of Participant’s death if Participant dies after attaining age fifty-five or until reaching the Participant’s Early Retirement Date for such Unit as selected by the Participant if Participant survives until such date, i.e., the Trust funding for any such Unit and the security afforded Participant or Participant’s Beneficiary(ies) thereby shall be no different as a result of this Section 6.7 than they would have been had Participant continued in employment in the absence of this Section 6.7 and lived until at least age fifty-five.

Waiver of a Termination Benefit with respect to a Unit by a Participant, or of a Pre-Retirement Survivor Benefit with respect to a Unit by a Beneficiary(ies), and in either case, receipt of an Alternative Termination Benefit in lieu thereof, shall be conditioned upon the agreement in writing by the Participant, or Participant’s Beneficiary(ies), as applicable, at the time of Participant’s termination of employment, to provisions substantially as attached.

6.8           Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant's employment terminates before the Participant attains age fifty-five, and if such termination is as an EPR Terminee under the Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit Plan-Nonbargained Program ("SBC PBP") or as a Deceased Electing Employee under EPR, and is on or after the date Participant is within five years of being pension eligible, i.e., would be within five years of being eligible to retire with a service pension under the rules for service pension eligibility as in effect under the SBC PBP, and/or is a Senior Manager within five years of being eligible to retire with an immediate pension based on the eligibility rules of the SBC Supplemental Retirement Income Plan, whether or not actually a participant in either such plan, or a Participant who is age 55 or over terminates employment under EPR, then the provisions of this Section 6.8 shall govern and control with respect to the distribution of the Plan’s benefits if the benefits offered by this Section 6.8 are elected.  In such case, the Participant, or the Participant’s Beneficiary(ies) if the Participant’s employment terminates by reason of the Participant’s death, may irrevocably elect in writing, in an EPR special election form filed with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor Benefit or the Early Retirement Benefit, as applicable, with respect to any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an “EPR Alternative Termination Benefit”.

Such an EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the Participant’s Agreement, provided in accordance with and governed in all respects by the terms of the Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the Participant had remained in employment and retired upon the Participant's Early Retirement Date specified in his EPR special election form applicable to such Unit of Participation, regardless of Participant’s actual termination date.  For purposes of applying the Plan and the Agreement, Normal Retirement shall be the Participant’s sixty-fifth birthday and Early Retirement shall be the date specified by the Participant as Participant’s Early Retirement date, which date shall be specified in Participant's special EPR election form filed with the Company, and which date may be no earlier than Participant’s fifty-fifth birthday.  In the event of Participant’s death prior to age fifty-five, the EPR Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or Participant’s Beneficiary(ies), shall be determined, as described below, by applying the Plan and Agreement with respect to such Unit as if the Participant had died upon or after reaching age fifty-five.

Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this Section 6.8, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the Termination Benefit or the Early Retirement Benefit for a Unit, or a Beneficiary(ies) elects to receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a) If Participant dies on or after the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) shall receive the remaining installments of Participant’s retirement benefit; or (b) If Participant dies on or after age fifty-five but prior to the date specified by Participant as Participant’s Early Retirement date, Participant’s Beneficiary(ies) will receive survivor benefits in  accordance with Section 6.6(b), i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon or after attainment of age fifty-five, or  (c) If Participant’s death occurs prior to age fifty-five, Participant’s Beneficiary(ies) will receive at such time as Participant would have attained age fifty-five, survivor benefits in accordance with Section 6.6(b), i.e., the provision of the Plan that would have applied had Participant’s death actually been an in service death which occurred upon attainment of age fifty-five; and  (d)  Finally, the benefit described in Section 6.6(e) shall apply commencing on the later of the sixteenth year after commencement of payments pursuant to the EPR Alternative Termination Benefit or the first of the month following Participant’s death.

For purposes of computing the Vested Benefits (as such term is used in rabbi trusts (“Trusts”) established by the Company for the purpose of providing for the payment of benefits under the Plan) corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for purposes of determining the Trust funding level applicable for such EPR Alternative Termination Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five or until the date of Participant’s death if Participant dies after attaining age fifty-five or until reaching the Participant’s Early Retirement Date for such Unit as selected by the Participant if Participant survives until such date, i.e., the Trust funding for any such Unit and the security afforded Participant or Participant’s Beneficiary(ies) thereby shall be no different as a result of this Section 6.8 than they would have been had Participant continued in employment in the absence of this Section 6.8 and lived until at least age fifty-five.

Section 7 Intentionally Omitted.

Section 8 Payment of Benefits.

8.1           Intentionally Omitted.

8.2           Small Benefit.  Notwithstanding any election made by the Participant, the Administrative Committee will pay any benefit in the form of a lump sum payment if the lump sum equivalent amount is less than $10,000 when payment of such benefit would otherwise commence.

8.3           Emergency Benefit.  In the event that the Administrative Committee, upon written petition of the Participant, determines in its sole discretion, that the Participant has suffered an unforeseeable financial emergency, the Employer shall pay to the Participant, as soon as practicable following such determination, the balance of his Deferred Compensation Accounts for one or more Units of Participation as necessary to meet the emergency (the “Emergency Benefit”).  For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence.  Cash needs arising from foreseeable events such as the purchase of a house or education expenses for children shall not be considered to be the result of an unforeseeable financial emergency.  Upon payment of an Emergency Benefit with respect to any Unit of Participation, the Unit of Participation shall thereupon terminate, and no other benefits shall be payable under the Plan to either the Participant or any Beneficiary of the Participant with respect to the Unit of Participation.

8.4           Commencement of Payments.  Except as otherwise provided in this Plan, commencement of payments under this Plan shall begin sixty (60) days following the event which entitles a Participant (or a Beneficiary) to payments under the Plan, or at such earlier date as may be determined by the Administrative Committee.

8.5           Withholding; Unemployment Taxes.  To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder the minimum taxes required to be withheld by the federal or any state or local government.

8.6           Change in Status.  In the event of a change in the employment status of a Participant to a status in which he is no longer an Eligible Employee under this Plan, but is an eligible employee under the Management Deferred Compensation Plan of 1988 or another similar deferred compensation plan of the Employer, the Participant and all of his Units of Participation under this Plan shall automatically be transferred to such other deferred compensation plan for which he is then an eligible employee, unless otherwise determined by the Administrative Committee.  In the event of any such transfer, the provisions of the other deferred compensation plan to which the Participant transfers shall thereafter determine the rights and benefits of the Participant with respect to all of his Units of Participation, unless otherwise determined by the Administrative Committee.  The Employer may, but shall not be required to, enter into revised Agreements with the Participant to carry out the provisions of this Section.

8.7           Transfer to RWAC.   Effective August 1, 1990, if a Participant transfers to a RWAC prior to completion of a Unit of Participation, deferrals which would otherwise have been made by the Participant in accordance with Section 5.2 shall continue to be made by the Employer until the Participant resumes employment with the Employer but for a maximum period not to exceed 5 years.  Contributions which would have been made by the Employer in accordance with Section 5.3 shall also continue to be made by the Employer during such period as Participant contributions are continued in accordance with the preceding sentence.  Benefits applicable during the period of employment at a RWAC (not to exceed 5 years) and the methods used for crediting the Deferred Compensation Account and repaying amounts contributed by the Employer and reducing the Normal Retirement or Early Retirement Benefit paid to the Participant or his Beneficiary shall be the same as those applicable pursuant to Section 6.7 in the case of Disability, i.e., employment at a RWAC shall be deemed a Disability for the purpose of making determinations pursuant to Section 6.7.  If the Participant has not resumed employment with the Employer or has not completed a Unit of Participation as result of Employer Contributions within 5 years from date of transfer, a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Account at the date of transfer shall be paid upon termination of employment with a RWAC or the expiration of such 5 year period whichever is earlier.

8.8           Leave of Absence.  If a Participant absents himself from employment on a formally granted leave of absence (i.e., the absence is with formal permission in order to prevent a break in the continuity of the Employee's term of employment which permission is granted in conformity with the rules of the Employer which employs the individual, as adopted from time to time), all of the Participant's Units of Participation shall automatically be frozen upon such leave of absence, unless otherwise determined by the Administrative Committee. No Participant deferrals or Employer contributions shall be made during the leave of absence.  However, during the leave of absence (for a period not to exceed six (6) months), the Participant shall continue to be credited with interest on his Deferred Compensation Accounts as provided under Section 5.1 and to vest in such amounts as provided under Section 5.4, and all benefits shall continue to be payable to the Participant and his Beneficiaries in accordance with Section 6 hereof, except in the case of a political leave (i.e., to campaign for or serve when elected to a political office, to serve if appointed to public office or for non-candidate employees to participate in campaigns of candidates for political office).  In the case of such a political leave, except as provided under Section 8.1, the only benefit payable if the Participant dies during such leave shall be a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Accounts, which shall be payable to the Participant's Beneficiary.  If the Participant returns to employment with the Employer in an employment status which makes him eligible to participate in this Plan within six (6) months from commencement of the leave of absence, Participant deferrals and Employer contributions will resume until the end of the original Unit Deferral Period.  If the Participant has not resumed employment with the Employer in an employment status which makes him eligible to participate in this Plan within six (6) months from the commencement of the leave of absence, a Termination Benefit based on the amounts credited to the Participant's Deferred Compensation Accounts shall be paid to the Participant.

This Section 8.8 shall not apply with respect to any period during which a Participant is suffering from a Disability, and such period of Disability shall not be included under this Section 8.8 as a portion of a period of leave of absence.

8.9           Ineligible Participant.  Notwithstanding any other provisions of this Plan to the contrary, if any Participant is determined not to be a “management or highly compensated employee” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (ERISA) or Regulations thereunder, such Participant will not be eligible to participate in this Plan and shall receive an immediate lump sum payment equal to the vested portion of the amounts standing credited to his Deferred Compensation Accounts.  Upon such payment no Survivor Benefit or other benefit shall thereafter be payable under this Plan either to the Participant or any Beneficiary of the Participant, except as provided under Section 8.1.

Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both primary as well as contingent) to whom payment under this Plan shall be made in the event of his death prior to complete distribution to Participant of the benefits due him under the Plan.  Each Beneficiary designation shall become effective only when filed in writing with the Administrative Committee during the Participant's lifetime on a form prescribed by the Administrative Committee with written acknowledgment of receipt.

The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of Beneficiary or Beneficiaries other than the spouse.

If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Administrative Committee shall direct the distribution of such benefits to the Participant's estate.

Section 9 Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both primary as well as contingent) to whom payment under this Plan shall be made in the event of his death prior to complete distribution to Participant of the benefits due him under the Plan.  Each Beneficiary designation shall become effective only when filed in writing with the Administrative Committee during the Participant’s lifetime on a form prescribed by the Administrative Committee with written acknowledgment of receipt.

The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed.  The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of Beneficiary or Beneficiaries other than the spouse.

If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Administrative Committee shall direct the distribution of such benefits to the Participant’s estate.

Section 10 Discontinuation, Termination, Amendment.

10.1           Employer's Right to Discontinue Offering Units.  The Chairman of the Board may at any time discontinue offerings of additional Units of Participation with respect to any or all future Plan Years. Any such discontinuance shall have no affect upon the deferrals or benefits or the terms or provisions of this Plan as applicable to any then previously existing Units of Participation.

10.2           Employer's Right to Terminate Plan.  The Board may at any time terminate the Plan. Termination of the Plan shall mean that (1) there shall be no further offerings of additional Units of Participation with respect to any future Plan Year; (2) Base Salary shall prospectively cease to be deferred with respect to all Units of Participation for the then Plan Year and thereafter; and (3) all then currently existing Units of Participation shall be treated as follows:

The Participant's Deferred Compensation Accounts shall be 100% vested. The Participant shall receive or continue to receive all benefits under this Plan at such time as provided in and pursuant to the terms and conditions of his Agreement(s) and as described in this Plan, provided however, any benefits payable under a Unit of Participation that is not completed due to a termination of the Plan under this Section 10.2 shall be prorated based upon the number of months Participant made deferrals with respect to such Unit of Participation divided by the Unit Deferral Period for that Unit of Participation.

10.3           Amendment.  The Board may at any time amend the Plan in whole or in part, provided however, that no amendment, including an amendment to this Section 10, shall be effective, without the written consent of a Participant, to alter, to the detriment of such Participant, the benefits described in this Plan as applicable to a Unit of Participation of the Participant or to decrease amounts standing credited to such Participant's Deferred Compensation Accounts under the Plan.  For purposes of this Section 10.3, an alteration to the detriment of a Participant shall mean a reduction in the period of time over which benefits are payable under a Participant's Agreement, subject however to the proration provisions of Section 10.2 hereof, or any change in the form of benefits payable to a Participant under the Participant's Agreement.  Written notice of any amendment shall be given to each Participant.

Section 11 Miscellaneous.

11.1           Unsecured General Creditor.  Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of Employer, nor shall they be Beneficiaries of, or have any rights, claims, or interests in any life insurance policies, annuity contracts, or the proceeds therefrom owned or which may be acquired by Employer (“Policies”).  Any such Policies or other assets of Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of Employer under this Plan.  Any and all of the Employer's assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of Employer. Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future.

11.2           Trust Fund. The Employer shall be responsible for the payment of all benefits provided under the Plan.  At its discretion, the Company may establish one or more trusts, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer's creditors.  To the extent any benefits provided under the Plan are actually paid from any such trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Employer.

11.3           Obligations to Employer.  If a Participant becomes entitled to a distribution of benefits under the Plan, the Employer may offset against the amount of benefits otherwise distributable any claim to reimbursement for intentional wrongdoing by the Participant against the Employer or an affiliate.  Such determination shall be made by the Administrative Committee.

11.4           Nonassignability.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

11.5           Employment Not Guaranteed.  Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Employee any right to be retained in the employ of the Employer or to serve as a director.

11.6           Protective Provisions.  A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Employer may deem necessary and taking such other relevant action as may be requested by the Employer.  If a Participant refuses so to cooperate, the Employer shall have no further obligation to the Participant under the Plan.  If a Participant commits suicide during the two-year period beginning on the Unit Start Date for a given Unit of Participation or if the Participant makes any material misstatement of information or non-disclosure of medical history, then no benefits will be payable with respect to that Unit of Participation to such Participant or his Beneficiary, or in the Employer's sole discretion, benefits may be payable in a reduced amount.

11.7           Gender, Singular and Plural.  All pronouns and any variations thereof shall be deemed to refer to the masculine or feminine, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.

11.8           Waiver of Benefits.  No benefit shall be payable under the provisions of this Plan with respect to any Participant who is or was a member of a group of employees designated by an Employer as eligible to waive such benefit if such Participant has waived such benefit under this Plan unless the Employer by which such Participant is or was last employed has authorized the revocation of such waiver and such Participant has revoked such waiver.

11.9           Captions.  The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning of construction of any of its provisions.

11.10                      Applicable Law.  This Plan shall be governed and construed in accordance with the laws of the State of Missouri.

11.11                      Validity.  In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.

11.12                      Notice.  Any notice or filing required or permitted to be given to the Administrative Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of the Employer, directed to the attention of the Vice President-Human Resources of the Employer.  Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

11.13                      Successors and Assigns.  This Plan shall be binding upon the Company and its successors and assigns.

SBC COMMUNICATIONS INC.

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN OF 1988 AGREEMENT

19___ UNIT OF PARTICIPATION

THIS AGREEMENT is made and entered into at St. Louis, Missouri as of the _____ day of ___________________________, 19___, by and between SBC Communications Inc. (“Company”), and (“Senior Manager”).

WHEREAS, the Company has adopted a Senior Management Deferred Compensation Plan of 1988 (the “Plan”); and

WHEREAS, The Senior Manager has been determined to be eligible to participate in the Plan; and

WHEREAS, the Plan requires that an agreement be entered into between the Company and the Senior Manager setting out certain terms and benefits of the Plan as they apply to the Senior Manager;

NOW, THEREFORE, the Company and the Senior Manager hereby agree as follows:

1.           The Plan is hereby incorporated into and made a part of this Agreement, as though set forth in full herein. The parties shall be bound by, and have the benefit of, each and every provision of the Plan, including without limitation the restrictions on assignability set forth in the Plan.

2.           The Senior Manager was born on ______________________.

3.           The Senior Manager's basic allotment percentage in the SBC Communications Inc. Savings Plan for Salaried Employees (“Savings Plan”) is _____ percent (___%).  Any subsequent change in this level of participation by the Senior Manager before this Unit of Participation is completed will void this Agreement and require that a new Agreement be entered into between the Employer and the Senior Manager.

4.           The Senior Manager's Base Salary during a calendar year shall be reduced in accordance with Exhibit A attached to this Agreement.

5.           The Senior Manager's Projected Employer Contribution associated with this Unit of Participation is set forth in Exhibit A attached to this Agreement.  There shall be no duplication of Employer matching contributions, i.e., it is understood that any Employer matching contributions corresponding to Senior Manager deferrals under this Unit of Participation that are contributed to the Plan will preclude Employer matching contributions to the Savings Plan with respect to such Senior Manager deferrals, and vice versa.

6.           The amount per month of Pre-Retirement Survivor Benefit in accordance with Section 6.6(a) of the Plan is the greater of (i) $____________, or (ii) the balance in the Deferred Compensation Account (excluding Short Term Incentive Awards deferred and interest earned on such awards) divided by the number of months payments are to be made, plus interest; such amounts shall be payable for the greater of ten (10) years or the number of years from the date of Participant's death until he would have been age 65.

7.           The payment option for Participant's 19___ Unit of Participation shall be the Retirement Benefit Option in accordance with Section 6.

This payment option will also apply to payout of any Short Term Incentive Awards deferred and interest earned on such awards. Such payout is not considered part of the Standard Retirement Benefit.

RETIREMENT BENEFIT OPTION

(Paragraphs 8 and 9 apply to benefits paid pursuant to the Retirement Benefit Option.)

8.           Upon Normal or Early Retirement, the Participant hereby elects: (please initial (a) or (b))

(a) _______ To receive a Standard Retirement Benefit, payable for a period of one hundred eighty (180) months.

(b) _______ To receive an Alternative Retirement Benefit to be paid in accordance with one of the following payment modes: (please initial one of the following)

(i) ______ In a lump sum payment.

(ii) ______ In equal monthly installments for a period of sixty (60) months.

(iii) ______ In equal monthly installments for a period of one hundred twenty (120) months.

9.           The Participant hereby elects to receive any Early Retirement Benefit as follows (please initial (a) or (b)):

(a) _______ Commencing at age 65.

(b) _______ Commencing at Early Retirement.

10.           Intentionally Omitted

11.           Intentionally Omitted

12.           This Agreement shall inure to the benefit of, and be binding upon, the Company, its successors and assigns, and the Senior Manager and his Beneficiaries.

IN WITNESS WHEREOF, the parties hereto have signed and entered into this Agreement on and as of the date first above written.

THE COMPANY:

By ___________________________________

Its Senior Vice President-Human Resources

SENIOR MANAGER                                                              ______________________                 ___________

Signature                                      Date

EXHIBIT A

SBC COMMUNICATIONS INC.

SENIOR MANAGEMENT

DEFERRED COMPENSATION PLAN AGREEMENT

19__ Unit of Participation

Unit Start Date:  _____________, 19__

Unit Deferral Period: 48 Months

Annual Amount

Year                                                                                      Deferred                          

1.           Unit Start Date:

19__                 (commencing the first day

 of the month of January)                                                                        $__________ (1)

2.           19__                                                                                             __________ (1)

3.           19__                                                                                             __________ (1)

4.           19__                 (ending the last day of                                                                     __________ (1)

 the month of December)

Total Unit

Deferral Amount                                           $_____________

Projected Employer Contribution                                                                               $_____________

associated with this Unit of

Participation

Monthly Pre-Retirement Survivor                                                                              $_____________

Benefit associated with this Unit

of Participation

_____________________________________________________________________

(1)   This amount will be deferred in equal amounts on a monthly basis.

EX-10.H

Exhibit 10-h

AT&T HEALTH PLAN

Effective:  January 1, 1987

           Revisions Effective:  January 1, 2009

AT&T HEALTH PLAN

ARTICLE 1   PURPOSE

The AT&T Health Plan ("Plan") provides Eligible Employees, certain Retired Eligible Employees, and each of their Dependents with supplemental medical, dental, and vision benefits.  

ARTICLE 2   DEFINITIONS

For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

2.1Basic Plan(s). “Basic Plan(s)” shall mean AT&T’s group managed care medical (known as the AT&T Medical Plan), dental (non-DHMO option), and vision care plans (including the AT&T Retiree Vision Care Program).   For a Participant who Retired on or before August 31, 1992, Basic Plans shall mean the AT&T Medical and Group Life Insurance Plan–CustomCare (“CustomCare”) and dental (non-DHMO option) plans.

2.2CEO.  "CEO" shall mean the Chief Executive Officer of AT&T Inc.

2.3COBRA.  “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

2.4Committee.  "Committee" shall mean the Human Resources Committee of the Board of Directors of AT&T Inc.

2.5Dependent(s).  “Dependent(s)” shall mean those individuals who would qualify as an Eligible Employee’s dependent(s) under the terms of the major medical Basic Plan in which the Eligible Employee participates, or, if applicable, Substitute Basic Coverage.

2.6Disability.  "Disability" shall mean qualification for long term disability benefits under Section 3.1 of the Officer Disability Plan.

2.7Eligible Employee.  "Eligible Employee" shall mean an Officer.  Notwithstanding the foregoing, the CEO may, from time to time, exclude any Officer or group of Officers from being an “Eligible Employee” under this Plan.  Employees of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as such by the CEO.

2.8Employer.  "Employer" shall mean AT&T Inc. or any of its Subsidiaries.

2.9Executive Officer.  “Executive Officer” shall mean any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934.

2.10Officer.  "Officer" shall mean an individual who is designated as an officer level Employee for compensation purposes on the records of AT&T.

2.11Participant.  “Participant” shall mean an Eligible Employee or Retired Eligible Employee who has been designated to participate in the Plan and his/ her Dependent(s).

2.12Plan Year. ”Plan Year” shall mean the calendar year.

2.13Qualified Dependent.  “Qualified Dependent” shall mean a Dependent who loses coverage under a COBRA Eligible Program due to a Qualifying Event.

2.14Qualifying Event.“Qualifying Event” shall mean any of the following events if, but for COBRA continuation coverage, they would result in a Participant’s loss of coverage under this Plan:

(1) death of a covered Employee;

(2) termination (other than by reason of such Employee’s gross  misconduct) of an Employee’s employment;

(3) reduction in hours of an Employee;

(4) divorce or legal separation of an Employee or dissolution of an Employee’s registered domestic partnership;

(5) an Employee’s entitlement to Medicare benefits; or

(6) a Dependent child ceasing to qualify as a Dependent under a Program.

2.15Retire or Retirement.  “Retire” or "Retirement" shall mean the termination of an Eligible Employee's employment with AT&T or any of its Subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date such Eligible Employee has attained age 55, and, for an Eligible Employee on or after January 1, 2002, has five (5) years of service, or (2) the date the Eligible Employee has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997: 

Net Credited Service	Age
25 years or more	50 or older
30 years or more	Any age

2.16  SEVP-HR.    “SEVP-HR” shall mean AT&T’s highest ranking Officer, specifically responsible for human resources matters.

2.17 Subsidiary.  "Subsidiary" shall mean any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest.  The Committee may, at its sole discretion, designate any other corporation, partnership, venture or other entity a Subsidiary for the purpose of participating in this Plan.  Notwithstanding anything herein to the contrary, unless designated a “Subsidiary” pursuant to the immediately preceding sentence, Cingular Wireless LLC, Sterling Commerce, Inc., and their respective subsidiaries shall not be considered a Subsidiary under this Plan.

2.18 AT&T.  "AT&T" shall mean AT&T Inc.

ARTICLE 3   ELIGIBILITY

3.1Active Participants and their Dependents.Each Eligible Employee shall be eligible to participate in this Plan along with his/her Dependent(s) beginning on the effective date of the employee becoming an Eligible Employee.

Upon becoming an Eligible Employee, he/she shall have 90 days to elect to participate in this Plan.  In order to continue participation, the Eligible Employee must pay all applicable contributions.  If an Eligible Employee terminates participation in this Plan at any time for any reason, that Eligible Employee and his/her Dependent(s) shall be ineligible to participate in the Plan at any time in the future.

3.2Retired Participants and their Dependents.  Provisions of this Plan will continue in effect during Retirement for each Eligible Employee and his/her Dependent(s) with respect to any Eligible Employee who became a Participant before January 1, 1999.  Neither an Eligible Employee who became an Eligible Employee after December 31, 1998 nor his/her Dependent(s) shall be eligible for participation hereunder on or after such Eligible Employee’s Retirement.

3.3Requirement to Enroll and Participate in Basic Plans and Medicare.  As a condition to participation in the Plan, each Participant must be enrolled in, paying for, and participating in (i) the Basic Plans, or, if applicable, Substitute Basic Coverage, and (ii) all parts of Medicare for which such Participant is eligible and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage.

Notwithstanding any other provision of the Plan to the contrary, an individual who first becomes an Eligible Employee in the middle of a Plan Year and who is enrolled in AT&T sponsored group health plans other than the Basic Plans, will be allowed to participate in the Plan for the remainder of the Plan Year along with his/her Dependent(s) who are enrolled in such other AT&T sponsored health plans, as if they were participating in the Basic Plans.  At the next group enrollment opportunity for the Basic Plans, the Eligible Employee and his/her Dependent(s) must enroll in the Basic Plans to continue participation in this Plan.

ARTICLE 4   BENEFITS

4.1Covered Benefits. Subject to the limitations in this Article, this Plan provides 100% payment, through reimbursement or otherwise, of all medical, dental, and vision services not paid under the Eligible Employee’s (i) Basic Plans or, if applicable, Substitute Basic Coverage, or (ii) Medicare, provided expenses for such services would qualify as deductible medical expenses for federal income tax purposes, whether deducted or not. Contributions or premiums for participation in this Plan, the Basic Plans, Medicare, or any other health plan are not considered “services”, and are therefore not eligible benefits under this Plan.

4.2Benefit Limits.  Benefits paid to any Eligible Employee or any one of his/her Dependents under this Plan shall not exceed $50,000 per Plan Year per individual, and benefits paid to any Eligible Employee and his/her Dependents under this Plan shall not exceed $100,000 total per Plan Year. Amounts paid to or on behalf of an Eligible Employee or his/her Dependent(s) under (i) the Basic Plans, or if applicable, Substitute Basic Coverage, (ii) Medicare, or (iii) any other AT&T sponsored group health plan will not be included in these limits.

4.3Priority of Paying Covered Claims.  Claims for benefits will be applied against the various health plans and coordinated with Medicare in the following order:

(1) Medicare, to the extent the Participant is eligible therefore and such claim is actually paid by Medicare,

(2) Basic Plans,

(3) CarePlus, if elected,

(4) Long Term Care Plan, if elected,

(5) this Plan.

4.4Substitute Basic Coverage.  Notwithstanding any other provision of this Plan to the contrary, if an Eligible Employee is eligible for participation under this Plan during Retirement, but not eligible to participate under the Basic Plans, the Plan shall provide medical, dental, and vision benefits for the Eligible Employee and his/her Dependent(s) substantially equivalent to the benefits under the Basic Plans through an insured product (hereinafter, "Substitute Basic Coverage"). Eligibility for Substitute Basic Coverage is conditioned upon the Eligible Employee’s payment of contributions in the same amount that a similarly situated retired Basic Plan participant is required to pay under the Basic Plans. Such Substitute Basic Coverage shall constitute such Eligible Employee’s Basic Plans for all purposes under this Plan.  The costs of Substitute Basic Coverage (except for the required monthly contributions referenced in this paragraph) shall be borne by AT&T, and the costs of Substitute Basic Coverage shall not be included in the determination of any Participant’s annual Plan contribution amount as provided in Article 7.

ARTICLE 5   TERMINATION OF PARTICIPATION

5.1Termination of Participation.  Participation will cease on the last day of the month in which one of the following conditions occurs:

(1)   The Participant is no longer a participant in the Basic Plans or Substitute Basic Coverage, in which case participation ceases for such Participant;

(2)   A Participant eligible to enroll in Medicare is no longer a participant in all parts of Medicare for which such Participant is eligible to enroll and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage, in which case participation ceases for such Participant;

(3)   The Eligible Employee’s termination of employment for reasons other than Death, Disability, or Retirement, in which case participation ceases for the Eligible Employee and his/her Dependent(s);

(4)   The demotion or designation of an Eligible Employee so as to no longer be eligible to participate in the Plan, in which case participation ceases for the Eligible employee and his/her Dependent(s);

(5)   The Eligible Employee (or Retired Eligible Employee) engages in competitive activity under Article 8, in which case participation ceases for the Eligible Employee (or Retired Eligible Employee) and his/her Dependent(s); or

(6)   Discontinuance of the Plan by AT&T, or, with respect to a Subsidiary’s Eligible Employees (or Retired Eligible Employees), such Subsidiary’s failure to make the benefits hereunder available to Eligible Employees employed by it (or its Retired Eligible Employees), in which case participation ceases for the Eligible Employee (or Retired Eligible Employee) and his/her Dependent(s).

5.2Dependents Failure to Participate in Basic Plans.  If a Dependent ceases participation under a Basic Plan or, if applicable, Substitute Basic Coverage, such Dependent’s participation under this Plan will cease with the same effective date.

5.3Death.  In the event of the Eligible Employee’s (or Retired Eligible Employee’s) death, the Eligible Employee’s (or Retired Eligible Employee’s) Dependents may continue participation in this Plan as follows:

(1) In the event of the death of a Retired Eligible Employee such Retired Eligible Employee’s Dependents may continue participation in this Plan for so long as such Dependents are participating in the Basic Plans (or, if applicable, Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7.

(2) In the event of an in-service death of an Eligible Employee eligible to participate in the Plan in Retirement as provided under Article 3.2, such Eligible Employee’s surviving Dependents may continue participation in this Plan for so long as such Dependents are participating in the Basic Plans (or, if applicable Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7.  If a surviving spouse of such Eligible Employee otherwise eligible for participation in the Plan remarries, his/her participation will cease with the effective date of his/ her marriage.

(3) In the event of an in-service death of an Eligible Employee not eligible to participate in the Plan in Retirement as provided in Article 3.2, such Eligible Employee’s Dependent(s) may continue participation in this Plan for a 12-month period commencing the month following the month in which such Eligible Employee dies as long as such Dependent(s) are participating in the Basic Plans and are paying any applicable contributions for this Plan as provided in Article 7.  If the Eligible Employee’s Dependent(s) are eligible for COBRA, they will automatically be enrolled in COBRA so that there is no lapse in coverage, and this 12-month coverage will be integrated and run concurrently with COBRA coverage.

ARTICLE 6   DISABILITY

6.1Disability.  With respect to any Eligible Employee who is receiving short term or long term disability benefits under the Officer Disability Plan, participation under this Plan will be as follows:

(1) The Eligible Employee will be eligible to participate in this Plan for as long as he/she receives short term or long term disability benefits under the Officer Disability Plan.

(2) An individual who became an Eligible Employee on or after January 1, 1999 will no longer be eligible to participate in this Plan once long term disability benefits under the Officer Disability Plan are discontinued, unless the Eligible Employee is otherwise eligible for continued benefits under this Plan.

(3) An Employee who became an Eligible Employee before January 1, 1999, will be eligible for participation in this Plan as follows:

(a) If the individual is Retirement eligible at the time long term disability benefits under the Officer Disability Plan commence, he/she will be eligible to continue participation in this Plan on the same terms and conditions that participation would be available to such Eligible Employee in Retirement, regardless of his/her continued receipt of long term disability benefits.

(b) If the individual is not Retirement eligible at the time long term disability benefits under the Officer Disability Plan commence, he/she will be eligible to participate in this Plan for as long as such Eligible Employee participates in the Basic Plans.

ARTICLE 7   COSTS

7.1Costs of the Plan.  Except as provided below in this Article 7, costs and expenses incurred in the operation and administration of this Plan will be borne by AT&T, and each Subsidiary shall reimburse AT&T for applicable costs and expenses attributable to Eligible Employees employed by it (and Retired Eligible Employees formerly employed by it).

7.2Active Participant Contributions.  An Eligible Employee electing to participate in the Plan will pay to participate in the Plan while in active service or while receiving short term or long term disability benefits under the Officer Disability Plan. The contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Eligible Employees electing to participate in the Plan during active service or while receiving short term or long term disability benefits under the Disability Plan shall be set annually by the SEVP-HR, determined in the SEVP-HR’s sole and absolute discretion.  The SEVP-HR may adopt tiered rates for similarly situated groups of Eligible Employees based on factors such as the number of Dependents covered or Medicare eligibility.  Notwithstanding the foregoing, required contributions for Executive Officers shall be approved by the Human Resources Committee of the AT&T Inc. Board of Directors.

7.3Retired Eligible Employees Contributions.  Eligible Employees entitled to participate in the Plan after Retirement or after termination of long term disability benefits under the Officer Disability Plan who elect to participate will pay to participate in the Plan. The contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Eligible Employees entitled to participate in the Plan after Retirement or after termination of long term disability benefits under the Officer Disability Plan who elect to participate shall be set annually by the SEVP-HR (in his/her sole and absolute discretion), to the extent their contributions have not previously been provided for in a separate agreement.

7.4Survivor Contributions.  Upon the death of an Eligible Employee the contribution percentage paid by the surviving spouse will be equal to the contribution, adjusted (if applicable) for factors such as the number of Dependents or Medicare eligibility that that would have been paid by the Participant had he/she survived.  In the event there is no surviving spouse but there are surviving eligible Dependents, such Dependents shall pay a ratable share of the contribution, adjusted (if applicable) for factors such as the number of Dependents or Medicare eligibility that would have been paid by the Participant had he/she survived.

In order to continue participation, the Retired Eligible Employee or his/her Dependent(s) must pay all applicable contributions.

If a Retired Eligible Employee terminates participation at any time for any reason, participation of that Retired Eligible Employee and his/her Dependent(s) may not be reinstated for any reason.

ARTICLE 8   COVENANT NOT TO COMPETE

Non-Competition.  Notwithstanding any other provision of this Plan, no coverage shall be provided under this Plan with respect to any Eligible Employee who shall, without the written consent of AT&T, and while employed by AT&T or any Subsidiary thereof, or within three (3) years after termination of employment from AT&T or any Subsidiary thereof, engage in competition with AT&T or any Subsidiary thereof or with any business with which a subsidiary of AT&T or an affiliated company has a substantial interest (collectively referred to herein as "Employer business").  For purposes of this Plan, engaging in competition with any Employer business shall mean engaging by Eligible Employee in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business.  Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business.  However, engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business.  Accordingly, benefits shall not be provided under this Plan if, within the time period and without the written consent specified, the Eligible Employee either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties the Eligible Employee takes and regardless of whether or not the employing company, or the company that Eligible Employee becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

ARTICLE 9  MISCELLANEOUS

9.1Administration.  Subject to the terms of the Plan, the CEO or SEVP-HR shall establish such rules as are deemed necessary for the proper administration of the Plan. AT&T will compute a "gross-up" allowance which will be paid to an Eligible Employee to offset any income tax liabilities incurred as a result of receiving benefits under this Plan. 

9.2Amendments and Termination.  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.

9.3Newborns' and Mothers' Health Protection Act of 1996.  To the extent this Plan provides benefits for hospital lengths of stay in connection with childbirth, the Plan will cover the minimum length of stay required for deliveries (i.e., a 48-hour hospital stay after a vaginal delivery or a 96-hour stay following a delivery by Cesarean section.)  The mother’s or newborn’s attending physician, after consulting with the mother, may discharge the mother or her newborn earlier than the minimum length of stay otherwise required by law.  Such coverage shall be subject to all other provisions of this Plan.

9.4Women's Health and Cancer Rights Act of 1998.  To the extent this Plan provides benefits for mastectomies, it will provide, for an individual who is receiving benefits in connection with a mastectomy and who elects breast reconstruction in connection with such mastectomy, coverage for reconstruction on the breast on which the mastectomy was performed, surgery and reconstruction on the other breast to give a symmetrical appearance, and prosthesis and coverage for physical complications of all stages of the mastectomy, including lymphedemas.  Such coverage shall be subject to all other provisions of this Plan.

9.5Mental Health Parity Act of 1996.  To the extent this Plan provides mental health benefits other than treatment for substance or alcohol abuse, it will not place annual or lifetime maximums for such benefits that are lower than the annual and lifetime maximums for physical health benefits.  Such coverage shall be subject to all other provisions of this Plan.

9.6Continuation of Coverage During Family or Medical Leave.  During any period which an Eligible Employee is on a family or medical leave as defined in the Family or Medical Leave Act, any benefit elections in force for the Eligible Employee shall remain in effect.  While the Eligible Employee is on paid leave, contributions shall continue.  If the Eligible Employee is on an unpaid leave, the Eligible Employee may elect to prepay required contributions on a pre-tax basis before the commencement of such unpaid leave.  Alternatively, the Eligible Employee may elect to make such payments on an after-tax basis monthly in accordance with an arrangement that the Plan Administrator shall provide.  If coverage is not continued during the entire period of the family or medical leave because the Eligible Employee declines to pay the premium, the coverage must be reinstated upon reemployment with no exclusions or waiting periods, notwithstanding any other provision of this Plan to the contrary. If the Eligible Employee does not return to work upon completion of the leave, the Eligible Employee must pay the full cost of any health care coverage that was continued on his/her behalf during the leave.  These rules apply to the COBRA Eligible Programs.

9.7Rights While on Military Leave.  Pursuant to the provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994, an Employee on military leave will be considered to be on a Leave of Absence and will be entitled during the leave to the health and welfare benefits that would be made available to other similarly situated Employees if they were on a Leave of Absence.  This entitlement will end if the Employee provides written notice of intent not to return to work following the completion of the military leave.  The Employee shall have the right to continue his/her coverage, including any Dependent coverage, for the lesser of the length of the leave or 18 months.  If the military leave is for a period of 31 days or more, the Employee may be required to pay 102 percent of the total premium (determined in the same manner as a COBRA continuation coverage premium).  If coverage is not continued during the entire period of the military leave because the Employee declines to pay the premium or the leave extends beyond 18 months, the coverage must be reinstated upon reemployment with no pre-existing condition exclusions (other than for service-related illnesses or injuries) or waiting periods (other than those applicable to all eligible Employees).

9.8Qualified Medical Child Support Orders.  The Plan will comply with any Qualified Medical Child Support Order issued by a court of competent jurisdiction or administrative body that requires the Plan to provide medical coverage to a Dependent child of an Eligible Employee.  The Plan Administrator will establish reasonable procedures for determining whether a court order or administrative decree requiring medical coverage for a Dependent child meets the requirements for a Qualified Medical Child Support Order.  The cost of coverage or any additional cost of such coverage, if any, shall be borne by the Eligible Employee.

9.9Right of Recovery.  If the Plan has made an erroneous or excess payment to any Participant, the Plan Administrator shall be entitled to recover such excess from the individual or entity to whom such payments were made.  The recovery of such overpayment may be made by offsetting the amount of any other benefit or amount payable by the amount of the overpayment under the Plan.

ARTICLE 10   COBRA

10.1Continuation of Coverage Under COBRA.  Participants shall have all COBRA continuation rights required by federal law and all conversion rights.  COBRA continuation coverage shall be continued as provided in this Article 10.

10.2COBRA Continuation Coverage for Terminated Participants.  A covered Participant may elect COBRA continuation coverage, at his/her own expense, if his participation under this Plan would terminate as a result of one of the following Qualifying Events: an Employee’s termination of employment or reduction of hours with an Employer.

10.3COBRA Continuation Coverage for Dependents.  A Qualified Dependent may elect COBRA continuation coverage, at his/her own expense, if his/her participation under this Plan would terminate as a result of a Qualifying Event.

10.4Period of Continuation Coverage for Covered Participants.  A covered Participant who qualifies for COBRA continuation coverage as a result of an Eligible Employee’s termination of employment or reduction in hours of employment described in Subsection 10.2 may elect COBRA continuation coverage for up to 18 months measured from the date of the Qualifying Event.  Coverage under this Subsection 10.4 may not continue beyond the:

(1)   date on which the Participant’s Employer ceases to maintain this Plan;

(2)   last day of the month for which premium payments have been made with respect to this Plan, if the individual fails to make premium payments on time, in accordance with Subsection 10.6;

(3)   date the covered Participant becomes entitled to Medicare; or

(4)   date the covered Participant is no longer subject to a pre-existing condition exclusion under the Participant's other coverage or new employer plan for the type of coverage available under the COBRA Eligible Program for which the COBRA election was made.

10.5Period of COBRA Continuation Coverage for Dependents.  If a Qualified Dependent elects COBRA continuation coverage under a COBRA Eligible Program as a result of the an Employee’s termination of employment as described in Subsection 10.2, continuation coverage may be continued for up to 18 months measured from the date of the Qualifying Event.  COBRA continuation coverage for all other Qualifying Events may continue for up to 36 months.

Continuation coverage under this Subsection 10.5 with respect to a COBRA Eligible Program may not continue beyond the date:

(1)   on which premium payments have not been made, in accordance with Subsection 10.6 below;

(2)   the Participant becomes entitled to Medicare;

(3)   on which the Employer ceases to maintain this Plan; or

(4)   the Participant is no longer subject to a pre-existing condition exclusion under the Participant’s other coverage or new employer plan for the type of coverage available under this Plan.

10.6Contribution Requirements for COBRA Continuation Coverage.  Covered Participants and Qualified Dependents who elect COBRA continuation coverage as a result of a Qualifying Event will be required to pay continuation coverage payments.  Continuation coverage payments are the payments required for COBRA continuation coverage that is an amount equal to a reasonable estimate of the cost to this Plan of providing coverage for all covered Participants at the time of the Qualifying Event plus a  2% administrative expense.  In the case of a disabled individual who receives an additional 11-month extended coverage under COBRA, the Employer may assess up to 150% of the cost for this extended coverage period.  Such cost shall be determined on an actuarial basis and take into account such factors as the Secretary of the Treasury may prescribe in regulations.

Covered Participants and Qualified Dependents must make the continuation coverage payment prior to the first day of the month in which such coverage will take effect.  However, a covered Participant or Qualified Dependent has 45 days from the date of an affirmative election to pay the continuation coverage payment for the first month's payment and the cost for the period between the date medical coverage would otherwise have terminated due to the Qualifying Event and the date the covered Participant and/or Qualified Dependent actually elects COBRA continuation coverage.

The covered Participant and/or Qualified Dependent shall have a 30-day grace period to make the continuation coverage payments due thereafter.  Continuation coverage payments must be postmarked on or before the completion of the 30-day grace period.  If continuation coverage payments are not made on a timely basis, COBRA continuation coverage will terminate as of the last day of the month for which timely premiums were made.  The 30-day grace period shall not apply to the 45-day period for the first month’s payment of COBRA premiums as set out in the section above.

If payment is received that is significantly less than the required continuation coverage payment, then continuation coverage will terminate as of the last day of the month for which premiums were paid.  A payment is considered significantly less than the amount due if it is greater than the lesser of $50 or 10% of the required continuation coverage payment.  Upon receipt of a continuation coverage payment that is insignificantly less than the required amount, the Plan Administrator must notify the covered Participant or Qualified Dependent of the amount of the shortfall and provide them with an additional 30-day grace period from the date of the notice for this payment only.

10.7Limitation on Participant's Rights to COBRA Continuation Coverage.

(1)   If a Qualified Dependent loses, or will lose medical coverage under this Plan as a result of divorce, legal separation, entitlement to Medicare, or ceasing to be a Dependent, such Qualified Dependent is responsible for notifying the Plan Administrator in writing within 60 days of the Qualifying Event.  Failure to make timely notification will terminate the Qualified Dependent's rights to COBRA continuation coverage under this Article.

(2)   A Participant must complete and return the required enrollment materials within 60 days from the later of (a) the date of loss of coverage, or (b) the date the Plan Administrator sends notice of eligibility for COBRA continuation coverage.  Failure to enroll for COBRA continuation coverage during this 60-day period will terminate all rights to COBRA continuation coverage under this Article.  An affirmative election of COBRA continuation coverage by a Participant or his/her spouse shall be deemed to be an election for that Participant's Dependent(s) who would otherwise lose coverage under the Plan.

10.8Subsequent Qualifying Event.  If a second Qualifying Event occurs during an 18-month extension explained above, coverage may be continued for a maximum of 36 months from the date of the first Qualifying Event.  In the event the Dependent loses coverage due to a Qualifying Event and after such date the Participant becomes entitled to Medicare, the Dependent shall have available up to 36 months of coverage measured from the date of the Qualifying Event that causes the loss of coverage.  If the Participant was entitled to Medicare prior to the Qualifying Event, the Dependent shall have up to 36 months of coverage measured from the date of entitlement to Medicare.

10.9Extension of COBRA Continuation Period for Disabled Individuals.  The period of continuation shall be extended to 29 months in total (measured from the date of the Qualifying Event) in the event the individual is disabled as determined by the Social Security laws within 60 days of the Qualifying Event.  The individual must provide evidence to the Plan Administrator of such Social Security determination prior to the earlier of 60 days after the date of the Social Security determination, or the expiration of the initial 18 months of COBRA continuation coverage.  In such event, the Employer may charge the individual up to 150% of the COBRA cost of the coverage.

ARTICLE 11   PRIVACY OF MEDICAL INFORMATION

11.1Definitions.  For purposes of this Article 11, the following defined terms shall have the meaning assigned to such terms in this subsection:

(1)           “Business Associate” shall mean an outside entity or person that performs administrative or other functions on behalf of the Plan;

(2)           “Health Care Operations” shall mean activities that involve, but are not limited to, quality assessment and improvement, the assessment of health care professionals, disease management, case management, legal services, benefits fraud and abuse investigations, and business planning and development (including cost-management and planning analyses).  Health Care Operations also include, but are not limited to, general health care plan administrative functions such as management activities relating to compliance with HIPAA’s administrative simplification requirements, customer service involving the provision of data analysis for the Plan Sponsor of the HIPAA Plan and other entities whose employees participate in the HIPAA Plan, resolution of internal grievances and due diligence in connection with the sale or transfer of assets to a potential successor in interest if the potential successor is a covered entity, or will become a covered entity, under HIPAA;

(3)           “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996 as amended from time to time.

(4)           “Payment” shall mean any activities performed that involve making benefit determinations and payment. These activities include, but are not limited to, billing, reviews for medical necessity, claims management, coordination of benefits, adjudication of health benefits claims (including appeals and other payment-related disputes), subrogation, plan reimbursement, investigations of potential fraud, determining employee contributions, reviews of appropriateness of care, preauthorizations and utilization reviews;

(5)           “Protected Health Information” or “PHI” shall mean individually  identifiable information created or retained by the HIPAA Plan beginning on or after April 14, 2003 which pertains to a person’s past, present or future physical or mental health, the health care the person is receiving or has received in the past and all past, present or future Payments for the person’s health care;

(6)           “Treatment” means the provision, coordination or management of health care and related services by one or more health care providers. This category includes, but is not limited to, consultations and referrals between health care providers, the coordination or management of health care by a health care provider with a third party and the referral of a patient for health care from one health care provider to another.

11.2Privacy Provisions Relating to Protected Health Information (“PHI”).  The Plan and its Business Associates (collectively referred to in this Article 11 as a “HIPAA Plan”) shall use and disclose PHI to the extent permitted by, and in accordance with, HIPAA.  Specifically, each HIPAA Plan will use and disclose PHI for Treatment, Payment and Health Care Operations.

11.3Disclosure of De-Identified or Summary Health Information.  The HIPAA Plan, or, with respect to the HIPAA Plan, a health insurance issuer, may disclose de-identified or summary health information to the Plan Sponsor of the HIPAA Plan (and its affiliates) if such entity requests the de-identified or summary health information for the purpose of:

(1)           Obtaining premium bids from health plans for providing health insurance coverage under the HIPAA Plan;

(2)           Modifying, amending or terminating the group health benefits under the HIPAA Plan;

In addition, the HIPAA Plan or a health insurance insurer with respect to the HIPAA Plan may disclose to the Plan Sponsor of the HIPAA Plan (or its affiliates) information on whether an individual is participating in the group health benefits provided by the HIPAA Plan or is enrolled in, or has ceased enrollment with health insurance offered by the HIPAA Plan.

11.4The HIPAA Plan Will Use and Disclose PHI as Required by Law or as Permitted by the Authorization of the Participant or Beneficiary.

Upon submission of an authorization signed by a Participant, beneficiary, subscriber or personal representative that meets HIPAA requirements, the HIPAA Plan will disclose PHI to a Company (or affiliate) sponsored pension plan, long term care plan, disability plan or other benefit plan sponsored by the Company (or an affiliate) with a need to access this PHI for purposes related to such benefit plan’s administration. Authorizations will also be honored when provided to the HIPAA Plan with respect to job accommodation requests, Family Medical Leave Act requests, drug/substance abuse testing, fitness for duty exams, and workers compensation claims.

In addition, PHI will be disclosed to the extent permitted or required by law, without the submission of an authorization form.

11.5Disclosure of PHI to the Plan Sponsor.  The HIPAA Plan will disclose information to the Plan Sponsor only upon certification from the Plan Sponsor that the HIPAA Plan documents have been amended to incorporate the assurances provided below.

The Plan Sponsor agrees to:

(1) not use or further disclose PHI other than as permitted or required by the HIPAA Plan document or as required by law;

(2) ensure that any affiliates or agents, including a subcontractor, to whom the Plan Sponsor provides PHI received from the HIPAA Plan, agrees to the same restrictions and conditions that apply to the Plan Sponsor with respect to such PHI;

(3) not use or disclose PHI for employment-related actions and decisions unless authorized by the individual to whom the PHI relates;

(4) not use or disclose PHI in connection with any other benefits or employee benefit plan of the Plan Sponsor or its affiliates unless permitted by the Plan or authorized by an individual to whom the PHI relates;

(5) report to the Plan any PHI use or disclosure that is inconsistent with the uses or disclosures provided for of which it becomes aware;

(6) make PHI available to an individual in accordance with HIPAA’s access rules;

(7) make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA;

(8) make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA;

(9) make internal practices, books and records relating to the use and disclosure of PHI received from the HIPAA Plan available to the Secretary of the United States Department of Health and Human Resources for purposes of determining the Plan’s compliance with HIPAA; and

(10) if feasible, return or destroy all PHI received from the HIPAA Plan that the Plan Sponsor still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible.)

11.6Separation Between the Plan Sponsor and the HIPAA Plan.  In accordance with HIPAA, only the following employees and Business Associate personnel shall be given access to PHI:

(1) employees of the AT&T Benefits and/or AT&T Executive Compensation organizations responsible for administering group health plan benefits under the HIPAA Plan, including those employees whose functions in the regular course of business include Payment, Health Care Operations or other matters pertaining to the health care programs under a HIPAA Plan;

(2) employees who supervise the work of the employees described in (1), above;

(3) support personnel, including other employees outside of the AT&T Benefits or AT&T Executive Compensation organizations whose duties require them to rule on health plan-related appeals or perform functions concerning the HIPAA Plan;

(4) investigatory personnel to the limited extent that such PHI is necessary to conduct investigations of possible fraud;

(5) outside and in-house legal counsel providing counsel to the HIPAA Plan;

(6) consultants providing advice concerning the administration of the HIPAA Plan; and

(7) the employees of Business Associates charged with providing services to the HIPAA Plan.

The persons identified above shall have access to and use PHI to the extent that such access and use is necessary for the administration of group health benefits under a HIPAA Plan.  If these persons do not comply with this Plan document, the Plan Sponsor shall provide a mechanism for resolving issues of noncompliance, including disciplinary sanctions.

EX-10.K

Exhibit 10-k

Effective January 1, 2009

Administrative Plan

The benefits under this Plan are offered by AT&T Inc. (“AT&T”) to persons who have been identified by AT&T as executive officers under Rule 3b-7 of the Securities Exchange Act of 1934 (“Executive Officers”).

Administration of Plan.  The Plan or the benefits hereunder may be modified or terminated by the Human Resources Committee in its sole discretion at any time.

Except to the extent otherwise provided herein, the Vice President responsible for Human Resources (or the successor to such position) shall be the Administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms.  The Administrator, in his or her sole discretion, may establish, adopt or revise rules, as he or she may deem necessary or advisable for the administration of the Plan, including the allocation or limitation of benefits.

The Administrator may adopt another plan, not to exceed the benefits included herein, for the benefit of such other employees or former employees of Employers as the Administrator may determine in his or her sole discretion, on such terms and conditions as the Administrator shall determine.  The Administrator may, from time to time, revise the plan solely to increase the financial limits on benefits, not to exceed the corresponding proportional increase in the consumer price index from January 1, 2003, through the date of change.

All decisions of the Administrator shall be final and binding unless the Board of Directors or its delegate should determine otherwise.

No Employment Rights.  Nothing herein shall constitute a contract of continuing employment or in any manner obligate AT&T or any Executive Officer to continue the employment relationship of, or obligate an Executive Officer to continue in the service of AT&T or any Affiliate.

Non-Transferability.  No recipient of benefits under this Plan nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey any of the benefits hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.

Notice.  Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent by certified mail, to the principal office of AT&T, directed to the attention of the Senior Executive Vice President-Human Resources.  Any notice required or permitted to be given to any other person shall be sufficient if in writing and hand delivered, or sent by certified mail, to the person at the person's last known mailing address as reflected on the records of his or her employing company.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for certification.

Validity.  In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this plan.

Applicable Law.  This Plan shall be governed and construed in accordance with the laws of the State of Texas to the extent not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder ("ERISA").

Automobile.  Each Executive Officer may receive the use of a four-door automobile or an automobile allowance and expenses associated with the operation of the automobile.  The Administrator shall determine the amount of the allowance for each Executive Officer provided that the allowance shall not exceed $2,000 per month.

Communications.  Each Executive Officer may receive reasonable communications services including local, long distance, DSL, Internet, wireless, satellite television/video and related equipment.

Financial Counseling.  Executive Officers may receive income tax preparation services and financial planning services from a list of designated providers not to exceed $14,000 per year.

Estate Planning.  Executive Officers may receive estate planning documentation services not to exceed $10,000 per year.  The Estate Planning limit restarts in the even of a company-initiated relocation to another state.

Clubs.  Executive Officers may receive initiation fees, dues, assessments and other charges for reasonable memberships as approved by the CEO or the Administrator, in each case in his or her sole discretion. AT&T does not reimburse for dues, initiation fees or other expenses incurred in connection with a membership in a club that discriminates in its membership policies based on race, creed, gender or ethnic origin.  The Administrator shall report annually to the Human Resources Committee as to the usage of this benefit by the Chief Executive Officer and to the Chief Executive Officer on the usage by all other Executive Officers.

Executive Protection.  Based upon the concern for the security of Executive Officers, the need to secure their optimum availability for business purposes and to permit uninterrupted communications between them, the Executive Officers are authorized to receive home security services, and, whenever feasible, to use AT&T provided aircraft in connection with business travel and to use such aircraft for the personal travel of Executive Officers where the Chief Executive Officer, in his or her sole discretion, deems such use appropriate because of similar considerations.

Retirement.  Upon the Retirement of an Executive Officer , he or she may receive up to an additional amount for financial consulting reasonably in connection with his/her Retirement, as follows:  In any given year, 1. for retirements occurring from January 1 through June 30 (inclusive), the amount will be $20,000 in the calendar year of retirement; 2. for retirements occurring from July 1 through November 30 (inclusive), the amount will be $10,000 in the calendar year of retirement and $10,000 in the immediately following calendar year; and 3. For retirements occurring from December 1 through December 31 (inclusive), the amount will be $20,000 in the year following retirement.  After the Retirement of an Executive Officer he or she shall continue to receive the communications, financial counseling and estate planning benefits until his or her death.  After the death of an Executive Officer or Retired Executive Officer, his or her survivor shall receive the communications benefit for 6 billing cycles and shall receive the financial counseling and estate planning benefits for the remainder of the year of death and the immediately following calendar year.

Taxes.  Each recipient of benefits under this Plan shall receive an amount equal to that necessary to offset the Federal, state and local income taxes, as well as associated employment taxes, of the recipient (including taxes on tax reimbursements) resulting from the benefits in this Plan, other than (1) the monthly automobile allowance for Executive Officers; and (2) personal use of aircraft.

Annual Limits.  Expenses will be charged against the annual limits for the calendar year based on the date of the invoice.

Administrative Plan Addendum for Calendar Years 2005 - 2008

Estate Planning

The annual limit for Estate Planning services provided under this Plan for the years 2005 through 2008 is $25,000.

The Estate Planning limit restarts in the event of a company-initiated relocation to another state.

Financial Consulting in Connection with Retirement

For Retirements with a pension effective date from January 1, 2005 through December 31, 2007, the annual limit is based on the participant's distribution election under the  Supplemental Retirement Income Plan ("SRIP"), as follows :

SRIP Election	Annual Limit
Annuity	$10,000 in the year of retirement and $10,000 in the immediately following calendar year.
Lump Sum	$5,000 in the year of retirement, $10,000 in the immediately following calendar year, and $5,000 in the second calendar year following retirement

For Retirements with a pension effective date from January 1, 2008 through December 31, 2008, the annual limit shall be as follows:

Retirements Occurring Between (dates are inclusive)	Annual Limit
January 1 and June 30	20,000 in the calendar year of retirement
July 1 and November 30	$10,000 in the calendar year of retirement and $10,000 in the immediately following calendar year;
December 1 and December 31	$20,000 in the year following retirement

EX-10.N

Exhibit 10-n

1996 STOCK AND INCENTIVE PLAN

Plan Effective:  January 1, 1996

Revisions Effective:  November 2, 2002

AT&T INC.

1996 STOCK AND 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. No awards may be granted under this Plan on or after April 27, 2001.

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.

The Plan is further intended to attract and retain the services of Participants upon whose judgment, interest, and special efforts the successful operation of AT&T and its subsidiaries is dependent.

1.3 Effective Date of the Plan.  The Plan shall become effective on January 1, 1996; however, grants may be made before that time subject to becoming effective on or after that date.  During the first year this Plan is effective, Awards shall be issued only to the extent the potential payout of Shares shall not exceed 10% of the Shares approved for issuance under this Plan.

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 under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, 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 a Participant 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 shareowners of the Company approve 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 eighty percent (80%) 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, as specified in Article 3, appointed by the Board to administer the Plan with respect to grants of Awards.

(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 disability plan.

(j)   “Employee” means any management 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 Shares 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 select any other index or measurement to determine the Fair Market Value of Shares under the Plan.

(n)  “Incentive Stock Option” or “ISO” means an option to purchase Shares from AT&T, granted under this Plan, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.

(o)  “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.

(p)  “Key Executive Officer Short Term Award” means a Performance Unit expressed in dollars.

(q)  “Nonqualified Stock Option” or “NQSO” means the option to purchase Shares from AT&T, granted under this Plan, which is not intended to be an Incentive Stock Option.

(r)   “Option” or “Stock Option” shall mean an Incentive Stock Option or a Nonqualified Stock Option, and shall include a Restoration Option.

(s)   “Participant” shall mean an Employee or former Employee that participates in this Plan.

(t)    “Performance Unit” and “Performance Share” shall each mean an Award granted to an Employee pursuant to Article 8 herein.

(u)   “Plan” means this 1996 Stock and Incentive Plan.  The Plan may also be referred to as the “AT&T 1996 Stock and Incentive Plan” or as the “AT&T Inc. 1996 Stock and Incentive Plan.”

(v)   “Restricted Stock” means an Award of Stock granted to an Employee pursuant to Article 7 herein.

(w)  “Restriction Period” means the period during which Shares of Restricted Stock are subject to restrictions or conditions under Article 7.

(x)   “Retirement” or to “Retire” shall mean the termination of a Participant’s employment with the Company or one of its Subsidiaries, 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 attains age 55 (individuals who become Officer Level Employees on or after January 1, 2002, must also have five (5) years of service); or (2) the date the Participant has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, except as otherwise indicated below:

Net Credited Service Age

10 Years of more 65 or older

20 years or more 55 or older

25 years or more 50 or older

30 years or more Any age

With respect to a Participant who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan – Nonbargained Program upon termination of employment, the terms “Retirement” or to “Retire” shall include such Participant’s termination of employment.

Termination Under EPR.  In determining whether an Eligible Employee’s termination of employment under the Enhanced Pension and Retirement Program (“EPR”) is a Retirement for purposes of this Plan, five years shall be added to each of age and net credited service (“NCS”).  If with such additional age and years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement Eligible according to the AT&T Supplemental Retirement Income Plan (“SRIP”) or (2) the Eligible Employee upon such termination of employment under EPR has attained one of the following combinations of age and service,

Actual NCS + 5 Years Actual Age + 5 Years

10 Years of more 65 or older

20 years or more 55 or older

25 years or more 50 or older

30 years or more Any age

then such termination of employment shall be a Retirement for all purposes under this Plan and the Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a termination of employment which is a Retirement.

(y) “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.

(z)  “Shares” or “Stock” means the shares of common stock of the Company.

(aa)  “Subsidiary” shall mean any corporation in which the Company owns directly, or indirectly through subsidiaries, more than fifty percent (50%) of the total combined voting power of all classes of Stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns more than fifty percent (50%) of the combined equity thereof.

(bb) “Window Period” means the period beginning on the third business day following the date of public release of the Company's quarterly sales and earnings information, and ending on the twelfth business day following such date.

Article 3 Administration.

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

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

(b)  The Disinterested Committee and such other Committee as the Board may create, if any, specifically to administer the Plan with respect to non-Insiders (the “Non-Insider Committee”) shall each have full authority to administer the Plan and all Awards hereunder with respect to all persons who are not Insiders, except as otherwise provided herein or by the Board.  Either Committee may be replaced by the Board at any time.

       3.2   Authority of the Committee. The Committee shall have full power, except as limited by law and subject to the provisions herein, in its sole and exclusive discretion: to grant Awards; to select the recipients of Awards; to determine the eligibility of a person to participate in the Plan or to receive a particular Award; to determine the sizes and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 13 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan.  Further, the Committee shall make all other determinations in its discretion which may be necessary or advisable for the administration of the Plan.

References to determinations or other actions by the Company, herein, shall mean actions authorized by the Committee, the Chairman of the Board of the Company, the Senior Executive Vice President of the Company in charge of Human Resources or their respective successors or duly authorized delegates, in each case in the discretion of such person.

All determinations and decisions made by the Company pursuant to the provisions of the Plan, and all related orders and resolutions of the Board shall be final, conclusive, and binding on all persons, including 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 grant under the Plan shall not exceed 60 million Shares of Stock.  No more than 10% of the Shares approved for issuance under this Plan may be Shares of Restricted Stock.  No more than 40% of the Shares approved for issuance under this Plan may be issued to Participants as a result of Performance Share or Restricted Stock Awards.  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.

Without limiting the discretion of the Committee under this section, unless otherwise provided by the 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)  The grant of a Stock Option or a Restricted Stock Award shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award.  However, to the extent the Participant uses previously owned Shares to pay the Exercise Price or any taxes, or Shares are withheld to pay taxes, these Shares shall be available for regrant under the Plan.

(b)  With respect to Performance Shares, the number of Performance Shares granted under the Plan shall be deducted from the number of Shares available for grant under the Plan. The number of Performance Shares which cannot be, or are not, converted into Shares and distributed (including deferrals) to the Participant (after any applicable tax withholding) following the end of the Performance Period shall increase the number of Shares available for regrant under the Plan by an equal amount.

(c) With respect to Performance Units representing a fixed dollar amount that may only be settled in cash, the Performance Units Award shall not affect the number of Shares available under the Plan.

4.2 Lapsed Awards.  If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, Shares subject to such Award shall be again available for the grant of an Award under the Plan.

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 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 constituting outstanding Awards, as may be determined to be appropriate and equitable by the 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 participate in 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 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 the maximum number of Shares subject to Options which may be granted to any single Employee during any calendar year shall not exceed 2% of the Shares approved for issuance under this Plan.  The Committee may grant ISOs, NQSOs, or a combination thereof; provided, however, that no ISO may be issued after January 1, 2006.   The Committee may authorize the automatic grant of additional Options (“Restoration Options”) when a Participant exercises already outstanding Options, or options granted under a prior option plan of the Company, on such terms and conditions as it shall determine.  Unless otherwise provided by the Committee, the number of Restoration Options granted to a Participant with respect to the exercise of an option (including an Option under this Plan) shall not exceed the number of Shares delivered by the Participant in payment of the Exercise Price of such option, and/or in payment of any tax withholding resulting from such exercise, and any Shares which are withheld to satisfy withholding tax liability arising out of such exercise.  A Restoration Option shall have an Exercise Price of not less than 100% of the per Share Fair Market Value on the date of grant of such Restoration Option, and shall be subject to all the terms and conditions of the original grant, including the expiration date, and such other terms and conditions as the Committee in its sole discretion shall determine.

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, including, but not limited to whether the Option is intended to be an ISO or a NQSO.

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.

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 a later 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 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 or the Board shall in each instance approve, which need not be the same for each grant or for each Participant. Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading.  The Company may further 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.  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 therefor.

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 of Stock 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 Stock, 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 must have 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 sell order) a sufficient portion of the Shares 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 Stock 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 of Stock, the value of the Shares delivered shall be equal to the Fair Market Value of the Shares on the day preceding the date of exercise of the Option.

Restricted Stock may not be used to pay the Option 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 the Employment of a Participant shall terminate 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.  If the Employment of a Participant shall be terminated 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.  If the Employment of a Participant shall terminate 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 not an EPR Terminee (as that term is defined in the AT&T Pension Benefit Plan or the Ameritech Management Pension Plan), but 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; provided, however, this vesting provision shall not apply to an Option granted prior to September 28, 2001, unless and except for those Options outstanding as of September 27, 2001, that have an Exercise Price equal to or more than the Fair Market Value of Stock on such date;

(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 one (1) year 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 paragraph (a), 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 shall once again become available for grant under the Plan).

(e)   Notwithstanding the foregoing, the Committee may, in its sole discretion, establish different terms and conditions pertaining to the effect of termination of Employment, but no such modification shall shorten the terms of Options issued prior to such modification.

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, as the same may be amended from time to time, 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: (a) in the case of the Participant, only upon the Participant’s death and in accordance with the Company's Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) 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 may be made by the Committee, the Senior Executive Vice President of the Company in charge of Human Resources or such person’s successor, or the delegate of or a committee appointed by any of the foregoing, 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 attainment of Performance Goals based on Performance Criteria in the same manner as provided in Section 8.4, herein, with respect to Performance Shares.  No Employee may receive, in any calendar year, in the form of Restricted Stock more than one-third of 1% of the Shares approved for issuance under this Plan.

7.2 Restricted Stock Agreement.  The Committee may require, as a condition to an Award, that a recipient of a Restricted Stock Award 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, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Restriction Period established by the Committee, which shall not be less than a period of three years.

7.4 Other Restrictions.  The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, 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 Company shall also have the right to retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as 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, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Restriction Period and completion of all conditions to vesting, if any.  However, unless otherwise provided by the Committee, the Committee, in its sole discretion, shall have the right to immediately 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.  During the Restriction Period, 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 the Employment of a Participant shall terminate by reason of death or Disability, all Restriction Periods and 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.  If the Employment of a Participant shall terminate 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 Other Grants.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may make grants of cash or other property to eligible Employees in such amounts and upon such terms and conditions as the Committee shall determine.  If the grant is in the form of stock or shares in a company other than AT&T, the award shall be subject to tax withholding in accordance with Article 14, hereof, in the same manner as Stock.

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.

8.2 Value of Performance Shares and Units.

(a) A Performance Share is equivalent in value to a Share of Stock.  In any calendar year, no individual may be Awarded Performance Shares having a potential payout of Shares of Stock exceeding two-thirds of 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 of two-thirds of 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.  In the event the Committee denominates a Performance Unit Award in dollars instead of Performance Units, the Award may be referred to as a Key Executive Officer Short Term Award.  In all other respects, the Key Executive Officer Short Term Award will be treated in the same manner as Performance Units under this Plan.

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 performance objectives (“Performance Goals”) for the Company, its Subsidiaries, and/or divisions of any of foregoing, based on the Performance Criteria and other factors set forth in (a) through (d), below.  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.  All Performance Shares and Performance Units which may not be converted under the Performance Goals or which are reduced by the Committee under Section 8.6 or which may not be converted for any other reason after the end of the Performance Period shall be canceled at the time they would otherwise be distributable.  When the Committee desires an Award to qualify under Section 162(m) of the Code, as amended, the Committee shall establish the Performance Goals for the respective Performance Shares and Performance Units prior to or within 90 days of the beginning of the service relating to such Performance Goal, and not later than after 25% of such period of service 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:

(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 and/or Value Added (after-tax cash operating profit less depreciation and less a capital charge).

(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.

(3)                  The Company’s Stock price; return on shareholders’ equity; total shareholder return (Stock price appreciation plus dividends, assuming the reinvestment of dividends); and/or earnings per share.

(4)                  With respect to the Company (on a consolidated basis), to one or more of its Subsidiaries, and/or to a division of any of the foregoing: sales; costs; market share of a product or service; return on net assets; return on assets; return on capital; profit margin; and/or operating revenues, expenses or earnings.

(b)   If the performance of more than one Subsidiary is being measured to determine the attainment of performance goals, then a weighted average of the Subsidiaries’ results shall be used, as determined by the Committee, including, but not limited to, basing such weighting upon the revenues, assets or net income for each Subsidiary for any year prior to the Performance Period or by using budgets to weight such Subsidiaries.

(c)   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, they 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 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 Performance Shares or Performance Units 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 which on the record date for the dividend had been awarded to the Participant and not converted, distributed (or deferred) or canceled.

8.6 Form and Timing of Payment of Performance Units and Performance Shares.  As soon as practicable 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 Goals for such Performance Period), 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, 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 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).  In addition, if required in order to exempt the transaction from the provisions of Section 16(b) of the Exchange Act, any election by an Insider to take a greater amount in cash must be made during a Window Period and shall be subject to Committee approval.

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 of Stock per Performance Share.

8.7 Termination of Employment Due to Death, Disability, or Retirement.  If the Employment of a Participant shall terminate 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.  In the event of Retirement, the full Performance Units and Performance Shares shall be converted and distributed based on and subject to the achievement of the Performance Goals and in accordance with all other terms of the Award and this Plan.

8.8 Termination of Employment for Other Reasons.  If the Employment of a Participant shall terminate for other than a reason set forth in Section 8.7 (and other than for Cause), the number of Performance Units and Performance Shares to be converted and distributed shall be converted and distributed based upon the achievement of the Performance Goals and in accordance with all other terms of the Award and the Plan; however, the Participant may receive no more than a prorated payout of all Performance Units and Performance Shares, based on the portions of the respective Performance Periods that have been completed.

8.9 Termination of Employment for Cause.  In the event that a Participant's Employment shall be terminated 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.

Article 10 Deferrals.Unless otherwise provided by the Committee, a Participant may, as permitted by the Stock Savings Plan or the Salary and Incentive Award Deferral Plan, defer all or part of awards made under this Plan in accordance with and subject to the terms of such plans.

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.

Upon the occurrence of a Change in Control:

(a) Any and all Options granted hereunder immediately shall become vested and exercisable;

(b) Any Restriction Periods and all restrictions imposed on Restricted Shares shall lapse and they shall immediately become fully vested;

(c) The 100% Performance Goal for all Performance Units and Performance Shares relating to incomplete Performance Periods shall be deemed to have been fully achieved and shall be converted and distributed in accordance with all other terms of the Award and this Plan; provided, however, notwithstanding anything to the contrary in this Plan, no outstanding Performance Unit or Performance Share may be reduced.

Article 13. Amendment, Modification, and Termination.

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

13.2 Awards Previously Granted.  No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

Article 14 Withholding.

14.1 Tax Withholding.  The Company shall deduct or withhold an amount sufficient to satisfy Federal, state, and local taxes (including 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.  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.

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.   In addition, if required in order to exempt the transaction from the provisions of Section 16(b) of the Exchange Act, any such election by an Insider must be made during a Window Period and shall be subject to Committee approval.

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 Securities Law Compliance.  With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions or Rule 16b-3 or its successors under the Exchange Act.  To the extent any provision of the plan or action by the Committee fails to comply with a condition of Rule 16b-3 or its successors, it shall not apply to the Insiders or transactions thereby.

16.5 Governing Law.  This Plan shall be governed by and construed in accordance with the substantive laws of the State of Texas, excluding any conflicts or choice of law rule or principle that might otherwise refer constructive or interpretation of this Plan to provisions of the substantive law of any jurisdiction other than the State of Texas. Any action seeking to enforce the rights of an employee, former employee or person who holds such rights through, from or on behalf of such employee or former employee under this Plan may be brought only in a Federal or state court located in Bexar County, Texas.

EX-10.T

Exhibit 10-t

2001 INCENTIVE PLAN

                              Plan Effective:  April 27, 2001

   Revisions Effective:  November 18, 2005

AT&T INC.

2001 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 shall become effective on April 27, 2001; however, grants may be made before that time subject to becoming effective on or after that date.

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, 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 shareowners of the Company approve 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 eighty percent (80%) 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 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 Shares 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 select any other index or measurement to determine the Fair Market Value of Shares under the Plan.

(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)           "Key Executive Officer Short Term Award" or "KEO Award" means a Performance Unit.

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

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

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

(s)           "Plan" means this 2001 Incentive Plan.  The Plan may also be referred to as the "AT&T 2001 Incentive Plan" or as the "AT&T Inc. 2001 Incentive Plan."

(t)           "Restricted Stock" means an Award of Stock granted to an Employee pursuant to Article 7 herein.

(u)           "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 attains age 55 (individuals who become Officer Level Employees on or after January 1, 2002, must also have five (5) years of 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

In determining whether a Participant's Termination of Employment under the Enhanced Pension and Retirement Program ("EPR") is a Retirement as defined above, 5 years shall be added to each of Age and Net Credited Service.

(v)           "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.

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

(x)           "Subsidiary" shall mean any corporation in which the Company owns directly, or indirectly through subsidiaries, more than fifty percent (50%) of the total combined voting power of all classes of Stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns more than fifty percent (50%) of the combined equity thereof.

(y)           "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.

Article 3 Administration.

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

(a)           With respect to Insiders, the Plan and all 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 who 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)           The Disinterested Committee and such other Committee as the Board may create, if any, to administer the Plan with respect to non-Insiders (such other Committee shall be the "Non-Insider Committee") shall each have full authority to administer the Plan and all Awards hereunder with respect to all persons who are not Insiders, except as otherwise provided herein or by the Board.  Any Committee may be replaced by the Board at any time.

3.2 Authority of the Committee.  The Committee shall have full power, except as limited by law and subject to the provisions herein, in its sole and exclusive discretion:  to grant Awards; to select the recipients of Awards; to determine the eligibility of a person to participate in the Plan or to receive a particular Award; to determine the sizes and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 13 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan.  Further, the Committee shall make all other determinations in its discretion, which may be necessary or advisable for the administration of the Plan.

No Award other than Restoration Options may be made under the Plan after April 2, 2011.

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.

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 the Company, its stockholders, Employees, Participants, and their estates and beneficiaries.

Subject to the terms of this Plan, the Committee is authorized, and shall not be limited in its discretion, to use any of the Performance Criteria specified herein in its determination of any Award under this Plan.

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 60 million Shares of Stock.  No more than 10% of the Shares approved for issuance under this Plan may be Shares of Restricted Stock.  No more than 40% of the Shares approved for issuance under this Plan may be issued to Participants as a result of Performance Share and Restricted Stock Awards.  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.

Without limiting the discretion of the Committee under this section, unless otherwise provided by the 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)           The grant of a Stock Option or a Restricted Stock Award shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award.  However, to the extent the Participant uses previously owned Shares to pay the Exercise Price or any taxes, or Shares are withheld to pay taxes, these Shares shall be available for regrant under the Plan.

(b)           With respect to Performance Shares, the number of Performance Shares granted under the Plan shall be deducted from the number of Shares available for grant under the Plan. The number of Performance Shares which cannot be, or are not, converted into Shares and distributed (including deferrals) to the Participant or deferred through another plan following the end of the Performance Period, or which are withheld for taxes, shall increase the number of Shares available for regrant under the Plan by an equal amount.

(c)           With respect to Performance Units representing a fixed dollar amount that may only be settled in cash, the Performance Units Award shall not affect the number of Shares available under the Plan.

4.2 Lapsed Awards.  If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, Shares subject to such Award shall be again available for the grant of an Award under the Plan.

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 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 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 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 the maximum number of Shares subject to Options which may be granted to any single Employee during any calendar year shall not exceed 2% of the Shares approved for issuance under this Plan.  The Committee may not grant Incentive Stock Options, as described in Section 422 of the Code, under this Plan.  The Committee may authorize the automatic grant of additional Options ("Restoration Options") when a Participant exercises already outstanding Options, or options granted under a prior option plan of the Company, on such terms and conditions as it shall determine.  Unless otherwise provided by the Committee, the number of Restoration Options granted to a Participant with respect to the exercise of an option (including an Option under this Plan) shall not exceed the number of Shares delivered by the Participant in payment of the Exercise Price of such option, and/or in payment of any tax withholding resulting from such exercise, and any Shares which are withheld to satisfy withholding tax liability arising out of such exercise.  A Restoration Option shall have an Exercise Price of not less than 100% of the per Share Fair Market Value on the date of grant of such Restoration Option, and shall be subject to all the terms and conditions of the original grant, including the expiration date, and such other terms and conditions as the Committee in its sole discretion shall determine.

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 effected 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.  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 therefor.

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 of Stock 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 Stock, 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 must have 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 Stock 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 of Stock, the value of the Shares delivered shall be equal to the Fair Market Value of the Shares on the day preceding the date of exercise of the Option.

Restricted Stock may not be used to pay the Option 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 not an EPR Terminee (as that term is defined in the AT&T Pension Benefit Plan or the Ameritech Management Pension Plan), but 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; provided, however, this vesting provision shall not apply to Options granted prior to September 28, 2001, unless and except for those Options outstanding as of September 27, 2001, that have an Exercise Price equal to or more than the Fair Market Value of Stock on such date;

(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 paragraph (a), 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 shall once again become available for grant under the Plan).

(e)           Notwithstanding the foregoing, the Committee may, in its sole discretion, establish different terms and conditions pertaining to the effect of Termination of Employment, but no such modification shall shorten the terms of Options issued prior to such modification.

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 attainment of Performance Goals based on Performance Criteria in the same manner as provided in Section 8.4, herein, with respect to Performance Shares.  No Employee may receive, in any calendar year, in the form of Restricted Stock more than one-third of 1% of the Shares approved for issuance under this Plan.

7.2 Restricted Stock Agreement.  The Committee may require, as a condition to an Award, that a recipient of a Restricted Stock Award 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 as may be determined by the Committee.  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, without limitation, 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 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.  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.

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.

8.2 Value of Performance Shares and Units.

(a)           A Performance Share is equivalent in value to a Share of Stock.  In any calendar year, no individual may be Awarded Performance Shares having a potential payout of Shares of Stock exceeding two-thirds of 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 of two-thirds of 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" or "KEO 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 performance objectives ("Performance Goals") for the Company, its Subsidiaries, and/or divisions of any of foregoing, based on the Performance Criteria and other factors set forth in (a) through (d), below.  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.  All Performance Shares and Performance Units which may not be converted under the Performance Goals or which are reduced by the Committee under Section 8.6 or which may not be converted for any other reason after the end of the Performance Period shall be canceled at the time they would otherwise be distributable.  When the Committee desires an Award to qualify under Section 162(m) of the Code, as amended, the Committee shall establish the Performance Goals for the respective Performance Shares and Performance Units prior to or within 90 days of the beginning of the service relating to such Performance Goal, and not later than after 25% of such period of service 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:

(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, 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), return on net assets, return on assets, return on capital, profit margin, 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.

(3)   The Company’s Stock price, return on shareholders’ equity, total shareholder return (Stock price appreciation plus dividends, assuming the reinvestment of dividends), and/or earnings per share.

(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 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 Performance Shares or Performance Units 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 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 Goals for such Performance Period), 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, 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 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 of Stock 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.  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, the Participant may receive no more than a prorated payout of all Performance Units and Performance Shares, 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.

8.9 Termination of Employment for Cause.  In the event of the Participant's 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.

Article 10 Deferrals.Unless otherwise provided by the Committee, a Participant may, as permitted by the Stock Savings Plan or the Salary and Incentive Award Deferral Plan, defer all or part of Awards made under this Plan in accordance with and subject to the terms of such plans.

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.

Upon the occurrence of a Change in Control:

(a)           Any and all Options granted hereunder immediately shall become vested and exercisable;

(b)           Any Restriction Periods and all restrictions imposed on Restricted Shares shall lapse and they shall immediately become fully vested;

(c)           The 100% Performance Goal for all Performance Units and Performance Shares relating to incomplete Performance Periods shall be deemed to have been fully achieved and shall be converted and distributed in accordance with all other terms of the Award and this Plan; provided, however, notwithstanding anything to the contrary in this Plan, no outstanding Performance Unit or Performance Share may be reduced.

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 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 shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

Article 14 Withholding.

14.1 Tax Withholding.  The Company shall deduct or withhold an amount sufficient to satisfy Federal, state, and local taxes (including 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.  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 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.

EX-10.U

Exhibit 10-u

PACIFIC TELESIS GROUP

1996EXECUTIVE DEFERRED COMPENSATION PLAN

(Amended Effective November 20, 2008)

PACIFIC TELESIS GROUP

1996 EXECUTIVE DEFERRED COMPENSATION PLAN

(Adopted Effective December 1, 1995)

SECTION 1.                                Purpose.

The Pacific Telesis Group 1996 Executive Deferred Compensation Plan (the “Plan”) provides certain Officers of the Company with an opportunity to defer compensation and accrue earnings on a pre-tax basis and with an opportunity to receive employer matching contributions that cannot be provided to them under the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees ("the Savings Plan") because of the limitations imposed by section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“the Code”).

SECTION 2.                                Eligibility to Participate.

The following employees are eligible to participate in the Plan:

(A) Officers of Pacific Telesis Group and/or Pacific Bell;

(B) The Officers of any Affiliate of Pacific Telesis Group who are specifically designated to participate by the PTG Board and the Board of Directors or other governing body of such Affiliate.

SECTION 3.                                Plan Accounts.

3.1           Establishment of Account. An account shall be established for each eligible employee who elects to become a participant in the Plan in accordance with the procedures set forth in Section 4 of the Plan. The account shall be credited with allocations and earnings under Sections 4, 5 and 6 and debited with distributions under Section 7 of the Plan.

3.2           No Funding or Assignment. For income tax purposes under the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), it is intended that this Plan constitute an unfunded deferred compensation arrangement. The amounts credited to Plan accounts for employees of each participating Company shall be held in the general funds of such participating Company. All amounts in such accounts, including all Compensation deferred by an employee, shall remain an asset of the participating Company. A participating Company shall not be required to reserve or otherwise set aside funds for the payment of amounts credited to Plan accounts. The obligation of a participating Company to pay benefits under the Plan constitutes a mere promise to make benefit payments in the future, and shall be unfunded as to the employee, whose rights shall be those of a general unsecured creditor. Title to and beneficial ownership of any assets which a participating Company may set aside or otherwise designate to make payments under the Plan shall at all times remain in the participating Company, and the employee shall not have any property interest in any specific assets of a participating Company. The rights of an employee or his or her beneficiary to benefit payments under the Plan are not subject in any manner to assignment, alienation, pledge or garnishment by creditors.

SECTION 4. Deferred Compensation.

4.1           Annual Deferral and Distribution Election. An eligible employee may elect to participate in the Plan prior to the beginning of any calendar year, or within 30 days of first becoming eligible to participate in the Plan, or within 30 days of becoming eligible to participate in a feature of the Plan with respect to such Plan feature. An employee's election shall direct that compensation in one or more of the following categories (collectively “Compensation”) be deferred and credited to an account under the Plan, subject to the limitations and effectiveness prescribed for each category of Compensation, and shall direct that such Compensation, together with all other amounts credited under the Plan with respect to such Compensation under Section 5 (Company Match) and Section 6 (Earnings), shall be distributed in accordance with a distribution option set forth in Section 7.

(A) Salary. An employee may elect to defer part of his or her base annual compensation (“Salary”) otherwise payable for services performed in a calendar year, but not less than $2,500 nor more than 80% of salary. Such election shall become effective for Salary otherwise payable for services performed in the payroll period beginning, (i) in the case of an employee who makes an election within 30 days of first becoming eligible to participate in the Plan, immediately subsequent to the election or (ii) in all other cases, on the first day of the calendar year to which the election applies. An election related to Salary otherwise payable for services performed in any calendar year shall become irrevocable, (x) in the case of an election made within 30 days of first becoming eligible to participate in the Plan, on the last day before the applicable payroll period for which the election becomes effective, or (y) in all other cases, on the last day prior to the beginning of such calendar year.

(B) STIP. An employee may elect to defer all or part, but not less than $5,000, of his or her awards under the Pacific Telesis Group Short Term Incentive Plan, or a similar or successor incentive compensation plan or program of Pacific Telesis Group or an Affiliate (“STIP”), for services performed in a calendar year and otherwise payable in the calendar year following such calendar year. Such election may be made with respect to services to be performed (i) in the remainder of the year in which the employee first becomes eligible to participate in the Plan, provided the election is made prior to October 1st of such year, which election shall become effective for STIP earned with respect to services performed beginning with the payroll period immediately subsequent to the election, or (ii) in the next following calendar year, which election on shall become effective on the first day of the calendar year to which the election applies in all other cases. An election related to the STIP award for services performed in a calendar year shall become irrevocable (x) in the case of an election made within 30 days of first becoming eligible to participate in the Plan, on the last day before the applicable payroll period for which the election becomes effective, or (y) in all other cases, on the last day prior to the beginning of such calendar year.

(C) LTIP. An employee may elect to defer all or part, but not less than $5,000, of his or her awards under the Pacific Telesis Group Senior Management Long Term Incentive Plan or a similar or successor long term incentive compensation plan of Pacific Telesis Group or an Affiliate (“LTIP”), for services performed in a multiple-year performance period and otherwise payable in a calendar year following such performance period. An election related to the LTIP award otherwise payable for services performed in a performance period shall become irrevocable on the last day prior to the beginning of the performance period applicable to that LTIP award.

(D) Other Awards. An employee may elect to defer all or part of his or her awards under any other bonus, special award, or any other similar form of compensation (“Other Awards”) otherwise payable to him or her by a participating Company with respect to services performed in a calendar year. An election related to Other Awards otherwise payable in a calendar year shall become irrevocable on the last day prior to the beginning of such calendar year.

Notwithstanding the foregoing, in no event shall deferrals under the Plan include that portion of Compensation required for all applicable tax, Social Security and employee benefit plan withholding, whether or not such withholding requirement is related to this Plan.

4.2            Form of Election, Modification or Termination. An employee's election or written notice of modification or termination of any prior election shall be made in accordance with procedures established by the Plan Administrator, in the form of a document approved by the Plan Administrator, executed by the employee and filed with the Plan Administrator or his or her designee. An election which has not become irrevocable may be modified, terminated or reinstated by the employee prior to the time such election would have become irrevocable as provided in Section 4.1. An election with respect to Salary, STIP or Other Awards for services performed in a calendar year and/or with respect to LTIP for services performed in a multiple-year performance period shall be deemed irrevocably terminated when the employee, whether by transfer or termination of employment, ceases to be eligible to participate in the Plan during such calendar year and/or such multiple-year performance period (as applicable).

4.3            Modification of Irrevocable Election by the Committee. Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may modify or terminate the employee's election with respect to Compensation otherwise payable in a calendar year as it deems necessary to prevent extreme financial hardship to the employee, notwithstanding that the election has become effective and irrevocable as provided in Section 4.1.

4.4            Allocation to Accounts. Deferred amounts related to Compensation which would otherwise have been paid by a participating Company shall be credited to the employee's account as of the date the Compensation would otherwise have been paid. Deferred amounts related to Compensation which would otherwise have been distributed in Pacific Telesis Group common shares shall be credited to the employee's account as deferred Pacific Telesis Group shares as of the date such Pacific Telesis Group shares would otherwise have been transferred to the employee.

SECTION 5.                                Company Match.

5.1            Eligibility for Company Match. An employee who (A) elects to defer Compensation under the Plan for a calendar year, and (B) has made the maximum elective deferral under the Savings Plan permitted by section 402(g) of the Code for such calendar year (except to the extent that a further limitation is required by section 401 (k)(3) and/or section 415 of the Code), shall be eligible to have additional amounts based on Compensation deferred pursuant to this Plan ("Company Match") credited to his or her account hereunder.

5.2            Amount of Company Match. The Company Match credited to an employee's account under this Plan with respect to Compensation deferred during a calendar year shall be equal to

(A) the amount of Compensation deferred into the employee's Plan account, multiplied by

(B) the percentage in effect for that calendar year at which the employee's Basic Contributions to the Savings Plan are matched by employing Company contributions;

provided, however, that the maximum Company Match credited to the employee's account under this Plan shall not exceed

(C) 6% of the employee's Savings Plan Salary, multiplied by

(D) the percentage in effect for that calendar year at which the employee's Basic Contributions to the Savings Plan are matched by employing Company contributions, reduced by

(E) the total amount of matching Company contributions credited to the employee's account under the Savings Plan.

For purposes of determining the amount of Compensation deferred into the employee's Plan account, deferred Pacific Telesis Group common shares shall be valued by multiplying the number of shares deferred by the Price of Pacific Telesis Group common shares on the deferral date.

5.3            Allocation to Account. Until fully credited for the calendar year, and subject to the delay provided in Section 5.4, Company Match shall be credited to an employee's account under this Plan as of each date that deferred Compensation is credited to the employee's account under this Plan.

5.4            Maximum Pre-Tax Savings Plan Deferrals Required. No Company Match shall be credited to an employee's account for a calendar year until the employee has made before-tax contributions under the Savings Plan equal to the maximum elective deferrals permitted under section 402(g) of the Code, as further limited by section 401 (k)(3) of the Code. Thereafter, the employee's account shall immediately be credited with an amount equal to the Company Match that would otherwise have been previously credited under Section 5.3.

5.5            Savings Plan Provisions Prevail. The provisions of this Section 5 shall not limit or affect the application of the provisions regarding matching Company contributions in the Savings Plan, which shall take precedence over the provisions of this Section 5.

SECTION 6.            Earnings on Accounts.

6.1            Interest Allocations to Accounts. Deferred amounts related to Compensation which would otherwise have been paid in cash shall bear interest from the date the Compensation would otherwise have been paid. Interest shall be applied to Company Match credited to an employee's account as if such Company Match had been credited to the employee's account at the same time that the related amounts of Compensation deferred hereunder were credited to the employee's account. The interest credited to an account shall be compounded annually at the end of each calendar year.

6.2            Rate of Interest. The rate of interest to be applied to an employee's aggregate account balance under the Plan for a calendar year shall be determined by the Committee from time to time, and promptly communicated to eligible employees in advance of its application, but in no event shall (A) the interest rate be decreased below the average 10-Year Treasury note rate, (B) any reduction apply to interest already credited to Plan accounts for periods prior to the Committee's action, or (C) any interest rate previously guaranteed for a given period and communicated to eligible employees be reduced during such period except as may be equitable in light of any change in applicable law which substantially increases the burden to the participating Companies of paying such guaranteed interest.

6.3            Retroactive Limitation of Interest Accrual in Case of Early Separation. Notwithstanding Section 6.2, an employee whose Separation occurs before he or she attains age 55 will receive interest on all deferred cash Compensation and Company Match for all years of participation in the Plan based on the average 10-Year Treasury note rate, rather than the rate of interest established by the Committee for any particular calendar year.

6.4            Dividends and Adjustments for Pacific Telesis Group Shares. An employee's account credited with deferred Pacific Telesis Group shares shall be credited on each subsequent dividend payment date for Pacific Telesis Group shares with an amount equivalent to the dividend payable on the number of Pacific Telesis Group common shares equal to the number of deferred Pacific Telesis Group shares in the employee's account on the record date for such dividend. Such amount shall then be converted to a number of additional deferred Pacific Telesis Group shares, determined by dividing such amount by the Price of Pacific Telesis Group common shares on the dividend payment date. In the event of any change in outstanding Pacific Telesis Group common shares by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, that it deems appropriate in the number of deferred Pacific Telesis Group shares then credited to an employee's account. Any and all such adjustments shall be conclusive and binding upon all parties concerned.

SECTION 7.            Distribution.

7.1            Distribution Elections. At the time an eligible employee makes an election to defer Compensation otherwise payable for services performed in a calendar year, the employee also shall make an election with respect to the distribution, during the employee's lifetime, of such deferred Compensation, together with Company Match and earnings credited to the employee's Plan account with respect to such deferred Compensation. Subject to the provisions on Hardship distributions in Section 7.6.3 and the provisions on Options for Distribution in the Event of Death in Section 7.3, distribution elections shall become effective and irrevocable at the same time the election to defer such Compensation becomes effective and irrevocable under Section 4.1.

7.2            Options for Distribution During Life. An employee may elect to receive the amounts credited to the employee's Plan account with respect to a deferral election made pursuant to Section 4.1 (a) in one payment, or (b) in a number of annual installments over a period of 5, 10, or 15 years, calculated in accordance with procedures established by the Plan Administrator. As specified by the employee, distributions shall commence as soon as practicable after

(A) the first day of the calendar year next following the employee's Separation;

(B) the first day of the fifth calendar year next following the employee's Separation; or

(C) the first day of the calendar year next following the employee's attainment of a specified age between 59 1/2 and 70.

All amounts credited to an employee's Plan account with respect to which he or she has elected distribution in the same form and commencing at the same time shall be aggregated as a single Distribution Account. Notwithstanding the employee's election under this Section 7.2 with respect to the time and form of distribution for each such Distribution Account, if the aggregate of all amounts credited to an employee's Distribution Account is less than $50,000 at the time of such employee's Separation, such Distribution Account shall be distributed in a single payment as soon as practicable after the first day of the calendar year next following the employee's Separation.

7.3            Options for Distribution In the Event of Death. An employee may elect that, in the event the employee should die before full payment of all amounts credited to the employee's Plan account, the balance of the employee's Plan account shall be distributed to the beneficiary or beneficiaries designated by the employee

(A) in one payment, paid as soon as practicable after the first day of the calendar year next following the year of the employee's death;

(B) in 10 annual installments, calculated in accordance with procedures established by the Plan Administrator, commencing as soon as practicable after the first day of the calendar year next following the year of the employee's death, provided that if the aggregate of all amounts credited to an employee's Plan Account is less than $50,000 at the time of such employee's death, such Distribution Account shall be distributed in a single payment as soon as practicable after the first day of the calendar year next following the employee's death; or

(C) by a continuation of the distribution times and forms elected under Section 7.2 (in the case of an employee who dies before commencement of distributions, using as any specified age the date the employee would have attained that age if he or she had continued to live), subject to the single payment distribution of a Distribution Account credited with less than $50,000 at the time of the employee's death, as set forth in Section 7.2.

If no election has been made under this Section 7.3, the balance of the employee's deferred account shall be distributed in one payment as soon as practicable after the first day of the calendar year next following the year of the employee's death. if no beneficiary designation has been made, distribution shall be made to the estate of the employee.

7.4            Form of Elections. Distribution elections and beneficiary designations shall be made in writing in the form of a document or documents approved by the Plan Administrator, executed by the employee and filed with the Plan Administrator or his or her designee. An employee may designate one or more individuals or a trust as his or her beneficiary, and may change the beneficiary designation at any time, effective upon receipt by the Plan Administrator or his or her designee.

7.5            Form and Timing of Distribution. Amounts credited to an employee's Plan account as cash plus accumulated interest, less applicable withholding taxes, shall be distributed in cash. Amounts credited as deferred Pacific Telesis Group shares, less applicable withholding taxes, shall be distributed in the form of whole Pacific Telesis Group common shares, plus cash for any fractional share. Installment distributions subsequent to the first installment shall be paid on or about the anniversary date of the first annual installment until the entire balance of the employee's Plan account is paid. Account balances held pending distribution shall continue to be credited with interest or additional deferred Pacific Telesis Group shares, as applicable, determined in accordance with Section 6.

7.6            Distributions Not in Accordance with Elections.

7.6.1         Postponement of Payment. The Committee may postpone payment of Plan benefits to an employee (A) who, in the year Plan benefits would otherwise be payable, is a "covered employee" for purposes of the $1 million limitation on deductible compensation under Section 162(m) of the Code, and (B) whose compensation for the year in which Plan benefits would otherwise be payable would, but for such postponement, exceed the $1 million limit on deductibility. In addition, notwithstanding an election pursuant to Section 7.2, at the sole discretion of the Committee, in the event that an employee's Separation is on account of total and permanent disability, as determined by the Committee, the Committee may postpone payment of Plan benefits to such employee to commence in a year later than the year in which his or her Plan benefits would otherwise be payable upon such Separation, provided that no such postponement shall extend beyond the earlier of (a) ten years from the date of Separation, or (b) the year in which such employee attains age 65.

Notwithstanding the foregoing, the following shall apply solely with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.1Postponement of Payment.   If the Committee reasonably anticipates that the payment of any or all of an employee’s Plan benefits, if made as scheduled, would not be deductible due to the application of Code Section 162(m), the distribution of such employee’s Plan benefits may be delayed to (A) the end of the employee’s first taxable year in which the Committee reasonably anticipates (or should reasonably anticipate) that the deduction of such payment would not be barred by application of Code Section 162(m), or (B) the 15th day of the third month of the year following the year of the employee’s separation from service; provided, however, this delayed payment provision shall apply only to the extent all payments of non-qualified deferred compensation from plans sponsored by AT&T Inc. (or any affiliate) are similarly delayed.

7.6.2          Immediate Single Payment. Notwithstanding an election Pursuant to Section 7.2, at the sole discretion of the Committee the entire amount then credited to the employee's account shall be paid as soon as practicable in a single payment if an employee is involuntarily terminated by his or her Company or becomes employed by a governmental agency having jurisdiction over the activities of Pacific Telesis Group or any of its Affiliates.

Notwithstanding the foregoing, the following shall apply solely with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.2Immediate Single Payment.  Notwithstanding an election pursuant to Section 7.2, at the sole discretion of the Committee the entire amount then credited to the employee's account shall be paid as soon as practicable in a single payment if an employee becomes employed by a governmental agency having jurisdiction over the activities of Pacific Telesis Group or any of its Affiliates to the extent (A) necessary for any employee in the executive branch of the United States government to comply with an ethics agreement with the Federal government, or (B) reasonably necessary to avoid the violation of an applicable Federal, state or local ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the employee to participate in activities in the normal course of the employee’s position in which the employee would otherwise not be able to participate under an applicable rule).  For purposes of this section, a payment is reasonably necessary to avoid the violation of a Federal, state or local ethics law or conflicts of interest law if the payment is a necessary part of a course of action that results in compliance with a Federal, state or local ethics law or conflicts of interest law that would be violated absent such course of action, regardless of whether other actions would also result in compliance with Federal, state or local ethics law or conflicts of interest law.

7.6.3            Hardship Distribution. Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may authorize a Hardship distribution from the employee's Plan account. For purposes of the Plan, "Hardship" means an unanticipated emergency that is caused by an event beyond the control of the employee and that would result in severe financial hardship if early distribution were not permitted. As determined by the Committee in its sole discretion, Hardship may include one or more of the following.

(A) A sudden and unexpected illness or accident of the employee;

(B) Extraordinary and unreimbursed medical or hospital expenses incurred by the employee or a member of his or her family or a relative;

(C) The loss of the employee's property due to casualty; or

(D) Any other similar unforeseeable emergency that is caused by an event beyond the control of the employee and would impose a severe financial hardship if early distribution were not permitted.

A distribution based on Hardship cannot exceed the amount required to meet the immediate financial need created by the Hardship and not reasonably available from other resources of the employee, including reimbursement or compensation by insurance or otherwise; provided that an employee shall not be required to request a hardship distribution from the Savings Plan in order to receive a Hardship distribution under this Plan.

Notwithstanding the foregoing, the following shall apply solely with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.3Unforeseeable Emergency Distribution.  Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may authorize a distribution from the employee's Plan account in the event of an unforeseeable emergency. For purposes of the Plan, "unforeseeable emergency" means (A) a severe financial hardship to the employee resulting from an illness or accident of the employee, the employee’s spouse, the employee’s beneficiary, or the employee’s dependent (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B)), (B) loss of he employee’s property due to casualty, or (C) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the employee.  As determined by the Committee in its sole discretion, Hardship may include one or more of the following:

(A) the imminent foreclosure of or eviction from the employee’s primary residence; ;

(B) the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication; or

(C) the need to pay for the funeral expense of a spouse, a beneficiary, or a dependent (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B))

A distribution on account of an unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, or by liquidation of the employee’s assets, to the extent the liquidation of such assets would not cause severe financial hardship. Distributions based on an unforeseeable emergency cannot exceed the amount reasonably necessary to meet the emergency need (which may include amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).  However, an employee shall not be required to request a  hardship distribution or unforeseeable emergency distribution that might be available from the 401(k) plan or other nonqualified deferred compensation plan in which the employee participates.

The following two provisions shall apply with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.4Distributions to Specified Employees.  Notwithstanding any other provision of the Plan to the contrary (other than Plan Section 7.6.2), if an employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i), distribution shall be made in accordance with the employee’s distribution election, provided, however, that no distribution shall be made to such employee on account of separation from service before the date that is six (6) months after the date of separation from service (or, if earlier, the date of death of such employee).

7.6.5Distributions Upon Income Inclusion Under Code Section 409A.  Distributions to an employee may commence at any time the Plan fails to meet the requirements of Code Section 409A and the regulation issued thereunder, as applicable to and with respect to such employee; provided, however, the amount of such distribution shall exceed the amount required to be included in income as a result of the failure to comply with such requirements.

7.7           Payment Obligation. The obligation to distribute benefits under the Plan shall be borne primarily by the last Company to employ an employee in a position eligible to participate in the Plan immediately prior to the distribution. A Company’s withdrawal from participation in the Plan shall not affect that Company's liability hereunder. If for any reason the primarily liable Company fails to make timely payment of a amount due under the Plan, Pacific Telesis Group shall be secondarily liable for the obligation.

SECTION 8.           Administration: Claims and Review Procedures.

8.1            Plan Administrator. The Plan Administrator shall be the Executive Vice President- Human Resources Pacific Telesis Group, or his or her deligee. The Plan Administrator shall have the authority to administer and interpret the Plan, including sole discretion to determine the rights of an employee or beneficiary under the Plan, and to authorize disbursements under the Plan, except for decisions expressly reserved by the Plan for the Committee or for the PTG Board or the Board of Directors of an Affiliate.

8.2            Initial Claim Unnecessary. No claim for benefits shall be required for commencement of distributions in accordance with an employee's election under Sections 7.2 and 7.3 of the Plan. The obligation of a Company to make distributions under the Plan shall not be affected by any action or inaction (on the part of an employee, his beneficiaries or any Company) with respect to amounts owed, including but not limited to the failure to make timely demand, the granting of extensions of time or other indulgences, the failure to make timely payment or the failure to give notices other than those prescribed in Section 8.3.

8.3            Review of Adverse Decisions. An employee or beneficiary who disagrees with a decision by the Plan Administrator relating to the payment of benefits under the Plan may submit a claim requesting Plan benefits in writing to the Committee, which shall respond in writing. A claim shall be deemed denied unless the response is sent within 90 days (or within 180 days, if the Committee extends the time to respond by notifying the claimant in writing of the special circumstances requiring an extension and the date by which the response is expected). If the claim is denied in whole or part, the response shall state (A) the specific reasons, making specific reference to pertinent provisions of the Plan; (B) what additional information, if any, would help perfect the claim for benefits; and (C) what steps the claimant must take to submit the claim for review. Within 60 days after the date of a denial, a claimant may file a written request for the PTG Board of Directors to review the denial. Notwithstanding Section 8.2 of the Plan, such request for review must be made in a timely manner for the purpose of seeking any further review of a decision or determining any entitlement to a benefit under the Plan. The PTG Board shall notify the claimant in writing of the review decision, specifying the reasons for the decision and the Plan provisions on which it is based. A claim shall be deemed denied unless the decision on appeal is sent within 60 days (or within 120 days, if the PTG Board extends the time to respond by notifying the claimant in writing). The Plan Administrator, Committee and PTG Board shall retain such right, authority and discretion as are provided or not expressly limited in section 503 of ERISA and the regulations thereunder and, if the Committee denies a claim upon review, the claimant shall have such further rights of review as are provided therein.

SECTION 9.            Amendment and Termination.

9.1            Amendment.  The PTG Board of Directors may at any time make changes in the Plan, but such amendment shall have prospective effect only and shall not adversely affect the rights of any employee, without his or her consent, to any benefit under the Plan to which such employee was entitled prior to the effective date of amendment. Changes in the interest rate applied to Plan account balances as determined by the Committee from time to time in accordance with Section 6.2 of the Plan shall not be deemed to be Plan amendments, notwithstanding that they apply to Compensation previously earned and deferred. The Executive Vice President - Human Resources of Pacific Telesis Group, with the approval of the Executive Vice President and General Counsel of Pacific Telesis Group, shall be authorized to make minor or administrative changes to the Plan.

9.2            Termination.  The PTG Board of Directors may at any time terminate the Plan. Any termination of the Plan shall not terminate the deferral of Compensation previously deferred into a Plan account, but may prevent the deferral of Compensation not yet earned notwithstanding the employee's prior election to defer such Compensation.

SECTION 10.          Definitions.

For purposes of this Plan, the following words shall have the meaning so defined unless the context clearly indicates otherwise:

10.1            “Affiliate” as the term relates to Pacific Telesis Group, means a subsidiary of or other entity that controls, is controlled by, or is under common control with Pacific Telesis Group, as the case may be. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

10.2            "PTG Board of Directors" or “PTG Board” means the Board of Directors of Pacific Telesis Group.

10.3            “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.

10.4            “Committee” means the Compensation and Personnel Committee of the Board of Directors of Pacific Telesis Group.

10.5            “Company” shall mean Pacific Telesis Group, Pacific Bell or any other corporation which is an Affiliate of Pacific Telesis Group.

10.6            "Officer" means an officer of a Company, as determined by the Plan Administrator, but the term shall not include Assistant Secretary, Assistant Treasurer, Assistant Comptroller or any other assistant officer.

10.7            “Price” with respect to Pacific Telesis Group common shares as of a particular date means the average of the daily high and low sale prices of Pacific Telesis Group common shares on the New York Stock Exchange ("NYSE") for the period of five trading days ending on such date, or the period of five trading days immediately preceding such date if the NYSE is closed on the date.

10.8            "Savings Plan" means the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees.

10.9            "Savings Plan Salary" means "Salary" as defined in the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees, without reduction for deferrals of salary under this Plan and without regard to the limit on compensation under section 401(a)(17) of the Code. If an eligible employee is employed by a participating Company for only a portion of a calendar year or is on a leave of absence for a portion of a calendar year, the employee's Savings Plan Salary is prorated to reflect only the period during which the employee was actively employed by a participating Company.

10.10           “Separation” means retirement or termination from all employment with Pacific Telesis Group or its Affiliates.

EX-10.W

Exhibit 10-w

1995 MANAGEMENT STOCK OPTION PLAN

Plan Effective:  January 1, 1996

Revisions Effective:  November 16, 2001

AT&T INC.

1995 MANAGEMENT STOCK OPTION PLAN

ARTICLE 1.  PURPOSE, DEFINITIONS AND EFFECTIVE DATE

1.1 Purpose.  The purpose of the 1995 Management Stock Option Plan ("Plan") is to promote the success and enhance the value of AT&T Inc. (the "Company") by linking the personal interests of the Employees of the Company and its Subsidiaries to the interests of the Company's shareowners, and by providing Employees with an additional incentive for outstanding performance.

1.2 Additional Definitions. In addition to definitions set forth elsewhere in the Plan, for purposes of the Plan:

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

(b) “Disability” shall mean absence of an Employee from work under the relevant Company or Subsidiary disability plan.

 (c) "Employee" shall mean any employee of the Company or of one of the Company’s Subsidiaries.  Directors who are not otherwise employed by the Company or one of its Subsidiaries shall not be considered Employees under the Plan.

 (d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor Act thereto.

 (e) "Fair Market Value" shall mean the closing price on the New York Stock Exchange (“NYSE”) for Shares 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 select any other index or measurement to determine the Fair Market Value of Shares under the Plan.

 (f) "Option" shall mean the right to purchase one or more shares of the common stock of AT&T Inc. on the terms and conditions contained in this Plan, the rules of the Committee, and the terms of the Option.  “Awards” shall mean Options.

(g) “Participant” shall mean an Employee or former Employee that participates in this Plan.

(h) "Retirement" shall mean the termination of a Participant's employment with the Company or one of its Subsidiaries, for reasons other than death, Disability or for Cause, on or after the date Participant has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, 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

With respect to a Participant who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan - Nonbargained Program upon termination of employment, the term "Retirement" shall include such Participant's termination of employment.

In determining whether a Participant's Termination of Employment under the Enhanced Pension and Retirement Program ("EPR") is a Retirement as defined above, 5 years shall be added to each of Age and Net Credited Service.

 (i) "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.

 (j) "Shares" or "Stock" or "Shares of Stock" shall mean the common stock of AT&T Inc.

 (k) "Subsidiary" shall mean any corporation in which the Company owns directly, or indirectly through subsidiaries, more than fifty percent (50%) of the total combined voting power of all classes of Stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns more than fifty percent (50%) of the combined equity thereof.

1.3 Effective Date.  The Plan shall be effective on the date it is approved by the Company's Board of Directors.

ARTICLE 2.  ADMINISTRATION

2.1 The Committee.  The Plan shall be administered by a committee (the "Committee") which shall be the Human Resources Committee or any other committee appointed by the Board of Directors (the "Board").

2.2   Authority of the Committee. The Committee shall have full power, except as limited by law

and subject to the provisions herein, in its sole and exclusive discretion: to grant Awards; to select the recipients of Awards; to determine the eligibility of a person to participate in the Plan or to receive a particular Award; to determine the sizes and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 5 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan.  Further, the Committee shall make all other determinations in its discretion which may be necessary or advisable for the administration of the Plan.

References to determinations or other actions by the Company, herein, shall mean actions authorized by the Committee, the Chairman of the Board of the Company, the Senior Executive Vice President of the Company in charge of Human Resources or their respective successors or duly authorized delegates, in each case in the discretion of such person.

All determinations and decisions made by the Company pursuant to the provisions of the Plan, and all related orders and resolutions of the Board shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries.

ARTICLE 3.  SHARES SUBJECT TO THE PLAN

3.1 Number of Shares.  Subject to adjustment as provided in Section 3.3 Adjustments in Authorized Shares, herein, the total number of Shares of Stock for which Options may be granted under the Plan may not exceed 160,000,000 Shares.  These Shares may be either authorized but unissued or reacquired Shares.  The Committee or the Board may amend this Plan to increase the number of authorized Shares.

3.2 Lapsed Options.  If any Option granted under the Plan is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Option again shall be available for the grant of an Option under the Plan.

3.3 Adjustments in Authorized Shares.  In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Options granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; and provided that the number of Shares subject to any Option shall always be a whole number.

ARTICLE 4.  STOCK OPTIONS

4.1 Grant of Options.  Subject to the terms and provisions of the Plan, Options may be granted to such Employees, at such times and on such terms and conditions, as shall be determined by the Committee; provided, however, no Options may be granted after the 10th anniversary of the effective date of the Plan.  The Committee or the Board shall have discretion in determining the number of Options and the number of Shares subject to each Option granted to each Participant.  Without limiting the generality of the foregoing, the Committee shall have the authority to establish guidelines setting forth anticipated grant levels which correspond to various salary grades, salary ranges or the equivalent thereof.

4.2 Form of Issuance.  Options may be issued in the form of a certificate 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 a certificate, then the Option shall be deemed granted upon issuance of a notice of the grant addressed to the recipient.  The terms and conditions of an Option shall be set forth in the certificate, in the notice of the issuance of the grant, or in such other documents as the Committee shall determine.  The Committee may require a Participant to enter into a written agreement containing terms and conditions relating to the Option and its exercise.

4.3 Option Price.  The Option Price for each grant of an Option shall be determined by the Committee; provided, however, that the minimum Option Price shall be one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted.  If the Committee does not specify an Option Price then the Option Price shall be the Fair Market Value of a Share on the date the Option is granted.

4.4   Duration of Options.  Each Option shall expire at such time as the Committee shall determine at the time of grant 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.  For options granted before June 29, 2001, the foregoing reference to “tenth (10th) anniversary” shall be replaced with “fifth (5th) anniversary”.

4.5 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 Employee who is not at that time an officer, director or ten percent beneficial owner, as those terms are defined under Section 16 of the Exchange Act.

4.6. 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 or the Board shall in each instance approve, which need not be the same for each grant or for each Participant. Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading.  The Company may further 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 Option 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.

4.7 Payment.  The Option Price shall be paid in full at the time of exercise.  No Shares shall be issued or transferred until full payment has been received therefor.

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 the Company at any time, by:

(i) delivery of Shares of Stock 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 Option Price in Stock, 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 must have 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 to such stockbroker together with instructions irrevocably instructing the stockbroker:  (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a sell order) a sufficient portion of the Shares to pay the Option 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 Option 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 Stock 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 of Stock, the value of the Shares delivered shall be equal to the Fair Market Value of the Shares on the day preceding the date of exercise of the Option.

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

4.8   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 Reason of Death or Disability.  In the event the employment of a Participant is terminated by reason of death or Disability any outstanding Options granted to the Participant shall vest as of the date of termination of employment and may be exercised, if at all, no more than one (1) year following termination of employment, unless the Options, by their terms, expire earlier.  For options granted on and after May 1, 1997, the above referenced exercise period of “one (1) year” shall be “three (3) years.”

(b) Termination by Retirement.  In the event the employment of a Participant is terminated by reason of Retirement:

(i)           Upon the Participant's termination of employment, all outstanding unvested Options granted to the Participant shall vest as of the date of the Participant's termination of employment; provided, however, this provision shall not apply to a Participant who, as determined by AT&T, is an officer level employee for compensation purposes unless the employee is age 55 or older at termination of employment, nor shall this provision apply to a Participant who is an EPR Terminee (as that term is defined in the AT&T Pension Benefit Plan or the Ameritech Management Pension Plan); provided further, however, this vesting provision shall not apply to an Option granted prior to September 28, 2001, unless and except for those Options outstanding as of September 27, 2001, that have an Option Price equal to or more than the Fair Market Value of Stock on such date; and

(ii)          Any outstanding Options granted to the Participant which are vested as of the date of termination of employment may be exercised, if at all, no more than three (3) years following termination of employment, unless the Options, by their terms, expire earlier.   For options granted on and after May 1, 1997, the above referenced exercise period of “three (3) years” shall be “five (5) years.”  If the Participant is Retirement eligible at the time the Participant terminates employment by reason of death or disability (as defined above) after March 31, 2000, then for purposes of this section, the Participant shall be deemed to have terminated employment by reason of Retirement.

(c) Termination of Employment for Other Reasons.  If the employment of a Participant shall terminate for any reason other than the reasons set forth in (a) or (b), above, and other than for Cause, all outstanding Options granted to the Participant which are vested as of the date of termination of employment may be exercised by the Participant within the period beginning on the effective date of termination of employment and ending three (3) months after such date, unless the Options, by their terms, expire earlier.  For options granted on and after May 1, 1997 but before January 26, 2001, the above referenced exercise period of “three (3) months” shall be “one (1) year.”

(d) Termination for Cause.  If the employment of a Participant shall terminate for Cause, all outstanding Options held by the Participant shall immediately terminate and be forfeited to the Company, and no additional exercise period shall be allowed.

(e) Options not Vested at Termination.  Any outstanding Options not vested as of the effective date of termination of employment shall expire immediately and shall be forfeited to the Company.

4.9 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 term of employment at a RWAC is equal to or less than five (5) years, shall not be deemed a termination of employment under this Plan.  Provided, however 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 in this Plan.  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.

4.10 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 the Company’s Rules for Employee Beneficiary Designations, as the same may be amended from time to time, 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: (a) in the case of the Participant, only upon the Participant’s death and in accordance with the Company’s Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) in the case of any holder after the Participant’s death, only by will or by the laws of descent and distribution.

4.11 Change in Control. Upon the occurrence of a Change in Control, unless otherwise determined by the Committee or the Board prior to such Change in Control, all Options held by Participants hereunder shall immediately become vested and exercisable, notwithstanding the provisions of Section 4.6 Exercise of Options to the contrary.  A "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 shareowners of the Company approve 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 eighty percent (80%) 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.

4.12 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 5.  AMENDMENT, MODIFICATION, AND TERMINATION

5.1 Amendment, Modification, and Termination.  The Committee or the Board, may at any time and from time to time, terminate, amend, or modify the Plan.

5.2 Awards Previously Granted.  No termination, amendment, or modification of the Plan shall in any material manner adversely affect any Option previously granted under the Plan, without the written consent of the Participant holding such Option.

ARTICLE 6.  WITHHOLDING

6.1   Tax Withholding.  Upon exercise of an Option, the Company shall withhold Shares sufficient in value, using the Fair Market Value on the date determined by the Company to be used to value the Shares for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such exercise.

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 Option Price is from the sale by a stockbroker pursuant to Section 4.7(b)(ii), hereof, 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.

ARTICLE 7.  MISCELLANEOUS

7.1 Employment.  Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary thereof to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employment of the Company or any Subsidiary thereof.

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

7.3 Successors.  All obligations of the Company under the Plan 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.

7.4   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.

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 anddetermined 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.

7.5 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.

7.6 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.

7.7 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.

7.8 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.

7.9 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 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.

EX-10.Z

Exhibit 10-z

PACIFIC TELESIS GROUP

EXECUTIVE DEFERRAL PLAN

(Amended as of November 20, 2008)

PACIFIC TELESIS GROUP

EXECUTIVE DEFERRAL PLAN

(Restated as of December 1, 1995)

SECTION 1. Purpose.

The Pacific Telesis Group Executive Deferral Plan (the "Plan") provides certain Officers of the Company with an opportunity to defer compensation and accrue earnings on a pre-tax basis and with an opportunity to receive employer matching contributions that cannot be provided to them under the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees ("the Savings Plan") because of the limitations imposed by section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code").

SECTION 2. Eligibility to Participate

The following employees are eligible to participate in the Plan:

(A)Officers of Pacific Telesis Group and/or Pacific Bell;

(B)The Officers of any corporate Affiliate of Pacific Telesis Group who are specifically designated to participate by the Board of Directors of Pacific Telesis Group and the Board of Directors of such corporate Affiliate.

Prior to April 1, 1994, certain employees of AirTouch Communications (formerly "PacTel Corporation") were eligible to participate in the Plan, and they retain certain rights to benefits as provided under the Plan.

SECTION 3. Plan Accounts.

3.1     Establishment of Account. An account shall be established for each eligible employee who elects to become a participant in the Plan in accordance with the procedures set forth in Section 4 of the Plan. The account shall be credited with allocations and earnings under Sections 4, 5 and 6 and debited with distributions under Section 7 of the Plan.

3.2     Predecessor Plan Accounts. An employee's account under the Pacific Telesis Group Senior Management Incentive Award Deferral Plan (the "Predecessor Plan") was transferred to this Plan as of January 1, 1985 (the "Effective Date" of this Plan), if the employee was then an eligible employee as provided in Section 2. In such a case, the employee's account under this Plan was credited as of the Effective Date with the amount credited to the employee's account under the Predecessor Plan as of December 31, 1984, and such amount shall bear interest from the Effective Date in accordance with Section 6. Elections regarding distribution made under the Predecessor Plan shall not be affected by the transfer of an employee's account to this Plan.

3.3     No Funding or Assignment. For income tax purposes under the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), it is intended that this Plan constitute an unfunded deferred compensation arrangement. The amounts credited to Plan accounts for employees of each participating Company shall be held in the general funds of such participating Company. All amounts in such accounts, including all Compensation deferred by an employee, shall remain an asset of the participating Company. A participating Company shall not be required to reserve or otherwise set aside funds for the payment of amounts credited to Plan accounts. The obligation of a participating Company to pay benefits under the Plan constitutes a mere promise to make benefit payments in the future, and shall be unfunded as to the employee, whose rights shall be those of a general unsecured creditor. Title to and beneficial ownership of any assets which a participating Company may set aside or otherwise designate to make payments under the Plan shall at all times remain in the participating Company, and the employee shall not have any property interest in any specific assets of a participating Company. The rights of an employee or his or her beneficiary to benefit payments under the Plan are not subject in any manner to assignment, alienation, pledge or garnishment by creditors.

SECTION 4. Deferred Compensation.

4.1     Annual Deferral and Distribution Election. An eligible employee may elect to participate in the Plan prior to the beginning of any calendar year or within 30 days of first becoming eligible to participate in the Plan or a feature of the Plan (with respect to such Plan feature). An employee's election shall direct that compensation in one or more of the following categories (collectively "Compensation") be deferred and credited to an account under the Plan, subject to the limitations and effectiveness prescribed for each category of Compensation, and shall direct that such Compensation, together with all other amounts credited under the Plan with respect to such Compensation under Section 5 (Company Match) and Section 6 (Earnings), shall be distributed in accordance with a distribution option set forth in Section 7.

(A)Salary. An employee may elect to defer part of his or her salary otherwise payable for services performed in a calendar year, but not less than $2,500 nor more than 80% of salary. Such election shall become effective for salary otherwise payable for services performed in the payroll period beginning (i) immediately subsequent to the election, in the case of an employee who makes an election within 30 days of first becoming eligible to participate in the Plan, or (ii) on or after the first day of the calendar year to which the election applies in all other cases. An election related to salary otherwise payable for services performed in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year (or the applicable payroll period for which the election becomes effective, in the case of an election made within 30 days of first becoming eligible to participate in the Plan).

(B)STIP. An employee may elect to defer all or part, but not less than $5,000, of his or her awards under the Short-Term Incentive Plan or Short-Term Incentive Compensation Plan of Pacific Telesis Group or an Affiliate, or a similar or successor plan or program ("STIP"), for services performed in a calendar year and otherwise payable in the calendar year following such calendar year. An election related to the STIP award for services performed in a calendar year shall become irrevocable on the last day prior to the year in which the services are performed.

(C)LTIP. An employee may elect to defer all or part, but not less than $5,000, of his or her awards under the Pacific Telesis Group Senior Management Long-Term Incentive Plan or the similar plan of an Affiliate ("LTIP"), for services performed in a three-year performance period and otherwise payable in the calendar year following such three-year performance period. An election related to the LTIP award otherwise payable for services performed in a three-year performance period shall become irrevocable on the last day prior to the beginning of the three-year performance period applicable to that LTIP award.

(D)Other Awards. An employee may elect to defer all or part of his or her awards under any other bonus, special award, or any other similar form of compensation ("Other Awards") otherwise payable to him or her by a participating Company with respect to services performed in a calendar year. An election related to Other Awards otherwise payable in a calendar year shall become irrevocable on the last day prior to the beginning of such calendar year.

Notwithstanding the foregoing, in no event shall deferrals under the Plan include that portion of Compensation required for all applicable tax, Social Security and employee benefit plan withholding, whether or not such withholding requirement is related to this Plan, and no deferral election made under this Section 4.1 shall be effective with respect to salary or other awards payable during any calendar year after 1995, STIP payable during any calendar year after 1996 and LTIP payable during any calendar year after 1998, except LTIP as may have already been elected for deferral on forms on file as of December 31, 1994.

4.2  Form of Election. Modification or Termination. An employee's election or written notice of modification or termination shall be made in accordance with procedures established by the Plan Administrator, in the form of a document approved by the Plan Administrator, executed by the employee and filed with the Plan Administrator or his or her designee. The Plan Administrator may permit an employee to make a series of annual elections to be effective in future years, in which case such elections shall become irrevocable as provided in Section 4.1. An election which has not become irrevocable may be modified, terminated or reinstated by the employee prior to the time such election would have become irrevocable as provided in Section 4.1. An election with respect to salary, ST1P or her Awards for services performed in a calendar year and/or with respect to LTIP for services performed in a three-year performance period shall be deemed irrevocably terminated when the employee, whether by transfer or termination of employment, ceases to be eligible to participate in the Plan during such calendar year and/or such three-year performance period (as applicable).

4.3  Modification of Irrevocable Election by the Committee. Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may modify or terminate the employee's election with respect to Compensation otherwise payable in a calendar yearas it deems necessary to prevent extreme financial hardship to the employee, notwithstanding that the election has become effective and irrevocable as provided in Section 4.1.

4.4  Allocation to Accounts. Deferred amounts related to Compensation which would otherwise have been paid by a participating Company shall be credited to the employee's account as of the date the Compensation would otherwise have been paid. Deferred amounts related to Compensation which would otherwise have been distributed inPacific Telesis Group common shares shall be credited to the employee's account as deferred Pacific Telesis Group shares as of the date such Pacific Telesis Group shares would otherwise have been transferred to the employee.

SECTION 5. Company Match.

5.1  Eligibility for Company Match. An employee who (A) elects to defer Compensation under the Plan for a calendar year, and (B) has made the maximum elective deferral under the Savings Plan permitted by section 402(g) of the Code for such calendar year (except to the extent that a further limitation is required by section 401(k)(3) of the Code), shall be eligible to have additional amounts based on Compensation deferred pursuant to this Plan ("Company Match") credited to his or her account hereunder.

5.2  Amount of Company Match. The Company Match credited to an employee's account under this Plan with respect to Compensation deferred during a calendar year shall be equal to

(A)the amount of Compensation deferred into the employee's Plan account, multiplied by

(B)the percentage in effect for that calendar year at which the employee's Basic Contributions to the Savings Plan are matched by employing Company contributions;

provided, however, that the maximum Company Match credited to the employee's account shall not exceed

(C)6% of the employee's Savings Plan Salary, multiplied by

(D)the percentage in effect for that calendar year at which theemployee'sBasic Contributionsto the Savings Plan are matched by employing Company contributions, reduced by

(E)the total amount of matching Company contributions credited to the employee's account under the Savings Plan.

For purposes of determining the amount of Compensation deferred into the employee's Plan account, deferred Pacific Telesis Group shares shall be valued by multiplying the number of shares deferred by the Price of Pacific Telesis Group common shares on the deferral date.

5.3  Allocation to Account. Until fully credited for the calendar year, and subject to the delay provided in Section 5.4, Company Match shall be credited to an employee's account under this Plan as of each date that deferred Compensation is credited to the employee's account under this Plan.

5.4   Maximum Pre-Tax Savings Plan Deferrals Required. No Company Match shall be credited to an employee's account for a calendar year until the employee has made before-tax contributions under the Savings Plan equal to the maximum elective deferrals permitted under section 402(g) of the Code, as further limited by section 401(k)(3) of the Code. Thereafter, the employee's account shall immediately be credited with an amount equal to the Company Match that would otherwise have been previously credited under Section 5.3.

5.5   Savings Plan Provisions Prevail.. The provisions of this Section 5 shall not limit or affect the application of the provisions regarding matching Company contributions in the Savings Plan, which shall take precedence over the provisions of this Section 5.

SECTION 6.  Earnings on Accounts.

6.1  Interest Allocations to Accounts. Deferred amounts related to Compensation which would otherwise have been paid in cash shall bear interest from the date the Compensation would otherwise have been paid. Interest shall be applied to Company Match credited to an employee's account as if such Company Match had been credited to the employee's account at the same time that the related amounts of Compensation deferred hereunder were credited to the employee's account. The interest credited to an account shall be compounded annually at the end of each calendar year.

6.2  Rate of Interest. The rate of interest to be applied to account balances for a calendar year shall be determined by the Committee from time to time, and promptly communicated to eligible employees in advance of its application, but in no event shall (A) the interest rate be decreased below the average 10-Year Treasury note rate, (B) any reduction apply to interest already credited to Plan accounts for periods prior to the Committee's action, or (C) any interest rate previously guaranteed for a given period and communicated to eligible employees be reduced during such period except as may be equitable in light of any change in applicable law which substantially increases the burden to the participating Companies of paying such guaranteed interest.

6.3   Retroactive Limitation of Interest Accrual in Case of Early Separation. Notwithstanding Section 6.2, an employee whose Separation occurs before he or she attains age 55 will receive interest on all deferred cash Compensation and Company Match based on the average 10-Year Treasury note rate for all years of participation in this Plan, rather than tt rate of interest established by the Committee for any particular calendar year.

6.4   Dividends and Adjustments for Pacific Telesis Group Shares. An employee's account credited with deferred Pacific Telesis Group shares shall be credited on each subsequent dividend payment date for Pacific Telesis Group shares with an amount equivalent to the dividend payable on the number of Pacific Telesis Group common shares equal to the number of deferred Pacific Telesis Group shares in the employee's account on the record date for such dividend. Such amount shall then be converted to a number of additional deferred Pacific Telesis Group shares, determined by dividing such amount by the price of Pacific Telesis Group common shares on the dividend payment date. For purposes of the preceding sentence, the price of Pacific Telesis Group common shares as of a particular date shall be the average of the daily high and low sale prices of Pacific Telesis Group common shares on the New York Stock Exchange ("NYSE") for the period of five trading days ending on such date, or the period of five trading days immediately preceding such date if the NYSE is closed on the date. In the event of any change in outstanding Pacific Telesis Group common shares by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, that it deems appropriate in the number of deferred Pacific Telesis Group shares then credited to an employee's account. Any and all such adjustments shall be conclusive and binding upon all parties concerned.

SECTION 7. Distribution.

7.1   Distribution Elections. At the time an eligible employee makes an election to defer Compensation otherwise payable for services performed in a calendar year, the employee also shall make an election with respect to the distribution (during the employee's lifetime and in the event of the employee's death) of such deferred Compensation and Company Match and earnings credited to the employee's Plan account with respect to such deferred Compensation. Subject to the provisions on Hardship distributions in Section 7.6.3 and the provisions on Options for Distribution in the Event of Death in Section 7.3, distribution elections shall become effective and irrevocable at the same times the election to defer such Compensation becomes effective and irrevocable under Section 4.1.

7.2   Options for Distribution During Life. An employee may elect to receive the amounts credited to the employee's account in one payment or in a number of monthly or annual installments (over a period not exceeding 15 years) calculated in accordance with procedures established by the Plan Administrator. As specified by the employee, distributions shall commence as soon as practicable after the first day of the calendar quarter next following the employee's

(A)Separation;

(B)attainment of a specified age between 59 1/2 and 70;

(C)the earlier of attainment of a specified age not less than age 59 1/2 or Separation; or

(D)the earlier of age 70 or a specified number of years (maximum of 5) after Separation.

7.3  Options for Distribution In the Event of Death. An employee may elect that, in the event the employee should die before full payment of all amounts credited to the employee's account, the balance of the deferred account shall be distributed to the beneficiary or beneficiaries designated by the employee

(A)in one payment;

(B)in a number of monthly or annual installments (over a period not exceeding 10 years), calculated in accordance with procedures established by the Plan Administrator; or

(C)by a continuation of the monthly or annual installment distributions elected under Section 7.2.

A single payment or first installment elected under paragraphs (A) or (8) of this Section shall be paid as soon as practicable after the first day of the next calendar quarter beginning after the employee's death. If an employee who has elected to continue installment distributions under paragraph (C) of this Section dies before commencement of such distributions, the distributions shall commence in accordance with the employee's election under Section 7.2, using as any specified age the date the employee would have attained that age if he or she had continued to live. If no election has been made under this Section 7.3, the balance of the deferred account shall be distributed in one payment. If no beneficiary designation has been made, distribution shall be made to the estate of the employee.

At any time an employee who is a participant in the Pacific Telesis Group 1996 Executive Deferred Compensation Plan may revoke all elections made with respect to the time and form of distribution of all remaining amounts credited to the employee's account in the event of death, and make an irrevocable election directing that all remaining amounts credited to the employee's account in the event of death shall be distributed at the same time and in the same manner as such employee has elected with respect to distribution of his or her account under the Pacific Telesis Group 1996 Executive Deferred Compensation Plan in the event of death. At any time an employee who is not a participant in the Pacific Telesis Group 1996 Executive Deferred Compensation Plan may revoke all elections made with respect to the time and form of distribution of all remaining amounts credited to the employee's account in the event of death, and make an irrevocable election directing that all remaining amounts credited to the employee's account in the event of death shall be distributed at the same time and in the same form, in accordance with one of the above methods described in (A), (B) or (C) above. Such election shall be effective upon receipt by the Plan Administrator or his or her designee.

7.4   Form of Elections. Distribution elections and beneficiary designations shall be made in writing in the form of a document or documents approved by the Plan Administrator, executed by the employee and filed with the Plan Administrator or his or her designee. An employee may designate one or more individuals or a trust as his or her beneficiary, and may change the beneficiary designation at any time, effective upon receipt by the Plan Administrator or his or her designee.

7.5  Form and Timing of Distribution. Amounts credited to an employee's Plan account as cash plus accumulated interest, less applicable withholding taxes, shall be distributed in cash. Amounts credited as deferred Pacific Telesis Group shares, less applicable withholding taxes, shall be distributed in the form of whole Pacific Telesis Group common shares, plus cash for any fractional share. Installment distributions subsequent to the first installment shall be paid on or about the anniversary date of the first annual installment or on or about the first day of each succeeding month, whichever is applicable, until the entire balance of the employee's Plan account is paid. Account balances held pending distribution shall continue to be credited with interest or additional deferred Pacific Telesis Group shares, as applicable, determined in accordance with Section 6. Monthly distribution payments within a single calendar year will be uniform, but the total amount paid each year will vary with changes in the yield on the account during the prior year.

7.6  Distributions Not in Accordance with Elections.

   7.6.1  Postponement of Payment. With respect to Plan account balances accrued pursuant to elections filed after February 17, 1993, the Committee may postpone payment of Plan benefits to an employee (A) who, in the year Plan benefits would otherwise be payable, is a "covered employee" for purposes of the $1 million limitation on deductible compensation under Section 162(m) of the Internal Revenue Code, and (B) whose compensation for the year in which Plan benefits would otherwise be payable would, but for such postponement, exceed the $1 million limit on deductibility. In addition, notwithstanding an election pursuant to Section 7.2, at the sole discretion of the Committee, in the event an employee's Separation is on account of total and permanent disability, the Committee may postpone payment of benefits to such employee to commence in a year later than the year in which his or her Plan benefits would otherwise be payable, provided that no such postponement shall extend beyond the earlier of (a) 10 years from the date of Separation or (b) the year in which such employee attains age 65.

Notwithstanding the foregoing, the following shall apply with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.1Postponement of Payment.  If the Committee reasonably anticipates that the payment of any or all of an employee’s Plan benefits, if made as scheduled, would not be deductible due to the application of Code Section 162(m), the distribution of such employee’s Plan benefits may be delayed to (A) the end of the employee’s first taxable year in which the Committee reasonably anticipates (or should reasonably anticipate) that the deduction of such payment would not be barred by application of Code Section 162(m), or (B) the 15th day of the third month of the year following the year of the employee’s separation from service; provided, however, this delayed payment provision shall apply only to the extent all payments of non-qualified deferred compensation from plans sponsored by AT&T Inc. (or any affiliate) are similarly delayed.

7.6.2  Immediate Single Payment. Notwithstanding an election pursuant to Section 7.2, at the sole discretion of the Committee the entire amount then credited to the employee's account shall be paid as soon as practicable in a single payment if an employee is involuntarily terminated by his or her Company or becomes employed by a governmental agency having jurisdiction over the activities of Pacific Telesis Group or any of its Affiliates.

Notwithstanding the foregoing, the following shall apply with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

7.6.2Immediate Single Payment.  Notwithstanding an election pursuant to Section 7.2, at the sole discretion of the Committee the entire amount then credited to the employee's account shall be paid as soon as practicable in a single payment if an employee becomes employed by a governmental agency having jurisdiction over the activities of Pacific Telesis Group or any of its Affiliates to the extent (A) necessary for any employee in the executive branch of the United States government to comply with an ethics agreement with the Federal government, or (B) reasonably necessary to avoid the violation of an applicable Federal, state or local ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the employee to participate in activities in the normal course of the employee’s position in which the employee would otherwise not be able to participate under an applicable rule).  For purposes of this section, a payment is reasonably necessary to avoid the violation of a Federal, state or local ethics law or conflicts of interest law if the payment is a necessary part of a course of action that results in compliance with a Federal, state or local ethics law or conflicts of interest law that would be violated absent such course of action, regardless of whether other actions would also result in compliance with Federal, state or local ethics law or conflicts of interest law.

7.6.3 Hardship Distribution. Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may authorize a Hardship distribution from the employee's Plan account. For purposes of the Plan, "Hardship" means an unanticipated emergency that is caused by an event beyond the control of the employee and that would result in severe financial hardship if early distribution were not permitted. As determined by the Committee in its sole discretion, Hardship may include one or more of the following:

(A)A sudden and unexpected illness or accident of the employee;

(B)Extraordinary and unreimbursed medical or hospital expenses incurred by the employee or a member of his or her family or a relative;

(C)The loss of the employee's property due to casualty; or

(D)Any other similar unforeseeable emergency that is caused by and event beyond the control of the employee and would impose a severe financial hardship if early distribution were not permitted.

A distribution based on Hardship cannot exceed the amount required to meet the immediate financial need created by the Hardship and not reasonably available from other resources of the employee, including reimbursement or compensation by insurance or otherwise. However, an employee shall not be required to request a hardship distribution from the Savings Plan in order to receive a Hardship distribution under this Plan.

Notwithstanding the foregoing, the following shall apply with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

 7.6.3Unforeseeable Emergency Distribution.  Upon receipt of a written request made by or on behalf of an employee, the Committee in its sole discretion may authorize a distribution from the employee's Plan account in the event of an unforeseeable emergency. For purposes of the Plan, "unforeseeable emergency" means (A) a severe financial hardship to the employee resulting from an illness or accident of the employee, the employee’s spouse, the employee’s beneficiary, or the employee’s dependent (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B)), (B) loss of he employee’s property due to casualty, or (C) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the employee.  As determined by the Committee in its sole discretion, Hardship may include one or more of the following:

(A) the imminent foreclosure of or eviction from the employee’s primary residence; ;

(B) the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication; or

(C) the need to pay for the funeral expense of a spouse, a beneficiary, or a dependent (as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B))

A distribution on account of an unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, or by liquidation of the employee’s assets, to the extent the liquidation of such assets would not cause severe financial hardship. Distributions based on an unforeseeable emergency cannot exceed the amount reasonably necessary to meet the emergency need (which may include amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).  However, an employee shall not be required to request a  hardship distribution or unforeseeable emergency distribution that might be available from the 401(k) plan or other nonqualified deferred compensation plan in which the employee participates.

The following two provisions shall apply with respect to Plan participants who, as of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had not attained age fifty-five (55):

 7.6.4Distributions to Specified Employees.   Notwithstanding any other provision of the Plan to the contrary (other than Plan Section 7.6.2), if an employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i), distribution shall be made in accordance with the employee’s distribution election, provided, however, that no distribution shall be made to such employee on account of separation from service before the date that is six (6) months after the date of separation from service (or, if earlier, the date of death of such employee).

 7.6.5Distributions Upon Income Inclusion Under Code Section 409A.   Distributions to an employee may commence at any time the Plan fails to meet the requirements of Code Section 409A and the regulations issued thereunder, as applicable to and with respect to such employee; provided, however, the amount of such distribution shall not exceed the amount required to be included in income as a result of the failure to comply with such requirements.

7.7   Payment Obligation. The obligation to distribute benefits under the Plan shall be borne primarily by the last Company to employ an employee in a position eligible to participate in the Plan immediately prior to the distribution. A Company's withdrawal from participation in the Plan shall not affect that Company's liability hereunder. If for any reason the primarily liable Company fails to make timely payment of a amount due under the Plan, Pacific Telesis Group shall be secondarily liable for the obligation. Notwithstanding the foregoing, Pacific Telesis Group shall be solely and exclusively responsible for providing the benefits accrued under the Plan by a Post-Separation AirTouch Employee.

SECTION 8. Administration: Claims and Review Procedures.

8.1     Plan Administrator. The Plan Administrator shall be the Executive Vice President, Human Resources Department of Pacific Telesis Group. The Plan Administrator shall have the authority to administer and interpret the Plan, including sole discretion to determine the rights of an employee or beneficiary under the Plan, and to authorize disbursements under the Plan, except for decisions expressly reserved by the Plan for the Committee or for the Board of Directors of Pacific Telesis Group or of an Affiliate.

8.2     Initial Claim Unnecessary. No claim for benefits shall be required for commencement of distributions in accordance with an employee's election under Sections 7.2 and 7.3 of the Plan. The obligation of a Company to make distributions under the Plan shall not be affected by any action or inaction (on the part of an employee, his beneficiaries or any Company) with respect to amounts owed, including but not limited to the failure to make timely demand, the granting of extensions of time or other indulgences, the failure to make timely payment or the failure to give notices other than those prescribed in Section 8.3.

8.3     Review of Adverse Decisions. An employee or beneficiary who disagrees with a decision by the Plan Administrator relating to the payment of benefits under the Plan may submit a claim requesting Plan benefits in writing to the Committee, which shall respond in writing. A claim shall be deemed denied unless the response is sent within 90 days (or within 180 days, if the Committee extends the time to respond by notifying the claimant in writing of the special circumstances requiring an extension and the date by which the response is expected). If the claim is denied in whole or part, the response shall state (A) the specific reasons, making specific reference to pertinent provisions of the Plan; (B) at additional information, if any, would help perfect the claim for benefits; and (C) what steps the claimant must take to submit the claim for review: Within 60 days after the date of a denial, a claimant may file a written request for the Pacific Telesis Group Board of Directors to review the denial. Notwithstanding Section 8.2 of the Plan, such request for review must be made in a timely manner for the purpose of seeking any further review of a decision or determining any entitlement to a benefit under the Plan. The Board of Directors shall notify the claimant in writing of the review decision, specifying the reasons for the decision and the Plan provisions on which it is based. A claim shall be deemed denied unless the decision on appeal is sent within 60 days (or within 120 days, if the Board extends the time to respond by notifying the claimant in writing). The Plan Administrator, Committee and Board shall retain such right, authority and discretion as are provided or not expressly limited in section 503 of ERISA and the regulations thereunder and, if the Committee denies a claim upon review, the claimant shall have such further rights of review as are provided therein.

SECTION 9. Amendment and Termination.

The Pacific Telesis Group Board of Directors may at any time make changes in the Plan or terminate the Plan, but such changes or termination shall have prospective effect only and shall not adversely affect the rights of any employee, without his or her consent, to any benefit under the Plan to which such employee was entitled prior to the effective date of such change or termination. Any termination of the Plan shall not terminate the deferral of Compensation previously deferred into a Plan account, but may prevent the deferral of Compensation not yet earned and the crediting of Company Match thereon, notwithstanding the employee's prior election to defer such Compensation. Changes in the interest rate applied to account balances which are made by the Committee in accordance with Section 6.2 of the Plan shall not be deemed to be Plan amendments, notwithstanding that they apply to Compensation previously earned and deferred. The Executive Vice President, Human Resources Department of Pacific Telesis Group, with the approval of the Executive Vice President and General Counsel of Pacific Telesis Group, shall be authorized to make minor or administrative changes to the Plan.

SECTION 10. Definitions.

For purposes of this Plan, the following words shall have the meaning so defined unless the context clearly indicates otherwise:

10.1    "Affiliate" as the term relates to Pacific Telesis Group or to AirTouch Communications (formerly "PacTel Corporation"), means a subsidiary of or other entity that controls, is controlled by, or is under common control with Pacific Telesis Group or AirTouch Communications, as the case may be. As used herein, "control" means the possession, directly or indirectly, of the power to direct or use the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

10.2    "AirTouch Group" means AirTouch Communications (or its successor) and its Affiliates immediately after the total and complete separation of AirTouch Communications from Pacific Telesis Group.

10.3     "Committee" shall mean the Compensation and Personnel Committee of the Board of Directors of Pacific Telesis Group.

10.4     "Company" shall mean Pacific Telesis Group, Pacific Bell or any other corporation which is an Affiliate of Pacific Telesis Group. Prior to April 1, 1994, Company also included PacTel Corporation (now "AirTouch Communications") and any other corporation; which was an Affiliate of PacTel Corporation.

10.5     "Effective Date" means January 1, 1985, the effective date of the Plan.

10.6      "Officer' means an officer of a Company, as determined by the Plan

Administrator, but the term shall not include Assistant Secretary, Assistant Treasurer, Assistant Comptroller or any other assistant officer.

10.7      "Post-Separation AirTouch Employee" means an employee who, immediately after the total and complete separation of PacTel Corporation from Pacific Telesis Group, was employed by a member of the AirTouch Group.

10.8      "Savings Plan" means the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees. Prior to April 1, 1994, "Savings Plan" also means the PacTel Corporation Retirement Plan (for employees who were eligible to participate therein).

10.9       "Savings Plan Salary" means "Salary" as defined in the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees and, prior to April 1, 1994, "Compensation" as defined in the PacTel Corporation Retirement Plan, whichever is applicable to the employee, without reduction for deferrals of salary under this Plan and without regard to the limit on compensation under section 401(a)(17) of the Code. If an eligible employee is employed by a participating Company for only a portion of a calendar year or is on a leave of absence for a portion of a calendar year, the employee's Savings Plan Salary is prorated to reflect only the period during which the employee was actively employed by a participating Company.

10.10      "Separation" means retirement or termination from all employment with Pacific Telesis Group or its Affiliates. With respect to a Post-Separation AirTouch Employee, "Separation" means retirement or termination from all employment with the AirTouch Group without employment by Pacific Telesis Group or its Affiliates.

EX-10.BB

Exhibit 10-bb

AT&T INC.

STOCK PURCHASE AND DEFERRAL PLAN

Adopted November 19, 2004

As amended through November 20, 2008

Article 1 - Statement of Purpose

The purpose of the Stock Purchase and Deferral Plan (“Plan”) is to increase stock ownership by, and to provide savings opportunities to, a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.

Article 2 - Definitions

For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:

Annual Bonus.  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.

           Base Compensation.  The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:

(a)   base salary;

(b)  lump sum payments in lieu of a base salary increase;  and

(c)  Annual Bonus.

Payments by an Employer under a disability plan made in lieu of any compensation described above, shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.

Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of “Base Compensation” provided, however, any such addition or subtraction shall be effective only with respect to the next period in which a Participant may make an election to establish a Share Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions or Matching Contributions in such later Plan Year.

Business Day.  Any day during regular business hours that AT&T is open for business.

Change in Control.  With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.

Chief Executive Officer.  The Chief Executive Officer of AT&T Inc.

Code.  References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.

Committee.  The Human Resources Committee of the Board of Directors of AT&T Inc.

Disability. Absence of an Employee from work with an Employer under the relevant Employer's disability plan.

Eligible Employee.  An Employee who:

(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);

(b) is, as determined by AT&T, a member of Employer's “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level Employee; and

(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.

Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.

In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.

           Employee.  Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.

 Employee Contributions.  Amounts credited to a Share Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.

 Employer.  AT&T Inc. or any of its Subsidiaries.

 Exercise Price.  The price per share of Stock purchasable under an Option.

            Fair Market Value or FMV.  In valuing Stock or any other item subject to valuation under this Plan, the Committee may use such index or measurement as the Committee may reasonably determine from time to time, and such index or measurement shall be the FMV of such Stock or other item, provided that for purposes of determining the Exercise Price of Stock Options, the Committee shall use a value consistent with the requirements of Section 409A.  In the absence of such action by the Committee, FMV means, with respect to Stock, the closing price on the New York Stock Exchange (“NYSE”) of the Stock on the relevant date, or if on such date the Stock is not traded on the NYSE, then the closing price on the immediately preceding date such Stock is so traded.

 Leave of Absence.  Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being "disabled" (within the meaning of Treasury Regulation §1.409A-3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.

 Officer Level Employee.  Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.

 Options or Stock Options.  Options to purchase Stock issued pursuant to this Plan.

 Participant.  An Employee or former Employee who participates in this Plan.

 Plan Year.  Each of the following shall be a Plan Year:  the period January 1, 2005, through January 15, 2006; the period January 16, 2006, through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.

 Retirement or Retire.  Termination of Employment on or after the earlier of the following dates, unless otherwise provided by the Committee:  (a) for Officer Level Employees, the date the Participant is at least age 55 and has five (5) years of Net Credited Service; or (b) the date the Participant has attained one of the following combinations of age and Net Credited Service:

Net Credited Service Age

10 Years of 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 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.

Shares or Share Units.  An accounting entry representing the right to receive an equivalent number of shares of Stock.

Share Deferral Account or Account.   The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan, with each Account relating to a Plan Year.  For each Plan Year after 2008, there shall be (1) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Base Compensation (excluding Annual Bonus) and related Matching Share Units and (2) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Short Term Incentive Award and/or Annual Bonus and any related Matching Share Units.  Earnings on Share Units and Matching Share Units shall accrue to the respective Share Deferral Accounts where they are earned.

Short Term Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan.  It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.

Specified Employee.  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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

Stock.  The common stock of AT&T Inc.

Subsidiary.  Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.

Termination of Employment. References herein to “Termination of Employment," “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers. For purposes of this Plan, a Termination of Employment with respect to an Employer shall be deemed to also occur when such Employer incurs a Change in Control.

Article 3 - Administration of the Plan

3.1           The Committee.

Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and determine all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility, entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, 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.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.

3.2           Authorized Shares of Stock.

(a) Except as provided below, the number of shares of Stock which may be distributed pursuant to the Plan, exclusive of Article 8 - Options, is 21,000,000.  The number of shares of Stock which may be issued pursuant to the exercise of Stock Options is 34,000,000 (together with an equal number of Stock Options).  Only the actual number of shares of Stock that are issued (shares issued would not include, for example, any reduction in shares to be issued as a result of tax withholding in connection with a distribution of Stock, exercise of options, or otherwise) shall be counted against the authorized number of shares of Stock. To the extent an Option issued under this Plan is canceled, terminates, expires, or lapses for any reason, such Option shall again be available for issuance under the Plan.  Conversions of Stock awards into Share Units and their eventual distribution (excluding the effects of any dividends on such Share Units) shall count only against the limits of the plans from which they originated and shall not be applied against the limits in this Plan.  To the extent Share Units are credited through deferrals of Stock or Employee Contributions where the distribution of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, and such deductible Share Units are available for distribution, such Share Units shall be distributed first.

(b)  In the event the Committee determines that continuing the issuance of Share Units under the Plan or Stock Options under the Plan may cause the number of shares of Stock that are to be distributed under this Plan or the number of Stock Options (as determined pursuant to subsection (a), above) to exceed the number of authorized shares of Stock, then in lieu of distributing Stock, the Committee may provide after such determination and only with respect to Share Units that have not theretofore been credited to a Share Deferral Account, that such Share Units may be settled in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the date of the distribution of such Share Unit.  The Committee may also provide after such determination and only with respect to Stock Options that have not theretofore been issued that such Stock Options may only be settled on a Net-Settled basis in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the day of exercise.

(c) In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, share combination, or other change in the corporate structure of AT&T affecting the shares of Stock (including a conversion of Stock into cash or other property), such adjustment shall be made to the number and class of the shares of Stock 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 of Stock subject to outstanding Options granted under the Plan, and/or in the number of outstanding Options and Share Units, or such other adjustment determined by the Committee, in each case as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.

3.3           Claims Procedure.

Subject to the authority of the Committee over the Plan, AT&T shall appoint a Claims Board to adjudicate claims brought by or in respect to Participants and their beneficiaries relating to benefits under the Plan.  A Participant may apply in writing to the Claims Board to make a claim under this Plan.  The Claims Board shall provide written notice within 90 days to a Participant whose claim hereunder has been denied, setting forth reasons for such denial or explaining that an extension of the time for processing the claim is necessary, written in a manner calculated to be understood by such person.  After receipt of such notice, or expiration of 90 days without any response from the Claims Board, the Participant may appeal the decision in writing to the Senior Executive Vice President of AT&T in charge of Human Resources, or to the person’s successor, within 90 days, except that if the Participant is an Insider, as that term is used in the 2006 Incentive Plan, then the Participant's appeal shall be to the Committee.  The Participant shall receive written notice within 60 days of the resolution of the appeal, and if denied, setting forth reasons for the denial or explaining that an extension of time for processing the appeal is necessary, written in a manner calculated to be understood by such person.  If no notice of the decision on the Participant’s appeal is furnished within the required time frame, the appeal will be deemed denied. The Participant shall receive a full and fair review of the decision denying the claim in accordance with the requirements of ERISA.

All interpretations, determinations and decisions of the Claims Board with respect to any claim, including without limitation the appeal of any claim, shall be made by the Claims Board, in its sole discretion, based on the Plan and comments, documents, records, and other information presented to it, and shall be final, conclusive and binding.

The claims procedures set forth in this section are intended to comply with United States Department of Labor Regulation § 2560.503-1 and should be construed in accordance with such regulation.  In no event shall it be interpreted as expanding the rights of claimants beyond what is required by United States Department of Labor Regulation § 2560.503-1.

Article 4 - Contributions

4.1           Election to Make Contributions.

(a)The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:

(1)  From 6% to 30% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  The Employee Contributions shall be used to acquire Share Units to be credited to the Share Deferral Account for that Plan Year.

(2)  Up to 95% (in whole percentage increments or limited to the target amount) of a Short Term Incentive Award, or from 6% to 30% (in whole percentage increments) of Annual Bonus, in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009. An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of, or in partial or full replacement for, the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.

(b)  The Committee may permit an Eligible Employee to make an election to purchase Share Units under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time, provided that any such election is made in accordance with Section 409A of the Code.  In no event shall an acquisition of Share Units pursuant to this paragraph (b) or pursuant to the conversion of a right to receive Stock into Share Units (such as through a distribution of Stock under the 2001 Incentive Plan) result in the crediting of an AT&T Matching Contribution or Options.

(c) Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.

(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to purchase Share Units in the Plan at any time; provided, however, that only the Committee may take such action with respect to persons who are Officer Level Employees.

(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)-1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

4.2           Purchase of Share Units.

(a) Employee Contributions (as well as any corresponding AT&T Matching Contributions) shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.  In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.

(b)  The number of Share Units purchased by a Participant during a calendar month shall be found by dividing the Participant's Employee Contributions during the month by the FMV of a share of Stock on the last day of such month.

(c)  A contribution to the Plan shall be made when the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.   The Committee may modify or change this paragraph (c) from time to time.

4.3           Reinvestment of Dividends.

In the month containing a record date for a cash dividend on Stock, each Share Deferral Account shall be credited with that number of Share Units equal to the declared dividend per share of Stock, multiplied by the number of Share Units held in such Share Deferral Account as of such record date, and dividing the product by the FMV of a share of Stock on the last day of such month.

Article 5 - AT&T Matching Contributions

5.1           AT&T Match.

(a) Each month AT&T shall credit the Participant's relevant Share Deferral Account with  the number of “Matching Share Units” found by taking eighty percent (80%) of the Participant's Employee Contributions from Base Compensation made to this Plan and to the Cash Deferral Plan during the month with respect to the first six percent (6%) of the Participant’s monthly Match Eligible Compensation (as defined below) and dividing the resulting figure by the FMV of the Stock on the last day of such month. The monthly “Match Eligible Compensation” shall be the sum of:

(1) the monthly Employee Contributions from Base Compensation to this Plan and the Cash Deferral Plan (in the aggregate, “Deferred BC”), plus

(2) the amount of the Participant’s monthly Base Compensation in excess of the Deferred BC (“Non-Deferred BC”) but only to the extent such monthly Non-Deferred BC, when aggregated with the Participant’s total Non-Deferred BC for prior months in such Plan Year, as determined by the relevant Employer, exceeds the limit in effect under Section 401(a)(17) of the Code applicable with respect to such Plan Year.

The foregoing formula shall apply regardless of whether or not the Participant makes contributions to a 401(k) plan.

A Participant may receive Matching Share Units in a Share Deferral Account for a particular form of compensation only if the Participant is then making contributions to the same Share Deferral Account; provided, however, this condition shall not apply for purposes of determining under Section 5.1(a)(2) whether the limit described therein has been reached.

As provided in the definition of Share Deferral Account, Matching Share Units shall be credited to the respective Share Deferral Account that is related to the same form of Employee Contributions (either (1) Base Compensation excluding Annual Bonus or (2) Annual Bonus).

(b) In the sole discretion of the Committee, in the event the Committee reduces the number of Options that AT&T issues for each Share Unit purchased, the Committee may provide for the contribution of a Bonus Matching Contribution on such terms as the Committee determines.  Such Bonus Matching Contribution may not exceed 20% of the Participant’s Employee Contributions for the month.  The Bonus Matching Contribution shall be subject to such terms and conditions as required by the Committee and, unless otherwise provided by the Committee, to the same vesting and distribution requirements as AT&T Matching Contributions.

5.2           Distribution of Share Units Acquired with Matching Contributions.

A Participant's Matching Share Units shall be distributed in a lump sum, in accordance with the Plan's distribution provisions, in the earlier of: (a) the calendar year following the calendar year of the Termination of Employment of the Participant, or (b) the calendar year in which the Participant reaches age 55, in each case only with respect to Matching Share Units relating to Share Deferral Accounts for Plan Years before such distribution calendar year.

Matching Share Units acquired as part of a Share Deferral Account that commences in or after the calendar year the Employee reaches age 55 or after the calendar year in which the Employee Terminates Employment will be distributed in the same manner and time as other Share Units in such Share Deferral Account.

Notwithstanding anything to the contrary in this section, Matching Share Units acquired in 2008 and later shall be distributed at the same time as other Share Units (including those acquired with Employee Contributions) in the same Share Deferral Account.

Article 6 - Distributions

6.1 Distributions of Share Units.

(a)  Initial Election with Respect to a Share Deferral Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Share Deferral Account, the Participant shall also elect the calendar year the Share Deferral Account shall be distributed, which may be from the first through fifth calendar years after the Plan Year the Account commenced (except as otherwise provided in this Plan with respect to Matching Share Units).  For example, if an Account commenced in 2005, the Participant may elect to commence the distribution in any calendar year from and including 2006 to and including 2010.  If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Share Deferral Account distributed in a single installment in the first calendar year after the calendar year the Account commenced.  However, for purposes of Initial Elections with respect to Plan Years prior to 2008 only, in the event the Participant Terminates Employment, the distribution of the Share Deferral Unit shall occur in the calendar year following the calendar year of the Participant’s Termination of Employment unless the Employee has made an irrevocable election under (b), below.

(b)  Election to Delay a Scheduled Distribution.  A Participant may elect to defer a scheduled distribution of a Share Deferral Account for five (5) additional calendar years beyond that previously elected (except as otherwise provided in this Plan with respect to Matching Share Units).  Unless otherwise provided by the Committee, the election to defer the distribution must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant scheduled distribution.  To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.  For example, an election to defer a scheduled distribution in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  An election to defer the distribution of a Share Deferral Account may not be made in the same calendar year that the election to establish the Share Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) an election to defer the distribution of a Share Deferral Account must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.

(c)  A Participant’s Share Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable as determined by AT&T) of the calendar year elected by the Participant for that Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.

6.2           Death of the Participant.

In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Share Deferral Accounts shall be distributed to the Participant's beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.

6.3           Unforeseeable Emergency Distribution.

If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Share Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Share Deferral Accounts (other than Matching Share Units), on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:

(a)           “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.

(b)           The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the lesser of (i) the FMV of the Participant's vested Share Deferral Account, calculated as the date on which the amount becomes payable, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, and (ii) the amount reasonably necessary, as determined by the AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation §1.409A-6.

(c)           Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

6.4           Ineligible Participant.

Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.

6.5 Distribution Process.

A Share Deferral Account shall be distributed under this Plan by taking the number of Share Units comprising the Account to be distributed and converting them into an equal number of shares of Stock.  (Once distributed, a Share Unit shall be canceled.)

Article 7 - Transition Provisions

7.1 Stockholder Approval

The Plan was approved by Stockholders at the 2005 Annual Meeting of Stockholders.

7.2           2005 Share Deferral Accounts.

Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Share Deferral Account for the (i) contribution of Base Compensation and/or Short Term Incentive Awards paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Share Deferral Account; and/or (ii) the conversion of a distribution of Stock that would be made during the same Plan Year pursuant to the 2001 Incentive Plan into an equal number of Share Units, so long as such conversion would not cause the recognition of income for Federal income tax purposes in respect of such distribution of Stock prior to distribution of Share Units under this Plan.

7.3           2007 Amendments.

(a) Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008. except for amendments to this Article 7, which shall be effective upon adoption.  Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Cash Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute Stock that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan. In addition, all unvested but not forfeited Matching Share Units shall vest on November 15, 2007.  Matching Shares that have been forfeited shall not be reinstated, and no amendment to this Plan shall be interpreted as reinstating such forfeitures.

 (b)  Not withstanding anything to the contrary in this Plan, a Participant who as of December 29, 2006, was eligible for an additional payment pursuant to Section 4A of the BellSouth Corporation Executive Incentive Award Deferral Plan shall not, with respect to the 2008 Plan Year, receive Matching Share Units on Base Compensation that exceeds $230,000.

7.4           2008 Amendments.

For Plan Years prior to 2009, Participants who, at the time of the determination of their eligibility to participate in an Account, are paid through a “sales plan” involving the use of commissions may elect to contribute up to 40% of Base Compensation.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.

Article 8 - Options

8.1          Grants.

Options may be issued in definitive form or recorded on the books and records of AT&T for the account of the Participant, at the discretion of AT&T.  If AT&T elects not to issue the Options in definitive form, they shall be deemed issued, and the Participants shall have all rights incident thereto as if they were issued on the dates provided herein, without further action on the part of AT&T or the Participant.  In addition to the terms herein, all Options shall be subject to such additional provisions and limitations as provided in any Administrative Procedures adopted by the Committee prior to the issuance of such Options.  The number of Options issued to a Participant shall be reflected on the Participant's annual statement of account.

8.2           Term of Options.

The Options may only be exercised:  (a) after the earlier of (i) the expiration of one (1) year from date of issue or (ii) the Participant's Termination of Employment, and (b) no later than the tenth (10th) anniversary of their issue; and Options shall be subject to earlier termination as provided herein.

8.3           Exercise Price.

The Exercise Price of an Option shall be the FMV of the Stock on the date of issuance of the Option, and an Option may not be repriced.

8.4           Issuance of Options.

(a)  For each Share Deferral Account established by a Participant:

(1)  on June 15 of the Plan Year for the Share Deferral Account, the Participant shall receive two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding January through May period with Employee Contributions of Base Compensation and/or Short Term Incentive Award.  A fractional number of Options shall be rounded up to the next whole number.

(2)  on the February 15 immediately following the Plan Year for the Share Deferral Account, a Participant shall receive:

(i)two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding June through the remainder of the relevant Plan Year with Employee Contributions of Base Compensation and/or Short Term Incentive Award; and

(ii)           two (2) Options for each Share Unit acquired prior to such date by the Participant with dividend equivalents that were derived, directly or indirectly (such as dividend equivalents paid on Share Units acquired with dividend equivalents), from Share Units acquired with Employee Contributions as part of such Share Deferral Account.

(b) A fractional number of Options shall be rounded up to the next whole number.

(c) If Stock is not traded on the NYSE on any of the foregoing Option issuance dates, then the Options shall not be issued until the next such day on which Stock is so traded.

(d) If a Participant Terminates Employment other than (i) while Retirement eligible or (ii) because of death or Disability, no further Options shall be issued to or with respect to such Participant.  In the event of re-Employment following a Termination of Employment, the preceding sentence shall not apply to those Options resulting from participation in the Plan after such re-Employment until a subsequent Termination of Employment.

(e) No more than 400,000 Options shall be issued to any individual under this Plan during a calendar year.  No Share Unit may be counted more than once for the issuance of Options.

(f) The Committee may, in its sole discretion, at any time, increase or lower the number of Options that are to be issued for each Share Unit acquired, not to exceed two (2) Options per Share Unit purchased.  However, if the Committee lowers the number of Options, then such change shall only be effective with respect to the next Share Deferral Account a Participant may elect to establish.

(g) The Committee may also, at any time and in any manner, limit the number of Options which may be acquired as a result of the Short Term Incentive Award being contributed to the Plan.  Further, except as otherwise provided by the Committee, in determining the number of Options to be issued to a Participant with respect to a Participant's contribution of a Short Term Incentive Award to the Plan and subsequent crediting of Share Units, Options may be issued only with respect to an amount which does not exceed the target amount of such award (or such other portion of the award as may be determined by the Committee).  Where a Participant’s election to contribute a Short Term Incentive Award to the Plan becomes applicable to Annual Bonus, the above limitation on options shall apply to the contribution of Annual Bonus as though it were a Short Term Incentive Award.

(h) No options shall be issued to or in respect of a Participant for a particular issuance, unless at least ten (10) Options will be issued to that Participant.

8.5           Exercise and Payment of Options.

Options shall be exercised by providing notice to the designated agent selected by AT&T (if no such agent has been designated, then to AT&T), in the manner and form determined by AT&T, which notice shall be irrevocable, setting forth the exact number of shares of Stock with respect to which the Option is being exercised and including with such notice payment of the Exercise Price.  When Options have been transferred, AT&T 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 of Stock.

Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading or as otherwise provided or limited by AT&T.  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.

The Exercise Price shall be paid in full at the time of exercise.  No Stock shall be issued or transferred until full payment has been received therefore.

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 AT&T may impose from time to time, and further subject to suspension or termination of this provision by AT&T at any time, by:

(i) delivery of Stock 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 Stock, at the time of exercise of the Option, the Participant must establish to the satisfaction of AT&T that the Stock tendered to AT&T must have been held by the Participant for a minimum of six (6) months preceding the tender; or

(ii) if AT&T has designated a stockbroker to act as AT&T's agent to process Option exercises, issuance of an exercise notice to such stockbroker together with instructions irrevocably instructing the stockbroker:  (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a sell order) a sufficient portion of the Stock 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 AT&T.  In the event the stockbroker sells any Stock on behalf of a Participant, the stockbroker shall be acting solely as the agent of the Participant, and AT&T disclaims any responsibility for the actions of the stockbroker in making any such sales.  No Stock shall be issued until the settlement date and until the proceeds (equal to the Exercise Price and tax withholding) are paid to AT&T.

If payment is made by the delivery of Stock, the value of the Stock delivered shall be equal to the FMV of the Stock on the day preceding the date of exercise of the Option.

Restricted Stock may not be used to pay the Option exercise price.

8.6           Restrictions on Exercise and Transfer.

No Option shall be transferable except: (a) upon the death of a Participant in accordance with AT&T's Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) in the case of any holder after the Participant's death, only by will or by the laws of descent and distribution.  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, 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.  In each such case the Option holder shall be considered a Participant for the limited purpose of exercising such Options.

8.7           Termination of Employment.

(a)  Not Retirement Eligible.  Unless otherwise provided by the Committee, if a Participant Terminates Employment while not Retirement eligible, a Participant's Options may be exercised, to the extent then exercisable:

(i) if such Termination of Employment is by reason of death or Disability, then for a period of three (3) years from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter; or

(ii) if such Termination of Employment is for any other reason, then for a period of one (1) year from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter.

(b)  Retirement Eligible.  Unless otherwise provided by the Committee, if a Participant Terminates Employment while Retirement eligible, the Participant's Option may be exercised, to the extent then exercisable:  (i) for a period of five (5) years from the date of Retirement or (ii) until the expiration of the stated term of such Option, whichever period is shorter.

(c) Re-Employment of a Participant after a Termination of Employment shall have no effect on the periods during which Options resulting from the prior Employment may be exercised.  For example, if the Option exercise period has been shortened because of the prior Termination of Employment, it shall not be extended because of the re-Employment.

(d)  Notwithstanding any other definition of Termination of Employment under this Plan, for purposes of this Article 8 – Options only, a Termination of Employment shall mean the cessation of the Employee being employed by any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest, including but not limited to where AT&T ceases to hold such interest in the employing company.  In addition, the definition of Retirement for purposes of this Article 8 shall use the immediately foregoing definition of Termination of Employment in  lieu of any other definition.

Article 9 - Discontinuation, Termination, Amendment.

9.1           AT&T's Right to Discontinue Offering Share Units.

The Committee may at any time discontinue offerings of Share Units under the Plan.  Any such discontinuance shall have no effect upon existing Share Units or the terms or provisions of this Plan as applicable to such Share Units.

9.2           AT&T's Right to Terminate Plan.

The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.

After termination of the Plan, Participants shall continue to earn dividend equivalents in the form of Share Units on undistributed Share Units and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant's elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.

9.3 Amendment.

The Committee may at any time amend the Plan in whole or in part including but not limited to changing the formulas for determining the amount of AT&T Matching Contributions under Article 5 or decreasing the number of Options to be issued under Article 8; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, a Share Deferral Account of the Participant, other than as provided elsewhere in this section.   For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which Stock may be distributed to a Participant, any reduction in the Participant's number of vested Share Units or Options, or an increase in the Exercise Price or decrease in the term of an Option.   Any such consent may be in a writing, telecopy, or e-mail or in another electronic format. An election to acquire Share Units with Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.

Notwithstanding anything to the contrary contained in this section of the Plan, the Committee may modify this Plan with respect to any person subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) to place additional restrictions on the exercise of any Option or the transfer of any Stock not yet issued under the Plan.

The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA. To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.

Article 10 – Miscellaneous.

10.1        Tax Withholding.

Upon distribution of Stock, including but not limited to, shares of Stock issued upon the exercise of an Option, AT&T shall withhold shares of Stock sufficient in value, using the FMV on the date determined by AT&T to be used to value the Stock for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution.

Any fractional share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of AT&T, 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 8.5, hereof, 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 FMV of the Stock.

10.2        Elections and Notices.

Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan 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 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.  Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Share Deferral Accounts shall become irrevocable at the close of business on the last day to make such election. AT&T may limit the time an election may be made in advance of any deadline.

If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for 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.

By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by e-mail, by e-mail attachment, or by notice by e-mail of electronic delivery through AT&T's Internet Web site or by other electronic means.

10.3        Unsecured General Creditor.

Participants and their beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of any Employer.  No assets of any Employer shall be held under any trust for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of any Employer under this Plan.  Any and all of each Employer's assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to distribute shares of Stock corresponding to Share Units and Options, under the Plan.

10.4        Non-Assignability.

Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, shares of Stock corresponding to Share Units under the Plan, if any, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the Stock distributable shall, prior to actual distribution, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

10.5        Employment Not Guaranteed.

Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any employee any right to be retained in the employ of an Employer or to serve as a director.

10.6        Errors.

At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.

10.7 Captions.

The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.

10.8        Governing Law.

To the extent not preempted by Federal law, the Plan, and all benefits 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.

Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under this Plan, 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 benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits 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 Dallas 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.

10.9        Plan to Comply with Section 409A.

In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.

10.10      Successors and Assigns.

This Plan shall be binding upon AT&T and its successors and assigns.

EX-10.CC

Exhibit 10-cc

AT&T INC.

CASH DEFERRAL PLAN

Adopted November 19, 2004

As amended through November 20, 2008

Article 1 - Statement of Purpose

The purpose of the Cash Deferral Plan (“Plan”) is to provide savings opportunities to a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.

Article 2 - Definitions

For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:

Annual Bonus.  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.

               Base Compensation.  The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:

(a)   base salary;

(b)  lump sum payments in lieu of a base salary increase;  and

(c) Annual Bonus.

Payments by an Employer under a disability plan made in lieu of any compensation described  above, shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.

Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of  “Base Compensation” provided, however, any such addition or subtraction shall  be effective only with respect to the next period in which a Participant may make an election to establish a Cash Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions in the later Plan Year.

Business Day.  Any day during regular business hours that AT&T is open for business.

Cash Deferral Account or Account The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan with each account relating to a Plan Year.  For each Plan Year after 2008, there shall be a separate Cash Deferral Account for Base Compensation (excluding Annual Bonus) and a separate Cash Deferral Account for the Short Term Incentive Award and/or Annual Bonus.  Earnings on each of Employee Contributions shall accrue to the respective Cash Deferral Accounts where they are earned

Change in Control.  With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.

Chief Executive Officer.  The Chief Executive Officer of AT&T Inc.

Code.  References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.

Committee.  The Human Resources Committee of the Board of Directors of AT&T Inc.

Disability. Absence of an Employee from work with an Employer under the relevant Employer's disability plan.

Eligible Employee.  An Employee who:

(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);

(b) is, as determined by AT&T, a member of Employer's “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level Employee; and

(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.

Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.

In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.

               Employee.  Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.

Employee Contributions.  Amounts credited to a Cash Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan

Employer.  AT&T Inc. or any of its Subsidiaries.

Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, the 2006 Incentive Plan or any successor plan, or any other award that the Committee specifically permits to be contributed to a Cash Deferral Account under this Plan (regardless of the purpose of the award).

Leave of Absence.  Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration  of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being "disabled" (within the meaning of Treasury Regulation §1.409A-3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment..

Officer Level Employee.  Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.

Participant.  An Employee or former Employee who participates in this Plan.

Plan Interest Rate.  An annual rate of interest equal to Moody’s Long-Term

Corporate Bond Yield Average for the September preceding the calendar year during which the interest rate will apply.   The Committee may choose another method of calculating the Plan Interest Rate, but such other method may only apply to Cash Deferral Units that Participants have not yet elected to establish.

Plan Year.  Each of the following shall be a Plan year:  the period from January 1, 2005 through January 15, 2006; the period January 16, 2006 through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.

Retirement or Retire.  Termination of Employment on or after the date the Participant has attained one of the following combinations of age and Net Credited Service:

Net Credited Service Age

10 Years of 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 the same existed on October1, 2008, 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.

Short Term Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar  plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan   It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.

Specified Employee.  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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

Subsidiary.  Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.

Termination of Employment. References herein to “Termination of Employment," “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers. For purposes of this Plan, a Termination of Employment with respect to an Employer shall be deemed to occur when such Employer incurs a Change in Control.

Article 3 - Administration of the Plan

3.1          The Committee.

Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility  entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, 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.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.

3.2          Claims Procedure.

Subject to the authority of the Committee over the Plan, AT&T shall appoint a Claims Board to adjudicate claims brought by or in respect to Participants and their beneficiaries relating to benefits under the Plan.  A Participant may apply in writing to the Claims Board to make a claim under this Plan.  The Claims Board shall provide written notice within 90 days to a Participant whose claim hereunder has been denied, setting forth reasons for such denial or explaining that an extension of the time for processing the claim is necessary, written in a manner calculated to be understood by such person.  After receipt of such notice, or expiration of 90 days without any response from the Claims Board, the Participant may appeal the decision in writing to the Senior Executive Vice President of AT&T in charge of Human Resources, or to the person’s successor, within 90 days, except that if the Participant is an Insider, as that term is used in the 2006 Incentive Plan, then the Participant's appeal shall be to the Committee.  The Participant shall receive written notice within 60 days of the resolution of the appeal, and if denied, setting forth reasons for the denial or explaining that an extension of time for processing the appeal is necessary, written in a manner calculated to be understood by such person.  If no notice of the decision on the Participant’s appeal is furnished within the required time frame, the appeal will be deemed denied.  The Participant shall receive a full and fair review of the decision denying the claim in accordance with the requirements of ERISA.

All interpretations, determinations and decisions of the Claims Board with respect to any claim, including without limitation the appeal of any claim, shall be made by the Claims Board, in its sole discretion, based on the Plan and comments, documents, records, and other information presented to it, and shall be final, conclusive and binding.

The claims procedures set forth in this section are intended to comply with United States Department of Labor Regulation § 2560.503-1 and should be construed in accordance with such regulation.  In no event shall it be interpreted as expanding the rights of claimants beyond what is required by United States Department of Labor Regulation § 2560.503-1.

Article 4 - Contributions

4.1           Election to Make Contributions.

(a)The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:

(1)  From 1% to 50% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  Employees who are below the level of Senior Manager, as shown on the records of AT&T at the time of the election, may contribute no more than 25% or such other amount as determined by AT&T.

(2)  Up to 95% (in whole percentage increments) of a Short Term Incentive Award, or up to 50% (in whole percentage increments) of Annual Bonus (25% for Employees who are below the level of Senior Manager), in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009.  An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of or in partial or full replacement for the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.

(b)  The Committee may permit an Eligible Employee to make an election to make other contributions under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time provided that any such election is made in accordance with Section 409A of the Code.)

(c) Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations, thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.

(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to make contributions to the Plan at any time; provided, however, only the Committee may take such action with respect to persons who are Officer Level Employees.

(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)-1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

(f)  To the extent a Participant makes contributions to the Plan where the payment of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, such contributions and earnings thereon shall be distributed first.

(g) With respect to a Plan Year, an Employee may elect to (1) make Employee Contributions of Base Compensation other than Annual Bonus to this Plan but only if the Employee elects to contribute at least 15% of Base Compensation other than Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan and/or (2) make Employee Contributions of Annual Bonus to this Plan but only if the Employee elects to contribute at least 15% of Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan.

4.2           Contributions to a Cash Deferral Account.

(a) Employee Contributions shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.   In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.

(b)  A Participant’s contributions shall be credited to the Participant’s Cash Deferral Account on the day the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.   Earnings on each Cash Deferral Account shall be recorded on Participant’s statements quarterly.  The Committee may modify or change this paragraph (b) from time to time.

4.3 Earnings on Cash Deferral Accounts.

During a calendar year, the Participant’s Cash Deferral Account shall accrue interest on amounts held by such Account at the Plan Interest Rate for such year, compounded quarterly on the last day of each quarter.  Interest will accrue on unpaid amounts in the Cash Deferral Account from the date credited to such Account.

Article 5 - Distributions

5.1 Distributions of Cash Deferral Accounts.

(a)  Initial Election with Respect to a Cash Deferred Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Cash Deferral Account, the Participant shall also elect the calendar year of the distribution of the Cash Deferral Account and the number of installments.   The Participant may elect either of the following:

(1) Specified Date Distribution.  That the distribution of the Cash Deferral Account commence in the calendar year specified by the Participant, but no later than the 5th calendar year after the Plan Year the Cash Deferral Account commenced, in up to Ten (10) installments.  However, for purposes of Initial Elections with respect to Plan Years prior to 2009 only, in the event the Participant Terminates Employment prior to the calendar year of the distribution, the Cash Deferral Account must commence distribution the calendar year following the calendar year of the Termination of Employment, with the same number of installments, unless the Employee has made an irrevocable election under (b), below.  For example, if the Participant elected a 2010 distribution with five (5) installments, but Terminated Employment in 2007, the Cash Deferral Account would commence distribution in 2008.

(2)  Retirement Distribution.  That the distribution of the Cash Deferral Account commence the calendar year following the calendar year of Retirement in up to (10) installments.  If the Participant Terminates Employment while not Retirement eligible, the distribution shall commence the calendar year following the calendar year of Termination of Employment, but shall be limited to five (5) installments.  This distribution alternative will not be available for Initial Elections made after 2007.

If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Cash Deferral Account distributed in a single installment in the first calendar year after the calendar year Employee Contributions were first made.

(b)  If an Employee elected a Specified Date Distribution for a Cash Deferral Account, the Employee may elect a new Specified Date Distribution commencement date but not a new number of installments; provided, however, Termination of Employment will not accelerate the distribution, unlike the initial deferral election.  Unless otherwise provided by the Committee, the election of a new commencement date must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant commencement date.   To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.   For example, an election to defer a scheduled distribution that would otherwise commence in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  The new distribution election must delay commencement of the distribution by five (5) years.  An election to create a new Specified Date Distribution and defer the commencement of the distribution of a Cash Deferral Account may not be made in the same calendar year the election to establish the Cash Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) such election to create a new Specified Date Distribution must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.

(c)  A Participant’s Cash Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable, as determined by AT&T) of the calendar year elected by the Participant for the Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.  The distributions shall continue annually on each successive March 10 (or such other date as determined by AT&T) until the number of installments elected by the Participant is reached.  In each installment, AT&T shall distribute to the Participant that portion of the Participant's Cash Deferral Account that is equal to the total dollar amount of the Participant's Account divided by the number of remaining installments.

(d)  The Committee may establish other distribution alternatives from time to time, but such alternatives may be offered no earlier than the next period in which a Participant may make an election to establish a Cash Deferral Account.

5.2          Death of the Participant.

In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Cash Deferral Accounts shall be distributed to the Participant's beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.

5.3           Unforeseeable Emergency Distribution.

If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Cash Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Cash Deferral Accounts , on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:

(a)           “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.

(b)           The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the amount reasonably necessary, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation § 1.409A-6.

(c)           Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

5.4           Ineligible Participant.

Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual's continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.

Article 6 - Transition Provisions

6.1           2005 Cash Deferral Accounts.

Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Cash Deferral Account for the contribution of Base Compensation and/or Incentive Awards that would otherwise be paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Cash Deferral Account.

6.2           2007 Amendments.

Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008, except for amendments to this Article 7, which shall be effective upon adoption.    Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Stock Purchase and Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute cash with respect to Performance Shares granted that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan.

6.3           2008 Amendments.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.

Article 7 - Discontinuation, Termination, Amendment.

7.1           AT&T's Right to Discontinue Offering Cash Deferral Accounts.

The Committee may at any time discontinue offerings of Cash Deferral Accounts or contributions under the Plan.  Any such discontinuance shall have no effect upon existing Cash Deferral Accounts or the terms or provisions of this Plan as applicable to such Accounts.

7.2           AT&T's Right to Terminate Plan.

The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.

After termination of the Plan, Participants shall continue to earn interest on undistributed amounts and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant's elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.

7.3 Amendment.

The Committee may at any time amend the Plan in whole or in part; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, any of the Cash Deferral Accounts of the Participant, other than as provided elsewhere in this section.  For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which the Participant’s Cash Deferral Account may be distributed to a Participant, any reduction in the amounts credited to the Participant's Cash Deferral Accounts, or any reduction in the Plan Interest Rate (other than as it may fluctuate in accordance with its terms) for Cash Deferral Accounts previously elected by the Participant.  Any such consent may be in a writing, telecopy, or e-mail or in another electronic format. An election to make Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.

The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA. To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.

Article 8 - Miscellaneous

8.1           Tax Withholding.

Upon a distribution from a Participant’s Cash Deferral Account, AT&T shall withhold sufficient amounts to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution.

8.2           Elections and Notices.

Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan 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 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.  Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Cash Deferral Accounts shall become irrevocable at the close of business on the last day to make such election. AT&T may limit the time an election may be made in advance of any deadline.

           If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for 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.

By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by e-mail, by e-mail attachment, or by notice by e-mail of electronic delivery through AT&T's Internet Web site or by other electronic means.

8.3           Unsecured General Creditor.

Participants and their beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of any Employer.  No assets of any Employer shall be held under any trust for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of any Employer under this Plan.  Any and all of each Employer's assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to make distributions under and in accordance with the terms of the Plan.

8.4           Non-Assignability.

Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, any Cash Deferral Account under the Plan, if any, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of  a distributable Cash Deferral Account shall, prior to actual distribution, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

8.5           Employment Not Guaranteed.

Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any employee any right to be retained in the employ of an Employer or to serve as a director.

8.6           Errors.

At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.

8.7 Captions.

The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.

8.8           Governing Law.

To the extent not preempted by Federal law, the Plan, and all benefits 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.

Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under this Plan, 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 benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits 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 Dallas 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.

8.9           Plan to Comply with Section 409A.

In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.

8.10        Successors and Assigns.

This Plan shall be binding upon AT&T and its successors and assigns.

EX-10.EE

Exhibit 10-ee

2005

SUPPLEMENTAL EMPLOYEE

RETIREMENT PLAN

Adopted:  November 19, 2004

             Effective:  November 18, 2005

Amended:  December 31, 2008

2005 SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

1   Purpose.

The purpose of the 2005 Supplemental Employee Retirement Plan (the “SERP” or the "Plan") is to provide Participants with retirement benefits to supplement benefits payable pursuant to qualified group pension plans sponsored by AT&T or an affiliate of AT&T.  The Plan is a successor to the AT&T Supplemental Retirement Income Plan (“SRIP”) that was effective January 1, 1984 and which was amended, effective December 31, 2004, to cease accruals so that the benefits payable under the SRIP shall be grandfathered and administered in accordance with the provisions of the SRIP in a manner that does not invoke Section 409A of the Code.

2   Definitions.

For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

Administrative Committee. "Administrative Committee" means a Committee, consisting of the SEVP-HR and two or more other members designated by the SEVP-HR, which shall administer the Plan.

Agreement.  "Agreement" means the written agreement entered into between AT&T by its SEVP-HR and a Participant prior to January 1, 2009 to carry out the Plan with respect to such Participant.  No Agreements are necessary for Participants who become eligible to participate in the Plan on or after January 1, 2009.

AT&T.  "AT&T" means AT&T Inc.

Beneficiary.  "Beneficiary" shall mean any beneficiary or beneficiaries designated by the Participant pursuant to the AT&T Rules for Employee Beneficiary Designations as may hereafter be amended from time-to-time ("Rules").  If a Participant fails to execute a Beneficiary designation form with respect to Plan benefits, his or her Beneficiary designation form with respect to his SRIP benefits shall apply with respect to his Plan benefits.  If a Participant fails to execute a Beneficiary designation form with respect to Plan benefits and with respect to SRIP benefits, the default provisions in the Rules shall apply.

CEO or Chief Executive Officer.  “CEO” or “Chief Executive Officer” shall mean the Chief Executive Officer of AT&T.

Disabled or Disability.  “Disabled” or "Disability" means the Participant’s (i) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Participant’s employer.  The Administrative Committee, in its complete and sole discretion, determines whether a Participant is Disabled.  The Administrative Committee may require that the Participant submit to an examination by a competent physician or medical clinic selected by the Administrative Committee.  On the basis of such medical evidence, the determination of the Administrative Committee as to whether or not a Participant is Disabled shall be conclusive.

Earnings.  "Earnings" means for a given calendar year the Participant's: (1) bonus earned as a short term award during the calendar year but not exceeding 200% of the target amount of such bonus (or such other portion of the bonus or target bonus as may be determined by the Human Resources Committee of the Board of AT&T), plus (2) base salary before reduction due to any contribution pursuant to any deferred compensation plan or agreement sponsored by AT&T or an AT&T affiliate, including but not limited to compensation deferred in accordance with Sections 401(k), 125, or 132(f) of the Internal Revenue Code.

Final Average Earnings.  "Final Average Earnings" means the average of the Participant's Monthly Earnings for the thirty-six (36) consecutive months out of the one hundred twenty (120) months next preceding the Participant's Termination of Employment which yields the highest average earnings.  If the Participant has fewer than thirty-six (36) months of employment, the average shall be taken over his or her period of employment.

GAAP Rate.  For a referenced calendar year, "GAAP Rate" means the interest rate used for valuing Plan liabilities on December 31 of the immediately preceding calendar year and for calculating periodic pension expense for the referenced calendar year, both for purposes of AT&T's financial statement reporting requirements.

Immediate Annuity Value of any AT&T or affiliate Qualified Pensions.  “Immediate Annuity Value of any AT&T or affiliate Qualified Pensions” shall have the meaning as provided in Attachment B.

Immediate Annuity Value of SRIP. "Immediate Annuity Value of SRIP" shall have the meaning as provided in Attachment C.

Immediate Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other than SERP. "Immediate Annuity Value of any AT&T or affiliate Non-Qualified Pensions other than SERP" shall have the meaning as provided in Attachment D.

Mid-Career Hire.  “Mid-Career Hire” means an individual whose Service Commencement Date is on or after the individual’s thirty-fifth (35th) birthday.

Monthly Earnings.  "Monthly Earnings" means one-twelfth (1/12) of Earnings.

Mortality Tables.  "Mortality Tables" means the mortality tables as defined by Code Section 417(e) for valuing minimum lump sum benefits payable from qualified pension plans for the referenced period.

Officer. "Officer" shall mean an individual who is designated as an officer level employee for compensation purposes on the records of AT&T.

Participant. "Participant" means:

(a)   Any person who, as of close of business on December 31, 2004, was employed by an AT&T affiliate and was a participant in the SRIP; or

(b)   Any person who was a participant in the SRIP, terminated employment in 2004 and receives Earnings in 2005; or

(c)   An Officer of AT&T or an AT&T affiliate who is designated by the CEO as eligible to participate in the Plan.

Notwithstanding the foregoing definition of Participant, the CEO, may, at any time and from time to time, exclude any person or group of persons from being deemed a “Participant” under this plan.

An individual’s participation in SERP shall commence as of his or her SERP Effective Date.

Retire or Retirement.  "Retire" or "Retirement" shall mean the Termination of Employment of a Participant for reasons other than death, on or after the earlier of the following dates:  (1) the date the Participant is Retirement Eligible or (2) the date the Participant has attained one of the following combinations of age and service at Termination of Employment:

Years of Service	Age
25 years or more	50 or older
30 years or more	Any age

Retirement Eligible.  "Retirement Eligible" or "Retirement Eligibility" means that a Participant has attained age 55 and has at least five (5) Years of Service.

Retirement Percent.  "Retirement Percent" means the percent specified in the Agreement with the Participant (if any) which establishes a Target Retirement Benefit (see Section 3.1) as a percentage of Final Average Earnings. For an individual who becomes a Participant on or after January 1, 2006, "Retirement Percent" means 50 percent unless otherwise provided by the Human Resources Committee of the Board of Directors of AT&T.

SERP Effective Date.  “SERP Effective Date” means the date of the written designation of the Participant’s eligibility to participate in SERP, signed by the CEO.

SEVP-HR.  “SEVP-HR” means AT&T’s Senior Executive Vice President responsible for Human Resources matters.

Supplemental Retirement Income Plan or SRIP.  "Supplemental Retirement Income Plan” or “SRIP" means the AT&T Inc. Supplemental Retirement Income Plan effective January 1, 1984.

Service Commencement Date.  “Service Commencement Date” means the Participant’s employment commencement date with AT&T or any AT&T affiliate, as such date may be adjusted from time-to-time in accordance with rules, policies and procedures generally applied by AT&T to adjust for breaks in service or other periods of time, as reflected in AT&T’s or an AT&T affiliate’s records, all as determined in the discretion of the SEVP-HR.

Service Factor.  "Service Factor" means, unless otherwise agreed in writing by the Participant and AT&T, either (a) a deduction of 1.43 percent, or .715 percent for Mid-Career Hires, multiplied by the number by which (i) thirty-five (or thirty in the case of a Participant who is an Officer) exceeds (ii) the number of Years of Service of the Participant, or (b) a credit of 0.715 percent multiplied by the number by which (i) the number of Years of Service of the Participant exceeds (ii) thirty-five (or thirty in the case of a Participant who is an Officer).  For purposes of the above computation, a deduction shall result in the Service Factor being subtracted from the Retirement Percent whereas a credit shall result in the Service Factor being added to the Retirement Percent.

Termination of Employment.  "Termination of Employment" means the ceasing of the Participant's employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily.  A Participant will be deemed to have realized a Termination of Employment at any time that a Participant and the Administrative Committee reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or an independent contractor) will be permanently reduced to a level that is less than fifty percent (50%) of the average level of bona fide services the Participant performed during the immediately preceding thirty-six (36) months (or the entire period the Participant has provided services if the Participant has been providing services to the AT&T controlled group of companies less than thirty-six (36) months).

Year.  A "Year" is a period of twelve (12) consecutive calendar months.

Years of Participation.  "Years of Participation" means the number of each complete Years beginning with the Participant’s SERP Effective Date through each annual anniversary of such date.

Years of Service.  "Years of Service" means the number of each complete Years of full-time service as an employee of AT&T or an AT&T affiliate beginning with the Participant’s Service Commencement Date through each annual anniversary of such date, including service prior to the adoption of this Plan. “Years of Service” shall also include a Participant’s Years of service that are recognized for purposes of the BellSouth Corporation Supplemental Employee Retirement Plan, but that are not otherwise included pursuant to the immediately preceding sentence.

3   Plan ("SERP") Benefits.

3.1     SERP Benefit Formula.

With respect to (1) a Participant who was a participant in the SRIP prior to January 1, 1998, or (2) a Participant who, prior to January 1, 1998, was an officer of a Pacific Telesis Group ("PTG") company and became a participant in the SRIP after January 1, 1998, the amount of such Participant’s SERP Benefit is calculated as follows:

Final Average Earnings

x Revised Retirement Percentage                                                                                                                     

= Target Retirement Benefit

 - Immediate Annuity Value of any AT&T or affiliate Qualified Pensions

 - Immediate Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other than the SERP

= Target Benefit

-  Age Discount                                                                                                                    

= Annual Value of Life with 10 Year Certain SERP Benefit payable as a result of Termination of Employment Before SRIP Reduction

- Immediate Annuity Value of SRIP                                                                                                                    

=  Annual Value of Life with 10 Year Certain SERP Benefit payable as a result of Termination of Employment

With respect to all other Participants, subject to the provisions of Attachment E, the amount of such Participant’s SERP Benefit is calculated as follows:

Final Average Earnings

x Revised Retirement Percentage                                                                                                                     

= Target Retirement Benefit

-  Age Discount

= Discounted Target Benefit

-  Immediate Annuity Value of any AT&T or affiliate Qualified Pensions

-  Immediate Annuity Value of SRIP

-  Immediate Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other that SERP

= Annual Value of Life with 10 Year Certain SERP Benefit payable as a result of Termination of Employment

Where in both of the above cases the following apply:

(a)      Revised Retirement Percentage = Retirement Percent + Service Factor

(b)      For purposes of determining the Service Factor, the Participant's actual Years of Service as of the date of Termination of Employment, to the day, shall be used.

(c)      For purposes of determining the Final Average Earnings, the Participant's Earnings history as of the date of Termination of Employment shall be used.

(d)      Age Discount means the Participant's SERP Benefit shall be decreased by five-tenths of one percent (.5%) for each month that the date of the Participant’s Termination of Employment precedes the date on which the Participant will attain age 60.

Notwithstanding the foregoing, if at the time of Termination of Employment the Participant is, or has been within the one year period immediately preceding the Participant's Termination of Employment, an Officer with 30 or more Years of Service such Participant's Age Discount shall be zero.

Except to true up for an actual short term award paid following Termination of Employment, there shall be no recalculation of the value of a Participant's SERP Benefit hereunder following a Participant's Termination of Employment.

 3.2.   Vesting.

Notwithstanding any other provision of this Plan, upon any Termination of Employment of the Participant for a reason other than death or Disability, AT&T shall have no obligation to the Participant under this Plan if the Participant has less than five (5) Years of Service or, for Participants who are informed, in writing, of their SERP eligibility on or after September 28, 2006, less than four (4) Years of Participation, at the time of Termination of Employment.

4   Election and Form of Distribution of SERP Benefits.

4.1      Normal Form.

The normal form of a Participant's benefits hereunder shall be a Life with 10-Year Certain Benefit as described in Section 4.2(a).

4.2      Election Alternatives.

Notwithstanding the normal form for distribution of a Participant’s SERP Benefits, a Participant may elect one of the following Benefit Payout Alternatives:

(a)     Life with a 10-Year Certain Benefit.  An annuity payable during the longer of (i) the life of the Participant or (ii) the 10-year period commencing on the Participant’s Termination of Employment and ending on the day next preceding the tenth anniversary of such date (the "Life With 10-Year Certain Benefit").  If a Participant who is receiving a Life with 10-Year Certain Benefit dies prior to the expiration of the 10-year period described in this Section 4.2(a), the Participant's Beneficiary shall be entitled to receive the remaining Life With 10-Year Certain Benefit installments which would have been paid to the Participant had the Participant survived for the entire such 10-year period.

(b)     Joint and 100% Survivor Benefit.  A joint and one hundred percent (100%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to one hundred percent (100%) of the amount payable during the Participant's life, for life (the "Joint and 100% Survivor Benefit").

(c)     Joint and 50% Survivor Benefit.  A joint and fifty percent (50%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to fifty percent (50%) of the amount payable during the Participant's life, for life (the "Joint and 50% Survivor Benefit").

(d)     Lump Sum Benefit.  A lump sum benefit, which shall apply only if the Participant has attained the age of fifty-five (55) years as of his or her Termination of Employment.  If a Participant elects a lump sum benefit but realizes a Termination of Employment prior to attaining age fifty-five (55), the Participant’s SERP Benefit shall be paid as provided in Section 4.2(a), 4.2(b) or 4.2(c), as elected or deemed elected by the Participant.

The Benefit Payout Alternatives described in Section 4.2(b), 4.2(c) and 4.2(d) shall be the actuarially determined equivalent (using the same reasonable actuarial assumptions and methods for valuing each Benefit Payout Alternative as determined by the SEVP-HR in his or her complete and sole discretion) of the Life With 10-Year Certain Benefit that is converted by such election.  The amount of a Participant's lump sum benefit shall be calculated as of the Participant's Termination of Employment by applying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment, but using the Participant’s age, Years of Service and other factors as of the Participant’s Termination of Employment.

4.3     Distribution Election.

(a)     Individual Who Is A Participant On or Before December 31, 2008.  An individual who was a Participant on or before December 31, 2008 may make an irrevocable election of a Benefit Payout Alternative before the earlier of December 31 of the year immediately preceding his or her Termination of Employment or December 31, 2008 by delivery of such election, in writing, telecopy, email or in another electronic format, pursuant to or as instructed by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion).

(b)     Individual Who Becomes A Participant After December 31, 2008.  An individual who becomes a Participant after December 31, 2008 may make an irrevocable election of a Benefit Payout Alternative no later than the thirtieth (30th) day immediately following the Participant’s SERP Effective Date by delivery of such election in writing, telecopy, email or in another electronic format, pursuant to or as instructed by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion).

(c)     Failure to Timely Make a Distribution Election.  If a Participant fails to make a timely election of a Benefit Payout Alternative as provided in Section 4.3(a) or 4.3(b), such Participant shall be deemed to have elected and such Participant's form of benefit shall be the Life With 10-Year Certain Benefit described in Section 4.2(a).

(d)     Death of or Divorce from Annuitant During Participant’s Lifetime.  Notwithstanding any other provision of this Plan to the contrary, in the event of the death of a designated annuitant during the life of the Participant, the Participant's election to have a Benefit Payout Alternative described in Section 4.2(b) or 4.2(c) shall, without any action by the Participant, be revoked, and the Participant’s benefit, or remaining benefit, under the Plan, as the case may be, shall be paid as provided in Section 4.2(a).  Any conversion of benefit from one form to another pursuant to the provisions of this paragraph shall use the same reasonable actuarial assumptions and methods for valuing each annuity form of benefit before and after the death of the designated annuitant and shall be subject to actuarial adjustment (as determined by the SEVP-HR in his or her complete and sole discretion) such that the Participant's new benefit is the actuarial equivalent of the Participant's remaining prior form of benefit.  Payments pursuant to Participant's new form of benefit shall be effective commencing with the first monthly payment for the month following the death of the annuitant.

Notwithstanding any other provision of this Plan to the contrary, in the event of the divorce or legal separation of the Participant, the Participant’s election to have a Benefit Payout Alternative described in Section 4.2(b) or 4.2(c), with a survivor annuity for the benefit of the Participant's former spouse as Beneficiary, shall, without any action by the Participant, be revoked, and the Participant's benefit, or remaining benefit, under the Plan, as the case may be, shall be paid as provided in Section 4.2(a) (using the same reasonable actuarial assumptions and methods for valuing each annuity form of benefit before and after the divorce or legal separation  and shall be subject to actuarial adjustment (as determined by the SEVP-HR in his or her complete and sole discretion).  In such event, the 10-Year period as described in Section 4.2(a) shall be the same 10-year period as if such form of benefit was the form of benefit originally selected and the expiration date of such period shall not be extended beyond its original expiration date.  Payments pursuant to Participant’s new form of benefit shall be effective commencing with the first monthly payment following notice from the Participant to the SEVP-HR after the divorce (or legal separation) becomes final.

(e)     Special Provisions for Lump Sum Benefit Election.  A Participant who elects a lump sum benefit under Section 4.2(d) must, contemporaneous with such Lump Sum Benefit election, elect a specific number of year(s), not to exceed twenty (20) years, following his or her Termination of Employment upon which the lump sum benefit (including any interest accrued thereon) shall be distributed; provided, however,

(i)     the Participant may not receive more than thirty percent (30%) of his or her lump sum benefit (excluding any interest thereon) until the third (3rd) anniversary of his or her Termination of Employment; provided, however, if the Participant is age sixty (60) or older as of his or her Termination of Employment, the Participant, if elected in his or her timely filed election of a Benefit Payout Alternative, may receive one hundred percent (100%) of his or her lump sum benefit upon the day that is six (6) months following his or her Termination of Employment if he or she agrees, in writing, substantially in the form provided in Attachment A, not to compete with an Employer Business within the meaning of Section 8.2 for a period of three (3) years from such Participant’s Termination of Employment and further agrees that if he or she fails to abide by such agreement, the non-compete agreement is challenged, or the non-compete agreement is unenforceable, he or she shall forfeit all benefits hereunder and repay the lump sum benefit to AT&T; and

(ii)    prior to distribution of the Participant’s lump sum benefit, interest on such lump sum benefit shall accrue and shall be added to the Participant’s lump sum benefit or distributed monthly, as elected by the Participant in his or her election of a Benefit Payout Alternative.

A Participant’s lump sum benefit payment schedule must comply with the rules for payment schedules as adopted by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion), which, for example, may require payment of principal to be made no more frequently than once per calendar year.

If the payment schedule elected by a Participant does not comply with the rules for payment schedules, (i) thirty percent (30%) of such Participant’s lump sum benefit shall be paid to the Participant upon the date that is six (6) months following the Participant’s Termination of Employment,and (ii) the remaining seventy percent (70%) shall be paid to the Participant on the third (3rd) anniversary of such Participant’s Termination of Employment.

(f)     Lump Sum Benefit Account Balance.  From and after a Participant’s Termination of Employment, the SEVP-HR shall maintain records of a lump sum benefit account balance for each Participant who elected a lump sum benefit.  During such period of time that all or any portion of a Participant’s lump sum benefit is not paid, interest shall be credited using the same methodology used by AT&T for financial accounting purposes using the GAAP Rate that was used to calculate such Participant’s lump sum benefit.  Payments of principal and interest shall be deducted from the lump sum benefit account balance.

A Participant whose employment has not terminated may change a prior distribution election at any time on or before December 31, 2008, provided, however, if the Participant’s employment terminates for any reason in the calendar year in which the new distribution election is filed, such new election shall be null and void.  In the event the Participant’s new election is null and void, the Participant’s prior election, if any, shall apply.  If there is no prior election, the Plan’s default distribution provisions shall apply.

5   Death or Disability Benefits.                                                                                                

5.1      Death Following Termination of Employment.

If a Participant who has commenced payment of his or her SERP benefit hereunder dies, his or her Beneficiary shall be entitled to receive the remaining SERP benefit in accordance with the Benefit Payout Alternative elected or deemed elected by the Participant.

5.2      Death Prior to Termination of Employment.

If a Participant dies prior to his or her Termination of Employment, a pre-retirement death benefit will be calculated and paid as though the Participant had Retired  (determined without regard to the 5 Years of Service or the 4 Years of Participation requirements) on the day prior to the date of death.  The pre-retirement death benefit shall be paid at such time and in such form as timely elected or deemed elected by the Participant; provided, if the Participant elected or is deemed to have elected any form of an annuity, such pre-retirement death benefit shall be paid as a Beneficiary Life Annuity (as such term is hereinafter described) based on the life expectancy of the Beneficiary, and, if the Participant elected or is deemed to have elected a Life with a 10-Year Certain Benefit, such Beneficiary Life Annuity shall continue for the longer of (i) the Beneficiary’s life, or (ii) the 10 year period commencing on the Participant’s death.  If paid as a Beneficiary Life Annuity, such benefit shall be the actuarially determined equivalent using the same reasonable actuarial assumptions and methods (as determined by the SEVP-HR in his or her complete and sole discretion) of the Life With 10-Year Certain Benefit that would have been paid to the Participant had he or she Retired on the day immediately prior to his or her death.  If the Participant had timely elected and qualified to receive a Lump Sum Benefit, it shall be calculated in the same manner as provided in Section 4.2 as if the Participant were alive; e.g., calculated as of the Participant's death applying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s death, but using the Participant’s age, Years of Service and other factors as of the Participant’s date of death.

5.3     Disability.

Upon a Participant's Termination of Employment and contemporaneous qualification for receipt of long term disability benefits under an AT&T or AT&T affiliate sponsored long term disability benefit plan in which the Participant participates prior to being Retirement Eligible (without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant will continue to accrue Years of Service during such disability until the earliest of his or her:

(a)     Recovery from Disability,

(b)     Retirement (determined without regard to the 5 Years of Service or 4 Years of Participation requirements), or

(c)     Death.

Upon the occurrence of either (a) Participant's recovery from Disability prior to his or her Retirement Eligibility if Participant does not return to employment, or (b) Participant's Retirement (determined without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant shall be entitled to receive a SERP Benefit as if he or she realized a Termination of Employment as of the date of such occurrence.

For purposes of calculating the foregoing benefit, the Participant's Final Average Earnings shall be determined using his or her Earnings history as of the date of his or her Disability.

If a Participant who continues to have a Disability dies prior to his or her Retirement Eligibility (without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant will be treated in the same manner as if he or she had died while in employment (See Section 5.2).

6.                   Payment of Benefits.

6.1     Commencement of Payments.

(a)    Except as provided in Section 5.3, benefit payments shall commence pursuant to the Benefit Payout Alternative elected by the Participant in his or her Agreement on the date that is six (6) months following his or her Termination of Employment; provided, however, if the Participant dies after Termination of Employment and prior to the lapse of such six (6) month period, benefit payments shall commence upon the Participant’s death.  If a Participant elected (or is deemed to have elected) an annuity form of benefit under Section 4.2(a), 4.2(b) or 4.2(c), the aggregate monthly amount that would be paid between the Participant’s Termination of Employment through the date that benefit payments actually commence, shall be paid in a lump sum on the date that benefit payments actually commence hereunder.  In addition, during the period of time between a Participant’s Termination of Employment and the date that annuity payments hereunder actually commence, interest shall be credited on the withheld annuity amounts for such period of time that each annuity payment is withheld.  The credited interest shall be paid in a lump sum on the date that payments hereunder actually commence.  Interest shall be credited using the GAAP Rate in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment.

(b)    Notwithstanding the designation of a specific date for commencement of payment of a distribution hereunder, commencement of payments under this Plan may be delayed for administrative reasons in the discretion of the SEVP-HR, but shall begin not later than sixty (60) days following the date upon which payment(s) would otherwise commence under this Plan. A Participant shall not have the right to designate or participate in the decision as to the taxable year of benefit commencement.

6.2     Withholding; Unemployment Taxes.

(a)    A payment may be made from the Plan to reflect the payment of state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to a Participant (the “State, Local, or Foreign Tax Amount”).  Such payment may not exceed the amount of such taxes due as a result of participation in the Plan.  Such payment may be made by distributions to the Participant in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by distribution directly to the Participant.  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 as a result of the payment of the State, Local, or Foreign Tax Amount and to pay the additional income tax at source on wages attributable to such additional Code Section 3401 wages and taxes.  However, the total payment under this Section 6.2(a) shall not exceed the aggregate of the State, Local, or Foreign Tax Amount and the income tax withholding related to such State, Local, or Foreign Tax Amount.

(b)    A payment may be made from the Plan to pay the Federal Insurance Contributions Act tax imposed by Code Sections 3101, 3121(a), and 3121(v)(2) on compensation deferred under the Plan (the “FICA Amount”).  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA Amount and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes.  However, the total payment under this Section 6.2(b) shall not exceed the aggregate of the FICA Amount and the income tax withholding related to such FICA Amount.

6.3     Recipients of Payments; Designation of Beneficiary.

All payments to be made under the Plan shall be made to the Participant during his or her lifetime, provided that if the Participant dies prior to the completion of such payments, then all subsequent payments under the Plan shall be made to the Participant's Beneficiary or Beneficiaries.

In the event of the death of a Participant, distributions/benefits under this Plan shall pass to the Beneficiary (ies) designated by the Participant in accordance with this Plan and the Rules.

6.4     No Other Benefits.

No benefits shall be paid hereunder to the Participant or his or her Beneficiary except as specifically provided herein.

6.5     Small Benefit.

Notwithstanding any election made by the Participant, the SEVP-HR in his or her sole discretion may pay any benefit in the form of a lump sum payment if (A) the lump sum equivalent amount is or would be less than the applicable dollar amount under Code Section 402(g)(1)(B) when payment of such benefit would otherwise commence, and (B) the payment of the lump sum equivalent amount results in the termination and liquidation of the entirety of the Participant’s interest under the Plan and under any other plan that is considered a single nonqualified deferred compensation plan under Treasury Regulations Section 1.409A-1(c)(2).

7.                   Conditions Related to Benefits.

7.1     Administration of Plan.

The Administrative Committee and the SEVP-HR with respect to specific functions identified in the Plan, shall be the sole administrators of the Plan and will, in their discretion, administer, interpret, construe and apply the Plan in accordance with its terms.  The Administrative Committee or the SEVP-HR shall further establish, adopt or revise such rules and regulations as each may deem necessary or advisable for the administration of the Plan.  All decisions of the Administrative Committee or the SEVP-HR shall be final and binding unless the Board of Directors should determine otherwise.

7.2   No Right to AT&T Assets.

Neither a Participant nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of any AT&T company whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which AT&T, in its sole discretion, may set aside in anticipation of a liability hereunder, nor in or to any policy or policies of insurance on the life of a Participant owned by AT&T.  No trust shall be created in connection with or by the execution or adoption of this Plan or any Agreement, and any benefits which become payable hereunder shall be paid from the general assets of AT&T.  A Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of AT&T.

7.3     Trust Fund.

AT&T shall be responsible for the payment of all benefits provided under the Plan.  At its discretion, AT&T may establish one or more trusts, for the purpose of providing for the payment of such benefits.  Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of AT&T's creditors.  To the extent any benefits provided under the Plan are actually paid from any such trust, AT&T shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by AT&T.

7.4     No Employment Rights.

Nothing herein shall constitute a contract of continuing employment or in any manner obligate any AT&T company to continue the service of a Participant, or obligate a Participant to continue in the service of any AT&T company and nothing herein shall be construed as fixing or regulating the compensation paid to a Participant.

7.5     Modification or Termination of Plan.

This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.  A modification may affect present and future Participants.   AT&T also reserves the sole right to terminate at any time any or all Agreements.  In the event of termination of the Plan or of a Participant's Agreement, a Participant shall be entitled to benefits hereunder, if prior to the date of termination of the Plan or of his or her Agreement, such Participant has attained 5 Years of Service and, if applicable, 4 Years of Participation, in which case, regardless of the termination of the Plan/Participant's Agreement, such Participant shall be entitled to benefits at such time as provided in and as otherwise in accordance with the Plan and his or her Agreement, provided, however, a Participant's benefit shall be computed as if the Participant had realized a Termination of Employment as of the date of termination of the Plan or of his or her Agreement; provided further, however, a Participant's service subsequent to Plan/Agreement termination shall be recognized for purposes of reducing or eliminating the Age discount provided for by Section 3.1(d).  No amendment, including an amendment to this Section 7.5, shall be effective, without the written consent of a Participant, to alter, to the detriment of such Participant, the benefits described in this Plan as applicable to such Participant as of the effective date of such amendment.  For purposes of this Section 7.5, an alteration to the detriment of a Participant shall mean a reduction in the amount payable hereunder to a Participant to which such Participant would be entitled if such Participant realized a Termination of Employment at such time, or any change in the form of benefit payable hereunder to a Participant to which such Participant would be entitled if such Participant realized a Termination of Employment at such time.  Any amendment which reduces a Participant's benefit hereunder to adjust for a change in his or her pension benefit resulting from an amendment to any company-sponsored defined benefit pension plan which changes the pension benefits payable to all employees, shall not require the Participant's consent.  Written notice of any amendment shall be given to each Participant.

7.6     Offset.

If at the time payments or installments of payments are to be made hereunder, a Participant or his or her Beneficiary or both are indebted to AT&T or any AT&T affiliate as a result of debt incurred in the ordinary course of the employment relationship between the Participant and the AT&T company, then, annually, up to $5,000 of the payments remaining to be made to the Participant or his or her Beneficiary or both, may, at the discretion of the SEVP-HR, be reduced by the amount of such indebtedness; provided, however, that the reduction must be made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant or his or her Beneficiary; provided, further, however, that an election by the Board of Directors not to reduce any such payment or payments shall not constitute a waiver of such AT&T company's claim for such indebtedness.

7.7     Change in Status.

In the event of a change in the employment status of a Participant to a status in which he is no longer an Participant, the Participant shall immediately cease to be eligible for any benefits under this Plan except such benefits as had previously vested.  Only Participant's Years of Service and Earnings history prior to the change in his employment status shall be taken into account for purposes of determining Participant's vested benefits hereunder.

8.                   Miscellaneous.

8.1     Nonassignability.

Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt of the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.

8.2     Non-Competition.

Notwithstanding any other provision of this Plan, all benefits provided under the Plan with respect to a Participant shall be forfeited and canceled in their entirety if the Participant, without the consent of AT&T and while employed by AT&T or any subsidiary thereof or within three (3) years after termination of such employment, engages in competition with AT&T or any subsidiary thereof or with any business with which AT&T or a subsidiary or affiliated company has a substantial interest (collectively referred to herein as "Employer business") and fails to cease and desist from engaging in said competitive activity within 120 days following receipt of written notice from AT&T to Participant demanding that Participant cease and desist from engaging in said competitive activity.  For purposes of this Plan, engaging in competition with any Employer business shall mean engaging by the Participant in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business.  Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business. However, engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business.  Accordingly, benefits shall not be provided under this Plan if, within the time period and without the written consent specified, Participant either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties the Participant takes and regardless of whether or not the employing company, or the company that Participant becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

8.3     Notice.

Any notice required or permitted to be given to the Administrative Committee or the SEVP-HR under the Plan shall be sufficient if in writing and hand delivered, or sent by certified mail, to the principal office of AT&T, directed to the attention of the SEVP-HR.  Any notice required or permitted to be given to a Participant shall be sufficient if in writing and hand delivered, or sent by certified mail, to Participant at Participant's last known mailing address as reflected on the records of his or her employing company or the company from which the Participant incurred a Termination of Employment, as applicable.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for certification.

8.4      Validity.

In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this plan.

8.5     Applicable Law.

This Plan shall be governed and construed in accordance with the laws of the State of Texas to the extent not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder ("ERISA").

Attachment A

LUMP SUM DISTRIBUTION AGREEMENT

This Lump Sum Distribution Agreement is made as of the ____ day of ______________, ____ by and between AT&T Inc. (“AT&T” or the “Company”) and _______________(“Participant”).  Unless otherwise indicated herein, capitalized words used herein shall have the same meaning ascribed to such words in the 2005 Supplemental Employee Retirement Plan (the “Plan” or “SERP”).

WHEREAS, Participant is a Participant in the Plan, which is sponsored by the Company;

WHEREAS, pursuant to the Plan, Participant executed an Agreement, governing Participant’s benefits in the Plan;

WHEREAS, Participant’s Agreement provides for the distribution of his benefits in the form of a lump sum, payable one hundred percent (100%) upon the six (6) month anniversary of his Termination of Employment provided that Participant is age sixty (60) or older as of the date of his Termination of Employment and Participant agrees not to compete with an Employer Business;

NOW, THEREFORE, the parties hereto, for good and valuable consideration, the sufficiency of which is hereby acknowledged, hereby agree as follows:

1.   If Participant is age sixty (60) or over as of the date of his Termination of Employment, Company shall pay to

Participant hisbenefits under the Plan in the form of a lump sum distribution, one hundred percent (100%) of which shall be paid upon the six (6) month anniversary of Participant’s Termination of Employment.

2.   In exchange for the right to receive the payment described in Paragraph 1, above, Participant acknowledges and agrees that he shall not, without the written consent of Company, within three (3) years after Termination of Employment, engage in competition with AT&T or with any business with which AT&T or a subsidiary of AT&T or an affiliated company has a substantial interest (collectively referred to herein as "Employer business").  For purposes of this Lump Sum Distribution Agreement, engaging in competition with any Employer business shall mean Participant’s engaging in any business or activity in the same geographical market where the same or substantially similar business or activity is being carried on as an Employer business. Such term shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer business.  However, it is hereby specifically agreed that engaging in competition with an Employer business shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer business or that takes a position adverse to any Employer business.  Participant hereby specifically agrees not to engage in any such conduct.  Participant also specifically agrees that a breach of this provision would result if, within the time period and without the written consent specified, Participant either engages directly in competitive activity or in any capacity in any location becomes employed by, associated with, or renders service to any company, or parent or affiliate thereof, or any subsidiary of any of them, if any of them is engaged in competition with an Employer business, regardless of the position or duties Participanttakes and regardless of whether or not the employing company, or the company that

Participant becomes associated with or renders service to, is itself engaged in direct competition with an Employer business.

3.   Participant acknowledges and agrees that he shall promptly return to the Company and forfeit all consideration previously received pursuant to this Lump Sum Distribution Agreement, specifically the payment referred to in Paragraph 1, if he engages in competition with an Employer business in violation of the provisions of Paragraph 2.

4.   Participant may submit a description of any proposed activity in writing to AT&T and AT&T shall advise

Participantin writing within fifteen (15) business days whether such proposed activity would constitute engaging in competition with an Employer business, within the meaning of this Lump Sum Distribution Agreement.

5.   It is hereby specifically agreed that the terms of this Lump Sum Distribution Agreement shall be kept strictly confidential and that neither party shall, except as necessary for performance of the terms hereof or as specifically required by law, disclose the existence of this Lump Sum Distribution Agreement or any of its terms to third persons without the express consent of the other party.

6.   Participantagrees that for any breach or threatened breach of any of the provisions of this Lump Sum Distribution Agreement by Participant, the Company shall have no adequate legal remedy, and in addition to any other remedies available, including the repayment and forfeiture remedies described in Paragraph 3, a restraining order and/or an injunction may be issued against Participantto prevent or restrain any such breach.

7.   Any notice required hereunder to be given by either party will be in writing and will be deemed effectively given upon personal delivery to the party to be notified, or five (5) days after deposit with the United States Post Office by certified mail, postage prepaid, to the other party at the address set forth below, or to such other address as either party may from time to time designate by ten (10) days advance written notice pursuant to this Paragraph.

8.   In the event any provision of this Lump Sum Distribution Agreement is held invalid, void, or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Lump Sum Distribution Agreement, except that should any part of the non-compete provisions of Paragraph 2 of this Agreement be held invalid, void, or unenforceable as applicable to and as asserted by Participant, this Lump Sum Distribution Agreement, at the Company's option, may be declared by the Company null and void.  If this Lump Sum Distribution Agreement is declared null and void by Company pursuant to the provisions of this Paragraph, Participant shall return to Company all consideration previously received pursuant to this Lump Sum Distribution Agreement.

AT&T Inc.

                                                                                   &# 160;                      

By: Senior Executive Vice

President-Human Resources

175 E. Houston Street

San Antonio, Texas 78205

                                                                             0;                            

Date                                                                           Date

Attachment B

“Immediate Annuity Value of any AT&T or affiliate Qualified Pensions” shall mean:

The annual amount of annuity payments that would be paid out of the qualified defined benefit pension plan sponsored by AT&T or an AT&T affiliate in which the Participant participates on a single life, level payment annuity basis assuming payment of such qualified defined benefit pension plan benefit commenced immediately upon the Participant’s Termination of Employment, notwithstanding the form of payment of such qualified defined benefit pension plan’s benefit actually made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such qualified defined benefit pension plan benefit.

Attachment C

Immediate Annuity Value of SRIP. "Immediate Annuity Value of SRIP" shall mean

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life with 10 year certain annuity benefit that would be paid to the Participant pursuant to the SRIP as it exists on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the SRIP on December 31, 2008, applying the Participant’s Final Average Earnings and Years of Service (both as defined in the SRIP) as of December 31, 2004 and the Participant’s age as of December 31, 2008, notwithstanding the form of payment of the SRIP benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such SRIP benefit.

Attachment D

Attachment D to the AT&T 2005 Supplemental Employee Retirement Plan

Immediate Annuity Value of any AT&T or AT&T affiliate Non-Qualified Pensions other than SERP.  "Immediate Annuity Value of any AT&T or AT&T affiliate Non-Qualified Pensions other than SERP" shall mean with respect to a Participant, any one or more of the following, as applicable:

1.           For a Participant who is a participant in (or otherwise has a benefit in) the AT&T Pension Benefit Make Up Plan No. 1  (“PBMU No. 1”), the AT&T Pension Benefit Make Up Plan No. 2 (“PBMU No. 2”), the AT&T Inc. Management Mid-Career Hire Plan (the “Mid-Career Plan”), the Cingular Wireless SBC Executive Transition Pension Make Up Plan (the “Cingular Plan”) and/or the Pacific Telesis Group Executive Supplemental Cash Balance Pension Plan (“PTG Plan”) and is a Participant in the Plan on December 31, 2008:

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, as they exist on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, on December 31, 2008, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such PBMU No. 1, PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or PTG Plan benefit.

2.           For a Participant who is a participant in (or otherwise has a benefit in) the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan and has a SERP Effective Date after December 31, 2008:

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, as they exist on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, on his or her SERP Effective Date, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such PBMU No. 1, PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or PTG Plan benefit.

3.           For a Participant who is a participant in (or otherwise has a benefit in) the BellSouth Corporation Supplemental Executive Retirement Plan (the “BellSouth Plan”) and is a Participant in the Plan on December 31, 2008:

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the BellSouth Plan as it exists on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the BellSouth Plan on December 31, 2008, but applying the Participant’s age and years of service as if the Participant remained employed through the fourth anniversary of his or her SERP Effective Date and the Participant’s Included Earnings (as defined in the BellSouth Plan) as of December 31, 2008, notwithstanding the form of payment of the BellSouth Plan’s benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Plan benefit.

4.           For a Participant who is a participant in (or otherwise has a benefit in) the BellSouth Plan and has a SERP Effective Date after December 31, 2008:

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the BellSouth Plan as it exists on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the BellSouth Plan on his or her SERP Effective Date (applying the Participant’s age, years of service and Included Earnings (as defined in the BellSouth Plan) as of the Participant’s SERP Effective Date), notwithstanding the form of payment of the BellSouth Plan’s benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Plan benefit.

5.           For a Participant who is a participant in (or otherwise has a benefit in) the AT&T Corp. Long Term Disability and Survivor Protection Plan (“LTDSPP”) and is entitled to a nonqualified defined benefit from the LTDSPP, the AT&T Corp. Excess Benefit and Compensation Plan, (“Excess Plan”), and/or the AT&T Corp. Non-Qualified Pension Plan (“NQPP”) and is a Participant in the Plan on December 31, 2008 (the Participant’s election as to the time and form of benefits under these plans is identical to such election under this Plan):

The benefit payments paid pursuant to the LTDSPP (nonqualified defined benefit only), Excess Plan, and/or the NQPP, as applicable, commencing at the actual time and pursuant to the actual form such benefit payments are made from the LTDSPP, Excess Plan, and/or the NQPP, as applicable.

6.           For a Participant who is a participant in (or otherwise has a benefit in) the LTDSPP and is entitled to a nonqualified defined benefit from the LTDSPP, the Excess Plan, and/or the NQPP and has a SERP Effective Date after December 31, 2008:

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP, as applicable, as they exist on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the AT&T Corp. LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP, on his or her SERP Effective Date, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such the AT&T Corp. LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP benefit.

Attachment E

Attachment E applies with respect to any Participant who:

·   Became a Participant in the 2005 AT&T Supplemental Executive Retirement Plan on or before December 31, 2008;

·   Is a participant in the BellSouth Corporation Supplemental Executive Retirement Plan; and

·   Attained the age of fifty-four (54) on or before March 1, 2007; and

·   Realizes a Termination of Employment on or after January 1, 2009.

Upon Termination of Employment, such Participant’s Plan benefit shall equal the greater of his or her benefit determined in accordance with Section 3 of the Plan or this Attachment E.

A.           Definitions.  Solely for purposes of this Attachment E, the following words shall have the meanings as provided in this Attachment E.  Any other capitalized word, not otherwise defined in this Attachment E, shall have the meaning as provided in Section 2 of the Plan.

1. The term "Annual Bonus Award" shall mean the bonus amount paid annually to an Attachment E Participant that is included in the calculation of pension benefits under the Pension Plan.

2. The term “Attachment E Participant” shall mean any Participant to whom Attachment E applies as described in the first paragraph of this Attachment E.

3. The terms "BellSouth Corporation" and "Company" shall mean BellSouth Corporation, a Georgia corporation, or its successors.

4. The term "Included Earnings" shall mean the 12 month average of the sum of (1) the last sixty (60) months of base pay, plus (2) the Annual Bonus Awards payable during or after that sixty (60) month period; provided, however, Included Earnings shall not include base pay or Annual Bonus Awards earned after March 1, 2011.  The amounts of base pay and other payments used to determine Included Earnings as described above include all amounts during the specified period including those amounts previously deferred pursuant to other plans.  If an Attachment E Participant terminates employment while eligible for a benefit under this Attachment E and thereafter receives Included Earnings, these additional Included Earnings shall be deemed to have been paid as of the date of the Attachment E Participant’s Termination of Employment, and the amount of benefit payable under this Attachment E shall be corrected accordingly.

5. The term “Merger” shall mean the merger, pursuant to the Agreement and Plan of Merger dated as of March 4, 2006 (the “Merger Agreement”), by and among BellSouth, AT&T Inc. (“AT&T”), and ABC Consolidation Corp., a Georgia corporation and wholly-owned subsidiary of AT&T (“Merger Sub”), pursuant to which, at the “Effective Time” (as defined in the Merger Agreement), BellSouth was merged with and into the Merger Sub.

6. The term "Pension Plan" shall mean the BellSouth Personal Retirement Account Pension Plan as in effect on the date of the Merger.

7. The term "Standard Annual Bonus" shall mean the Attachment E Participant’s Target Award under the AT&T 2006 Incentive Plan or the AT&T Short Term Incentive Plan and for periods of time prior to the Attachment E Participant’s participation in the AT&T 2006 Incentive Plan or the AT&T Short Term Incentive Plan, Standard Annual Bonus shall mean an amount determined by applying a target percentage of an Attachment E Participant’s base pay rate as determined by the annual compensation plan and the Attachment E Participant’s job or pay grade.

8. The term "Vesting Service Credit", except as expressly limited or otherwise provided in this Attachment E or under an individual Attachment E Participant’s employment-related agreement with the Company, shall have the same meaning as is attributed to such term under the Pension Plan and shall be interpreted in the same manner as that term is interpreted for purposes of the Pension Plan; provided, however, Vesting Service Credit shall not include any period of time on or after March 1, 2011.

B.           Benefit Amount.  An Attachment E Participant’s benefit under this Attachment E shall be determined as follows:

The aggregate annualized benefit of each Attachment E Participant shall be determined by adding the sum of two percent (2%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for the first twenty years, plus one and one-half percent (1.5%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for the next ten years, plus one percent (1%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for each additional year up to the month in which the Attachment E Participant retires less (1) 100% of the Primary Social Security benefit payable at age 65, (2) 100% of the retirement benefit (unreduced for survivor annuity) payable from the Pension Plan (as defined below), and (3) 100% of the benefit payable from the BellSouth Corporation Supplemental Executive Retirement Plan (as defined below).

a.           The benefit reduction to be applied for the benefit payable from the Pension Plan shall be the amount of such benefit that would be payable on the date that benefits are eligible to be paid (or become payable) under the Plan, or, if earlier, March 1, 2011 (regardless of the Attachment E Participant’s actual pension commencement date under the Pension Plan) and determined assuming that the Attachment E Participant elected a single life annuity (regardless of the actual form of benefit elected under the Pension Plan).

The benefit reduction to be applied for the benefit payable from the BellSouth Corporation Supplemental Executive Retirement Plan shall be an objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Attachment E Participant pursuant to the BellSouth Supplemental Executive Retirement Plan as it exists on December 31, 2008 assuming the Attachment E Participant became eligible to receive a distribution of benefit payments under the BellSouth Supplemental Executive Retirement Plan on December 31, 2008, but applying the Attachment E Participant’s age and years of service as of March 1, 2011 and the Attachment E Participant’s Included Earnings as of December 31, 2008, notwithstanding the form of payment of the BellSouth Supplemental Executive Retirement Plan’s benefit that would actually be made to the Attachment E Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Supplemental Executive Retirement Plan benefit.

b.           The benefit amount determined in accordance with this Attachment E (expressed as an annuity) at the time of the Attachment E Participant’s Termination of Employment shall not be less than the benefit that would have been payable to the Attachment E Participant if the Attachment E Participant had a Termination of Employment on any prior December 31 (using pay, service, offsets and all factors applicable on the previous dates and assuming an immediate benefit commencement).

c.           The benefit amount determined in accordance with this Attachment E shall be reduced (before the offset for benefits under the Pension Plan) by one-quarter percent (0.25%) for each calendar month or part thereof by which the Attachment E Participant’s Termination of Employment precedes his or her 62nd birthday.

EX-10.HH

Exhibit 10-hh

AT&T

EXECUTIVE DEFERRED COMPENSATION PLAN

Amended and Restated Effective January 1, 2008

AT&T

EXECUTIVE DEFERRED COMPENSATION PLAN

Background and Purpose

The AT&T Executive Deferred Compensation Plan was previously established to provide a plan of deferred compensation for certain executives of the Company who are classified as Officers and who contribute to the continued growth, development, and future business of the Company.  From the time of its adoption through December 31, 1984, the Plan was named the “Bell System Senior Management Incentive Award Deferral Plan”.  During the period from January 1, 1984 through December 31, 2004, the Plan was known as the “AT&T Senior Management Incentive Award Deferral Plan”.  The name of the Plan was changed to “AT&T Executive Deferred Compensation Plan”, effective as of January 1, 2005, to reflect the broader classification of executive-level employees who became eligible to participate in the Plan as of that date.

The AT&T Executive Deferred Compensation Plan is a “nonqualified deferred compensation plan” as that term is defined in Code Section 409A(d)(1).  The AT&T Deferred Compensation Plan is intended to constitute an “employee pension benefit plan” as defined in Section 3(2)(A) of ERISA that covers a select group of management or highly compensated employees.

The AT&T Executive Deferred Compensation Plan is amended and restated, as set forth herein, to (i) effective as of January 1, 2008, to incorporate a series of amendments that were previously adopted by the AT&T Corp. Board of Directors; and (ii) effective as of January 1, 2005, to make additional amendments, necessary for the AT&T Executive Deferred Compensation Plan to comply with the applicable provisions of Code Section 409A.

The AT&T Executive Deferred Compensation Plan, as amended and restated, provides for two distinct programs:  (i) the “Grandfathered Deferral Program”; and (ii) the “Executive Deferral Program”.  The Grandfathered Deferral Program incorporates all provisions, rights, and obligations, in effect as of December 31, 2004, and governs the deferral accounts (and any earnings thereon) associated with compensation deferred under the AT&T Executive Deferred Compensation Plan that was earned and vested by the respective Participants prior to January 1, 2005.  The Grandfathered Deferral Program, and all accounts thereunder, is deemed to be a “grandfathered” nonqualified deferred compensation plan that is not subject to the requirements of Code Section 409A.  The Executive Deferral Program applies to all deferred compensation under the Plan that was not earned and vested prior to January 1, 2005 (and any earnings thereon), and is subject the applicable provisions of Code Section 409A.

During the period from January 1, 2005 to December 31, 2008, the AT&T Executive Deferred Compensation Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Service Notice 2005-1, the proposed Treasury Regulations for Code Section 409A, and the final Treasury Regulations for Code Section 409A, and any other generally applicable guidance published in the Internal Revenue Service Bulletin with an effective date prior to January 1, 2009.

Effective November 18, 2005, AT&T Corp. became a wholly-owned subsidiary of SBC Communications Inc. (now known as “AT&T Inc.”) pursuant to the Agreement and Plan of Merger dated as of January 30, 2005.

Section

1.

Definitions

The following words and phrases, as used in this plan document, shall have the meanings set forth below unless a clearly different meaning is required by the context in which the word or phrase is used.

1.0 Administrator.  Prior to August 22, 2006, “Administrator” means the Executive Vice President – Human Resources of AT&T Corp. (or his or her delegate).  On and after August 22, 2006, “Administrator” means the most senior vice president of AT&T Inc. responsible for human resource matters (or his or her designee).  The Administrator shall have absolute discretion to interpret, manage and administer the Plan in accordance with its terms and conditions.

1.1 Affiliate.  “Affiliate” means (i) any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or governmental or political subdivision thereof that directly, or through one or more intermediates, controls, or is controlled by, or is under common control with, the Company; or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee, provided, however, that effective immediately after the Closing, the term “Affiliate” shall not include any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or governmental or political subdivision that was not an Affiliate immediately prior to the Closing other than AT&T Enterprise Services, Inc.

1.2 Annual Base Salary.  “Annual Base Salary” means the amount of annual cash compensation for an active Officer or E-Band that is identified and treated as “salary” in accordance with the compensation and pay procedures of the Company, as in effect from time to time.  For clarification, “Annual Base Salary” does not include Annual Bonus.

1.3 Annual Bonus.  “Annual Bonus” means a cash payment of incentive compensation to an Officer or E-Band pursuant to the provisions of the AT&T Short Term Incentive Plan, as amended from time to time.

1.4 AT&T Common Stock.  For periods prior to the Closing, “AT&T Common Stock” means the common shares, par value of $1.00 per share, of AT&T Corp.  After the Closing, “AT&T Common Stock” means the common shares, par value $1.00 per share, of AT&T Inc. (known as SBC Communications Inc. prior to November 18, 2005).

1.5 AT&T Share Price.  “AT&T Share Price” means the average of the daily high and low sale prices of shares of AT&T Common Stock on the New York Stock Exchange (“NYSE”) during each of the five (5) trading days ending on the applicable Determination Date, or during each of the five trading days immediately preceding the applicable Determination Date, if the NYSE is closed on the Determination Date.

1.6 Basic Deferral Distribution Option.  “Basic Deferral Distribution Option” means the distribution option under the Grandfathered Deferral Program that is provided for in Section 2.6.

1.7 Broadband Spin-Off.  “Broadband Spin-Off” means the spin-off of the Company’s broadband unit that conducted business as “AT&T Broadband” (or the spin-off of a newly-formed holding company for such broadband business) to the Company’s shareholders pursuant to the definitive merger agreement for the AT&T-Comcast transaction, as approved by the Board and announced by the Company on December 19, 2001.

1.8 Beneficiary.  “Beneficiary” means the person, trust, entity, organization or estate of a Participant designated pursuant to Section 2.5(f) or Section 3.10 that is entitled to receive benefits under the Grandfathered Deferral Program or the Executive Deferral Program, as applicable, upon the death of a Participant.

1.9 Board.  “Board” means the Board of Directors of the Company.

1.10 Change in Control.  “Change in Control” has the same meaning assigned to that term in the AT&T 2004 Long Term Incentive Program as in effect on May 19, 2004.

1.11 CIC Eligible Employee. “CIC Eligible Employee” means a “Senior Officer” (as defined in the AT&T Senior Officer Separation Plan), a “Senior Manager” (as defined in the AT&T Senior Manager Separation Plan), or an “Executive” (as defined in the AT&T Executive Separation Plan) or an “Employee” (as defined in the AT&T Separation Plan), as the case may be who, within two (2) years following a Change in Control (a) is terminated for reasons other than (i) “cause”, or (ii) by reason of becoming eligible for benefits under any Company-sponsored long-term disability plan; or (b) terminates employment for “good reason” occurring after a Change in Control.

1.12 Closing.  “Closing” means the closing of SBC Communications Inc.’s acquisition of AT&T Corp. as defined in the definitive Agreement and Plan of Merger dated January 30, 2005, between AT&T Corp. and SBC Communications Inc.  The Closing occurred on November 18, 2005.

1.13 Code.  “Code” means the Internal Revenue Code of 1986, as amended.

1.14 Committee.  For periods prior to the Closing,“Committee” means the Compensation and Employee Benefits Committee of the Board (or the successor to such committee).  For period on or after the Closing, “Committee” means the Administrator.

1.15 Company.  “Company” means AT&T Corp., a New York corporation, and any successors to such entity.

1.16 Company Matching Contribution.  “Company Matching Contribution” means the matching contribution made by the Company to a Participant’s deferral account under the Executive Deferral Program in accordance with the provisions of Section 3.5.

1.17 Determination Date.  “Determination Date” means the date on which a completed election form for the Basic Deferral Distribution Option from a Participant is received by the Administrator.

1.18 E-Band.  “E-Band” means a management employee of a Participating Company holding a position classified as a “Manager 5” or “Manager E”, or its equivalent, in a non-banded environment, or at the salary grade level of “E-Band”, or its equivalent, in a banded environment (also referred to as an “Executive” or “Director” from time to time), as determined in the discretion of the Administrator.

1.19 Eligible Executive.  “Eligible Executive” means (i) in the context of the Grandfathered Deferral Program, an active management employee of a Participating Company who satisfies the eligibility requirements set forth in Section 2.1; and (ii) in the context of the Executive Deferral Program, an active management employee of a Participating Company who satisfies the eligibility requirements set forth in Section 3.1.

1.20 Employer.  “Employer” means the Company and certain of its subsidiaries and affiliates, as determined by the Company in its sole discretion.  Effective immediately after the Closing, the term “Employer” shall, in addition, include AT&T Enterprise Services, Inc. (known as “SBC Enterprise Services, Inc.” prior to January 19, 2006), which following the Closing became an affiliate of the Company.

1.21 ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.22 Executive Deferral Program.  “Executive Deferral Program” means the nonqualified deferred compensation program described in Section 3 that is applicable to amounts of compensation deferred by Officers and E-Bands that was not earned and vested prior to January 1, 2005.

1.23 Grandfathered Deferral Program.  “Grandfathered Deferral Program” means the nonqualified deferred compensation program described in Section 2 that is applicable to amounts of compensation deferred by Officers that was earned and vested prior to January 1, 2005.   The substantive terms and conditions of the Grandfathered Deferral Program, including all benefits and rights thereunder, are those that existed under the AT&T Senior Management Incentive Award Deferral Plan on October 3, 2004, without any subsequent “material modifications” (as referred to in the federal income tax regulations underlying Code Section 409A).

1.24 Long Term Award.  “Long Term Award” means an Eligible Executive’s annual grant from a Participating Company of “performance shares” (as defined in the 2004 Incentive Program) and/or restricted stock units.

1.25 Officer.  “Officer” means a management employee of a Participating Company holding a position classified as a “Manager 6”, “Manager O” or higher level in a non-banded environment, or at a salary grade level above “E-Band”, or its equivalent, in a banded environment (formerly referred to as a “Senior Manager” from time to time), as determined in the discretion of the Administrator.

1.26 Participant.  “Participant” means (i) in the context of the Grandfathered Deferral Program, an active or former Officer or E-Band who has satisfied the requirements in Section 2.1 to be an Eligible Executive, has made one or more elections to defer compensation under the Grandfathered Deferral Program, and has an account balance under the Grandfathered Deferral Program; and (ii) in the context of the Executive Deferral Program, an active or former Officer or E-Band who has satisfied the requirements in Section 3.1 to be an Eligible Executive, has made one or more elections to defer compensation under the Executive Deferral Program, and has an account balance under the Executive Deferral Program.

1.27 Participating Company.  “Participating Company” means AT&T Corp. and any Affiliate.

1.28 Plan.  “Plan” means the AT&T Executive Deferred Compensation Plan, which shall be evidenced by this plan document, as amended from time to time.  During the period beginning on January 1, 1984, and ending on December 31, 2004, the Plan was known as the “AT&T Senior Management Incentive Award Deferral Plan”.  Prior to January 1, 1984, the Plan was known as the “Bell System Senior Management Incentive Award Deferral Plan”.  A reference in this document to the “Plan” shall generally be construed as a reference to the Grandfathered Deferral Program and the Executive Deferral Program, collectively, unless another meaning is clearly required by the context in which the term “Plan” is used.

1.29 Savings Plan.  “Savings Plan” means the AT&T Long Term Savings Plan for Management Employees (or any successor to such plan).

1.30 Separation From Service.  “Separation From Service” means, for purposes of the Executive Deferral Program, a Participant’s termination of the employment with the Employer for any reason which constitutes a "separation from service" under Code Section 409A(a)(2).  Notwithstanding the foregoing, the employment relationship of a Participant with the Employer is considered to remain intact while the Participant is on military leave, sick leave or other bona fide leave of absence if there is a reasonable expectation that the Participant will return to perform services for the Employer and the period of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with the Employer under applicable law or contract.  Whether an Participant has terminated employment with the Employer will be determined by the Employer based on whether (i) it is reasonably anticipated by the Employer and the Participant that the Participant will permanently cease providing services to the Employer (as either an employee or independent contractor); or (ii) the level of bona fide services to be performed by the Participant (as either an employee or independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (as either an employee or independent contractor) over the immediately preceding thirty-six (36) month period or such shorter period during which the Participant was performing services for the Employer.  If a leave of absence occurs during such thirty-six (36) month or shorter period which is not considered a separation from service, unpaid leaves of absence shall be disregarded and the level of services provided during any paid leave of absence shall be presumed to be the level of services required to receive the compensation paid with respect to such leave of absence.

1.31 Service Period.  “Service Period” means the calendar year during which an Eligible Executive’s right to compensation from a Participating Company in the form of Annual Base Salary, Annual Bonus, and/or Long Term Award arises.

1.32 Service Recipient.  “Service Recipient” means the Employer and all other corporations, entities, and businesses (including, but not limited to, AT&T Inc., a Delaware corporation) that together with the Employer are considered a single employer under Code Sections 414(b) and 414(c).

1.33 Specified Employee.  “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 the Company in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

1.34 2004 Incentive Program.  “2004 Incentive Program” means the AT&T 2004 Long Term Incentive Program.

1.35 Year of Service.  “Year of Service” shall have the same meaning as that assigned to such term under the Savings Plan from time to time.

Section

2.

Grandfathered Deferral Program

2.0 Continuation of Prior Deferred Compensation Plan.  The Grandfathered Deferral Program, as set forth in Section 2, represents a restatement of the substantive terms and conditions of the AT&T Senior Management Incentive Award Deferral Plan, including all benefits and rights thereunder, as they existed on October 3, 2004.  The text set forth in Section 2 substantially tracks that in the AT&T Senior Management Incentive Award Deferral Plan document, as amended, through October 3, 2004.  Certain headings and introductory phrases have been introduced to the text for reference and transitional purposes; however, it is the Company’s intent that the Grandfathered Deferral Program, as set forth herein, reflect no “material modification” (as referred to in the federal income tax regulations underlying Code Section 409A) to those terms and conditions in existence under the AT&T Senior Management Incentive Award Deferral Plan on October 3, 2004.  It is further the Company’s intent that the deferral accounts previously established under the AT&T Senior Management Incentive Award Deferral Plan that was earned and vested prior to January 1, 2005 (including all earning thereon) and all deferral and distribution elections made with respect to such deferral accounts, be treated as exempt from the application of the provisions of Code Section 409A.

2.1 Eligibility to Participate.  An active Officer of a Participating Company who is eligible for an award under the AT&T Short Term Incentive Award Plan and/or who has been granted a “performance award” or “stock unit award” under the AT&T Senior Management Long Term Incentive Plan, the 1987 Long Term Incentive Plan, the AT&T 1997 Long Term Incentive Program or the 2004 Incentive Program shall be eligible to commence participation in the Grandfathered Deferral Program, provided, however, that no active Officer or other individual may be or become eligible to participate under the Grandfathered Deferral Program with respect to the deferral of any form of compensation with respect to which the Officer or other individual did not, prior to January 1, 2005, have a legally binding right to such compensation, and that right was earned and vested.

2.2 Participation Elections.  An Officer who satisfies the eligibility requirements in Section 2.1 may elect to participate in the Grandfathered Deferral Program by making an election to defer compensation in accordance with the following provisions:

(a) Elections to Defer Awards and Dividend Equivalent Payments.  Prior to the beginning of any calendar year, any Officer may elect to participate in the Grandfathered Deferral Program by directing that (i) all or part of an annual short term incentive award or a “performance award” or “stock unit award” under the 1987 Long Term Incentive Plan, the AT&T 1997 Long Term Incentive Program  or the 2004 Incentive Program, and/or (ii) all or part of the dividend equivalent payments under the 1987 Long Term Incentive Plan, the AT&T 1997 Long Term Incentive Program or the 2004 Incentive Program, that such employee’s Participating Company would otherwise pay currently to such employee in such calendar year, shall be credited to a deferred account subject to the terms of the Grandfathered Deferral Program.  However, in no event shall the part of an award under any plan credited during any calendar year be less than $1,000 (based on a valuation at the time the award would otherwise be paid).  There shall be no such minimum limitation on amounts credited during any calendar year that are related to dividend equivalent payments.

(b) Elections by Designated Officers to Defer Salary.  Prior to the beginning of any calendar year, the Chairman of the Board and any other Officer designated by the Chairman of the Board may elect to participate in the Grandfathered Deferral Program by directing that all or part of such Officer’s salary that such employee’s Participating Company would otherwise pay currently to such employee in such calendar year shall be credited to a deferred account subject to the terms of the Grandfathered Deferral Program.

(c) Elections to Defer Other Compensation.  Subject to approval by the Committee, prior to the beginning of any calendar year, any Officer may elect to participate in the Grandfathered Deferral Program as to other awards under the 1987 Long Term Incentive Plan, AT&T 1997 Long Term Incentive Program or 2004 Incentive Program, or other amounts of compensation of such Officer, by directing that all or part of such awards or compensation that such Officer’s Participating Company would otherwise pay currently to such Officer in such calendar year be credited to a deferred account subject to the terms of the Grandfathered Deferral Program.

(d) Form of Deferral Elections.  An election to participate in the Grandfathered Deferral Program described in Section 2.2(a), Section 2.2(b) or Section 2.2(c) shall be in the form of a document executed by the Officer and filed with the Executive Vice President – Human Resources of AT&T Corp. (or his or her designee).

(e) Irrevocability of Deferral Elections.  Except as provided in Section 2.5(k) or Section 2.6, an election related to awards, dividend equivalent payments, salary and/or other compensation otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year.

(f) Elections to Defer Made by Newly-Eligible Officers.  Notwithstanding anything to the contrary contained in this Section 2.2, in the case of an Officer who is newly eligible to participate in the Grandfathered Deferral Program, or in the case of any Officer with respect to awards or compensation newly eligible to be deferred under the Grandfathered Deferral Program, a deferral election may be made with respect to compensation earned and otherwise receivable in the same calendar year in which the election is made and subsequent to such election, provided such election is made within ninety (90) days of such eligibility.

2.3 Deferred Amounts – Amounts Otherwise Payable in Cash.  Amounts of compensation deferred under the Grandfathered Deferral Program pursuant to elections made under the provisions of Section 2.2 that otherwise would be payable in cash shall be credited to the Officer’s account and administered in accordance with the following provisions:

(a) General Rule.  Deferred amounts related to awards, dividend equivalent payments which would otherwise have been distributed in cash by a Participating Company and deferred amounts related to salary and/or other cash compensation shall be credited to the employee’s account and shall bear interest from the date the awards, dividend equivalent payments, salary and/or other cash compensation would otherwise have been paid.

(b) Interest Crediting Rate and Methodology.  The interest credited to the account will be compounded at the end of each calendar quarter, and the annual rate of interest applied at the end of any calendar quarter shall be determined by the Committee from time to time; provided, however, that:

(i) The annual interest rate to be applied with respect to the cash portion of an employee’s (or former employee’s) deferred account balance as of December 31, 1998, plus any additions to such account after December 31, 1998, but prior to January 1, 2000, that result from deferral elections made by the employee prior to December 31, 1998 (reduced by any distributions attributable to such portion of the employee’s deferred account balance), shall not be less than the applicable ten (10) year U.S. Treasury Note rate for the prior calendar quarter, plus five percent (5%).

(ii) The annual interest rate to be applied with respect to any additions to the cash portion of an employee’s (or former employee’s) deferred account after December 31, 1999, but prior to January 1, 2001, that result from deferral elections made by the employee prior to December 31, 1999, shall be the applicable ten (10) year U.S. Treasury Note rate for the prior calendar quarter, plus five percent (5%).

(iii) The annual interest rate to be applied with respect to any additions to the cash portion of an employee’s (or former employee’s) deferred account after December 31, 2000, shall be the applicable ten (10) year

U.S. Treasury Note rate for the prior calendar quarter, plus two percent (2%).

(c) Special Transition Rule.  If an employee made an election described in Section 2.2, which election was effective on December 31, 1983, then such employee’s account shall also be credited during 1984 with an amount equal to the deferred amounts which would have been credited to the employee’s account during 1984 had the company which employed the employee on December 31, 1983, continued to be a Participating Company during 1984, and such amount shall bear interest in accordance with Section 2.3(b) from the date such amount would have been credited had such company continued to be a Participating Company during 1984.

2.4 Deferred Amounts – Amounts Otherwise Payable in AT&T Common Stock.  Amounts of compensation deferred under the Grandfathered Deferral Program pursuant to elections made under the provisions of Section 2.2 that otherwise would  be payable in AT&T Common Stock shall be credited to the Officer’s account and administered in accordance with the following provisions:

(a) General Rule.  Deferred amounts related to awards that would otherwise have been distributed in AT&T Common Stock by a Participating Company shall be credited to the employee’s account as deferred AT&T Common Stock.

(b) Special Transition Rule.  If an employee made an election described in Section 2.2, which election was effective on December 31, 1983, then such employee’s account shall also be credited during 1984 with the deferred AT&T shares which would have been credited to the employee’s account had the company which employed the employee on December 31, 1983, continued to be a Participating Company in the Plan and in the AT&T Senior Management Long Term Incentive Plan during 1984.

(c) Deferred Amounts Related to Dividend Equivalent Payments.  Prior to the beginning of any calendar year, the Chairman of the Board and any other Officer designated by the Chairman of the Board may elect that deferred amounts related to dividend equivalent payments, which would otherwise have been distributed in cash by a Participating Company during such calendar year, shall be credited to the employee’s account as deferred AT&T Common Stock.  The number of deferred AT&T Common Stock credited, with respect to each dividend equivalent, shall be determined in accordance with the conversion formula set forth in Section 2.4(d), as if such dividend equivalent were the amount to be converted to a number of additional deferred AT&T Common Stock.

(d) Dividend Payment Conversions to AT&T Common Stock.  The employee’s account shall also be credited on each dividend payment date for deferred AT&T Common Stock with an amount equivalent to the dividend payable on the number of deferred AT&T shares of Common Stock equal to the number of deferred AT&T shares of Common Stock in the employee’s account on the record date for such dividend.  Such amount shall then be converted to a number of additional deferred AT&T shares of Common Stock determined by dividing such amount by the price of AT&T Common Stock, as determined in the following sentence.  The price of AT&T Common Stock related to any dividend payment date shall be the average of the daily high and low sale prices of AT&T Common Stock on the New York Stock Exchange (“NYSE”) for the period of five (5) trading days ending on such dividend payment date, or the period of five (5) trading days immediately preceding such dividend payment date if the NYSE is closed on the dividend payment date.

(e) Adjustments in Number of Deferred AT&T Common Stock.  In the event of any change in outstanding shares of AT&T Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, that it deems appropriate in the number of deferred AT&T shares of Common Stock then credited to employees’ accounts.  Any and all such adjustments shall be conclusive and binding upon all parties concerned.

(f) Special Deferred Share Conversion Election.  An employee with deferred shares of AT&T Common Stock credited to his account may make an irrevocable, one-time election to convert all or a portion of the deferred shares of AT&T Common Stock credited to his deferred account to their cash value amount and have such amount credited to the employee’s account.  If an employee makes this conversion election, the value of the deferred shares of AT&T Common Stock subject to the employee’s conversion election shall be determined by multiplying (i) the number of deferred shares of AT&T Common Stock credited to the employee’s account that are subject to the employee’s conversion election, by (ii) the average of the daily high and low sale prices of AT&T Common Stock on the NYSE during each of the five (5) trading days immediately preceding the date applicable to the AT&T Wireless Group split-off transaction, as determined by the Executive Vice President - Human Resources of AT&T Corp., in consultation with the AT&T Law Department.  After such cash value amount has been credited to the employee’s account, it shall thereafter be credited with interest from time to time at the applicable rate determined under Section 2.3(b) for amounts of salary and/or other cash compensation deferred during the year in which the split-off of the AT&T Wireless Group is consummated.  An employee’s conversion election must be made within the time period established by the Executive Vice President - Human Resources of AT&T Corp., in consultation with the AT&T Law Department.  Notwithstanding the foregoing provisions of this Section 2.4(f), no conversion of deferred shares of AT&T Common Stock to their cash value amount shall have been effective unless (i) the Board (or its delegate) approves the Separation and Distribution Agreement By and Between AT&T Corp. and AT&T Wireless Services, Inc. (“Wireless Separation and Distribution Agreement”); (ii) the Board (or its delegate) approves the Employee Benefits Agreement By and Between AT&T Corp. and AT&T Wireless Services, Inc. (“Wireless Employee Benefits Agreement”); and (iii) the AT&T Wireless Group split-off transaction contemplated by the Wireless Separation and Distribution Agreement and the Wireless Employee Benefits Agreement is consummated.  The period during which an employee may submit a Special Deferred Share Conversion Election has closed, and no such further elections shall be permitted under the Plan.

2.5 Distributions.  The amounts credited to an employee’s deferred account shall be distributed in accordance with the following provisions:

(a) Distribution Elections.  At the time an eligible employee makes an election to participate in the Grandfathered Deferral Program, the employee shall also make an election with respect to the distribution (during the employee’s lifetime or in the event of the employee’s death) of the amounts credited to the employee’s deferred account.  Except as provided in Section 2.5(k) or Section 2.6, such an election related to the distribution during the employee’s lifetime, of amounts otherwise payable currently in any calendar year, shall become irrevocable on the last day prior to the beginning of such calendar year.  The election related to the distribution in the event of the employee’s death, including the designation of a Beneficiary or Beneficiaries, may be changed by the employee at any time by filing the appropriate document with the Executive Vice President – Human Resources of AT&T Corp. (or his or her designee).

(b) Form of Distributions.  Amounts credited as cash plus accumulated interest shall be distributed in cash; amounts credited as deferred shares of AT&T Common Stock shall be distributed in the form of an equal number of AT&T shares of Common Stock.

(c) Number of Installment Payments.  With respect to amounts related to deferred cash credited to the employee’s account under Section 2.3(a), and to deferred shares of AT&T Common Stock credited to the employee’s account under Section 2.4(a), Section 2.4(b) or Section 2.4(c), an employee may elect to receive such amounts in one payment or in some other number of approximately equal annual installments (not exceeding twenty (20)), provided however, that the number of annual installments may not extend beyond the life expectancy of the employee, determined as of the date the first installment is paid.

(d) Time of Commencement of Payments.  The employee’s election made pursuant to the provisions of Section 2.5(a) shall also specify that the first installment (or the single payment if the employee has so elected) shall be paid either (i) as soon as practicable after the first day of the calendar quarter next following the end of the month in which the employee attains the age specified in such election, which age shall not be earlier than age fifty-five (55) or later than age seventy and one-half (70½), or (ii) as soon as practicable after the first day of the calendar quarter next following the end of the month in which the employee retires from a Participating Company or otherwise terminates employment with a Participating Company (except for a transfer to another Participating Company); provided, however, that the Committee may, in its sole discretion, direct that the first installment (or the single payment) shall be paid as soon as practicable after the first day of the first calendar quarter in the calendar year next following the year of retirement or other termination of employment.  In addition, any Officer eligible to defer salary may specify that the first installment (or the single payment if the employee has so elected) shall be paid as soon as practicable after the first day of the first calendar quarter in the calendar year next following the calendar year in which the employee retires from a Participating Company or otherwise terminates employment with a Participating Company (except for a transfer to another Participating Company).

(e) Acceleration of Distributions.  Notwithstanding an election pursuant to Section 2.5(c) and Section 2.5(d), the entire amount then credited to an employee’s account shall be paid immediately in a single payment (i) if the employee is discharged for cause by his Participating Company; (ii) if the such Participating Company determines that the employee engaged in misconduct in connection with the employee’s employment with the Participating Company; (iii) if the employee, without the consent of his Participating Company and while employed by such Participating Company or after the termination of such employment, establishes a relationship with a competitor of the Participating Company or engages in activity which is in conflict with or adverse to the interest of the Participating Company as determined under the AT&T Non-Competition Guideline; or (iv) the employee becomes employed by a governmental agency having jurisdiction over the activities of a Participating Company or any of its subsidiaries.

(f) Distributions to Beneficiaries.  An employee may elect that, in the event the employee should die before full payment of all amounts credited to the employee’s deferred account, the balance of the deferred account shall be distributed in one payment or in some other number of approximately equal annual installments (not exceeding ten (10)) to the Beneficiary or Beneficiaries designated in writing by the employee, or if no designation has been made, to the estate of the employee.  The first installment (or the single payment if the employee has so elected) shall be paid on the first day of the calendar quarter next following the month of death; provided, however, that the Committee may, in its sole discretion, direct that the first installment (or the single payment) shall be paid as soon as practicable after the first day of the first calendar quarter in the calendar year next following the year of death.

(g) Installment Payment Methodology.  Installments subsequent to the first installment to the employee, or to a Beneficiary or to the employee’s estate, shall be paid on the first day of the applicable calendar quarter in each succeeding calendar year until the entire amount credited to the employee’s deferred account shall have been paid.  Deferred amounts held pending distribution shall continue to be credited with interest or additional deferred shares of AT&T Common Stock, as applicable, determined in accordance with Section 2.3, Section 2.4(a), Section 2.4(b), Section 2.4(c), and Section 2.4(d).

(h) Severe Financial Hardship.  In the event an employee, or the employee’s beneficiary after the employee’s death, incurs a severe financial hardship, the Committee, in its sole discretion, may accelerate or otherwise revise the distribution schedules from the employee’s account to the extent reasonably necessary to eliminate the severe financial hardship.  For the purpose of this Section 2.5(h), a severe financial hardship will be considered to have occurred only if (i) the hardship has been caused by an accident, illness, or other event beyond the control of the employee or, if applicable, the beneficiary; and (ii) the hardship cannot be satisfied by other reasonably available financial resources of the employee, or if applicable, the beneficiary.

(i) Obligation to Make Distributions of Deferred Amounts.  The obligation to make a distribution of deferred amounts credited to an employee’s account during any calendar year, plus the additional amounts credited on such deferred amounts pursuant to Section 2.3, Section 2.4(a), Section 2.4(b), Section 2.4(c), and Section 2.4(d), shall be borne by the Participating Company which otherwise would have paid the related award or salary currently.  However, the obligation to make distribution with respect to deferred amounts which are related to amounts credited to an employee’s account under Section 2.3(c) and under Section 2.4(b), and with respect to which no Participating Company would otherwise have paid the related award currently, shall be borne by the Participating Company which employed the employee on January 1, 1984.

(j) Elections to Forego Deferred Compensation.  Notwithstanding any provision of the Plan to the contrary, the amount credited to a former Officer’s account shall be reduced by the amount specified in an Election to Forego Compensation Form executed by the former Officer under the AT&T Corp. Estate Enhancement Program, and the reduction shall be effective as of the effective date of such election.

(k) Modified Distribution Elections.  Notwithstanding the provisions of Section 2.5(a), Section 2.5(d), and any election made thereunder, an employee may modify a prior distribution election to preclude payment of his deferred account balance upon termination of employment and to provide for payment of the amount credited to his deferred account to commence as soon as practicable after attainment of a specific age (not greater than age sixty-five (65)) and to be distributed in one payment or in some other number of approximately equal annual installments (not exceeding ten (10)), provided that such modified distribution election (the “Modified Deferral Election”) shall be effective with respect to the employee only if (i) the Board (or its delegate) approves the Wireless Separation and Distribution Agreement and the Wireless Employee Benefits Agreement; (ii) the Modified Deferral Election is made on or before December 31, 2000, or such later date as approved by the AT&T Corp. Tax Department; (iii) the AT&T Wireless Group split-off transaction contemplated by the Wireless Separation and Distribution Agreement and the Wireless Employee Benefits Agreement is consummated; and (iv) the employee becomes a “Transferred Individual” as defined in the Wireless Employee Benefits Agreement.  A Modified Deferral Election must be made within the time period established by the Executive Vice President - Human Resources of AT&T Corp., in consultation with the AT&T Corp. Law Department.  Once made, a Modified Deferral Election shall be irrevocable.  If an employee makes more than one Modified Deferral Election, all such Modified Deferral Elections made by the employee shall provide for payments to commence at the same specific age and in the same number of annual installments.  The period during which an employee may submit a Modified Deferral Election has closed, and no such further elections shall be permitted under the Plan.

2.6 Basic Deferral Distribution Option.

(a) Notwithstanding the provisions of Section 2.5(a), Section 2.5(b), Section 2.5(c), and Section 2.5(d) to the contrary, effective thirty (30) days after the date on which the Broadband Spin-Off occurs, a Participant shall have an option to relinquish all of his rights under all prior deferral and distribution elections made under the Grandfathered Deferral Program.  The rights to be relinquished shall include, but not be limited to, the right to continued deferral of the balance of his deferred account in the Grandfathered Deferral Program (until full payment is made in accordance with the Participant’s previous distribution elections made pursuant to Section 2.5), the right (to the extent applicable) to future interest credits on the cash portion of his deferred account as provided for in Section 2.3(a) and Section 2.3(b), and ten (10) percent of his or her deferred account balance as of the Determination Date.  In exchange for relinquishing all of his or her rights under the Grandfathered Deferral Program, the Participant shall receive a single payment of an amount equal to ninety percent (90%) of the Participant’s deferred account balance as of the Determination Date (as determined under Section 2.6(a)(ii) and Section 2.6(a)(iii)), payable in the form of AT&T Common Stock, provided, however, that, effective as of November 20, 2008, accounts distributed under the Basic Deferral Distribution Option shall be made pursuant to Section 2.6(a)(iv).  The distribution shall be made as soon as administratively practicable after the applicable Determination Date, in a manner determined by the Administrator, subject to the following terms and conditions:

(i) The Basic Deferral Distribution Option may be exercised only by an irrevocable written election made by a Participant on a form approved by the Administrator and filed with the Administrator on a date not earlier than thirty (30) days after the date on which the Broadband Spin-Off occurs;

(ii) For purposes of the Basic Deferral Distribution Option, the value of a Participant’s deferred account as of the Determination Date shall equal the sum of (1) the value of the deferred cash portion, and (2) the value of the portion represented by the deferred shares of AT&T Common Stock, determined as follows:

(A) The value of the deferred cash portion of a Participant’s deferred account shall be the Participant’s deferred account balance (excluding any deferred shares of AT&T Common Stock credited to such account) as of the Determination Date (including all interest credited to such deferred account through that date); and

(B) The value of the portion represented by the deferred shares of AT&T Common Stock (if any) of the Participant’s deferred account shall be determined by (1) multiplying the number of deferred shares of AT&T Common Stock credited to the Participant’s deferred account on the Determination Date, by (2) the AT&T Share Price;

(iii) For periods prior to November 20, 2008, the number of shares of AT&T Common Stock to be distributed to a Participant who elects the Basic Deferral Distribution Option shall be determined by dividing (1) ninety percent (90%) of the value of the Participant’s deferred account (as determined in Section 2.6(a)(ii)), by (2) the AT&T Share Price.

(iv)  On or after November 20, 2008, the distribution shall consist of (1) ninety percent (90%) of the deferred shares of AT&T Common Stock (if any) credited to the Participant’s deferred account, and (2) ninety percent (90%) of the value of the deferred cash portion of a Participant’s deferred account balance (excluding any deferred shares of AT&T Common Stock credited to such account) as of the Determination Date (including all interest credited to such deferred account through that date).

(v) If a Participant is deceased, the Participant did not file an election for the Basic Deferral Distribution Option with the Administrator prior to the Participant’s death, and amounts are payable to one or more Beneficiaries from a deceased Participant’s deferred account, each of the Participant’s Beneficiaries shall have the independent right to elect the Basic Deferral Distribution Option with respect to the portion of the deceased Participant’s deferred account to which the respective Beneficiary is then entitled, subject to substantially the same terms and conditions that would be applicable under this Section 2.6 if the Beneficiary were a Participant; and

(vi) The Administrator may, in his or her sole discretion, require the Participant to execute a written receipt or such other documentation determined to be appropriate, on a form approved by the Administrator, as a condition for receipt of the shares of AT&T Common Stock.

(b) No Participant’s election of the Basic Deferral Distribution Option pursuant to Section 2.6(a) shall be effective (and no distribution shall be made pursuant to a Participant’s election of the Basic Deferral Distribution Option) until the later of (i) thirty (30) days after the date on which the Broadband Spin-Off occurs; or (ii) the satisfaction of all federal and state securities law requirements relative to the distribution of AT&T Common Stock to Participants who elect the Basic Deferral Distribution Option.

2.7 Termination of Participation.  A Participant’s participation in the Grandfathered Deferral Program shall terminate when the first of any of the following events occurs:

(a) The death of the Participant;

(b) The Participant ceases to have an account balance under the Grandfathered Deferral Program;

(c) The Board (or its delegate) terminates the Grandfathered Deferral Program pursuant to the provisions of Section 5.1; or

(d) The Board (or its delegate) terminates the Plan pursuant to the provisions of Section 5.1.

Section

3.

Executive Deferral Program

3.0 Establishment of Executive Deferral Program.  The Executive Deferral Program was established as part of the Plan, effective January 1, 2005, and applies to payments of Annual Base Salary and Annual Bonus, and grants of Long Term Awards, to Eligible Executives by a Participating Company that were not earned and vested prior to January 1, 2005.

3.1 Eligibility.  An individual shall be an Eligible Executive who is eligible to participate in the Executive Deferral Program if he or she is an active employee of a Participating Company who is classified as either an Officer or an E-Band.

3.2 Commencement of Participation.  An Eligible Executive may elect to participate in the Executive Deferral Program initially, and for any Service Period thereafter, by making a deferral election in accordance with the provisions of Section 3.3.

3.3           Deferral Elections.

(a) Form of Deferral Elections. Any deferral election under the Executive Deferral Program shall be made in writing on such form, or in such other manner, as the Administrator (or his or her designee) shall prescribe from time to time.  Each deferral election shall apply to a specified Service Period, and with respect to such Service Period shall (i) designate the type of compensation identified in Section 3.3(b) the Eligible Executive elects to defer; (ii) specify the amount (subject to the percentage limitations in Section 3.3(b)) of each type of compensation attributable to the Service Period which the Eligible Executive elects to defer; and (iii) indicate the Eligible Executive’s election to receive distribution of the deferred amounts upon his or her Separation From Service in a manner that conforms with the provisions of Section 3.8 and/or in the form of an in-service distribution that conforms with the provisions of Section 3.9.

(b) Allowable Amounts of Compensation for Deferral.  Under the Executive Deferral Program, an Eligible Executive may elect to defer the following amounts of compensation with respect to any Service Period:

(i)   Up to fifty percent (50%) of the Eligible Executive’s Annual Base Salary;

(ii)   Up to one hundred percent (100%) of the Eligible Executive’s Annual Bonus; and

(iii)   Up to one hundred percent (100%) of the Eligible Executive’s annual grant of Long-Term Awards.

(c) Time of Deferral Elections.  Except as provided in Section 3.3(d), a deferral election under the Executive Deferral Program must be made no later than the time specified by the Administrator; provided, however, that:

(i) A deferral election with respect to the deferral of an Eligible Executive’s Annual Base Salary shall be made no later than the last day of the calendar year immediately preceding the Service Period to which such deferral election applies; and

(ii) A deferral election with respect to the deferral of an Eligible Executive’s Annual Bonus and/or Long Term Awards that constitute “performance-based compensation” (as defined in the federal income tax regulations for Code Section 409A) shall be made no later than six (6) months before the end of the applicable Service Period.

Notwithstanding the preceding provisions of this Section 3.3(c), the Administrator (or his or her designee) may, in his or her sole discretion, require that a deferral election with respect to an Eligible Executive’s Annual Base Salary, Annual Bonus, and Long Term Awards (if any) for a particular Service Period all be made prior to the last day of the calendar year immediately preceding the Service Period to which such deferral election applies.

(d) Newly Eligible Executives.  If an Eligible Executive first becomes eligible to participate in the Executive Deferral Program during a Service Period, the Eligible Executive may make an initial deferral election within thirty (30) days after the Eligible Executive first becomes eligible to participate in the Executive Deferral Program.  Such deferral election shall be made only with respect to Annual Base Salary, Annual Bonus, and Long Term Award compensation earned, payable or granted for services performed by the Eligible Executive after the deferral election is made.

(e) Irrevocability of Deferral Elections.  A deferral election (including the distribution elections comprising part of a deferral election) under the Executive Deferral Program shall be deemed made when it is received by the Administrator (or his or her designee) but in any event such election must be received before the commencement of the Service Period.  Once a deferral election under the Executive Deferral Program has been made, it shall be irrevocable, and except as provided in Section 3.14 and Section 3.15, shall not be subject to any subsequent modification as to the amount of compensation to be deferred for the particular Service Period and/or the time and form of payment of the deferred compensation to which such election applies.

(f) Cessation of Deferrals.  Notwithstanding any provision of the Plan to the contrary, no Eligible Executive may make an election to defer compensation under the Executive Deferral Program that provides for the crediting of any amount of deferred compensation to a deferral account under the Plan after December 31, 2006.

(g) Independent Annual Deferral Elections.  An Eligible Executive may annually make a deferral election covering his or her Annual Base Salary, Annual Bonus, and Long Term Awards attributable to a particular Service Period.  The Eligible Executive’s deferral election made for each Service Period shall be independent of his or her deferral elections made for other Service Periods.  All deferral elections made under the Executive Deferral Program shall be independent of the Eligible Executive’s deferral elections, if any, made under the Grandfathered Deferral Program.

3.4 Crediting Accounts.

(a) Types of Deferred Compensation Credited to Accounts.  The deferred compensation credited to the cash portion of a Participant’s deferral account under the Executive Deferral Program shall be amounts of deferred Annual Base Salary and Annual Bonus that, but for the Participant’s deferral election, would have been payable to the Participant as cash, plus the Company Matching Contributions associated with such deferred compensation.  The deferred compensation credited to the deferred AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program shall be deferred Long Term Awards that, but for the Participant’s deferral election, would have been payable to the Participant as shares of AT&T Common Stock.

         (b)   Amounts of Deferred Compensation Credited to Accounts.  The amounts of deferred compensation credited to a Participant’s account under the Executive Deferral Program with respect to any deferral election shall be determined in accordance with the following provisions:

(i) Annual Base Salary.  The amount of Annual Base Salary to which a Participant’s deferral election shall be applied shall first be reduced by any pre-tax benefit deductions (including medical benefit premiums payable under a Code Section 125 plan and/or any contributions to a healthcare reimbursement account plan), but shall not be reduced for contributions made to the Savings Plan.  The amount of Annual Base Salary credited to a Participant’s deferral account shall be the percentage of his or her Annual Base Salary in any paycheck to be deferred under the Executive Deferral Program, net of withholding deductions for FICA and Medicare taxes due on the deferred amount of Annual Salary and federal and state income tax withholding based on the FICA and Medicare tax deductions.

(ii) Annual Bonus.  The amount of Annual Bonus credited to a Participant’s deferral account shall be the percentage of Annual Bonus to be deferred under the Executive Deferral Program, net of withholding deductions for FICA and Medicare taxes due on the deferred amount of the Annual Bonus and federal and state income tax withholding based on the FICA and Medicare tax deductions.

(iii)        Long Term Awards.  The amount of Long Term Awards credited to a Participant’s deferral account shall be the percentage of Long Term Awards to be deferred under the Executive Deferral Program, net of withholding deductions for FICA and Medicare taxes due on the deferred amount of the Long Term Awards and federal and state income tax withholding based on the FICA and Medicare tax deductions.

3.5   Company Matching Contributions.  Amounts of Annual Base Salary and Annual Bonus deferred under the Executive Deferral Program are eligible for Matching Company Contributions as provided in this Section 3.5.

(a)         Matching Contribution Rate Formula.  Subject to the limitations set forth in Section 3.5(b), the Company shall match a Participant’s contributions of deferred Annual Base Salary and deferred Annual Bonus under the Executive Deferral Program for a payroll period with periodic cash contributions to the Participant’s deferral account at the rate of two-thirds of the sum of the Participant’s deferred Annual Base Salary and Annual Bonus under the Executive Deferral Program for such payroll period.

(b)         Maximum Company Matching Contribution.  Notwithstanding the provisions of Section 3.5(a), the Company Matching Contribution to the Executive Deferral Program with respect to a Participant for any payroll period shall not exceed four percent (4%) of the sum of a Participant’s Annual Base Salary and Annual Bonus for the payroll period (before reduction by the amount of Participant’s deferrals under the Executive Deferral Program, the amount of the Participant’s elective deferrals under the Savings Plan, and the amount of any pre-tax salary reductions for the Participant under a Company-sponsored Code Section 125 cafeteria plan), less the amount of “company matching contributions” allocated to the Participant’s account under the Savings Plan for the corresponding payroll period.  For purposes of applying this limitation, the Company shall first match a Participant’s contributions, if any, to the Savings Plan until the allowable annual compensation and/or contribution limitations under the Savings Plan are attained; provided, however, that the Company Matching Contribution on the deferred portion of an Officer’s Annual Bonus shall be credited entirely to his or her deferral account under the Executive Deferral Program.

(c) Annual Limitation on Company Matching Contribution.  In no event shall the amount of the Company Matching Contribution made pursuant to Section 3.5(a) and Section 3.5(b) with respect to any Participant for any Plan Year exceed one hundred percent (100%) of the “matching company contribution” that could have been credited to the Participant’s account under the Savings Plan in the absence of any plan-based restrictions that reflect the limits on qualified plan contributions under the Code.

3.6           Vesting.

(a)          Participant Contributions.  A Participant shall be one hundred percent (100%) vested at all times in his or her contributions of deferred Annual Base Salary, Annual Bonus, and Long Term Awards (and all earnings thereon) to his or her deferral account under the Executive Deferral Program.

(b)          Company Matching Contributions.  The Company Matching Contributions credited to a Participant’s deferral account under the Executive Deferral Program (and any earning thereon) shall be one hundred percent (100%) vested after the Participant completes three (3) Years of Service.  If not then vested, the Company Matching Contributions credited to a Participant’s account under the Executive Deferral Program (and any earning thereon) shall also become one hundred percent (100%) vested, regardless of his or her number of Years of Service, upon the occurrence of any of the following events prior to (or concurrent with) his or her Separation From Service:

(i) The Participant terminates employment the Company with eligibility for AT&T Corp. Postretirement Welfare Benefits under the AT&T Pension Plan or the AT&T Management Pension Plan;

(ii) The Participant separates from service due to permanent disability;

(iii) The Participant attains the first day of the month in which his or her sixty-fifth (65th) birthday occurs;

(iv) The Participant separates from service pursuant to a Company-initiated force reduction program or in accordance with the Company’s practices with respect to technological displacement;

(v) The Participant is laid off (Participant’s position is eliminated or relocated and redeployment is not possible);

(vi) The Participant dies;

(vii) The Participant is assigned to an entity, other than a Participating Company or another Affiliate., and terminates employment with a Participating Company solely for this purpose;

(viii) The Participant’s employment with a Participating Company is terminated on account of a disposition of assets or disposition of a subsidiary;

(ix) The Participant’s employment with a Participating Company is terminated as part of an outsourcing transaction;

(x) This Plan is terminated or partially terminated, or there is a complete discontinuance of contributions by a Participating Company, other than by reason of being merged into, or consolidated with, another Participating Company; or

(xi) Upon the date a “Change in Control” (as such term is defined in the 2004 Incentive Program as of May 19, 2004) occurs, provided he or she is a CIC Eligible Employee.

(c)        Forfeitures.  If a Participant terminates employment with the Employer before the Company Matching Contributions credited to his or her deferral account are one hundred percent (100%) vested, the Participant’s Company Matching Contributions and the associated earnings credited to the Participant’s deferral account under the Executive Deferral Program shall be forfeited.  The Company Matching Contributions and any earnings thereon credited to a Participant’s deferral account under the Executive Deferral Program shall also be forfeited if the Participant violates the AT&T Non-Competition Guidelines or the AT&T Code of Conduct.

3.7           Deferral Account Earnings.

(a)        Earnings on Cash Portion of Deferral Account.  The annual rate of interest crediting on amounts allocated to the cash portion of a Participant’s deferral account under the Executive Deferral Program shall be equal to the yield on the ten (10) year U.S. Treasury Note, plus a premium amount, denominated as a percentage rate, determined by the Board (or its designee) from time to time.  For 2005 and all subsequent years until modified by the Board (or its designee), the applicable premium amount shall be equal to two percent (2%).  Interest on amounts held in the cash portion of a Participant’s deferral account under the Executive Deferral Program shall be credited quarterly, at the end of each calendar quarter, based on the actual average ten (10) year U.S. Treasury Note rate (and if applicable, any premium adjustment) for the prior calendar quarter.

(b)        Earnings on Share Unit Portion of Deferral Account.  The deferred AT&T share unit portion of each Participant’s deferral account under the Executive Deferral Program shall be credited on each dividend payment date for AT&T Common Stock with an amount equal to the dividend payment on the number of shares of AT&T Common Stock that is equal to the number of AT&T share units credited to the respective Participant’s deferral account.  That amount is then converted to an additional number of deferred AT&T share units and credited to the respective Participant’s deferral account under the Executive Deferral Program.  For valuation purposes, the deferred AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program will be indexed to the AT&T Share Price.

3.8 Distributions of Deferred Compensation Upon Separation From Service.

(a) General Rule.  Subject to Section 3.8(d), distributions of amounts of Annual Base Salary, Annual Bonus, and Long Term Awards deferred under the Executive Deferral Program pursuant to a specific deferral election (and any associated Company Matching Contributions and earnings) shall be made upon the Participant’s Separation From Service at a time and in a form elected pursuant to Section 3.3 which conforms with the provisions of this Section 3.8, except to the extent that the Participant elects to have permissible amounts of such deferred compensation paid in the form of an in-service distribution pursuant to Section 3.9.

(b) Form of Payments.  An Eligible Executive’s deferral election that includes an election to receive payment of deferred compensation upon the Eligible Executive’s Separation From Service shall specify whether the deferred compensation to which the deferral election applies shall be paid in the form of either (i) a single payment; or (ii) annual installments.  If the Eligible Executive elects the annual installment payment option, he or she shall also specify the number of annual installments to be made, ranging between a minimum of two (2) annual installments and a maximum of ten (10) annual installments.  If a Participant elects the single payment option, the Plan shall make a single payment to the Participant of all amounts of compensation (and any associated Company Matching Contributions and earnings) credited to the Participant’s deferral account for the particular Service Period.  If a Participant elects the installment payment option, the Plan shall pay to the Participant all amounts of compensation (and any associated Company Matching Contributions and earnings) credited to the Participant’s deferral account for the particular Service Period in the specified number of annual installment payments.

(c) Medium of Payment.  Under either the single payment or the annual installment payment options described in Section 3.8(b), (i) the distributable amount credited to the cash portion of a Participant’s deferral account under the Executive Deferral Program attributable to the particular Service Period shall be paid in the form of cash; and (ii) the distributable amount credited to the AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program attributable to the particular Service Period shall be paid in the form of shares of AT&T Common Stock equal to the number of AT&T share units credited to the AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program.

(d) Timing of Payments.

(i) Single Payment Option.  As part of each deferral election that provides for payment of deferred compensation upon the Participant’s Separation From Service in the form of a single payment, the Participant shall specify whether such payment is to be made either:

(A) On the first day of the calendar quarter that begins six (6) months after the calendar quarter during which the Participant incurs a Separation From Service with the Employer; or

(B) On the first day of the calendar quarter that immediately follows the first one-year anniversary of the Participant’s Separation From Service with the Employer.

(ii) Installment Payments.  As part of each deferral election that provides for payment of deferred compensation upon the Participant’s Separation From Service in the form of installment payments, the Participant shall specify whether such payments shall commence either:

(A) On the first day of the calendar quarter that begins six (6) months after the calendar quarter during which the Participant incurs a Separation From Service with the Company, with any subsequent annual installment payments being made on the first day of the same calendar quarter of each subsequent calendar year; or

(B) On the first day of the calendar quarter that immediately follows the first one-year anniversary of the Participant’s Separation From Service with the Company, with any subsequent annual installment payments being made on the first day of the same calendar quarter of each subsequent calendar year.

3.9           In-Service Distributions.

(a)         Election of In-Service Distributions.  In lieu of making an election for a distribution of deferred compensation upon Separation From Service pursuant to Section 3.8, a Participant may, as part of his or her deferral election for a particular Service Period, elect to receive an in-service distribution.  An in-service distribution election must specify (i) a source of the in-service distribution; and (ii) an in-service payment date.  Pursuant to Section 3.3(e), an in-service distribution election which comprises part of a deferral election shall be irrevocable once it is received by the Administrator.

(b)        Source of In-Service Distribution.  The source of an in-service distribution is limited to either the Annual Base Salary (plus any earnings thereon) or the Annual Bonus (plus any earnings thereon) which a Participant elects pursuant to Section 3.3 to defer for the particular Service Period.  An in-service distribution election shall apply to the entire amount of the specified source of compensation that is deferred by the Participant for the particular Service Period.  Company Matching Contributions made with respect to a Participant’s deferral of Annual Base Salary or Annual Bonus for a Service Period shall not be distributed as part of an in-service distribution.

(c)         In-Service Payment Date.  An election to receive an in-service distribution shall specify a future date (referred to as the “in-service payment date”) as of which the in-service distribution shall be made.  Such in-service payment shall be at least four (4) years but no more than ten (10) years after the date on which the deferral election that includes the in-service distribution election is made.

(d)         Timing of In-Service Distribution.  An in-service distribution shall be made to a Participant as soon as practicable during the third calendar quarter (July 1 to September 30) of the year during which the in-service payment date specified by the Participant occurs.

(e)         Form of Payment.  All in-service distributions shall be made in the form of a lump sum cash payment.

(f)         Limitation on Number of In-Service Distribution Elections.  A Participant may have no more than three (3) in-service distribution elections in force under the Executive Deferral Program at anytime.

(g)        Priority of Payment.  In the event that an Eligible Executive has a Separation From Service prior to the date indicated in his or her in-service distribution election, the Eligible Executive’s entire deferred compensation under the Plan shall be payable at the time and form as if the eligible executive had made a deferral election that provides for distribution pursuant to Section 3.8(d)(i)(A) upon a Separation From Service.

3.10           Payments After Death of Participant.

(a)        Beneficiary Election.  At the time an Eligible Executive first enrolls to participate in the Executive Deferral Program, the Eligible Executive shall be required to make and file a Beneficiary Election with the Administrator (or his or her designee).  The Beneficiary Election shall be made in writing on such form or forms as the Administrator (or his or her designee) shall prescribe.  As part of the Beneficiary Election, the Participant shall (i) designate a Beneficiary to receive the distribution of the balance of the Participant’s deferral account under the Executive Deferral Program in the event of the Participant’s death; and (ii) specify the number of annual installment payments (up to a maximum of five (5) payments) through which such account balance is to be made to the Participant’s Beneficiary.  Such Beneficiary Election shall be effective upon the Participant’s death.  Prior to death, a Participant may change his or her designated Beneficiary (but not the specified number of annual installment payments) from time to time following the procedures established by the Administrator (or his or her designee).  Once a Participant’s Beneficiary Election is made, the Participant’s specification of the number of annual installment payments shall be irrevocable.  The designation of a Participant’s Beneficiary on his or her Beneficiary Election shall be irrevocable upon the death of the Participant.  If, for any reason, the Administrator (or his or her designee) determines that it does not have a valid Beneficiary Election on file at the time of the Participant’s death, the Participant shall be deemed to have made a Beneficiary Election in which the Participant (i) designated his or her estate as the Beneficiary; and (ii) specified that his or her deferral account under the Executive Deferral Program be paid to the Beneficiary in a single payment.

(b)       Payments to Beneficiary.  Upon the death of a Participant, the first payment of all of the Participant’s deferral account balance under the Executive Deferral Program shall be made to the Participant’s Beneficiary during the calendar quarter that begins immediately after the calendar quarter during which the Participant’s death occurs.  If the Participant dies after the commencement of payment of his or her deferral account under the Executive Deferral Program, the Plan shall pay the remainder of the balance of the Participant’s account under the Executive Deferral Program to the Participant’s Beneficiary in the number of payments specified in the Participant’s Beneficiary Election at such time as when the payments would have been paid to the Participant had his or her death not occurred.  Any in-service distribution that a Participant may have elected pursuant to Section 3.9 but not received prior to the date of his or her death shall be paid to the Participant’s Beneficiary during the calendar quarter that begins immediately after the calendar quarter during which the Participant’s death occurs.  If, for any reason, the AT&T Executive Compensation Department is not notified of the Participant’s death until after the end of the calendar quarter that begins immediately after the calendar quarter during which the Participant’s death occurs, the first payment of all of the Participant’s deferral account balance under the Executive Deferral Program and the payment of any in-service distribution the Participant had elected but not received prior to his or her death shall be made to the Participant’s Beneficiary within such period of time as may be provided for under the provisions of Code Section 409A.

(c) Medium of Payment to Beneficiary.  Amounts credited to the cash portion of a Participant’s deferral account under the Executive Deferral Program shall be paid to the Participant’s Beneficiary in the form of cash.  Amounts credited to the AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program shall be paid to the Participant’s Beneficiary in the form of shares of AT&T Common Stock equal to the number of AT&T share units credited to the AT&T share unit portion of a Participant’s deferral account under the Executive Deferral Program.

3.11 Periodic Statements to Participants.  The Administrator (or his or her designee) shall deliver a statement to each Participant in the Executive Deferral Program each calendar quarter that reports with respect to the immediately preceding calendar quarter (i) the amount of contributions of the Participant’s deferred compensation received by the Plan during such calendar quarter; (ii) the amount of Company Matching Contributions credited to the Participant’s deferral account during such calendar quarter; (iii) the amount of interest credited to the cash portion of a Participant’s deferral account under the Executive Deferral Program during such calendar quarter; and (iv) the amount of dividends (if any) reinvested in the AT&T share unit portion of the Participant’s’ deferral account during such calendar quarter.

3.12 Impact of Participation in Executive Deferral Program.  The rules and procedures for the Executive Deferral Program set forth in this Section 3 shall only apply to the Executive Deferral Program.  Neither the establishment of the Executive Deferral Program nor the rules and procedures for the Executive Deferral Program set forth in this Section 3 shall have any bearing or impact on the Grandfathered Deferral Program or any Participant’s deferral account or deferral and distribution elections made thereunder.  An Eligible Executive’s decision to participate in the Executive Deferral Program, and any deferral election made under the Executive Deferral Program as a result of such decision to participate, shall not, in any way, impact the Eligible Executive’s deferral account or deferral and distribution elections made under the Grandfathered Deferral Program.  A Participant’s Beneficiary Election made pursuant to Section 3.10 (including his or her designation of a Beneficiary) shall be independent of any election as to the form

or number of payments upon death or any designation of a Beneficiary made by a Participant for purposes of the Grandfathered Deferral Program.

3.13 Delay in Deferred Compensation Payments to Specified Employees.  Notwithstanding any other provision of the Plan or the Executive Deferral Program to the contrary, if a Participant in the Executive Deferral Program incurs a Separation From Service on or after January 1, 2005, and at the time of such Separation From Service the Participant is a Specified Employee, no payment of deferred compensation from the Participant’s deferral account under the Executive Deferral Program shall be made to, or with respect to, such Participant before the date that is six (6) months after the Participant’s Separation From Service (or if earlier, the date of the Participant’s death).  Any payment from a deferral account under the Executive Deferral Program that, but for the application of the preceding provisions of this Section 3.13, would have been paid to a Participant at any time during the first six (6) months after the Participant’s Separation From Service (or if earlier, the date of the Participant’s death) shall be accumulated (including any earnings thereon credited in accordance with Section 3.7 during the period that payment is delayed pursuant to this Section 3.13) and paid to the Participant on the first day of the seventh (7th) month following the Participant’s Separation From Service.  Any payment under the Executive Deferral Program to a Specified Employee not scheduled to be made during the first six (6) months after the Participant’s Separation From Service shall be made at the time or times provided for in the Participant’s Deferral Election and Section 3.8 or Section 3.9, as applicable.  Notwithstanding the foregoing, in the event that an Eligible Executive’s in-service distribution date occurs within six (6) months following his or her Separation From Service, such in-service distribution date shall be disregarded and shall be of no force or effect.

3.14 Prohibition on Acceleration of Payments of Deferred Compensation.  Notwithstanding any provision of the Executive Deferral Program as set for the herein to the contrary except the provisions of Section 3.15, any acceleration of the time or schedule of any payment of deferred compensation under the terms of the Executive Deferral Program or the amount of such deferred compensation scheduled to be paid under the terms of the Executive Deferral Program, shall be prohibited on or after January 1, 2005, unless such change to the time, schedule or amount of the deferred compensation payment qualifies for an exception established in the federal income tax regulations underlying the prohibition on acceleration of deferred compensation payments set forth in Code Section 409A(a)(3).

3.15 Special Distribution Provision.  Notwithstanding any provision of the Executive Deferral Program as set forth herein to the contrary, in the event that (i) the Internal Revenue Service prevails in a claim that all or any portion of a Participant’s deferral account under the Executive Deferral Program is required to be included in the Participant’s taxable income for any taxable year of such Participant prior to the taxable year during which such amount is otherwise to be distributed to him or her due to the Plan’s failure to satisfy the requirements of Code Section 409A; or (ii) legal counsel satisfactory to the Company and the applicable Participant renders an opinion that the Internal Revenue Service would likely prevail in such a claim, the affected portion of the Participant’s deferral account that is required to be included in the Participant’s taxable income shall be immediately distributed to the Participant (or his or her Beneficiary).  For purposes of this Section 3.15, the Internal Revenue Service shall be deemed to have prevailed in a claim if such claim is upheld by a court of final jurisdiction, or if the Company or Participant, based on an opinion of legal counsel satisfactory to the Company and the Participant fails to appeal a decision of the Internal Revenue Service, or a court of applicable jurisdiction, with respect to such claim, to an appropriate Internal Revenue Service appeals authority or to a court of higher jurisdiction within the appropriate time period.

3.16 Termination of Participation in Executive Deferral Program.  A Participant’s participation in the Executive Deferral Program shall terminate upon the occurrence of the first of any of the following events:

(a) The death of the Participant;

(b) The Participant ceases to have a deferral account balance under the Executive Deferral Program;

(c) The Board (or its delegate) terminates the Executive Deferral Program pursuant to the provisions of Section 5.1; or

(d) The Board (or its delegate) terminates the Plan pursuant to the provisions of Section 5.1.

Notwithstanding the provisions of Section 3.16(b) or Section 3.16(c), an individual who has a deferral account balance under the Grandfathered Deferral Program shall continue to be a Participant in the Grandfathered Deferral Program and the Plan until his or her participation in the Grandfathered Deferral Program also terminates in accordance with the provisions of Section 2.8.

Section

4.

Claims and Appeals

4.0 Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim.  The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.

4.1 Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received.  If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90) day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90) day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim.  If this notice is provided, the AT&T Executive Compensation Administration Department may  take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.

If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v)  the time limits for requesting a review of a denied claim under Section 4.2 and for conducting the review under Section 4.3; and (vi) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under Section 4.3.

4.2 Request for Review.  Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in Section 4.1, the Claimant may request in writing that the Administrator review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Administrator at the address for giving notice to the Administrator designated in Section 7.5.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Administrator and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Administrator.  If the Claimant does not request a review of the AT&T Executive Compensation Administration Department’s decision by the Administrator within such sixty (60) day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Administration Department.

4.3 Review of Decision.  Within sixty (60) days after the Administrator’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Administrator determines that special circumstances require an extension of time beyond the initial sixty (60) day review period, the Administrator shall notify the Claimant in writing within the initial sixty (60) day period and explain the special circumstances that require the extension and state the date by which the Administrator expects to render its decision on the review of the claim.  If this notice is provided, the Administrator may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.

During its review of the claim, the Administrator shall:

     (a)   Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to Section 4.1;

    (b)   Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and

   (c)   Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.

After considering all materials presented by the Claimant, the Administrator will render a decision, written in a manner designed to be understood by the Claimant.  If the Administrator denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Administrator and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

The Administrator shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion. The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan.  Decisions by the Administrator shall be conclusive and binding on all parties and not subject to further review.

In any case, a Participant or Beneficiary may have further rights under ERISA.  The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this Section 4 before they seek any other legal recourse regarding claims for benefits.

Section

5.

Amendment and Termination

5.0 Continuation of Program.  The Company does not guarantee the continuation of the Plan or any benefits during employment or after termination of employment, nor does the Company guarantee any specific level of benefits.  Benefits are provided under the Plan at the Company’s discretion and do not create a contract of employment.  Neither the establishment nor the continuance of the Plan shall be construed as conferring any legal rights upon any Eligible Executive, Participant or other person for continuation of employment, nor shall such establishment or continuance interfere with the right of the Company to discharge any Eligible Executive, Participant or other person without regard to the existence of the Plan.  The Company intends to continue the Plan indefinitely; however, the Committee (for periods ending prior to the Closing) and the Board or its delegate (for periods beginning on or after the Closing) reserve the right to amend or terminate the Plan at any time pursuant to Section 5.1.

5.1 Amendment or Termination.  The Committee (for periods ending prior to the Closing) and the Board or its delegate (for periods beginning on or after the Closing) may, at any time, amend or terminate the Plan or any underlying program, but such amendment or termination shall not adversely affect the rights of any Participant without his or her consent, to any benefit under the Plan to which such Participant may have previously become entitled prior to the effective date of such amendment or termination.  The Executive Vice President – Human Resources of AT&T Corp. (or his or her successor), with the concurrence of the General Counsel of AT&T Corp. (or his or her successor), shall be authorized to make minor or administrative changes to the Plan, as well as amendments required by applicable federal or state law (or authorized or made desirable by such statutes).

Section

6.

Change In Control

6.0 Coverage of Individual Deferral Agreements.  Upon the occurrence of a “Change in Control” or a “Potential Change in Control” (as those terms are defined in the AT&T Corp. Benefits Protection Trust as in effect on October 23, 2000), each individual deferral agreement (including any individual nonqualified pension arrangement) made between an Officer (active or former) and a Participating Company for the deferral of compensation, retirement and/or severance benefits (and the deferred account balance, if any, under each such agreement) identified by the Executive Vice President – Human Resources of AT&T Corp. (or his or her successor), in his or her discretion, shall be deemed to be a deferred compensation obligation under the Plan.  Notwithstanding any other provision of the Plan to the contrary, (i) each of the individual deferral agreements (including each of the individual nonqualified pension arrangements) deemed to be a deferred compensation obligation of the Plan pursuant to the provisions of this Section 6.0 shall be treated under the Plan in a manner that is consistent with the express terms and conditions of the respective individual deferral agreement; and (ii) the deferred compensation (including nonqualified pension benefit) entitlement of an Officer under the Plan with respect to any such individual deferral agreement (including individual nonqualified pension arrangements) shall be limited solely to the benefit provided under the express terms and conditions of the respective individual deferral agreement.  Nothing contained in this Section 6.0 shall entitle an Officer to any other deferred compensation benefits under the Plan except as expressly provided in the individual deferral agreement (including any individual nonqualified pension arrangement).

6.1 Vesting Upon Change in Control.  Upon the occurrence of a “Change in Control” (as defined in the 2004 Incentive Program as in effect on May 19, 2004), the portion, if any, of each deferred account balance under the Plan (including the deferred account balance of any former Officer, the deferred account balance under any individual deferral agreement, and the benefits under any individual nonqualified pension arrangement deemed pursuant to the provisions of Section 6.0 to be an obligation of the Plan), that was not vested immediately prior to such “Change in Control”, shall become fully vested.

6.2 Interest Crediting After Change in Control.  After the occurrence of a “Change in Control” (as defined in the 2004 Incentive Program as in effect on May 19, 2004), the interest credited to a deferred account (including the deferred account of any former Officer and the deferred account under any individual deferral agreement deemed pursuant to the provisions of Section 6.0 to be an obligation of the Plan) for any period, to the extent applicable, shall not be less than the interest derived under the interest rate formula applicable to such deferred account (and used to calculate the interest credited to such deferred account) for the interest crediting period immediately prior to the occurrence of such “Change in Control” (unless the provisions of any individual deferral agreement provide otherwise).

6.3 Prohibition on Deferral of Short-Term Incentive Awards.  Notwithstanding any provision of any Officer’s deferral election to the contrary, after the occurrence of a “Change in Control” (as defined in the 2004 Incentive Program as in effect on May 19, 2004), no payment of any Officer’s short term incentive award, if any, under the AT&T Short Term Incentive Plan for the performance year during which such “Change in Control” occurs shall be deferred under the Plan.

Section

7.

General Provisions

7.0 Named Fiduciary.  The Administrator is hereby designated as the “named fiduciary” under this Plan.  The named fiduciary shall have authority to control and manage the operation and administration of this Program.

7.1 Plan Administration.  The Administrator (or his or her designee) shall have authority to establish, from time to time, and implement reasonable and necessary procedures for the administration of the Plan.

7.2 Cooperation With Administrator.  All Participants and Beneficiaries shall be required to reasonably cooperate with the direction of the Administrator (or his or her designee) with respect to the administration of the Plan.  Such cooperation shall include (i) timely completion, execution, and return of all enrollment forms, deferral election forms, and other administrative forms and documents in the manner prescribed by the Administrator; and (ii) compliance with such further administrative requirements and conditions as may be reasonably established by the Administrator from time to time.

7.3 Effective Date.  The effective date of this amended and restated Plan document is January 1, 2008, unless otherwise stated herein.

7.4 Calendar Year Plan.  All Plan records shall be maintained on a calendar year basis, beginning January 1 and ending December 31.

7.5 Notice Under Plan.  Any notice to be given under this Plan shall be in writing and shall be either delivered in person or mailed by United States Mail, first-class postage pre-paid.  If notice is to be given to the Administrator by mail, such notice shall be addressed as indicated below and mailed to the Administrator at the following address:

AT&T Inc.

208 South Akard, Room 2350.06

Dallas, Texas  75202

Attention:  AT&T Executive Compensation

                    Administration Department

If notice is to be given to a Participant by United States Mail, such notice shall be addressed using such Participant’s address then on file with the AT&T Executive Compensation Department.  Any party may change the address to which notices shall be mailed by giving written notice of such change of address.

7.6 Binding Effect.  This Plan shall be binding upon the Company’s successors and assigns, and upon the Participants and their Beneficiaries, heirs, executors, and administrators.

7.7 Pension Benefit Plan Under ERISA.  The Plan is intended to constitute an “employee pension benefit plan” within the meaning of Section 3(2)(A) of ERISA, covering a select group of management or highly compensated employees.

7.8 Plan Document.  This Plan document is the plan document required by ERISA. The information contained herein provides the final and exclusive statement of the terms of the Plan.  Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 5.1.  This document legally governs the operation of the Plan, and any claim of right or entitlement under the Plan shall be determined solely in accordance with the provisions of Section 4.  No other evidence, whether written or oral, shall be taken into account in determining the right of an Eligible Executive, a Participant or a Beneficiary, as applicable, to any benefit of any type provided under the Plan.

7.9 Source of Funds.  The amounts of compensation deferred under this Plan (and any earnings thereon) shall be held in the general funds of the Participating Companies.  The Participating Companies shall not be required to reserve, or otherwise set aside, funds for the payment of such amounts of compensation deferred (or the earnings thereon).

7.10 Prohibition on Assignments.  The rights of a Participant or Beneficiary to any deferred amounts of compensation deferred under this Plan, plus the additional amounts credited thereon pursuant to Section 2.3, Section 2.4(a), Section 2.4(b), Section 2.4(c), Section 2.4(d), and Section 3.7, shall not be subject to assignment by the Participant or any Beneficiary.

7.11 Governing Law. To the extent not preempted by applicable federal law, the Plan shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas (irrespective of the choice of laws principles of the State of Texas).

7.12 Severability.  If any provision of this Plan or the application thereof to any person or circumstance shall be held by a court of competent jurisdiction to be invalid or unenforceable under any applicable law, such event shall not affect or render invalid or unenforceable the remainder of the Plan and shall not affect the application of any provision of the Plan to any other person or circumstance.

7.13 Headings.  The headings and subheadings preceding the Sections of this Plan have been inserted solely as a matter of convenience of reference, and shall have no force or effect in the construction or interpretation of the Plan or any of its provisions.

7.14 Construction.  Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where the plural form would apply (and vice versa).  Pronouns and other words of one gender used herein shall be construed to include the other gender as the context requires.  The word “or” shall not be exclusive; “may not” is prohibitive and not permissive.  The term “earnings” shall refer to the amounts of interest and/or dividend equivalents credited to a deferral account hereunder pursuant to the provisions of Section 2.3(b), Section 2.4(d), and Section 3.7.  The words, “hereof”, “herein”, “hereunder” and words of similar import shall refer to the entire Plan document, and not to any particular Section or paragraph of the Plan document, unless the context clearly indicates otherwise.  All Section references made in this Plan document are to the applicable Sections of this Plan document unless otherwise specified.

7.15 Plan to Comply with Section 409A. The Plan (other than with respect to the Grandfathered Deferral Program) is at all times intended to comply with and operate in a manner that is consistent with the requirements of Section 409A of the Code.  Notwithstanding any other provision to the contrary in this Plan, each provision in this Plan (other than with respect to the Grandfathered Deferral Program) shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.

EX-10.II

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.

EX-10.JJ

Exhibit 10-jj

AT&T PENSION BENEFIT

MAKE UP PLAN NO. 1

Effective:  January 1, 2005

Revised September 1, 2005

Amended and Restated December 31, 2008

AT&T PENSION BENEFIT MAKE UP PLAN NO. 1

SECTION 1:  Purpose and History

1.1.           Purpose. The primary purpose of the AT&T Pension Benefit Make Up Plan No. 1 (the “Plan”) is to supplement the benefits a Participant is entitled to receive under a pension plan that is qualified under Code Section 401(a) and is sponsored by AT&T Inc. (“AT&T” or the “Company”) or one of its Subsidiaries (collectively, the “Pension Plans”).  This Plan recognizes compensation earned by an individual who is eligible to participate in this Plan as provided in Section 2 (a “Participant”) that is not recognized in the determination of benefits under the Participant’s Pension Plan, and this Plan is intended to make up benefits that would otherwise be lost because of such Pension Plan limitations.

The Plan is intended to provide deferred compensation benefits by recognizing compensation earned by a Participant that is in excess of the amount that is recognized under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”), and to provide benefits to the extent such Participant’s Pension Plan benefits are limited by the provisions of Code Section 415.

1.2.           History.  The Plan is effective as of January 1, 2005, and constitutes an amendment and  restatement of the plans listed in Attachment A (the “Predecessor Plans”).  AT&T and companies whose equity interests are owned 100%, directly or indirectly, by AT&T (“Subsidiary”) sponsored the Predecessor Plans for the benefit of their respective eligible employees.  No additional benefits shall accrue under the Predecessor Plans after December 31, 2004, and benefits of Participants who terminate employment on or after January 1, 2005 shall be paid solely under this Plan.  The Predecessor Plans were intended to supplement participants’ Pension Plan benefits by (i) recognizing compensation that is not eligible to be recognized for purposes of calculating Pension Plan benefits, either as a result of statutory limitations or Pension Plan limitations, and/or (ii) providing benefits in excess of the limitations of Code Section 415.  This Plan is intended to aggregate all of such Predecessor Plans and provide substantially similar benefits, on a going forward basis.  Further, this Plan is intended to satisfy the requirements of Code Section 409A, effective with respect to amounts deferred after December 31, 2004.   During the period from January 1, 2005 to December 31, 2008, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Service Notice 2005-1, and the final Treasury Regulations for Code Section 409A, and any other generally applicable guidance published in the Internal Revenue Service Bulletin with an effective date prior to January 1, 2009.  On or after January 1, 2009, this Plan shall be interpreted and construed consistent with the requirements of Code Section 409A and all applicable guidance issued thereunder.

SECTION 2:  Eligibility and Participation

2.1.           Eligibility. Benefit accrual in this Plan is limited to each employee of any Subsidiary of AT&T who:

        (a)   participates in a Pension Plan;

        (b)   is a General Management level or above employee;

        (c)   is not eligible for benefits under the 2005 AT&T Supplemental Employee Retirement Plan; and

       (d)   receives types of compensation that are used to determine the employee’s Pension Plan benefit (e.g., base salary or short term incentive compensation) in any calendar year, but that compensation is not recognized for purposes of determining such employee’s Pension Plan benefit, or whose Pension Plan benefit is limited by Code Section 415.

       (e)   is not an employee of a company acquired by AT&T on or after September 1, 2005 unless designated as eligible by AT&T’s highest ranking officer specifically responsible for human resource matters; provided, however, effective January 1, 2009, this section 2.1(e) shall not apply to any employee who satisfies the eligibility provisions of this section 2.1 (a), (b), (c), and (d) and is employed by AT&T Inc. or any of its Subsidiaries on or after January 1, 2009, other than an employee who is a participant in the BellSouth Corporation Supplemental Executive Retirement Plan, the AT&T Corp. Nonqualified Pension Plan, or the AT&T Corp. Excess Pension Plan.

2.2.           Construction of Eligibility Provisions. The eligibility provisions of Section 2.1, above, shall be interpreted in the broadest possible sense in order that this Plan can recognize all base salary and short term incentive compensation, whenever earned, for the purpose of making up any benefit that would otherwise be lost due to the fact that the Pension Plan is unable to recognize any such compensation in determining retirement benefits.

2.3.           Loss of Eligibility. In the event that any Participant ceases to satisfy the eligibility conditions of Section 2.1, such Participant shall nevertheless continue to be eligible to receive benefits under this Plan, however, no additional benefits shall accrue under the Plan unless and until he or she shall re-attain eligibility hereunder.

2.4.           Ineligible Participant .  Notwithstanding any other provision of this Plan to the contrary, if any Participant is determined not to be “in a select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the regulations thereunder, such Participant shall not be eligible to continue to accrue a benefit under this Plan on or after such date to the extent benefits hereunder are attributable to compensation in excess of the amount under Code Section 401(a)(17) and not attributable to the limitations imposed by the provisions of Code Section 415.

2.5           No Duplication of Benefits.  Notwithstanding any provision of this Plan to the contrary, if a Participant ceases to accrue benefits under this Plan and becomes eligible to receive the equivalent of his/her benefit under this Plan pursuant to the Pension Benefit Make Up Plan No. 2, to the extent such benefit is paid pursuant to such other plan, no duplication of such payment shall be made pursuant to this Plan.

SECTION 3:  Amount of Plan Benefits

3.1.           Amount of Plan Benefits. Subject to the terms and conditions of the Plan, the Plan benefits payable to, or on account of, a Participant under the Plan as of any date shall be an amount equal to:

(a)           the amount of the Participant’s benefit under the Pension Plan in which he or she participates on the date of his or her termination of employment that would have been payable to or on account of the Participant under such Pension Plan as of that date, determined without regard to the limitations imposed by either Code Section 401(a)(17) or 415 and determined as if all types of compensation that are used to determine the employee’s Pension Plan benefit (e.g., base salary and short-term incentive compensation that the Participant is eligible to receive) were recognized for purposes of calculating such amount;

REDUCED BY

(b)           the amount of the Participant’s benefit actually paid under the Pension Plan in which he participates on the date of his termination of employment.

The amount determined under subsection (a), above, shall be calculated in the same manner that is used for calculating the amount under subsection (b), using the benefit calculation methodology and the factors in effect under such Pension Plan as of the date of his termination of employment; the only difference being the amount of compensation used for calculating such amount.

3.2.           Participants in Predecessor Plans. If a Participant participated in one or more Predecessor Plans prior to becoming a Participant under this Plan, benefits under this Plan shall be no less than the benefits accrued under the Predecessor Plans, and the benefits under this Plan shall be in lieu of all benefits otherwise payable to him under the Predecessor Plans.

SECTION 4:  Payment of Plan Benefits

4.1           Distribution of Plan Benefits.  Benefits hereunder shall be calculated and distributed upon a Participant’s termination of employment; provided, however, distribution of Plan benefits of any Participant who is also a participant in the 2005 AT&T Supplemental Executive Retirement Plan shall commence on the sixth month anniversary of such Participant’s termination of employment.

4.2.           Form of Plan Benefits. Benefits hereunder shall be paid in the form of a lump sum; provided, however, if the amount of the Participant’s lump sum benefit exceeds $50,000 as of his termination of employment, the Plan benefit shall be paid in monthly installments over a period of ten (10) years.  .Notwithstanding the foregoing, with respect to any Participant who, prior to termination of employment ceases to satisfy the eligibility conditions of Section 2.1, the form of such Participant’s benefit (lump sum or ten (10) year monthly annuity) shall be determined as of the date such Participant ceases to satisfy the eligibility conditions of Section 2.1.

If benefits are distributed in the form of a monthly annuity for ten (10) years, the monthly payments shall be calculated in the same manner that a financial institution would calculate the monthly payments for a 10-year fixed interest loan.

Nothwithstanding any other provision of this Plan, the benefits of any Participant who was a participant in and accrued benefits under the Cingular Wireless SBC Executive 2005 Transition Pension Make Up Plan (which is a Predecessor Plans) shall have their benefits distributed exclusively in a lump sum.

4.3           Converting Form of Benefit.  For all purposes under the Plan, the lump sum benefit and ten year monthly installment form of benefit shall be the actuarially determined equivalent of one another, as determined by the Plan Administrator in the Plan Administrator’s complete and sole discretion, and the amount of such benefits under the Plan shall be determined on the basis of the Participant’s age and the rates, tables, and factors which would be utilized to determine such benefit under the Pension Plan as of the date required for making such determination..

SECTION 5:  General and Administrative Provisions

5.1.           Plan Administration. The Company shall be the Plan Administrator of the Plan.  The Plan Administrator’s responsibilities hereunder shall be carried out by its Senior Executive Vice President responsible for Human Resources matters.  The authority to control and manage the operation and administration of the Plan shall be vested in the Plan Administrator. The Plan Administrator has the exclusive right and discretion to construe, interpret and apply the provisions of the Plan and the entitlement to benefits under the Plan in accordance with its terms. The Plan Administrator may establish, adopt or revise such rules and regulations as the Plan Administrator may deem necessary or advisable for the administration of the Plan.  Any decision made by the Plan Administrator on any matter within  the Plan Administrator’s discretion is conclusive, final and binding on all persons, and not subject to further review. The Benefit Plan Committee of the Company shall grant or deny claims for benefits under the Plan and authorize disbursements. Adequate notice, pursuant to applicable law and prescribed Company practices, shall be provided in writing to any Participant or Beneficiary whose claim has been denied, setting forth the specific reasons for such denial. The review and appeal procedures for any Participant or Beneficiary whose claim has been denied shall be the same as those procedures set forth in the Pension Plan under which such Participant or Beneficiary is entitled to or received benefits.

5.2.           Source of Benefits; Unsecured Creditor. The obligations of the Company under the Plan are solely contractual. Any amount payable under the terms of the Plan shall be paid from the general assets of the Company or a Subsidiary.  Alternatively, amounts payable under the terms of the Plan may be paid from one or more trusts that the Company or a Subsidiary might elect to establish, the assets of which will be subject to the claims of the general creditors of the Company or the Subsidiary that created the trust.  Participants and their beneficiaries shall have no legal or equitable rights, interest, or claims in any property or assets of the Company or any Subsidiary.  Any and all of the Company’s or a Subsidiary’s assets shall be, and remain, the general, unpledged, unrestricted assets of the Company or any such Subsidiary.  The Company’s or a Subsidiary’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company or any such Subsidiary to distribute cash under the Plan in the future.  If a Participant's term of employment includes service by two Subsidiaries or by the Company and one or more Subsidiaries, the Company or Subsidiary which last employed the Participant shall be solely responsible for the entire benefit payable under the Plan.

5.3.           Notices. Any notice or document required to be given to or filed with the Plan Administrator shall be considered to be given or filed if delivered to the Plan Administrator or mailed by registered mail, postage prepaid, to the Plan Administrator.

5.4.           Applicable Laws. The Plan shall be construed and administered in accordance with the laws of the State of Texas, to the extent that such laws are not preempted by ERISA or any other laws of the United States of America.

5.5.           Gender and Number. Where the context requires, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

5.6.           Benefits Determined as of Termination of Employment . Except as otherwise specifically provided in the Plan, the right to benefits under the Plan and the amount of benefits of a Participant who has terminated or terminates employment with the Company or a Subsidiary shall be determined in accordance with the provisions of the Plan as in effect immediately prior to that termination of employment.

5.7.           Benefits Under Predecessor Plans.  Notwithstanding any provision of this Plan to the contrary, nothing shall reduce or impair the interests of individuals with respect to benefits that are being paid under a Predecessor Plan as of the effective date of this Plan without the consent of the affected Participant.  Notwithstanding any provision of this Plan to the contrary, nothing shall reduce or impair the interests of individuals with respect to benefits that are accrued under a Predecessor Plan as of the effective date of this Plan without the consent of the affected Participant; provided, however, benefits accrued as of December 31, 2004 under the terms of a Predecessor Plan shall only be distributed and paid under the terms of Section 4 of this Plan.

5.8.           Plan Not Contract of Employment. The Plan does not constitute a contract of employment, and nothing in the Plan or any action taken hereunder shall be construed as a contract of employment or to give any employee or Participant the right to be retained in the employ of the Company or a Subsidiary.

5.9.           Benefits May Not Be Assigned or Alienated. Benefits payable to, or on account of, any individual under the Plan may not be voluntarily or involuntarily assigned, pledged, transferred, mortgaged, alienated, conveyed in advance of actual receipt or otherwise encumbered.  No such amounts shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separation maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.  Any such attempted assignments to transfer shall be void.  Prior to the death of any Participant, no other person shall have any rights under the Plan with respect to that Participant.

5.10.          Beneficiary Designation .  Participants shall have the right to designate a Beneficiary to receive their benefits under the Plan should such Participant die prior to commencement of or complete distribution of benefits hereunder.  The AT&T Rules for Beneficiary Designations as may hereafter be amended from time to time (the “Rules”), which Rules are incorporated herein by this reference, shall apply.  For purposes of this Plan, “Beneficiary” shall mean any beneficiary designated by a Participant to receive his or her benefits under this Plan in the event of the Participant’s death, or as otherwise determined under the Rules to the extent the Participant fails to designate a beneficiary.

5.11.         Amendments and Termination. The Plan may be amended or terminated at any time in accordance with the provisions of the AT&T Schedule of Authorizations, as amended from time-to-time, but such amendments or termination shall not adversely affect the rights of any Participant, without his or her consent, to any benefit payable under the Plan to which such Participant has previously become entitled prior to the effective date of such amendment or termination.

5.12.         Tax Withholding. All applicable federal, state and local taxes required by law to be withheld shall be deducted from benefits paid under this Plan.

5.13.         Offsets and Overpayments.  If any overpayment is made by the Plan for any reason, the Plan shall have the right to recover such overpayment.  The Participant shall cooperate fully with the Plan to recover any overpayment and provide any necessary information and required documents.  If a Participant entitled to distribution of benefits hereunder owes any amount to AT&T or any Subsidiary, such amount may be withheld from benefits payable hereunder to satisfy such obligation.  Any overpayment or Participant debt to AT&T or any Subsidiary may be deducted from future benefits payable to or on behalf of the Participant from this Plan.

Attachment A

Predecessor Plans

1.   The AT&T Pension Benefit Make Up Plan No. 1, which is also the successor plan, effective January 1, 2000, to the SNET Pension Benefit Plan and, effective January 1, 1999, to the Pacific Telesis Group Excess Benefit Plan.

2.   Section 4.10.2 of the AT&T Pension Benefit Plan – Non-Bargained Program, which are the 415 Excess Benefit Provisions of such plan

3.   The Ameritech Corporate Resource Supplemental Pension Plan, which is a successor to the Ameritech Senior Management Retirement and Survivor Protection Plan and was established by Ameritech Corporation effective as of January 1, 1986, which, in turn was an amendment, restatement and continuation of the following predecessor plans:  the Ameritech Management Supplemental Pension Plan, the Ameritech Senior Management Non-Qualified Pension Plan, the Ameritech Mid-Career Pension Plan, and the retirement and survivor benefit provisions of the Ameritech Senior Management Long Term Disability and Survivor Protection Plan.

4.   The Ameritech Management Supplemental Pension Benefit Plan

5.   Effective January 1, 2009, The Cingular Wireless SBC Executive Transition Pension Make Up Plan and The Cingular Wireless SBC Executive 2005 Transition Pension Make Up Plan

EX-10.QQII

Exhibit 10-qq(ii)

AT&T INC.

HUMAN RESOURCES COMMITTEE

June 26, 2008

Second Amendment to BellSouth Corporation

Stock and Incentive Compensation Plan

RESOLVED, that the Human Resources Committee of AT&T Inc. ("Corporation") hereby authorizes and directs the Senior Executive Vice President-Human Resources to provide that, notwithstanding anything to the contrary in the plan, payments of Restricted Stock Units under the BellSouth Corporation Stock and Incentive Compensation Plan must be delayed six months from when they would otherwise be payable when such amounts are to be paid to a Specified Employee, as that term is used in Treasury Regulation §1.409A; and

RESOLVED FURTHER, that the appropriate officers of the Corporation are authorized to do or cause to be done any and all such acts and things, and to execute and deliver any and all documents and papers that they may deem necessary, proper or advisable to carry out the foregoing resolutions.

EX-10.XX

Exhibit 10-xx

AT&T

SENIOR MANAGEMENT LONG TERM

DISABILITY AND SURVIVOR PROTECTION PLAN

As Amended and Restated effective January 1, 1998

With Amendments through December 31, 2008

PURPOSE

The Senior Management Long Term Disability and Survivor Protection Plan (the “Plan”) has provided disability benefits to Senior Managers of AT&T Corp. The Plan also has provided a minimum retirement benefit (from all AT&T sources) to a Senior Manager who satisfies certain age and service requirements at termination of employment. The Surviving Spouse of a Senior Manager is also entitled to a minimum Surviving Spouse benefit (from all AT&T sources) if the Senior Manager dies while actively employed, or after termination of employment with eligibility for a minimum retirement benefit.

Effective December 31, 2007, the Plan was amended to eliminate the disability benefit with respect to future disabilities.  Also effective after December 31, 2007, new Senior Managers do not become participants in this Plan.

During the period from January 1, 2005 to December 31, 2008, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Notice 2005-1, and the final Treasury Regulations for Code Section 409A, and any other generally applicable guidance published in the Internal Revenue Service Bulletin with an effective date prior to January 1, 2009.  On or after January 1, 2009, this Plan shall be interpreted and construed consistent with the requirements of Code Section 409A and all applicable guidance issued thereunder with respect to all accrued benefits under this Plan, including, except as indicated below, those benefits that may be otherwise treated as existing prior to the statutory effective date of Code Section 409A (“grandfathered benefits”) within the meaning of Treasury Regulation Section 1.409A-6(a)(3).  The preceding sentence notwithstanding, it is the intention of the Company that the grandfathering provisions of Code Section 409A be applied under this Plan with respect to any Participant (and any surviving Spouse, Beneficiary or Estate of such Participant) who terminated employment prior to January 1, 2005, with respect to all benefits earned under the Plan with respect to such Participant prior to termination of employment.  If any individual who terminated employment prior to January 1, 2005 is rehired after December 31, 2004 and earns additional benefits following reemployment the terms of the Plan shall be applied separately with respect to benefits earned prior to January 1, 2005 and with respect to benefits earned following rehire. The Company reserves the right to amend any provision of the Plan or any election submitted by a Participant, or take any other action that the Company deems appropriate to ensure compliance with Code Section 409A, including altering the time and form of any distribution so as to accomplish the intended purpose of this Plan.

ARTICLE 1

DEFINITIONS

For the purpose of the Plan, the following terms shall have the meanings set forth in this Article 1.

1.01.   “Administrator” shall mean the person identified as the Pension Plan Administrator under the Pension Plan or such other person or entity designated by the Company.

1.02.   “Affiliated Corporation” shall mean any corporation or other entity of which 50 percent or more of the voting stock is owned directly or indirectly by AT&T.

1.03.   “AT&T” or “Company” shall mean AT&T Corp. (formerly American Telephone and Telegraph Company), a New York Corporation, or its successors.

1.04.   “AT&T Inc.” shall mean AT&T Inc. (formerly SBC Communications Inc.), a Delaware Corporation, which acquired AT&T Corp. effective November 18, 2005 pursuant to that certain merger agreement dated January 30, 2005.

1.05.   “Annual Basic Pay” shall mean the Participant’s annual base salary rate on the last day the Participant was on the active payroll plus an amount determined with reference to the Short Term Plan, but excluding all differentials regarded as temporary or extra payments and all awards and distributions made under the Long Term Plan.  For purposes of determining the Disability Allowance under Article A-2, the amount determined with reference to the Short Term Plan shall be the last Short Term Award granted to the Participant prior to the last day the Participant was on the active payroll.  For purposes of determining the Minimum Retirement Benefit under Article 3 and Article A-3, and the Surviving Spouse Benefit under Article 4 and Article A-4, the amount determined with reference to the Short Term Plan shall be the greater of (a) the Short Term Award for the last full calendar year of service prior to the earlier of the Participant’s retirement, termination or death, or (b) the Short Term Award granted with respect to any later partial calendar year of service.

1.06.   “Board” shall mean the Board of Directors of AT&T Corp.

1.07.   “Committee” shall mean the Employees’ Benefit Committee appointed by the Company to administer the Pension Plan, or any successor to such Employees’ Benefit Committee.

1.08.   “Leave of Absence” shall mean where a person is absent from employment with AT&T on a leave of absence, military leave, or sick leave, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the employer that employs the individual, as adopted from time to time, and the employee is reasonably expected to return to service. Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the employee shall Terminate Employment upon termination of such leave if the employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract. A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the employee being “disabled” (within the meaning of Treasury Regulation Section 1.409A-3(i)(4)). A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the employee has incurred a Termination of Employment.

1.09.   “Disability Benefit Plan” shall mean a Participating Company’s Sickness and Accident Disability Benefit Plan.

1.10.   “Long Term Plan” shall mean the AT&T Senior Management Long Term Incentive Program or successor long term incentive plans.

1.11.       (a) “Participant” for purposes of the Disability Allowance under Article A-2, shall mean an employee of a Participating Company holding a position evaluated or classified as above “E-band” or equivalent, except that no employee who has been notified in writing that the assignment to such position will be temporary shall be considered as a Participant for any purpose under the Plan.  Effective January 1, 2004, for purposes of Section A-2.04, “Participant” shall mean an employee of a Participating Company holding a position as a Senior Manager. Notwithstanding the preceding, effective January 1, 2008, an individual shall be a Participant for purposes of the Disability Allowance only if such individual is considered “disabled” pursuant to Section A-2.01(a) prior to January 1, 2008, and only with respect to a continuous uninterrupted period of disability commencing prior to January 1, 2008.

(b) “Participant” for purposes of the Minimum Retirement Benefit under Article 3, shall mean (i) an employee of a Participating Company who holds a position evaluated or classified as above “E-band” or equivalent, except that no employee who has been notified in writing that the assignment to such position will be temporary shall be considered as a Participant for any purpose under the Plan, or (ii) effective January 1, 2004, an employee of a Participating Company holding a position as a Senior Manager. For purposes of the Minimum Retirement Benefit under Article 3, “Participant” shall also include a former employee who met the requirements of the preceding sentence on the last day of employment with AT&T Corp. and who (i) terminated employment with five or more years of service and on or after age 62, or (ii) retired on a service pension under the Pension Plan or, (iii) effective for a termination of employment on or after January 1, 1998, was Service Pension Eligible as defined herein at the date of termination of employment.

Notwithstanding the preceding, an individual who is not a Participant on December 31, 2007 shall not become a Participant under this Plan.

(c) “Participant” for purposes of the Surviving Spouse Benefit under Article 4, shall mean an employee described in Section 1.11(a)above, or a former employee of a Participating Company who was a Participant under Section 1.11(a) on the last day of employment, if such former employee (1) is eligible to receive a Disability Allowance under Article 2, or (2) is eligible to receive a Minimum Retirement Benefit under Article 3.

(d) “Participant” for purposes of the Death Benefit under Article 5, shall mean a former employee of a Participating Company who was a Participant under Section 1.11(b) above on the last day of employment, if such former employee is eligible to receive a Disability Allowance under Article 2, or is eligible to receive a Minimum Retirement Benefit under Article 3.

      (e)   For purposes of Sections 1.11(b), 1.11(c), and 1.11(d) above, a former employee shall be considered to be eligible to receive a Disability Allowance under Article 2 or a Minimum Retirement Benefit under Article 3 if he or she has met the conditions specified in Article 2 or in Article 3, even though the receipt of other benefits by such former employee precludes his or her receipt of any benefits under Article 2 or Article 3.

      (f)   For purposes of Section 1.11, Senior Manager shall mean a management employee of a Participating Company classified as “Manager 6” in a non-banded environment, or at salary grade level above “E-band” or its equivalent, in a banded environment.

1.12.   “Participating Company” shall mean AT&T Corp. and any Affiliated Corporation that has elected, with the approval of the Committee as required by Section 8.01, to participate in the Plan.

1.13.   “Pension Plan” shall mean the AT&T Management Pension Plan or successor pension plans.

1.14.   “Plan” shall mean this AT&T Senior Management Long Term Disability and Survivor Protection Plan.

1.15.   “SERP Participant” shall mean an officer who is designated as a participant in the AT&T Inc. 2005 Supplemental Employee Retirement Plan (the “AT&T SERP”). The initial day of participation in such plan is the named officer’s “SERP Effective Date” as defined in the AT&T SERP. For purposes of this Plan, such individual is considered a SERP Participant whether or not he or she has satisfied the vesting requirements of the SERP.

1.16.   “SERP Vesting Date” shall mean the date a SERP Participant becomes vested in his or her benefit under the 2005 Supplemental Employee Retirement Plan of AT&T Inc., or January 1, 2011 if later.

1.17.   “Service Pension Eligible” means termination of employment with a combination of age and/or Term of Employment as follows:

(i)          the Participant’s Term of Employment has been at least thirty years, regardless of his or her age, or

(ii)          the Participant’s Term of Employment has been at least twenty-five years and he or she has reached the age of fifty years, or

(iii)          the Participant’s Term of Employment has been at least twenty years and he or she has reached the age of fifty-five years, or

(iv)          the Participant’s Term of Employment has been at least ten years and he or she has reached the age of sixty-five years

For purposes of determining whether a Participant is Service Pension Eligible at his or her termination of employment on or after January 1, 1998, “term of employment” shall include the period of a transition leave of absence, as defined in the Pension Plan, determined in accordance with the provisions of the Pension Plan.

1.18.   “Short Term Award” means the actual amount awarded (including any amounts deferred pursuant to the AT&T Senior Management Incentive Award Deferral Plan) annually to a Participant pursuant to the AT&T Short Term Incentive Plan or successor short term incentive plans.  Short Term Awards shall, for purposes of this Plan, be considered to be awarded on the last day of the performance period with respect to which they are earned.

1.19.   “Short Term Plan” shall mean the AT&T Short Term Incentive Plan or predecessor short term incentive plans.

1.20.   “Specified Employee” shall mean 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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

1.21.   “Surviving Spouse” means a deceased Participant’s surviving spouse of the opposite sex who is such Participant’s “spouse” within the meaning of the Qualified Plan, as defined in the respective provisions of the Qualified Plan.  Notwithstanding the preceding, if an alternate payee (as that term is defined in Section 414(p) of the Code) is deemed the surviving spouse for purposes of all or a portion of the Participant’s benefit under the Qualified Plan, such alternate payee shall not be deemed to be the “spouse” for any purpose under this Plan

1.22.   “Term of Employment” shall have the same meaning as the meaning assigned to such expression in the Pension Plan.

1.23.   “Termination of Employment” shall mean the ceasing of the Participant’s employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily. References herein to Termination of Employment, Terminate Employment, or a similar reference, shall mean the event where the employee has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group. Notwithstanding the foregoing, the employment relationship of a Participant with the AT&T controlled group is considered to remain intact while the individual is on a Leave of Absence. With respect to periods on or after November 18, 2005, the controlled group shall be determined with respect to entities required to be aggregated recognizing the acquisition of AT&T Corp. by SBC Communications Inc. (now known as AT&T Inc.).

ARTICLE 2

DISABILITY ALLOWANCE

Disability benefits under this Plan are provided only with respect to an eligible Participant whose disability commenced prior to January 1, 2008.  Plan provisions applicable to disability benefits are described in Article A-2.

ARTICLE 3

MINIMUM RETIREMENT BENEFIT

This Article 3 describes the Minimum Retirement Benefit payable with respect to a Participant who terminates employment on or after December 1, 2008. The provisions of Article A-3 describe the Minimum Retirement Benefit with respect to a Participant who terminates employment prior to December 1, 2008.

3.01. A Participant described in Section 1.11(a) whose Term of Employment has been five years or more who terminates employment on or after his or her sixty-second birthday, or a Participant described in Section 1.11(b) who is Service Pension Eligible at the time of his or her termination of employment, shall be eligible to receive a monthly minimum retirement benefit equal to one and one-quarter percent of Participant’s Annual Basic Pay, as defined in Section 1.05, on the last day the Participant was on the active payroll reduced by the sum of the Immediate Annuity Value of the Qualified Plan, and the Immediate Annuity Value of the AT&T Nonqualified Pension Plans.  For purposes of this Section 3.01,

(a) the Immediate Annuity Value of the Qualified Plan means the monthly amount of annuity payments that would be paid under the Pension Plan on a single life, level payment annuity basis assuming payment of such plan benefit commenced immediately upon the Participant’s Termination of Employment, notwithstanding the form of payment of such Pension Plan benefit actually made to the Participant and notwithstanding the actual commencement date of such Pension Plan benefit; and

(b) the Immediate Annuity Value of the AT&T Nonqualified Pension Plans shall mean the monthly amount of annuity benefits paid under the AT&T Excess Benefit and Compensation Plan and the AT&T Non-Qualified Pension Plan, as applicable, commencing at the actual time and pursuant to the actual form such benefit payments are made from such plans; provided, however, that if such payments are made in a form of payment other than a life annuity, the “Immediate Annuity Value” for purposes of this Section 3.01(b) shall mean the amount payable as a single life annuity that is the actuarial equivalent of the payments made from such plans. Actuarial equivalence for this purpose shall be determined based on the actuarial assumptions and methodology in effect under the SERP as of the date payments commence.

Notwithstanding the preceding, with respect to a Participant whose Termination of Employment occurs after the SERP Vesting Date, as defined herein, a benefit shall be calculated pursuant to the provisions of the preceding paragraph as of the Participant’s SERP Vesting Date, as if the Participant had a Termination of Employment and benefits under the Pension Plan and AT&T Nonqualified Pension Plans had commenced as of such date.  Thereafter, the Minimum Retirement Benefit shall be a frozen amount equal to the amount so determined as of such date.  If a Participant is not Service Pension Eligible or is not age 62 or older with five or more years of service as of the SERP Vesting Date, the Participant’s Minimum Retirement Benefit shall thereafter be zero.

3.02. The minimum retirement benefit shall be paid as an annuity, lump sum, or in installments payments, pursuant to an election under the AT&T SERP made on or before December 31, 2008 with respect to benefits that may become payable to the Participant under the AT&T SERP. The amount of any payment made in the form of installments or a lump sum will be the actuarial equivalent of the single life annuity benefits determined pursuant to Section 3.01, based on the actuarial assumptions and methodology in effect under the SERP as of the date payments commence.

3.03. Payment of the Minimum Retirement Benefit shall commence at the Participant’s Termination of Employment. Notwithstanding the preceding, effective on and after January 1, 2005 with respect to payments in the form of a commercial annuity pursuant to Section 6.01 and effective on and after January 1, 2009 with respect to all other payments under the Plan, payment under the Plan to or with respect to a Participant who is eligible to participate in the SERP or who is determined to meet the definition of Specified Employee shall be payable as otherwise provided in this Plan, except that the initial payment shall be made no earlier than six (6) months following his or her Termination of Employment.  If, absent this Section 3.03, payment to a Specified Employee would have commenced before the expiration of such six-month period, the first payment with respect to such Specified Employee will include the sum of the annuity payments withheld, together with interest thereon.    For purposes of the immediately preceding sentence, interest shall be credited using the GAAP Rate in effect as of the end of the calendar year immediately preceding the Participant’s Termination of Employment, for distributions made after December 31, 2007.  “GAAP Rate” means such rate as defined under the SERP for the referenced period. Notwithstanding the preceding, for distributions made prior to January 1, 2008, interest credited for purposes of this Section 3.03 shall be at an effective annual rate equal to 120 percent of the Federal Mid-term rate in effect as of the date such annuity payments otherwise would have commenced..

3.04. Payments made pursuant to this Article 3 shall terminate at the death of the Participant, but shall terminate earlier if the form of payment, determined pursuant to Section 3.02, is other than a life annuity form of payment.

ARTICLE 4

SURVIVING SPOUSE BENEFIT

This Article 4 describes the Surviving Spouse Benefit payable with respect to a Participant who is an employee on December 1, 2008 and whose death occurs on or after December 1, 2008. The provisions of Article A-4 describe the Surviving Spouse Benefit with respect to a Participant not described in the preceding sentence.

4.01. Subject to the provisions of Section 4.02, in the event of the death of a Participant, who is described in Section 1.11(c), the Surviving Spouse of such Participant shall be eligible to receive a monthly benefit equal to one and one-quarter percent of the Participant’s Annual Basic Pay, as defined in Section 1.04, on the last day the Participant was on the active payroll prior to his or her death reduced by the Spouse Immediate Annuity Value of the Qualified Plan, and the Spouse Immediate Annuity Value of the AT&T Nonqualified Pension Plans.  The Spouse Immediate Annuity Value of the Qualified Plan means the monthly annuity payment that would be paid to the Participant under the Pension Plan on a single life, level payment annuity basis assuming payment of such plan benefit commenced immediately upon the Participant’s Termination of Employment, whether by death or otherwise, notwithstanding the form of payment of such Pension Plan benefit actually made to the Participant and notwithstanding the actual commencement date of such Pension Plan benefit.  For purposes of this Section 4.01, the Spouse Immediate Annuity Value of the AT&T Nonqualified Pension Plans shall mean the monthly annuity benefits paid to the Surviving Spouse under the AT&T Excess Benefit and Compensation Plan and the AT&T Non-Qualified Pension Plan, as applicable, commencing at the actual time and pursuant to the actual form such benefit payments are made to the Surviving Spouse from such plans following the death of the Participant.

Notwithstanding the preceding, with respect to a Participant whose Termination of Employment occurs after the SERP Vesting Date, a benefit shall be calculated pursuant to the provisions of the preceding paragraph as of the Participant’s SERP Vesting Date, as if the Participant died and benefits under the Pension Plan and the AT&T Nonqualified Pension Plans had commenced on such date.  The amount so determined shall be fixed, and shall not be subject to redetermination. With respect to a benefit payable upon the death of a Participant occurring after the SERP Vesting Date, the Surviving Spouse Benefit shall be determined as follows:

(i)   If the Participant dies following Termination of Employment, the Surviving Spouse Benefit shall be equal to the amount determined as of the SERP Vesting Date; provided, however, if the Participant is not Service Pension Eligible or is not age 62 or older with five or more years of service as of the SERP Vesting Date, the Surviving Spouse Benefit shall be zero.

(ii)  If the Participant dies prior to Termination of Employment, the Surviving Spouse Benefit shall be equal to the amount determined as of the SERP Vesting Date.

4.02. Notwithstanding any provision of Section 4.01 to the contrary, the Surviving Spouse of a Participant shall not be eligible to receive benefits under this Article 4 if the form of payment designated by the Participant pursuant to an election under the AT&T SERP made on or before December 31, 2008 with respect to benefits that may become payable to the Participant under the AT&T SERP is other than a joint and survivor form of payment with the Surviving Spouse as the joint annuitant.

4.03.   The benefit payable to the Surviving Spouse shall be paid in the form of a single life annuity, commencing upon the death of the Participant.

4.04. Payments made pursuant to this Article 4 shall terminate at the death of the Surviving Spouse.

ARTICLE 5

DEATH BENEFITS

5.01.   Upon the death of a Participant described in Section 1.11(d) whose last day on the active payroll occurred on or after January 1, 1987, and who has not retired on a service pension or a disability pension under the Pension Plan, or who was not Service Pension Eligible at the time of termination, a death benefit in the amount of the Participant’s annual base salary rate in effect on the last day said Participant was on the active payroll shall be paid to one or more of the beneficiaries listed in Section 5.02 below as determined by the Committee, provided, however, that such death benefit shall be reduced by the sum of any death benefit paid under Section 5 of the Pension Plan, the AT&T Excess Benefits and Compensation Plan, and the AT&T Non-Qualified Pension Plan on account of the Participant’s death.

5.02.   The persons who may be the beneficiaries of the death benefit described in Section 5.01 are the Participant’s legal spouse if living with him at the time of his or her death, his or her unmarried child or children under age 23 (or over that age if physically or mentally incapable of self-support) who were being supported in whole or in part by the deceased at his or her death, or a dependent parent or parents living with the deceased at the time of his or her death or in a separate household in the vicinity of the deceased and provided by him.

5.03.   If the Participant is not survived by any person listed in Section 5.02, a death benefit up to the maximum amount shown in Section 5.01 above may be payable, at the discretion of the Committee, to any other dependent relative receiving or entitled to receive support from the deceased; if no such dependent relative survives the deceased, no death benefit will be payable under this Plan.

ARTICLE 6

SOURCE OF PAYMENT

6.01.       Source of Payments.

(a)           AT&T may establish a trust to hold assets to be used to make benefit payments under the terms of this Plan, provided such trust does not cause the Plan to be “funded” within the meaning of ERISA.  Funds invested hereunder shall, for purposes of this Plan, be considered to be part of the general assets of the Participating Company which invested the funds, and no Participant, beneficiary or lawful spouse shall have any interest or right in such funds.  To the extent trust assets are available, they may be used to pay benefits arising under this Plan and all costs, charges and expenses relating thereto.  To the extent that the funds held in the trust are insufficient to pay such benefits, costs, charges and expenses, AT&T or the responsible Participating Company shall pay such benefits, costs, charges and expenses from its general assets.

(b)           In addition, the Company may, in its sole discretion, purchase and distribute one or more commercial annuity contracts, or cause the trustee of the trust to purchase and distribute one or more commercial annuity contracts, to make benefit payments required under this Plan, to any Officer, as defined herein, or the Surviving Spouse of any Officer, provided, however, that with respect to an annuity purchase occurring prior to January 1, 2005,  the purchase and distribution of any such annuity contracts shall be no sooner than the expiration of any forfeiture provisions applicable to the Officer  under the AT&T Non-Competition Guidelines, or as otherwise may be provided in accordance with procedures establish by the Executive Vice President – Human Resources (or any successor to such position), and provided further that, effective January 1, 2004, the Company’s right to direct that payments under the Plan shall be made through one or more commercial annuity contracts shall be applicable to only the benefits payable to any Participant, or the Surviving Spouse of any such Participant, as applicable, who (1) was  on the active payroll of the Company (or on an approved leave of absence with guaranteed right of reinstatement) and classified as an Officer on December 31, 2003, and (2) satisfies the age and service requirements, or is within twelve months of satisfying the  requirements in effect at the time the Participant terminates employment with the Company for the receipt of retirement-related health benefits under the AT&T Corp. Postretirement Welfare Benefits Plan (or any successor to such plan) (other than by virtue of the “Rule of 65”or  through a Company-sponsored employee-paid health benefits access program, or through the AT&T Corp. Separation Medical Plan), without regard to whether or not the Officer has five years of service as of December 31, 1999. Such annuity contracts may be purchased from a commercial insurer acceptable to the Executive Vice President - Human Resources (or any successor to such position). Further, the Executive Vice President - Human Resources (or any successor to such position), may determine, in his or her sole discretion, to pay additional sums to any Officer, from the Company’s general assets or from the trust, if any, to reimburse the Officer for additional federal and state income taxes estimated to be incurred by reason of the distribution of any such annuity contracts. The Executive Vice President - Human Resources (or any successor to such position) shall establish a methodology or methodologies for determining the amount of such additional sums. The methodology or methodologies selected shall be those that the Executive Vice President - Human Resources (or any successor to such position) determines, in his or her sole discretion, to be the most effective and administratively feasible for the purpose of producing after-tax periodic benefit payments that approximate the after-tax periodic benefit payments that would have been received by Officers in the absence of the distribution of the annuity contract.  Any such purchase and distribution of an annuity contract shall be a full and complete discharge of the Plan’s, AT&T’s and the Participating Companies’ liability for payments assumed by the issuer of the annuity contract.

(c)    Notwithstanding the provisions of the preceding Section 6.01(b), effective January 1, 2005, a Participant who is eligible to elect to receive his or her benefit under the Plan in the form of a third-party commercial annuity contract pursuant to Section 6.01(b) shall be required to submit an election, on a form provided by the Company, with respect to the time and form of payment in which benefits under this Plan shall be distributed for any reason other than the death of the Participant.  Such election form shall be submitted to the Company no later than one of the following dates, whichever is applicable:  (i) such Participant’s separation from service, with respect to distribution of such annuity contract during the 2005 calendar year, (ii) the earlier of (A) such employee’s separation from service, or (B) December 31, 2005, with respect to the distribution of such annuity contract during the 2006 calendar year, and (iii) December 31, 2006, for distributions of such annuity contracts occurring after the 2006 calendar year.  Notwithstanding the foregoing, the Company may permit such a Participant to submit a distribution election form in 2006 with respect to his or her benefits under the Plan, provided that such election in the 2006 calendar year may not result in a change in payment elections with respect to payments that the Participant would otherwise receive during the 2006 calendar year, or to cause payments to be made in 2006, to the extent permitted under the proposed Treasury Regulations under Code Section 409A.

(d)  Notwithstanding the provisions of the preceding Section 6.01(b) and Section 6.01(c), the annuity purchase program described in Section 6.01(b) shall be discontinued effective September 6, 2007, and any election in effect on September 6, 2007 pursuant to which a Participant has elected to receive distribution of his or her benefits under this Plan through the purchase of a commercial annuity contract shall be null and void, as such election relates to any distribution from this Plan to a Participant or Surviving Spouse occurring after September 6, 2007.

6.02.       Unfunded Status.

The Plan at all times shall be entirely unfunded for purposes of the Internal Revenue Code of 1986, and ERISA, and, except as provided in Section 6.01, no provision shall at any time be made with respect to segregating any assets of a Participating Company for payment of any benefits hereunder.  Funds invested hereunder shall continue for all purposes to be part of the general assets of the Participating Company which invested the funds.  The Plan constitutes a mere promise by the Participating Company to make payments, if any, in the future.  No Participant, spouse, beneficiary or any other person shall have any interest in any particular assets of a Participating Company by reason of the right to receive a benefit under the Plan and to the extent the Participant, surviving lawful spouse, beneficiary or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any unsecured general creditor of a Participating Company.

ARTICLE 7

ADMINISTRATION OF THE PLAN

7.01.       Administration and Authorities.

The Plan shall be administered by the Company and it shall have full discretionary authority to manage and control the operation and administration of the Plan, including the power to interpret provisions of the Plan, make determinations of fact, promulgate rules and regulations, determine benefit eligibility of individual and classes of Participants, delegate its powers and duties hereunder to the Committee, the Administrator or others and take such other action as it shall find necessary and appropriate to implement the provisions of the Plan.  The Committee and the Administrator may retain attorneys, consultants, accountants or other persons (who may be employees of the Company or an Affiliated Corporation) to render advice and assistance and may delegate any of the authorities conferred on it to such persons as it shall determine to be appropriate to effect the discharge of its duties hereunder.  The Company, the Affiliated Corporations and any of their officers and employees shall be entitled to rely upon the advice, opinions, and determinations of any such persons.  Any exercise of the authorities set forth in this Section, whether by the Company, the Committee or its Delegate, or the Administrator, shall be final and binding upon the Company, its Affiliated Corporations, their officers, directors and affected Participants and beneficiaries.

7.02.      Committee.

The Company has delegated to the Committee authority to make the final determination to grant or deny claims for benefits under the Plan with respect to Participants and to authorize disbursements according to the terms of the Plan.

7.03.      Indemnification.

No member of the Board or the Committee or the Administrator shall be personally liable by reason of any contract or other instrument executed by such individual on his or her behalf or in his or her capacity as a member of the Board, Committee or the Administrator nor for any mistake of judgment made in good faith, and AT&T shall indemnify and hold harmless each member of the Board, each member of the Committee, the Administrator and each other employee, officer, or director of AT&T or any Participating Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or bad faith.

7.04.   Benefit Claims and Appeals.

       (a)   Benefit Claims.

All claims for benefit payments under the Plan shall be submitted in writing by a Participant, a Surviving Spouse, beneficiary, or the estate of the Participant, or the duly authorized representative of such person or estate (“Claimant” for purposes of this Section 7.04) to the Administrator. The Administrator shall notify the Claimant in writing within 90 days after receipt as to whether the claim has been granted or denied. This period may be extended for up to an additional 90 days, for a total of 180 days, in the case of special circmstances provided that written notice of the extension is furnished to the Claimant prior to the termination of the initial 90-day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the benefit determination. In the event the claim is denied, in whole or in part, the Claimant will receive notice of the Administrator’s decision, including: (i) the specific reasons for the adverse determination, (ii) reference to the pertinent Plan provisions on which the adverse determination is based, (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) a description of the Plan’s procedures for appealing the adverse determination (including applicable time limits) and the Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse determination on review.

      (b)   Benefit Appeals.

A Claimant whose claim for benefits has been denied, in whole or in part, may, within 60 days of receipt of any adverse benefit determination, appeal such denial to the Committee. All appeals shall be in the form of a written statement and shall (i) set forth all of the reasons in support of favorable action on the appeal, (ii) identify those provisions of the Plan upon which the Claimant is relying, and (iii) include copies of any other documents, records and other materials which may support favorable consideration of the claim. If the Claimant submits a written request for review of a denied claim, the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002), and (iv) a statement of the right of the Claimant to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review.  The Claimant may raise issues even if such issues were not raised in the initial benefit determination. The Committee shall decide the issues presented within 60 days after receipt of such request, but this period may be extended for up to an additional 60 days in the case of special circumstances provided that written notice of the extension is furnished to the Claimant prior to the termination of the initial 60-day period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination. In the case of an adverse determination, the decision of the Committee shall be set forth in writing and include (i) the specific reason or reasons for the adverse determination, (ii) reference to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002) relevant to the Claimant’s claim for benefits, and (iv) a statement of the right of the Claimant to bring a civil action action section 502(a) of ERISA.

Any Claimant whose claim for benefits has been denied shall have such further rights of review as are provided in ERISA § 503, and the Committee and Administrator shall retain such right, authority, and discretion as is provided in or not expressly limited by ERISA § 503.  The Plan provisions require that the Claimant pursue all claim and appeal rights described in this Section 7.04 before seeking any other legal recourse regarding claims for benefits.

      (c)   Final Review.

The Committee shall serve as the final review committee, under the Plan and ERISA, for the review of all appeals by Claimants (as defined in Section 7.04) whose initial claims for benefits have been denied, in whole or in part, by the Administrator. The Committee shall have the authority, subject to Section 7.04(c), to determine conclusively for all parties any and all questions arising from administration of the Plan, and shall have sole and complete discretionary authority and control to manage the operation and administration of the Plan, including, but not limited to, authorizing disbursements according to the Plan, the determination of all questions relating to eligibility for participation and benefits, interpretation of all Plan provisions, determination of the amount and kind of benefits payable to any Participant, Surviving Spouse or estate, and the construction of disputed and doubtful terms. Such decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.

ARTICLE 8

ADOPTION, AMENDMENT AND TERMINATION

8.01.        Adoption of Plan.

Any Affiliated Corporation that participates in the Pension Plan may, with the consent of the Committee, elect to participate in the Plan.  Such Affiliated Corporation shall become a Participating Company as of the date specified by the Committee in its resolution approving the participation of the Affiliated Corporation in the Plan.

8.02.        Amendment and Termination.

AT&T is the Sponsor of the Plan and the Board or its delegates, may from time to time amend, modify or change the Plan as set forth in this document, and the Board or its delegate (acting pursuant to the Board’s delegations of authority then in effect) may terminate the Plan at any time.  Plan amendments may include, but are not limited to, elimination or reduction in the level or type of benefits provided to any class or classes or Participants, surviving lawful spouses and beneficiaries).  Any and all Plan amendments may be made without the consent of any employee, Participant, spouse or beneficiary.  Notwithstanding the foregoing, the exercise of the power to amend, modify or terminate the Plan shall be subject to the limitations described in paragraphs (a) and (b) below.

      (a)   Such amendment, modification or termination shall not affect the rights of any Participant or surviving lawful spouse, without his or her consent, to any benefit under the Plan to which such Participant or surviving lawful spouse may have previously become entitled as a result of disability, death or termination of employment which occurred prior to the later of the adoption date or the effective date of such amendment or termination.

      (b)   Such amendment, modification or termination shall not affect the rights of any Participant or his or her surviving lawful spouse, without his or her consent, to any future benefits payable under Article 3 or Article 4, provided that, prior to the later of the adoption date or the effective date of such amendments or termination, such Participant either (i) had satisfied the requirements for eligibility for the benefits described in Article 3, other than the termination of employment requirement, or (ii) had begun to receive a disability allowance under Article 2.  For purpose of determining a spouse’s benefit, it shall be assumed that a Participant who is receiving a disability allowance as of the later of the adoption date or effective date of such amendment will continue to receive said allowance until his or her death.  The Annual Basic Pay used to compute such future benefits under Article 3 or Article 4 shall be the Participant’s highest Annual Basic Pay as described in Section 1.04 on any day during the term of his or her employment completed prior to the later of the adoption date or the effective date of such amendments or termination as if the Participant had terminated employment on that day.

Notwithstanding the preceding, the Board may adopt any prospective or retroactive amendment that it determines is necessary for the Plan to maintain its compliance with Code Section 409A.

8.03.       Sale, Spin-Off, or Other Disposition of Participating Company

      (a)   Subject to Section 8.02 of this Plan, in the event AT&T sells, spins off, or otherwise disposes of an Affiliated Corporation, or disposes of all or substantially all of the assets of an Affiliated Corporation such that one or more Participants terminate employment for the purposes of accepting employment with the purchaser of such stock or assets, any person employed by such Affiliated Corporation who ceases to be an employee of the Company or an Affiliated Corporation as a result of the sale, spin-off, or disposition shall be deemed to have terminated his or her employment with a Participating Company for all relevant purposes under this Plan. Notwithstanding the preceding, effective January 1, 2005, no distribution shall commence pursuant to this Section 8.03(a) unless the Participant has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group. With respect to periods on or after November 18, 2005, the controlled group shall be determined with respect to entities required to be aggregated recognizing the acquisition of AT&T Corp. by SBC Communications Inc. (now known as AT&T Inc.).

        (b)   Notwithstanding the foregoing provisions of this Section 8.03, and subject to Section 8.02 of this Plan, if the sale, spin-off, or other disposition of the stock or assets of an Affiliated Corporation is to a Successor Plan Sponsor with the effect that a Participant is or becomes a Transition Participant, the Successor Plan Sponsor shall be solely liable for the payment of the pension and death benefits described in this Plan, and the entitlement of the Transition Participant or his or her surviving lawful spouse or beneficiary to benefits under this Plan shall terminate.  A Transition Participant shall not be considered to have terminated his or her employment with AT&T or a Participating Company for any purpose under this Plan.

ARTICLE 9

GENERAL PROVISIONS

9.01.        Effective Date.

This Plan was first adopted with effect on March 17, 1976 and was previously amended and restated effective January 1, 1995.  This amended and restated Plan shall be effective with respect to Participants who are eligible for benefits under this Plan on or after January 1, 1998.  The provisions of the Plan in effect before January 1, 1998 shall apply to Participants who are terminate employment with eligibility for benefits under the Plan before January 1, 1998, and the spouse of such Participant, if applicable.

9.02.        Assignment of Benefits.

The benefits payable hereunder or the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, executed upon, encumbered, or subjected to any charge or legal process; no interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including without limitation, any judgment or claim for alimony, support or separate maintenance pursuant to a domestic relations order within the meaning of Section 206(d)(3) of ERISA and claims in bankruptcy proceedings.  Any such attempted disposition shall be null and void.

9.03.       Claims Release.

In case of accident resulting in injury to or death of a Participant which entitles the Participant or his or her surviving lawful spouse to benefits under the Plan, the Participant or his or her surviving lawful spouse may elect to accept such benefits or to prosecute such claims at law as the Participant or the surviving lawful spouse may have against one or more Participating Companies.  If an election is made to accept the benefits under the Plan, such election shall be in writing and shall release such Participating Company or such Participating Companies from all claims and demands that the Participant or his or her surviving lawful spouse may have against it, or against them, otherwise than under this Plan or under any other plan maintained by a Participating Company, on account of such accident.  The right of the Participant to a disability allowance under Article A-2 of the Plan shall lapse if election to accept such benefits, as above provided, is not made within sixty days after injury, or within such greater time as the Company shall fix for the making of such election.

9.04.       Damage Claims or Suits.

Should a claim other than under this Plan or under any other plan maintained by a Participating Company be presented or suit brought against a Participating Company, for damages on account of injury or death of a Participant, nothing shall be payable under this Plan on account of such injury or death except as provided in Section 9.05, provided, however, that the Company may, in its discretion and upon such terms as it may prescribe waive this provision if such claims be withdrawn or if such suit be discontinued.

9.05.        Judgment or Settlement.

In case any judgment is recovered against a Participating Company or any settlement is made of any claim or suit on account of the injury or death of a Participant, and the total amount which would otherwise have been payable under the Plan and under any other plan maintained by the Participating Company is greater than the amount paid on account of such judgment or settlement, the lesser of (a) the difference between such two amounts or (b) the amount which would otherwise have been payable under this Plan, may in the discretion of the Company, be distributed to the beneficiaries who would have received benefits under this Plan.

9.06.        Forfeiture of Benefits.

All Benefits to which a Participant and his or her lawful spouse would be otherwise eligible hereunder may be forfeited, at the discretion of the Board or of the Committee, if an individual without the Company’s consent establishes a relationship with a competitor of the Company or engages in any activity in conflict with or adverse to the interests of the Company under the standards of the AT&T Non-Competition Guideline and as determined by the Board or the Committee in its sole discretion.  To the extent a benefit under any other nonqualified plan of AT&T is offset by benefits payable under this Plan, such offset shall be determined as if a forfeiture had not occurred.

9.07.        Payment under Law.

In the case of any benefit, which the Committee shall determine to be of the same general character as a payment provided by the Plan, shall be payable to any participant, to his or her beneficiaries, his or her estate or his or her annuitant under any law now in force or hereafter enacted, only the excess, if any, of the amount prescribed in the Plan above the amount of such payment prescribed by law shall be payable under the Plan; provided, however, that no benefit payable under the Plan shall be reduced by reason of any governmental benefit or pension payable on account of military service or by reason of any benefit which the recipient would be entitled to receive under the Social Security Act or Railroad Retirement Act.  In those cases where, because of differences in the beneficiaries or in the time or methods of payment or otherwise, the determination of any such excess is not ascertainable by mere comparison but adjustments are necessary, the Committee or the Administrator, as applicable, shall, in its discretion, determine whether or not in fact any such excess exists and make the adjustments necessary to carry out in a fair and equitable manner the spirit of the provision for the payment of any such excess.

9.08.       Governing Law.

To the extent such laws are not preempted by the laws of the United States of America, the Plan shall be governed by the laws of the State of Texas, except as to its principles of conflict of laws.

9.09.        Severability.

If any section, clause, phrase, provision or portion of this Plan or the application thereof to any person or circumstance shall be invalid or unenforceable under any applicable law, such event shall not affect or render invalid or unenforceable the remainder of this Plan and shall not affect the application of any section, clause, provision, or portion hereof to other persons or circumstances.

9.10.       Facility of Payment.

If the Administrator shall find that any person to whom any amount is or was payable under the Plan is unable to care for his or her affairs because of illness or accident, then any payment, or any part thereof, due to such person (unless a prior claim therefore has been made by a duly appointed legal representative), may, if the Administrator so directs AT&T, be paid to the same person or institution that benefit with respect to such person is paid or to be paid under the Pension Plan if applicable, or the Participant’s lawful spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Administrator to be a proper recipient on behalf of such person otherwise entitled to payment.  Any such payment shall be in complete discharge of the liability of AT&T, the Board, the Committee, the Administrator, and the Participating Company therefore.  If any payment to which a Participant or beneficiary is entitled under this Plan is unclaimed or otherwise not subject to payment to the person or persons so entitled, such amounts representing such payment or payments shall be forfeited after a period of two years from the date the first such payment was payable and shall not escheat to any state or revert to any party; provided, however, that any such payment or payments shall be restored if any person otherwise entitled to such payment or payments makes a valid claim.

9.11.   Headings.

The captions of the preceding the sections and articles hereof have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provision of the Plan.

9.12.   Tax Withholding.

AT&T shall withhold all federal, state, local or other taxes required by law to be withheld from payments or accruals under the Plan.

9.13.   Fiduciary Relationship.

Nothing contained in the Plan, and no action taken pursuant to the provisions of the Plan, shall create or be construed to create a trust or contract of any kind, or a fiduciary relationship between or among AT&T, any other Participating Company, any Affiliated Corporation, the Board, the Administrator, the Committee, any Participant, employee, any surviving lawful spouse or any other person.

9.14.   No Guarantee of Employment.

Neither the Plan nor any action taken hereunder shall be construed as (i) a contract of employment or deemed to give any employee the right to be retained in the employment of a Participating Company, the right to any level of compensation, or the right to future participation in the Plan; or (ii) affecting the right of the Participating Company to discharge or dismiss any employees at any time.

9.15.   Plan Year.

For purposes of administering the Plan, the plan year shall begin on January 1 and end on December 31.

9.16.   Entire Plan.

This written Plan document is the final and exclusive statement of the terms of this Plan, and any claim of right or entitlement under the Plan shall be determined in accordance with its provisions pursuant to the procedures described in Article 7.  Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 8.02.

9.17.   Overpayments.

If any overpayment is made by the Plan for any reason, the Plan shall have the right to recover such overpayment.  The Participant shall cooperate fully with the Plan to recover any overpayment and provide any necessary information and required documents. Any recovery of overpayment pursuant to this Section 9.17 may be deducted from future benefits payable to or on behalf of the Participant from this Plan.

APPENDIX A

PRIOR PLAN PROVISIONS

This Appendix A sets forth the provisions related to the determination of benefit amounts and payment of such benefits payable to or with respect to a Participant whose employment terminated prior to December 1, 2008.  A reference in this Appendix A to a provision of Article 2, Article 3 or Article 4 means such provision as set forth in this Appendix A, unless the reference specifically indicates otherwise.

ARTICLE A-2

DISABILITY ALLOWANCE

2.01  (a) A Participant shall be considered to be “disabled” at any time during the first fifty-two week period (or twenty-six week period for a Participant “disabled” on or after January 1, 2004) following the onset of a physical or mental impairment, if such impairment prevents the Participant from meeting the performance requirements of the position held immediately preceding the onset of the physical or mental impairment.

(b) A Participant shall be considered to be “disabled” after the first fifty-two week period (or twenty-six week period for a Participant “disabled” on or after January 1, 2004) following the onset of a physical or mental impairment if such impairment prevents the Participant from meeting the performance requirements of (1) the position held immediately preceding the onset of the physical or mental impairment, (2) a similar position, or (3) any appropriate position with the Company or any other Participating Company which the Participant would otherwise be capable of performing by reason of the Participant’s background and experience.

(c) The Administrator shall make the determination of whether a Participant is disabled within the meaning of paragraph (a) above; the Committee shall make such determination with respect to paragraph (b) above.

(d) Notwithstanding the preceding, for purposes of the Plan, a Participant shall not be considered disabled with respect to any disability that commences after December 31, 2007.

2.02 (a) A Participant who is disabled, before January 1, 2004, during a period described in Section 2.01(a) shall be eligible to receive a monthly disability allowance equal to one hundred percent of the Participant’s monthly base salary rate on the last day the Participant was on the active payroll, reduced by any amounts described in Section 2.05(a) which are attributable to the period for which benefits are provided under this Section 2.02.

(b) A Participant who is disabled, on or after January 1, 2004, during a period described in Section 2.01(a) shall be eligible to receive a weekly disability allowance equal to one hundred percent of the Participant’s salary rate on the last day the Participant was on the active payroll, reduced by any amounts described in Section 2.05(a) which are attributable to the period for which benefits are provided under this Section 2.02.  The disability allowance provided under this Section 2.02(b) shall commence on the eighth consecutive day of the Participant’s absence from work due to his or her disability, and end on the earlier of (i) the date the Participant ceases to be disabled under Section 2.01(a), or (ii) the last day of the twenty-sixth week after commencement of the short-term disability benefit.

2.03.          (a) A Participant who is disabled, before January 1, 2004, during a period described in Section 2.01(b) shall, prior to his or her sixty-fifth birthday, be eligible to receive a monthly disability allowance equal to sixty percent of the Participant’s monthly base salary rate on the last day the Participant was on the active payroll, reduced by any amounts described in Section 2.05(b) which are attributable to the period for which benefits are provided under this Section 2.03.

(b) A Participant who is disabled, on or after January 1, 2004, during a period described in Section 2.01(b) shall, prior to his or her sixty-fifth birthday, be eligible to receive a weekly disability allowance equal to sixty percent of the Participant’s salary rate on the last day the Participant was on the active payroll, reduced by any amounts described in Section 2.05(b) which are attributable to the period for which benefits are provided under Section 2.03.  Benefits under this Section 2.03(b) shall be payable if the Participant remains disabled as a result of the same physical or mental impairment resulting in the payment of disability benefits under Section 2.02(b).  The disability allowance provided under this Section 2.03(b) shall commence on the twenty seventh week following the date when the Participant commenced receiving disability benefits under Section 2.02(b) and shall end on the earlier of (i) the date the Participant ceases to be disabled under Section 2.01(b), or (ii) the Participant’s sixty-fifth birthday.

2.04.   A Participant who is disabled during a period described in Section 2.01(b) shall commencing with his or her sixty-fifth birthday or the start of the period described in Section 2.01(b), if later, be eligible to receive a monthly disability allowance equal to the greater of:

(i)   one and one-quarter percent of the Participant’s Annual Basic Pay, as defined in Section 1.04, on the last day the Participant was on the active payroll, or

(ii)   if the Participant’s Term of Employment has been five years or more, ninety percent of the sum of (a) the monthly pension the Participant would have been entitled to receive commencing at age sixty-five under the Pension Plan (as in effect on the last day the Participant was on the active payroll, but ignoring any minimum service requirements for eligibility to a pension), if the period after the last day the Participant was on the active payroll and prior to the Participant’s sixty-fifth birthday had been included in the Participant’s Term of Employment as of the end of the applicable averaging period under the Pension Plan, plus (b) the monthly pension the Participant would have been entitled to receive commencing at age 65 under the AT&T Non-Qualified Pension Plan (as in effect on the last day the Participant was on the active payroll, but ignoring any minimum service requirements for eligibility to a pension), if the period after the last day the Participant was on the active payroll and prior to the Participant’s sixty-fifth birthday had been included in the Participant’s Term of  Employment as of the end of the applicable averaging period under the AT&T Non-Qualified Pension Plan, reduced by any amounts described in Section 2.05(c) that are attributable to the period for which benefits are provided under this paragraph.

2.05. (a) The Disability allowance determined for any period under Section 2.02 shall be reduced by the sum of the following benefits received by the Participant which are attributable to the period for which such disability allowance is provided: a service pension, deferred vested pension, or disability pension under the Pension Plan, a pension under the AT&T Excess Benefit and Compensation Plan, a pension under the AT&T Non-Qualified Pension Plan, a pension under the AT&T Mid-Career Pension Plan, an accident disability benefit or sickness disability benefit under the Disability Benefit Plan, any Workers’ Compensation Benefit, plus any comparable benefits provided under the plans or programs of any Successor Plan Sponsor and any other benefit payments required by law on account of the Participant’s disability.  However, no reduction shall be made on account of any pension under the Pension Plan at a rate greater than the rate of such pension on the date the Participant first received such pension after his or her disability, and no reduction shall be made on account of any pension under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefit and Compensation Plan, or the AT&T Mid-Career Pension Plan at a rate greater than the rate of such pension, including adjustments if any to reflect post-retirement incentive awards to the Participant under the Short Term Plan, as of the first date the Participant was entitled to receive such pension after his or her disability.

(b) The disability allowance determined for any period under Section 2.03 shall be reduced by the sum of the following benefits received by the Participant which are attributable to the period for which such disability allowance is provided: a service pension, deferred vested pension or disability pension under the Pension Plan, a pension under the AT&T Excess Benefit and Compensation Plan, a pension under the AT&T Non-Qualified Pension Plan, a pension under the AT&T Mid-Career Pension Plan, an accident disability benefit under the Disability Benefit Plan, any other retirement income payments from the Participant’s Participating Company or any Successor Plan Sponsor, any Workers’ Compensation Benefit, plus any Social Security Insurance Benefit.  However, no reduction shall be made on account of any pension under the Pension Plan at a rate greater than the rate of such pension on the date the Participant first received such pension after his or her disability, and no reduction shall be made on account of any pension under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefit and Compensation Plan, or under the AT&T Mid-Career Pension Plan at a rate greater than the rate of such pension, including adjustments if any to reflect post-retirement incentive awards to the Participant under the Short Term Plan, as of the first date the Participant was entitled to receive such pension after his or her disability, and no reduction shall be made on account of any Social Security Benefit at a rate greater than the rate which the Participant would have first been eligible to receive after his or her disability and as if no other members of his or her family were eligible for any Social Security Benefit.

Furthermore, the Board, in its discretion, may reduce the disability allowance by the amount of outside compensation or earnings of the Participant for work performed by the Participant during the period for which such disability allowance is provided.

(c) The disability allowance determined for any period under Section 2.04 shall be reduced by the sum of the following benefits received by the Participant which are attributable to the period for which such disability allowance is provided: a service pension, deferred vested pension or disability pension under the Pension Plan, a pension under the AT&T Excess Benefit and Compensation Plan, a pension under the AT&T Non-Qualified Pension Plan, a pension under the AT&T Mid-Career Pension Plan, an accident disability benefit under the Disability Benefit Plan, any other retirement income payments from the Participant’s Participating Company or any Successor Plan Sponsor, plus any Workers’ Compensation Benefit.  However, no reduction shall be made on account of any pension under the Pension Plan at a rate greater than the rate of such pension on the date the Participant first received such pension after his or her disability, and no reduction shall be made on account of any pension under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefit and Compensation Plan, or under the AT&T Mid-Career Pension Plan at a rate greater than the rate of such pension, including adjustments if any to reflect post-retirement incentive awards to the Participant under the Short Term Plan, as of the first date the Participant was entitled to receive such pension after his or her disability.

2.06. For purposes of Sections 2.01(a) and 2.01(b), the measurement of time following the onset of a physical or mental impairment shall coincide with the measurement of time used to calculate periods of Sickness and Accident Disability Benefits under Sections 4 and 5 of the Disability Benefit Plan.  Successive periods of physical or mental impairment shall be counted together in computing the periods during which the Participant shall be entitled to the benefits provided under Sections 2.02 and 2.03, except that any disability absence after the Participant has been continuously engaged in the performance of duty for thirteen weeks shall be considered to commence a new period of physical or mental impairment under Section 2.01(a), so that such Participant shall be entitled during such new period to the benefits provided under Section 2.02.

2.07. With respect to a Participant not subject to mandatory retirement at age 65 under the Age Discrimination in Employment Act (29 U.S.C. 631), the period of eligibility for the disability allowance provided in Section 2.03 and the period of eligibility for the disability allowance provided in Section 2.04, shall be the period described in Section 2.03, and the period described in Section 2.04, respectively, or such other period as is required under the Age Discrimination in Employment Act or under any applicable governing regulations or interpretations thereunder.

ARTICLE A-3

MINIMUM RETIREMENT BENEFIT

3.01. The Minimum Retirement Benefit shall be payable as described herein:

       (a) Subject to the provisions of Section 3.01(b) with respect to a Participant who terminates employment after December 31, 1997, a Participant described in Section 1.11(a) whose Term of Employment has been five years or more and is not disabled, who terminates employment on or after his or her sixty-second birthday, or a Participant described in Section 1.11(b) who is retired on a service pension under the Pension Plan, shall be eligible to receive a monthly minimum retirement benefit equal to one and one-quarter percent of Participant’s Annual Basic Pay, as defined in Section 1.04, on the last day the Participant was on the active payroll reduced by the sum of the following benefits received by the Participant which are attributable to the period for which benefits are provided under this Article 3: a service pension or deferred vested pension under the Pension Plan, a pension under the AT&T Excess Benefit and Compensation Plan, a pension under the AT&T Non-Qualified Pension Plan, a pension under the AT&T Mid-Career Pension Plan, and by any other retirement income payments received by the Participant from his or her Participating Company or from a Successor Plan Sponsor.  However, no reduction shall be made on account of any pension under the Pension Plan at a rate greater than the rate of such pension on the date the Participant first received such pension after his or her retirement or other termination of employment, and no reduction shall be made on account of any pension under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefit and Compensation Plan, or under the AT&T Mid-Career Pension Plan at a rate greater than the rate of such pension, including adjustments if any to reflect post-retirement incentive awards to the Participant under the Short Term Plan, as of the first date the Participant was entitled to receive such pension after his or her retirement or other termination of employment.

        (b)  The provisions of this Section 3.01(b) apply with respect to a Participant who terminates employment on or after January 1, 1998.  A Participant described in Section 1.11(a) whose Term of Employment has been five years or more and is not disabled, who terminates employment on or after his or her sixty-second birthday, or a Participant described in Section 1.11(b) who is Service Pension Eligible at the time of his or her termination of employment, shall be eligible to receive a monthly minimum retirement benefit equal to one and one-quarter percent of Participant’s Annual Basic Pay, as defined in Section 1.04, on the last day the Participant was on the active payroll reduced by an offset which is the sum of the benefits, determined in accordance with the following Section 3.01(c),  accrued under the Pension Plan, the AT&T Excess Benefit and Compensation Plan, the AT&T Non-Qualified Pension Plan, the AT&T Mid-Career Pension Plan, and by any other retirement income payments received by the Participant from his or her Participating Company or from a Successor Plan Sponsor (“Offset Plans”), which are attributable to the period for which benefits are provided under this Article 3.  However, no reduction shall be made on account of any pension under the Pension Plan at a rate greater than the rate of such pension on the date the Participant first received such pension after his or her retirement or other termination of employment, and no reduction shall be made on account of any pension under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefits and Compensation Plan, or under the AT&T Mid-Career Pension Plan at a rate greater than the rate of such pension, including adjustments if any to reflect post-retirement incentive awards to the Participant under the Short Term Plan, as of the first date the Participant was entitled to receive such pension after his or her retirement or other termination of employment.

                  (c) The following rules shall apply for purposes of determining the offset described in the preceding Section 3.01(b), effective for pensions that commence under this Plan on or after January 1, 1998 and prior to December 31, 2008:

(i)   with respect to a Participant who commences distribution of all of his or her pension benefit under the Pension Plan simultaneously with commencement of distribution of benefits under this Plan, the offset is the sum of the monthly benefit payable to the Participant under the Offset Plans, or, with respect to the portion of the benefit paid under such Offset Plan in a form other than a monthly annuity, the monthly single life annuity that is the actuarial equivalent of the amount paid in a form other than a monthly annuity. For purposes of this Section 3.01(c)(i), actuarial equivalence is determined pursuant to the provisions of the applicable Offset Plan; and

(ii)   with respect to a Participant who does not commence distribution of all of his or her pension benefit under the Pension Plan simultaneously with commencement of distribution of benefits under this Plan, the offset shall be determined (I) in accordance with Section 3.01(c)(i) with respect to the portion of the benefit under the Offset Plans that commences simultaneously with commencement of distribution under this Plan, and (II) with respect to the portion of the benefit under the Offset Plans that does not commence simultaneously with distribution under this Plan, the amount that would be payable, with respect to such portion of the benefit, in the form of a single life annuity under such Offset Plan, if such single life annuity payment commenced simultaneously with distribution of benefits under this Plan.

3.02. If an amendment to the Pension Plan effective on or after January 1, 1988 and before December 31, 2004, provides for an increase in the service pensions of previously retired employees, then a Participant’s minimum retirement benefit shall be increased pursuant to the same terms and conditions as are set forth in such Pension Plan amendment.

3.03. Subject to the provisions of Section 3.03 in the main text of the Plan regarding payment to Specified Employees, payment of the Minimum Retirement Benefit shall commence at the Participant’s Termination of Employment.

3.04 A Participant who terminated employment before January 1, 1997 with eligibility for a service pension or a disability pension under the Pension Plan shall receive a special pension increase, effective July 1, 1999, in accordance with the following schedule:

(a)   a Participant who terminated employment before January 1, 1976 shall receive an increase in his or her minimum retirement benefit of 15%;

(b)   a Participant who terminated employment after December 31, 1975 and before January 1, 1986 shall receive an increase in his or her minimum retirement benefit of 12.5%;

(c)   a Participant who terminated employment after December 31, 1985 and before January 1, 1991 shall receive an increase in his or her minimum retirement benefit of 10%;

(d)   a Participant who terminated employment during the 1991 calendar year shall receive an increase in his or her minimum retirement benefit of 9%;

(e)   a Participant who terminated employment during the 1992 calendar year shall receive an increase in his or her minimum retirement benefit of 8%;

(f)   a Participant who terminated employment during the 1993 calendar year shall receive an increase in his or her minimum retirement benefit of 7%;

(g)   a Participant who terminated employment during the 1994 calendar year shall receive an increase in his or her minimum retirement benefit of 6%;

(h)   a Participant who terminated employment during the 1995 calendar year shall receive an increase in his or her minimum retirement benefit of 5%; and

(i)   a Participant who terminated employment during the 1996 calendar year shall receive an increase in his or her minimum retirement benefit of 4%.

ARTICLE A-4

SURVIVING SPOUSE BENEFIT

4.01.            (a) Subject to the provisions of Section 4.02 with respect to the Spouse of a Participant who terminates employment after December 31, 1997, in the event of the death of a Participant, who is described in Section 1.11(c), the surviving lawful spouse of such Participant shall be eligible to receive a monthly benefit equal to one and one-quarter percent of the Participant’s Annual Basic Pay, as defined in Section 1.04, on the last day the Participant was on the active payroll prior to his or her death reduced by the sum of the following benefits received by the Participant’s surviving lawful spouse on account of the death of the Participant and which are attributable to the period for which benefits are provided under this Article 4: an annuitant’s pension under the Pension Plan, an annuity under the Insured Annuitant’s Plan, an annuitant’s pension under the AT&T Excess Benefit and Compensation Plan, an annuitant’s pension under the AT&T Non-Qualified Pension Plan and any other lifetime payments to such surviving lawful spouse from the Participant’s Participating Company or from any Successor Plan Sponsor.  However, no reduction shall be made on account of an annuitant’s pension under the Pension Plan, or on account of an annuitant’s pension under the AT&T Non-Qualified Pension Plan or on account of an annuitant’s pension under the AT&T Excess Benefit and Compensation Plan, or on account of any annuity under the Insured Annuitant’s Plan at a rate greater than (1) the rate of such pension or annuity on the date such pension or annuity was first payable in the case of the death of a Participant who is on the active payroll or (2) the rate of such pension or annuity on the date such pension or annuity first would have been payable had the Participant died on the day after the last day the Participant was on the active payroll in the case of the death of a Participant who is not on the active payroll.

              (b) Notwithstanding the preceding, if the benefit to the surviving spouse commences on or after January 1, 1998, and the surviving spouse does not simultaneously commence distribution of benefits under the Pension Plan, the reductions described in the preceding paragraph (a) shall be determined as if payments to the surviving spouse commenced in the form of a single life annuity at the same time as payments commence under this Plan.

              (c) Notwithstanding the preceding paragraphs (a) and (b), with respect to a Participant who terminated employment after December 31, 2004 and prior to December 1, 2008, if the Participant commenced distribution of the benefit under the Pension Plan prior to his or her death, but distribution of such benefit did not commence on or before December 1, 2008, the benefit payable to a surviving spouse pursuant to this Section 4.01 shall be further reduced by the single life annuity benefit, if any, which would have been payable to the Participant commencing on December 1, 2008 from the AT&T Excess Benefits and Compensation Plan and from the AT&T Non-Qualified Pension Plan

4.02. Notwithstanding any provision of Section 4.01 to the contrary, the surviving lawful spouse of a Participant shall not be eligible to receive benefits under this Article 4 if, prior to the Participants death, the Participant could have elected under the Pension Plan or under any predecessor pension plan maintained by a Participating Company to receive a reduced pension for his or her life in order to provide thereafter an annuity for the life of his or her lawful spouse, but he declined to make such an election. Effective for payments with respect to a Participant who terminates employment after December 31, 1997 and dies after commencement of distribution of the Pension Plan, the provisions of this Section 4.02 shall be applied as follows, to reflect the expanded optional forms of payment available under the Pension Plan:

           (a) if the Participant elected a lump sum or single life annuity form of payment under the Pension Plan, no surviving spouse benefit shall be paid under this Plan;

            (b) if the Participant elected the cash payment option (with residual annuity) under the Pension Plan, the benefit otherwise payable to the Surviving Spouse pursuant to Section 4.01 shall be reduced by the actuarial equivalent, determined as a single life annuity, of the amount of the cash payment made to the Participant pursuant to the cash payment option.

4.03 If an amendment to the Pension Plan effective on or after January 1, 1988 and before December 31, 2004, provides for an increase in the survivor annuities payable under said Plan, then the Surviving Spouse Benefit payable under Section 4.01 above shall be increased pursuant to the same terms and conditions as are set forth in such Pension Plan amendment, except that no such increase shall apply to the Surviving Spouse Benefit related to a deceased Participant who had not terminated employment or died prior to the effective date of such amendment.

4.04. The Surviving Spouse Benefit payable under Section 4.01 above shall be increased, effective July 1, 1999, in accordance with the following schedule:

             (a)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment before January 1, 1976, the Surviving Spouse Benefit shall be increased by 15%;

(b)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment after December 31, 1975 and before January 1, 1986, the Surviving Spouse Benefit shall be increased by 12.5%;

(c)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment after December 31, 1985 and before January 1, 1991 , the Surviving Spouse Benefit shall be increased by 10%;

(d)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1991 calendar year, the Surviving Spouse Benefit shall be increased by 9%;

(e)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1992 calendar year, the Surviving Spouse Benefit shall be increased by 8%;

(f)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1993 calendar year, the Surviving Spouse Benefit shall be increased by 7%;

(g)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1994 calendar year, the Surviving Spouse Benefit shall be increased by 6%;

(h)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1995 calendar year, the Surviving Spouse Benefit shall be increased by 5%; and

(i)   if the Surviving Spouse Benefit is with respect to a Participant who terminated employment during the 1996 calendar year, the Surviving Spouse Benefit shall be increased by 4%.

APPENDIX B

Annual Pay Definition Prior to 1991

Section 1.  Definition of Annual Basic Pay

For retirements occurring after August 10, 1980, and before April 15, 1991, the following was the applicable definition of “Annual Basic Pay”:

“Annual Basic Pay” shall mean the Participant’s annual base salary rate on the last day the Participant was on the active payroll plus, with respect to a Participant whose last day on the active payroll occurred after August 9, 1980, an amount determined with reference to the Short Term Plan, but excluding all differentials regarded as temporary or extra payments and all cash payments and distributions made under the Long Term Plan.  The amount determined with reference to the Short Term Plan shall be the lesser of the Participant’s standard Short Term Award in effect on the last day the Participant was on the active payroll or the Participant’s position rate on the last day the participant was on the active payroll multiplied by the applicable percentage determined as follows:

Last Day on Active Payroll August 10, 1980 through October 30, 1981 October 31, 1981 through September 29, 1983 On or after September 30, 1983 % of Position Rate 15% 50% 60%

EX-10.AAA

Exhibit 10-aaa

BELLSOUTH SUPPLEMENTAL LIFE INSURANCE PLAN

Amended and Restated Effective December 31, 2008

1.   PURPOSE

The purpose of the BellSouth Supplemental Life Insurance Plan (the "Plan") is to provide an insurance arrangement under which BellSouth Corporation and its subsidiaries and affiliates can assist key employees in acquiring and financing life insurance coverage.

During the period from January 1, 2005 through December 31, 2008, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Service Notice 2005-1, the proposed Treasury Regulations for Code Section 409A, the Final Treasury Regulations for Code Section 409A, applicable Internal Revenue Services Notices and Announcements and any other generally applicable guidance published in the Internal Revenue Service Bulletin.

2.   DEFINITIONS

For purposes of this Plan, the following terms have the meanings set forth below:

2.01 "Coverage Amount" means the Policy death benefit payable under the Participant's Policy.

2.02 "Coverage Level" means the Single Life Coverage insurance death benefit the Employee is eligible for under the Plan, determined based on the Employee's job classification, in accordance with the schedule of Coverage Levels maintained by the Plan Administrator. Provided ,however, that to determine the amount of insurance (death benefit for which an Employee is eligible, the applicable amount from the schedule of Coverage Levels shall be reduced by one hundred percent (100%) of the amount of any Single Life Coverage insurance death benefit and by fifty percent (50%) of the amount of any Survivorship Coverage insurance death benefit provided to the Employee under the BellSouth Split-Dollar Life Insurance Plan, the BellSouth Corporation Executive Life Insurance Plan, or the BellSouth Corporation Senior Manager Life Insurance Plan.

2.03 "Disability" means that the Participant is receiving disability benefits under any long-term disability plan sponsored by the Employer or an affiliated entity.

2.04 "Effective Date" means the effective date of the Plan, which is January 1, 1998.

2.05 "Employee" means an employee or former employee of the Employer who is eligible to participate in the Plan.

2.06 "Employer" means BellSouth Corporation and any subsidiary or affiliate of BellSouth Corporation which is authorized by the Plan Administrator to participate in this Plan.

2.07 "Employer Premium" means, with respect to a Participant's Policy, the Total Policy Premium payable for the year, less the portion of the premium to be paid by the Participant pursuant to Section 5.01 of the Plan.

2.08 "Enrollment Age" means the Participant's age at the time of enrollment in the Plan as to the Participant's initial Coverage Amount under the Plan, and it means the Participant's age at a subsequent enrollment for an increased Coverage Amount as to the increased Coverage Amount.

2.09 "Insurance Cost" means, with respect to a Participant, the annual cost for the Participant's Coverage Amount determined pursuant to the Insurance Cost schedule maintained by the Plan Administrator. The Insurance Cost for a Participant shall be determined at the time of the Participant's enrollment in the Plan, based on the Participant's Coverage Amount and Enrollment Age, and shall not change thereafter. A smoker rate shall be used to determine the Insurance Cost for any Participant who is deemed a smoker by the Insurer; a nonsmoker rate shall be used for all other Participants. A change in the Insurance Cost schedule will be effective only as to Plan enrollments occurring after the effective date of the change; it shall not affect the Insurance Cost for a Participant with respect to any Coverage Amount in effect for the Participant prior to the effective date of the change. If a Participant's coverage is in effect for a period of less than twelve (12) months during any Policy Year, the Participant's Insurance Cost for that year shall be determined by multiplying the annual cost as determined from the Insurance Cost schedule by a fraction, the numerator of which is the number of full months that the coverage is in effect and the denominator of which is twelve (12).

2.10 "Insurer" means, with respect to a Participant's Policy, the insurance company issuing the insurance policy on the Participant's life (or on the joint lives of the Participant and the Participant's spouse, in the case of a Survivorship Policy) pursuant to the provisions of the Plan.

2.11 "Participant" means an Employee who is participating in the Plan.

2.12 "Participant Premium" means, with respect to each Policy Year (or portion thereof) for a Participant, the Participant's Insurance Cost.

2.13 "Permanent Policy" means a Participant's Policy having cash values which are projected to be sufficient to continue to provide death benefit coverage at least equal to the Participant's Coverage Amount until the policy maturity date specified in the Participant's Policy (determined without regard to any Policy rider which extends the maturity date beyond the originally scheduled policy maturity date), and which is projected to have a cash accumulation value equal to at least ninety-five percent (95%) of the Policy Coverage Amount at the maturity date specified in such Policy, with no further premium payments. The determination of whether a Policy is at a given time a Permanent Policy shall be made by the Plan Administrator, based on Policy projections provided by the Insurer or its agent utilizing the Policy's then current mortality rates and Policy expenses, and the following Policy interest crediting rates. For the Policy Year in which the determination is made and for all prior Policy years, if any, the Policy projection shall be based on the actual interest crediting rates in effect for the Policy (or, if such rate is not known when the determination is made, the actual rate in effect for the preceding Policy Year). For each of the ten (10) succeeding Policy Years, the projections shall reflect that rate decreased ratably such that the rate for the tenth Policy Year following the Policy Year in which the determination is made shall be five percent (5%). For all successive Policy Years, the projection shall reflect a five percent (5%) Policy interest crediting rate. Notwithstanding the foregoing, if the interest crediting rate in effect for the Policy Year in which the determination is made is less than five percent (5%), the projections shall reflect such lower rate for all Policy Years thereafter.

2.14 "Plan" means the BellSouth Supplemental Life Insurance Plan, embodied herein.

2.15 "Plan Administrator" means the Chief Executive Officer of BellSouth Corporation and any individual or committee he designates to act on his behalf with respect to any or all of his responsibilities hereunder; provided, the Board of Directors of BellSouth Corporation may designate any other person or committee to serve in lieu of the Chief Executive Officer as the Plan Administrator with respect to any or all of the administrative responsibilities hereunder.

2.16 "Policy" means the life insurance coverage acquired on the life of the Participant (or on the joint lives of the Participant and the Participant's spouse, in the case of a Survivorship Policy) by the Participant or other Policy Owner issued pursuant to the terms of this Plan. The Plan Administrator shall determine the specific policies which may be acquired under the Plan, and shall maintain a list of approved policies.

2.17 "Policy Owner" means the Participant or that person or entity to whom the Participant has assigned his interest in the Policy.

2.18 "Policy Year" means the twelve month period (and each successive twelve month period) beginning on the issue date of the Policy.

2.19 "Premium Payment Years" means, with respect to a Participant's Policy, the number of consecutive Policy Years, beginning with the first Policy Year, and continuing for the longer of: (1) all Policy Years ending at the end of the Policy Year during which the Participant attains age sixty-two (62) (or, if the Participant dies before such time, the end of the Policy Year during which the Participant would have attained such age); or (2) five (5) Policy Years. Notwithstanding the foregoing, if prior to the end of such period the Policy qualifies as a Permanent Policy, the Premium Payment Years shall end at such earlier time.

2.20 "Retirement" means a termination of the Participant's employment with the Employer under circumstances where the Participant is immediately eligible to receive pension benefits under the Supplemental Executive Retirement Plan (SERP) maintained by the Employer or one of its subsidiaries.

2.21 "Single Life Coverage" means life insurance coverage on the life of the Participant.

2.22 “Specified Employee” shall mean, for periods on or after December 29, 2006, 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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.  For periods prior to December 29, 2006, the term Specified Employee shall mean a “specified employee” under Code Section 409A.

2.23 "Survivorship Coverage" means life insurance coverage on the lives of the Participant and the Participant's spouse, with the life insurance death benefit to be payable at the death of the last survivor of the Participant and the Participant's spouse.

2.24 "TotaI Policy Premium" means the level annual premium amount for the Participant's Single Life Coverage Policy that is projected to result in the Policy qualifying as a Permanent Policy if the annual premium amount is paid each year for all scheduled Premium Payment Years, assuming the Participant qualifies for the Insurer's guaranteed issue nonsmoker rates, or if the Participant is deemed by the Insurer to be a smoker, the Insurer's guaranteed issue smoker rates. The determination as to the amount of the Total Policy Premium shall be based on Single Life Coverage even if the Participant elects Survivorship Coverage. If more than one type of Single Life Coverage Policy is available under the Plan, the Plan Administrator shall determine the Single Life Coverage Policy to be used to determine the Total Policy Premium. The Total Policy Premium for a Participant shall be determined when the Participant enrolls for coverage under the Plan, and shall not be changed thereafter; it shall be based on the Participant's Coverage Level, or, if less, the actual Coverage Amount elected by the Participant.

3.           ELIGIBILITY

3.01 General.  Each Employee who is designated by the Plan Administrator as a member of the Employer's "executive compensation group” or as a "senior manager" shall be eligible to participate in the Plan, provided that the Employee (and any other appropriate party, such as the Employee's spouse or a Policy Owner other than the Employee as determined by the Plan Administrator) relinquishes any rights to or interests in any policies providing interim coverage during the rehabilitation of Confederation Life Insurance Company under the BellSouth Corporation Executive Life Insurance Plan or the BellSouth Corporation Senior Manager Life Insurance Plan and completes such other forms as the Plan Administrator may require. Each such Employee on the Effective Date shall be eligible to participate in the Plan as of the Effective Date. Each Employee subsequently satisfying such eligibility requirements shall be eligible to participate in the Plan effective as of the first day of the calendar quarter (i.e., January 1, April 1, July 1, and October 1) following the date on which such standards are satisfied.

3.02 Type of Coverage.  If an Employee is married at the time the Employee enrolls in the Plan, the Employee can elect to participate in either Single Life Coverage or Survivorship Coverage. An Employee who is unmarried at the time the Employee enrolls in the Plan shall be eligible for Single Life Coverage only. The election of one type of coverage shall not preclude the Participant from electing the other type of coverage as to any increased Coverage Level the Participant becomes eligible for pursuant to Section 4.02 of the Plan.

3.03 Conversion of Coverage.  Subject to any proof of insurability required by the Insurer, a Participant (or other Policy Owner) can elect to convert Survivorship Coverage to Single Life Coverage, and with respect to a married Participant, the Participant (or other Policy Owner) can elect to convert Single Life Coverage to Survivorship Coverage. Provided, however, that the number of Premium Payment Years for a Participant shall not be redetermined in connection with a conversion from one type of coverage to another. Upon a conversion, the cash values of the replaced Policy shall be transferred to the new Policy in accordance with the Insurer's practices. Any Insurer charges or tax liability resulting from a conversion shall be borne by the Participant or other Policy Owner.

4.           AMOUNT OF COVERAGE

4.01 General.  An Employee who is eligible to participate in the Plan under Section 3.01 of the Plan shall be eligible for the full Coverage Level as specified in the Plan under Section 2.02. However, within sixty (60) days of becoming eligible to participate, a Participant can elect a Coverage Amount which is less than the applicable Coverage Level; provided, however, that the Coverage Amount elected must be an even multiple of $100,000. If a Participant elects a Coverage Amount less than the Participant's Coverage Level (or fails to elect any Coverage), the Participant cannot later increase the Coverage Amount except in connection with a promotion under Section 4.02 of the Plan.

4.02 Promotions.  Employees promoted to a job classification or position eligible for an increased Coverage Level shall be eligible for the increased Coverage Level effective as of the first day of the calendar quarter (i.e., January 1, April 1, July 1, and October 1) following the promotion. The additional Coverage Amount available to the Participant under this Section shall be equal to the applicable Coverage Level after the promotion reduced by any Coverage Amounts already in effect for a Participant. In order to be effective, any election for an increase in the Coverage Amount must be made within the time period prescribed by the Plan Administrator in enrollment materials provided to the Employee.

4.03 Survivorship Coverage.  If a Participant elects Survivorship Coverage, the amount of Survivorship Coverage will be determined by the Plan Administrator based on the Participant's age and smoker or nonsmoker status, the age and insurability of the Participant's spouse, and based on the Participant's Total Policy Premium. The Coverage Amount shall be the highest amount such that the Policy will qualify as a Permanent Policy if the Total Policy Premium is paid for each year that is a scheduled Premium Payment Year.

5.           PAYMENT OF PREMIUMS

5.01 Participant Premium Payments.  A Participant shall pay the Participant Premium for each Policy Year which is a Premium Payment Year for the Participant. The amount shall be paid by the Participant to the Employer by payroll (or retirement income) deductions of equal installments during the Policy Year, or in such other manner as may be determined by the Plan Administrator. The Employer shall pay the Participant Premium amount to the Insurer, and can do so as collected from the Participant or can advance payments to the Insurer for a Policy Year at any time during the Policy Year or up to thirty (30) days in advance of the Policy Year. If a Participant terminates employment with the Employer, and the Employer has made such an advance payment of the Participant Premium to the Insurer, the Employer may withhold any uncollected portion of the advanced Participant Premium from any amount payable to the Participant by the Employer to the extent permitted by law. Notwithstanding the other provisions of this paragraph, no Participant Premium shall be required with respect to Survivorship Coverage after the death of the Participant.

5.02 Employer Premium Payments.  The Employer shall pay the Employer Premium for a Participant's Policy within thirty (30) days of the beginning of each Policy Year which is a Premium Payment Year.

Notwithstanding any other Plan provision to the contrary, if a Participant (who was not earned and vested in all deferred compensation under the plan as of December 31, 2004 and thus was not grandfathered from the requirements of Code Section 409A) incurs a “separation from service” (within the meaning of Code Section 409A) on or after January 1, 2005, and at the time of such separation from service, the Participant is a Specified Employee who is eligible to continue participation due to his Retirement or Disability, then payment of any Employer Premium shall be delayed until the date that is six months after the Participant’s separation from service.

5.03 Additional Employer Premium Payments.  For each of the last three (3) scheduled Premium Payment Years for a Participant, the Plan Administrator shall determine whether there will be any increased Employer premium payment with respect to a Participant's Policy. The Plan Administrator shall first determine whether the Participant's Policy is then projected to qualify as a Permanent Policy if the Total Policy Premium is paid each year for the remaining scheduled Premium Payment Years. If the Policy is projected to qualify as a Permanent Policy, no increased Employer Premium payment shall be required for such Premium Payment Year. If the projections indicate that the Policy will not qualify as a Permanent Policy, then the amount payable by the Employer under Section 5.02 shall be increased by an amount which will result in the Policy qualifying as a Permanent Policy if such increased amount is paid for each remaining Premium Payment Year, but any such increase in Employer Premium shall be limited by the maximum premium amounts permissible for such Policy under Internal Revenue Code Sections 7702 and 7702A (or comparable successor sections) without forfeiting any of the favorable tax attributes associated with life insurance policies. The determination as to whether any increased amount is payable shall be made separately for each of the last three (3) Premium Payment Years. However, the Employer Premium payable under Section 5.02 shall not be reduced to an amount that is less than the amount which would have been payable by the Employer for a Premium Payment Year without regard to this Section 5.03. Regardless of the type of coverage actually provided to a Participant, and notwithstanding any changes in the type of coverage provided to the Participant under Section 3.03, the increased Employer Premium payable under this Section 5.03 shall be the amount that would be payable if the Participant had elected Single Life Coverage and maintained such coverage for all Policy Years; also, if more than one type of Single Life Coverage Policy is available under the Plan, the Single Life Coverage Policy used to determine Total Policy Premium under Section 2.24 shall be used to make the determination under this Section 5.03. In the event tax law limits preclude the Employer from qualifying a Policy as a Permanent Policy by the end of the last scheduled Premium Payment Year, then the Employer's obligation to pay premiums under Section 5.02 and 5.03 (and make additional Employer payments under Section 5.04) shall be extended until projections indicate that the Policy qualifies as a Permanent Policy.

5.04                      Additional Employer Payments.

a.           If the payment of an Employer Premium under Section 5.02 (or any increased amount under Section 5.03) results in the recognition of income for tax purposes by the Participant in any year, the Employer shall pay to the Participant an amount determined by the Plan Administrator which is designed to approximate (1) the sum of the total federal and state income taxes and applicable payroll taxes which would be payable by the Participant at the highest marginal rate provided for under applicable federal income tax laws, and at the highest marginal rate provided for under applicable state income tax laws for the state of the Participant's tax domicile, on the income so recognized, plus (2) the total federal and state income taxes and applicable payroll taxes which would be payable by the Participant on the payment described in clause (1).

b.           If the payment of any Employer Premium under Section 5.02 (or any increased amount under Section 5.03) on Survivorship Coverage after the death of the Employee results in the recognition of income for tax purposes by the Participant's spouse or other Policy Owner, the Employer shall pay to the Participant's spouse or other Policy Owner an amount determined by the Plan Administrator which is designed to approximate the total federal and state income taxes which would be payable by the Participant's spouse or other Policy Owner at the highest marginal rate provided for under applicable federal income tax laws, and at the highest marginal rate provided for under applicable state income tax laws for the state of the tax domicile of the Participant's spouse or other Policy Owner, attributable to such premium payment.

c.           For purposes of this Section 5.04, a tax shall be deemed payable or income shall be deemed recognized if either (i) it is finally determined by the Internal Revenue Service, or (ii) an opinion is given by the Employer's counsel, that the tax is payable.

d.           Any payment made to a Participant or a Participant's spouse under this Section shall be made no later than April 1 of the year following the year to which the payment relates.

e.           Any amount to be paid to a Participant, a Participant's spouse, or other Policy Owner under this Section, and the amounts payable, shall be conclusively determined by the Plan Administrator based on generally applicable tax rates and not based upon the unique tax situation of each Participant, Participant's spouse, or other Policy Owner.

5.05                      Termination of Obligation to Pay Premiums.  Notwithstanding anything herein to the contrary, the Employer's obligation to pay premiums (including any increased amounts under Section 5.03) with respect to the Participant's Policy, shall terminate upon the first to occur of any of the following events:

a. Termination of employment of the Participant with the Employer prior to the Participant's death for reasons other than Retirement or Disability.

b. The written notice by the Employer to the Participant following a resolution by the Board of Directors of BellSouth Corporation to terminate this Plan.

c. As to Single Life Coverage only, the death of the Participant.

d. As to Survivorship Coverage only, the death of the last survivor of the Participant and the Participant's spouse.

e. The surrender or cancellation of the Participant's Policy, except that a Policy will not be considered surrendered or canceled if the surrender or cancellation is in connection with the replacement of the Policy with another Policy pursuant to the provisions of the Plan.

f. The withdrawal of any Policy cash values, or borrowing against the Policy cash values, by the Participant or other Policy Owner.

g. The reduction of the Participant's Policy death benefit to a level that is less than the initial Policy Coverage Amount, except that a conversion from Survivorship Coverage to Single Life Coverage shall not be considered a reduction in Policy death benefit for the purpose of this Section.

h. The determination by the Plan Administrator that the Policy will qualify as a Permanent Policy with no further Employer Premium payments.

6.           POLICY OWNERSHIP

6.01 Ownership.  The Policy Owner shall be the sole and exclusive owner of a Participant's Policy and shall be entitled to exercise all of the rights of ownership.

6.02 Possession of Policy.  The Policy Owner shall keep possession of the Policy.

7.           GOVERNING LAWS & NOTICES

7.01 Governing Law.  This Plan shall be governed by and construed in accordance with the laws of the State of Georgia.

7.02 Notices.  All notices hereunder shall be in writing and sent by first class mail with postage prepaid. Any notice to the Employer shall be addressed to BellSouth Corporation at its office at 1155 Peachtree Street, N.E. ,Atlanta. GA 30367-6000, ATIENTION: Human Resources – Director Executive Benefits. Any notice to the Employee shall be addressed to the Employee at the address for the Employee maintained in the Employer's records. Any party may change the address for such party herein set forth by giving notice of such change to the other parties pursuant to this Section.

8.           NOT A CONTRACT OF EMPLOYMENT

This Plan shall not be deemed to constitute a contract of employment between an Employee and the Employer or a Participant and the Employer, nor shall any provision restrict the right of the Employer to discharge an Employee or Participant, or restrict the right of an Employee or Participant to terminate employment.

9.           AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION

AND SUCCESSORS

9.01 Amendment.  The Board of Directors of BellSouth Corporation, or its delegate, shall have the right in its sole discretion, to amend the Plan in whole or in part at any time and from time to time. In addition, the Plan Administrator shall have the right, in its sole discretion, to amend the Plan at any time and from time to time so long as such amendment is not of a material nature. Notwithstanding the foregoing, no modification or amendment shall be effective so as to decrease any benefits of a Participant unless the Participant consents in writing to such modification or amendment. Written notice of any material modification or amendment shall be given promptly to each Participant.

9.02 Termination.  The Board of Directors of BellSouth Corporation may terminate the Plan without the consent of the Participants or Employees.

The Plan shall be terminated effective December 31, 2008 for employees who are actively employed by the Company on December 31, 2008. The Plan shall continue with its current terms for Participants who are former employees as of December 31, 2008.

9.03 Successors.  The terms and conditions of this Plan shall enure to the benefit of and bind the Employer, the Participant, their successors, assignees, and representatives. If, subsequent to the Effective Date of the Plan, substantially all of the stock or assets of the Employer are acquired by another corporation or entity or if the Employer is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder shall be obligations of the acquirer or successor corporation or entity.

10.           PLAN ADMINISTRATION

10.01 Individual Administrator.  If the Plan Administrator is an individual, he shall act and record his actions in writing. Any matter concerning specifically such individual's own benefit or rights hereunder shall be determined by the Board of Directors of BellSouth Corporation or its delegate.

10.02 Administrative Committee.  If the Plan Administrator is a committee, or if any of the duties or responsibilities of the Plan Administrator are vested in a committee, action of the Plan Administrator may be taken with or without a meeting of committee members; provided, action shall be taken only upon the vote or other affirmative expression of a majority of the committee members qualified to vote with respect to such action. If a member of the committee is a Participant, he or she shall not participate in any decision which solely affects his or her own benefit under the Plan.  For purposes of administering the Plan, the Plan Administrator shall choose a secretary who shall keep minutes of the committee's proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any certificate or other written direction on behalf of the Plan Administrator.

10.03 Rights and Duties of the Plan Administrator.  The Plan Administrator shall administer the Plan and shall have all powers necessary to accomplish that purpose, including (but not limited to) the following:

a. to construe, interpret and administer the Plan;

b. to make determinations required by the Plan, and to maintain records regarding Participants' benefits hereunder;

c. to compute and certify the amount and kinds of benefits payable to Participants, and to determine the time and manner in which such benefits are to be paid;

d. to authorize all disbursements pursuant to the Plan;

e. to maintain all the necessary records of the administration of the Plan;

f. to make and publish such rules and procedures for the regulation of the Plan as are not inconsistent with the terms hereof;

g. to designate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder; and

h. to hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan.

The Plan Administrator shall have the exclusive right to construe and interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of benefits, and its decisions on such matters shall be final and conclusive on all parties.

10.04 Bond; Compensation.  The Plan Administrator and (if applicable) its members shall serve as such without bond and without compensation for services hereunder.

11.           CLAIMS PROCEDURE

11.01 Named Fiduciary.  The Plan Administrator is hereby designated as the named fiduciary under this Plan.

11 .02 Claims Procedures.  Any controversy or claim arising out of or relating to this Plan shall be filed with the Plan Administrator which shall make all determinations concerning such claim. Any decision by the Plan Administrator denying such claim shall be in writing and shall be delivered to all parties in interest in accordance with the notice provisions of Section 7.02 hereof. Such decision shall set forth the reasons for denial in plain language. Pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the Employee can perfect the claim will be provided. This notice of denial of benefits will be provided within 90 days of the Plan Administrator's receipt of the Employee's claim for benefits. If the Plan Administrator fails to notify the Employee of its decision regarding the claim, the claim shall be considered denied, and the Employee shall then be permitted to proceed with the appeal as provided in this Section.

An Employee who has been completely or partially denied a benefit shall be entitled to appeal this denial of his/her claim by filing a written statement of his/her position with the Plan Administrator no later than sixty (60) days after receipt of the written notification of such claim denial. The Plan Administrator shall schedule an opportunity for a full and fair review of the issue within thirty (30) days of receipt of the appeal. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

Following the review of any additional information submitted by the Employee, either through the hearing process or otherwise, the Plan Administrator shall render a decision on the review of the denied claim in the following manner:

a.   The Plan Administrator shall make its decision regarding the merits of the denied claim within sixty (60) days following receipt of the request for review (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). The Plan Administrator shall deliver the decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the Employee prior to the commencement of the extension. If the decision on review is not furnished within the prescribed time, the claim shall be deemed denied on review.

b.   The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

EX-10.EEE

Exhibit 10-eee

BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN

(As amended and restated effective as of January 1, 2005)

BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN

(As amended and restated effective as of January 1, 2005)

BellSouth Corporation (“BellSouth”) established on the first (1st) day of September, 1985, the BellSouth Nonqualified Deferred Income Plan (“Plan”) for certain employees of BellSouth and its subsidiaries, and the Plan was subsequently amended from time to time.  The Plan is now hereby amended and restated, effective as of the lst day of January, 2005, and as so amended and restated is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, with respect to all benefits under the Plan that are subject to Section 409A.  Subject to the limitations contained in Article 2 of the Plan, and except as expressly provided herein, the Plan as so amended and restated shall hereafter apply to all Deferral Agreements, including those executed before this effective date, under the Plan.

ARTICLE I

DEFINITIONS

1.1           “Base Salary” means the gross salary of the Participants, including the amount of any before-tax basic and supplemental contributions to the BellSouth Retirement Savings Plan or similar contributions to a comparable plan maintained by a Participating Company and the amount of any other deferrals from gross salary under any nonqualified deferred compensation plans which may be maintained by a Participating Company from time to time.

1.1A       “CEO” means the Chief Executive Officer of BellSouth.

1.1B        “Change in Control Severance Plan” means a severance plan (or plans) adopted under the terms of the Company Disclosure Letter to the Merger Agreement (as defined in Section 1.5D below).

1.1C        “Code” means the Internal Revenue Code of 1986, as amended.

1.2           “Compensation” means Net Monthly Salary.

1.3           “Compensation Rate” means the cash compensation of a Participant, including (i) annual Base Salary rate in effect on the date the Deferral Agreement is executed, and (ii) standard lump-sum award amount(s) in effect under incentive compensation programs on the date the Deferral Agreement is executed.  For Participants employed by Participating Companies whose compensa­tion structures do not readily fit within this definition, Compensation Rate means cash compensation as defined by the CEO.

1.4           “Deferral Agreement” means an agreement pursuant to which deferral elections under this Plan are made and includes a standard Deferral Agreement, substantially in the form of Exhibit A hereto, a Deferral Agreement for deferral of certain lump-sum payments, substantially in the form of Exhibit B hereto, and other agreements approved from time to time for use in connection with this Plan as described in Article 2.

1.4A        “Disabled” or “Disability” means, with respect to a Non-Grandfathered Participant, any of the following:

(a)           the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or

(b)           the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Employer.

1.4B        “Effective Date” means January 1, 2005, the date as of which the Plan is amended and restated.

1.5           “Employer” means (i) BellSouth and (ii) any subsidiary of BellSouth authorized by BellSouth to enter into Deferral Agreements pursuant to this Plan.

1.5A        “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.5B         “Executive Severance Agreement” means a BellSouth executive change in control agreement entered into by and between an executive who is a Participant in this Plan and BellSouth, as amended and/or superseded from time to time, providing certain benefits in the event of a change in corporate control of BellSouth.

1.5C         “Grandfathered Participant” means any Participant other than a Non-Grandfathered Participant.

1.5D         “Merger” means the planned merger, pursuant to the Agreement and Plan of Merger dated as of March 4, 2006 (the “Merger Agreement”), by and among BellSouth, AT&T Inc. (“AT&T”), and ABC Consolidation Corp., a Georgia corporation and wholly-owned subsidiary of AT&T (“Merger Sub”), pursuant to which, at the “Effective Time” (as defined in the Merger Agreement), BellSouth will be merged with and into the Merger Sub.

1.5E          “Net Credited Service” shall have the same meaning as is given such term in the BellSouth Personal Retirement Account Pension Plan, under the terms of such plan in effect on the Effective Date.

1.6            “Net Monthly Salary” means the amount of a Participant’s Base Salary which actually is paid to him or her in any month, net of all withholding, allotments, and deductions other than any reduction as a result of participation in this Plan.

1.6A         “Non-Grandfathered Participant” means any Participant who (a) is described in Section 5.5A, Section 5.5B or Section 5.5C, or (b) otherwise first becomes eligible for a Retirement benefit, or dies or becomes Disabled, on or after January 1, 2005.

1.7            “Participant” means an employee who is authorized by the CEO or his delegated representative to participate in the Plan and to execute a Deferral Agreement.

1.7A         “Participating Company” means (i) BellSouth and (ii) any corporate Subsidiary at least eighty percent (80%)of the capital stock of which is owned by BellSouth or by one or more eighty percent (80%) owned Subsidiaries, which has been designated by BellSouth for participation in this Plan.

1.7B          “Plan Administrator” means the CEO and any individual or committee he designates to act on his behalf with respect to any or all of his responsibilities hereunder; provided, the CEO may designate any other person or committee to serve as the Plan Administrator with respect to any or all of the administrative responsibilities hereunder.

1.8            “Plan Year” means (i) January 1, 1986 through December 31, 1986 and (ii) each and every calendar year thereafter through 1996.  For certain Participants designated by the CEO, “Plan Year” also means calendar year 1997 or calendar year 1998.

1.8A         “Rabbi Trust Agreements” means each and all of the: (i) BellSouth Corporation Trust Under Executive Benefit Plan(s); (ii) BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s); (iii) BellSouth Enterprises, Inc. Trust Under Executive Benefit Plan(s); (iv) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Mobile Systems Executives; (v) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Advertising and Publishing Executives; and (vi) Trust Under Executive Benefit Plan(s) for Certain BellSouth Companies; in each case, as amended from time to time.

1.8B          “Responsible Officer” means the officer elected by the Employer’s Board of Directors (or similar governing body) responsible for human resources matters for the Employer.

1.9            “Retirement” means any termination by a Participant who is (or would be) eligible for a pension, other than a deferred vested pension, under the terms and conditions of the BellSouth Personal Retirement Account Pension Plan, or comparable plan maintained by the Participating Company employing the Participant, under the terms of such plans in effect on the Effective Date.

With respect to any Participant who, at the time eligibility for Retirement is determined, is not eligible to participate in either the BellSouth Personal Retirement Account Pension Plan or a comparable plan maintained by the Participating Company employing the Participant, “Retirement” means the termination of employment by the Participant if at such time (A) the sum of (i) plus (ii) equals or exceeds seventy-five (75) years where (i) is the Participant’s whole years and whole months of age and (ii) is the Participant’s whole years and whole months of Net Credited Service, and (B) the Participant’s Net Credited Service is at least ten (10) years (the “Rule of 75”).  For purposes of the Rule of 75, Net Credited Service shall include the Participant’s period of service with any Subsidiary both prior to and after the time such Subsidiary became a Subsidiary.

Additionally, “Retirement” means (i) any termination by a Participant who is (or would be) eligible for a service benefit under terms and conditions of the BellSouth Corporation Supplemental Executive Retirement Plan (“SERP”), under the terms of SERP in effect on the Effective Date, (ii) any termination by a Participant who has attained age 62 or older and whose Net Credited Service is ten (10) years or more at the time of employment termination, (iii) any termination by a Participant who separates from service under the BellSouth Career Transition Assistance Plan (CTAP), the BellSouth Enterprises Employee Career Transition Plan (ECTP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan (BST CTAP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan-Professional (BST CTAP-P), the BellSouth Telecommunications, Inc. Employee Separation Assistance Plan (ESAP), the BellSouth Telecommunications, Inc. Competitive Management Restaffing Plan (CMRP), the BellSouth Telecommunications, Inc. Leadership Repositioning Plan (LRP), the BellSouth Telecommunications, Inc. Competitive Sourcing Transition Assistance Plan - Information Technology (CSTAP-IT), the BellSouth Advertising & Publishing Corporation Voluntary Management Separation Pay Plan (VMSPP), or a designated successor to any such plan, or other severance arrangement approved by the CEO as applicable to this Plan, and (iv) any termination by a Participant who separates from service under the BellSouth Voluntary Transition Incentive Plan (VTIP) and whose Net Credit Service is ten years or more at the time of such separation.

1.10          “Section 409A” means Code Section 409A and the Treasury regulations or other authoritative guidance issued thereunder.  Whenever the terms “subject to Section 409A” or “to the extent permitted by Section 409A” (or any such similar reference so as to indicate that a Plan provision is subject to Section 409A) are used, such terms shall be interpreted to mean that the applicable Plan provision shall be effective only if and to the extent such provision would not trigger penalty taxes or interest under Section 409A.

1.11          “Subsidiary” means any corporation other than BellSouth which is a member of the same controlled group of corporations, within the meaning of Code Section 414(b), as BellSouth and any trade or business (whether or not incorporated) which is under common control with BellSouth, within the meaning of Code Section 414(c).

ARTICLE 2

TERM; AMENDMENT

This Plan shall be effective until terminated by the CEO.  This Plan originally provided for 1986 through 1998 with Plan specifications and interest rates being established by the CEO for each separate Plan Year.  Notwithstanding the foregoing, no deferrals will be permitted under the Plan except with respect to the Plan Years described in Section 1.8 and then only to the extent authorized by the CEO.

This Plan may be amended, renewed, or restated by the CEO; provided that no such action shall accelerate or postpone the time or schedule of payment of any Plan benefits except as may be permitted under Code Section 409A and regulations thereunder.  Notwithstanding the foregoing, no contractual right created by and under any Deferral Agreement on the date of termination or amendment shall be abrogated by the termination or amendment of this Plan unless the Participant who executed such Deferral Agreement consents.  Participants have no other right or interest in the continuance of this Plan in any form.

ARTICLE 3

ADMINISTRATION; INTERPRETATION

3.1           Claims Procedure.

(a)           Initial Claim. Claims for benefits under the Plan may be filed with the Plan Administrator on forms or in such other written documents, as the Plan Administrator may prescribe.  The Plan Administrator shall furnish to the claimant written notice of the disposition of a claim within 90 days after the application therefor is filed.  In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, citations of the pertinent provisions of the Plan, and, where appropriate, an explanation as to how the claimant can perfect the claim and/or submit the claim for review.

(b)           Appeal.  Any Participant or Beneficiary who has been denied a benefit shall be entitled, upon request to the Plan Administrator, to appeal the denial of his claim.  The claimant (or his duly authorized representative) may review pertinent documents related to the Plan and in the Plan Administrator’s possession in order to prepare the appeal.  The request for review, together with written statement of the claimant’s position, must be filed with the Plan Administrator no later than 60 days after receipt of the written notification of denial of a claim provided for in Section 3.1(a).  The Plan Administrator’s decision shall be made within 60 days following the filing of the request for review.  If unfavorable, the notice of the decision shall explain the reasons for denial and indicate the provisions of the Plan or other documents used to arrive at the decision.

3.2           Interpretation.  The Plan Administrator shall have the exclusive responsibility and complete discretionary authority to control the operation and administration of the Plan, with all powers necessary to properly carry out such responsibility, including without limitation the full and exclusive power (i) to interpret the terms of this Plan and any Deferral Agreement, including the power to construe ambiguous or uncertain terms (ii) to establish reasonable procedures with which Participants must comply to exercise any right established under the Plan or any Deferral Agreement, (iii) to determine status, coverage, eligibility for and the amount of benefits, and all questions arising in connection therewith, and (iv) to resolve all questions that arise in the operation and administration of this Plan.  The rights and duties of Participants and other persons and entities are subject to, and governed by, such acts of administration, interpretations, procedures, and delegations.  All actions or determinations of the Plan Administrator or its delegates under this Article 3 shall be final, conclusive and binding on all persons.

3.3           Post-Merger Plan Administration.  Notwithstanding anything to the contrary in this Plan, following the Merger, responsibility for administration of the Plan shall be determined under the terms of the Rabbi Trust Agreements.  As provided in the Rabbi Trust Agreements, claims for benefits, appeals of benefit denials and Plan interpretations shall be made by a “Trust Contractor” or “Independent Fiduciary” (as such terms are defined in the Rabbi Trust Agreements), as the case may be.  At any time during which a Trust Contractor or Independent Fiduciary shall, under the terms of the Rabbi Trust Agreements, have such Plan administrative responsibilities, the term “Plan Administrator” as used in this Plan shall refer to such Trust Contractor or Independent Fiduciary.

ARTICLE 4

DEFERRAL AGREEMENT

4.1           Election to Defer.  As hereinafter provided and subject to acceptance by an Employer, (a) a Participant may elect to reduce the amount of Compensation which will be paid to him or her during any Plan Year by executing and delivering to his or her Employer in a timely fashion a standard Deferral Agreement, substantially in the form of Exhibit A hereto, and (b) a Participant may elect to reduce the amount of a lump-sum payment to which he or she may become entitled prior to 1997 in connection with separation under the BellSouth Career Transition Assistance Plan (CTAP), the BellSouth Enterprises Employee Career Transition Plan (ECTP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan (BST CTAP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan Professional (BST CTAP-P), the BellSouth Telecommunications, Inc. Employee Separation Assistance Plan (ESAP), the BellSouth Telecommunications, Inc. Competitive Management Restaffing Plan (CMRP), the BellSouth Telecommunications, Inc. Leadership Repositioning Plan (LRP), the BellSouth Advertising & Publishing Corporation Voluntary Management Separation Pay Plan (VMSPP), the BellSouth Voluntary Transition Incentive Plan (VTIP) or a designated successor to any such plan, or other severance arrangement approved by the CEO as applicable to this Plan, by executing and delivering to his or her Employer in a timely fashion a Deferral Agreement, substantially in the form of Exhibit B hereto; provided that subsection (b) of this Section 4.1 shall apply to a Participant separating under the BellSouth Voluntary Transition Incentive Plan (VTIP) only if the Participant’s Net Credited Service is ten (10) years or more at the time of such separation.

4.2           Creation of Contractual Obligation.  An Employer which accepts a properly executed and timely delivered Deferral Agreement agrees to pay to the Participant or his or her Designated Beneficiary, as defined in Section 6.1, the benefits described in Article 5, which shall be calculated based upon (i) the amount deferred by each Participant, (ii) interest rate established for each Plan Year by the CEO or his delegate and applied to that amount annually, (iii) the time which elapses between the Plan Year of deferral and the date of benefit payments, and (iv) other factors established in this Plan and by the CEO or his delegate.

An Employer’s senior executive officer or Responsible Officer is authorized to accept and approve a properly executed Deferral Agreement on behalf of that Employer under Section 4.2.

4.3           Timing of Election.  A Participant may execute and deliver to his or her Employer a standard Deferral Agreement, substantially in the form of Exhibit A hereto, on or before November 30 of any calendar year to reduce the Participant’s Compensation only for the next subsequent Plan Year.  In addition, a Participant may execute and deliver to his or her Employer a Deferral Agreement, substantially in the form of Exhibit B hereto, in connection with a lump-sum payment described in Section 4.1(b) of this Plan within the time period prescribed by his or her Employer, but in no event later than the day preceding the day on which individuals are selected for separation under such program by the Employer.

Notwithstanding any other provisions of this Plan or any Deferral Agreement, no Deferral Agreement shall be effective to defer Compensation (or other amounts) which is earned by any Participant on or before the date upon which the Deferral Agreement is properly executed and timely delivered to the Participant’s Employer.

4.4           Amount of Deferral.  (a) A Participant may elect to defer during any Plan Year a dollar amount which is less than or equal to a specified percent of his or her Compensation Rate applicable to the Plan Year rounded to the next highest one thousand dollars.  The CEO shall establish the specified percent of the Compensation Rate applicable to each Plan Year.  Notwithstanding any provision of a Deferral Agreement or this Plan to the contrary, the Deferral Agreement of a Participant, with regard to a deferral described in this paragraph (a) shall be modified automatically if necessary such that all actual reductions pursuant to his or her Deferral Agreement are made from his or her Net Monthly Salary.

(b)           A Participant may elect to defer a portion of a lump-sum payment to which he or she may become entitled as described in Section 4.1(b) in an amount not to exceed (i) a dollar amount which is less than or equal to the maximum deferral, if any, which such Participant could elect under paragraph (a) of this Section 4.4 at the time of election, and (ii) the dollar amount by which any election of deferrals under paragraph (a) of this Section 4.4 for the Plan Year in which the Participant terminates employment have not been satisfied at the time of termination of employment, except as may be otherwise approved by the CEO.

4.5           No Deferrals Since 1998.   No deferrals have been permitted under the Plan since Plan Year 1998.  No current or future deferrals shall be permitted under the Plan.

ARTICLE 5

PAYMENT OF BENEFITS

5.1           Retirement Benefit.  (a)  If a Participant terminates employment with his or her Employer and is not immediately reemployed by another Employer (or, in the case of a Non-Grandfathered Participant, by a Subsidiary), and such termination constitutes a Retirement, or upon any subsequent termination from such an entity that constitutes a Retirement, then the Employer shall pay to the Participant the annual Retirement benefit stated in his or her Deferral Agreements on those dates specified in each Deferral Agreement.  The Employer shall also make any Retirement benefit payment to a Participant who has remained employed with the Employer (or with another Employer or a Subsidiary) through the date specified for such payment in his or her Deferral Agreement.  Except as hereinafter provided, the Retirement benefit payment(s) which will be stated in a Participant’s Deferral Agreement shall be a number of payments equal to the lesser of (i) fifteen (15) and (ii) the remainder of eighty (80) minus the age at which Retirement benefit payments commence pursuant to this Section.  The Retirement benefit shall be paid as soon as administratively practicable after the first (1st) day of January following the calendar year in which the Participant attains age sixty-five (65).  Any such Deferral Agreement executed by a Participant which defers amounts which would otherwise be payable to the Participant in or after the Plan Year in which he or she attains age sixty-five (65), however, shall provide that the first Retirement benefit payable shall be paid as soon as administratively practicable after the first (1st) day of January following the later of (i) the fifth (5th) anniversary of the date upon which the Deferral Agreement is accepted by the Employer or (ii) his or her Retirement, and that the number of Retirement benefit payments shall equal the remainder of (i) eighty (80) minus (ii) the age at which Retirement benefit payments commence pursuant to this Section.

(b)           Notwithstanding the provisions of paragraph (a) of this Section 5.1, to the extent authorized in terms and conditions approved for a Plan Year by the CEO pursuant to Article 2 of this Plan, the Employer shall pay to the Participant the annual Retirement benefit specified in his or her Deferral Agreements on those dates specified in each Deferral Agreement which may differ from those specified in Section 5.1(a).

(c)           If a Grandfathered Participant is, on the date of termination, or becomes thereafter a proprietor, officer, partner, or employee of, or otherwise is or becomes affiliated with (i) any business that is in competition with any Employer or (ii) any government agency having regulatory jurisdiction over the business activities of any Employer, then, upon that date, no further benefit payments shall be made to the Participant, or any other person with respect to the Participant’s participation in this Plan, under any provision or Section of this Plan, except that, the Participant shall be paid in lump-sum as soon as administratively practicable after the first (1st) day of January following that date an amount equal to (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at a rate equal to the rate paid on ten (10) year United States Treasury obligations on each date for which interest is credited, compounded quarterly, for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the act occurs or status is first attained, inclusive, (iii) minus the amount of all Interim Distributions and any other payments hereunder.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  This Section 5.1(c) shall be inapplicable with respect to any Non-Grandfathered Participant.

5.2           Interim Distributions.  A Participant shall be paid the benefits stated in Paragraph 3 of his or her standard Deferral Agreements on those dates stated in that paragraph of each such Deferral Agreement (herein referred to as “Interim Distributions”).  However, no Interim Distribution shall be stated in a Deferral Agreement or paid to any Participant as a result of the Deferral Agreement if the Participant is age fifty-five (55) or older on any day during the Plan Year to which the Deferral Agreement applies.  Except as may be otherwise specified by the CEO, no Interim Distribution shall be paid to a Participant on or after the date upon which the Participant or his or her Designated Beneficiary receives any benefit or payment under any other Section of this Plan or any other paragraph of his or her Deferral Agreement.  No Interim Distribution shall be paid in connection with any Deferral Agreement which does not specifically provide for such benefits.

5.3           Death Benefit.  If a Participant dies on or before the date upon which he or she is eligible for Retirement, then his or her Designated Beneficiary, as defined in Section 6.1, shall be paid in a lump-sum as soon as administratively practicable after the first day of January following his or her date of death an amount equal to:  (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at the rate approved for and applicable to his or her participation in each Plan Year for which he or she executed accepted Deferral Agreements, such rates to be compounded quarterly for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which his or her death occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of his or her death.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.

If a Participant dies on or after the date upon which he or she is eligible for Retirement (as defined in Section 1.9), whether or not he or she has in fact terminated employment, prior to commencing receipt of benefits, or having received all benefits, as the case may be, payable in accordance with the duly authorized Deferral Agreement under this Plan, except as provided under Section 5.4, then his or her Designated Beneficiary, as defined in Section 6.1, shall receive all benefits, or continue to receive the remaining benefits, as the case may be, in accordance with that Deferral Agreement.

If the Participant’s Designated Beneficiary receives or is entitled to receive a benefit hereunder, then no person or persons shall receive or be entitled to receive any benefit or payment under any other Section or this Plan or under any Deferral Agreement, notwithstanding any other provision of this Plan or any Deferral Agreement.

5.4           Pre-Retirement Disability Benefit.  If a Participant suffers a Disability or becomes Disabled (as defined in Section 1.4A) prior to the date upon which he or she receives or is entitled to receive a benefit under Section 5.1 or Section 5.3, then he or she shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the Plan Year in which the Disability occurs an amount equal to:  (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at the rate approved for and applicable to his or her participation in each Plan Year for which he or she executed accepted Deferral Agreements, such rates to be compounded annually for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which his or her Disability occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of onset of Disability.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  If the Participant receives or is entitled to receive a benefit hereunder, then no person or persons shall receive or be entitled to receive any benefit or payment under any other section of this Plan or under any Deferral Agreement, notwithstanding any other provisions of this Plan or any Deferral Agreement.

5.5           Termination of Employment Prior to Retirement or Disability.  If a Participant terminates employment with his or her Employer, and is not immediately reemployed by another Employer (or, in the case of a Non-Grandfathered Participant, by a Subsidiary), prior to death, Disability or Retirement, then a benefit amount shall be paid to the Participant in a lump-sum (or, in the case of a Grandfathered Participant, either in a lump-sum or in five (5) annual installments, at the election of the CEO), payable as soon as administratively practicable after the first (1st) day of January following his or her date of termination (and anniversaries thereof in case of installments), which amount equals (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at a rate equal to the rate on ten (10) year United States Treasury obligations on each date for which interest is to be credited, compounded quarterly, for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the termination occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of his or her termination.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  If the Participant receives or is entitled to receive a benefit hereunder, then no person or persons shall then or thereafter receive any benefit or payment under any other Section of this Plan or any Deferral Agreement, notwithstanding any other provision of this Plan or any Deferral Agreement.

5.5A        Termination of Employment Under TPPS:V Prior to Retirement or Disability.  If a Participant terminates employment with his or her Employer under the BellSouth Corporation Transition Payment Plan for Senior Management: Voluntary (“TPPS:V”) during calendar year 2006, prior to death, Disability or Retirement, the Participant shall be permitted to make a new payment election with respect to the Participant’s Plan benefits to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Each Participant who elects to participate in TPPS:V, and who terminates employment under the provisions of TPPS:V and satisfies all requirements of TPPS:V, will be deemed to have made this new payment election with respect to his or her NQDIP benefits.  Notwithstanding anything to the contrary in this Plan, the new payment election described above shall in no event change payment elections with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.  No new payment election may be made pursuant to this Section 5.5A after December 31, 2006.

5.5B        Termination of Employment Under Change in Control Severance Plan.  A Participant (i) who as of his or her termination of employment has not satisfied the age and service requirements for Retirement, (ii) who will be treated under the Change in Control Severance Plan as having satisfied such requirements upon terminating employment under the circumstances specified therein, and (iii) who elects on or before December 31, 2006, to be covered under these terms, shall be deemed to have made a new payment election to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Notwithstanding anything to the contrary in this Plan, no such election made after December 31, 2006, shall be valid and the new payment election described above shall in no event change the terms of payment with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.

5.5C        Termination of Employment Under Executive Severance Agreement.  A Participant who has an Executive Severance Agreement with BellSouth and (i) who as of his or her “Termination Date” (as defined in the Executive Severance Agreement) has not satisfied the age and service requirements for Retirement, (ii) who will be treated under the Executive Severance Agreement as having satisfied such requirements upon terminating employment under the circumstances specified therein, and (iii) who elects on or before December 31, 2006, to be covered under these terms, shall be deemed to have made a new payment election to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Notwithstanding anything to the contrary in this Plan, no such election made after December 31, 2006, shall be valid, and the new payment election described above shall in no event change the terms of payment with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.

5.6           Distributions to Code Section 409A Specified Employees.  Notwithstanding any provision of this Plan to the contrary, with respect to any Non-Grandfathered Participant who is a “specified employee” for purposes of Code Section 409A, no payment of any portion of the Non-Grandfathered Participant’s benefit amount which is occasioned by the Non-Grandfathered Participant’s separation from service shall be made before the date that is six (6) months after the date of such Participant’s separation from service.

ARTICLE 6

MISCELLANEOUS

6.1           Beneficiary Designation.  If a Participant dies and, on the date of his or her death, any benefit or benefits remain to be paid to the Participant under the terms and conditions of this Plan, the remaining benefit or benefits shall be paid to that person or persons designated by the Participant (“Designated Beneficiary”) on the form provided from time to time to the Participant by his or her Employer in accordance with the Deferral Agreement.  If the Designated Beneficiary dies prior to completion of all payments under the Deferral Agreement, the estate of the Designated Beneficiary shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the year in which the Designated Beneficiary died.  The amount of the lump-sum will be equal to (i) the amount deferred pursuant to each of the Participant’s Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clauses (iii) and (iv) below) credited separately at the rate approved for and applicable to the Participant’s participation in each Plan Year from which he or she executed accepted Deferral Agreements, such rates to be compounded quarterly for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the Designated Beneficiary’s death occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any received by the Participant or Designated Beneficiary, (iv) minus the Retirement benefits paid to the Participant or Designated Beneficiary pursuant to the Deferral Agreement(s).  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the estate of the Designated Beneficiary.  If no Designated Beneficiary has been chosen by the Participant or if the Designated Beneficiary is not living on the date of the Participant’s death, the estate of the Participant shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the year in which the Participant died.  The amount of the lump-sum shall be determined in the manner described previously in this Section 6.1.

6.2           Obligations of Employers Not the Obligations of BellSouth.  The duties and obligations of each Employer hereunder are several but not joint, each Employer is only liable to its own employees who are Participants hereunder, and BellSouth is not liable for the actions, omissions, duties or obligations of any other Employer hereunder.

6.3           Recalculation Events; Treatment of this Plan under Applicable Federal Income Tax Laws.  With respect to Grandfathered Participants, the adoption and maintenance of the Plan is strictly conditioned upon (i) the applicability of Code Section 451(a) to the Participant’s recognition of gross income as a result of his or her participation, (ii) the fact that Participants will not recognize gross income as a result of participation in this Plan until and to the extent that benefits are received, (iii) the applicability of Code Section 404(a)(5) to the deductibility of the amounts paid to Participants hereunder, (iv) the fact that an Employer will not receive a deduction for amounts credited to any accounting reserve created as a result of this Plan until and only to the extent that benefits are paid, and (v) the inapplicability of Parts 2, 3, and 4 of Title I of ERISA to this Plan by reason of the exemptions set forth in ERISA Sections 201(a), 301(a) and 401(a) and Part 1 of ERISA by reason of the exemption set forth in Section 2520.104-23 of applicable United States Department of Labor regulations.  If the Internal Revenue Service, the Department of Labor or any court determines or finds as a fact or legal conclusion that any of the above conditions is untrue and issues or intends to issue an assessment, determination, opinion or report stating such, or if the opinion of the legal counsel of BellSouth based upon legal authorities then existing is that any of the above assumptions is incorrect, then, if the CEO so elects within one year of such finding, determination, or opinion, a Recalculation Event shall be deemed to have occurred.

If a Recalculation Event occurs under this Section 6.3, Section 6.4, or any other Section of this Plan, then each Grandfathered Participant who has not attained the age of fifty-five (55) years on the date on which the CEO takes official action to elect the occurrence of a Recalculation Event shall thereafter be paid benefits in accordance with the election made irrevocably in connection therewith in the Deferral Agreement.  For each such Grandfathered Participant the amount of Retirement benefit stated in the Deferral Agreement shall be recalculated and restated using a rate of interest equal to the rate of interest on ten (10) year United States Treasury obligations on each date upon which interest should have been or will be calculated, compounded quarterly, instead of the interest rate assumed in originally calculating the benefit, as referenced in Section 4.2.

Notwithstanding anything to the contrary contained in this Plan or a Deferral Agreement, the benefits payable with respect to any Participant who shall have either (i) attained the age of fifty-five (55) years or (ii) died, on or prior to the date on which the CEO takes official action to elect the occurrence of a Recalculation Event under either Sections 6.3 or 6.4 of this Plan, shall not be recalculated and restated in the manner described in such Sections or in any other way affected by such action.  If such Participant or Designated Beneficiary receives or is entitled to receive a benefit as result of the occurrence of a Recalculation Event, then no person or persons shall receive or be entitled to receive any benefit or payment under any other Section of this Plan or under any Deferral Agreement, notwithstanding any other provision of this Plan or the Deferral Agreement.

This Section 6.3 shall be inapplicable with respect to any Non-Grandfathered Participant.

6.4           Changes in the Internal Revenue Code of 1954.  With respect to Grandfathered Participants, the adoption and maintenance of this Plan also is strictly conditioned upon the existence and continuation of the percentage tax rates for corporations stated in Section 11(b) of the Internal Revenue Code of 1954, as amended through August 13, 1981 but not thereafter (the “1954 Code”).  In particular, the adoption and maintenance of this Plan is strictly conditioned upon the rate of tax stated in Section 11(b)(5) of the 1954 Code, that is, “46 percent of so much of the taxable income as exceeds $100,000.”  If (1) 1954 Code Section 11(b) is deleted or amended or a surtax or other addition to tax is imposed and, as a result thereof, the rate of federal income tax imposed on taxable income of corporations in excess of One Hundred Thousand Dollars ($100,000) is reduced below such rate in effect immediately before reduction and is less than forty percent (40%), (2) a tax is imposed by the federal government on income, sales, consumption, or the value of goods and services which is not currently contained in the Code, or (3) the Code is amended or restated so extensively that in the opinion of the legal counsel of BellSouth the tax treatment of this Plan to the Employer has materially changed to the detriment of the Employer, then, if the CEO so elects within one year after the enactment of the legislation causing such event, a Recalculation Event shall be deemed to have occurred and a benefit will be payable only as described in Section 6.3.

This Section 6.4 shall be inapplicable with respect to any Non-Grandfathered Participant.

6.5           Governing Law.  This Plan and the Deferral Agreements shall be construed in accordance with the laws of the State of Georgia to the extent such laws are not preempted by ERISA.

6.6           Successors, Mergers, Consolidations.  The terms and conditions of this Plan and each Deferral Agreement shall inure to the benefit of and bind BellSouth, the other Employers, the Participants, their successors, assigns, and personal representatives.  If substantially all of the assets of any Employer are acquired by another corporation or entity or if an Employer is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder and as a result of the Employer’s acceptance of Deferral Agreements shall be obligations of the successor corporations or entity.

6.7           Discharge of Employer’s Obligation.  The payment by the Employer of the benefits due under each and every Deferral Agreement to the Participant or to the person or persons specified in Section 6.1 discharges the Employer’s obligations hereunder, and the Participant has no further rights under this Plan or the Deferral Agreements upon receipt by the appropriate person of all benefits.  In addition, (i) if any payment is made to a Participant or his or her Designated Beneficiary with respect to benefits described in this Plan from any source arranged by the Employer including, without limitation, any fund, trust, insurance arrangement, bond, security device, or any similar arrangement, such payment shall be deemed to be in full and complete satisfaction of the obligation of the Employer under this Plan and the Deferral Agreements to the extent of such payment as if such payment had been made directly by the Employer; and (ii) if any payment from a source described in clause (i) above shall be made, in whole or in part, prior to the time payment would be made under the terms of this Plan and the Deferral Agreement, such payment shall be deemed to satisfy the Employer’s obligation to pay Plan benefits beginning with the benefit which would next become payable under the Plan and the Deferral Agreement and continuing in the order in which benefits are so payable, until the payment from such other source is fully recovered.  In determining the benefits satisfied by a payment described in clause (ii), Plan benefits, as they become payable, shall be discounted to their value as of the date such actual payment was made using an interest rate equal to the valuation interest rate for deferred annuities as last published by the Pension Benefit Guaranty Corporation prior to the date of such actual payment.  If the benefits which actually become payable under this Plan, after applying the discount described in the preceding sentence, are less than the amount of the payment(s) described in clause (ii), any such shortfall shall not be collected from or enforced against the Participant as a claim by the Employer.

6.8           Social Security and Income Tax Withholding.  Each Participant agrees as a condition of participation hereunder that his or her Employer may withhold federal, state, and local income taxes and Social Security taxes from any distribution or benefit paid hereunder.

6.9           Notice; Delivery of Deferral Agreement.  Any notice required to be delivered hereunder and any Deferral Agreement is properly delivered to the Employer when personally delivered to, or actually received from the United States mail, postage prepaid, by Executive Compensation and Benefits Group, Room 13J08, BellSouth Corporation, 1155 Peachtree Street, N.E., Atlanta, Georgia  30309-3610, or at such other address as the Plan Administrator shall prescribe from time to time.

6.10          Nature of Obligations Created Hereunder.  The Participants agree as a condition of participation hereunder that:

(a)           Participants have the status of general, unsecured creditors of the Employer and the Plan and the Deferral Agreements constitute the mere promise by the Employer to make benefit payments in the future;

(b)           nothing contained in this Plan or any Deferral Agreement shall create or be construed to create a trust of any kind between BellSouth, any Employer, and any Participant;

(c)           benefits payable, and rights to benefits under, this Plan and Deferral Agreements may not be anticipated, sold, assigned (either at law or in equity), transferred, pledged, encumbered or subject to attachment, garnishment, levy, execution or other legal or equitable process.

The Plan is intended to be unfunded for purposes of ERISA and the Code.

6.11           No Modification of Employment Agreement.  Neither this Plan nor any Deferral Agreement constitutes a modification of any employment agreement which may exist between the Participant and the Participating Company employing the Participant, and no right to continued employment is created by this Plan or the Deferral Agreement.

6.12           Liability of Employers for Individual Participants Employed by More than One Employer; Applicability of Deferral Agreement Filed with One Employer to Subsequent Employers.  Any Deferral Agreement which is timely executed and delivered to an Employer shall be effective to defer Compensation earned by the Participant from that Employer or any other Employer during the period in which the Deferral Agreement is effective.  The execution and delivery of a Deferral Agreement by a Participant constitutes an election by the Participant to defer Compensation earned from any Employer under the terms of this Plan.  A Participant who timely executes and delivers a Deferral Agreement to one Employer and who subsequently transfers to another Employer or otherwise terminates employment and becomes employed by another Employer shall have the Compensation which is paid to him or her by both Employers reduced under the terms of the Deferral Agreement and this Plan as if the transfer or termination and reemployment had not occurred.  The Employer which accepts an executed, timely delivered Deferral Agreement is liable to the Participant for all benefits which may be payable under, and as a result of, that Deferral Agreement notwithstanding the transfer of a Participant to or from another Employer, or the termination and reemployment of a Participant by another Employer.  If a Participant timely executes and delivers Deferral Agreements to more than one Employer, each Employer is singly and not jointly liable for the Deferral Agreement or Deferral Agreements which it accepted.  Any provision of this Plan which refers to a benefit or payment which is payable as a result of more than one (1) Deferral Agreement shall be construed to apply only to the Deferral Agreements delivered by that Participant and accepted by each separate Employer of that Participant, and not to all Deferral Agreements executed and timely delivered by one Participant or all Participants to all Employers, each Deferral Agreement which incorporates the terms of this constituting a separate contractual obligation of a single Employer.

6.13           Savings Clause.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality of 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.

6.14           Plan to Comply with Code Section 409A.  Notwithstanding any provision to the contrary in this Plan, each provision of this Plan shall be interpreted to permit the deferral of compensation and the payment of deferred amounts in accordance with Code Section 409A and any provision that would conflict with such requirements shall not be valid or enforceable.

Exhibit A

DEFERRAL AGREEMENT

FOR THE BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN

1.           Amount of Deferral.  I, _______________, hereby agree to participate in the BellSouth Nonqualified Deferred Income Plan (“Plan”).  I have read the Plan in its entirety and agree to its terms and conditions, which are incorporated herein by reference. Pursuant to the terms of the Plan, I elect to defer from my compensation to be paid to me in Plan Year ____ the sum of _________________ Dollars.  I understand that my Compensation which ordinarily would be paid to me in that Plan Year will be reduced by the amount of my deferral, and that such reduction will be made only from my gross monthly salary, not from any bonus or incentive award which may be payable to me.

2.           Retirement Benefits.  In consideration for my deferral, my Employer shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

3.           Interim Distributions.  In consideration for my deferral, my Employer shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

4.           Recalculation Event.  If a Recalculation Event applicable to me occurs, my Employer shall pay to me benefits in an amount determined in accordance with the terms and conditions of paragraph 6.3 of the Plan paid in accordance with the terms elected below.  The undistributed balance of the recalculated amount will continue to accumulate at the reduced rate specified in paragraph 6.3 of the Plan.

- Recalculated amount paid in a LUMP-SUM in the year following the Recalculation Event.

- Recalculated amount paid in FOUR ANNUAL PAYMENTS beginning in the year following the Recalculation Event.

- Recalculated amount paid in SAME NUMBER of payments beginning on the same date as specified in paragraph 2 of this Agreement.

(All amounts are to be paid as soon as administratively practicable after the first of the specified year.)

5.           Election Irrevocable.  This election is irrevocable after November 30 immediately preceding the Plan Year to which this Agreement pertains.

6.           Primacy of Plan.  I recognize that I am entitled to benefits hereunder and that this Agreement is subject to the terms and conditions of the Plan.

Participant:	Accepted by Employer:
Name (Print)	Name of Employer
	By:
Signature	Its:
	Title
Date	Date

Exhibit B

DEFERRAL AGREEMENT

FOR THE BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN

(For Deferral of Lump-Sum Payments)

THIS AGREEMENT is made this ___ day of ____________, 19__, by and between ___________________ (the “Company”) and _____________________ (the “Employee”);

W I T N E S S E T H:

WHEREAS, the Employee may separate from service with the Company under the terms of an eligible separation plan or arrangement sponsored by the Company (hereinafter, the “Separation Plan”); and

WHEREAS, the BellSouth Nonqualified Deferred Income Plan (the “Plan”) permits the Employee to elect irrevocably to defer a portion of the lump-sum separation allowance to which he may become entitled thereunder, and the Employee desires to make such deferral;

NOW, THEREFORE, it is mutually agreed as follows:

1.

PLAN PROVISIONS CONTROL

The Plan, including all terms, conditions, restrictions and limitations contained therein, is hereby incorporated by reference and made a part of this Agreement for all purposes.   The terms and conditions applicable to the plan year of the Plan in which the Employee separates from service shall apply to deferrals hereunder.  In interpreting the Plan for purposes of this Agreement, the lump-sum separation allowance payable under the Separation Plan shall not be included in the Employee’s “Compensation Rate” as that term is used in the Plan.

2.

CONDITIONAL DEFERRAL

The deferral election contained herein shall be irrevocable by the Employee upon its submission to the Company but shall be expressly conditioned upon the Employee’s separation from service under the Separation Plan.  If the Employee does not separate from service under the Separation Plan, this Agreement shall be null and void.  Neither the Company’s offering of this deferral opportunity to the Employee, the Company’s acceptance of the Employee’s deferral election contained in this Agreement, nor any other provision hereof shall in any way be construed as conferring upon the Employee any right or entitlement to any payment under the Separation Plan.

3.

DEFERRAL ELECTION(S)

(a)           Subject to the Plan’s limitations, the Employee hereby irrevocably elects to defer from the lump-sum separation allowance payable under the Separation Plan __________________________ Dollars ($__________).*

*NOTE:                      Amount may not exceed __% of the sum of your current annual base

salary and lump-sum awards received in the previous twelve (12) months.

YES _______                                           NO _______

(b)           The Employee hereby irrevocably elects to defer from the lump-sum separation allowance payable under the Separation Plan the dollar amount by which any election of deferrals from base salary under the Plan for the plan year of the Plan in which the Employee separates from service has not been satisfied by the time the Employee separates.

YES _______                                           NO _______

Such amounts shall be subject to the terms of the original Deferral

Agreement to which they relate.

I understand that the lump-sum separation allowance payable under the Separation Plan which would otherwise have been paid to me will be reduced by the amount of my deferral(s).

4.

RETIREMENT BENEFITS

In consideration of my deferral described in section 3(a) above, if any, the Company shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

Any distributions attributable to deferral(s) under Schedule B of the Plan shall be made beginning on _____________ in _____ annual payments.

5.

INTERIM DISTRIBUTIONS

In consideration for my deferral described in section 3(a) above, if any, the Company shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

6.

RECALCULATION EVENT

If a Recalculation Event occurs, the Company shall pay to me benefits in an amount determined in accordance with the terms and conditions of paragraph 6.3 of the Plan paid in accordance with the terms elected below.  The undistributed balance of the recalculated amount will continue to accumulate at the reduced rate specified in paragraph 6.3 of the Plan.

  ·  Recalculated amount paid in a lump-sum as soon as administratively practicable after the first day of the year following the date of the Recalculation Event.

  ·  Recalculated amount paid in four annual payments beginning as soon as administratively practicable after the first day of the year following the date of the Recalculation Event.

  ·  Recalculated amount paid in same number of payments beginning on the same date as specified in paragraph 4 of this Agreement.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its corporate name by a duly authorized officer, and the Employee has hereunto set his hand, as of the date set forth above.

EMPLOYEE:	THE COMPANY:
Name (Print)	Name of Company
	By:
Signature	Signature
	Title

EX-10.GGG

Exhibit 10-ggg

AT&T NON-QUALIFIED PENSION PLAN

THIS DOCUMENT, LIKE ALL COMPANY PLANS, PERSONNEL POLICIES OR PRACTICES, IS NOT A CONTRACT OF EMPLOYMENT.  IT IS NOT INTENDED TO CREATE, AND IT SHOULD NOT BE CONSTRUED TO CREATE, ANY CONTRACTUAL RIGHTS TO CONTINUED EMPLOYMENT, EITHER EXPRESS OR IMPLIED, BETWEEN THE COMPANY AND ITS EMPLOYEES.

AT AT&T CORP., THE EMPLOYMENT RELATIONSHIP WITH EMPLOYEES COVERED BY THIS PLAN IS "AT-WILL."  THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO QUIT THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON, AND THE COMPANY RESERVES THE RIGHT TO TERMINATE ANY EMPLOYEE’S EMPLOYMENT, WITH OR WITHOUT CAUSE, AT ANY TIME FOR ANY REASON, SUBJECT TO THE RIGHTS OF ELIGIBLE PARTICIPANTS TO BENEFITS PROVIDED BY THIS PLAN.

IN THE EVENT THERE IS A CONFLICT BETWEEN STATEMENTS IN THIS PLAN AND THE TERMS OF ANY OTHER BENEFIT PLAN, POLICY, OR PRACTICE, THE APPLICABLE BENEFIT PLAN, POLICY OR PRACTICE PROVIDING THE BENEFITS IN QUESTION WILL CONTROL.  AT&T CORP. RESERVES THE RIGHT, AT ANY TIME, TO MODIFY, SUSPEND, CHANGE, OR TERMINATE ITS EMPLOYEE BENEFIT PLANS OR EXECUTIVE LEVEL INCENTIVE, BENEFIT AND/OR PERQUISITE PLANS, PROGRAMS, POLICIES OR PRACTICES.

As Amended and Restated Effective January 1, 1997, Including

Amendments Adopted Through December 31, 2008

AT&T NON-QUALIFIED PENSION PLAN

Article 1.

Purpose

This AT&T Non-Qualified Pension Plan (the “Plan”) is an amendment and restatement of predecessor programs sponsored by the Company that were first adopted on October 1, 1980, and reflects amendments adopted through December 31, 2008.  The Plan provides supplemental pension, disability and death benefits to certain employees of AT&T Corp. (“AT&T”) and its Affiliated Corporations, as defined herein. The Plan is intended to constitute an unfunded plan of deferred compensation for a select group of management or highly compensated employees for purposes of Title I of ERISA.  Except as otherwise indicated herein, the provisions of this amended and restated AT&T Non-Qualified Pension Plan shall apply only with respect to a Participant, as defined herein, who terminates employment on or after January 1, 1997. For former employees who terminated employment before January 1, 1997, the provisions of the AT&T Non-Qualified Pension Plan in effect on the date of the former employee’s termination of employment shall govern.

Effective January 1, 1997, the Plan was amended to provide a Special Update to the Basic Formula and a Special Update to the Alternate Formula, for employees who were actively employed and participating in the Plan on January 1, 1997.  Effective January 1, 1998, the Plan was amended to discontinue ongoing benefit accruals for employees other than Officers, to implement a Cash Balance Formula as the only formula providing ongoing accruals, and to provide for the transfer of the benefit accrued as of December 31, 1996 under the AT&T Mid-Career Pension Plan to this Plan, for Officers who participate in this Plan on or after January 1, 1998.

Effective January 1, 2004, the Plan was amended to provide benefit accruals for a select group of management or highly compensated employees of a Participating Company who participate in the AT&T Executive Deferred Compensation Plan.  The benefit provided to such employees by the Plan is generally equal to the reduction in the benefit payable to or on behalf of such employee under the AT&T Management Pension Plan and the AT&T Excess Benefit and Compensation Plan, resulting from such employee’s election to defer amounts (“Qualified Deferrals” herein) under the AT&T Executive Deferred Compensation Plan or the AT&T Inc. Cash Deferral Plan.  Accruals under this provision ceased December 31, 2007.

Effective after December 31, 2008, benefit accruals under this Plan are limited to accruals under the cash balance formula with respect to short term incentive awards, for employees who are Officers on December 31, 2008. These accruals will continue for this group of Officers until the individuals “SERP Vesting Date,” as defined herein, at which time the benefit will be frozen. Employees who become Officers after December 31, 2008 are not entitled to benefits under this Plan, except with respect to benefits earned under a prior formula that was frozen effective December 31, 1997, or with respect to benefits based on Qualified Deferrals, with respect to which benefit accruals ceased December 31, 2007.

During the period from January 1, 2005 to December 31, 2008, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Notice 2005-1, and the final Treasury Regulations for Code Section 409A, and any other generally applicable guidance published in the Internal Revenue Service Bulletin with an effective date prior to January 1, 2009.  On or after January 1, 2009, this Plan shall be interpreted and construed consistent with the requirements of Code Section 409A and all applicable guidance issued thereunder with respect to all accrued benefits under this Plan, including, except as indicated below, those benefits that may be otherwise treated as existing prior to the statutory effective date of Code Section 409A (“grandfathered benefits”) within the meaning of Treasury Regulation Section 1.409A-6(a)(3).  The preceding sentence notwithstanding, it is the intention of the Company that the grandfathering provisions of Code Section 409A be applied under this Plan with respect to any Participant (and any surviving Spouse, Beneficiary or Estate of such Participant) who terminated employment prior to January 1, 2005, with respect to all benefits earned under the Plan with respect to such Participant prior to termination of employment.  If any individual who terminated employment prior to January 1, 2005 is rehired after December 31, 2004 and earns additional benefits following reemployment the terms of the Plan shall be applied separately with respect to benefits earned prior to January 1, 2005 and with respect to benefits earned following rehire. The Company reserves the right to amend any provision of the Plan or any election submitted by a Participant, or take any other action that the Company deems appropriate to ensure compliance with Code Section 409A, including altering the time and form of any distribution so as to accomplish the intended purpose of this Plan.

Article 2. 

Definitions

Unless the context clearly indicates otherwise, the following terms have the meanings described below when used in this Plan, and references to a particular Article, Section, or Appendix shall mean the Article, Section, or Appendix so delineated in this Plan.

Section 2.01 Adjusted Career Average Pay

 “Adjusted Career Average Pay,” as used in the Alternate Formula described in Section 4.02(b), means (i) in the case of an Officer, the sum of A and B below, divided by such Officer’s Term of Employment, and (ii) in the case of an E-band Employee, the amount described in B below divided by such E-band Employee’s Term of Employment;  for purposes of this Section 2.01, the last day of a Participant’s Term of Employment is the earliest to occur of July 31, 1997, the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Alternate Formula, or the date of the Participant’s termination of employment from a Participating Company:

A. the sum of (1) and (2), where (1) is the product of (a) the average of the Officer’s annual Short Term Incentive Awards includable in the 1989 Base Period, and (b) the Officer’s Term of Employment as of December 31, 1989, and (2) is his or her Short Term Incentive Awards and any Deferred Salary for the period from January 1, 1990 through the earliest to occur of (i) July 31, 1997, (ii) the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Alternate Formula, or (iii) the date of the Participant’s termination of employment from a Participating Company.

B. the sum of (1) and (2), where (1) is the product of (a) the Participant’s average annual “Compensation” (as defined in the Pension Plan) for the 1992 Base Period, and (b) the Participant’s Term of Employment as of December 31, 1992, and (2) is the Participant’s “Compensation” (as defined in the Pension Plan) for the period from January 1, 1993 through the earliest to occur of (i) July 31, 1997, (ii) the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Alternate Formula, or (iii) the date of the Participant’s termination of employment from a Participating Company.

Section 2.02  Administrator

 “Administrator” means the person identified as the Pension Plan Administrator under the Pension Plan, or such other person or entity designated by the Company.

Section 2.03 Affiliated Corporation

 “Affiliated Corporation” means any corporation or other entity of which 50 percent or more of the voting stock is owned directly or indirectly by AT&T.

Section 2.04 AT&T, Company

 “AT&T” or “Company” means AT&T Corp., a New York Corporation, or its successors. Effective on November 18, 2005, AT&T Corp. was acquired by SBC Communications Inc. (now known as AT&T Inc.) pursuant to a plan and agreement of merger dated January 30, 2005.

Section 2.05 AT&T Controlled Group

 “AT&T Controlled Group” means AT&T and each other entity required to be aggregated with AT&T under Code Sections 414(b), (c), (m), or (o). With respect to periods on or after November 18, 2005, the controlled group shall be determined with respect to entities required to be aggregated recognizing the acquisition of AT&T Corp. by SBC Communications Inc. (now known as AT&T Inc.).

Section 2.06 1989 Base Period

 “1989 Base Period” means the period from January 1, 1987, through December 31, 1989, inclusive.  Notwithstanding the provisions of the immediately preceding sentence, the “1989 Base Period” shall in no event include any period on or after the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Basic Formula or under the Alternate Formula.

Section 2.07 1992 Base Period

 “1992 Base Period” means the period from January 1, 1990, through December 31, 1992, inclusive.  Notwithstanding the provisions of the immediately preceding sentence, the “1992 Base Period” shall in no event include any period on or after the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Alternate Formula or under the Alternate Minimum Formula.

Section 2.08 1996 Base Period

 “1996 Base Period” means the period from January 1, 1994 through December 31, 1996, inclusive.  Notwithstanding the provisions of the immediately preceding sentence, the “1996 Base Period” shall in no event include any period on or after the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Special Update to the Basic Formula or under the Special Update to the Alternate Formula.

Section 2.09 Board

 “Board” means the Board of Directors of AT&T.

Section 2.10 Cash Balance Account

 “Cash Balance Account” means a hypothetical bookkeeping account used solely in calculating the amount under this Plan of a Cash Balance Participant’s Benefit Based on the Cash Balance Account, as described in Section 4.03.  The term “Cash Balance Account” does not include amounts credited to the Qualified Deferrals Cash Balance Account, as described in Section 4.11.

Section 2.11 Cash Balance Participant

 “Cash Balance Participant” means an employee who is on the active roll of a Participating Company as an Officer on or after January 1, 1998. Notwithstanding the preceding sentence, an individual who is promoted to an Officer position after December 31, 2008 shall not be eligible to earn benefits as a “Cash Balance Participant.”

Section 2.12 CIC Eligible Employee

“CIC Eligible Employee” means a Deferral Participant who is considered a “CIC Eligible Employee” under the terms of the Pension Plan.

Section 2.13 Code

“Code” means the Internal Revenue Code of 1986, as amended from time to time. Any reference to a particular section of the Code includes any applicable regulations promulgated under that section.

Section 2.14 Committee

“Committee” means the Employees’ Benefit Committee appointed by AT&T to administer the Pension Plan.

Section 2.15 Concert Employee

“Concert Employee” means a former employee of a Participating Company who, pursuant to pertinent agreement(s) concluded between AT&T and British Telecommunications, PLC (“BT”) became employed by a Concert entity after December 15, 1999 and before April 1, 2002, under such circumstances that his or her net credited service would be subject to an immediate bridge if the Concert entity were a participating company under the Pension Plan,  who was an Officer immediately prior to his or her employment by Concert, and who returned to the employment of a Participating Company as an Officer immediately following the termination of his or her employment by Concert on or before April 1, 2002.  For purposes of this definition, “Concert” means the joint venture established pursuant to pertinent agreement(s) concluded between AT&T and BT.

Section 2.16 Covered Compensation Base

“Covered Compensation Base” means an amount which is the average of the maximum wage amounts on which an employee’s liability for Social Security taxes was determined for each year beginning with January 1, 1958 and ending with December 31, 1993.

Section 2.17 Deferral Participant

“Deferral Participant” means an employee who defers compensation under the AT&T Executive Deferred Compensation Plan, or for periods after 2006, the AT&T Inc. Cash Deferral Plan, to the extent that such deferred compensation is a Qualified Deferral.

Section 2.18 Deferred Salary

“Deferred Salary” means any salary amounts deferred under the AT&T Senior Manager Incentive Award Deferral Plan, for periods commencing on or after January 1, 1994 and prior to January 1, 2005.  For periods commencing on or after January 1, 2005, “Deferred Salary” is zero.  Deferred Salary does not include amounts deferred pursuant to Code Section 401(k) or amounts contributed pursuant to Code Section 125.

Section 2.19 Deferred Vested Benefit

“Deferred Vested Benefit” means a benefit determined pursuant to Section 4.02E (under  benefit formulas prior to January 1, 1998) and payable to a Participant who is vested under the Pension Plan at the time of his or her termination of employment, and who is not Service Pension Eligible as of the date specified by the relevant provision of  this Plan.

Section 2.20 Disability Benefit

“Disability Benefit” means the benefit payable from the Plan to a Participant who, prior to January 1, 1998, became eligible for a disability pension from the Pension Plan while an Officer.  If the disability pension from the Pension Plan is discontinued (other than by reason of attainment of normal retirement age, as defined in the Pension Plan), the Disability Benefit hereunder shall also be discontinued.

Section 2.21 E-band Employee

“E-band Employee” means any employee of a Participating Company employed in a position evaluated or classified by the Company as an “E-band” (formerly E-level, Fifth level and SG-12 through SG-14) or equivalent position in a banded environment, or Manager 5 or its equivalent in a non-banded environment, except that no employee who is assigned to such a position on a temporary basis after being notified in writing of the temporary status of such assignment shall be an “E-band Employee” for any purpose under this Plan.

Section 2.22 ERISA

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular section of ERISA includes any applicable regulations promulgated under that section.

Section 2.23 50% Joint and Survivor Annuity

“50% Joint and Survivor Annuity” means an annuity form of payment under which payments continue to the surviving Spouse of the Participant, effective as of the first day of the month after the death of the Participant, and continuing until the last day of the month in which the death of the Spouse occurs, in an amount equal to fifty percent of the amount of the monthly benefit which was being paid to the Participant.  If the Spouse predeceases the Participant after the Pension Commencement Date (and the pension is other than a Deferred Vested Pension described in Section 4.02(a)(iii)), the Participant’s pension shall be restored by the amount of the original reduction for this election, starting with the pension payment for the month following the death of the Spouse. For purposes of the 50% Joint and Survivor Annuity, the Spouse is the Spouse to whom the Participant was married on his or her Pension Commencement Date. This definition does not apply with respect to any benefit payable pursuant to a SERP Election made by a SERP Participant.

Section 2.24 100% Joint and Survivor Annuity

“100% Joint and Survivor Annuity” means an annuity form of payment under which payments continue to the surviving Spouse of the Participant, effective as of the first day of the month after the death of the Participant, and continuing until the last day of the month in which the death of the Spouse occurs, in an amount equal to amount of the monthly benefit which was being paid to the Participant.  If the Spouse predeceases the Participant after the Pension Commencement Date, the Participant’s pension shall be restored by the amount of the original reduction for this election, starting with the pension payment for the month following the death of the Spouse. For purposes of the 100% Joint and Survivor Annuity, the Spouse is the Spouse to whom the Participant was married on his or her Pension Commencement Date. This definition does not apply with respect to any benefit payable pursuant to a SERP Election made by a SERP Participant.

Section 2.25 Leave of Absence

A “Leave of Absence” means where a person is absent from employment with AT&T on a leave of absence, military leave, or sick leave, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the employer that employs the individual, as adopted from time to time, and the employee is reasonably expected to return to service. Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the employee shall Terminate Employment upon termination of such leave if the employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract. A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the employee being “disabled” (within the meaning of Treasury Regulation Section 1.409A-3(i)(4). A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the employee has incurred a Termination of Employment.

Section 2.26 Normal Retirement Date

“Normal Retirement Date” means the Participant’s normal retirement date as that term is defined in the Pension Plan.

Section 2.27 Officer

“Officer” means any employee of a Participating Company holding a position evaluated or classified by the Company above the “E-band” level in a banded environment, or classified at the Manager 6 level or above in a non-banded environment, except that no employee who is assigned to such a position on a temporary basis after being notified in writing of the temporary status of such assignment shall be an “Officer” for any purpose under this Plan.

Section 2.28 Participant

“Participant” means an Officer or an E-band Employee who satisfies the requirements of Article 3 for eligibility to accrue benefits under the Plan.  An employee who has become a Participant, but who is no longer eligible to accrue benefits under the Plan, shall continue to be a Participant with respect to any nonforfeitable benefits he or she has accrued under the Plan, until such accrued benefits have been fully discharged through payment or through the purchase of an annuity contract.

Section2.29 Participating Company

“Participating Company” means AT&T and any Affiliated Corporation which shall have determined, with the concurrence of AT&T, to participate in the Plan.  In order to be a Participating Company under this Plan, a company must also be a participating company under the AT&T Management Pension Plan.

Section 2.30 Pension Commencement Date

“Pension Commencement Date” means the first day of the first month for which a payment under this Plan is payable in the form of an annuity or any other form. With respect to payments that commenced prior to January 1, 2009, the pension commencement date under the Pension Plan was the same as the Pension Commencement Date under this Plan.

Section 2.31 Pension Plan

“Pension Plan” means the AT&T Management Pension Plan, as amended and restated from time to time, and effective January 1, 2007, the AT&T Pension Benefit Plan – AT&T Legacy Management Program.

Section 2.32 Pension Plan Benefit

“Pension Plan Benefit” means (i) for purposes of determining the benefit under Section 4.02E(b) of the Plan, the “accrued benefit” under any of the pay base formulas under the Pension Plan, other than the special update formula,  (ii) for purposes of determining the benefit under Section 4.02E(e) of the Plan, the “accrued benefit” under any of the pay base formulas under the Pension Plan, including the special update formula, and (iii) for purposes of determining the benefit under Section 4.02E(c) of the Plan, the “accrued benefit” under the Pension Plan under any of the pay base formulas under the Pension Plan, including the special update formula, each of (i), (ii)  and (iii) herein determined without regard to the limitations on covered compensation under Code Section 401(a)(17), or the limitations on benefit accruals and payments under Code Section 415 and, unless otherwise indicated in the Plan, before any reduction in such pension benefit for the cost of a survivor benefit or for early commencement. Notwithstanding the provisions of the immediately preceding sentence, in applying the pay base formulas under the Pension Plan to a Participant described in Section 3.02(c), service and compensation after the date specified in the applicable provisions of Section 3.02(c) for purposes of determining the benefit under Section 4.02E(b) or Section 4.02E(e) of this Plan shall be excluded.

Section 2.33   Plan

“Plan” means this AT&T Non-Qualified Pension Plan, as set forth herein and as amended from time to time.

Section 2.34   Position Rate

“Position Rate” means an amount established periodically by the Company for each Officer’s position, upon which base salaries are administered.

Section 2.35   Qualified Deferral

A “Qualified Deferral” means any salary or bonus amounts deferred under the AT&T Executive Deferred Compensation Plan, for periods commencing on or after January 1, 2005, or the AT&T Inc. Cash Deferral Plan for periods after December 31, 2006, to the extent such salary or bonus would have been included as “Eligible Pay” (determined before application of any limitations under Code Section 401(a)(17)) under the Pension Plan if not deferred. Notwithstanding the preceding, the term “Qualified Deferral” does not include amounts deferred pursuant to Code Section 401(k) or amounts contributed pursuant to Code Section 125.  An amount is treated as deferred for the period in which such amount would have been paid, if not deferred. Notwithstanding the preceding, a Qualified Deferral does not include amounts deferred with respect to any paycheck dated after December 31, 2007.

Section 2.36   Qualified Deferrals Cash Balance Account

“Qualified Deferrals Cash Balance Account” means a hypothetical bookkeeping account used solely in calculating the amount under this Plan of a Deferral Participant’s Benefit Based on the Qualified Deferrals Cash Balance Account, as described in Section 4.11E.  The term “Qualified Deferrals Cash Balance Account” does not include amounts credited to the Cash Balance Account described in Section 4.03E.

Section 2.37   SERP

“SERP” means the 2005 Supplemental Employee Retirement Plan of AT&T Inc., as amended from time to time.

Section 2.38  SERP Effective Date

“SERP Effective Date” means SERP Effective Date as defined in the SERP.

Section 2.39   SERP Election

“SERP Election” means the election made before December 31, 2008 and in effect on December 31, 2008 with respect to distributions under the 2005 Supplemental Employee Retirement Plan of AT&T Inc. The SERP Election shall also apply to benefits payable under this Plan to a Participant who became a SERP Participant prior to January 1, 2009.

Section 2.40   SERP Participant

“SERP Participant” means an individual who has been designated as eligible to participate in the SERP.  For purposes of this Plan, such individual is considered a SERP Participant whether or not he or she has satisfied the vesting requirements of the SERP.

Section 2.41   SERP Vesting Date

“SERP Vesting Date” means the date a SERP Participant becomes vested in his or her benefit under the 2005 Supplemental Employee Retirement Plan of AT&T Inc., or January 1, 2011 if later.

Section 2.42   Service Benefit

“Service Benefit” means the benefit determined pursuant to Section 4.02E(a) through (e), as applicable, and payable under the Plan to a Participant who is Service Pension Eligible at the date specified by the relevant provision of this Plan as if the Participant terminated employment as of such date.

Section 2.43   Service Pension Eligible

“Service Pension Eligible” means (i) with respect to a termination of employment prior to January 1, 1997, the Participant is eligible for a service pension under the Pension Plan; and (ii) with respect to a termination of employment on or after January 1, 1997, the Participant meets the following requirements:

(i) the Participant’s term of employment has been at least thirty years, regardless of his or her age, or

(ii) the Participant’s term of employment has been at least twenty-five years and he or she has reached the age of fifty years, or

(iii) the Participant’s term of employment has been at least twenty years and he or she has reached the age of fifty-five years, or

        (iv)   the Participant’s term of employment has been at least ten years and he or she has reached the age of sixty-five years.

For purposes of subparagraphs (i) through (iv) above, a Participant’s “term of employment” is determined under the provisions of the Pension Plan, as that plan was in effect on January 1, 1997, and is measured as of the date specified by the relevant provision of this Plan as if the Participant terminated employment of such date, or if no date is specified, as of the date of such Participant’s termination of employment.  In determining the Participant’s “term of employment” under the Pension Plan, and in determining a Participant’s status as eligible for a service pension under the Pension Plan, the effect of the Management Pension Enhancement under the Pension Plan for employees with five or more years of term of employment (under the Pension Plan) as of December 30, 1989, shall be disregarded.

Section 2.44   Short Term Incentive Award

“Short Term Incentive Award” means the actual amount awarded annually (including any such amounts deferred pursuant to the AT&T Senior Management Incentive Award Deferral Plan or the AT&T Executive Deferred Compensation Plan) to an Officer pursuant to the AT&T Short Term Incentive Plan, or any predecessor short term incentive plan. A Short Term Incentive Award shall, for purposes of Sections 4.02E(a) and 4.02E(d) of this Plan, be considered to be awarded on the last day of the performance period with respect to which it is earned. For purposes of the annual award credit under the Cash Balance Account, the Short Term Incentive Awards shall be taken into account in the year paid (or in which it would have been paid, if not deferred) and only if such amount is paid (or would have been paid, if not deferred) on or before the end of the month in which the Officer terminates employment. Notwithstanding the preceding, after calendar year 2007, a short term incentive award shall be taken into account if it is paid in the month following termination of employment as part of the regular payroll schedule applied for payment of amounts earned during the final pay period of the month in which employment terminated.

Effective December 15, 1999, any short term award received from Concert by a Concert Employee while employed in “Concert service” (as defined in the Pension Plan) shall be treated as a Short Term Incentive Award provided that, had the award been received from a Pension Plan participating company, it would have been considered a Short Term Incentive Award.

Section 2.45   Special Update Adjusted Career Average Pay

“Special Update Adjusted Career Average Pay,” as used in the Special Update to the Alternate Formula described in Section 4.02E(e), means (i) in the case of an Officer the sum of (a) the average annual Short Term Incentive Awards and the average annual Deferred Salary under the AT&T Senior Management Incentive Award Deferral Plan for the 1996 Base Period and (b) the average annual “Compensation” (as defined in the Pension Plan) for the 1996 Base Period, and (ii) in the case of an E-band Employee, the average annual “Compensation” (as defined in the Pension Plan) for the 1996 Base Period.

Section 2.46   Specified Employee

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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

Section 2.47    Successor Plan Sponsor

“Successor Plan Sponsor” means Lucent Technologies Inc. and any other corporation or entity that enters into an agreement or agreements providing for the assumption of liabilities arising under this Plan, including the Management Interchange Agreement dated as of April 8, 1996, and the Employee Benefits Agreement dated February 1, 1996, and amended and restated as of March 29, 1996, between AT&T and Lucent Technologies Inc.

Section 2.48   Spouse

“Spouse” means a person of the opposite sex who is the lawful spouse of a married Participant, under the laws of the state of the Participant’s domicile, and at the relevant time period stated under the applicable Plan provisions.   Notwithstanding the preceding, if an alternate payee (as that term is defined in Section 414(p) of the Code) is deemed the surviving spouse for purposes of all or a portion of the Participant’s benefit under the Pension Plan, such alternate payee shall not be deemed to be the “spouse” for any purpose under this Plan.

Section 2.49   Term of Employment

 “Term of Employment” means “term of employment” as determined under the provisions of the Pension Plan, as that plan was in effect on January 1, 1997, but excluding any service subsequent to the date indicated, if any, by a provision of this Plan for purposes of applying such Plan provision. Notwithstanding the foregoing, except for purposes of determining a CIC Credit pursuant to Section 4.11E(c), a Participant’s Term of Employment shall end no later than the date the Participant is reclassified or reassigned (or such later date as otherwise specified in Section 3.02(c) for the purpose indicated therein).

Section 2.50   Termination of Employment

The ceasing of the Participant’s employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily. Effective January 1, 2009, references herein to Termination of Employment, Terminate Employment, or a similar reference, shall mean the event where the employee has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group. Notwithstanding the foregoing, the employment relationship of a Participant with the AT&T controlled group is considered to remain intact while the individual is on a Leave of Absence.

Section 2.51   Total Compensation

“Total Compensation” as used in the Alternate Minimum Formula described in Section 4.02(c) means, with respect to any period, the sum of (i) “Compensation” as defined in  the Pension Plan, (ii) Deferred Salary under the AT&T Senior Management Incentive Award Deferral Plan, and (iii) Short Term Incentive Awards, applicable to such period.

Section 2.52   Transition Employee

“Transition Employee” means a former Participant, as to whom the responsibility and liability for the payment of benefits accrued or payable under this Plan has been assumed by a Successor Plan Sponsor.

Section 2.53   Years of Service

“Years of Service” with respect to a Participant means the years of service as defined in Article 2 of the Pension Plan as that plan was in effect on December 31, 1993.  “Years of Service” is used herein solely for the purpose of determining a Participant’s eligibility for the Alternate Minimum Formula.

Article 3.

Participation and Eligibility for Plan Benefits

Section 3.01    Eligibility to Accrue Plan Benefits

Effective for periods prior to January 1, 1997, eligibility to accrue benefits under this Plan shall be determined in accordance with the provisions of the Plan as in effect from time to time prior to January 1, 1997.

Effective January 1, 1997 through July 31, 1997, all Officers and E-band Employees shall be eligible to accrue benefits under this Plan.

During the period beginning August 1, 1997 and ending December 31, 1997, no employee will accrue additional retirement benefits under this Plan.

Effective January 1, 1998, an employee who was an Officer prior to January 1, 1998 shall be eligible to accrue benefits under the Cash Balance Formula of this Plan, during the period on or after January 1, 1998 that he or she continues to be an Officer of a Participating Company.   Any other employee who becomes an Officer prior to January 1, 2009 shall become eligible to accrue benefits under the Cash Balance Formula on the date he or she becomes an Officer. Notwithstanding the preceding, such Officer shall not accrue additional benefits hereunder after the SERP Vesting Date. An individual who is not an Officer on December 31, 2008 shall not be eligible to accrue benefits under the Plan after December 31, 2008.

Effective January 1, 2004, an employee who defers compensation under the AT&T Executive Deferred Compensation Plan, or the AT&T Inc. Cash Deferral Plan for periods after December 31, 2006, shall be eligible to accrue benefits under this Plan with respect to amounts deferred under such plan, to the extent such amounts deferred are Qualified Deferrals.  Notwithstanding the preceding, a Qualified Deferral does not include amounts deferred with respect to any paycheck dated after December 31, 2007.

No individual shall become a Participant in this Plan after December 31, 2008.

Section 3.02   Eligibility to Receive Plan Benefits

(a)Participants Who Are Officers

Participants Who Are Officers Before January 1, 2009

Subject to the provisions of Section 3.01, Section 3.02(c) regarding reassignments and reclassifications, and Section 3.02(d) regarding Qualified Deferrals and Section 3.02(a)(v) regarding Participants who become an Officer after December 31, 2008, a Participant who is an Officer prior to January 1, 2009 shall be eligible for the following pension benefits from the Plan, in an amount determined in accordance with the provisions of Article 4 and Appendix E.  If a Participant is eligible for a benefit determined pursuant to more than one subparagraph of this Section 3.02(a), the benefit payable from the Plan shall be determined under the provision which applies to him or her and which produces the greatest benefit, taking into account the Pension Commencement Date and the form of payment. Notwithstanding the preceding, the benefit with respect to a Participant who is an Officer prior to January 1, 2009 shall be calculated as of the earlier of the Participant’s termination of employment or SERP Vesting Date as the immediate single life annuity that would be payable under the Plan commencing on such date, and once determined, the amount of the single life annuity payable under this Plan shall not change.

(i)   If the Participant is a Cash Balance Participant, a Benefit Based on the Cash Balance Account, as described in Section 4.03E(f), provided that the Participant is vested under the Pension Plan at the time of his or her termination of employment from the AT&T Controlled Group;

(ii)   If the Participant is Service Pension Eligible at the time of his or her termination of employment with a Participating Company, a Service Benefit determined in accordance with the applicable provision of  Section 4.01E and Section 4.02E (with regard to benefits frozen prior to January 1, 1998);

(iii)   If the Participant is not Service Pension Eligible at the time specified in the relevant Plan provision, a Deferred Vested Benefit determined in accordance with Section 4.02E(a) or Section 4.02E(d) (with regard to benefits frozen prior to January 1, 1998), as applicable, provided that the Participant is vested under the Pension Plan at the time of his or her termination of employment from the AT&T Controlled Group;

(iv)   If the Participant became eligible for a disability pension from the Pension Plan while an Officer, a Disability Benefit, determined in accordance with Section 4.02E(a) or Section 4.02E(d) (with regard to benefits frozen prior to January 1, 1998), as applicable. Such Disability Benefit shall be paid in lieu of any other benefit under the Plan, so long as the Participant is prevented by such disability from resuming active service with a Participating Company. If the Participant’s disability continues to his or her Normal Retirement Date, the Disability Benefit shall be converted to a Service Benefit commencing on the first day of the month following such Normal Retirement Date;

Participants Who Become Officers After December 31, 2008

(v)   If an individual first becomes an Officer after December 31, 2008, the only benefits payable under the Plan with respect to such individual will be benefits attributable to Qualified Deferrals, if any, and benefits that were accrued under the Plan prior to January 1, 1998, if any. Benefits earned prior to January 1, 1998 will be paid pursuant to the provisions of Section 3.02(b) applicable to Participants who are E-band Employees, and benefits attributable to Qualified Deferrals pursuant to Section 3.02(d). The benefit with respect to such Participant shall be calculated as of the SERP Effective Date as the immediate single life annuity that would be payable under the Plan commencing on such date, and once determined, the amount of the single life annuity payable under this Plan shall not change.

(b)Participants Who Are E-band Employees (and Certain Officer Promotions)

Subject to the provisions of Section 3.01, Section 3.02(c) regarding reassignments and reclassifications, and Section 3.02(d) regarding Qualified Deferrals, a Participant who is an E-band Employee, and a Participant who becomes an Officer after December 31, 2008, shall be eligible for the following pension benefits from the Plan, in an amount determined in accordance with the provisions of Article 4 and, as applicable Appendix E:

(i)   If the Participant is Service Pension Eligible at the time of his or her termination of employment from a Participating Company, a Service Benefit determined in accordance with the applicable provision of Section 4.01E and Section 4.02E (with respect to benefits frozen prior to January 1, 1998) ;

(ii)   If the Participant is not Service Pension Eligible at the time of his or her termination of employment with a Participating Company, a Deferred Vested Benefit determined in accordance with Section 4.02E(a) or Section 4.02E(d) (with respect to benefits frozen prior to January 1, 1998), as applicable, provided that the Participant is vested under the Pension Plan at the time of his or her termination of employment from the AT&T Controlled Group.

In applying the provisions of this Section 3.02(b) to a Participant who is promoted to Officer after December 31, 2008, the determinations in (i) and (ii) of whether the Participant is Service Pension Eligible shall be made as of such Participant’s SERP Effective Date. The benefit with respect to such a Participant shall be determined as described in Section 3.02(a)(v).

(c)Reassignments

 (i) An Officer who, on or after January 1, 1986 and before January 1, 1998, was reassigned to a position evaluated below the E-band level for reasons other than unsatisfactory performance, and who has satisfied the vesting requirements of the Pension Plan as of the reassignment date shall be eligible for benefits as follows:

(A) such a former Officer who was Service Pension Eligible as of the reassignment date, shall be eligible for a Service Benefit under Section 3.02(a)(ii) as of his or her termination of employment.  The benefit of any reassigned Officer described in this Section 3.02(c)(i)(A) shall equal the greater of (1) or (2), as follows:

(1)   an amount computed in accordance with Section 4.02(a), the Basic Formula, or Section 4.02(d), the Special Update to the Basic Formula, as applicable, as in effect on the reassignment date.  For purposes of determining a benefit under the Basic Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which he or she was reassigned, July 31, 1997, or termination of employment; and

(2)   an amount computed in accordance with Section 4.02(b) (the Alternate Formula), or Section 4.02(e) (the Special Update to the Alternate Formula), as applicable, as in effect on the reassignment date. For purposes of determining a benefit under the Alternate Formula, the Participant’s Term of Employment shall exclude any period following the last day of 1988 or if later, the earliest to occur of the last day of the year in which he or she was reassigned, July 31, 1997, or termination of employment.

(B) such a former Officer who was not Service Pension Eligible, but who was eligible for a deferred vested pension pursuant to the Pension Plan as of the reassignment date, shall be eligible for a Deferred Vested Benefit under Section 3.02(a)(iii) as of his or her termination of employment.  For purposes of determining benefits pursuant to this Section 3.02(c)(i) (B) the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which such reassignment occurs, July 31, 1997, or termination of employment, and.

(ii) An Officer who, on or after January 1, 1986 and before January 1, 1998, was reassigned to a position evaluated below the E-band level, and who was not Service Pension Eligible or eligible for a deferred vested pension pursuant to the Pension Plan as of the reassignment date, will not be eligible for benefits under this Plan.

(iii) An Officer who, on or after January 1, 1986 and before January 1, 1998, was reassigned to a position evaluated at the E-band level for reasons other than unsatisfactory performance, shall be eligible for benefits as follows:

 (A) such a former Officer who was Service Pension Eligible as of the reassignment date, shall be eligible for a Service Benefit under Section 3.02(a)(ii) upon his or her termination of employment. The benefit of any reassigned Officer described in this Section 3.02(c)(iii)(A) shall equal the greater of (1) and (2) as follows:

(1)    an amount computed in accordance with Section 4.02(a), the Basic Formula, or Section 4.02(d), the Special Update to the Basic Formula, as applicable, as in effect on the reassignment date. For purposes of determining a benefit under the Basic Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, July 31, 1997, or termination of employment;  for purposes of determining a benefit under the Special Update to the Basic Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, December 31, 1996, or termination of employment; and

(2)    an amount computed in accordance with Section 4.02(b) (the Alternate Formula), or Section 4.02(e) (the Special Update to the Alternate Formula), as applicable, as in effect on the reassignment date.  For purposes of determining a benefit under the Alternate Formula, the Participant’s Term of Employment shall exclude any period following the last day of 1988 or if later, the earliest to occur of the last day of the year in which his or her job was reclassified, July 31, 1997, or termination of employment; for purposes of determining a benefit under the Special Update to the Alternate Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, December 31, 1996, or termination of employment.

 (B) such a former Officer who was not Service Pension Eligible but was eligible for a deferred vested pension pursuant to the Pension Plan, as of the reassignment date, shall be eligible for a Deferred Vested Benefit under Section 3.02(a)(iii) upon his or her termination of employment.  The benefit of any reassigned Officer described in this Section 3.02(c)(iii)(B) shall be computed under Section 4.02(a) (the Basic Formula), or Section 4.02(d) (the Special Update to the Basic Formula), as applicable, in effect as of the date of such reassignment.  For purposes of determining a benefit under the Basic Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, July 31, 1997, or termination of employment; for purposes of determining a benefit under the Special Update to the Basic Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, December 31, 1996, or termination of employment.

(iv) A Participant, other than an Officer, whose job was classified or reclassified during or after 1986 and prior to January 1, 1998 to a level below E-band, will be eligible for the Service Benefit computed in accordance with Section 4.02(b) (the Alternate Formula), or Section 4.02(e) (the Special Update to the Alternate Formula), as applicable, as in effect on the reclassification date, provided he or she is Service Pension Eligible as of the date of such classification or reclassification, and further provided he or she is not demoted subsequent to such day because of unsatisfactory job performance prior to termination of employment.  For purposes of determining a benefit under the Alternate Formula, the Participant’s Term of Employment shall exclude any period following the last day of 1988 or if later, the earliest to occur of the last day of the year in which his or her job was reclassified, July 31, 1997, or termination of employment;  For purposes of determining a benefit under the Special Update to the Alternate Formula, the Participant’s Term of Employment shall exclude any period following the earliest to occur of the last day of the year in which his or her job was reclassified, December 31, 1996, or termination of employment.

       (v)   The benefit with respect to a Participant who is an Officer on or after January 1, 1998 who is reassigned on or after January 1, 1998 and before January 1, 2009, shall be determined pursuant to Section 4.03(f); provided, however, that the benefit of such former Officer shall be determined in accordance with subparagraphs (i) through (iii) of this Section 3.02(c) assuming a reassignment date of December 31, 1997, if such determination produces a higher benefit, as of the Participant’s Pension Commencement Date.

(d)Benefits Based on Qualified Deferrals

A Participant who is a Deferral Participant shall be eligible for a Benefit Based on the Qualified Deferrals Cash Balance Account, as described in Section 4.11E.  Notwithstanding any other provision of the Plan to the contrary, the Benefit Based on the Qualified Deferrals Cash Balance Account shall be payable in addition to any other benefits payable under the Plan.

Article 4.

Pension Benefits After 2008

Section 4.01   Applicable Benefit Formulas.

The provisions of this Article 4 apply with respect to benefits payable to or with respect to a Participant who terminates employment on or after December 1, 2008.  This article also describes the distribution provisions with respect to Participants who terminated employment after December 31, 2004 with respect to whom benefit payments had not commenced on or before December 1, 2008. The determination of pension benefits in all other cases is made as described in Appendix E. Appendix E generally includes the provisions of Article 4 as in effect prior to December 31, 2008.  References in the Plan to a provision in Article 4 should in general be interpreted as reference to the corresponding provision in Appendix E when applied to or with respect to a termination of employment prior to December 1, 2008.

(a)Participants Terminated Before January 1, 1997

The Service Benefit, Deferred Vested Benefit, or Disability Benefit payable to a Participant who terminated employment from a Participating Company prior to January 1, 1997 is determined in accordance with the terms of the Plan as in effect from time to time prior to January 1, 1997.

(b)Active Participants on  January 1, 1997

(i) Participants Whose Eligibility to Accrue Benefits Ends Prior to August 1, 1997.

(A) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he or she leaves the service of a Participating Company prior to August 1, 1997, and who is Service Pension Eligible as of the last day of his or her Term of Employment, will be the greater of the annual benefit amount determined under the Basic Formula described in Section 4.02E(a), the annual benefit amount determined under the Alternate Formula described in Section 4.02E(b), or, in the case of an Officer who had at least five Years of Service as an Officer as of December 31, 1993, the annual benefit amount determined under the Alternate Minimum Formula described in Section 4.02E(c).

(B) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he leaves the service of a Participating Company prior to August 1, 1997, but who is not Service Pension Eligible as of the last day of his or her Term of Employment, will be a Deferred Vested Benefit determined under the Basic Formula described in Section 4.02E(a), provided he or she is vested under the Pension Plan at the time of termination of employment from the AT&T Controlled Group.  Notwithstanding the provisions of the immediately preceding sentence, if such Participant was an Officer who had at least five Years of Service as an Officer as of December 31, 1993, the annual benefit shall not be less than the annual benefit determined under the Alternate Minimum Formula described in Section 4.02E(c).

 (C) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an E-band Employee on January 1, 1997, who terminates employment as an E-band Employee prior to August 1, 1997 and who is Service Pension Eligible as of the last day of his or her Term of Employment, will be the annual benefit amount determined under the Alternate Formula described in Section 4.02E(b).

(D) Effective August 1, 1997, the annual benefit of a Participant described in this Section 4.01(b)(i) shall increase (but shall not be decreased) to the amount determined pursuant to the following subsection 4.01(b)(ii)(A), if the Participant is described in subsection 4.01(b)(i)(A), or to the amount determined pursuant to subsection 4.01(b)(ii)(B) if the Participant is described in subsection 4.01(b)(i)(B), or to the amount determined pursuant to the following subsection 4.01(b)(ii)(D), if the Participant is described in subsection 4.01(b)(i)(C).  For purposes of applying the provisions of Section 4.01(b)(ii) to increase a benefit which commenced prior to August 1, 1997 pursuant to this subsection 4.01(b)(i)(D), any age-based reduction shall be based on such Participant’s age on his or her original Pension Commencement Date.

 (ii) Participants  Whose Eligibility to Accrue Benefits Ends after July 31, 1997.

(A) Subject to the provisions of subsection 4.01(b)(ii)(C) for Officers after December 31, 1997, the annual benefit of a Participant who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he or she leaves the service of a Participating Company after July 31, 1997, and who is Service Pension Eligible as of his or her termination of employment from a Participating Company, will be the greater of the annual benefit amount determined under the Special Update to the Basic Formula described in Section 4.02E(d) and the annual benefit amount determined under the Special Update to the Alternate Formula described in Section 4.02E(e). Notwithstanding the preceding, in no event shall be the benefit with respect to a Participant described in this subsection 4.01(b)(ii)(A) be less than the amounts determined pursuant to Section 4.01(b)(i)(A).

(B) Subject to the provisions of subsection 4.01(b)(ii)(C), the annual benefit of a Participant who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he leaves the service of a Participating Company after July 31, 1997  but  who is not Service Pension Eligible as of the last day of his or her termination of employment will be a Deferred Vested Benefit equal to the greater of the annual benefit amount determined under the Special Update to the Basic Formula described in Section 4.02E(d) or the amounts determined pursuant to Section 4.01(b)(i)(B), provided he or she is vested under the Pension Plan at the time of termination of employment from the AT&T Controlled Group.

(C) The annual benefit of a Participant on January 1, 1997 who is also an Officer on or after January 1, 1998 shall not be less than the amount determined pursuant to subsection 4.01(d).

(D) Subject to the provisions of Section 4.01(d)(ii) regarding an E-band Employee who becomes an Officer on or after January 1, 1998, the benefit of a Participant who is an E-band Employee on January 1, 1997, who terminates employment as an E-band Employee after July 31, 1997, and who is Service Pension Eligible as of his or her termination of employment from a Participating Company, will be the annual benefit amount determined under the Special Update to the Alternate Formula described in Section 4.02E(e), but shall in no event be less than the amount determined pursuant to Section 4.01(b)(i)(C).

(c)New Participants after January 1, 1997 and before January 1, 1998

(i) An individual who first becomes a Participant after January 1, 1997 and before January 1, 1998, and who is an Officer on January 1, 1998, shall be eligible for benefits determined pursuant to Section 4.01(d).

(ii) An individual who first becomes an Officer on or after August 1, 1997, who was not previously an E-band Employee, and who leaves the service of a Participating Company prior to January 1, 1998 shall not be eligible for benefits under the Plan.

(iii) An individual, who first becomes a Participant after January 1, 1997 and before January 1, 1998, who is not an Officer at any time on or after January 1, 1998, and who terminates employment with a Participating Company on or after January 1, 1998 shall be eligible for a Service Benefit if the Participant is Service Pension Eligible at the time of his or her termination of employment from a Participating Company. Such benefit shall be determined only under the Alternate Formula described in Section 4.02E(b). No benefit shall be payable from the Plan if such Participant is not Service Pension Eligible at the time of his or her termination of employment from a Participating Company.

(d)Participants who are Officers on or after January 1, 1998 (Cash Balance Participants)

Participants Who Are Officers Before January 1, 2009

   (i) An individual who is an Officer on or after January 1, 1998, who first became an Officer on or after August 1, 1997 and who was not previously an E-band Employee shall be eligible for a benefit determined under Section 4.03 if such Officer is vested in his or her benefit under the Pension Plan upon his or her termination of employment from the AT&T Controlled Group.

    (ii) An individual who is an Officer on or after January 1, 1998, who was an Officer or an E-band Employee prior to August 1, 1997, and whose Pension Commencement Date is after July 1, 1998, shall be eligible for a benefit from the Plan if such Officer is vested in his or her benefit under the Pension Plan upon termination of employment from the AT&T Controlled Group. The benefit shall be the greater of (A) the benefit determined pursuant to Section 4.03, or (B) the sum of (I) the Mid-Career Pension Benefit determined pursuant to Section 4.07 and (II) the benefit accrued under the Plan prior to January 1, 1998 and payable pursuant to the terms of Section 4.01E(b)(ii)(A) or Section 4.01E(b)(ii)(B), as applicable.  For purposes of the preceding sentence, the determination of the greater of (A) and (B) shall be made taking into account the Pension Commencement Date and the form of payment determined in accordance with Section 4.09E.

Participants Who Become Officers After December 31, 2008

(iii) Notwithstanding the preceding Sections 4.01(d)(i) and 4.01(d)(ii), benefits, if any, with respect to an individual who first becomes on Officer after December 31, 2008 shall be determined pursuant to the provisions of the Plan related to a Qualified Deferral Participant and to a Participant who is an E-band Employee, as applicable with respect to such individual. Such a Participant shall not be eligible for benefits determined under the Cash Balance Formula.

(e)  Surviving Spouse of an E-band Employee or Officer

 An Automatic Survivor Annuity will be paid to the Spouse to whom an E-band Employee or Officer is married at the time of his or her death while an active employee, provided such Participant is vested as of his or her date of death, and satisfies the provisions of Section 4.04 at the date of death.  The benefit payable to such Spouse shall be equal to the present value of the benefit determined in accordance with Section 4.04.  The provisions of this Section 4.01(e) do not apply to a benefit determined under the cash balance formula of Section 4.11, or to a benefit based on a Mid-Career Pension Benefit of Section 4.07E. The benefit to a Surviving Spouse shall not be payable under both this Section 4.01(e) and Section 4.01(f).

(f)Surviving Spouse (or Estate) of a Cash Balance Participant

A benefit, determined pursuant to the provisions of Section 4.10, shall be payable to the surviving Spouse (or estate, in the case of a Participant who is not married at the time of death) of a Cash Balance Participant who is vested in his or her benefit under the Pension Plan as of his or her date of death and who dies prior to commencing distribution of his or her benefit under the Plan.  The benefit to a Surviving Spouse shall not be payable under both this Section 4.01(f) and Section 4.01(e).

(g)Deferral Participant

An individual who is a Deferral Participant shall be eligible for a benefit determined pursuant to Section 4.11, provided that such Participant is vested in his or her benefit under the Pension Plan upon his or her termination of employment from the AT&T Controlled Group.  Notwithstanding any other provision of the Plan to the contrary, such benefit shall be payable in addition to any other benefits otherwise payable under the Plan.

(h)Surviving Spouse (or Estate) of a Deferral Participant

A benefit, determined pursuant to the provisions of Section 4.10, shall be payable to the surviving Spouse (or estate, in the case of a Participant who is not married at the time of death) of a Deferral Participant who is vested in his or her benefit under the Pension Plan as of his or her date of death and who dies prior to commencing distribution of his or her benefit under the Plan.

Section 4.02   Benefit Formulas (other than Cash Balance)

To the extent that a benefit payable to a Participant who terminates employment on or after December 1, 2008 is based on a formula other than the Cash Balance Account of Section 4.03 or the Qualified Deferral Cash Balance Account of Section 4.11, the amount of such benefit shall be determined in accordance with the provisions of Section 4.02E of Appendix E.

Section 4.03   Cash Balance Accounts

Effective January 1, 1998, a cash balance formula was added to the Plan, applicable only to Participants who were Officers on or after such date.  Section 4.03E describes the manner in which cash balance accounts were established, and the annual accruals under such formula.

The Cash Balance Account of a Participant who is an Officer prior to January 1, 2009 shall continue to be credited with Annual Award Credits and Interest Credits until the earlier of such Participant’s termination of employment or SERP Vesting Date, at which time no further amounts shall be credited to the Cash Balance Account.  In the latter case, the provisions of Section 4.03E(c) and Section 4.03E(d) shall be applied as if the SERP Vesting Date is the Participant’s termination date and commencement date, as applicable.   The amount of the single life annuity that would be payable from the Cash Balance Account commencing as of such date shall be determined in accordance with the provisions of Section 4.03E(f). Any reference to the Benefit Based on the Cash Balance Account for a period after the SERP Vesting Date shall be the amount so determined as of such date.

The Cash Balance Account with respect to a Participant who is not an Officer prior to January 1, 2009 shall be zero.

Section 4.04   Automatic Survivor Annuities

The Automatic Survivor Annuity described in this Section 4.04 does not apply to a benefit determined under the cash balance formula of Section 4.03 or 4.11, or to a benefit based on the Mid-Career Pension Benefit of Section 4.07. The Automatic Survivor Annuity is payable upon the death of a Participant who dies while actively employed after December 31, 2008, if such Participant’s benefit under the Plan is determined under a formula described in Section 4.02E.

The surviving Spouse of such a Participant shall be entitled to a pre-retirement Automatic Survivor Annuity determined pursuant to this Section 4.04 effective commencing as of the first day of the month following the death of a Participant who dies while an employee if such Participant  has a Term of Employment of at least fifteen years at the time of death, or,  if such Participant meets the age and Term of Employment requirements for a Service Benefit (or is Service Pension Eligible) at the time of his or her death. The pre-retirement Automatic Survivor Annuity shall be payable monthly in an amount equal to forty six percent of the monthly benefit that would have been payable to the Participant pursuant to Section 4.02E had such Participant terminated employment with a Service Benefit, regardless of his or her actual eligibility therefore, on the date of his or her death.  For purposes of determining the Automatic Survivor Annuity provided in this Section 4.04(a), the early retirement discounts in Sections 4.02E(a), 4.02E(b), 4.02E(d) or 4.02E(e) shall not apply.  With respect to a Participant whose benefit is determined pursuant to Section 4.01(d)(ii)(B), the Automatic Survivor Annuity shall not include the portion, if any, of the Participant’s benefit attributable to the Participant’s transferred Mid-Career Pension Benefit described in Section 4.07. With respect to a Participant who terminates employment on or after December 1, 2008, distribution of a benefit determined pursuant to this Section 4.04 shall be made in a lump sum payment upon the death of the Participant.  The amount of the lump sum payment shall be determined by multiplying the monthly benefit determined above by the immediate single life annuity factor based on the age of the surviving Spouse as of the commencement date, and the Code Section 417(e) actuarial assumptions in effect under the Pension Plan as of such date.

Section 4.05   Special Increases

The provisions of Section 4.05E do not apply to a benefit that commences after December 1, 2008, except in the case of a survivor benefit payable with respect to a Participant who commenced distribution of a Plan benefit on or before December 1, 2008.

Section 4.06   Monthly Payments

The annual benefit determined under Section 4.02 shall be divided by twelve to determine a monthly benefit amount.  All annuity benefits under the Plan shall be payable monthly or at such other periods as the Committee or the Administrator, as applicable, may determine in each case; a benefit payable other than monthly shall be adjusted to reflect the period covered by such payment.  Notwithstanding the preceding, distributions after December 1, 2008 with respect to a Participant who terminates employment on or after December 1, 2008 shall only be made in the form of a lump sum or installments over a period of 120 months, except with respect to a SERP Election.

Section 4.07   Mid-Career Pension Benefit

The description of the Mid-Career Pension Benefit is set forth in Section 4.07E of Appendix E.

Section 4.08   Treatment During Subsequent Employment

Effective beginning January 1, 2005, benefits shall not be suspended during a period of employment or reemployment. Benefits paid upon a subsequent termination of employment shall be reduced by the actuarial equivalent of the benefit payments that were continued during reemployment.

Section 4.09   Payment of Pensions

(a)Commencement Prior to 2005

Provisions governing the payment of pension benefits that commenced after 2004 and prior to 2009 are set forth in Section 4.09E of Appendix E.

(b)Commencement After 2004 and Prior to 2009

Provisions governing the payment of pension benefits that commenced after 2004 and prior to 2009 are set forth in Section 4.09E of Appendix E.

(c)Commencement After 2008

Payment of benefits that commence after December 1, 2008, except in the case of a survivor benefit payable with respect to a Participant who commenced distribution of a Plan benefit on or before December 1, 2008, shall be made in the time and form as described in the following subparagraphs (i) through (iv), as applicable.

(i) Participants Terminating Prior to 2005:  The provisions of Section 4.09E regarding the time and form of payment of benefits under the Plan shall apply with respect to benefits commencing after 2008 to or with respect to a Participant who terminated employment prior to 2005.  If such an individual is rehired into a position covered by this Plan after 2004, the terms of the Plan shall apply separately to the benefit earned prior to 2005 and the benefit earned after 2004.

     (ii) Participants Terminating Employment after 2004 and Prior to December 1, 2008: Subject to the provisions of Section 4.09(d) and Section 6.01, benefits payable to or with respect to a Participant who terminates employment after December 31, 2004 and prior to December 1, 2008 shall be paid

(A) if distribution of benefits to or on behalf of the Participant commence on or before December 1, 2008, pursuant to the provisions of Section 4.09E, or

(B) if distribution of benefits does not commence on or before December 1, 2008, the annual benefit amount to which such Participant is entitled commencing at Normal Retirement Date shall be determined under the terms of the Plan as set forth in Appendix E.  Distribution of such benefit shall be made to the Participant commencing on July 1, 2009 in the form of a lump sum, equal to the present value determined pursuant to Section 4.09(c)(iv); provided, however, if the amount so determined exceeds $50,000, distribution shall be paid in monthly installments over a period of 120 months. If the Participant dies prior to the commencement of such payment, distribution equal to the present value of the amount that otherwise would have been payable to the Participant shall be made on July 1, 2009 to the Surviving Spouse, if any, otherwise to the estate of the Participant.  If the Surviving Spouse entitled to receive the benefit described in the preceding sentence dies after the Participant but before distribution of such benefit, the benefit shall be paid to the estate of the Surviving Spouse. Survivor benefits, if any, upon death following commencement of distribution to the Participant shall be determined pursuant to the provisions of Section 4.10(d).

(iii) Participants Terminating Employment on or After December 1, 2008: Subject to the provisions of Section 4.09(c)(iv) and Section 4.09(d), benefits payable to or with respect to a Participant who terminates employment on or after December 1, 2008 shall be paid as follows:

(A) Participants Who Are Not SERP Participants:

The “Plan Retirement Benefit” for a Participant who does not become a SERP Participant is equal to the sum of (i) the benefit earned prior to January 1, 1998, determined pursuant to the provisions of Section 4.02E, and (ii) the Benefit Based on the Qualified Deferrals Cash Balance Account, if any, payable at Normal Retirement Date and determined pursuant to the provisions of Section 4.11, expressed as a single life annuity payable commencing at Normal Retirement Date. Distribution of such benefit shall be paid in the form of a lump sum, in an amount determined pursuant to Section 4.09(c)(iv), upon the Participant’s Termination of Employment; provided, however, if the present value so determined exceeds $50,000, distribution shall be paid in monthly installments over a period of 120 months. If the Participant dies before receiving a complete distribution of the benefits so determined, survivor benefits, if any, shall be paid in accordance with the provisions of Section 4.10.

(B) Participants Who Are SERP Participants on December 31, 2008:

(I) A Participant who is a SERP Participant on December 31, 2008 shall continue to accrue benefits under the Cash Balance Formula until the earlier of his or her SERP Vesting Date or termination of employment. As of such date, the Participant’s benefit under the Plan shall be determined as the greater of (A) the Participant’s benefit, if any, determined pursuant to Section 4.02 or (B) the sum of (i) the Benefit Attributable to the Cash Balance Formula and (ii) the Benefit Attributable to Qualified Deferrals, determined as if payment of such benefit were to commence on such date. The amount of the monthly benefit so determined, expressed as a single life annuity, shall be fixed and shall not change (the “Frozen Single Life Annuity”);

(II) Subject to the provisions of Section 4.09(d), upon Termination of Employment, distribution of the benefit determined pursuant to subparagraph (I) shall commence in a form of payment determined pursuant to such Participant’s SERP Election, as defined herein.  The amount payable to such Participant shall be the actuarial equivalent of the single life annuity determined pursuant to subparagraph (I), based on actuarial equivalent factors under the AT&T SERP as of the Participant’s Termination of Employment. Survivor benefits, if any, following the death of the Participant shall be determined in accordance with the provisions of Section 4.10.

(C) Participants who become SERP Participants after December 31, 2008:

(I) A Participant who becomes a SERP Participant after December 31, 2008 shall not be entitled to accrued additional benefits under the Plan after December 31, 2008.  The sum of (i) the benefit earned prior to January 1, 1998, determined pursuant to the provisions of Section 4.02E, and (ii) the Benefit Attributable to Qualified Deferrals, determined pursuant to the provisions of Section 4.11, if any, shall be determined as if payment of such benefits were to commence on the SERP Effective Date, and the amount of the monthly benefit so determined, expressed as a single life annuity, shall be fixed and shall not change (the “Frozen Single Life Annuity”).

(II) Subject to the provisions of Section 4.09(d), distribution of the benefit determined pursuant to subparagraph (I) shall be paid in the form of a lump sum or in 120 monthly installments commencing upon Termination of Employment; the applicable form of payment shall be determined on the Participant’s SERP Effective Date, based on the present value of the Frozen Single Life Annuity if distribution of such benefit commenced on the SERP Effective Date in the form of a single life annuity, and based on the actuarial assumptions in effect under the SERP as of such date.  If the present value determined as of such SERP Effective Date is $50,000 or less, the form of payment shall be a lump sum, and if the present value exceeds $50,000, the form of payment shall be 120 monthly installments.  The amount of the benefit payable commencing at Termination of Employment shall be determined in accordance with the provisions of Section 4.09(c)(iv).  If the Participant dies before receiving a complete distribution of the benefits so determined, survivor benefits, if any, shall be determined in accordance with the provisions of Section 4.10.

(iv) Determination of Present Value:  For purposes of Section 4.09(c)(ii)(B), Section 4.09(c)(iii)(A), and Section 4.09(c)(iii)(C), present value shall be determined as follows:

(A)      Employee who is not a SERP Participant: with respect to a Participant described in Section 4.09(c)(ii)(B) or Section 4.09(c)(iii)(A), an amount equal to the present value of the single life annuity that would be payable under the Plan commencing on the Participant’s Normal Retirement Date.  Such present value shall be determined on the basis of actuarial assumptions under the Qualified Plan as of such date, calculated as follows: the annual amount of such benefit payable at Normal Retirement Date shall be multiplied by the factor for determining the lump sum value as set forth in Appendix B of the Qualified Plan for the Participant’s age at Termination of Employment.  Notwithstanding the preceding, for a Participant described in Section 4.09(c)(ii)(B), the present value shall be based on the Participant’s age as of December 1, 2008, and the amount so determined will be accumulated to July 1, 2009 at an effective annual interest rate of four percent; and

(B)       Employee who is a SERP Participant other than a SERP Participant on December 31, 2008:  with respect to a Participant described in Section 4.09(c)(iii)(C), the present value of the amount payable commencing at Termination of Employment shall be determined by multiplying the Frozen Single Life Annuity (determined pursuant to Section 4.09(c)(iii)(C)(I)) by an immediate annuity factor based on the age of the Participant at Termination of Employment.  The immediate annuity factor shall be based on the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment, and as defined in the SERP.

With respect to benefits payable in installments over a period of 120 months, the amount of each monthly installment shall be calculated in the same manner that a financial institution would calculate the monthly payments for a 10-year fixed interest loan, based on the present value of Plan benefits determined pursuant to Section 4.09(c)(iv). The interest rate used in the calculations shall be equal to the Code Section 417(e) interest rate in effect under the Pension Plan on the date of the Participant’s Termination of Employment, or, with respect to distributions made pursuant to Section 4.09(c)(ii)(B), the rate in effect for the 2008 calendar year.

(d)Payments to Specified Employees

Notwithstanding the provisions of the preceding sections 4.09(a) through 4.09(c), effective on and after January 1, 2005 with respect to payments in the form of a commercial annuity pursuant to Section 6.01 and effective on and after January 1, 2009 with respect to all other payments under the Plan, payment under the Plan to or with respect to a Participant who is eligible to participate in the SERP or who is determined to meet the definition of Specified Employee shall be payable as otherwise provided in this Plan, except that the initial payment shall be made no earlier than six (6) months following his or her Termination of Employment.  If, absent this Section 4.09(d), payment to a Specified Employee would have commenced before the expiration of such six-month period, the first payment with respect to such Specified Employee will include the sum of the annuity payments withheld, together with interest thereon.    For purposes of the immediately preceding sentence, interest shall be credited using the GAAP Rate in effect as of the end of the calendar year immediately preceding the Participant’s Termination of Employment, for distributions made after December 31, 2007.  “GAAP Rate” means such rate as defined under the SERP for the referenced period. Notwithstanding the preceding, for distributions made prior to January 1, 2008, interest credited for purposes of this Section 4.09(d) shall be at an effective annual rate equal to 120 percent of the Federal Mid-term rate in effect as of the date such annuity payments otherwise would have commenced.

Section 4.10   Payment of Plan Benefits Following Death

The provisions of this Section 4.10 apply upon the death of a Participant who is an employee on or after December 1, 2008, and, for purposes of Section 4.10(d), upon the death of a Participant described in Section 4.09(c)(ii)(B).

(a) Death prior to commencement:  If a Participant described in Section 4.09(c)(iii) dies before Termination of Employment, or following Termination of Employment but before the date as of which distribution of the Plan benefit commences, benefits will be payable in a lump sum to the  Spouse, or if there is no surviving Spouse, to the Participant’s estate.  The amount of such lump sum payment shall be determined pursuant to the provisions of Section 4.10(c).

(b) Death of Spouse before payment of survivor benefit:  If a Participant dies before the date as of which distribution of the Plan benefits commences, and he or she is survived by a Spouse entitled to payment pursuant to Section 4.10(a), and such surviving Spouse dies prior to the date payment of benefits under this Plan commence, a lump sum benefit shall be payable to the estate of the Spouse upon the death of the Spouse. The amount of such lump sum payment shall be determined pursuant to the provisions of Section 4.10(c).

(c) Determination of lump sum amount for death before commencement:

(i) With respect to a Participant described in Section 4.09(c)(iii)(A), the lump sum payment payable pursuant to Section 4.10(a) or Section 4.10(b) shall be an amount equal to the present value of the Plan Retirement Benefit, as defined in Section 4.09(c)(iii)(A).  Such present value shall be determined on the basis of actuarial assumptions under the Qualified Plan as of the date of death, calculated as follows: the annual amount the Plan Retirement Benefit, payable in the form of a single life annuity commencing at Normal Retirement Date shall be multiplied by the factor for determining the lump sum value as set forth in Appendix B of the Qualified Plan for the Participant’s age at death;

(ii) The lump sum payment payable pursuant to Section 4.10(a) or Section 4.10(b) upon the death of a Participant who is a SERP Participant, shall be determined by multiplying the Frozen Single Life Annuity determined pursuant to Section 4.09(c)(iii)(B) or Section 4.09(c)(iii)(C), as applicable, by an immediate annuity factor based on the age of the Participant as of the date of death.  The immediate annuity factor shall be based on the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the date of death and as defined in the SERP.

(d) Death following commencement of distribution for a Participant who is not a SERP Participant on December 31, 2008:  If a Participant described in Section 4.09(c)(ii)(B), Section 4.09(c)(iii)(A) or Section 4.09(c)(iii)(C) dies following distribution of Plan benefits in the form of a lump sum, no benefit shall be payable following the death of the Participant. If the Participant is receiving payment of the Plan benefit in the form of 120 monthly installments, the present value of the remaining payments shall be made to the surviving Spouse of the Participant, or if there is no surviving Spouse, to the estate of the Participant. Such present value shall be calculated using the interest rate that was used to determine the amount of the monthly installments at the time distribution of such payments commenced.

(e) Death following commencement of distribution for a Participant who is a SERP Participant on December 31, 2008:  Upon the death following commencement of benefits under the Plan of a Participant who is a SERP Participant on December 31, 2008, further payment of benefits related to the retirement benefit under the Plan shall be the survivor benefit, if any, payable under the terms of an election made on or before December 31, 2008 with respect to benefits that may become payable to the Participant under the SERP, determined under the actuarial assumptions and methodology set forth in the SERP.   Any survivor benefit payable pursuant to this Section 4.10(e) shall be paid to the same beneficiary to whom survivor benefits are payable under the SERP.

Section 4.11      Qualified Deferrals Cash Balance Account

A Qualified Deferral Cash Balance Account was added to the Plan effective January 1, 2005, or such later date on which an Officer, E-band Employee, or other eligible employee began deferring certain compensation under the AT&T Executive Deferred Compensation Plan or the AT&T Inc. Cash Deferral Plan (“Qualified Deferrals,” as defined in Section 2.35 herein).  Annual Qualified Deferral Credits were discontinued under the Plan effective with respect to amounts deferred under such deferral plan from any paycheck dated after December 31, 2007.

Deferral Interest Credits shall continue to be credited to the Qualified Deferral Cash Balance Account of all Participants who made Qualified Deferrals as defined herein. The Benefit Based on the Qualified Deferrals Cash Balance Account shall be the benefit commencing at Normal Retirement determined pursuant to the provisions of Section 4.11E(e).  Notwithstanding the preceding sentence, with respect to a Participant who is an Officer, the following provisions shall apply:

(i) with respect to a Participant who is an Officer prior to December 31, 2008, Deferral Interest Credits shall cease as of the earlier of the Participant’s termination of employment or SERP Vesting Date.  In the latter case, the provisions of Section 4.11E(d) with respect to application of the interest credit shall be applied as if the SERP Vesting Date is the Participant’s commencement date.   The amount of the single life annuity that would be payable from the Qualified Deferral Cash Balance Account commencing as of the date or termination or the SERP Vesting Date shall be determined in accordance with the provisions of Section 4.11E(e).  Any reference to the Benefit Based on the Qualified Deferral Cash Balance Account for a period after the SERP Vesting Date shall mean the benefit so determined as of such date; and

(ii) with respect to a Participant who becomes an Officer after December 31, 2008, Deferral Interest Credits shall cease as of the Participant’s SERP Effective Date. The provisions of Section 4.11E(d) with respect to application of the interest credit shall be applied as if the SERP Effective Date is the Participant’s commencement date.   The amount of the single life annuity that would be payable from the Qualified Deferral Cash Balance Account commencing as of the SERP Effective Date shall be determined in accordance with the provisions of Section 4.11E(e).  Any reference to the Benefit Based on the Qualified Deferral Cash Balance Account for a period after the SERP Effective Date shall mean the benefit so determined as of such date.

Article 5.

Death Benefits

Section 5.01   Participation

A Death Benefit shall be provided under this Article 5, in the following cases: (a) upon the death prior to January 1, 1998 of an active Officer; (b) upon the death of an Officer who, on or after August 10, 1980 and prior to January 1, 1998, (i) terminated employment with eligibility for a pensioner death benefit under the Pension Plan (excluding for purposes of this Section 5.01 the effect of any management pension enhancement pursuant to the Pension Plan) or (ii) terminated employment with eligibility to receive payments under the AT&T Senior Management Long Term Disability and Survivor Protection Plan; (c) upon the death prior to January 1, 2008 of an active Officer, provided such Officer is eligible for the sickness death benefit under the Pension Plan; or (d) upon the death of an Officer who is on the active payroll of a Participating Company on January 1, 1998 and who terminates employment prior to January 1, 2008, if such Officer was Service Pension Eligible or otherwise satisfied eligibility requirements for the Pensioner Death Benefit under the Pension Plan (such as, under certain circumstances, the Rule of 65, as defined in the Pension Plan), at the time of his or her termination of employment (excluding for purposes of this Section 5.01 the effect of any management pension enhancement pursuant to the Pension Plan). A Participant who terminates employment on or after January 1, 1998 and is subsequently reemployed prior to January 1, 2008 shall not be eligible for a Death Benefit following such reemployment unless he or she was eligible for the pensioner death benefit under the Pension Plan as of the date of such earlier termination of employment, and provided further that such Participant’s last employment with a Participating Company was with one covered by the death benefit provisions of the Pension Plan; such eligibility for a Death Benefit shall terminate with respect to a Participant who remains employed within the AT&T Controlled Group on January 1, 2008.

Notwithstanding the provisions of the preceding paragraph, no Death Benefit under this Article 5 shall be provided with respect to a Participant who made a qualified election for a form of payment that resulted in a lump sum distribution of the full present value of his or her accrued benefit (as reduced to reflect the limitations of Code Section 415 and Code Section 401(a)(17) as of the Participant’s Pension Commencement Date) under the Pension Plan.

The Death Benefit under this Article 5 is in addition to the sickness and pensioner death benefits under the Death Benefit Plan in the Pension Plan, and shall be paid to the same beneficiary or beneficiaries, and administered in the same manner as such benefits under the Death Benefit Plan in the Pension Plan.  Notwithstanding the preceding, effective for deaths occurring on or after January 1, 2009, the Death Benefit shall be paid in a lump sum within a reasonable period of time following the date the Beneficiary is identified by the Committee or its delegate.

Section 5.02   Death Benefits

(a)Sickness or Pensioner Death Benefit

In the case of the death of an Officer described in Section 5.01, as eligible for death benefit coverage, except as otherwise determined under Section 5.02(a)(ii), a Death Benefit equal to one year’s wages (as defined below) shall be paid.

(i)           Death after January 1, 1996 and before January 1, 1998

For purposes of determining the Death Benefit payable under Section 5.02(a), with respect to an Officer described in Section 5.01, who died after January 1, 1994 and before January 1, 1998, “one year’s wages” is defined as the greater of (A) the Officer’s Short Term Award for the calendar year preceding the earlier of (i) his or her date of death, or (ii) the date of his or her termination of employment, or (B) the Officer’s Short Term Award with respect to any later partial calendar year of service, but only with respect to a calendar year prior to 1998.

(ii)           Death on or after January 1, 1998

For purposes of determining the Death Benefit under Section 5.02(a), with respect to an Officer described in Section 5.01, who dies on or after January 1, 1998, the amount of the Death Benefit shall equal the amount that would have been payable if the Participant died with eligibility for the Death Benefit as of December 31, 1997.

(b)Other Post-Retirement Death Benefits

Additional death benefits described in this Section 5.02(b) shall be provided, (i) with respect to an Officer who terminated employment on a service pension or disability pension under the Pension Plan, after December 31, 1986 and before January 1, 1997 (or who terminated employment on a service pension or a disability pension prior to December 31, 1986, provided he or she did not attain age fifty-five on or before December 31, 1983), and (ii) with respect to an Officer who terminates employment after December 31, 1996, only if such Officer is Service Pension Eligible at the time of his or her termination of employment.  The death benefits described under Section 5.02(b)(ii) shall also be paid upon the death of an Officer who terminates employment with entitlement to the benefits under the AT&T Senior Management Long Term Disability and Survivor Protection Plan.

(i)Group Life Differential

Upon the death of an Officer, age sixty-six or older who retired after December 31, 1986 and before October 1, 1990, the difference between (i) the amount of his or her Basic Group Life Insurance coverage under the Company’s Group Life Insurance Program, as in effect on the day before his or her sixty-sixth birthday, and (ii) the amount of such insurance coverage, as in effect on the date of his or her death, shall be paid in a lump sum to the beneficiary or beneficiaries designated by the Officer, or, if there is no such beneficiary, to the Officer’s estate.

(ii)Tax Differential

An individual who is the beneficiary of a deceased retired Officer or of an Officer who terminated employment with entitlement to payments under the AT&T Senior Management Long Term Disability and Survivor Protection Plan, and who receives one or more of the benefits listed below, shall be eligible to receive, under this Section 5.02(b)(ii), a tax differential payment related to the difference between (i) the beneficiary’s assumed federal income tax liability on such benefit or benefits and (ii) the beneficiary’s assumed federal income tax liability had such benefit or benefits been paid as a non-tax death benefit under a life insurance policy on the life of the retired Officer:

(A) Post-Retirement Survivor Annuity described in Section 4.04(b),

(B) Pensioner Death Benefit described in Section 5.02(a),

(C) Group Life Differential Death Benefit described in Section 5.02(b)(i),

(D) Pensioner Death Benefit described in Article 5 of the Pension Plan,

(E) The Death Benefit described in Section 5 of the AT&T Senior Management Long Term Disability and Survivor Protection Plan, and

(F) The Death Benefit described in the AT&T Excess Benefit and Compensation Plan.

Pursuant to the terms of the various plans described above, no benefit identified in (A), (B), (C), (D) or (F) is payable with respect to a Participant who terminates employment after December 31, 2007 (or such earlier date as may be specified in such plan), and no benefit shall be payable under this Plan with respect to such plans.

Federal estate tax, state and local inheritance taxes, and state and local income taxes, shall not be considered in computing the tax differential payment under this Section 5.02(b)(ii).

Article 6.

Source Of Payment

Section 6.01   Source of Payments

(a)     Benefits arising under this Plan and all costs, charges, and expenses relating thereto will be payable from the Company’s general assets. The Company may, however, establish a trust to pay such benefits and related expenses, provided such trust does not cause the Plan to be “funded” within the meaning of ERISA. To the extent trust assets are available, they may be used to pay benefits arising under this Plan and all costs, charges, and expenses relating thereto. To the extent that the funds held in the trust, if any, are insufficient to pay such benefits, costs, charges and expenses, the Company shall pay such benefits, costs, charges, and expenses from its general assets.

(b)   In addition, the Company may, in its sole discretion, purchase and distribute one or more commercial annuity contracts, or cause the trustee of the trust to purchase and distribute one or more commercial annuity contracts, to make benefit payments required under this Plan, to any Officer, as defined herein, or the Surviving Spouse of any Officer, provided, however, that with respect to an annuity purchase occurring prior to January 1, 2005,  the purchase and distribution of any such annuity contracts shall be no sooner than the expiration of any forfeiture provisions applicable to the Officer  under the AT&T Non-Competition Guidelines, or as otherwise may be provided in accordance with procedures establish by the Executive Vice President – Human Resources (or any successor to such position), and provided further that, effective January 1, 2004, the Company’s right to direct that payments under the Plan shall be made through one or more commercial annuity contracts shall be applicable to only the benefits payable to any Participant, or the Surviving Spouse of any such Participant, as applicable, who (1) was  on the active payroll of the Company (or on an approved leave of absence with guaranteed right of reinstatement) and classified as an Officer on December 31, 2003, and (2) satisfies the age and service requirements, or is within twelve months of satisfying the  requirements in effect at the time the Participant terminates employment with the Company for the receipt of retirement-related health benefits under the AT&T Corp. Postretirement Welfare Benefits Plan (or any successor to such plan) (other than by virtue of the “Rule of 65”or  through a Company-sponsored employee-paid health benefits access program, or through the AT&T Corp. Separation Medical Plan), without regard to whether or not the Officer has five years of service as of December 31, 1999.

Any such annuity contracts described above may be purchased from a commercial insurer acceptable to the Executive Vice President - Human Resources (or any successor to such position). Further, the Executive Vice President - Human Resources (or any successor to such position), may determine, in his or her sole discretion, to pay additional sums to any Officer, from the Company’s general assets or from the trust, if any, to reimburse the Officer for additional federal and state income taxes estimated to be incurred by reason of the distribution of any such annuity contracts. The Executive Vice President - Human Resources (or any successor to such position) shall establish a methodology or methodologies for determining the amount of such additional sums. The methodology or methodologies selected shall be those that the Executive Vice President - Human Resources (or any successor to such position) determines, in his or her sole discretion, to be the most effective and administratively feasible for the purpose of producing after-tax periodic benefit payments that approximate the after-tax periodic benefit payments that would have been received by Officers in the absence of the distribution of the annuity contract.  Any such purchase and distribution of an annuity contract shall be a full and complete discharge of the Plan’s, AT&T’s and the Participating Companies’ liability for payments assumed by the issuer of the annuity contract.

(c)    Notwithstanding the provisions of the preceding Section 6.01(b), effective January 1, 2005, a Participant who is eligible to elect to receive his or her benefit under the Plan in the form of a third-party commercial annuity contract pursuant to Section 6.01(b) shall be required to submit an election, on a form provided by the Company, with respect to the time and form of payment in which benefits under this Plan shall be distributed for any reason other than the death of the Participant.  Such election form shall be submitted to the Company no later than one of the following dates, whichever is applicable:  (i) such Participant’s separation from service, with respect to distribution of such annuity contract during the 2005 calendar year, (ii) the earlier of (A) such employee’s separation from service, or (B) December 31, 2005, with respect to the distribution of such annuity contract during the 2006 calendar year, and (iii) December 31, 2006, for distributions of such annuity contracts occurring after the 2006 calendar year.  Notwithstanding the foregoing, the Company may permit such a Participant to submit a distribution election form in 2006 with respect to his or her benefits under the Plan, provided that such election in the 2006 calendar year may not result in a change in payment elections with respect to payments that the Participant would otherwise receive during the 2006 calendar year, or to cause payments to be made in 2006, to the extent permitted under the proposed Treasury Regulations under Code Section 409A.

(d)  Notwithstanding the provisions of the preceding Section 6.01(b) and Section 6.01(c), the annuity purchase program described in Section 6.01(b) shall be discontinued effective September 6, 2007, and any election in effect on September 6, 2007 pursuant to which a Participant has elected to receive distribution of his or her benefits under this Plan through the purchase of a commercial annuity contract shall be null and void, as such election relates to any distribution from this Plan to a Participant or Surviving Spouse occurring after September 6, 2007.

Section 6.02   Unfunded Status

The Plan at all times shall be entirely unfunded for purposes of the Code and ERISA, and, except as provided in Section 6.01, no provision shall be made at any time with respect to segregating any assets of a Participating Company for the payment of any benefits hereunder. The Plan constitutes a mere promise by the Participating Companies to make payments, if any, in the future. No Participant, surviving Spouse or any other person shall have any interest in any particular assets of a Participating Company by reason of the right to receive a benefit under the Plan, and to the extent a Participant, surviving Spouse, or any other person, acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any unsecured general creditor of any Participating Company.

Article 7.

Administration Of The Plan

Section 7.01   Administration and Authorities

The Plan shall be administered by the Company, and it shall have full discretionary authority to manage and control the operation and administration of the Plan, including the power to interpret the provisions of the Plan, to make determinations of fact, promulgate rules and regulations, to determine benefit eligibility of individuals and classes of Participants (including, without limitation, determinations of a Participant’s applicable Term of Employment and Position Rate), delegate its powers and duties hereunder to the Committee, the Administrator, or others, and to take such other action as it shall find necessary and appropriate to implement the provisions of the Plan. The Committee and the Administrator may retain attorneys, consultants, accountants or other persons (who may be employees of the Company or an Affiliated Corporation) to render advice and assistance, and may delegate any of the authorities conferred on them to such persons as they shall determine to be appropriate to effect the discharge of their duties hereunder. The Company, other Participating Companies, and any of their Officers and E-band Employees, shall be entitled to rely upon the advice, opinions, and determinations of any such persons. Any exercise of the authorities set forth in this Article 7, whether by the Company, the Committee or its delegate, or the Administrator, shall be final and binding upon the Company, its Affiliated Corporations, their officers, directors and affected Participants and beneficiaries.

Section 7.02   Committee

The Company has delegated to the Committee the authority to make the final determination to grant or deny claims for benefits under the Plan with respect to Participants, surviving Spouses, and other beneficiaries, and to authorize disbursements according to the terms of the Plan.

Section 7.03   Indemnification

No member of the Board, the Committee or the Administrator shall be personally liable, by reason of any contract or other instrument executed by such individual, or on his or her behalf, in his or her capacity as a member of the Board, the Committee or the Administrator, nor for any mistake of judgment made in good faith, and AT&T shall indemnify and hold harmless each member of the Board, each member of the Committee, the Administrator and each other employee, officer, or director of AT&T, to whom any duty or power relating to the administration or interpretation of the Plan have been allocated or delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan, unless arising out of such person’s own fraud or bad faith.

Section 7.04   Benefit Claims and Appeals

(a)Benefit Claims

All claims for benefit payments under the Plan shall be submitted in writing by the Participant, a Surviving Spouse, beneficiary, or the estate of the Participant, or the duly authorized representative of such person or estate (“Claimant” for purposes of this Section 7.04) to the Administrator. The Administrator shall notify the Claimant in writing within 90 days after receipt as to whether the claim has been granted or denied. This period may be extended for up to an additional 90 days, for a total of 180 days, in the case of special circumstances provided that written notice of the extension is furnished to the Claimant prior to the termination of the initial 90-day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the benefit determination. In the event the claim is denied, in whole or in part, the Claimant will receive notice of the Administrator’s decision, including: (i) the specific reasons for the adverse determination, (ii) reference to the pertinent Plan provisions on which the adverse determination is based, (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) a description of the Plan’s procedures for appealing the adverse determination (including applicable time limits) and the Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse determination on review.

(b)Benefit Appeals

A Claimant whose claim for benefits has been denied, in whole or in part, may, within 60 days of receipt of any adverse benefit determination, appeal such denial to the Committee. All appeals shall be in the form of a written statement and shall (i) set forth all of the reasons in support of favorable action on the appeal, (ii) identify those provisions of the Plan upon which the Claimant is relying, and (iii) include copies of any other documents, records and other materials which may support favorable consideration of the claim. If the Claimant submits a written request for review of a denied claim, the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002), and (iv) a statement of the right of the Claimant to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review.  The Claimant may raise issues even if such issues were not raised in the initial benefit determination. The Committee shall decide the issues presented within 60 days after receipt of such request, but this period may be extended for up to an additional 60 days in the case of special circumstances provided that written notice of the extension is furnished to the Claimant prior to the termination of the initial 60-day period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination. In the case of an adverse determination, the decision of the Committee shall be set forth in writing and include (i) the specific reason or reasons for the adverse determination, (ii) reference to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002) relevant to the Claimant’s claim for benefits, and (iv) a statement of the right of the Claimant to bring a civil action under section 502(a) of ERISA.

Any Claimant whose claim for benefits has been denied shall have such further rights of review as are provided in ERISA § 503, and the Committee and Administrator shall retain such right, authority, and discretion as is provided in or not expressly limited by ERISA § 503.

(c)Final Review

The Committee shall serve as the final review committee, under the Plan and ERISA, for the review of all appeals by Claimants (as defined in Section 7.04) whose initial claims for benefits have been denied, in whole or in part, by the Administrator. The Committee shall have the authority, subject to Section 7.04(c), to determine conclusively for all parties any and all questions arising from administration of the Plan, and shall have sole and complete discretionary authority and control to manage the operation and administration of the Plan, including, but not limited to, authorizing disbursements according to the Plan, the determination of all questions relating to eligibility for participation and benefits, interpretation of all Plan provisions, determination of the amount and kind of benefits payable to any Participant, Surviving Spouse or estate, and the construction of disputed and doubtful terms. Such decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.

(d)Action by Trustee

In the event that the Company (or its designee) fails to make a decision on a claim and/or appeal within 20 days of an event entitling the Claimant to a payment under this Plan (or, if later, within the ninety/sixty day period, with extensions, set forth in Section 7.04(a) and (b)), the Trustee of the AT&T Corp. Benefits Protection Trust (“Trust”) may make a decision in lieu of the Company (or its designee) as authorized by the Trust and subject to the terms and conditions of the Trust.  Any decision by the Trustee to make a payment under this Plan to the Claimant is subject to the availability of Trust assets allocated to pay benefits under this Plan.  A payment to the Claimant from the prorated Trust assets shall be considered a satisfaction of the Company’s liability under this Plan to the extent payment from the Trust was sufficient to cover the amount determined by the Trustee as the amount to which the Claimant was entitled.

Article 8.

Adoption, Amendment And Termination

Section 8.01   Adoption of Plan

Any Affiliated Corporation that participates in the Pension Plan may, with the consent of AT&T, elect to participate in the Plan.  Such Affiliated Corporation shall become a Participating Company as of the date specified by AT&T in its resolution approving the participation of the Affiliated Corporation in the Plan.

Section 8.02   Amendment and Termination

AT&T is the sponsor of the Plan, and the Board or its delegate, may from time to time amend, modify or change the Plan, as set forth in this document, and the Board or its delegate (acting pursuant to the Board’s delegations of authority then in effect) may terminate the Plan at any time.  Plan amendments, modifications, and changes may include, but are not limited to, elimination or reduction in the level or type of benefits provided to any class or classes of Participant (and surviving Spouses and other beneficiaries).  Any and all Plan amendments, modifications, and changes may be made without the consent of any Participant, surviving Spouse or beneficiary.  Notwithstanding the foregoing, no such amendment, modification, or change shall retroactively impair or otherwise adversely affect the rights of any Participant or surviving Spouse to benefits under the Plan to which he or she has previously become entitled as a result of a Participant’s satisfaction of the vesting schedule of this Plan which is the same as and never will be greater than the vesting schedule under the Pension Plan.

Notwithstanding the preceding, the Board may adopt any prospective or retroactive amendment that it determines is necessary for the Plan to maintain its compliance with Code Section 409A.

Section 8.03   Sale, Spin-Off, or Other Disposition of Participating Company

(a)           Subject to Section 9.01 of this Plan, in the event AT&T sells, spins off, or otherwise disposes of an Affiliated Corporation, or disposes of all or substantially all of the assets of an Affiliated Corporation, such that one or more Participants terminate employment with a Participating Company for the purpose of accepting employment with the acquirer of such Affiliated Corporation or such assets, each such Participant shall be deemed to have terminated his or her employment with such Participating Company for all relevant purposes under this Plan. Notwithstanding the preceding, effective January 1, 2005, no distribution shall commence pursuant to this Section 8.03(a) unless the Participant has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group.

(b)           Notwithstanding the provisions of Section 8.03(a), and subject to Section 9.01 of this Plan, if the sale, spin-off, or other disposition of the stock or assets of an Affiliated Corporation is to a Successor Plan Sponsor, with the effect that a Participant is or becomes a Transition Employee, the Successor Plan Sponsor shall be solely liable for the payment of the annual benefits and death benefits described in this Plan, and the entitlement of the Transition Employee, or of his or her surviving Spouse or beneficiary, to benefits under this Plan shall terminate. A Transition Employee shall not be considered to have terminated his or her employment with AT&T or a Participating Company for any purpose under this Plan.

Article 9.

General Provisions

Section 9.01   Binding Effect

The Plan shall be binding upon and inure to the benefit of each Participating Company and its successors and assigns, and to the benefit of each Participant, his or her successors, assigns, designees,spouse, and estate. The Plan also shall be binding upon any successor corporation or organization succeeding to substantially all of the assets and business of AT&T, but nothing in the Plan shall preclude AT&T from merging or consolidating into or with, or transferring all or substantially all of its assets to, another corporation which assumes the Plan and all obligations of AT&T hereunder. AT&T agrees that it will make appropriate provision for the preservation of the rights of Participants, surviving Spouses and beneficiaries under the Plan, in any agreement or plan or reorganization into which it may enter to effect any merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of obligations, that results in a Participant continuing to be employed by the Company or an Affiliated Corporation, the term “Participating Company” shall refer to such other corporation and the Plan shall continue in full force and effect as to that Participant and his or her lawful spouse or other beneficiary.

Section 9.02   Fiduciary Relationship

Nothing contained in the Plan, and no action taken pursuant to the provisions of the Plan, shall create or be construed to create a trust or contract of any kind, or a fiduciary relationship between or among AT&T, any other Participating Company, any Affiliated Corporation, the Board, the Administrator, the Committee, any Participant, any surviving Spouse or any other person.

Section 9.03   No Guarantee of Employment

Neither the Plan, nor any action taken thereunder, shall be construed as (i) a contract of employment, or (ii) deemed to give any employee the right to be retained in the employment of a Participating Company, or (iii) the right to any position level or level of compensation, or (iv) the right to future participation in the Plan, or (v) affecting the right of a Participating Company to discharge or dismiss any employee at any time.

Section 9.04   Tax Withholding

AT&T shall withhold all federal, state, local or other taxes required by law to be withheld from payments or accruals under the Plan.

Section 9.05   Assignment of Benefits

Benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, executed upon, encumbered, or subjected to any charge or legal process; no interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, any Participant, Spouse, or beneficiary, including without limitation, any judgment or claim for alimony, support or separate maintenance pursuant to a domestic relations order within the meaning of Section 206(d)(3) of ERISA, and claims in bankruptcy proceedings. Any such attempted disposition shall be null and void.

Section 9.06   Facility of Payment

If the Administrator shall find that any person to whom any amount is or was payable under the Plan is unable to care for his or her affairs, because of illness or accident, then any payment, or any part thereof, due to such person (unless a prior claim therefore has been made by a duly appointed legal representative), may, if the Administrator so directs AT&T, be paid to the same person or institution that the benefits with respect to such person are paid under the Pension Plan, if applicable, or to the person’s spouse, under the laws of the state of the person’s domicile, Participant’s surviving Spouse,  child, or relative, or to an institution maintaining or having custody of such person, or to any other person deemed by the Administrator to be a proper recipient, on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability for such amount, of AT&T, the Board, the Committee, the Administrator, and the Participating Company therefore. If any payment, to which a Participant, a surviving Spouse, or a beneficiary, is entitled under this Plan, is unclaimed or otherwise not subject to payment to the person or persons so entitled, the amounts representing such payment or payments shall be forfeited after a period of two (2) years from the date the first such payment was payable and shall not escheat to any state or revert to any party; provided, however, that any such payment or payments shall be restored if any person otherwise entitled to such payment or payments makes a valid claim.

Section 9.07   Severability

If any section, clause, phrase, provision or portion of this Plan, or the application thereof, to any person or circumstance, shall be invalid or unenforceable under any applicable law, such invalidity or unenforceability shall not affect or render invalid or unenforceable the remainder of this Plan, and shall not affect the application of any section, clause, provision, or portion hereof to other persons or circumstances.

Section 9.08   Effective Date

This Plan first became effective for Officers actively employed on or after October 1, 1980 and for E-band Employees actively employed on or after on January 1, 1984 and is amended and restated effective January 1, 1997, with subsequent amendments through December 31, 2008.

Section 9.09   Plan Year

The Plan Year shall begin on January 1 and end on December 31.

Section 9.10   Headings

The captions of the sections and articles hereof have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provision of the Plan.

Section 9.11   Governing Law

To the extent such laws are not preempted by the laws of the United States of America, the Plan shall be governed by the laws of the State of Texas, except as to its principles of conflict of laws.

Section 9.12   Forfeiture of Benefits

Except as provided in this Section 9.12 and Section 3.02, benefits previously awarded may not be canceled, and upon attaining the right under the Plan for a Service Benefit or a  Deferred Vested Benefit, or for an automatic survivor annuity, such right shall be nonforfeitable. Notwithstanding any eligibility or entitlement to benefits of an individual arising or conferred under any other provision or paragraph of this Plan, all benefits for which a Participant would otherwise be eligible hereunder may be forfeited, subject to the requirements of ADEA (29 CFR 1625.12), (i) at the discretion of the Board or the Committee, if an individual without the Company’s consent establishes a relationship with a competitor of the Company or (ii) at the discretion of the Executive Vice President – Human Resources, if an individual violates the AT&T Non-Competition Guideline, as determined by the Executive Vice President – Human Resources in his or her sole discretion. To the extent a benefit under any other nonqualified plan of AT&T is offset by benefits payable under this Plan, such offset shall be determined as if a forfeiture had not occurred.

Section 9.13   Special Classification

For purposes of the Plan, the determination of those causes of death not classified as due to accident shall be accomplished in the same manner as set forth in the Pension Plan, as such plan was in effect on October 1, 1996.

Section 9.14   Claims Release

In case of accident resulting in the death of a Participant which entitles his or her beneficiary or beneficiaries or his or her surviving Spouse to death benefits under the Plan, such beneficiary(ies) or surviving Spouse shall, prior to the payment of any such benefits, sign a release, releasing the Company and/or other Participating Companies, as applicable, from all claims and demands which the deceased had and which his or her beneficiary(ies) or his or her surviving Spouse may have against them, otherwise than under the Plan, on account of such accident. If any person(s), other than the beneficiary(ies) and/or the surviving Spouse under this Plan, might legally assert claims against a Participating Company on account of the death of a Participant, no part of the Death Benefit under the Plan shall be due or payable until there have also been delivered to the Committee or the Administrator, as applicable, good and sufficient releases of all claims, arising from or growing out of the death of the Participant, which such other beneficiary(ies) and/or surviving Spouse might legally assert against any Participating Company. The Committee or the Administrator, as applicable, in its discretion, may require that the releases described above shall release any other company connected with the accident. This requirement of a release or releases shall not apply in the case of Survivor Annuities as described in Section 4.04.

Section 9.15   Damage Claims or Suits

Should a claim, other than under the Plan, be presented, or suit brought against the Company or any Participating Company, for damages on account of death of the Participant, nothing shall be payable under the Plan on account of such death except as provided in Section 9.17; provided, however, that the Committee or the Administrator, as applicable, may, in its discretion and upon such terms as it may prescribe, waive this provision if such claim be withdrawn or if such suit be discontinued; and provided further that this provision shall not preclude the payment of Survivor Annuities as described in Section 4.04.

Section 9.16   Judgment or Settlement

In case any judgment is recovered against any Participating Company, or any settlement is made of any claim or suit, on account of the death of a Participant, and the amount paid to the beneficiary(ies) or surviving Spouse who would have received benefits under the Plan is less than what would otherwise have been payable under the Plan, the difference between the two amounts may, in the discretion of the Committee or the Administrator, as applicable, be distributed to such beneficiary(ies) or surviving Spouse.

Section 9.17   Payment under Law

In the case that any benefit (which the Committee or the Administrator, as applicable, shall determine to be of the same general character as a benefit provided by the Plan) is payable to any Participant, to his or her beneficiary(ies), to his or her estate, or to his or her surviving Spouse under any law now in force or hereafter enacted, only the excess, if any, of the amount prescribed in the Plan, above the amount of such payment prescribed by law, shall be payable under the Plan; provided, however, that no benefit payable under the Plan shall be reduced by reason of any governmental benefit or pension payable on account of military service or by reason of any benefit which the recipient would be entitled to receive under the Social Security Act or the Railroad Retirement Act. In those cases where, because of differences in the beneficiaries, or in the time or methods of payment or otherwise, the determination of any such excess is not ascertainable by mere comparison but adjustments are necessary, the Committee or the Administrator, as applicable, shall, in its discretion, determine whether or not in fact any such excess exists and make the adjustments necessary to carry out in a fair and equitable manner the spirit of the provision for the payment of any such excess. Further, in determining whether or not there is an excess, to the extent any payments under any law are considered in determining whether there is any excess payable to an employee under any other plan sponsored by the Company, the amount of such payments under law shall not be considered under this Plan.

Section 9.18   CIC Provision

         (a)   Applicability

This Section 9.18 applies only to an individual who, as of the date a Change in Control (“CIC”) occurs (as defined in the Pension Plan) is an employee of a Participating Company and a Participant in this Plan.

(b)   Nonforfeitable Benefits

Notwithstanding any other provisions of this Plan, on and after the date a CIC occurs, solely for purposes of determining entitlement to benefits from this Plan, and individual described in Section 9.18(a) shall be deemed to be vested under the Pension Plan, whether or not such Participant is otherwise entitled to a vested benefit from the Pension Plan.

(c)   Amendments to CIC Provisions

Notwithstanding the provisions of Section 8.02, or any other provision of the Plan, unless required by applicable law, this Section 9.18 may not be amended in any manner adverse to the interests of Participants without their consent and, further, upon the occurrence of a CIC, no amendment may be made to this Section 9.18 by the Board, the Company, (including any successor to the Company), any committee, any officer, or any other party to suspend, modify, or eliminate any benefit provisions that are applicable upon occurrence of a CIC.

Section 9.19   Entire Plan

This written Plan document is the exclusive statement of the terms of this Plan, and any claim of right or entitlement under the Plan shall be determined in accordance with its provisions pursuant to the procedures described in Article 7. Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 8.02.

Section 9.20   Overpayments

If any overpayment is made by the Plan for any reason, the Plan shall have the right to recover such overpayment.  The Participant shall cooperate fully with the Plan to recover any overpayment and provide any necessary information and required documents. Any recovery of overpayment pursuant to this Section 9.20 may be deducted from future benefits payable to or on behalf of the Participant from this Plan.

AT&T Non-Qualified Pension Plan

Appendix A.

Section 4.02(c)E Alternate Minimum Formula - Table of Factors

Service/Age	50 or less	51	52	53	54	55	56	57	58	59	60	61	62	63	64	65
20 or less	1.33	1.33	1.33	1.36	1.43	1.47	1.43	1.38	1.33	1.28	1.25	1.20	1.15	1.10	1.05	1.00
21	1.38	1.32	1.32	1.35	1.42	1.46	1.42	1.37	1.32	1.27	1.24	1.19	1.14	1.09	1.05	1.00
22	1.42	1.37	1.31	1.34	1.41	1.45	1.41	1.36	1.30	1.26	1.23	1.18	1.14	1.09	1.05	1.00
23	1.47	1.41	1.36	1.33	1.40	1.44	1.40	1.35	1.29	1.25	1.22	1.17	1.13	1.09	1.04	1.00
24	1.52	1.46	1.40	1.39	1.39	1.43	1.39	1.34	1.29	1.24	1.21	1.17	1.12	1.08	1.04	1.00
25	1.58	1.51	1.45	1.43	1.45	1.42	1.38	1.33	1.28	1.23	1.20	1.16	1.12	1.08	1.04	1.00
26	1.57	1.50	1.44	1.42	1.44	1.41	1.37	1.32	1.27	1.22	1.19	1.15	1.11	1.08	1.04	1.00
27	1.57	1.49	1.43	1.42	1.43	1.40	1.36	1.31	1.26	1.21	1.18	1.15	1.11	1.07	1.04	1.00
28	1.56	1.48	1.42	1.41	1.43	1.39	1.36	1.31	1.25	1.21	1/18	1.14	1.11	1.07	1.04	1.00
29	1.55	1.48	1.42	1.40	1.42	1.39	1.35	1.30	1.25	1.20	1.17	1.14	1.10	1.07	1.03	1.00
30	1.38	1.36	1.33	1.35	1.39	1.38	1.34	1.29	1.24	1.19	1.17	1.13	1.10	1.07	1.03	1.00
31	1.38	1.35	1.33	1.34	1.39	1.37	1.34	1.29	1.24	1.19	1.16	1.13	1.10	1.06	1.03	1.00
32	1.37	1.35	1.32	1.34	1.38	1.37	1.33	1.28	1.23	1.18	1.16	1.12	1.09	1.06	1.03	1.00
33	1.37	1.34	1.32	1.34	1.38	1.36	1.33	1.28	1.23	1.18	1.15	1.12	1.09	1.06	1.03	1.00
34	1.36	1.34	1/31	1.33	1.37	1.36	1.32	1.27	1.22	1.17	1.15	1.12	1.09	1.06	1.03	1.00
35 or more	1.36	1.33	1.31	1.33	1.37	1.35	1.32	1.27	1.22	1.17	1.14	1.11	1.09	1.06	1.03	1.00

Appendix B.                                           

Early Retirement Factors – Alternate Formula, Special Update to the Alternate Formula, and Alternate Minimum Formula

The benefit payable under the Alternate Formula of Section 4.02E(b), under the Special Update to the Alternate Formula of Section 4.02E(e), or under Formula B of the Alternate Minimum Formula of Section 4.02E(c), for commencement prior to Normal Retirement Age shall equal the amount otherwise determined under such sections, multiplied by the applicable factor based on completed years and months of age effective as of the Pension Commencement Date:

Attained Age

Years/Months	0	1	2	3	4	5	6	7	8	9	10	11
50	.29	.29	.30	.30	.31	.31	.32	.32	.32	.33	.33	.34
51	.34	.34	.35	.35	.36	.36	.37	.37	.37	.38	.38	.39
52	.39	.40	.40	.41	.42	.42	.43	.44	.44	.45	.46	.46
53	.47	.48	.48	.49	.50	.50	.51	.52	.52	.53	.54	.54
54	.55	.56	.57	.57	.58	.59	.60	.60	.61	.62	.63	.63
55	.64	.64	.66	.66	.66	.66	.67	.67	.67	.67	.69	.69
56	.69	.69	.71	.71	.71	.72	.72	.72	.74	.74	.74	.76
57	.76	.76	.78	.78	.78	.79	.79	.79	.81	.81	.81	.83
58	.83	.83	.84	.84	.86	.86	.88	.88	.88	.90	.90	.91
59	.91	.91	.93	.93	.95	.95	.97	.97	.97	.98	.98	1.00
60	1.00

Appendix C.

Initial Conversion Factors

Age	Conversion Factor	Age	Conversion Factor
20	17.16	43	50.04
21	17.88	44	51.60
22	18.48	45	52.92
23	19.20	46	55.08
24	20.04	47	57.12
25	20.76	48	59.28
26	22.08	49	61.32
27	24.12	50	63.24
28	26.16	51	65.88
29	29.76	52	68.28
30	31.68	53	70.80
31	33.72	54	73.20
32	35.16	55	75.60
33	36.48	56	78.60
34	37.44	57	81.60
35	38.40	58	84.60
36	40.08	59	87.48
37	41.64	60	90.36
38	42.84	61	94.56
39	44.16	62	98.76
40	45.36	63	102.84
41	46.92	64	106.92
42	48.60	65 or later	111.12

Appendix D.

Deferred Vested Benefit – Early Commencement Factors

Single Life Annuity Early Commencement Factors

Based Upon Completed Years and Months of Age

At Commencement of Non-Service Benefit

Years\Months	0	1	2	3	4	5	6	7	8	9	10	11
50	0.26	0.26	0.26	0.26	0.26	0.26	0.27	0.27	0.27	0.27	0.27	0.28
51	0.28	0.28	0.28	0.28	0.28	0.29	0.29	0.29	0.29	0.29	0.30	0.30
52	0.30	0.30	0.30	0.31	0.31	0.31	0.31	0.32	0.32	0.32	0.32	0.32
53	0.33	0.33	0.33	0.33	0.34	0.34	0.34	0.34	0.34	0.35	0.35	0.35
54	0.35	0.36	0.36	0.36	0.36	0.37	0.37	0.37	0.37	0.38	0.38	0.38
55	0.38	0.39	0.39	0.39	0.40	0.40	0.40	0.40	0.41	0.41	0.41	0.42
56	0.42	0.42	0.43	0.43	0.43	0.44	0.44	0.44	0.44	0.45	0.45	0.45
57	0.46	0.46	0.46	0.47	0.47	0.48	0.48	0.48	0.49	0.49	0.49	0.50
58	0.50	0.50	0.51	0.51	0.52	0.52	0.52	0.53	0.53	0.54	0.54	0.54
59	0.55	0.55	0.56	0.56	0.57	0.57	0.57	0.58	0.58	0.59	0.59	0.60
60	0.60	0.61	0.61	0.62	0.62	0.63	0.63	0.64	0.64	0.65	0.65	0.66
61	0.66	0.67	0.67	0.68	0.68	0.69	0.70	0.70	0.71	0.71	0.72	0.72
62	0.73	0.74	0.74	0.75	0.76	0.76	0.77	0.78	0.78	0.79	0.80	0.80
63	0.81	0.82	0.82	0.83	0.84	0.85	0.85	0.86	0.87	0.88	0.88	0.89
64	0.90	0.91	0.91	0.92	0.93	0.94	0.95	0.96	0.97	0.97	0.98	0.99
65	l.00

Appendix E.

Article 4E - Pension Benefits

This Appendix E sets forth the provisions related to the determination of benefit amounts and payment of such benefits commencing on or before December 1, 2008, and to the extent indicated herein, and as modified by Article 4 of the main text of the Plan, the determination of benefit amounts with respect to certain benefits commencing after December 1, 2008.   A reference in this Appendix E to a provision of Article 4 means such provision as set forth in this Appendix E, unless the reference specifically indicates otherwise.

Section 4.01E     Applicable Benefit Formulas.

For purposes of applying the provisions of Sections 4.01 and 4.02 with respect to a Participant described in Section 3.02(c), the Participant’s “Term of Employment” and the day for the determination of such a Participant’s status as “Service Pension Eligible” shall be subject to the provisions of Section 3.02(c).

(a)Participants Terminated Before January 1, 1997

The Service Benefit, Deferred Vested Benefit, or Disability Benefit payable to a Participant who terminated employment from a Participating Company prior to January 1, 1997 is determined in accordance with the terms of the Plan as in effect from time to time prior to January 1, 1997.

(b)Active Participants on January 1, 1997

(i) Participants Whose Eligibility to Accrue Benefits Ends Prior to August 1, 1997.

(A) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he or she leaves the service of a Participating Company prior to August 1, 1997, and who is Service Pension Eligible as of the last day of his or her Term of Employment, will be the greater of the annual benefit amount determined under the Basic Formula described in Section 4.02(a), the annual benefit amount determined under the Alternate Formula described in Section 4.02(b), or, in the case of an Officer who had at least five Years of Service as an Officer as of December 31, 1993, the annual benefit amount determined under the Alternate Minimum Formula described in Section 4.02(c).

(B) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he leaves the service of a Participating Company prior to August 1, 1997, but who is not Service Pension Eligible as of the last day of his or her Term of Employment, will be a Deferred Vested Benefit determined under the Basic Formula described in Section 4.02(a), provided he or she is vested under the Pension Plan at the time of termination of employment from the AT&T Controlled Group.  Notwithstanding the provisions of the immediately preceding sentence, if such Participant was an Officer who had at least five Years of Service as an Officer as of December 31, 1993, the annual benefit shall not be less than the annual benefit determined under the Alternate Minimum Formula described in Section 4.02(c).

(C) Subject to the provisions of Section 4.01(b)(i)(D), the annual benefit of a Participant, who is an E-band Employee on January 1, 1997, who terminates employment as an E-band Employee prior to August 1, 1997 and who is Service Pension Eligible as of the last day of his or her Term of Employment, will be the annual benefit amount determined under the Alternate Formula described in Section 4.02(b).

(D) Effective August 1, 1997, the annual benefit of a Participant described in this Section 4.01(b)(i) shall increase (but shall not be decreased) to the amount determined pursuant to the following subsection 4.01(b)(ii)(A), if the Participant is described in subsection 4.01(b)(i)(A), or to the amount determined pursuant to subsection 4.01(b)(ii)(B) if the Participant is described in subsection 4.01(b)(i)(B), or to the amount determined pursuant to the following subsection 4.01(b)(ii)(D), if the Participant is described in subsection 4.01(b)(i)(C).  For purposes of applying the provisions of Section 4.01(b)(ii) to increase a benefit which commenced prior to August 1, 1997 pursuant to this subsection 4.01(b)(i)(D), any age-based reduction shall be based on such Participant’s age on his or her original Pension Commencement Date.

(ii) Participants  Whose Eligibility to Accrue Benefits Ends after July 31, 1997.

(A) Subject to the provisions of subsection 4.01(b)(ii)(C) for Officers after December 31, 1997, the annual benefit of a Participant who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he or she leaves the service of a Participating Company after July 31, 1997, and who is Service Pension Eligible as of his or her termination of employment from a Participating Company, will be the greater of the annual benefit amount determined under the Special Update to the Basic Formula described in Section 4.02(d) and the annual benefit amount determined under the Special Update to the Alternate Formula described in Section 4.02(e). Notwithstanding the preceding, in no event shall be the benefit with respect to a Participant described in this subsection 4.01(b)(ii)(A) be less than the amounts determined pursuant to Section 4.01(b)(i)(A).

(B) Subject to the provisions of subsection 4.01(b)(ii)(C), the annual benefit of a Participant who is an Officer or an E-band Employee on January 1, 1997, who is an Officer at the time he leaves the service of a Participating Company after July 31, 1997  but  who is not Service Pension Eligible as of the last day of his or her termination of employment will be a Deferred Vested Benefit equal to the greater of the annual benefit amount determined under the Special Update to the Basic Formula described in Section 4.02(d) or the amounts determined pursuant to Section 4.01(b)(i)(B), provided he or she is vested under the Pension Plan at the time of termination of employment from the AT&T Controlled Group.

(C) The annual benefit of a Participant on January 1, 1997 who is also an Officer on or after January 1, 1998 shall not be less than the amount determined pursuant to subsection 4.01(d).

(D) Subject to the provisions of Section 4.01(d)(ii) regarding an E-band Employee who becomes an Officer on or after January 1, 1998, the benefit of a Participant who is an E-band Employee on January 1, 1997, who terminates employment as an E-band Employee after July 31, 1997, and who is Service Pension Eligible as of his or her termination of employment from a Participating Company, will be the annual benefit amount determined under the Special Update to the Alternate Formula described in Section 4.02(e), but shall in no event be less than the amount determined pursuant to Section 4.01(b)(i)(C).

(c)New Participants after January 1, 1997 and before January 1, 1998

(i) An individual who first becomes a Participant after January 1, 1997 and before January 1, 1998, and who is an Officer on January 1, 1998, shall be eligible for benefits determined pursuant to Section 4.01(d).

(ii) An individual who first becomes an Officer on or after August 1, 1997, who was not previously an E-band Employee, and who leaves the service of a Participating Company prior to January 1, 1998 shall not be eligible for benefits under the Plan.

(iii) An individual, who first becomes a Participant after January 1, 1997 and before January 1, 1998, who is not an Officer at any time on or after January 1, 1998, and who terminates employment with a Participating Company on or after January 1, 1998 shall be eligible for a Service Benefit if the Participant is Service Pension Eligible at the time of his or her termination of employment from a Participating Company. Such benefit shall be determined only under the Alternate Formula described in Section 4.02(b). No benefit shall be payable from the Plan if such Participant is not Service Pension Eligible at the time of his or her termination of employment from a Participating Company.

(d)Participants who are Officers on or after January 1, 1998 (Cash Balance Participants)

Participants Who Are Officers Before January 1, 2009

(i)       An individual who is an Officer on or after January 1, 1998, who first became an Officer on or after August 1, 1997 and who was not previously an E-band Employee shall be eligible for a benefit determined under Section 4.03 if such Officer is vested in his or her benefit under the Pension Plan upon his or her termination of employment from the AT&T Controlled Group.

(ii)      An individual who is an Officer on or after January 1, 1998, who was an Officer or an E-band Employee prior to August 1, 1997, and whose Pension Commencement Date is after July 1, 1998, shall be eligible for a benefit from the Plan if such Officer is vested in his or her benefit under the Pension Plan upon termination of employment from the AT&T Controlled Group. The benefit shall be the greater of (A) the benefit determined pursuant to Section 4.03, or (B) the sum of (I) the Mid-Career Pension Benefit determined pursuant to Section 4.07 and (II) the benefit accrued under the Plan prior to January 1, 1998 and payable pursuant to the terms of Section 4.01(b)(ii)(A) or Section 4.01(b)(ii)(B), as applicable.  For purposes of the preceding sentence, the determination of the greater of (A) and (B) shall be made taking into account the Pension Commencement Date and the form of payment determined in accordance with Section 4.09.

Participants Who Become Officers After December 31, 2008

(iii) Notwithstanding the preceding Sections 4.01(d)(ii) and 4.01(d)(ii), benefits, if any, with respect to an individual who first becomes on Officer after December 31, 2008 shall be determined pursuant to the provisions of the Plan related to a Qualified Deferral Participant or to a Participant who is an E-band Employee, as more fully described in the provisions of Article 4 of the main text of the Plan effective after December 31, 2008 (such provisions which are not included in this Appendix E). Such a Participant shall not be eligible for benefits determined under the Cash Balance Formula.

(e)Surviving Spouse of an Officer (other than a Cash Balance Participant)

(i)  An Automatic Survivor Annuity will be paid to the Spouse to whom an Officer (other than a Cash Balance Participant) is married at the time of his or her death, provided such Participant is vested as of his or her date of death, and satisfies the provisions of Section 4.04(a) or Section 4.04(b), as applicable.  The benefit payable to such Spouse shall be determined in accordance with Section 4.04(a) if such Officer is an employee of the AT&T Controlled Group at the time of death, and in accordance with Section 4.04(b) if such Officer is not an employee of the AT&T Controlled Group at the time of death.

(ii)  Notwithstanding the provisions of the preceding subsection 4.01(e)(i), if the Officer elects distribution of his or her Pension Plan benefit in the form of a 50% Joint and Survivor Annuity and dies following his or her Pension Commencement Date, the surviving Spouse will be eligible for a monthly benefit equal to 50% of the monthly benefit being paid to the Officer at the time of his or her death.  The benefit payable to the surviving Spouse will commence on the first day of the month following the date of the Officer’s death. For purposes of this subsection 4.01(e)(ii), the surviving Spouse is the Spouse to whom the Officer was married at his or her date of death.  In no event will a benefit be paid pursuant to this subsection 4.01(e)(ii), if a benefit is payable pursuant to subsection 4.01(e)(i) or subsection 4.01(g).

(f)Surviving Spouse of an E-band Employee

 An Automatic Survivor Annuity will be paid to the Spouse to whom an E-band Employee is married at the time of his or her death while an active employee, provided such Participant is vested as of his or her date of death, and satisfies the provisions of Section 4.04(a) at the date of death.  The benefit payable to such Spouse shall be determined in accordance with Section 4.04(a).  The provisions of this Section 4.01(f) do not apply to a benefit determined under the cash balance formula of Section 4.11, or to a benefit based on a Mid-Career Pension Benefit of Section 4.07.

(g)Surviving Spouse (or Estate) of a Cash Balance Participant

A benefit, determined pursuant to the provisions of Section 4.10, shall be payable to the surviving Spouse (or estate, in the case of a Participant who is not married at the time of death) of a Cash Balance Participant who is vested in his or her benefit under the Pension Plan as of his or her date of death and who dies prior to commencing distribution of his or her benefit under the Plan.

A benefit, determined pursuant to the provisions of Section 4.09, shall be payable to the surviving Spouse of a Cash Balance Participant who dies prior to December 1, 2008 following commencement of his or her benefits under the Plan, if such Participant’s benefit was being paid under the 50% Joint and Survivor Annuity or 100% Joint and Survivor Annuity form of payment.

(h)Deferral Participant

An individual who is a Deferral Participant shall be eligible for a benefit determined pursuant to Section 4.11, provided that such Participant is vested in his or her benefit under the Pension Plan upon his or her termination of employment from the AT&T Controlled Group.  Notwithstanding any other provision of the Plan to the contrary, such benefit shall be payable in addition to any other benefits otherwise payable under the Plan.

(i)Surviving Spouse (or Estate) of a Deferral Participant

A benefit, determined pursuant to the provisions of Section 4.11(f), shall be payable to the surviving Spouse (or estate, in the case of a Participant who is not married at the time of death) of a Deferral Participant who is vested in his or her benefit under the Pension Plan as of his or her date of death and who dies prior to commencing distribution of his or her benefit under the Plan.

A benefit, determined pursuant to the provisions of Section 4.09, shall be payable to the surviving Spouse of a Deferral Participant who dies prior to December 1, 2008 following commencement of his or her benefits under the Plan, if such Participant’s benefit was being paid under the 50% Joint and Survivor Annuity or 100% Joint and Survivor Annuity form of payment.

Section 4.02E     Benefit Formulas (other than Cash Balance)

(a)Basic Formula

(i) Service Benefit.  The annual Service Benefit under the Basic Formula shall be determined by adding (A) the product of one and five-tenths percent (1.5%) of the average annual Short Term Incentive Awards for the 1989 Base Period and the Officer’s Term of Employment as of December 31, 1989, and (B) the sum of one and six-tenths percent (1.6%) of the Short Term Incentive Award for each successive full or partial calendar year of employment following 1989, through the earlier of the date of termination of active participation in the Plan or July 31, 1997.

(ii) Service Benefit - Early Commencement.  If a Participant commences distribution of the annual Service Benefit prior to attainment of age fifty-five, the Service Benefit determined in accordance with the Basic Formula of this Section 4.02(a) shall be reduced by one-half percent for each calendar month or part thereof by which his or her age at commencement is less than fifty-five years, except that the Service Benefit for an Officer who terminates employment with a Term of Employment of thirty or more years shall be reduced by one-quarter percent for each calendar month or part thereof by which such Officer’s age at commencement is less than fifty-five years.

(iii) Deferred Vested Benefit.

The annual benefit determined under the Basic Formula for as Officer eligible for a Deferred Vested Benefit under the provisions of Section 3.02(a)(iii) shall be payable commencing at the Officer’s Normal Retirement Date in an amount equal to the benefit determined pursuant to Section 4.02(a)(i). An Officer who has elected to have his deferred vested pension under the Pension Plan payable early in reduced amounts pursuant to the terms and conditions of the Pension Plan shall be deemed to have elected to have his or her Deferred Vested Benefit under this Plan payable early in reduced amounts.  In the event of such an election, the amount of Deferred Vested Benefit shall be determined as follows:

 (A) with respect to payments for the months occurring on or after January, 1997 and prior to August, 1997, the amount determined pursuant to Section 4.02(a)(i) shall be multiplied by a factor determined in accordance with Appendix D, based on the Participant’s age on his or her Pension Commencement Date, or

                   (B) with respect to payments for months commencing on or after August 1, 1997, the amount determined pursuant to Section 4.02(a)(i) shall be multiplied by a factor of one-half percent for each calendar month or part thereof by which the Participant’s age at commencement is less than fifty-five years, except that the reduction with respect to an Officer with a Term of Employment of thirty or more years shall be one-quarter percent for each calendar month or part thereof by which such Officer’s age at commencement is less than fifty-five years.

 (iv) Disability Benefit.  The annual Disability Benefit payable to a Participant who becomes eligible for a disability pension from the Pension Plan because of total disability as a result of sickness or injury incurred while an Officer, shall be equal to the Service Benefit determined pursuant to this Section 4.02(a), unreduced for early commencement.  Such Disability Benefit shall continue to be paid so long as the employee is prevented by such disability from resuming active service with a Participating Company.  If the employee’s disability continues to his or her Normal Retirement Date, the Disability Benefit shall be converted to a Service Benefit.

(b)Alternate Formula

The annual Service Benefit under the Alternate Formula shall be the excess of B over A, where A equals the Participant’s annual Pension Plan Benefit and B equals the product of (i) one and seven-tenths percent of the Participant’s Adjusted Career Average Pay, less eight-tenths of one percent of the Participant’s Covered Compensation Base, and (ii) the Participant’s Term of Employment. The Service Benefit under this Alternate Formula will be reduced in case of commencement before age sixty by multiplying such benefit by the appropriate reduction factor from Appendix B.  For purposes of the Alternate Formula, the Participant’s Term of Employment is determined as of the earliest to occur of (i) July 31, 1997, (ii) the date specified in the applicable provision of Section 3.02(c) for purposes of determining a benefit under the Alternate Formula, or (iii) the date of termination of employment from a Participating Company.

(c)Alternate Minimum Formula

The annual Service Benefit under the Alternate Minimum Formula in this Section 4.02(c) shall be an amount equal to (A) the product of the greater of the amount determined under the following Formula A or Formula B, multiplied by the applicable factor set forth in Appendix A, where such factor is based on the Participant’s age and service as of December 31, 1996, less (B) the amount of the Officer’s Pension Plan Benefit (as adjusted to reflect any reduction for early commencement).  If the Pension Commencement Date under this Plan occurs prior to the date the Participant is eligible to commence receipt of his or her deferred vested pension from the AT&T Management Pension Plan, payments under this Plan shall be made without the reduction in (B) of the immediately preceding sentence until the earliest date on which the Participant is eligible to commence distribution of such deferred vested pension from the AT&T Management Pension Plan, at which time payments from the Plan shall be adjusted to reflect such reduction.

(i) Formula A.  For purposes of the Alternate Minimum Formula in this Section 4.02(c), Formula A means the sum of (a) the product of one and five tenths percent of average calendar year Total Compensation for the 1992 Base Period and the Term of Employment as of December 31, 1992 and (b) one and six tenths percent of Total Compensation for the calendar year 1993. Such sum shall be actuarially reduced in case of commencement before age fifty-five by applying the appropriate reduction factor set forth in Section4.02(a)(ii).

(ii) Formula B.  For purposes of the Alternate Minimum Formula in this Section 4.02(c), Formula B means the product of (a) the excess of one and seven tenths percent of Adjusted Career Average Pay, over eight tenths of one percent of the Covered Compensation Base (determined as of December 31, 1993), and (b) the Officer’s Term of Employment at December 31, 1993.  Such product shall be actuarially reduced in case of commencement before age sixty by applying the appropriate reduction factor set forth in Appendix B.  Solely for purposes of this Formula B, “Adjusted Career Average Pay” means the Participant’s Total Compensation for his or her Term of Employment through December 31, 1993, divided by such Participant’s Term of Employment as of December 31, 1993.

(d)Special Update to the Basic Formula

(i) Service Benefit.  The annual Service Benefit under the Special Update to the Basic Formula shall be equal to one and six-tenths percent of the sum of the Officer’s average annual Short Term Incentive Awards and the average annual Deferred Salary for the 1996 Base Period, multiplied by the lesser of (1) one plus the Officer’s Term of Employment as of December 31, 1996 and (2) one hundred and five percent of the Officer’s Term of Employment as of December 31, 1996. The Special Update to the Basic Formula is equal to zero for any determination date prior to January 1, 1997.

(ii)   Service Benefit - Early Commencement.  If a Participant commences distribution of the annual Service Benefit prior to attainment of age fifty-five, the Service Benefit determined in accordance with the Special Update to the Basic Formula of this Section 4.02(d), shall be reduced by one-half percent for each calendar month or part thereof by which his or her age at commencement is less than fifty-five years, except that the Service Benefit for an Officer who terminates employment with  a Term of Employment of thirty or more years shall be reduced by one-quarter percent for each calendar month or part thereof by which such Officer’s age at commencement is less than fifty-five years.

(iii)   Deferred Vested Benefit.  The annual benefit determined under the Special Update to the Basic Formula for each Officer eligible for a Deferred Vested Benefit under the provisions of Section 3.02(a)(iii) shall be payable commencing at the Normal Retirement Date in an amount equal to the benefit determined pursuant to Section 4.02(d)(i). An Officer who has elected to have his deferred vested pension under the Pension Plan payable early in reduced amounts pursuant to the terms and conditions of the Pension Plan shall be deemed to have elected to have his or her Deferred Vested Benefit under this Plan payable early in reduced amounts.  In the event of such an election, the amount determined pursuant to Section 4.02(d)(i) shall be reduced by one-half percent for each calendar month or part thereof by which the Participant’s age at commencement is less than fifty-five years, except that the reduction with respect to an Officer with a Term of Employment of thirty or more years shall be one-quarter percent for each calendar month or part thereof by which such Officer’s age at commencement is less than fifty-five years.

(e) Special Update to the Alternate Formula

The annual Service Benefit under the Special Update to the Alternate Formula shall be the excess of B over A, where A equals the Participant’s Pension Plan Benefit and B equals the product of (i) and (ii), where (i) is one and seven-tenths percent of the Participant’s Special Update Adjusted Career Average Pay, less eight-tenths of one percent of the Participant’s Covered Compensation Base (determined as of December 31, 1996), and (ii) is the lesser of (1) one plus the Participant’s Term of Employment as of December 31, 1996 and (2) one hundred and five percent of the Participant’s Term of Employment as of December 31, 1996. The benefit under this Alternate Formula will be reduced in case the Pension Commencement Date is before age sixty by applying the appropriate reduction factor from the Table of such factors shown in Appendix B to such benefit.  The Special Update to the Alternate Formula is equal to zero for any determination date prior to January 1, 1997.

Section 4.03E   Cash Balance Accounts

The provisions of this Section 4.03E describe the establishment and development of the Cash Balance Account with respect to a Participant who is an Officer on or after January 1, 1998 and before January 1, 2009 with respect to benefits that commence under the Cash Balance Formula prior to January 1, 2009. Except as modified by the provisions of Article 4 of the main text of the Plan, the methodology set forth in this Section 4.03E also applies for purposes of determining a Benefit Based on the Cash Balance Account with respect to benefits that commence after December 1, 2008 to or with respect to a Participant who was an Officer prior to January 1, 2009.

The Cash Balance Account with respect to a Participant who is not an Officer prior to January 1, 2009 shall be zero.

(a)Establishment of Cash Balance Accounts

A Cash Balance Participant’s Cash Balance Account is a hypothetical bookkeeping account used solely in calculating the amount of the Cash Balance Participant’s Benefit Based on the Cash Balance Account. The Cash Balance Account is calculated by accumulating the initial cash balance credit determined pursuant to Section 4.03(b), annual award credits determined pursuant to Section 4.03(c), and interest credits determined pursuant to Section 4.03(d).

A Participant’s Cash Balance Account shall be established as of the later of January 1, 1998 or the date the Participant becomes a Cash Balance Participant in the Plan. Except as provided in Section 4.03(b), the initial Cash Balance Account shall be zero.

(b)Initial Cash Balance Credit

(i)           Effective as of January 1, 1998, the Cash Balance Account of each Cash Balance Participant on the roll of a Participating Company on that date shall be credited with an initial cash balance credit determined by multiplying the Participant’s conversion benefit (as defined below) by one hundred seven percent (107%) of the applicable conversion factor set forth in Appendix C, based on the Participant’s attained age (in whole years) as of December 31, 1996.  The Cash Balance Participant’s conversion benefit under this Section 4.03(b) shall equal one-twelfth of his or her annual benefit determined in accordance with Section 4.02(d).

(ii)           The initial cash balance credit shall be zero for any Participant who is not an Officer on January 1, 1998.   

(c)Annual Award Credit

(i)January 1, 1998

Effective as of January 1, 1998, the Cash Balance Account of each Cash Balance Participant on the roll of a Participating Company on that date shall be credited with an annual award credit.  This annual award credit shall equal the sum of (A) and (B) where (A) is the product of (I) and (II), where (I) is the Short Term Incentive Award, if any, for 1997 and (II) is two times the pay factor for the Participant as set forth in Section 4.04(c)(v) of the Pension Plan, based on the Participant’s attained age as of December 31, 1997, and (B) is the credit based on the Participant’s 1997 Deferred Salary, if any, determined pursuant to the following (x), (xi) or (xii), as applicable, where for purposes of (x), (xi) and (xii), “pay factor” means the pay factor as set forth in Section 4.04(c)(v) of the Pension Plan based on the Participant’s attained age as of December 31, 1997, and:

(x)   if the sum of the pay taken into account for such Participant under the Pension Plan and the AT&T Excess Benefit and Compensation Plan (such sum constituting “1997 Considered Pay”) is equal to or greater than the Social Security Wage Base for 1997, the credit described in Section 4.03(c)(i)(B) shall be equal to the Participant’s 1997 Deferred Salary multiplied by two times the pay factor, and

(xi)   if the sum of the Participant’s 1997 Deferred Salary and 1997 Considered Pay (as defined in (x) above) is less than or equal to the Social Security Wage Base for 1997, the credit described in Section 4.03(c)(i)(B) shall be equal to the Participant’s 1997 Deferred Salary multiplied by one times the pay factor, and

(xii)   if the 1997 Considered Pay, (as defined in (x) above), is less than the Social Security Wage Base for 1997, but the sum of the Participant’s 1997 Deferred Salary and 1997 Considered Pay is greater than such Social Security Wage Base, the credit described in Section 4.03(c)(i)(B) shall be equal to the sum of (I) and (II), where (I) is the 1997 Deferred Salary multiplied by one times the pay factor, and (II) is one times the pay factor multiplied by the excess over the 1997 Social Security Wage Base of the sum of 1997 Deferred Salary and 1997 Considered Pay.

(ii)Calendar Year 1998 and Thereafter

Except as otherwise provided herein, effective as of December 31, 1998, and each December 31 thereafter, the Cash Balance Account of each individual who is a Cash Balance Participant during the respective calendar year shall be credited with an annual award credit. The Cash Balance Participant’s annual award credit shall equal  (A), plus, for Plan Years prior to 2005, (B), where (A) is the product of (I) and (II), where (I) is the Short Term Incentive Award for the respective calendar year (as determined pursuant to Section 2.40), and (II) is two times the supplemental pay factor for the Participant as set forth in Section 4.04(c)(v) of the Pension Plan, based on the Participant’s attained age as of December 31 of such calendar year, and (B) is the credit based on the Participant’s Deferred Salary, if any, for the calendar year determined pursuant to the following (xiii), (xiv) or (xv), as applicable, where for purposes of (x), (xi) and (xii), “pay factor” means the pay factor as set forth in Section 4.04(c)(v) of the Pension Plan based on the Cash Balance Participant’s attained age as of December 31 of such calendar year, and

(xiii)   if the sum of the pay taken into account for such Participant under the Pension Plan and the AT&T Excess Benefit and Compensation Plan (such sum constituting “Considered Pay”) is equal to or greater than the Social Security Wage Base for the calendar year, the credit described in Section 4.03(c)(ii)(B) shall be equal to the Participant’s Deferred Salary multiplied by two times the pay factor, and

(xiv)   if the sum of the Participant’s Deferred Salary and Considered Pay (as defined in (xiii) above) is less than or equal to the Social Security Wage Base for the calendar year, the credit described in Section 4.03(c)(ii)(B) shall be equal to the Participant’s  Deferred Salary multiplied by one times the pay factor, and

(xv)   if the Considered Pay, (as defined in (xiii) above), is less than the Social Security Wage Base for the calendar year, but the sum of the Participant’s Deferred Salary  and Considered Pay is greater than such Social Security Wage Base, the credit described in Section 4.03(c)(ii)(B) shall be equal to the sum of (I) and (II), where (I) is the Deferred Salary multiplied by one times the pay factor, and (II) is one times the pay factor multiplied by the excess over such Social Security Wage Base of the sum of  the Participant’s Deferred Salary and Considered Pay.

Notwithstanding the foregoing, in any calendar year in which a Cash Balance Participant terminates employment, any such annual award credit shall be based on his or her attained age as of the end of the month in which the Participant terminates employment and shall be credited to the Participant’s Cash Balance Account as of that date.

(d)Interest Credits

Beginning in 1998, a Cash Balance Participant’s Cash Balance Account shall be credited with an interest credit based on the balance of his or her Cash Balance Account as of the first day of the Plan Year.  Notwithstanding the provisions of the immediately preceding sentence, no Interest Credits shall be made with respect to the period after the last day of the month immediately preceding the Participant’s Pension Commencement Date.

For the Plan Year in which a Cash Balance Participant terminates employment, his or her Cash Balance Account shall also be credited with an interest credit based on any annual award credit for that Plan Year.

Unless the Participant commences his or her pension during the Plan Year, the interest credit shall be made as of the last day of that Plan Year.  For the Plan Year in which the Participant commences his or her pension, the interest credit shall be made as of the last day of the month immediately preceding the Participant’s Pension Commencement Date.

The interest crediting rate shall be the same interest crediting rate in effect for such period under the Pension Plan, and shall be credited at the same time and in the same manner as interest credits are applied under the Pension Plan.

(e)Cash Balance Account Attributable to the Mid-Career Pension Benefit

 (i)           With respect to an employee who is an Officer on or after January 1, 1998, effective as of the later of January 1, 1998 or the first day of the month following the transfer to this Plan of the liability for a Participant’s annual benefit from the AT&T Mid-Career Pension Plan, if any, as described in Section 4.07, a Mid-Career Cash Balance Subaccount shall be established for such Participant.  The initial credit to such Mid-Career Cash Balance Subaccount shall be determined by multiplying the Cash Balance Participant’s Mid-Career Conversion Benefit (as defined below) by one hundred seven percent (107%) of the applicable conversion factor set forth in Appendix C, based on the Cash Balance Participant’s attained age (in whole years) as of December 31, 1996.  The Cash Balance Participant’s Mid-Career Conversion Benefit under this Section 4.03(b) shall equal the monthly benefit (commencing at Normal Retirement Age) transferred from the AT&T Mid-Career Pension Plan.  Such initial Mid-Career Cash Balance Subaccount shall be credited with interest credits as follows:

(A) with respect to the Mid-Career Cash Balance Subaccount for a Participant who is Officer on January 1, 1998, interest credits, beginning in 1998, determined in the manner described in Section 4.03(d);

 (B) with respect to the Mid-Career Cash Balance Subaccount for a Participant who is not an Officer on January 1, 1998, interest credits determined as follows:

  (I)             an initial interest credit effective as of the date the Mid-Career Cash Balance Subaccount is established, equal to the interest that would have been credited in accordance with the provisions of Section 4.03(d) for the period beginning January 1, 1998 to the date such Subaccount is established; and

(II)           interest credits determined in the manner described in Section 4.03(d), effective for periods following the establishment of such Subaccount.

 (ii)           A benefit attributable to the Mid-Career Cash Balance Subaccount, if any, shall be payable only if the Participant has completed a Term of Employment of at least five years classified by the Company as full-time, for one or more Participating Companies, at E-band or above, prior to the Normal Retirement Date. For purposes of determining whether the Participant has completed a Term of Employment of at least five years, the provisions of the Pension Plan providing exceptions to what is considered a break in the continuity of service shall not apply.  Except as otherwise provided under the terms of the Plan, if the Participant becomes eligible to receive a benefit based on the Mid-Career Cash Balance Subaccount, the Mid-Career Cash Balance Subaccount shall be added to the Participant’s Cash Balance Account determined pursuant to Section 4.03(b) through (d).

(f)Benefit Based on the Cash Balance Account

A Cash Balance Participant’s Benefit Based on the Cash Balance Account shall be a monthly benefit determined in the manner described in the Pension Plan, taking into account the Participant’s Cash Balance Account as of the date such benefit is being determined.

Section 4.04E    Automatic Survivor Annuities

The Automatic Survivor Annuity described in this Section 4.04 does not apply to a benefit determined under the cash balance formula of Section 4.03 or 4.11, or to a benefit based on the Mid-Career Pension Benefit of Section 4.07.  For purposes of this Section 4.04, an Officer who is not Service Pension Eligible at the time of his or her termination of service with a Participating Company shall not be considered a retired Officer, unless such Officer was eligible for a Disability Benefit at the time of his or her termination of service.

(a)Before-Retirement

The surviving Spouse shall be entitled to a pre-retirement Automatic Survivor Annuity determined pursuant to this Section 4.04(a) effective commencing as of the first day of the month following the death of a Participant who dies while an employee if such Participant  has a Term of Employment of at least fifteen years at the time of death, or,  if such Participant meets the age and Term of Employment requirements for a Service Benefit (or is Service Pension Eligible) at the time of his or her death. The pre-retirement Automatic Survivor Annuity shall be payable monthly in an amount equal to forty five percent (forty six percent effective for benefits commencing on or after July 1, 1998) of the monthly benefit that would have been payable to the Participant pursuant to Section 4.02 had such Participant terminated employment with a Service Benefit, regardless of his or her actual eligibility therefore, on the date of his or her death.  For purposes of determining the Automatic Survivor Annuity provided in this Section 4.04(a), the early retirement discounts in Sections 4.02(a), 4.02(b), 4.02(d) or 4.02(e) shall not apply.  With respect to a Participant whose benefit is determined pursuant to Section 4.01(d)(ii)(B), the Automatic Survivor Annuity shall not include the portion, if any, of the Participant’s benefit attributable to the Participant’s transferred Mid-Career Pension Benefit described in Section 4.07.

(b)Post-Retirement

(i)           Subject to the provisions of Section 4.04(b)(ii), upon the death of an Officer receiving (or eligible to receive) a Service or Disability Benefit under this Plan who retired on or after December 31, 1986 (or retired prior to that date but had not reached age fifty-five on or before December 31, 1983), a survivor annuity in the amount of forty five percent  (forty six percent effective for benefits commencing on or after July 1, 1998) of such retired Officer’s monthly benefit amount will be payable beginning on the first day of the month following the date of his or her death to the surviving Spouse to whom  such retired Officer is married at the time of death.  If the Officer had not yet commenced distribution of his or her benefit, the benefit will be reduced for early commencement, as if the Officer’s Pension Commencement Date were the date payments to the surviving Spouse commence. For purposes of determining the monthly benefit payable to the surviving Spouse pursuant to this Section 4.04(b), the Officer’s Service or Disability Benefit determined pursuant to Section 4.02 is based on the amount that would be paid in the form of a single life annuity, and is not reduced to reflect any optional form of payment. With respect to a Participant whose benefit is determined pursuant to Section 4.01(d)(ii)(B), the Automatic Survivor Annuity shall not include the portion, if any, of the Service or Disability Benefit attributable to the Participant’s transferred Mid-Career Pension Benefit described in Section 4.07.

(ii)           In the case of an Officer who terminates employment on or after August 1, 1997, no benefit shall be payable pursuant to Section 4.04(b)(i) unless (A) the Officer’s benefit under the Pension Plan is larger under a “pay base” formula of the Pension Plan than under the cash balance formula of such plan, (B) the benefit determined under Section 4.02(a), 4.02(b), 4.02(d) or 4.02(e), as applicable, is greater than the benefit determined under Section 4.03 of this Plan, and (C) the Officer elected to receive his or her Pension Plan benefit in the form of a single life annuity or a 50% joint and survivor annuity.   For purposes of making the determination under (A) and (B) of this Section 4.04(b)(ii), any applicable reduction for commencement prior to age 65 is taken into account, and any amounts attributable to the Mid-Career Pension Benefit, whether pursuant to Section 4.03(e) or Section 4.07, shall be disregarded.  If pursuant to the immediately preceding provisions of this Section 4.04(b)(ii) the provisions of Section 4.04(b)(i) do not apply with respect to such Participant, the benefits, if any, payable following the death of a Participant after his or her Pension Commencement Date shall be determined solely in accordance with the provisions of Section 4.09(a)(iv).

Section 4.05E    Special Increases

Monthly pension payments being made under the Plan to a terminated Participant or the surviving Spouse of a terminated Participant shall be increased by the same percentage and pursuant to the same terms and conditions, as are set forth for comparable payments to similarly situated individuals, from time to time, under the Pension Plan.

Section 4.06E   Monthly Payments

The annual benefit determined under Section 4.02 shall be divided by twelve to determine a monthly benefit amount.  All annuity benefits under the Plan shall be payable monthly or at such other periods as the Committee or the Administrator, as applicable, may determine in each case; a benefit payable other than monthly shall be adjusted to reflect the period covered by such payment.

Section 4.07E    Mid-Career Pension Benefit

(a)Transfer of Mid-Career Pension Benefit

Effective January 1, 1998, for an Officer who is a Participant as of January 1, 1998, the liability for the monthly benefit from the AT&T Mid-Career Pension Plan, if any, shall be transferred to this Plan, and the AT&T Mid-Career Pension Plan shall retain no further obligation with respect to such benefit.   With respect to an employee who becomes an Officer after January 1, 1998, the liability for the annual benefit from the AT&T Mid-Career Pension Plan, if any, shall be transferred to this Plan effective upon his or her designation as an Officer, and the AT&T Mid-Career Pension Plan shall retain no further obligation with respect to such benefit. Solely for purposes of determining the benefit transferred to this Plan, it shall be assumed that the Participant had completed a Term of Employment of at least five years classified by the Company as full-time, for one or more Participating Companies, at E-band or above prior to December 31, 1997, and had terminated employment as of December 31, 1997.

(b)Eligibility for Payment of Mid-Career Pension Benefit

Following the transfer of the AT&T Mid-Career Pension Plan benefit to this Plan, such transferred benefit shall be paid from this Plan, in the manner described in Section 4.07(c), provided that such Participant has completed a Term of Employment of at least five years classified by the Company as full-time, for one or more Participating Companies, at E-band or above, prior to the last day of the month in which he or she reaches Normal Retirement Age. For purposes of determining whether the Participant has completed a Term of Employment of at least five years, the provisions of the Pension Plan providing exceptions to what is considered a break in the continuity of service shall not apply.  Notwithstanding the preceding provisions of this Section 4.07, if a benefit paid under this Plan is paid pursuant to the Cash Balance Formula of Section 4.03, no additional benefit shall be paid pursuant to this Section 4.07, because such transferred benefit is already included in the determination of benefit amounts under Section 4.03.

(c)Manner of Payment of Mid-Career Pension Benefit

The transferred Mid-Career Pension Benefit is included in the benefit determined pursuant to Section 4.01(d)(ii)(A) or Section 4.01(d)(ii)(B), as applicable.  A Mid-Career Pension Benefit payable pursuant to Section 4.01(d)(ii)(A) is included in the “Benefit Based on the Cash Balance Account” described in Section 4.03(f), through the operation of Section 4.03(e)(ii).  If a Participant’s benefit is payable pursuant to Section 4.01(d)(ii)(B) and commences prior to January 1, 2009, the portion of such benefit attributable to the Mid-Career Pension Benefit shall be paid only in the form of a single life annuity, and if such benefit commences prior to Normal Retirement Date shall be reduced in accordance with the terms of the AT&T Mid-Career Pension Plan as in effect on December 31, 1997, and shall not be included in determining the Automatic Survivor Annuity of Section 4.04 (a) or Section 4.04(b). In addition to the provisions of this Section 4.07(c), distribution of the Mid-Career Pension Benefit shall be subject to the provisions of Section 4.09.

Section 4.08E     Treatment During Subsequent Employment

When a Participant’s Term of Employment includes service with more than one Participating Company, the last Participating Company to employ him or her immediately prior to his or her termination of employment, with entitlement to a benefit hereunder, shall be responsible for the full benefit under this Plan. If a Participant’s benefit payments under the Pension Plan are suspended under the terms of the Pension Plan, because of his or her employment or reemployment subsequent to termination of employment, any benefit payment he or she is entitled to under this Plan shall be permanently suspended for the period of such employment or reemployment to the same extent and in the same manner, consistent with the terms and conditions applicable to the suspension of benefit payments under the Pension Plan, provided, however, that payments to which an Officer is entitled under an annuity contract purchased on his or her behalf shall not be suspended for the period of such employment or reemployment.  Payment of a Participant’s benefit under this Plan shall resume simultaneously with the recommencement of his or her benefits under the Pension Plan. Following recommencement of benefit payments under this Plan, the Participant (or surviving Spouse) shall not be eligible to receive any payments under this Plan that would otherwise have been payable but for the suspension.

Notwithstanding the preceding, effective beginning January 1, 2005, benefits shall not be suspended during a period of employment or reemployment. Benefits paid upon a subsequent termination of employment shall be reduced by the actuarial equivalent of the benefit payments that were continued during reemployment.

Section 4.09E    Payment of Pensions

(a)Commencement Prior to 2005

(i) Subject to the exception set forth in paragraph (ii) of this Section 4.09(a), (regarding the Alternate Minimum Formula), benefits payable to the Participant under this Plan shall commence on the date the benefits under the Pension Plan are first paid to the Participant, and shall, except for the reasons specified in Section 3.02(a)(iv), Section 4.08 or Section 9.12, continue to the death of the recipient.  Benefits payable to the surviving Spouse or the estate of the Participant shall commence and be paid as indicated in the applicable provision of this Plan.

(ii) Any benefit payable to an Officer pursuant to Section 4.02(c) shall not commence before age sixty-five, except that an Officer who has been employed for at least five years as an Officer as of December 31, 1993, and as to whom the sum of his or her attained age and Term of Employment equaled or exceeded seventy as of that date, shall be eligible to commence his or her benefit as of the first day of the month following his or her termination of employment and shall, except for the reasons specified in Section 4.09(a)(i), continue to his or her death.

 (iii) For a Participant who terminated employment prior to August 1, 1997, the benefit under this Plan shall be payable in the form of a single life annuity.  Any post-retirement survivor benefits, with respect to such a Participant, shall be determined solely in accordance with the provisions of Section 4.04(b).

(iv) This Section 4.09(a)(iv) applies only to a Participant who terminates employment on or after August 1, 1997, and who is not described in Section 4.09(a)(v).

(A)   If the Participant elects the cash payment option under the Pension Plan, with no remaining annuity payable from the Pension Plan, or a lump sum, if applicable, the benefit under this Plan shall be paid in the form of a single life annuity.  For purposes of this subparagraph (A), an annuity payable under the AT&T Excess Benefit and Compensation Plan is not considered to be an annuity payable from the Pension Plan.

(B)  If the Participant elected the cash payment option under the Pension Plan, with an annuity remaining under the Pension Plan, the benefit under this Plan shall be paid in the same form as the remaining annuity under the Pension Plan is paid.

(C)  The form of payment under this Plan shall be the same form of payment, as elected by the Participant under the Pension Plan, unless the benefit under the Pension Plan is the cash payment option or a lump sum, if applicable, (in which case the form of payment under this Plan shall be determined pursuant to the immediately preceding subparagraphs (A) or (B)).  If the form of payment under the Pension Plan includes a joint and survivor form of payment with the survivor benefit payable to an alternate payee, the benefit to the Participant under this Plan shall be (i) paid as a single life annuity, if the Participant is not married on the Pension Commencement Date, or (ii) paid in the joint and survivor form of payment elected by the Participant under the Pension Plan, with the survivor benefit under this Plan payable to the Spouse to whom the Participant is married at the Pension Commencement Date, if the Participant is married on the Pension Commencement Date.

  (D)  The single life annuity benefit otherwise payable under this Plan to a Participant will be reduced as follows to reflect the form of payment: (1) the benefit under this Plan based on the Cash Balance Account shall be reduced by 8% (10% for a Pension Commencement Date prior to July 1, 1999) if payment is made in the form of a 50% Joint and Survivor Annuity, and by 15% (18% for a Pension Commencement Date prior to July 1, 1999) if payment is made in the form of a 100% Joint and Survivor Annuity; (2) the benefit under this Plan which is not based on the Cash Balance Account, with respect to a Participant who is not Service Pension Eligible on termination of employment, shall be reduced by 12% if the benefit is to be paid under the 50% Joint and Survivor Annuity form of payment; and (3) in the case of a Participant whose benefit under the Plan is based on a formula other than the Cash Balance Account, a benefit payable in the form of a 100% Joint and Survivor Annuity shall be reduced for commencement prior to Normal Retirement Date by applying the early commencement factors applicable to the cash balance formula, as described in the Pension Plan, and shall be reduced for the 100% Joint and Survivor Annuity form of payment by 15% (18% for a Pension Commencement Date prior to July 1, 1999).

  (E)  Notwithstanding the preceding (A) through (D), the benefit payable under this Plan that is attributable to the Mid-Career Pension Benefit and paid pursuant to Section 4.01(d)(ii)(B) shall be paid only in the form of a single life only.

(v) The benefit under this Plan with respect to an Officer who is Service Pension Eligible at his or her termination of employment on or after August 1, 1997, and who meets the requirements set forth in Section 4.04(b)(ii), shall be paid in the form of a single life annuity, and any post-retirement survivor benefit will be determined pursuant to Section 4.04(b)(ii).  In lieu of the benefit payable pursuant to the immediately preceding sentence, such Officer may instead elect distribution of his benefit in the form of a 100% Joint and Survivor Annuity, with reduction for commencement prior to Normal Retirement Date and for the 100% Joint and Survivor Annuity form of payment determined as described in the preceding subsection 4.09(a)(iv)(D)(3).

(b)Commencement After 2004 and Prior to 2009

Except as provided in Section 6.01 regarding payments in the form of a commercial annuity contract, the provisions of Section 4.09(a) regarding the time and form of payment of benefits under the Plan shall apply with respect to benefits for which distribution to a Participant commenced, or with respect to benefits payable on behalf of a Participant whose death occurred, after 2004 and prior to 2009. The provisions of Section 4.09(a) relating to commencement of the benefit under the Pension Plan shall refer to commencement of the Participant’s regular pension under the Pension Plan (and not to commencement of any benefit under the Pension Plan based on the Special CIC Credit or the Force Management Pension Credit).

(c)Commencement After 2008

Provisions related to payment of benefits to the Participant that commence after December 31, 2008 or with respect to a Participant who is an employee on December 31, 2008 and whose death occurs after December 31, 2008 are not included in Appendix E.  Such payments shall be made in the time and form as described in Section 4.09(c) of Article 4 as in effect after December 31, 2008 as set forth in the main text of the Plan.

(d)Payments to Specified Employees

Notwithstanding the provisions of the preceding sections 4.09(a) through 4.09(c), effective on and after January 1, 2005 with respect to payments in the form of a commercial annuity pursuant to Section 6.01 and effective on and after January 1, 2009 with respect to all other payments under the Plan, payment under the Plan to or with respect to a Participant who is determined to meet the definition of Specified Employee shall be payable as otherwise provided in this Plan, except that the initial payment shall be made no earlier than six (6) months following his or her Termination of Employment.  If, absent this Section 4.09(d), payment to a Specified Employee would have commenced before the expiration of such six-month period, the first payment with respect to such Specified Employee will include the sum of the annuity payments withheld, together with interest thereon.    For purposes of the immediately preceding sentence, interest shall be credited using the GAAP Rate in effect as of the end of the calendar year immediately preceding the Participant’s Termination of Employment, for distributions made after December 31, 2007.  “GAAP Rate” means such rate as defined under the SERP for the referenced period. Notwithstanding the preceding, for distributions made prior to January 1, 2008, interest credited for purposes of this Section 4.4(d) shall be at an effective annual rate equal to 120 percent of the Federal Mid-term rate in effect as of the date such annuity payments otherwise would have commenced.

Section 4.10E    Preretirement Survivor Benefits for Cash Balance Participants

(a)Preretirement Death Benefit

(i)  If a Cash Balance Participant who is vested under the Pension Plan dies before the date as of which his or her benefit commences under this Plan, and he or she has a surviving Spouse at the time of death, a single life annuity determined pursuant to Section 4.10(b), shall be payable to the surviving Spouse commencing on the first day of any month following the death of the Participant, (A) with respect to a Participant who terminated employment prior to January 1, 2005, or (B) with respect to a Participant who terminated employment after December 31, 2004 and dies before December 1, 2008, but only to the extent that such surviving Spouse otherwise satisfies the requirements of the Plan with respect to receipt of such a benefit.  Payment shall commence at the same time as payment to a surviving Spouse commences under the Pension Plan. For purposes of this Section 4.10(a), the surviving Spouse shall be the Spouse to whom the Participant is married on the date of the Participant’s death and who has survived the Cash Balance Participant to at least the next calendar day after the Cash Balance Participant’s death.   If the Cash Balance Participant is unmarried at the date of his or her death, or if the surviving Spouse does not survive the Participant to at least the next calendar day after the Participant’s death, the Participant’s Cash Balance Account shall be payable to the estate of the Participant.  No death benefit is payable with respect to a Participant who terminated employment after December 31, 2004 who dies after December 1, 2008, except as described in Section 4.09(c)(ii) of Article 4 of the main text of the Plan effective after December 31, 2008 (such provisions which are not included in this Appendix E),

(ii)  If a Participant dies before the date as of which his or her benefit commences under this Plan, and he or she does not have a surviving Spouse at the time of his or her death, or if such surviving Spouse is not eligible for a benefit pursuant to the provisions of Section 4.10(a)(i), a lump sum benefit shall be payable to the surviving Spouse of the Participant, or, if there is no surviving Spouse, to the Participant’s estate, within a reasonable period of time following the death of the Participant.  The amount of such single cash payment shall be equal to the Participant’s Cash Balance Account.

(iii) If a Participant dies before the date as of which his or her benefit commences under this Plan and he or she is survived by a surviving Spouse who is entitled to a benefit pursuant to the preceding Section 4.10(a)(i) or Section 4.10(a)(ii), and such surviving Spouse dies prior to the date payment of benefits under this Plan commence, a lump sum benefit shall be payable to the estate of the surviving Spouse upon the death of the surviving Spouse. The amount of such single cash payment shall be equal to the Participant’s Cash Balance Account.

(b)Single Life Annuity

A surviving Spouse’s single life annuity shall equal the Cash Balance Participant’s Benefit Based on the Cash Balance Account under Section 4.03(f), but substituting the surviving Spouse’s attained age, for the age of the Participant when applying the procedures of the Pension Plan for purposes of such determination.

If the Cash Balance Participant would have been eligible for a benefit determined pursuant to Section 4.02 had he or she terminated employment on the day preceding the date of death, the surviving Spouse’s single life annuity will be determined in accordance with the provisions of Section 4.04(a), if that provision produces a higher benefit (determined as of the Spouse’s Pension Commencement Date) for the surviving Spouse than the benefit determined under this Section 4.10(b).

Section 4.11E    Qualified Deferrals Cash Balance Account

The provisions of this Section 4.03E describe the establishment and development of the Qualified Deferrals Cash Balance Account with respect to benefits that commence under the Qualified Deferrals Cash Balance Account Formula prior to January 1, 2009. Except as modified by the provisions of Article 4 of the main text of the Plan, the methodology set forth in this Section 4.11E also applies for purposes of determining a Benefit Based on the Qualified Deferrals Cash Balance Account with respect to benefits that commence after December 1, 2008.

(a)Establishment of Qualified Deferrals Cash Balance Accounts

A Deferral Participant’s Qualified Deferrals Cash Balance Account is a hypothetical bookkeeping account used solely in calculating the amount of the Deferral Participant’s Benefit Based on the Qualified Deferrals Cash Balance Account. The Qualified Deferrals Cash Balance Account is calculated by accumulating the annual qualified deferral credits determined pursuant to Section 4.11(b), and deferral interest credits determined pursuant to Section 4.11(c).

A Participant’s Qualified Deferrals Cash Balance Account shall be established as of the date the Deferral Participant begins to make Qualified Deferrals under the AT&T Executive Deferred Compensation Plan or the AT&T Inc. Cash Deferral Plan.

(b)Annual Qualified Deferral Credits

Effective as of each December 31 following the date an individual becomes a Deferral Participant, the Qualified Deferrals Cash Balance Account of such individual shall be credited with an annual qualified deferral credit. The Deferral Participant’s annual qualified deferral credit shall equal the credit based on the participant’s Qualified Deferral, if any, for the calendar year determined pursuant to the following (xvi), (xvii) or (xviii), as applicable, where for purposes of (xvi), (xvii) and (xviii), “pay factor” means the pay factor as set forth in Section 4.04(c)(v) of the Pension Plan based on the Participant’s attained age as of December 31 of such calendar year, and

(xvi)   if the sum of the pay taken into account for such Participant under the Pension Plan and the AT&T Excess Benefit and Compensation Plan (such sum constituting “Considered Pay”) is equal to or greater than the Social Security Wage Base for the calendar year, the annual qualified deferral credit shall be equal to the Qualified Deferral multiplied by two times the pay factor, and

(xvii)   if the sum of the participant’s Qualified Deferral and Considered Pay (as defined in (xvi) above) is less than or equal to the Social Security Wage Base for the calendar year, the annual qualified deferral credit shall be equal to the participant’s  Qualified Deferrals multiplied by one times the pay factor, and

(xviii)   if the Considered Pay, (as defined in (xvi) above), is less than the Social Security Wage Base for the calendar year, but the sum of the participant’s Qualified Deferrals and Considered Pay is greater than such Social Security Wage Base, the annual qualified deferral credit shall be equal to the sum of (I) and (II), where (I) is the Qualified Deferrals multiplied by one times the pay factor, and (II) is one times the pay factor multiplied by the excess over such Social Security Wage Base of the sum of  the participant’s Qualified Deferrals and Considered Pay.

Notwithstanding the foregoing, in any calendar year in which a Deferral Participant terminates employment, any such annual qualified deferral credit shall be based on his or her attained age as of the end of the month in which the participant terminates employment and shall be credited to the Qualified Deferrals Cash Balance Account as of that date.

Annual Qualified Deferral Credits were discontinued under the Plan effective with respect to amounts deferred from any paycheck dated after December 31, 2007.

(c)CIC Subaccount

A Deferral Participant who is a CIC Eligible Employee shall have a “CIC credit” credited to his or her CIC Subaccount as of the date of such termination of employment that allows the Deferral Participant to be considered a CIC Eligible Employee.  The CIC credit shall be an amount equal to the sum of (i) and (ii) as follows:

(i)   The CIC Eligible Employee’s Qualified Deferral for the calendar year immediately preceding the calendar year in which the “change in control” (as such term is defined in the Pension Plan) occurs, multiplied by the lesser of (A) five percent for each whole year of the CIC Eligible Employee’s Term of Employment as of the last day of the month in which the change in control occurs, or (B) one hundred percent;

(ii)   An interest credit on the amount determined in (i) above from the first of the month following the month in which the change in control occurs through the last day of the month in which such termination of employment occurs, based on the effective annual rates set forth in Section 4.10(d), as in effect for the period beginning on the first of the month following the month in which the change in control occurs through the month in which such termination of employment described in this Section 4.10(c) occurs.

The CIC Subaccount shall be credited with interest credits in the manner described in the following Section 4.11(d). The benefit amount, method of payment, and pre-retirement survivor benefit, if any, attributable to the CIC Subaccount shall be determined in the manner described with respect to the “CIC Credit” under the Pension Plan. The benefit provisions of this Section 4.11(c) shall be subject to the provisions of Section 9.18.    For purposes of any joint and survivor annuity benefit, the surviving Spouse is the Spouse to whom the Participant was married on his or her Pension Commencement Date.

In order to fulfill the intent of the CIC resolutions as adopted by the Board of Directors of the Company in October, 2000, prior to the adoption of the AT&T Executive Deferred Compensation Plan, solely for the purpose of determining severance payments with respect to a CIC Eligible Employee under an “applicable severance plan” as that term is defined in Section G.07(j) of the Pension Plan, the benefit attributable to the CIC Subaccount with respect to a Deferral Participant shall be treated as paid from the Pension Plan.

(d)Deferral Interest Credits

Effective as of each December 31 following the date an individual becomes a Deferral Participant, the Qualified Deferrals Cash Balance Account of such individual shall be credited with an interest credit based on the balance of his or her Qualified Deferrals Cash Balance Account as of the first day of the Plan Year.  Notwithstanding the provisions of the immediately preceding sentence, no Interest Credits shall be made with respect to the period after the last day of the month immediately preceding the participant’s Pension Commencement Date.

For the Plan Year in which a Deferral Participant terminates employment, his or her Qualified Deferrals Cash Balance Account shall also be credited with an interest credit based on any annual qualified deferral credit for that Plan Year.

Unless the Participant commences his or her pension during the Plan Year, the interest credit shall be made as of the last day of that Plan Year.  For the Plan Year in which the Deferral Participant commences his or her pension, the interest credit shall be made as of the last day of the month immediately preceding the participant’s Pension Commencement Date.

The interest crediting rate shall be the same interest crediting rate in effect for such period under the Pension Plan, and shall be credited at the same time and in the same manner as interest credits are applied under the Pension Plan.

(e)Benefit Based on the Qualified Deferrals Cash Balance Account

A Deferral Participant’s Benefit Based on the Qualified Deferrals Cash Balance Account shall be a monthly benefit determined in the manner described in the Pension Plan, taking into account the participant’s Qualified Deferrals Cash Balance Account as of the date such benefit is being determined, and multiplied by twelve to produce an annual benefit.  Notwithstanding the preceding, the Benefit Based on the Qualified Deferrals Cash Balance Account shall not exceed (I) the benefit that would have been payable under the Pension Plan, determined before application of the limitations of Code Section 401(a)(17) and Code Section 415, if eligible pay under the Pension Plan for a Plan Year included the Qualified Deferrals for such Plan Year, minus (II) the benefit actually payable under the Pension Plan plus the benefit actually payable under the AT&T Excess Benefit and Compensation Plan, where (I) and (II) are determined as of the Participant’s Pension Commencement Date, and the form of payment elected by the participant.  The Benefit Based on the Qualified Deferrals Cash Balance Account shall be paid in the same form of payment elected by the Participant under the Pension Plan.  Notwithstanding the preceding, if the Participant elected the cash payment option under the Pension Plan, the benefit under this Plan shall be paid in the same form as the remaining annuity elected by the Participant under the Pension Plan.  For purposes of any joint and survivor annuity benefit, the surviving Spouse is the Spouse to whom the Participant was married on his or her Pension Commencement Date.

(f)Preretirement Death Benefit

(i)  If a Deferral Participant dies prior to his or her Pension Commencement Date and he or she has a surviving Spouse at the time of death, a single life annuity determined pursuant to the following Section 4.11(f)(iv), commencing on the first day of any month following the death of the Participant, shall be payable to the surviving Spouse if such Participant terminates employment after December 31, 2004 and dies before January 1, 2009, but only to the extent that such surviving Spouse otherwise satisfies the requirements of the Plan with respect to receipt of such a benefit. For purposes of this Section 4.11(f), a surviving Spouse shall be the individual to whom the Participant is legally married on the date of the Participant’s death and who has survived the Participant to at least the next calendar day after the Participant’s death.  If the Deferral Participant is unmarried at the date of his or her death, or if the surviving Spouse does not survive the Participant to at least the next calendar day after the Participant’s death, the Participant’s Qualified Deferrals Cash Balance Account shall be payable to the estate of the Participant.

(ii)  If a Deferral Participant dies before the date as of which his or her benefit commences under this Plan, and he or she does not have a surviving Spouse at the time of his or her death, or if such surviving Spouse is not eligible for a benefit pursuant to the provisions of Section 4.11(f)(i), a lump sum benefit shall be payable to the surviving Spouse of the Participant, or, if there is no surviving Spouse, to the Participant’s estate, within a reasonable period of time following the death of the Participant.  The amount of such single cash payment shall be equal to the Participant’s Qualified Deferrals Cash Balance Account.

(iii) If a Deferral Participant dies before the date as of which his or her benefit commences under this Plan and he or she is survived by a surviving Spouse who is entitled to a benefit pursuant to the preceding Section 4.11(f)(i) or Section 4.11(f)(ii), and such surviving Spouse dies prior to the date payment of benefits under this Plan commence, a lump sum benefit shall be payable to the estate of the surviving Spouse within a reasonable period of time following the death of the surviving Spouse. The amount of such single cash payment shall be equal to the Participant’s Qualified Deferrals Cash Balance Account.

(iv)  A surviving Spouse’s single life annuity payable pursuant to Section 4.11(f)(i) shall equal the Participant’s Benefit Based on the Qualified Deferrals Cash Balance Account under Section 4.03(d), but substituting the surviving Spouse’s attained age, for the age of the Participant when applying the procedures of the Pension Plan for purposes of such determination.

EX-10.HHH

Exhibit 10-hhh

AT&T EXCESS BENEFIT AND COMPENSATION PLAN

AT&T Corp.

and

Such of its Subsidiary Companies which are

Participating Companies

Effective January 1, 1997, Including Amendments Adopted Through December 31, 2008

Article I.

Background and Purpose

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AT&T EXCESS BENEFIT AND COMPENSATION PLAN

Article

   1.

Background and Purpose

The AT&T Excess Benefit Plan was established to provide eligible management and occupational employees of AT&T Corp. (formerly American Telephone and Telegraph Company) and Participating Companies with certain benefits that would have been payable under the AT&T Management Pension Plan or the AT&T Pension Plan, respectively, but for the limitations placed on benefits payable under the AT&T Management Pension Plan or the AT&T Pension Plan by Section 415 of the Code. Effective January 1, 1989, AT&T established an additional plan to provide eligible management employees with certain benefits that would have been payable under the AT&T Management Pension Plan but for the limitations placed on eligible compensation by Code Section 401(a)(17). These plans were amended, the two separate plans combined into a single plan document, and restated, effective January 1, 1994, and are referred to collectively as the “AT&T Excess Benefit and Compensation Plan” or “Plan.”

The Plan is intended to constitute an unfunded “excess benefit plan” as defined in Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to the extent it provides benefits that would be paid under the AT&T Management Pension Plan or the AT&T Pension Plan but for the limitations imposed by Code Section 415, and an “unfunded plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” for purposes of Title I of ERISA, to the extent it provides other benefits.

Except as expressly provided below, this amended and restated plan document applies only to employees who terminate employment on or after January 1, 1997. For former employees who terminated employment before January 1, 1997, the provisions of the AT&T Excess Benefit and Compensation Plan in effect on the date of the former employee’s termination of employment shall govern.

During the period from January 1, 2005 to December 31, 2008, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Notice 2005-1, and the final Treasury Regulations for Code Section 409A, and any other generally applicable guidance published in the Internal Revenue Service Bulletin with an effective date prior to January 1, 2009.  On or after January 1, 2009, this Plan shall be interpreted and construed consistent with the requirements of Code Section 409A and all applicable guidance issued thereunder with respect to all accrued benefits under this Plan, including, except as indicated below, those benefits that may be otherwise treated as existing prior to the statutory effective date of Code Section 409A (“grandfathered benefits”) within the meaning of Treasury Regulation Section 1.409A-6(a)(3).  The preceding sentence notwithstanding, it is the intention of the Company that the grandfathering provisions of Code Section 409A be applied under this Plan with respect to any Participant (and any Surviving Spouse, Beneficiary or Estate of such Participant) who terminated employment prior to January 1, 2005, with respect to all benefits earned under the Plan with respect to such Participant prior to termination of employment. If an individual who terminated employment prior to January 1, 2005 is rehired after December 31, 2004 and earns additional benefits under the Plan following his or her rehire, the terms of the Plan shall be applied separately with respect to benefits earned prior to January 1, 2005 and with respect to benefits earned following rehire. The Company reserves the right to amend any provision of the Plan or any election submitted by a Participant, or take any other action that the Company deems appropriate to ensure compliance with Code Section 409A, including altering the time and form of any distribution so as to accomplish the intended purpose of this Plan.

Article

   2.

Definitions

Unless the context clearly indicates otherwise, the following terms have the meanings described below when used in this Plan and references to a particular Article or Section shall mean the Article or Section so delineated in this Plan.

2.1. Administrator

AT&T Corp. shall be the “administrator” of the Plan as that term is defined in ERISA.    Effective August 22, 2006, and until such time as the Board determines and advises otherwise, the Senior Executive Vice President – Human Resources of AT&T Inc. (or the individual directly reporting to the Chief Executive Officer of AT&T Inc. who has responsibility for human resource matters, regardless of such individual’s title) is authorized to administer, amend, merge and/or terminate the Plan, to appoint and remove members of the administrative committees and claims administrators for the Plan, and to allocate Plan administrative responsibilities to such committees or administrators.

2.2. AT&T Corp.

AT&T Corp. (formerly the American Telephone and Telegraph Company), a New York corporation, or its successor.

2.3. AT&T Inc. or AT&T

AT&T Inc. (formerly SBC Communications Inc.), a Delaware Corporation, which acquired AT&T Corp. effective November 18, 2005 pursuant to that certain merger agreement dated January 30, 2005.

2.4. AT&T Company

AT&T and each other entity required to be aggregated with AT&T under Code §§ 414(b), (c), (m), or (o).  With respect to periods prior to November 18, 2005, the controlled group shall be determined only with respect to entities required to be aggregated with AT&T Corp. With respect to periods on or after November 18, 2005, the controlled group shall be determined with respect to entities required to be aggregated recognizing the acquisition of AT&T Corp. by SBC Communications Inc. (now known as AT&T Inc.).

2.5. AT&T Corp. Subsidiary

Any corporation of which more than 50 percent of the voting stock is owned directly or indirectly by AT&T Corp.

2.6. AT&T Management Pension Plan

The AT&T Management Pension Plan, as amended and restated from time to time, and effective January 1, 2007, the AT&T Pension Benefit Plan – AT&T Legacy Management Program.

2.7. AT&T Pension Plan

The AT&T Pension Plan, as amended and restated from time to time.

2.8. Beneficiary

Any person entitled to an Excess Death Benefit, if any, pursuant to Section 4.10.

2.9. Benefit Limitation

The maximum benefit payable to a Participant under the Qualified Plan in accordance with Code Section 415, but after application of the Compensation Limitation, if any, under the AT&T Management Pension Plan or the AT&T Pension Plan.

2.10. Board

The Board of Directors of AT&T Corp.

2.11. Change in Control

A change in control, as that term is defined in the AT&T Management Pension Plan.

2.12. CIC Eligible Employee

A CIC eligible employee, as that term is defined in the AT&T Management Pension Plan.

2.13. Code

The Internal Revenue Code of 1986, as amended from time to time (and its predecessor, the Internal Revenue Code of 1954, as amended). Any reference to a particular section of the Code includes any applicable regulations promulgated under that section.

2.14. Code Section 401(a)(17) Excess Retirement Benefit

The benefit, if any, described in Section 4.3 that is payable to an Executive or a Surviving Spouse of an Executive under the terms of the Plan.

2.15. Code Section 415 Excess Retirement Benefit

The benefit, if any, described in Section 4.2 that is payable to a Participant or a Surviving Spouse of a Participant under the terms of the Plan.

2.16. Committee

The Employees’ Benefit Committee appointed by AT&T Corp. to administer the Plan, or any successor to such Employees’ Benefit Committee.

2.17. Company

AT&T Corp.

2.18. Compensation Limitation

The maximum amount of annual compensation under Code Section 401(a)(17) that may be taken into account in any Plan Year for benefit accrual purposes under the AT&T Management Pension Plan, or that is taken into account in any Plan Year under the AT&T Management Pension Plan for purposes of calculating an Accident Death Benefit (for periods prior to January 1, 1999), Sickness Death Benefit or Pensioner Death Benefit under the AT&T Management Pension Plan.

2.19. Eligible Employee

An individual who is employed in a position eligible to participate in the AT&T Management Pension Plan or the AT&T Pension Plan. An individual who is a participant in the 2005 Supplemental Employee Retirement Plan of AT&T Inc. (“SERP”) on December 31, 2008 shall not be eligible to continue to accrue a benefit under this Plan on or after such individual’s SERP Vesting Date.  An individual who becomes a participant in the SERP after December 31, 2008 shall not be eligible to continue to accrue a benefit under this Plan on or after such individual’s SERP Effective Date (as defined in the SERP).

2.20.       ERISA

The Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular section of ERISA includes any applicable regulations promulgated under that section.

2.21. Excess Death Benefit

The benefit, if any, described in Section 4.10 of the Plan.

2.22. Excess Retirement Benefit

The sum of the Code Section 415 Excess Retirement Benefit, if any, and the Code Section 401(a)(17) Excess Retirement Benefit, if any, payable to a Participant or a Surviving Spouse (or to the estate of the Participant or Surviving Spouse) under the terms of the Plan.

2.23. Executive

A participant in the AT&T Management Pension Plan who is considered to be within “a select group of management or highly compensated employees” for purposes of Title I of ERISA and whose “eligible pay,” as that term is defined in the AT&T Management Pension Plan (other than the AT&T Management Pension Plan provision limiting eligible pay to an amount under $150,000, as adjusted), in any Plan Year exceeds the Compensation Limitation for that Plan Year. Notwithstanding the preceding, for periods of participation in the AT&T Management Pension Plan prior to January 1, 1998, the term “compensation,” as that term is defined in the AT&T Management Pension Plan, shall be substituted in the preceding sentence for the term “eligible pay.”

2.24. Leave of Absence

Where a person is absent from employment with AT&T on a leave of absence, military leave, or sick leave, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the employer that employs the individual, as adopted from time to time, and the employee is reasonably expected to return to service. Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the employee shall Terminate Employment upon termination of such leave if the employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract. A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the employee being “disabled” (within the meaning of Treasury Regulation Section 1.409A-3(i)(4)). A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the employee has incurred a Termination of Employment.

2.25. Normal Retirement Date

The Normal Retirement Date as determined under the AT&T Management Pension Plan or the AT&T Pension Plan, as applicable.

2.26. Officer

An individual who is designated as an officer level employee for compensation purposes on the records of AT&T Inc. Notwithstanding the preceding, for purposes of Section 7.1(b), relating to the purchase of a commercial annuity contract, the term “Officer” shall mean an officer of AT&T Corp., as defined in the AT&T Non-Qualified Pension Plan.

2.27. Participant

An individual and/or an Executive who has satisfied the eligibility requirements in Section 3.1.

2.28. Participating Company

AT&T Corp. and any AT&T Corp. Subsidiary that is a participating company under the AT&T Management Pension Plan or the AT&T Pension Plan.    Effective January 1, 2007, the term Participating Company shall also include an AT&T Company to the extent that an employee of such AT&T Company is eligible to participate in the AT&T Management Pension Plan pursuant to the provisions of Section 2.15(c) of that plan.

2.29. Plan

This AT&T Excess Benefit and Compensation Plan.

2.30. Plan Administrator

With respect to individuals covered by the AT&T Management Pension Plan, the Pension Plan Administrator under the AT&T Management Pension Plan and, with respect to individuals covered by the AT&T Pension Plan, the Pension Plan Administrator under the AT&T Pension Plan.  The Plan Administrator has the authority to administer and adjudicate claims under the Plan.

2.31. Qualified Plan

The AT&T Management Pension Plan or the AT&T Pension Plan, whichever such Plan holds the liability for the Participant’s qualified accrued pension benefit as of the date payment(s) under this Plan commence(s) or recommence(s).

2.32. Specified Employees

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 12-month period ending on each December 31st (such 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 Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

2.33. SERP

The 2005 Supplemental Employee Retirement Plan of AT&T Inc., as amended from time to time.

2.34. SERP Participant

An individual who has been designated as eligible to participate in the SERP.  For purposes of this Plan, such individual is considered a SERP Participant whether or not he or she has satisfied the vesting requirements of the SERP.

2.35. SERP Vesting Date

The later of January 1, 2011 or the date an individual vests under the SERP.

2.36. Surviving Spouse

A deceased Participant’s surviving spouse of the opposite sex who is such Participant’s “spouse” within the meaning of the Qualified Plan, as defined in the respective provisions of the Qualified Plan.  Notwithstanding the preceding, if an alternate payee (as that term is defined in Section 414(p) of the Code) is deemed the surviving spouse for purposes of all or a portion of the Participant’s benefit under the Qualified Plan, such alternate payee shall not be deemed to be the “spouse” for any purpose under this Plan.

2.37. Termination of Employment

The ceasing of the Participant’s employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily. References herein to Termination of Employment, Terminate Employment, or a similar reference, shall mean the event where the employee has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group. Notwithstanding the foregoing, the employment relationship of a Participant with the AT&T controlled group is considered to remain intact while the individual is on a Leave of Absence.

2.38. VRIP

The Voluntary Retirement Incentive Program for Management Employees within the meaning of the AT&T Management Pension Plan.

Article

   3.

Eligibility

3.1. Participation

(a) Date of Participation.   If the benefit payable under the Qualified Plan to an Eligible Employee or a Surviving Spouse or Beneficiary of an Eligible Employee is limited by reason of the application of the Benefit Limitation or the Compensation Limitation, he or she shall be eligible to be a Participant or receive benefits as a Surviving Spouse, as applicable, under this Plan.  An Eligible Employee shall not become a Participant in this Plan if he or she is subject to the Compensation Limitation, but not the Benefit Limitation, under the AT&T Pension Plan.

(b) Loss of Eligibility.  In the event any Participant ceases to be an Eligible Employee by reason of a change to an employment status which is not eligible to participate in the Plan, such Participant shall nevertheless continue to be eligible to receive benefits under this Plan, however, no additional benefits shall accrue under the Plan unless and until he or she shall re-attain eligibility hereunder.

3.2. Surviving Spouse Benefit

The Surviving Spouse of a Participant shall be eligible to receive an Excess Retirement Benefit under the Plan to the extent provided in Section 4.1 or Section 4.5 of the Plan.

3.3. Relationship To Other Plans

The Excess Retirement Benefit and Excess Death Benefit (as defined in Section 4.10) payable under the Plan shall be in addition to any other benefits provided, directly or indirectly, to a Participant, Surviving Spouse, Beneficiary, or the estate of such Participant or Surviving Spouse, by any AT&T Company. Participation in the Plan shall not preclude or limit the participation of the Participant in any other benefit plan sponsored by an AT&T Company for which such Participant would otherwise be eligible. Notwithstanding the preceding, the Excess Retirement Benefit and Excess Death Benefit payable to a Participant, Surviving Spouse, Beneficiary, or estate of a Participant or Surviving Spouse under this Plan shall not duplicate benefits payable to such Participant, Surviving Spouse, Beneficiary, or estate of such Participant or Surviving Spouse, under any other plan or arrangement of an AT&T Company.

3.4. Forfeiture of Benefits

If any Participant who otherwise would be entitled to an Excess Retirement Benefit under this Plan is discharged for cause due to conviction of a felony related to his or her employment, the rights of such Participant to an Excess Retirement Benefit under this Plan, including the rights of the Participant’s Surviving Spouse, Beneficiary and/or estate to any benefits related to such Participant under the Plan, shall be forfeited. To the extent a benefit under any other nonqualified plan of AT&T is offset by benefits payable under this Plan, such offset shall be determined as if a forfeiture had not occurred.

Article

4.

Retirement and Death Benefits

4.1 Excess Retirement Benefits

If the retirement benefit payable to a Participant or a Surviving Spouse under the AT&T Management Pension Plan or the AT&T Pension Plan is limited by reason of the application of the Benefit Limitation and/or, for an Executive or Surviving Spouse of an Executive under the AT&T Management Pension Plan is limited in any year by reason of the application of the Compensation Limitation, an Excess Retirement Benefit shall be paid as provided in this Article 4 to the Participant or the Surviving Spouse, as applicable.  Notwithstanding the immediately preceding sentence, effective for distributions commencing on or after January 1, 2009, the provisions of Section 4.2 and Section 4.3 shall not apply for purposes of determining the benefit payable following the death of a Participant except with respect to a Participant who terminated employment prior to January 1, 2005. In all other cases, the benefit payable following the death of a Participant shall be determined pursuant to Section 4.5, or Section 4.4(c)(ii)(B).

4.2 Amount of Code Section 415 Excess Retirement Benefit

(a)           Subject to the provisions of Section 4.2(c), Section 4.7 and Section 4.8, the amount, if any, of the Code Section 415 Excess Retirement Benefit payable monthly to a Participant or a Surviving Spouse pursuant to this Section 4.2 shall be equal to the excess, if any, of (i) over (ii) at the date of benefit commencement or recommencement, as applicable, where:

"(i)" is the amount of the monthly benefit which would be provided to the Participant or the Surviving Spouse under the Qualified Plan as of such date, without regard to the Benefit Limitation but taking into account the Compensation Limitation, based on the age of the Participant (or Surviving Spouse, if applicable) as of such date and the form of payment elected by the Participant or Surviving Spouse, as applicable, under the Qualified Plan; and

"(ii)" is the amount of the monthly benefit actually payable to such Participant or Surviving Spouse under the Qualified Plan as of such date, based on the age of the Participant (or Surviving Spouse, if applicable) and the form of payment elected by the Participant or Surviving Spouse, as applicable, under the Qualified Plan.

For purposes of subparagraphs (i) and (ii), the Qualified Plan shall be the Qualified Plan as in effect at the date of termination of employment, or death, if earlier, provided, however, that if the Qualified Plan is subsequently amended in a manner that affects the amount of benefit payable with respect to such Participant or Surviving Spouse, the terms of the Qualified Plan, as amended, shall, to the extent applicable, apply to such Participant or Surviving Spouse.

(b)           Except as described in Section 4.2(c), the amount of the Code Section 415 Excess Retirement Benefit payable as a result of the application of the Benefit Limitation under the Qualified Plan pursuant to Section 4.2(a) shall be determined or redetermined, including a decrease, (i) as of the date when benefits are to commence pursuant to Section 4.4 or recommence pursuant to Section 4.7 (including the date survivor annuitant benefits payable to a Surviving Spouse commence following the death of a Participant who was receiving a monthly benefit from the Qualified Plan at the time of his or her death); (ii) as of the effective date of any subsequent increases and/or decreases in the Benefit Limitation, to the extent such increase and/or decrease affects the benefit payable to the Participant or Surviving Spouse under the Qualified Plan, and/or (iii) as of the effective date of any special increases in the benefit payable with respect to the Participant or Surviving Spouse, prior to application of the Benefit Limitation, as a result of amendments to the AT&T Management Pension Plan and/or the AT&T Pension Plan, whichever is applicable.  Benefits under this Section 4.2 Plan shall also be redetermined upon the occurrence of an event described in Section 4.6.

(c)           The provisions of Section 4.2(a) and Section 4.2(b) shall apply only (i) to benefits payable with respect to a Participant who terminated employment prior to January 1, 2005, and (ii) to benefits payable with respect to a Participant who terminated employment after December 31, 2004 if distribution commenced to either the Participant or the Surviving Spouse on or before December 1, 2008. Effective for distributions commencing after December 1, 2008, except with respect to a Participant who terminated employment prior to January 1, 2005, the Code Section 415 Excess Retirement Benefit shall be determined as of the later of (i) November 30, 2008 or (ii) the date of the Participant’s termination of employment, determined as if benefits under the Qualified Plan commenced in the form of a single life annuity as of such date, and shall not be subject to redetermination pursuant to Section 4.2(b). Notwithstanding the preceding, (i) with respect to a SERP Participant who is eligible to participate in the SERP on December 31, 2008, the Code Section 415 Excess Retirement Benefit shall be determined as of the earlier of termination of employment or the SERP Vesting Date, and (ii) with respect to a SERP Participant who first becomes eligible to participate in the SERP on or after January 1, 2009, the Code Section 415 Excess Retirement Benefit shall be determined as of the earlier of termination of employment or the Participant’s SERP Effective Date (as defined in the SERP), and with respect to any SERP Participant, shall not thereafter be subject to redetermination pursuant to Section 4.2(b).

4.3 Amount of Code Section 401(a)(17) Excess Retirement Benefit

(a)           Subject to the provisions of Section 4.3(c), Section 4.7 and Section 4.8, the amount, if any, of the Code Section 401(a)(17) Excess Retirement Benefit payable monthly to a Participant or a Surviving Spouse pursuant to this Section 4.3 shall be equal to the excess, if any, of (i) over (ii) at the date of benefit commencement or recommencement, as applicable, where:

"(i)" is the amount of the monthly benefit which would be provided to the Participant or the Surviving Spouse under the AT&T Management Pension Plan as of such date, without regard to the Compensation Limitation and Benefit Limitation, based on the age of the Participant (or Surviving Spouse, if applicable) as of such date and the form of payment elected by the Participant or Surviving Spouse, as applicable, under the AT&T Management Pension Plan; and

"(ii)" is the amount of the monthly benefit actually payable to such Participant or Surviving Spouse under the AT&T Management Pension Plan as of such date, based on the age of the Participant (or Surviving Spouse, if applicable) and the form of payment elected by the Participant or Surviving Spouse, as applicable, under the AT&T Management Pension Plan, taking into account the Compensation Limitation, but prior to application of the Benefit Limitation.

For purposes of subparagraphs (i) and (ii), the determination of the benefits payable under this Plan shall be made pursuant to the terms of the AT&T Management Pension Plan as in effect at the date of termination of employment, or death, if earlier, provided, however, that if the AT&T Management Pension Plan is subsequently amended in a manner that affects the amount of benefit payable with respect to such Participant or Surviving Spouse, the terms of the AT&T Management Pension Plan, as amended, shall, to the extent applicable, apply to such Participant or Surviving Spouse.

 (b)           Except as described in Section 4.3(c), the amount of the Code Section 401(a)(17) Excess Retirement Benefit payable as a result of the application of the Compensation Limitation under the AT&T Management Pension Plan pursuant to Sections 4.3(a) shall be determined or redetermined, including a decrease, (a) as of the date when benefits are to commence pursuant to Section 4.4 or recommence pursuant to Section 4.7; (b) as of the effective date of any subsequent increases and/or decreases in the Compensation Limitation, to the extent such increase and/or decrease affects the benefit payable to the Participant or Surviving Spouse under the AT&T Management Pension Plan, and/or (c) as of the effective date of any special increases in the benefit payable with respect to the Participant or Surviving Spouse, prior to application of the Compensation Limitation, as a result of amendments to the AT&T Management Pension Plan.  Benefits under this Section 4.3 Plan shall also be redetermined upon the occurrence of an event described in Section 4.6.

(c)           The provisions of Section 4.3(a) and Section 4.3(b) shall apply only (i) to benefits payable with respect to a Participant who terminated employment prior to January 1, 2005, and (ii) to benefits payable with respect to a Participant who terminated employment after December 31, 2004 if distribution commenced to either the Participant or the Surviving Spouse on or before December 1, 2008. Effective for distributions commencing after December 1, 2008, except with respect to a Participant who terminated employment prior to January 1, 2005, the Code Section 401(a)(17) Excess Retirement Benefit shall be determined as of the later of (i) November 30, 2008 or (ii) the date of the Participant’s termination of employment, determined as if benefits under the AT&T Management Pension Plan commenced in the form of a single life annuity as of such date, and shall not be subject to redetermination pursuant to Section 4.3(b).  Notwithstanding the preceding, (i) with respect to a SERP Participant who is eligible to participate in the SERP on December 31, 2008, the Code Section 401(a)(17) Excess Retirement Benefit shall be determined as of the earlier of termination of employment or the SERP Vesting Date, and (ii) with respect to a SERP Participant who first becomes eligible to participate in the SERP on or after January 1, 2009, the Code Section 401(a)(17) Excess Retirement Benefit shall be determined as of the earlier of termination of employment or the Participant’s SERP Effective Date (as defined in the SERP), and with respect to any SERP Participant, shall not thereafter be subject to redetermination pursuant to Section 4.3(b).

4.4. Time and Form of Benefits Payable to a Participant or Surviving Spouse

 (a)           For Benefits Commencing Prior to 2005.  The Excess Retirement Benefit provided under the Plan payable to either the Participant or the Surviving Spouse, as applicable, with respect to benefits commencing prior to the 2005 calendar year shall be payable as follows:

(1)    With respect to a Participant whose Qualified Plan benefit is payable under the AT&T Management Pension Plan and who terminates employment prior to January 1, 1998, and with respect to a Participant whose Qualified Plan benefit is payable under the AT&T Pension Plan and who terminates employment prior to July 1, 1999, the Excess Retirement Benefit shall commence at the same time and shall be paid in the same benefit form as the Participant’s or Surviving Spouse’s benefits are paid under the AT&T Management Pension Plan or the AT&T Pension Plan, whichever is applicable, provided, however, that the Committee shall have the right to approve the election of the form of the Excess Retirement Benefit payable to the Participant under this Plan; and

(2)   With respect to a Participant whose Qualified Plan benefit is payable under the AT&T Management Pension Plan and who terminates employment after December 31, 1997, the Excess Retirement Benefit shall commence at the same time and shall be paid in the same form of annuity in which all or a portion of the Participant’s or Surviving Spouse’s benefits under the AT&T Management Pension Plan are paid, or if no annuity is payable from the AT&T Management Pension Plan under the form of payment elected, shall be paid in the form of a single life annuity, unless the Committee, in its sole discretion, elects to pay the Excess Retirement Benefit in the form of a single lump sum payment; and

(3)   With respect to a Participant whose Qualified Plan benefit is payable under the AT&T Pension Plan and who terminates employment after June 30, 1999, the Excess Retirement Benefit shall commence at the same time and shall be paid in the same form of annuity in which all or a portion of the Participant’s or Surviving Spouse’s benefits under the AT&T Pension Plan benefits are paid, or if no annuity is elected under the AT&T Pension Plan, shall be paid in the form of a single life annuity, unless the Committee, in its sole discretion, elects to pay the Excess Retirement Benefit in the form of a single lump sum payment.

(b)           Benefits Commencing After 2004 and On or Before December 1, 2008.  With respect to a Participant whose Qualified Plan benefit commences after 2004, except as provided in Section 7.1 regarding payments in the form of a commercial annuity contract, the Excess Retirement Benefit shall commence at the same time and shall be paid in the same form of annuity in which all or a portion of the Participant’s or Surviving Spouse’s benefits under the Qualified Plan are paid, or if no annuity is elected under the Qualified Plan, in the form of a single life annuity.

  (c)           Benefits Commencing After December 1, 2008.  Payment of benefits with respect to a Participant whose Qualified Plan benefit has not commenced on or before December 1, 2008 shall be made in the time and form as described in the following subparagraphs (i) through (v), as applicable. For purposes of this subparagraph (c), if  a Participant or Surviving Spouse is entitled to a benefit based on a Force Management Pension credit and/or a CIC Credit under the AT&T Management Pension Plan in addition to the regular pension benefit, and if such Participant or Surviving Spouse, as applicable, commenced distribution of only a portion of the Qualified Plan benefit (and associated benefit under this Plan) on or before December 1, 2008, then the provisions of subparagraphs (i) through (v) shall be applied separately to the portion of the benefit for which distribution has commenced, and that portion of the benefit for which distribution has not commenced by such date.

(i) Participants Terminating Prior to 2005:  The provisions of Section 4.4(b) regarding the time and form of payment of benefits under the Plan shall apply with respect to benefits commencing after December 1, 2008 to or with respect to a Participant who terminated employment prior to 2005.  If such an individual is rehired into a position covered by this Plan after 2004, the terms of the Plan shall apply separately to the benefit earned prior to 2005 and the benefit earned after 2004.

 (ii) Participants Terminating Employment after 2004 and Prior to December 1, 2008: Subject to the provisions of Section 4.4(d) and Section 7.1(c), benefits payable to or with respect to a Participant who terminates employment after December 31, 2004 and  before December 1, 2008 shall be paid as follows:

(A) if distribution of benefits with respect to the Participant commences on or before December 1, 2008, the time and form of payment of benefits under the Plan shall be determined in the manner described in Section 4.4(b), or

(B) if distribution of benefits does not commence on or before December 1, 2008, distribution shall be made to the Participant commencing on July 1, 2009 in the form of a lump sum equal to the present value determined pursuant to Section 4.4(c)(vi); provided, however, if the amount so determined exceeds $50,000, distribution shall be paid in monthly installments over a period of 120 months. If the Participant dies prior to the commencement of such payment, distribution equal to the present value of the amount that otherwise would have been payable to the Participant shall be made on July 1, 2009 to the Surviving Spouse, or if there is no Surviving Spouse, to the estate of the Participant.  If the Surviving Spouse entitled to receive the benefit described in the preceding sentence dies after the Participant but before distribution of such benefit, the benefit shall be paid to the estate of the Surviving Spouse.  Survivor benefits, if any, upon death following commencement of distribution to the Participant shall be determined pursuant to the provisions of Section 4.5(d).

(iii) Participants Terminating Employment On or After December 1, 2008 Who Are Not SERP Participants: Subject to the provisions of Section 4.4(c)(iv), Section 4.4(c)(v), and Section 4.4(d), benefits payable to a Participant who terminates employment on or after December 1, 2008 shall be paid in the form of a lump sum equal to the present value determined pursuant to Section 4.4(c)(vi), upon the Participant’s Termination of Employment; provided, however, if the amount so determined exceeds $50,000, distribution shall be paid in monthly installments over a period of 120 months. If the Participant dies before receiving a complete distribution of the benefits so determined, survivor benefits, if any, shall be paid in accordance with the provisions of Section 4.5.

(iv) SERP Participants on December 31, 2008: Subject to the provisions of Section 4.4(d), with respect to a Participant who becomes eligible to participate in the SERP prior to January 1, 2009, Excess Retirement Benefits shall be paid to such Participant in accordance with the terms of an election made on or before December 31, 2008 with respect to benefits that may become payable to the Participant under the SERP, and shall be effective for purposes of this Plan without regard to whether such Participant becomes vested under the SERP. The amount payable from the Plan shall be the actuarial equivalent of the single life annuity benefit determined pursuant to the provisions of Section 4.2(c) and Section 4.3(c), based on the actuarial assumptions in effect under the SERP as of the date payments commence. Survivor benefits, if any, following the death of the Participant shall be determined in accordance with the provisions of Section 4.5.

(v) Participants Terminating Employment On or After December 1, 2008 Who Become SERP Participants After December 31, 2008: Subject to the provisions of Section 4.4(d), with respect to a Participant who becomes eligible to participate in the SERP after December 31, 2008, Excess Retirement Benefits shall be paid in the form of a lump sum or in 120 monthly installments commencing upon Termination of Employment; the applicable form of payment shall be determined on the Participant’s SERP Effective Date, based on the present value of the Excess Retirement Benefit determined as if distribution of such benefit commenced on the SERP Effective Date in the form of a single life annuity, and based on the actuarial assumptions in effect under the SERP as of such date.  If the present value determined as of the SERP Effective Date is $50,000 or less, the form of payment shall be a lump sum, and if present value exceeds $50,000, the form of payment shall be 120 monthly installments. The amount of the benefit payable commencing at Termination of Employment shall be determined in accordance with the provisions of Section 4.4(c)(vi). If the Participant dies before receiving a complete distribution of the benefits so determined, survivor benefits, if any, shall be paid in accordance with the provisions of Section 4.5

(vi) Determination of Present Value: For purposes of Section 4.4(c)(ii)(B), Section 4.4(c)(iii) and Section 4.4(c)(v), the present value shall be determined as follows:

(A) Employee who is not a SERP Participant: with respect to a Participant who is not a SERP Participant, equal to the present value of the single life annuity that would be payable under the Plan commencing on the Participant’s Normal Retirement Date.  Such present value shall be determined on the basis of actuarial assumptions under the Qualified Plan as of such date, calculated as follows: the annual amount of the Excess Retirement Benefit shall be divided by the early commencement factor as set forth in Appendix B of the Qualified Plan for the Participant’s age at Termination of Employment, and multiplied by the factor for determining the lump sum value as set forth in Appendix B of the Qualified Plan for the Participant’s age at Termination of Employment. Notwithstanding the preceding, for a Participant described in Section 4.4(c)(ii)(B), the present value shall be based on the Participant’s age as of December 1, 2008, and the amount so determined will be accumulated to July 1, 2009 at an effective annual interest rate of four percent.

(B) Employee who is a SERP Participant:   with respect to a Participant who is a SERP Participant, other than a SERP Participant described in Section 4.4(c)(iv), the present value of the amount payable at Termination of Employment shall be determined by multiplying the Excess Retirement Benefit determined pursuant to Section 4.2(c) and Section 4.3(c) by an immediate annuity factor based on the age of the Participant at Termination of Employment.  The immediate annuity factor shall be based on the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment and as defined in the SERP.

 For purposes of Sections 4.4(c)(ii)(B), 4.4(c)(iii) and 4.4(c)(v) above, monthly installments shall be calculated in the same manner that a financial institution would calculate the monthly payments for a 10-year fixed interest loan. The interest rate used in the calculations shall be equal to the Code Section 417(e) interest rate in effect under the Qualified Plan on the date of the Participant’s Termination of Employment (except, with respect to distributions made pursuant to Section 4.4(c)(ii)(B), such rate in effect for the 2008 calendar year).

  (d)           Payments to Specified Employees.  Notwithstanding the provisions of the preceding sections 4.4(a) through 4.4(c), effective on and after January 1, 2005 with respect to payments in the form of a commercial annuity pursuant to Section 7.1 and effective on and after January 1, 2009 with respect to all other payments under the Plan, payment of the Excess Retirement Benefit under the Plan with respect to a Participant who is eligible to participate in the SERP or who is determined to meet the definition of Specified Employee shall be payable as otherwise provided in this Plan, except that the initial payment shall be made no earlier than the sixth month  anniversary of his or her Termination of Employment.  If, absent this Section 4.4(d), payment to a Specified Employee would have commenced before the expiration of such six-month period, the first payment with respect to such Specified Employee will include the sum of the payments withheld, together with interest thereon.  For purposes of the immediately preceding sentence, interest shall be credited using the GAAP Rate in effect as of the end of the calendar year immediately preceding the Participant’s Termination of Employment, for distributions made after December 31, 2007.  “GAAP Rate” means such rate as defined under the SERP for the referenced period. Notwithstanding the preceding, for distributions made prior to January 1, 2008, interest credited for purposes of this Section 4.4(d) shall be at an effective annual rate equal to 120 percent of the Federal Mid-term rate in effect as of the date such annuity payments otherwise would have commenced.

4.5. Additional Provisions for Payment of Excess Retirement Benefit Following Death

The provisions of this Section 4.5 apply upon the death of a Participant if payment of the Excess Retirement Benefit is determined pursuant to the provisions of Section 4.4(c)(iii), Section 4.4(c)(iv) or Section 4.4(c)(v), and, for purposes of Section 4.5(d), also to a Participant described in Section 4.4(c)(ii)(B). In all other circumstances, benefits, if any, payable following the death of the Participant, shall be determined as described elsewhere in this Plan.

(a) Death prior to commencement:  If a Participant described in Section 4.4(c)(iii), Section 4.4(c)(iv) or Section 4.4(c)(v) dies before Termination of Employment, or following Termination of Employment but before the date as of which his or her benefit commences under this Plan, the Excess Retirement Benefit shall be payable in a lump sum to the Surviving Spouse, or if there is no Surviving Spouse, to the Participant’s estate, upon the death of the Participant. The amount of such lump sum payment shall be determined pursuant to the provisions of Section 4.5(c).

 (b) Death of Spouse before payment of survivor benefit: If a Participant dies before the date as of which his or her benefit commences under this Plan, and he or she is survived by a Surviving Spouse entitled to payment of the Excess Retirement Benefit pursuant to Section 4.5(a), and such Surviving Spouse dies prior to the date payment of benefits under this Plan commence, a lump sum benefit shall be payable to the estate of the Surviving Spouse upon the death of the Surviving Spouse. The amount of such lump sum shall be determined pursuant to the provisions of Section 4.5(c).

 (c)  Determination of lump sum amount for death before commencement:

(i) Except with respect to a SERP Participant, the single cash payment payable pursuant to Section 4.5(a) or Section 4.5(b) shall be equal to the difference between (A) the Participant’s “cash balance account” under the Qualified Plan as of the date of death of the Participant or the Surviving Spouse, as applicable, determined without regard to the Compensation Limitation or the Benefit Limitation, and (B) the corresponding payment that would be payable under the Qualified Plan as of the date of commencement of benefits under this Plan.  No benefit is payable pursuant to Section 4.5(a) or Section 4.5(b) with respect to a Participant who does not have a cash balance account under the Qualified Plan at the time of his or her death.

(ii) The single cash payment payable pursuant to Section 4.5(a) or Section 4.5(b) upon the death of a Participant who is a SERP Participant, shall be determined by multiplying the Excess Retirement Benefit determined pursuant to Section 4.2(c) and Section 4.3(c) by an immediate annuity factor based on the age of the Participant on the date of death.  The immediate annuity factor shall be based on the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment and as defined in the SERP.

(d)  Death following commencement of distribution for a Participant who is not a SERP Participant on December 31, 2008:  If the Participant dies following distribution of the lump sum pursuant to Section 4.4(c)(ii)(B), Section 4.4(c)(iii) or Section 4.4(c)(v), no benefit shall be payable with respect to such Participant’s Excess Retirement Benefit following the death of the Participant. If the Participant is receiving payment of the Excess Retirement Benefit in the form of installments pursuant to Section 4.4(c)(ii)(B), Section 4.4(c)(iii) or Section 4.4(c)(v) and dies prior to receiving such installments for 120 months, the present value of the remaining payments shall be made to the Surviving Spouse of such Participant, or if there is no Surviving Spouse, to the estate of the Participant. Such present value shall be calculated using the interest rate that was used to determine the amount of the monthly installments at the time distribution of such payments commenced.

(e) Death following commencement of distribution for a Participant who is a SERP Participant on December 31, 2008:  Upon the death following commencement of benefits under the Plan of a Participant described in Section 4.4(c)(iv), further payment of benefits related to the Excess Retirement Benefit shall be the survivor benefit, if any, payable under the terms of an election made on or before December 31, 2008 with respect to benefits that may become payable to the Participant under the SERP and under this Plan, determined under the actuarial assumptions and methodology set forth in the SERP.   Any survivor benefit payable pursuant to this Section 4.5(e) shall be paid to the same beneficiary to whom survivor benefits are payable under the SERP.

4.6. Future Benefit Adjustments

(a)           Effective with respect to benefits that commenced on or before December 1, 2008, if a Participant has commenced receiving a pension under the Qualified Plan (other than a deferred vested pension under a formula other than cash balance) in the form of either a joint and 50 percent survivor annuity or a joint and 100 percent survivor annuity (including such a joint and survivor annuity pursuant to the cash payment option under the AT&T Management Pension Plan) and his or her designated annuitant subsequently predeceases him or her, the Participant’s Excess Retirement Benefit under this Plan shall be adjusted prospectively, by increasing the monthly pension by the original cost of the survivor annuity form of benefit under the Qualified Plan. Such adjustment shall be effective as of the first day of the first month following the death of the Participant’s designated annuitant.  The amount, if any, which is to be paid from this Plan following the death of such designated annuitant shall be determined pursuant to the recalculation provisions of Section 4.2 and Section 4.3. The provisions of this Section 4.6(a) do not apply with respect to a distribution in the form of a commercial annuity pursuant to Section 7.1.

 (b)           In the event that, following commencement of benefits on or before December 1, 2008 to a Participant or Surviving Spouse under the Plan, the Qualified Plan benefit is subsequently increased as a result of a successful claim for benefits under the Qualified Plan, the Excess Retirement Benefit to the Participant or Surviving Spouse under this Article 4 shall be recalculated as soon as practicable after the Qualified Plan benefit is adjusted.  The Company shall have the right to recover any benefits paid from this Plan to the extent that such payments are subsequently paid by the Qualified Plan as a result of such successful claim for benefits under those plans.

4.7. Suspension and Recommencement of Benefit Payments

Subject to Section 5.2, if a Participant’s benefit payments under the Qualified Plan are suspended (or would have been suspended if the Participant had not received his or her total benefit under such plan as a lump sum) under the terms of that plan because of his or her employment or reemployment subsequent to termination of employment, any type of benefit payment he or she is entitled to under this Plan shall be permanently suspended for the period of such employment or reemployment to the extent and in a manner consistent with the terms and conditions applicable to the suspension of benefit payments under the Qualified Plan, provided, however, that payments for which an Executive is entitled pursuant to a commercial annuity contract purchased on his or her behalf pursuant to Section 7.1 of the Plan shall not be suspended for the period of such employment or reemployment.  Payment of a Participant’s suspended benefit under this Plan shall recommence simultaneously with the recommencement of his or her benefits under the Qualified Plan.  The amount of the Participant’s Excess Retirement Benefit upon recommencement shall be adjusted (including a decrease, if applicable) to reflect adjustments, if any, in the amount of the Participant’s pension benefit under the Qualified Plan resulting from the period of reemployment, pursuant to Section 4.2 and/or Section 4.3, including any recalculations pursuant to Section 4.2(b) and Section 4.3(b).  Following recommencement of payment under this Plan, the Participant (or Surviving Spouse) shall not be eligible to receive any payments that would otherwise have been payable but for the suspension.

Notwithstanding the preceding, effective beginning January 1, 2005, benefits shall not be suspended during a period of employment or reemployment. Benefits paid upon a subsequent termination of employment shall be reduced by the actuarial equivalent of the benefit payments that were continued during reemployment.

4.8. Application of Code Section 417(e)

Notwithstanding the foregoing provisions of this Article 4, effective for distributions commencing on or before December 1, 2008, if the application of Code Section 417(e) has resulted in an increase in the Participant’s or Surviving Spouse’s otherwise payable benefit under the AT&T Management Pension Plan (including the VRIP provisions) or the AT&T Pension Plan, the benefit otherwise determinable under this Plan will be decreased by the amount of the increase attributable to the application of Code Section 417(e) under the AT&T Management Pension Plan or the AT&T Pension Plan, as applicable, even if this decrease results in eliminating the Excess Retirement Benefit from this Plan.

4.9. Change in Control Provisions

(a)    In accordance with the preceding provisions of Article 3 and this Article 4, following the occurrence of a Change in Control, the benefit determined pursuant to Section 4.2 and/or Section 4.3 for a CIC Eligible Employee shall be determined taking into account the Change in Control provisions of the AT&T Management Pension Plan.

(b)    Notwithstanding the provisions of Section 9.1, or any other provision of the Plan, unless required by applicable law, this Section 4.9 may not be amended in any manner adverse to the interests of Participants without their consent and, further, upon the occurrence of a Change in Control, no amendment may be made to this Section 4.9 by the Board, the Company, (including any successor to the Company), any committee, any officer, or any other party to suspend, modify, or eliminate any benefit provisions that are applicable upon occurrence of a Change in Control.  

4.10. Excess Death Benefit

(a)           If an Accident Death Benefit (for periods prior to January 1, 1999), Sickness Death Benefit or Pensioner Death Benefit (collectively, “Death Benefit”) is payable under the terms of the AT&T Management Pension Plan but is limited by reason of the Compensation Limitation, an Excess Death Benefit shall be paid as provided in this Section 4.10 to the Beneficiary of an Executive otherwise entitled to receive the Death Benefit under the terms and conditions of the AT&T Management Pension Plan, including the condition that no Pensioner Death Benefit is payable with respect to a Participant who has commenced distribution of the pension benefit under the AT&T Management Pension Plan but who at the time of death is not receiving payment in the form of an annuity from that plan.

(b)           The amount, if any, of the Excess Death Benefit payable shall be equal to the difference between (i) and (ii) where:

“(i)”           is the amount of the Death Benefit which would be provided to the Beneficiary under the AT&T Management Pension Plan, if any, without regard to the Compensation Limitation under the AT&T Management Pension Plan; and

“(ii)”                      is the amount of the Death Benefit actually payable to such Beneficiary under the AT&T Management Pension Plan.

(c)           The Excess Death Benefit provided under this Plan, if any, (i) shall commence at the same time, (ii) shall be paid for as long as, and (iii) shall be paid in the same benefit form as the Committee or its delegate has determined with respect to the Death Benefit payable under the AT&T Management Pension Plan. Notwithstanding the preceding, effective for deaths occurring on or after January 1, 2009, the Excess Death Benefit, if any, shall be paid in a lump sum within a reasonable period of time following the date the Beneficiary is identified by the Committee or its delegate.

Article

   5.

Miscellaneous Provisions

5.1. Determination of Benefits

Except as otherwise indicated herein, Excess Retirement Benefit payments under Article 4 of this Plan shall be calculated in accordance with the rules, procedures, and assumptions utilized under the AT&T Management Pension Plan or the AT&T Pension Plan, whichever is applicable. Thus, whenever it is necessary to determine whether one benefit is less than, equal to, or larger than another, or to determine the equivalent actuarial value of any benefit, whether or not such form of benefit is provided under this Plan, such determination shall be made, at the Administrator’s discretion, by AT&T Corp.’s enrolled actuary, using mortality, interest and other assumptions normally used at the time in determining actuarial equivalence under the AT&T Management Pension Plan or AT&T Pension Plan, whichever is applicable.

5.2. Mandatory Portability Agreement

A Participant (a) who is employed by an “Interchange Company,” as that term is defined under the Mandatory Portability Agreement (“MPA”), subsequent to retirement or termination of employment from AT&T Corp., its subsidiaries or any affiliated company, (b) who is covered under the terms and conditions of the MPA, and (c) for whom assets and liabilities are transferred from the AT&T Management Pension Plan or the AT&T Pension Plan to a defined benefit pension plan of an Interchange Company, shall forfeit his rights to an Excess Retirement Benefit under this Plan, including the rights of the Participant’s spouse to an Excess Retirement Benefit as a Surviving Spouse and the rights of a Beneficiary to an Excess Death Benefit.

Article

   6.

Disposition of Participating Company

6.1. Sale, Spin-Off, or Other Disposition of Participating Company

(a)           Subject to Sections 5.2 and 10.1, in the event AT&T Corp. sells, spins off, or otherwise disposes of a Subsidiary, or disposes of all or substantially all of the assets of a Subsidiary such that one or more Participants terminate employment for the purpose of accepting employment with the purchaser of such stock or assets, any person employed by such Subsidiary who ceases to be an employee as a result of the sale, spin-off, or disposition shall be deemed to have terminated his or her employment with a Participating Company and be eligible for an Excess Retirement Benefit commencing in accordance with the terms and conditions of this Plan that are applicable to a separation from service.  Further, if the Participant dies after termination of employment as described in this Section 6.1, his or her Surviving Spouse may be entitled to an Excess Retirement Benefit, if eligible as provided in Sections 4.2 and 4.3, and/or his or her Beneficiary may be entitled to an Excess Death Benefit, if eligible as provided in Section 4.10. Notwithstanding the preceding, effective January 1, 2005, no distribution shall commence pursuant to this Section 6.1(a) unless the Participant has a separation from service, as defined under Code Section 409A, with all members of the AT&T controlled group.

(b)           Notwithstanding the foregoing provisions of this Section 6.1, and subject to Section 10.1, if, as part of the sale, spin-off, or other disposition of the stock or assets of a Subsidiary, the Subsidiary, its successor owner, or any other party agrees in writing to assume the liability for the payment of the Excess Retirement Benefit and/or the Excess Death Benefit to which the Participant, Surviving Spouse and/or Beneficiary would have been entitled under the Plan but for such sale, spin-off, or other disposition, then the entitlement of the Participant or his or her Surviving Spouse to an Excess Retirement Benefit and/or any Beneficiary to an Excess Death Benefit under this Plan shall terminate. Any subsequent entitlement of the former Participant or his or her Surviving Spouse or Beneficiary to the Excess Retirement Benefit and/or the Excess Death Benefit shall be the sole responsibility of the assuming party.

Article

   7.

Source of Payment

7.1. Source of Payments

(a)     Benefits arising under this Plan and all costs, charges, and expenses relating thereto will be payable from the Company’s general assets. The Company may, however, establish a trust to pay such benefits and related expenses, provided such trust does not cause the Plan to be “funded” within the meaning of ERISA. To the extent trust assets are available, they may be used to pay benefits arising under this Plan and all costs, charges, and expenses relating thereto. To the extent that the funds held in the trust, if any, are insufficient to pay such benefits, costs, charges and expenses, the Company shall pay such benefits, costs, charges, and expenses from its general assets.

(b)   In addition, subject to the provisions of  Section 7.1(d), the Company may, in its sole discretion, purchase and distribute one or more commercial annuity contracts, or cause the trustee of the trust to purchase and distribute one or more commercial annuity contracts, to make benefit payments required under this Plan, to any Officer, as defined in the AT&T Non-Qualified Pension Plan, or the Surviving Spouse of any Officer, provided, however, that with respect to an annuity purchase occurring prior to January 1, 2005,  the purchase and distribution of any such annuity contracts shall be no sooner than the expiration of any forfeiture provisions applicable to the Officer  under the AT&T Non-Competition Guidelines, or as otherwise may be provided in accordance with procedures establish by the Executive Vice President – Human Resources (or any successor to such position), and provided further that, effective January 1, 2004, the Company’s right to direct that payments under the Plan shall be made through one or more commercial annuity contracts shall be applicable to only the benefits payable to any Participant, or the Surviving Spouse of any such Participant, as applicable, who (1) was  on the active payroll of the Company (or on an approved leave of absence with guaranteed right of reinstatement) and classified as an Officer on December 31, 2003, and (2) satisfies the age and service requirements, or is within twelve months of satisfying the  requirements in effect at the time the Participant terminates employment with the Company for the receipt of retirement-related health benefits under the AT&T Corp. Postretirement Welfare Benefits Plan (or any successor to such plan) (other than by virtue of the “Rule of 65”or  through a Company-sponsored employee-paid health benefits access program, or through the AT&T Corp. Separation Medical Plan), without regard to whether or not the Officer has five years of service as of December 31, 1999. Such annuity contracts may be purchased from a commercial insurer acceptable to the Executive Vice President - Human Resources (or any successor to such position). Further, the Executive Vice President - Human Resources (or any successor to such position), may determine, in his or her sole discretion, to pay additional sums to any Officer, from the Company’s general assets or from the trust, if any, to reimburse the Officer for additional federal and state income taxes estimated to be incurred by reason of the distribution of any such annuity contracts. The Executive Vice President - Human Resources (or any successor to such position) shall establish a methodology or methodologies for determining the amount of such additional sums. The methodology or methodologies selected shall be those that the Executive Vice President - Human Resources (or any successor to such position) determines, in his or her sole discretion, to be the most effective and administratively feasible for the purpose of producing after-tax periodic benefit payments that approximate the after-tax periodic benefit payments that would have been received by Officers in the absence of the distribution of the annuity contract.  Any such purchase and distribution of an annuity contract shall be a full and complete discharge of the Plan’s, AT&T Corp.’s and the Participating Companies’ liability for payments assumed by the issuer of the annuity contract.

(c)    Notwithstanding the provisions of the preceding Section 7.1(b), effective January 1, 2005, a Participant who is eligible to elect to receive his or her benefit under the Plan in the form of a third-party commercial annuity contract pursuant to Section 7.1(b) shall be required to submit an election, on a form provided by the Company, with respect to the time and form of payment in which benefits under this Plan shall be distributed for any reason other than the death of the Participant.  Such election form shall be submitted to the Company no later than one of the following dates, whichever is applicable:  (i) such Eligible Employee’s separation from service, with respect to distribution of such annuity contract during the 2005 calendar year, (ii) the earlier of (A) such employee’s separation from service, or (B) December 31, 2005, with respect to the distribution of such annuity contract during the 2006 calendar year, and (iii) December 31, 2006, for distributions of such annuity contracts occurring after the 2006 calendar year.  Notwithstanding the foregoing, the Company may permit such an employee to submit a distribution election form in 2006 with respect to his or her benefits under the Plan, provided that such election in the 2006 calendar year may not result in a change in payment elections with respect to payments that the Participant would otherwise receive during the 2006 calendar year, or to cause payments to be made in 2006, to the extent permitted under the proposed Treasury Regulations under Code Section 409A.

(d)  Notwithstanding the provisions of the preceding Section 7.1(b) and Section 7.1(c), the annuity purchase program described in Section 7.1(b) shall be discontinued effective September 6, 2007, and any election in effect on September 6, 2007 pursuant to which a Participant has elected to receive distribution of his or her benefits under this Plan through the purchase of a commercial annuity contract shall be null and void, as such election relates to any distribution from this Plan to a Participant or Surviving Spouse occurring after September 6, 2007.

7.2. Unfunded Status

The Plan at all times shall be entirely unfunded for purposes of the Code and ERISA and no provision shall at any time be made with respect to segregating any assets of a Participating Company for payment of any benefits hereunder. Funds that may be invested through a trust described in Section 7.1 shall continue for all purposes to be part of the general assets of the Participating Company that invested the funds. The Plan constitutes a mere promise by AT&T Corp. and the Participating Companies to make Excess Retirement Benefit payments and Excess Death Benefit payments, if any, in the future. No Participant, Surviving Spouse or any other person shall have any interest in any particular assets of a Participating Company by reason of the right to receive a benefit under the Plan and to the extent the Participant, Surviving Spouse or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any unsecured general creditor of a Participating Company.

7.3. Fiduciary Relationship

Nothing contained in the Plan, and no action taken pursuant to the provisions of the Plan, shall create or be construed to create a trust or a fiduciary relationship between or among AT&T Corp., any other Participating Company, the Board, the Administrator, the Committee, any Participant, any Surviving Spouse, or any other person, except as provided in Section 8.4.

Article

   8.

Administration of the Plan

8.1. Administration

AT&T Corp. shall be the “administrator” of the Plan as that term is defined in ERISA.

8.2. Indemnification

Neither the Administrator, any member of the Board or of the Committee, nor each other officer to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, shall be personally liable by reason of any contract or other instrument executed by such individual or on his or her behalf in his or her capacity as the Administrator or as a member of the Board or of the Committee, nor for any mistake of judgment made in good faith, and AT&T Corp. shall indemnify and hold harmless the Administrator, each member of the Board, each member of the Committee, and each other employee or officer to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or bad faith.

8.3. Claims Procedure

(a)           All claims for benefit payments under the Plan shall be submitted in writing by the Participant, Surviving Spouse, Beneficiaries, estate, or the duly authorized representative of such person or estate (“Claimant” for purposes of this Section 8.3) to the Plan Administrator. The Plan Administrator shall notify the Claimant in writing within 90 days after receipt as to whether the claim has been granted or denied. This period may be extended for up to an additional 90 days, for a total of 180 days, in the case of special circumstances provided that written notice of the extension is furnished to the Claimant prior to the commencement of the extension. In the event the claim is denied, in whole or in part, the Claimant will receive notice of the Plan Administrator’s decision, including: (i) the specific reasons for the denial, (ii) reference to the pertinent Plan provisions on which the denial is based, (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) a description of the Plan’s procedures for appealing the denial (including applicable time limits) and the Claimant’s right to bring a civil action under section 502(a) of ERISA, to the extent ERISA applies to such claim for benefits, following an adverse determination on review.

(b)           Any Claimant whose claim for benefits has been denied, in whole or in part, may, within 60 days of receipt of any adverse benefit determination, appeal such denial to the Committee. All appeals shall be in the form of a written statement and shall (i) set forth all of the reasons in support of favorable action on the appeal, (ii) identify those provisions of the Plan upon which the Claimant is relying, and (iii) include copies of any other documents, records and other materials which may support favorable consideration of the claim. If the Claimant submits a written request for review of a denied claim, the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002), to the extent ERISA applies to such claim for benefits, and (iv) a statement of the right of the Claimant to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, to the extent ERISA applies to such claim for benefits. The Committee shall decide the issues presented within 60 days after receipt of such request, but this period may be extended for up to an additional 60 days in the case of special circumstances provided that written notice of the extension is furnished to the Claimant prior to the commencement of the extension.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination. In the case of an adverse determination, the decision of the Committee shall be set forth in writing and include (i) the specific reason or reasons for the adverse determination, (ii) reference to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information (as defined in DOL Reg. §2560.503-1(m)(8) for claims filed on or after January 1, 2002) relevant to the Claimant’s claim for benefits, to the extent ERISA applies to such claim for benefits, and (iv) a statement of the right of the Claimant to bring a civil action under ERISA Section 502(a), to the extent ERISA applies to such claim for benefits.

Any Claimant whose claim for benefits has been denied shall have such further rights of review as are provided in ERISA Section 503, and the Committee and Plan Administrator shall retain such right, authority, and discretion as is provided in or not expressly limited by ERISA Section 503.

(c)           The Committee shall serve as the final review committee, under the Plan and ERISA, for the review of all appeals by Claimants whose initial claims for benefits have been denied, in whole or in part, by the Plan Administrator. The Committee shall have the authority, subject to Section 8.3(d), to determine conclusively for all parties any and all questions arising from administration of the Plan, and shall have sole and complete discretionary authority and control to manage the operation and administration of the Plan, including, but not limited to, authorizing disbursements according to the Plan, the determination of all questions relating to eligibility for participation and benefits, interpretation of all Plan provisions, determination of the amount and kind of benefits payable to any Participant, Surviving Spouse, Beneficiary or estate, and the construction of disputed and doubtful terms. Such decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.

(d)           In the event that the Company (or its designee) fails to make a decision on a claim and/or appeal within 20 days of an event entitling the Claimant to a payment under this Plan (or, if later, within the ninety/sixty day period, with extensions, set forth in Section 8.3(a) and (b)), the Trustee of the AT&T Corp. Benefits Protection Trust (“Trust”) may make a decision in lieu of the Company (or its designee) as authorized by the Trust and subject to the terms and conditions of the Trust.  Any decision by the Trustee to make a payment under this Plan to the Claimant is subject to the availability of Trust assets allocated to pay benefits under this Plan.  A payment to the Claimant from the prorated Trust assets shall be considered a satisfaction of the Company’s liability under this Plan to the extent payment from the Trust was sufficient to cover the amount determined by the Trustee as the amount to which the Claimant was entitled.

8.4. Named Fiduciaries

AT&T Corp., the Committee, the Administrator(s) and each Participating Company, and effective beginning August 22, 2006, the Chief Financial Officer of AT&T Inc., and the individual directly reporting to the Chief Executive Officer of AT&T Inc., who has responsibility for human resource matters, are each a named fiduciary as that term is used in ERISA with respect to the particular duties and responsibilities herein provided to be allocated to each of them, respectively.

8.5. Role of the Committee

(a)           The Committee shall have the specific powers elsewhere herein granted to it and shall have such other powers as may be necessary in order to enable it to administer the Plan, except for powers herein granted or provided to be granted to others.

(b)           The adoption of by-laws and rules for the employment of a secretary and assistants shall be the same as are set forth in AT&T Management Pension Plan or the AT&T Pension Plan.

8.6. Allocation of Responsibilities

AT&T Corp. may allocate responsibilities for the operation and administration of the Plan consistent with the Plan’s terms, including allocation of responsibilities to the Committee and the other Participating Companies. AT&T Corp. and other named fiduciaries may designate in writing other persons to carry out their respective responsibilities under the Plan, and may employ persons to advise them with regard to any such responsibilities.

8.7. Multiple Capacities

Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.

Article

   9.

Amendment and Termination

9.1. Amendment and Termination

Pursuant to ERISA Section 402(b)(3), and subject to Section 4.9 of the Plan, the Board or its delegate (acting pursuant to the Board’s delegations of authority then in effect) may from time to time amend, suspend, or terminate the Plan at any time. Plan amendments may include, but are not limited to, elimination or reduction in the level or type of benefits provided prospectively to any class or classes of Participants (and Surviving Spouses and Beneficiaries). Any and all Plan amendments may be made without the consent of any Participant, Surviving Spouse or Beneficiary. Notwithstanding the foregoing, no such amendment, suspension, or termination shall retroactively impair or otherwise adversely affect the rights of any Participant, Surviving Spouse, or other person to benefits under the Plan, the AT&T Management Pension Plan or the AT&T Pension Plan which have arisen prior to the date of such action.

Notwithstanding the preceding, the Board may adopt any prospective or retroactive amendment that it determines is necessary for the Plan to maintain its compliance with Code Section 409A.

Article

   10.

General Provisions

10.1. Binding Effect

The Plan shall be binding upon and inure to the benefit of each Participating Company and its successors and assigns, and to each Participant, his or her successors, designees, Beneficiaries, designated annuitants, and estate. The Plan shall also be binding upon any successor corporation or organization succeeding to substantially all of the assets and business of AT&T Corp. Nothing in the Plan shall preclude AT&T Corp. from merging or consolidating into or with, or transferring all or substantially all of its assets to, another corporation which assumes the Plan and all obligations of AT&T Corp. hereunder. AT&T Corp. agrees that it will make appropriate provision for the preservation of the rights of Participants, Surviving Spouses and Beneficiaries under the Plan in any agreement or plan or reorganization into which it may enter to effect any merger, consolidation, reorganization, or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets, the term “Participating Company” shall refer to such other corporation and the Plan shall continue in full force and effect.

10.2. No Guarantee of Employment

Neither the Plan nor any action taken hereunder shall be construed as (i) a contract of employment or deemed to give any Participant the right to be retained in the employment of a Participating Company, the right to any level of compensation, or the right to future participation in the Plan; or (ii) affecting the right of a Participating Company to discharge or dismiss any Participant at any time.

10.3. Assignment of Benefits

No Excess Retirement Benefit or Excess Death Benefit under this Plan or any right or interest in such Excess Retirement Benefit or Excess Death Benefit shall be assignable or subject in any manner to anticipation, alienation, sale, transfer, claims of creditors, garnishment, pledge, execution, attachment or encumbrance of any kind, including, but not limited to, pursuant to any domestic relations order (within the meaning of ERISA Section 206(d)(3) and Code Section 414(p)(1)(B)) or judgment or claims for alimony, support, separate maintenance, and claims in bankruptcy proceedings, and any such attempted disposition shall be null and void.

10.4. Facility of Payment

If the Plan Administrator shall find that any person to whom any amount is or was payable under the Plan is unable to care for his or her affairs because of illness or accident, then any payment, or any part thereof, due to such person (unless a prior claim therefore has been made by a duly appointed legal representative), may, if the Plan Administrator so directs AT&T Corp., be paid to the same person or institution that the benefit with respect to such person is paid or to be paid under the AT&T Management Pension Plan or AT&T Pension Plan, if applicable, or the Participant’s Surviving Spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Administrator to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability of AT&T Corp., the Board, the Committee, the Administrator, and the Participating Company therefore. If any payment to which a Participant, Surviving Spouse or Beneficiary is entitled under this Plan is unclaimed or otherwise not subject to payment to the person or persons so entitled, such amounts representing such payment or payments shall be forfeited after a period of two years from the date the first such payment was payable and shall not escheat to any state or revert to any party; provided, however, that any such payment or payments shall be restored if any person otherwise entitled to such payment or payments makes a valid claim.

10.5. Severability

If any section, clause, phrase, provision, or portion of this Plan or the application thereof to any person or circumstance shall be invalid or unenforceable under any applicable law, such event shall not affect or render invalid or unenforceable the remainder of this Plan and shall not affect the application of any section, clause, provision, or portion hereof to other persons or circumstances.

10.6. Plan Year

Each plan year shall begin on January 1 and end on December 31.

10.7. Headings

The captions preceding the sections and articles hereof have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

10.8. Governing Law

The Plan shall be governed by the laws of the State of Texas (other than its conflict of laws provisions) from time to time in effect, except to the extent such laws are preempted by the laws of the United States of America.

10.9. Entire Plan

This written Plan document is the final and exclusive statement of the terms of this Plan, and any claim of right or entitlement under the Plan shall be determined in accordance with its provisions pursuant to the procedures described in Article 8. Unless otherwise authorized by the Board or its delegate, no amendment or modification to this Plan shall be effective until reduced to writing and adopted pursuant to Section 9.1.

10.10. Overpayments

If any overpayment is made by the Plan for any reason, the Plan shall have the right to recover such overpayment.  The Participant shall cooperate fully with the Plan to recover any overpayment and provide any necessary information and required documents. Any recovery of overpayment pursuant to this Section 10.10 may be deducted from future benefits payable to or on behalf of the Participant from this Plan.

EX-10.III

Exhibit 10-iii

BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN

AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2005

1.           PURPOSE

The purpose of the BellSouth Split-Dollar Life Insurance Plan (the "Plan") is to provide a split-dollar insurance arrangement under which BellSouth Corporation and its subsidiaries and affiliates can assist key employees in acquiring and financing life insurance coverage. This Plan incorporates the provisions of the BellSouth Corporation Executive Life Insurance Plan and the BellSouth Corporation Senior Manager Life Insurance Plan, as amended as of the effective date of this Plan (the "Prior Plans"), and, as of such effective date, shall be deemed to constitute a complete restatement of both Prior Plans, as amended (except to the extent otherwise specifically provided in Section 3.1 of this Plan).

2.           DEFINITIONS

For purposes of this Plan, the following terms have the meanings set forth below:

2.1 "Agreement" means the agreement executed between the Employer and a Participant implementing the terms of this Plan, substantially in the form attached hereto as Exhibit "A".

2.2 "Assignment" means the collateral assignment executed by the Policy Owner, substantially in the form attached hereto as Exhibit "B".

2.3 “Coverage Amount" means the face amount of the insurance death benefit provided to a Participant under the Plan, as specified in Participant's Agreement.

2.4 "Disability" means that the Participant is receiving disability benefits under any long-term disability plan sponsored by the Employer or an affiliated entity.

2.5 "Effective Date" means the effective date of the Plan, which is January 1, 1998.

2.6 "Employee" means an employee or former employee of the Employer who is eligible to participate in the Plan.

2.7 "Employer" means BellSouth Corporation and any subsidiary or affiliate of BellSouth Corporation which is authorized by the Plan Administrator to participate in this Plan.

2.8 "Employer Account" means, with respect to a Participant's Policy, a bookkeeping entry maintained by the Employer pursuant to Section 6 of the Plan, equal to the lesser of (1) the cash value of the Policy, or (2) the amount of Policy premiums paid by the Employer (and not collected from the Participant). With respect to a Replacement Policy, the amount of Policy premiums paid by the Employer shall be deemed to include the total of all such premiums paid on the Replacement Policy and the Replaced Policy, reduced by an amount equal to that portion of the Replaced Policy Cash Value, if any, paid to the Employer at the time the Replacement Policy is issued.

2.9 “Employer Premium" means, with respect to a Participant's Policy, the total Policy premium payable for the Policy Year by the Company as specified in the Participant's Agreement, less the portion of the premium to be paid by the Participant pursuant to Section 5.1 of the Plan.

2.10 "Enrollment Age" means the Participant's age at the time of enrollment in the Prior Plans as to the Participant's initial Coverage Amount, and it means the Participant's age at a subsequent enrollment for an increased Coverage Amount as to the increased Coverage Amount; provided, however, that with respect to a Replacement Policy, the age at enrollment shall mean the age at the time of enrollment for the Replaced Policy.

2.11 "Insurance Cost" means, with respect to a Participant, the annual cost for the Participant's Coverage Amount determined pursuant to the Insurance Cost schedule maintained by the Plan Administrator. The Insurance Cost for a Participant shall be determined as of the time of the Participant's enrollment in the Prior Plan(s), based on the Participant's Coverage Amount and Enrollment Age, and shall not change thereafter. A smoker rate shall be used to determine the Insurance Cost for any Participant who smoked cigarettes at any time during the twelve month period immediately preceding the Participant's enrollment; a nonsmoker rate shall be used for all other Participants. However, notwithstanding the previous sentence, if a Replacement Policy is issued for a Participant and the Participant qualifies as a nonsmoker for the Replacement Policy, the nonsmoker rate shall thereafter be used to determine the Insurance Cost for the Participant.

If a Participant's coverage is in effect for a period of less than twelve (12) months during any Policy Year, the Participant's Insurance Cost for that year shall be determined by multiplying the annual cost as determined from the insurance cost schedule by a fraction, the numerator of which is the number of full months that the coverage is in effect and the denominator of which is twelve (12).

2.12 "Insurer" means, with respect to a Participant's Policy, the insurance company issuing the insurance policy or group policy certificate on the Participant's life (or on the joint lives of the Participant and the Participant's spouse) pursuant to the provisions of the Plan.

2.13 "Participant" means an Employee who is participating in the Plan.

2.14 "Participant Account" means, with respect to a Participant's Policy, a bookkeeping entry maintained by the Employer pursuant to Section 6 of the Plan, equal to the excess, if any, of the cash value of the Policy over the Employer Account.

2.15 "Participant Premium" means, with respect to each Policy Year (or portion thereof) for a Participant, the greater of (1) the Participant's Insurance Cost; or (2) the one year term cost for the Policy Year (or portion thereof) determined based on the Participant's age at the beginning of the Policy Year, the Insurer's published one year term rates in effect at the beginning of the Policy Year, and the Participant's Coverage Amount under the Plan. The one year term cost amount shall be determined pursuant to the guidelines set forth in Revenue Ruling 66­-110, 1966-1 C.B. 12, and Revenue Ruling 67-154, 1967-1 C.B. 11, and shall be conclusively determined by the Plan Administrator.

2.16 "Permanent Policy" means a Policy having cash values which are projected to be sufficient to continue to provide death benefit coverage at least equal to the Participant's Coverage Amount until the policy maturity date specified in the Participant's Policy (determined without regard to any Policy rider which extends the maturity date beyond the originally scheduled policy maturity date), and which is projected to have a cash accumulation value equal to at least ninety-five percent (95%) of the Policy Coverage Amount at the maturity date specified in such Policy, with no further premium payments, following a withdrawal by the Employer of all amounts to which it is entitled pursuant to Section 8.3. A determination as to whether a Policy is at a given time a Permanent Policy shall be made by the Plan Administrator, and shall be based on Policy projections provided by the Insurer or its agent utilizing the Policy's then current mortality rates and Policy expenses, and the following Policy interest crediting rates. For the Policy Year of the Employer withdrawal made pursuant to Section 8.3, the projections shall reflect the actual Policy interest crediting rate in effect for such year (or, if such rate is not known when the determination is made the actual rate in effect for the preceding Policy Year). For each of the ten (10) succeeding Policy Years, the projections shall reflect that rate decreased ratably such that the rate in the tenth Policy Year following the Policy Year in which the Employer withdrawal occurs will be five percent (5%). For all successive Policy Years, the projections shall reflect a five percent (5%) Policy interest crediting rate. Notwithstanding the foregoing, if the actual Policy interest crediting rate in effect when the determination is made is less than five percent (5%), the projections shall reflect such lower rate for the Policy Year of the Employer withdrawal and all subsequent Policy Years.

2.17 "Plan" means the BellSouth Split-Dollar Life Insurance Plan. Except as otherwise provided in Section 3.1, with respect to each Participant who participated in the BellSouth Corporation Executive Life Insurance Plan, the Plan shall be construed and interpreted as a restatement of the provisions of such plan, as amended; and, with respect to each Participant who participated in the BellSouth Corporation Senior Manager Life Insurance Plan, the Plan shall be construed and interpreted as a restatement of such plan, as amended.

2.18 "Plan Administrator" means the Chief Executive Officer of BellSouth Corporation and any individual or committee he designates to act on his behalf with respect to any or all of his responsibilities hereunder; provided, the Board of Directors of BellSouth Corporation may designate any other person or committee to serve in lieu of the Chief Executive Officer as the Plan Administrator with respect to any or all of the administrative responsibilities hereunder.

2.19 "Policy" means the life insurance coverage acquired on the life of the Participant (or on the joint lives of the Participant and the Participant's spouse) by the Participant or other Policy Owner, which may be issued as a separate insurance policy or a certificate under a group policy.

2.20 "Policy Owner" means the Participant or that person or entity to whom the Participant has assigned his interest in the Policy. In the case of a Replacement Policy issued to replace a Policy for which the Policy Owner is other than the Participant, the Policy Owner of the Replacement Policy shall be the same as the Policy Owner of the Policy being replaced , unless elected otherwise by such Policy Owner.

2.21 "Policy Year" means the twelve month period (and each successive twelve month period) beginning on the effective date of the Agreement.

2.22 "Premium Payment Years" means, with respect to a Participant's Policy, the number of consecutive Policy Years (including, for a Replacement Policy, the number of Policy Years during which the Replaced Policy was in force), beginning with the first Policy Year, during which the Employer is required to pay a Policy premium, as specified in the Participant's Agreement.

2.23 "Replaced Policy" means a Policy which has been replaced by a Replacement Policy. If a Participant's Policy has been replaced more than one time, then the term Replaced Policy shall include all prior Policies.

2.24 "Replaced Policy Cash Value" means the cash value of the Replaced Policy on the Effective Date.

2.25 "Replacement Policy" means a Policy issued to replace a Policy previously issued under the Plan.

2.26 "Retirement" means a termination of the Participant's employment with the Employer under circumstances where the Participant is immediately eligible to receive pension benefits under the Supplemental Executive Retirement Plan (SERP) maintained by the Employer or one of its subsidiaries.

2.27 "Single Life Coverage" means life insurance coverage on the life of the Participant.

2.28 "Survivorship Coverage" means life insurance coverage on the lives of the Participant and the Participant's spouse, with the life insurance death benefit to be payable at the death of the last survivor of the Participant and the Participant's spouse.

2.29 "Terminated for Cause" means, with respect to a Participant, the termination of the Participant's employment with the Employer due to: (i) fraud, misappropriation, embezzlement, or intentional material damage to the property or business of the Employer; (ii) commission of a felony involving moral turpitude of which the Participant is finally adjudicated guilty; or (iii) continuance of either willful and repeated failure or grossly negligent and repeated failure by the Participant to materially perform his duties.

3.           ELIGIBILITY

3.1 General.  Each Employee with a Prior Plan Agreement in effect on the day preceding the Effective Date shall be eligible to participate in the Plan, provided that the Employee (and any other appropriate party, such as the Employee's spouse or a Policy Owner other than the Employee, as determined by the Plan Administrator) executes an Agreement consenting to the terms of this Plan, as amended, and completes such other forms as the Plan Administrator shall require. Any Employee eligible to participate who fails to execute (or secure execution of) an enrollment form consenting to the terms of this Plan, as amended, within the time period prescribed by the Plan Administrator, shall not be eligible for coverage under the Plan, but shall remain subject to the terms and conditions of the Prior Plan(s) in which such Employee participates as in effect on the day preceding the Effective Date, as amended thereafter from time to time. Effective November 24, 2003, any Employee who is, or becomes, an executive officer or director of BellSouth Corporation (as such terms are used in Section 402 of the Sarbanes-Oxley Act of 2002) shall be ineligible to participate in the Plan and any Agreement previously executed by such Employee shall be terminated pursuant to Section 8 of the Plan.

3.2 Type of Coverage.  The type(s) of coverage for a Participant on the Effective Date shall be the type(s) of coverage in place on the day preceding the Effective Date pursuant to the Participant's Agreement(s) under the Prior Plan(s). Provided, however, that the Policy Owner may make a one-time election to exchange Survivorship Coverage for Single Life Coverage (equal to fifty percent (50%) of the Participant's Survivorship Coverage Amount), or to exchange Single Life Coverage for Survivorship Coverage (equal to two hundred percent (200%) of the Participant's Single Life Coverage Amount), subject to any proof of insurability required by the Insurer. Such an election must be made within the time period prescribed by the Plan Administrator. If an unmarried Participant enrolls for Single Life Coverage and subsequently marries, then, subject to the approval of the Plan Administrator, the Participant (or other Policy Owner) shall have the right to make an election, exercisable no later than one hundred eighty (180) days following the marriage, to convert (subject to any proof of insurability required by the Insurer) the Single Life Coverage to Survivorship Coverage (with the Coverage Amount equal to two hundred percent (200%) of the Single Life Coverage Amount). If a married Participant enrolls for Survivorship Coverage and subsequently divorces, then, subject to the approval of the Plan Administrator, the Participant (or other Policy Owner) shall have the right to make an election, exercisable no later than one hundred eighty (180) days following the finalization of the divorce, to convert (subject to any proof of insurability required by the Insurer) the Survivorship Coverage to Single Life Coverage (with the Coverage Amount equal to fifty percent (50%) of the Survivorship Coverage Amount). Under no other circumstances shall a Participant (or other Policy Owner) have any right to change an election as to type of coverage after the coverage becomes effective. Any Insurer charges or tax liability resulting from a conversion shall be borne by the Participant or other Policy Owner.

4.           AMOUNT OF COVERAGE

The Coverage Amount for a Participant shall be the amount specified in the Participant's Agreement.

5.           PAYMENT OF PREMIUMS; PAYMENT OF CERTAIN TAXES

5.1 Participant Premium Payments.  A Participant shall pay the Participant Premium for each Policy Year which is a Premium Payment Year for the Participant. The amount shall be paid by the Participant to the Employer by payroll (or retirement income) deductions of equal installments during the Policy Year, or in such other manner as may be agreed to between the Plan Administrator and the Participant. The Employer shall pay the Participant Premium amount to the Insurer, and can do so as collected from the Participant or can advance payments to the Insurer for a Policy Year at any time during the Policy Year or up to thirty (30) days in advance of the Policy Year. If a Participant terminates employment with the Employer, and the Employer has made such an advance payment of the Participant Premium to the Insurer, the Employer may withhold any uncollected portion of the advanced Participant Premium from any amount payable to the Participant by the Employer to the extent permitted by law. Notwithstanding the other provisions of this paragraph, no Participant Premium shall be required with respect to Survivorship Coverage after the death of the Participant, and no Participant Premium shall be required after termination of the Participant's Agreement pursuant to Section 8.1.

5.2 Employer Premium Payments.  The Employer shall pay the Employer Premium for a Participant's Policy within thirty (30) days of the beginning of each Policy Year which is a Premium Payment Year. However, no Employer Premium shall be required: (1) after the Participant's Agreement terminates pursuant to Section 8.1; or, (2) for a Policy Year if the Employer withdrawal and release of Assignment under Section 8.3 would have occurred at the end of the prior Policy year but for the requirement in Section 8.3 that the Policy not constitute a Modified Endowment Contract following such withdrawal. Also, if the payment of the Employer Premium for a Policy year would cause the Participant's Policy to constitute a Modified Endowment Contract (as such term is defined in Section 7702A of the Internal Revenue Code), then the Employer Premium amount for such Policy year shall be reduced to the largest such amount that can be paid without causing the Policy to constitute a Modified Endowment Contract. The Employer may, but shall not be required to, make additional premium payments with respect to a Participant's Policy after the last Premium Payment Year.

5.3           Additional Employer Payments.

a. If, during any year participation in the Plan results in the recognition of income for tax purposes by the Participant as a result of BellSouth's election to treat premium payments as loans for federal tax purposes and to impute interest thereon to affected Participants, the Employer shall pay to the Participant an amount determined by the Plan Administrator which is designed to approximate the (1) sum of the total federal and state income taxes and additional payroll taxes which would be payable by the Participant at the highest marginal rate provided for under applicable federal income tax laws, and at the highest marginal rate provided for under applicable state income tax laws for the state of the Participant's tax domicile, on the additional income so recognized for the year, plus (2) the total federal and state income taxes and payroll taxes which would be payable by the Participant on the payment described in clause (1). Any payment to be made under this subsection a. shall be made no later than April 1 of the year following the year to which the payment relates.

b. If, with respect to Survivorship Coverage after the death of the Participant, participation in the Plan results in the recognition of income for tax purposes by the Participant's spouse or other Policy Owner as a result of BellSouth's election to treat premium payments as loans for federal tax purposes and to impute interest thereon to affected Participants, the Employer shall pay to the Participant's spouse or other Policy Owner an amount determined by the Plan Administrator which is designed to approximate the total federal and state income taxes which would be payable by the Participant's spouse or other Policy Owner at the highest marginal rate provided for under applicable federal income tax laws, and the highest marginal rate provided for under applicable state income tax laws for the state of the tax domicile of the Participant's spouse or other Policy Owner, on the income so recognized . Any payment to be made under this subsection b. shall be made no later than April 1 of the year following the year to which the payment relates.

c. If the termination of the Employer's interest in a Participant's Policy pursuant to Section 8.3 of the Plan results in the recognition of income for tax purposes by the Participant, the Employer shall pay to the Participant an amount determined by the Plan Administrator which is designed to approximate the total federal and state income taxes which would be payable by the Participant at the highest marginal rate provided for under applicable federal income tax laws, and at the highest marginal rate provided for under applicable state income tax laws for the state of the Participant's tax domicile, attributable to such termination. Such payment shall be made immediately following the termination of the Employer's interest in the Policy or, if later, at such time as a determination is made that such a tax is payable.

d. For purposes of this Section 5.3, a tax shall be deemed payable or income shall be deemed recognized, if either (i) it is finally determined by the Internal Revenue Service, or (ii) an opinion is given by the Employer's counsel, that the tax is payable.

e. Any amount to be paid to a Participant, a Participant's spouse, or other Policy Owner under this Section, and the amounts payable, shall be conclusively determined by the Plan Administrator, based on generally applicable tax rates and not based upon the unique tax situation of each Participant, Participant's spouse, or other Policy Owner.

6.           ACCOUNTS

With respect to each Policy covered by an Agreement made under this Plan, the Employer shall maintain bookkeeping entries reflecting the Employer Account and Participant Account values.

7.           POLICY OWNERSHIP

7.1 Ownership.  Except as otherwise provided in this Plan, the Policy Owner shall be the sole and exclusive owner of a Participant's Policy and shall be entitled to exercise all of the rights of ownership including, but not limited to, the right to designate the beneficiary or beneficiaries to receive payment of the portion of the death benefit under the Policy equal to the Coverage Amount, and the right to assign any part or all of the Policy Owner's interest in the Policy (subject to the Employer's rights, the terms and conditions of the Assignment specified in Section 7.2 of the Plan, and the terms and conditions of this Plan) to any person, entity or trust by the execution of a written instrument delivered to the Employer.

7.2 Employer's Rights.  In exchange for the Employer's agreement to pay the amounts described in Sections 5.2 and 5.3 of this Plan, the Policy Owner shall execute an Assignment to the Employer of the rights provided to the Employer under this Plan. The Employer shall have the right to direct the Policy Owner in writing to take any action required consistent with these rights, and upon the receipt of such written direction from the Employer, the Policy Owner shall promptly take such action as is necessary to comply therewith. The Employer agrees that it shall not exercise any rights assigned to it in the Assignment in any way that might impair or defeat the rights and interest of the Policy Owner under this Plan. The Employer shall have the right to assign any part or all of interest in the Policy (subject to the Policy Owner's rights and the terms and conditions of this Plan) to any person, entity or trust by the execution of a written instrument delivered to the Policy Owner.

7.3 Delivery and Possession of Policy.  Any Policy issued pursuant to an Agreement under the Plan shall be delivered by the Insurer directly to the Employer, and the Employer shall accept delivery of any such Policy on behalf of the Participant or other Policy Owner and shall have the authority to execute any forms or procedures required by the Insurer in order to complete the issue and delivery of such Policy. Thereafter, the Employer shall keep possession of the Policy as long as there is an Assignment in effect with respect to the Policy. The Employer agrees to make the Policy available to the Policy Owner or to the Insurer from time to time for the purposes of endorsing or filing any change of beneficiary on the Policy or exercising any other rights as the owner of the Policy, but the Policy shall promptly be returned to the Employer.

7.4 Policy Loans.  Except as otherwise specifically provided for in Section 8 of this Plan, neither the Employer nor the Policy Owner may borrow against the Policy cash values.

7.5 Withdrawals and Surrender.  Except as otherwise specifically provided for in Section 8 of this Plan, neither the Employer nor the Policy Owner may withdraw Policy cash values or surrender all or a portion of the Policy. Provided, however, that a cancellation or exchange of a Replaced Policy in connection with the acquisition of a Replacement Policy shall not be deemed a withdrawal from or surrender of the Replaced Policy.

8.           TERMINATION OF AGREEMENT

8.1 Termination Events.  Notwithstanding anything herein to the contrary, the Participant's Agreement, and the Employer's obligation to pay premiums with respect to the Participant's Policy acquired pursuant to the Agreement, shall terminate upon the first to occur of any of the following events:

a. Termination of employment of the Participant with the Employer prior to the Participant's death for reasons other than Retirement or Disability; or upon termination of a disabled Participant's Disability prior to the Participant's death for reasons other than Retirement or return to active status.

b. Termination of the Participant's Agreement by mutual agreement of the Participant and the Employer.

c. A unilateral election by the Participant to terminate the Participant's Agreement; provided, however, that such an election may be made by a Participant only within sixty (60) days following the end of the last Premium Payment Year for the Participant's Policy.

d. The written notice by the Employer to the Participant following a resolution by the Board of Directors of BellSouth Corporation to terminate this Plan and all Agreements made under the Plan.

e. As to Single Life Coverage only, the death of the Participant

f. As to Survivorship Coverage only, the death of the last survivor of the Participant and the Participant's spouse

g. After the release of Assignment pursuant to Section 8.3.

h. Upon becoming an executive officer or director of BellSouth Corporation (as such terms are used in Section 402 of the Sarbanes-Oxley Act of 2002).

8.2           Disposition of Policy

a. In the event of a termination of a Participant's Agreement under Section 8.1a or b of the Plan, the Policy Owner shall be entitled to acquire the Employer's rights under the Participant's Policy by paying to the Employer an amount equal to the Employer Account; alternatively, the Policy Owner can require the Employer to withdraw a portion of the cash values from the Participant's Policy, partially surrender the Policy, or borrow a portion of the cash values from the Participant's Policy, with the amount to be specified by the Policy Owner, and the Policy Owner's required payment to the Employer under this Section shall thereby be reduced to an amount equal to the excess of the Employer Account over the amount withdrawn, received upon partial surrender, or borrowed by the Employer (for these purposes, the amount withdrawn, received upon partial surrender, or borrowed shall refer to the amount actually received by the Employer after the application of any charges, such as surrender charges, applicable to the withdrawal, partial surrender, or borrowing). The Policy Owner may exercise this interest in the Policy by so notifying the Employer within ninety (90) days after an event of termination under Section 8.1a or b of this Plan has occurred. Within thirty (30) days after receipt of such notice, the Employer shall make any required withdrawal, partial surrender, or policy loan and the Policy Owner shall pay the Employer the applicable payment, if any. Upon receipt of payment from the Policy Owner, or immediately following the withdrawal, partial surrender, or policy loan if no payment is required, the Employer shall release the Assignment and the Policy Owner shall have all rights, title, and interest in the Policy free of all provisions and restrictions of the Assignment, the Agreement and this Plan.

b. Notwithstanding the provisions of Section 8.2a , if the Participant is Terminated for Cause by the Employer, then the Policy Owner shall have no right to acquire the interest in the Policy.

c. If the Policy Owner fails to exercise his right to acquire the interest in the Policy pursuant to Section 8.2a or is precluded from exercising such right pursuant to Section 8.2b, the Policy Owner shall transfer title to the Policy to the Employer, free of all provisions and restrictions of the Assignment, the Participant's Agreement and this Plan.

d. In the event of a termination of a Participant's Agreement pursuant to the Participant's election under Section 8.1c, the Employer shall receive from the Participant's Policy an amount equal to the Employer Account, with such amount to be received through a withdrawal, partial surrender, policy loan, or some combination thereof, as determined by the Employer. Immediately thereafter, the Employer shall release the Assignment and the Policy Owner shall have all rights, title and interest in the Policy free of all provisions and restrictions of the Assignment, the Participant's Agreement, and this Plan.

8.3 Release of Assignment.  At the end of each Policy Year for a Participant's Policy, the Plan Administrator shall determine whether a withdrawal from the Policy by the Employer of an amount equal to the Employer Account, and a release of the Assignment, shall occur with respect to the Participant's Policy. Such withdrawal and release shall be made within ninety (90) days after the end of the first Policy Year as of the end of which: (1) the Participant's Policy would qualify as a Permanent Policy following such withdrawal by the Employer; and, (2) the Participant's Policy would not constitute a Modified Endowment Contract (as such term is defined in Section 7702A of the Internal Revenue Code) following such withdrawal. The Employer withdrawal shall be made though a withdrawal, partial surrender, or policy loan, or some combination thereof, as determined by the Employer. Immediately after receiving the proceeds of the withdrawal, partial surrender, or policy loan, the Employer shall release the Assignment and the Policy Owner shall have all rights, title and interest in the Policy free of all provisions and restrictions of the Assignment, the Participant's Agreement and this Plan.

8.4   Allocation of Death Benefit.  In the event of a termination under Section 8.1e or 8.1f of the Plan, the death benefit under the Participant's Policy shall be divided as follows:

a. The beneficiary or beneficiaries of the Policy Owner shall be entitled to receive an amount equal to the Coverage Amount.

b. The Employer shall be entitled to receive the balance of the death benefit.

8.5 Employer Undertakings.  Upon the death of the Participant (or, in the case of Survivorship Coverage, the death of the last survivor of the Participant and the Participant's spouse) while the Participant's Agreement is in force, the Employer agrees to take such action as may be necessary to obtain payment from the Insurer of the death benefit to the beneficiaries, including, but not limited to, providing the Insurer with an affidavit as to the amount to which the Employer is entitled under the Agreement and this Plan.

9.           GOVERNING LAWS AND NOTICES

9.1 Governing Law.  This Plan shall be governed by and construed in accordance with the laws of the State of Georgia.

9.2 Notices.  All notices hereunder shall be in writing and sent by first class mail with postage prepaid. Any notice to the Employer shall be addressed to BellSouth Corporation at its office at 1155 Peachtree Street. N.E., Atlanta, GA 30367-6000, ATTENTION: Human Resources-Director Executive Benefits. Any notice to the Employee shall be addressed to the Employee at the address following such party's signature on his Agreement. Any party may change the ·address for such party herein set forth by giving notice of such change to the other parties pursuant to this Section.

10.           NOT A CONTRACT OF EMPLOYMENT

This Plan and any Agreement executed hereunder shall not be deemed to constitute a contract of employment between an Employee and the Employer or a Participant and the Employer, nor shall any provision restrict the right of the Employer to discharge an Employee or Participant, or restrict the right of an Employee or Participant to terminate employment.

11.           AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION AND SUCCESSORS

11.1 Amendment.  The Board of Directors of BellSouth Corporation, or its delegate, shall have the right in its sole discretion, to amend the Plan in whole or in part at any time and from time to time. In addition, the Plan Administrator shall have the right, in its sole discretion, to amend the Plan at any time and from time to time so long as such amendment is not of a material nature. Notwithstanding the foregoing, no modification or amendment shall be effective so as to decrease any benefits of a Participant unless the Participant consents in writing to such modification or amendment. Written notice of any material modification or amendment shall be given promptly to each Participant.

11.2 Termination.  The Board of Directors of BellSouth Corporation may terminate the Plan without the consent of the Participants or Employees.

11.3 Interpretation.  As to the provisions of the Assignment, the Agreement and the Plan, the provisions of the Assignment shall control.  As between the Agreement and the Plan, the provisions of the Agreement shall control.

11.4 Successors.  The terms and conditions of this Plan shall enure to the benefit of and bind the Employer, the Participant, their successors, assignees, and representatives. If, subsequent to the Effective Date of the Plan, substantially all of the stock or assets of the Employer are acquired by another corporation or entity or if the Employer is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder shall be obligations of the acquirer or successor corporation or entity.

12.           PLAN ADMINISTRATION

12.1 Individual Administrator.  If the Plan Administrator is an individual, he shall act and record his actions in writing. Any matter concerning specifically such individual's own benefit or rights hereunder shall be determined by the Board of Directors of BellSouth Corporation or its delegate.

12.2 Administrative Committee.  If the Plan Administrator is a committee, or if any of the duties or responsibilities of the Plan Administrator are vested in a committee, action of the Plan Administrator may be taken with or without a meeting of committee members; provided, action shall be taken only upon the vote or other affirmative expression of a majority of the committee members qualified to vote with respect to such action. If a member of the committee is a Participant, he shall not participate in any decision which solely affects his own benefit under the Plan. For purposes of administering the Plan, the Plan Administrator shall choose a secretary who shall keep minutes of the committee's proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any certificate or other written direction on behalf of the Plan Administrator.

12.3   Rights and Duties of the Plan Administrator.  The Plan Administrator shall administer the Plan and shall have all powers necessary to accomplish that purpose, including (but not limited to) the following:

a. to construe, interpret and administer the Plan;

b. to make determinations required by the Plan, and to maintain records regarding Participants' benefits hereunder;

c. to compute and certify the amount and kinds of benefits payable to Participants, and to determine the time and manner in which such benefits are to be paid;

d. to authorize all disbursements pursuant to the Plan;

e. to maintain all the necessary records of the administration of the Plan;

f. to make and publish such rules and procedures for the regulation of the Plan as are not inconsistent with the terms hereof;

g. to designate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder; and

h. to hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan.

The Plan Administrator shall have the exclusive right to construe and interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of benefits, and its decisions on such matters shall be final and conclusive on all parties.

12.4 Bond; Compensation.  The Plan Administrator and (if applicable) its members shall serve as such without bond and without compensation for services hereunder.

13.           CLAIMS PROCEDURE

13.1 Named Fiduciary.  The Plan Administrator is hereby designated as the named fiduciary under this Plan.

13.2   Claims Procedures.  Any controversy or claim arising out of or relating to this Plan shall be filed with the Plan Administrator which shall make all determinations concerning such claim. Any decision by the Plan Administrator denying such claim shall be in writing and shall be delivered to all parties in interest in accordance with the notice provisions of Section 9.2 hereof. Such decision shall set forth the reasons for denial in plain language. Pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the Employee can perfect the claim will be provided. This notice of denial of benefits will be provided within 90 days of the Plan Administrator's receipt of the Employee's claim for benefits. If the Plan Administrator fails to notify the Employee of its decision regarding the claim, the claim shall be considered denied, and the Employee shall then be permitted to proceed with the appeal as provided in this Section.

An Employee who has been completely or partially denied a benefit shall be entitled to appeal this denial of his/her claim by filing a written statement of his/her position with the Plan Administrator no later than sixty (60) days after receipt of the written notification of such claim denial. The Plan Administrator shall schedule an opportunity for a full and fair review of the issue within thirty (30) days of receipt of the appeal. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

Following the review of any additional information submitted by the Employee, either through the hearing process or otherwise, the Plan Administrator shall render a decision on the review of the denied claim in the following manner:

a. The Plan Administrator shall make its decision regarding the merits of the denied claim within 60 days following receipt of the request for review (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). The Plan Administrator shall deliver the decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the Employee prior to the commencement of the extension. If the decision on review is not furnished within the prescribed time, the claim shall be deemed denied on review.

b. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

EXHIBIT "A”

BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN AGREEMENT

This Agreement is made effective as of January 1, 1998, by and between the Employer and _________ (the "Participant").

WHEREAS, the Employer and the Participant executed an agreement (the “Prior Agreement”) under the [Bellsouth Corporation Executive Life Insurance Plan] [BellSouth Corporation Senior Manager life Insurance Plan (the "Prior Plan"); and

WHEREAS, the Prior Plan has been amended and restated as the BellSouth Split-Dollar life Insurance Plan (the “Plan”); and

WHEREAS, in exchange for coverage under the Plan as amended and restated, the Participant consents and agrees to the terms of the Plan, as amended and restated;

NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employer and the Participant hereby mutually covenant and agree as follows:

1. This Agreement shall constitute an amendment and restatement of the Prior Agreement and, as of the effective date of this Agreement, the Prior Plan and Prior Agreement shall be terminated and replaced by the Plan and this Agreement.

2. The Policy subject to this Agreement is Policy number ___________, issued by Pacific Life Insurance Company (the “Replacement Policy"), which replaces the Replaced Policy. As of the effective date of this Agreement, no further benefits will be provided to the Participant or Employer under the Replaced Policy, and such Policy will be canceled.

3. The Replaced Policy Cash Value shall be transferred directly to the Replacement Policy as of the effective date of this Agreement.

4. The Coverage Amount shall be $____________ of [Single Life] [Survivorship] Coverage.

5. The Premium Payment Years shall be ___________ consecutive Policy Years.

6 For each Policy Year beginning after 1998, the total Policy premium for each year which is a Premium Payment Year shall be $__________, and the Employer Premium shall equal such total Policy premium reduced by the Participant Premium payable by the Participant for such Policy Year.

7. The Policy Owner for the Replacement Policy shall be the same as the Policy Owner for the Replaced Policy.

8. The Participant agrees to pay the Participant Premium contribution as specified in the Plan, and consents to paying such amount to the Employer through regular payroll (or retirement income) deductions.

9. The Participant has read and understands the provisions of the Plan, and agrees that all of the terms and conditions specified in the Plan are hereby incorporated by reference herein and form a part of this Agreement.

10. Subject to the terms of the Plan, this Agreement shall not be amended or modified without the written consent of the Participant and the Employer.

11. This Agreement shall be governed by the laws of the State of Georgia.

Date	For the Employer
Date	Signature of Participant
	Address of Participant

EXHIBIT "B"

BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN ASSIGNMENT

This Assignment is made by the undersigned Policy Owner effective January 1, 1998.

DEFINITIONS:
ASSIGNEE:	BellSouth Corporation
PARTICIPANT:
POLICY OWNER:
INSURED(S):
INSURER:	Pacific Life Insurance Company
POLICY:	Policy#________________ issued by the Insurer.
REPLACED POLICY:	Policy#________________ issued by the Insurer.

SPLIT-DOLLAR LIFE INSURANCE PLAN AGREEMENT (THE "AGREEMENT"):

That certain Agreement executed to be effective on January 1, 1998, between the Participant and the Assignee.

COVERAGE AMOUNT:

That portion of the death benefit coverage under the Policy equal to $______________.

RECITALS:

1. The benefits provided to the Policy Owner under the Policy replace those previously provided under the Replaced Policy.

2. Under the Agreement, the Assignee has agreed to assist the Policy Owner in the payment of premiums on the Policy issued by the Insurer.

3. In consideration of such premium payments by the Assignee, the undersigned Policy Owner intends to grant the Assignee certain limited interests in the Policy.

THEREFORE, for value received, it is agreed:

1. Assignment.  The Policy Owner hereby assigns, transfers, and sets over to the Assignee, its successors and assigns, the following specific rights in the Policy and subject to the following terms and conditions:

a. the sole right to make withdrawals or borrow against the cash value of the Policy, as provided in Sections 8.2a, 8.2d, and 8.3 of the Plan;

b. the right to receive from the Insurer upon the death of the lnsured(s) the proceeds of the Policy in excess of the Coverage Amount;

c. the sole right to surrender all or a portion of the Policy and receive the surrender value thereof, as provided in Sections 8.2a, 8.2d, and 8.3 of the Plan.

2.           Retained Rights.  Except as expressly provided in Section 1, the Policy Owner retains all rights under the Policy including but not limited to:

a. the right to designate and change the beneficiary; and

b. the right to elect any optional mode of settlement permitted by the Policy or Insurer, subject only to the Assignee's right in Section 1.(b).

3. Authorization.  For purposes of Sections 1 and 2, the signature of either the Assignee or the Policy Owner shall be sufficient. Both the Assignee and the Policy Owner acknowledge that between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either.

4. Insurer.  The Insurer is hereby authorized to recognize, and is fully protected in recognizing the claims of the Assignee to rights hereunder, without investigating the reasons for such action by the Assignee, or the validity or the amount of such claims, nor giving notice to the Policy Owner of such claims of rights or interest to exercise such rights. Insurer reserves the right to require signatures of both the Assignee and the Policy Owner to exercise any or all ownership rights, as is their normal procedure.

5. Death Proceeds.  The Insurer shall pay to the Assignee that portion of the death benefit to which it is entitled. Payment by the Insurer of any or all of the death proceeds to the Assignee in reliance upon a signed authorization by any officer of the Assignee as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest in the Policy.

6. Release of Assignment.  Upon payment to the Assignee of those amounts due to it under the terms of the Agreement, the Assignee shall execute a written release of this Assignment to the Insurer who may then treat the Owner of the Policy as the sole Policy Owner for all purposes.

7. Assignment Controls.  In the event of any conflict between the provisions of this Assignment and provisions of the Agreement with respect to the rights of collateral assignment therein, the provisions of this Assignment shall prevail.

8. Cancellation of Replaced Policy.  The Policy Owner agrees that no further benefits will be provided under the Replaced Policy, and that benefits provided under the Policy are in lieu of the benefits previously provided under the Replaced Policy.

IN TESTIMONY WHEREOF, the Policy Owner has executed this Assignment to be effective January 1, 1998.

_____________________________________

Signature of Policy Owner

_____________________________________

Date

EX-12

Exhibit 12

AT&T, INC.

COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

Dollars in millions

	2008			2007			2006			2005			2004
Earnings:
Income from continuing operations before income taxes	$	19,903		$	18,204		$	10,881		$	5,718		$	7,165
Equity in net income of affiliates included above		(819	)		(692	)		(2,043	)		(609	)		(873
Fixed Charges		4,963			4,536			2,209			1,680			1,238
Distributed income of equity affiliates		163			395			97			158			331
Interest capitalized		(659	)		(171	)		(73	)		(36	)		(31	)
Earnings, as adjusted	$	23,551		$	22,272		$	11,071		$	6,911		$	7,830
Fixed Charges:
Interest expense	$	3,390		$	3,507		$	1,843		$	1,456		$	1,023
Interest capitalized		659			171			73			36			31
Dividends on preferred securities		3			3			3			31			24
Portion of rental expense representative of interest factor		911			855			290			157			160
Fixed Charges	$	4,963		$	4,536		$	2,209		$	1,680		$	1,238
Ratio of Earnings to Fixed Charges		4.75			4.91			5.01			4.11			6.32

*All periods presented exclude undistributed earnings on investments accounted for under the equity method as well as Income From Discontinued Operations, net of tax in our Consolidated Statements of Income, which was from the sale of our interest in the directory advertising business in Illinois and northwest Indiana.

EX-13

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

Dollars in millions except per share amounts

Selected Financial and Operating Data
Dollars in millions except per share amounts
At December 31 or for the year ended:	2008			2007				20062			20053		2004
Financial Data1
Operating revenues	$	124,028		$	118,928		$	63,055		$	43,764		$	40,733
Operating expenses	$	100,965		$	98,524		$	52,767		$	37,596		$	34,832
Operating income	$	23,063		$	20,404		$	10,288		$	6,168		$	5,901
Interest expense	$	3,390		$	3,507		$	1,843		$	1,456		$	1,023
Equity in net income of affiliates	$	819		$	692		$	2,043		$	609		$	873
Other income (expense) – net	$	(589	)	$	615		$	393		$	397		$	1,414
Income taxes	$	7,036		$	6,253		$	3,525		$	932		$	2,186
Income from continuing operations	$	12,867		$	11,951		$	7,356		$	4,786		$	4,979
Income from discontinued operations, net of tax4	$	-		$	-		$	-		$	-		$	908
Net income	$	12,867		$	11,951		$	7,356		$	4,786		$	5,887
Earnings per common share:
Income from continuing operations	$	2.17		$	1.95		$	1.89		$	1.42		$	1.50
Net income	$	2.17		$	1.95		$	1.89		$	1.42		$	1.78
Earnings per common share – assuming dilution:
Income from continuing operations	$	2.16		$	1.94		$	1.89		$	1.42		$	1.50
Net income	$	2.16		$	1.94		$	1.89		$	1.42		$	1.77
Total assets	$	265,245		$	275,644		$	270,634		$	145,632		$	110,265
Long-term debt	$	60,872		$	57,255		$	50,063		$	26,115		$	21,231
Construction and capital expenditures	$	20,335		$	17,888		$	8,398		$	5,612		$	5,130
Dividends declared per common share	$	1.61		$	1.47		$	1.35		$	1.30		$	1.26
Book value per common share	$	16.35		$	19.09		$	18.52		$	14.11		$	12.27
Ratio of earnings to fixed charges		4.75			4.91			5.01			4.11			6.32
Debt ratio		43.8	%		35.7	%		34.1	%		35.9	%		40.0	%
Weighted-average common shares
outstanding (000,000)		5,927			6,127			3,882			3,368			3,310
Weighted-average common shares
outstanding with dilution (000,000)		5,958			6,170			3,902			3,379			3,322
End of period common shares
outstanding (000,000)		5,893			6,044			6,239			3,877			3,301
Operating Data
Wireless customers (000)5		77,009			70,052			60,962			54,144			49,132
In-region network access lines in service (000)6		55,610			61,582			66,469			49,413			52,356
Broadband connections (000)7		16,322			14,802			12,170			6,921			5,104
Number of employees		302,660			309,050			304,180			189,950			162,700

1	Amounts in the above table have been prepared in accordance with U.S. generally accepted accounting principles.
2	Our 2006 income statement amounts reflect results from BellSouth Corporation (BellSouth) and AT&T Mobility LLC (AT&T Mobility), formerly Cingular Wireless LLC, for the two days following the December 29, 2006 acquisition. Our 2006 balance sheet and end-of-year metrics include 100% of BellSouth and AT&T Mobility. Prior to the December 29, 2006 BellSouth acquisition, AT&T Mobility was a joint venture in which we owned 60% and was accounted for under the equity method.
3	Our 2005 income statement amounts reflect results from AT&T Corp. for the 43 days following the November 18, 2005 acquisition. Our 2005 balance sheet and end-of-year metrics include 100% of AT&T Corp.
4	Our financial statements reflect results from our sold directory advertising business in Illinois and northwest Indiana as discontinued operations. The operational results and the gain associated with the sale of that business are presented in “Income from discontinued operations, net of tax.”
5	The number presented represents 100% of AT&T Mobility cellular/PCS customers. The 2004 number includes customers from the acquisition of AT&T Wireless Services, Inc.
6	In-region represents access lines serviced by our incumbent local exchange companies (in 22 states since the BellSouth acquisition and in 13 states prior to that acquisition). Beginning in 2006, the number includes BellSouth lines in service.
7	Broadband connections include in-region DSL lines, in-region U-verse high-speed Internet access, satellite broadband and 3G LaptopConnect cards.

1 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

For ease of reading, AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate in the communications services industry both in the United States and internationally providing wireless and wireline telecommunications services and equipment as well as directory advertising and publishing services. You should read this discussion in conjunction with the consolidated financial statements and accompanying notes. A reference to a “Note” in this section refers to the accompanying Notes to Consolidated Financial Statements. In the tables throughout this section, percentage increases and decreases that equal or exceed 100% are not considered meaningful and are denoted with a dash.

RESULTS OF OPERATIONS

Consolidated Results  Our financial results are summarized in the table below. We then discuss factors affecting our overall results for the past three years. These factors are discussed in more detail in our “Segment Results” section. We also discuss our expected revenue and expense trends for 2009 in the “Operating Environment and Trends of the Business” section.

We completed our acquisition of BellSouth Corporation (BellSouth) on December 29, 2006. We thereby acquired BellSouth’s 40% economic interest in AT&T Mobility LLC (AT&T Mobility), formerly Cingular Wireless LLC (Cingular), resulting in 100% ownership of AT&T Mobility. Our consolidated results in 2006 include BellSouth’s and AT&T Mobility’s operational results for the final two days of the year. Prior to the acquisition, we reported the income from our 60% share of AT&T Mobility as equity in net income. In accordance with U.S. generally accepted accounting principles (GAAP), operating results from BellSouth and AT&T Mobility prior to their respective acquisition dates are excluded.

							Percent Change
							2008 vs.			2007 vs.
	2008		2007		2006		2007			2006
Operating revenues	$	124,028	$	118,928	$	63,055		4.3	%		88.6	%
Operating expenses		100,965		98,524		52,767		2.5			86.7
Operating income		23,063		20,404		10,288		13.0			98.3
Income before income taxes		19,903		18,204		10,881		9.3			67.3
Net income		12,867		11,951		7,356		7.7			62.5
Diluted earnings per share		2.16		1.94		1.89		11.3	%		2.6	%

Overview

Operating income  As noted above, 2007 revenues and expenses reflect the addition of BellSouth’s and AT&T Mobility’s results while our 2006 results only include two days of their results. Accordingly, the following discussion of changes in our revenues and expenses is affected by these acquisitions.

Our operating income increased $2,659, or 13.0%, in 2008 and $10,116, or 98.3%, in 2007. Our operating income margin increased from 16.3% in 2006 to 17.2% in 2007 and to 18.6% in 2008. Operating income in 2008 increased primarily due to continued growth in wireless service and data revenues along with a decrease in the amortization of merger-related intangibles and increased in 2007 primarily due to the acquisition of BellSouth. Reported results in 2008 include directory revenue and expenses from directories published by BellSouth subsidiaries. In accordance with GAAP, our reported results in 2007 did not include deferred revenue of $964 and expenses of $308 from BellSouth directories published during the 12-month period ending with the December 29, 2006 date we acquired BellSouth. Had our 2007 directory results included this deferred revenue and expenses, operating income would have increased $2,003 for 2008, as compared to 2007.

Operating revenues increased $5,100, or 4.3%, in 2008 and $55,873, or 88.6%, in 2007. Revenues in 2008 reflect an increase in wireless subscribers and data revenues, primarily related to Internet Protocol (IP) data, partially offset by the continued decline in voice revenues. Increases in 2007 were primarily due to our acquisitions and to continuing growth in wireless subscribers. As discussed above, purchase accounting treatment for directories published 12 months prior to the BellSouth acquisition also increased revenues in 2008 when compared to 2007.

2

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Our operating revenues also reflect the continued decline of our retail access lines due to the dramatically declining overall economy and increased competition, as customers continued to disconnect both primary and additional lines and switched to wireless, Voice over Internet Protocol (VoIP) and cable offerings for voice and data. While we lose the wireline voice revenues, we have the opportunity to increase wireless service revenue should customers choose AT&T Mobility as their alternative provider.

Operating expenses increased $2,441, or 2.5%, in 2008 and $45,757, or 86.7%, in 2007. The increase in 2008 was primarily due to higher equipment costs related to the successful launch of the Apple iPhone 3G and increased sales of PDA devices, while the increase in 2007 was primarily due to merger integration costs and amortization expense on intangible assets identified at the time of acquisition. Also increasing 2008 expenses were higher commissions and residuals from the growth in wireless, severance associated with announced workforce reductions as well as hurricane-related expenses affecting both the wireless and wireline segments. Partially offsetting these increases were merger integration costs recognized in 2007 and not in 2008, and lower amortization expense on intangible assets in 2008.

Interest expense decreased $117, or 3.3%, in 2008 and increased $1,664, or 90.3%, in 2007. Interest expense remained relatively unchanged during 2008 with a decrease in our weighted average interest rate and increases in interest charged during construction, offset by an increase in our average debt balances. Future interest expense will continue to reflect increased interest during construction related to preparing 2008 spectrum purchases for service. The increase in 2007 was primarily due to higher average debt balances resulting from the inclusion of BellSouth and AT&T Mobility outstanding debt on our consolidated balance sheet.

Equity in net income of affiliates  Equity in net income of affiliates increased $127, or 18.4%, in 2008, primarily due to improved results from our investments in América Móvil S.A. de C.V. (América Móvil), Télefonos de México, S.A. de C.V. (Telmex) and Telmex Internacional, S.A.B. de C.V. (Telmex Internacional) offset by foreign exchange adjustments. Equity in net income of affiliates decreased $1,351 in 2007 as a result of the change in accounting for AT&T Mobility which moved Mobility’s results from this line. Prior to the December 29, 2006 BellSouth acquisition (see Note 2), we accounted for our 60% economic interest in AT&T Mobility under the equity method since we shared control equally with BellSouth. AT&T Mobility is now a wholly-owned subsidiary of AT&T, and wireless results are reflected in operating revenues and expenses in our consolidated statements of income.

Other income (expense) – net  We had other expense of $589 in 2008, and other income of $615 in 2007 and $393 in 2006. Results for 2008 included losses of $467 related to asset impairments, $261 in minority interest expense and $180 loss on the sale of merger-related investments held under independent management which support certain benefit plans (see Note 11). These losses were partially offset by a $121 gain on the disposition of other non-strategic assets, $107 gain related to interest income, $49 of income from leveraged leases and $41 of dividend income.

Other income for 2007 included gains of $409 related to a wireless spectrum license exchange, $166 in interest income, $148 from the sale of administrative buildings and other non-strategic assets, and $88 from other non-operating activities. These gains were partially offset by $196 in minority interest expense. Other income for 2006 included interest income of $377. There were no other individually significant other income or expense transactions during 2006.

Income taxes increased $783, or 12.5%, in 2008 and $2,728, or 77.4%, in 2007. The increase in income taxes in 2008 was primarily due to higher operating income. Our effective tax rate in 2008 was 35.4%, compared to 34.4% in 2007 and 32.4% in 2006. The increase in our effective tax rate for 2008 was primarily due to an increase in income before income taxes.

The increase in income taxes in 2007 compared to 2006 was primarily due to higher operating income reflecting the acquisition of BellSouth and its share of AT&T Mobility’s operating results. The increase in our effective tax rate for 2007 was primarily due to the consolidation of AT&T Mobility and an increase in income before income taxes.

3

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Supplemental Information

To provide improved comparability versus previous results, below is a supplemental table providing pro forma consolidated operating revenues for 2006, assuming the closing date for the BellSouth acquisition was January 1, 2006, along with a summary of how these 2006 pro forma numbers would have affected 2007 results. The 2008 results are included to provide trend information but the comparisons between 2008 and 2007 results are discussed in “Segment Results.”

Supplemental Consolidated Operating Revenues Information

							Percent Change
	Actual		Actual		Pro Forma		2007 vs.
	2008		2007		2006		2006
Segment operating revenues
Wireless service	$	44,249	$	38,568	$	33,692		14.5	%
Voice		37,321		40,798		43,505		(6.2	)
Data		24,372		23,206		22,173		4.7
Directory		5,416		4,806		5,823		(17.5	)
Other		12,670		11,550		11,861		(2.6	)
Total Operating Revenues	$	124,028	$	118,928	$	117,054		1.6	%

Pro forma wireless service growth in 2007 was driven by subscriber growth and strong increases in data usage, including increased messaging, browsing, media bundles and both laptop and smartphone connectivity. We have historically discussed our wireless segment results on a basis that included 100% of AT&T Mobility results, and a detailed wireless service revenue discussion can be found in our “Wireless Segment Results” section.

The pro forma voice revenue decline in 2007 is consistent with trends and is due to access line declines reflecting competition and substitution of alternative technologies, pricing pressures due to competition, anticipated shifts of traffic by major consolidated carriers to their own networks and a continuing decline in the number of AT&T Corp.’s (ATTC) mass-market customers, which are composed of consumers and small businesses.

Pro forma data growth was led by an increase in IP data revenues of 13.3% in 2007, with strength in high-speed Internet, managed Internet, Virtual Private Network (VPN) and hosting services. Data transport service revenues were up 0.7% in 2007, and packet-switched data revenues, which include frame relay and asynchronous transfer mode (ATM) services, were down 7.0%, consistent with the industry trend of customers switching to IP-based services from traditional circuit-based services.

Directory results were lower in 2007 due to the purchase accounting treatment of directories delivered by BellSouth’s advertising and publishing businesses in the 12 months prior to the merger (see Note 4). In accordance with GAAP, the deferred revenues from these books were not included in the 2007 consolidated directory revenues. Had those deferred revenues been included in 2007, directory revenues would have increased by $964. The pro forma revenues for 2006 do not reflect this purchase accounting treatment of deferred directory revenues.

Pro forma other revenues decreased in 2007 due to our decision to de-emphasize sales of lower-margin, stand-alone customer premises equipment.

4 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Segment Results

Our segments are strategic business units that offer different products and services and are managed accordingly. As a result of our acquisitions of BellSouth and ATTC, we revised our segment reporting to represent how we now manage our business, restating prior periods to conform to the current segments. Our operating segment results presented in Note 4 and discussed below for each segment follow our internal management reporting. We analyze our various operating segments based on segment income before income taxes. Each segment’s percentage of total segment operating revenue and income calculations is derived from our segment results table in Note 4 and reflects amounts before eliminations. We have four reportable segments: (1) wireless, (2) wireline, (3) advertising & publishing and (4) other.

The wireless segment accounted for approximately 39% of our 2008 total segment operating revenues as compared to 35% in 2007 and 46% of our 2008 total segment income as compared to 32% in 2007. This segment offers wireless voice and data communications services across the United States. This segment reflects 100% of the results reported by AT&T Mobility, which was our wireless joint venture with BellSouth prior to the December 29, 2006 acquisition and is now a wholly-owned subsidiary of AT&T. Prior to the acquisition, although we analyzed AT&T Mobility’s revenues and expenses under the wireless segment, we eliminated the wireless segment in our consolidated financial statements. In our 2006 and prior consolidated financial statements we reported our 60% proportionate share of AT&T Mobility’s results as equity in net income of affiliates.

The wireline segment accounted for approximately 55% of our 2008 total segment operating revenues as compared to 59% in 2007 and 47% of our 2008 total segment income as compared to 55% in 2007. This segment provides both retail and wholesale landline communications services, including local and long-distance voice, switched access, IP and Internet access data, messaging services, managed networking to business customers, AT&T U-verseSM TV service and satellite television services through our agency agreements.

The advertising & publishing segment accounted for approximately 4% of our 2008 total segment operating revenues as compared to 5% in 2007 and 7% of our 2008 total segment income as compared to 9% in 2007. This segment includes our directory operations, which publish Yellow and White Pages directories and sell directory advertising, Internet-based advertising and local search. For 2007, this segment includes 100% of the results of YELLOWPAGES.COM (YPC), which was a joint venture with BellSouth prior to the December 29, 2006 acquisition and is now a wholly-owned subsidiary of AT&T.

Under Statement of Financial Accounting Standards No. 141, “Business Combinations” (FAS 141), deferred revenue and expenses from BellSouth directories published during the 12-month period ending with the December 29, 2006 acquisition date were not recognized in 2007 consolidated results. Accordingly, our consolidated revenue and expenses in 2007 related to directory operations were lower. Because management assesses the performance of the segment including the revenue and expenses associated with those directories, for segment reporting purposes, our 2007 advertising & publishing segment results include revenues of $964 and expenses of $308, related to directories published prior to our acquisition of BellSouth. These amounts are eliminated in our consolidated results (see Note 4).

The other segment accounted for approximately 2% of our 2008 total segment operating revenues as compared to 1% in 2007 and less than 1% of our 2008 total segment income as compared to 4% in 2007. This segment includes results from Sterling Commerce, Inc. (Sterling), customer information services, payphone, and all corporate and other operations. During 2008, we announced our intention to discontinue our retail payphone operations. Additionally, this segment includes our portion of the results from our international equity investments and charges of $978 associated with our workforce reductions announced in 2008. Prior to December 29, 2006, this segment also included our results from AT&T Mobility as equity in net income of affiliates, as discussed above.

The following tables show components of results of operations by segment. We discuss significant segment results following each table. We discuss capital expenditures for each segment in “Liquidity and Capital Resources.”

5 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Wireless

Segment Results

										Percent Change
										2008 vs.			2007 vs.
	2008			2007			2006			2007			2006
Segment operating revenues
Service	$	44,410		$	38,678		$	33,788			14.8	%		14.5	%
Equipment		4,925			4,006			3,749			22.9			6.9
Total Segment Operating Revenues		49,335			42,684			37,537			15.6			13.7
Segment operating expenses
Cost of services and equipment sales		18,078			15,991			15,057			13.1			6.2
Selling, general and administrative		14,403			12,594			11,446			14.4			10.0
Depreciation and amortization		5,770			7,079			6,462			(18.5	)		9.5
Total Segment Operating Expenses		38,251			35,664			32,965			7.3			8.2
Segment Operating Income		11,084			7,020			4,572			57.9			53.5
Equity in Net Income of Affiliates		6			16			40			(62.5	)		(60.0	)
Minority Interest 1		(256	)		(198	)		(169	)		(29.3	)		(17.2	)
Segment Income	$	10,834		$	6,838		$	4,443			58.4	%		53.9	%

1 Minority interest is recorded as “Other Income (Expense) – Net” in the consolidated statements of income.

Accounting for AT&T Mobility

The wireless segment reflects 100% of the results reported by AT&T Mobility, which was our wireless joint venture with BellSouth prior to the December 29, 2006 acquisition, at which time it became a wholly-owned subsidiary of AT&T. Prior to the BellSouth acquisition (see Note 2), we accounted for our 60% economic interest in AT&T Mobility under the equity method since we shared control equally with BellSouth. This means that our 2006 consolidated results included our 60% share of AT&T Mobility’s results in “Equity in net income of affiliates” in our consolidated statements of income. Following the BellSouth acquisition, AT&T Mobility became a wholly-owned subsidiary and AT&T Mobility’s results are now included as operating revenues and expenses in our consolidated statements of income. Accordingly, results from this segment for the last two days of 2006 were included in our operating revenues and expenses and not in the “Equity in net income (loss) of affiliates” line. However, for all the periods presented, the wireless segment reflects 100% of the results reported by AT&T Mobility based on the management of the business.

Dobson Acquisition

In November 2007, we acquired Dobson Communications Corporation (Dobson). Dobson marketed wireless services under the Cellular One brand and had provided roaming services to AT&T subsidiaries since 1990. Dobson had 1.7 million subscribers across 17 states, mostly in rural and suburban areas. Dobson was incorporated into our wireless operations subsequent to its acquisition.

Wireless Customer and Operating Trends

As of December 31, 2008, we served 77.0 million wireless customers, compared to 70.1 million at December 31, 2007, and 61.0 million at December 31, 2006. Approximately 69% of our wireless customer net additions in 2008 were postpaid customer additions. Contributing to our net additions and retail customer growth was improvement in postpaid customer turnover (customer churn) levels due to our strong network performance and attractive products and services offerings, including the Apple iPhone. The improvement in churn levels benefited from network and customer service improvements and continued high levels of advertising. Gross customer additions were 21.4 million in 2008, 20.1 million in 2007 and 19.2 million in 2006. Postpaid customer gross additions increased approximately 8.4% primarily due to attractive plan offerings and exclusive product offerings such as the Apple iPhone, BlackBerry® Bold and unique quick messaging devices.

As the wireless industry continues to mature, we believe that future wireless growth will become increasingly dependent on our ability to offer innovative services, which will encourage existing customers to upgrade their current services and handsets and will attract customers from other providers, as well as on our ability to minimize customer churn. Average service revenue per user/customer (ARPU) increased approximately 1% compared to 2007 primarily due to increased data services ARPU growth. ARPU from postpaid customers increased 3.7% reflecting usage of more advanced handsets, such as the Apple iPhone 3G, by these customers. In 2008, data services ARPU grew 33.8% compared to 2007. The continued increase in data revenue was related to increased use of text messaging, Internet access, e-mail and other data services. We expect continued growth from data services as more customers purchase advanced handsets, such as iPhone 3G, and laptop cards and as our third-generation network continues to expand. The growth in data ARPU was partially offset by a decline in voice service ARPU of 6.5% compared to 2007. The decline in voice service ARPU is the result of a decrease in postpaid voice overage charges, increases in our Family Talk® and reseller customers, which have lower ARPU than traditional postpaid customers, lower roaming revenues due to acquisitions and rate negotiations as part of roaming cost savings initiatives, slowing international growth and lower regulatory cost recovery charges. We expect continued pressure on voice service ARPU.

6

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

In 2007, data service ARPU grew 46.9% compared to 2006. The continued increase in data revenue was related to increased use of text messaging, Internet access, e-mail and other data services. The growth in data ARPU was partially offset by a decline in voice service ARPU of 4.1% compared to 2006, reflecting a higher percentage of prepaid and reseller customers, which provide significantly lower ARPU than postpaid customers, and continued shifts to all-inclusive rate plans that offer lower monthly charges.

The effective management of customer churn also is critical to our ability to maximize revenue growth and to maintain and improve margins. Customer churn is calculated by dividing the aggregate number of wireless customers who cancel service during each month in a period by the total number of wireless customers at the beginning of each month in that period. Our customer churn rate was 1.7% in 2008, 1.7% in 2007 and 1.8% in 2006. The churn rate for postpaid customers was 1.2% in 2008, down from 1.3% in 2007 and 1.5% in 2006. The decline in postpaid churn reflects higher network quality and broader coverage, more affordable rate plans as well as exclusive devices and free mobile-to-mobile calling among our wireless customers.

Wireless Operating Results

Our wireless segment operating income margin was 22.5% in 2008, 16.4% in 2007 and 12.2% in 2006. The higher margin in 2008 was primarily due to revenue growth of $6,651, which exceeded our increase in operating expenses of $2,587, which included a decrease in depreciation and amortization of $1,309. The higher margin in 2007 was primarily due to revenue growth of $5,147, which exceeded our increase in operating expenses of $2,699.

Service revenues are comprised of local voice and data services, roaming, long-distance and other revenue. Service revenues increased $5,732, or 14.8%, in 2008 and $4,890, or 14.5%, in 2007 and consisted of:

·   Data revenue increases of $3,647, or 52.5%, in 2008 and $2,692, or 63.3%, in 2007. The increase in 2008 is primarily due to the increased number of data users and the above noted increase in data ARPU of 33.8%. Our significant data growth also reflects an increased number of subscribers using our 3G network. The increase in 2007 was related to increased use of text messaging and Internet access services, which resulted in an increase in data ARPU of 46.9%. Data service revenues represented approximately 23.9% of our wireless segment service revenues in 2008 and 18.0% in 2007.

·   Voice revenue increases of $2,076, or 6.6%, in 2008 and $2,135, or 7.3%, in 2007. The increase in 2008 was primarily due to an increase in the number of average wireless customers of approximately 14%, partially offset by a decline in voice ARPU of 6.5%. The increase in 2007 was primarily due to an increase in the average number of wireless customers of approximately 12%, partially offset by a decline in voice ARPU of 4.1%. Included in voice revenues for both periods were increases in long-distance and net roaming revenue due to increased international usage.

Equipment revenues increased $919, or 22.9%, in 2008 and $257, or 6.9%, in 2007. The increase in both 2008 and 2007 was due to higher handset revenues reflecting increased gross customer additions and customer upgrades to more advanced handsets. The increase in 2007 was partially offset by equipment discounts and rebate activity.

Cost of services and equipment sales expenses increased $2,087, or 13.1%, in 2008 and $934, or 6.2%, in 2007. The 2008 and 2007 increases were primarily due to increased equipment sales expense of $2,005 and $1,140, respectively, resulting from the overall increase in sales as well as an increase in sales of higher-cost 3G devices, the introduction of the Apple iPhone 3G (in 2008) and iPhone (in 2007) handsets as well as an increase in the number of handset accessory sales. The 2008 per-unit accessory cost decreased from 2007, while the 2007 per-unit accessory cost increased from 2006. Total equipment costs continue to be higher than equipment revenues due to the sale of handsets below cost, through direct sales sources, to customers who committed to one-year or two-year contracts or in connection with other promotions.

7

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Excluding equipment sales, costs of services remained relatively flat in 2008 as the result of higher regulatory fees of $204 due to revenue growth, reseller costs of $145, and interconnect and other costs of $141, substantially offset by lower incollect roaming costs of $249, network system costs of $132 and long-distance costs of $27.

The $145 increase in reseller costs is attributable to higher license, maintenance and other reseller costs partly offset by cost reductions from the migration of network usage from the T-Mobile USA (T-Mobile) network in California and Nevada to our networks in these states. Our remaining purchase commitment to T-Mobile for this transition period was $42 and $51 at December 31, 2008 and 2007, respectively.

The $141 increase in interconnect and other costs primarily related to increased usage and integration costs related to Dobson. The $132 decrease in network system costs is the result of benefits from network and systems integration and cost-reduction initiatives of $218, and lower data processing and payroll costs of $109, partly offset by incremental rents related to Dobson and general building expense increases of $124, and hurricane and other incremental network costs of $99.

Cost of services declined $206 in 2007. This decline was due to lower interconnect, roaming and long-distance expenses related to network and systems integration and cost-reduction initiatives, as well as cost reductions from the migration of network usage from the T-Mobile network. These decreases were partially offset by higher network usage, with increases in total system minutes of use of 13.5%, and associated network system expansion and increased network equipment costs.

Selling, general and administrative expenses increased $1,809, or 14.4%, in 2008 and $1,148, or 10.0%, in 2007.

The increase in selling, general and administrative expenses in 2008 was due to the following:

·   Increases of $702 in customer costs and other expenses primarily due to increased customer service costs of $159, customer maintenance costs of $240, bad debt expense of $49 and other support costs of $298, partially offset by a decline of $44 in billing expenses.

·   Increases in selling expenses of $362 due to increases in commissions expense, sales and marketing expenses partly attributable to the introduction of the Apple iPhone 3G.

·   Increases in upgrade commission and residual expenses of $745 due to higher handset upgrade volume and commission rates.

The increase in selling, general and administrative expenses in 2007 was due to the following:

·   Increases in selling expenses of $572 due to increases in sales and advertising expenses and Apple iPhone related costs, partially offset by a decrease in net commission expense, which was consistent with the increase in prepaid plan sales as a percentage of total retail sales.

·   Increases of $572 in customer maintenance and other expenses primarily due to increased bad debt expense of $338 and other support costs of $234, partially offset by a decline of $191 in billing expenses, lower information technology (IT) and customer service expenses.

·   Increases in upgrade commission and residual expenses of $195 due to increased prepaid plan costs and higher handset upgrade activity.

Depreciation and amortization decreased $1,309, or 18.5%, in 2008 and increased $617, or 9.5%, in 2007. The decrease in 2008 was due to lower amortization expense of $770 and lower depreciation expense of $539. The decrease in amortization expense is attributable to declining amortization of identifiable intangible assets, which are principally amortized using the sum-of-the-months-digits method of amortization, partially offset by incremental amortization on Dobson intangible assets acquired by AT&T Mobility. Depreciation expense decreased $695 due to certain network assets becoming fully depreciated and decreased $612 due to Time Division Multiple Access (TDMA) assets being depreciated on an accelerated basis through 2007. These decreases were partly offset by incremental depreciation on capital assets placed in service during 2008.

The increase in 2007 was primarily due to an increase of $1,522 in amortization of identifiable intangible assets related to our acquisition of BellSouth’s 40% ownership interest, partially offset by declining amortization of identifiable AT&T Wireless Services, Inc. intangible assets acquired by AT&T Mobility in 2004. Expenses also increased due to accelerated depreciation on TDMA assets and ongoing capital spending for network upgrades and expansion. The 2007 increase was partially offset by decreases in depreciation expense of $905 due to certain network assets becoming fully depreciated and purchase accounting adjustments on certain network assets related to acquiring BellSouth’s 40% ownership interest of AT&T Mobility.

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Wireline

Segment Results

							Percent Change
							2008 vs.			2007 vs.
	2008		2007		2006		2007			2006
Segment operating revenues
Voice	$	38,198	$	41,630	$	33,714		(8.2	)%		23.5	%
Data		25,352		24,075		18,317		5.3			31.4
Other		6,304		5,878		5,442		7.2			8.0
Total Segment Operating Revenues		69,854		71,583		57,473		(2.4	)		24.6
Segment operating expenses
Cost of sales		31,929		31,018		27,388		2.9			13.3
Selling, general and administrative		13,624		15,159		12,205		(10.1	)		24.2
Depreciation and amortization		13,150		13,416		9,682		(2.0	)		38.6
Total Segment Operating Expenses		58,703		59,593		49,275		(1.5	)		20.9
Segment Income	$	11,151	$	11,990	$	8,198		(7.0	)%		46.3	%

Operating Margin Trends

Our wireline segment operating income margin was 16.0% in 2008, compared to 16.7% in 2007 and 14.3% in 2006. Results for 2008 reflect revenue declines that exceeded expense declines. Our wireline segment operating income decreased $839, or 7.0%, in 2008 and increased $3,792 in 2007 primarily reflecting the addition of BellSouth’s operating results in 2007. Our operating income continued to be pressured by access line declines due to increased competition, as customers disconnected both primary and additional lines and switched to alternative technologies, such as wireless, VoIP and cable for voice and data. The deteriorating economy during 2008 also adversely affected our customers’ ability to purchase and maintain both wireline and wireless services. Our strategy is to offset these line losses by increasing non-access-line-related revenues from customer connections for data, video and voice. Additionally, we have the opportunity to increase wireless segment revenues if customers choose AT&T Mobility as an alternative provider. As noted above, 2007 revenues and expenses reflect the addition of BellSouth’s results while our 2006 results only include two days of their results. Accordingly, the following discussion of changes in our revenues and expenses is affected by this acquisition.

Voice revenues decreased $3,432, or 8.2%, in 2008 primarily due to declining demand for traditional voice services and increased $7,916, or 23.5%, in 2007. Included in voice revenues are revenues from local voice, long-distance and local wholesale services. Voice revenues do not include VoIP revenues, which are included in data revenues.

·   Local voice revenues decreased $1,887, or 7.7%, in 2008 and increased $6,831, or 38.4%, in 2007. The decrease in 2008 was driven primarily by loss of revenue of $1,230 from a decline in access lines and by $422 from a decline from ATTC’s mass-market customers. The increase in 2007 was primarily due to the acquisition of BellSouth, which increased local voice revenues approximately $8,040. Local voice revenues also increased in 2007 due to pricing increases for regional telephone service, custom calling features and inside wire maintenance agreements. Local voice revenues in 2007 were negatively impacted by expected declines in revenues from ATTC’s mass-market customers and from customer demand-related declines for calling features and inside wire agreements. We expect our local voice revenue to continue to be negatively affected by increased competition from alternative technologies, the disconnection of additional lines and the deteriorating economy.

·   Long-distance revenues decreased $1,195, or 7.9%, in 2008 and increased $761, or 5.3%, in 2007 primarily due to the acquisition of BellSouth, which increased long-distance revenues approximately $2,075. The decrease in 2008 was primarily due to a net decrease in demand for long-distance service, due to expected declines in the number of ATTC’s mass-market customers, which decreased revenues $677 and decreased demand from global and consumer customers, which decreased revenues $532.

·   Local wholesale revenues decreased $350, or 18.7%, in 2008 and increased $324, or 20.9%, in 2007. The decrease in 2008 was primarily due to the declining number of competitive providers using local wholesale lines. However, this declining revenue trend stabilized in the second half of 2008 since industry consolidation and local wholesale line loss has slowed. The increase in 2007 was primarily due to the acquisition of BellSouth, which increased local wholesale revenues approximately $615. Wholesale revenue decreased in 2007 due to industry consolidation as certain customers moved more traffic to their own networks.

9

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Data revenues increased $1,277, or 5.3%, in 2008 and increased $5,758, or 31.4%, in 2007. Data revenues accounted for approximately 36% of wireline operating revenues in 2008, 34% in 2007 and 32% in 2006. Data revenues include transport, IP and packet-switched data services.

IP data revenues increased $1,537, or 16.1%, in 2008 primarily due to growth in consumer and business broadband, VPNs and managed Internet services, and increased $3,080, or 47.6%, in 2007 primarily due to the acquisition of BellSouth, which increased IP data approximately $2,235. Broadband high-speed Internet access increased IP data revenues $498 in 2008. The increase in broadband revenues was partially offset by the decline in revenue due to the renegotiation of our Yahoo! agreement which took effect April 2008. VPNs increased $477 and various other IP data services such as U-verse video and dedicated Internet access services contributed $535 to the increase in 2008. The increase in IP data revenues in 2008 and 2007 reflects continued growth in the customer base and migration from other traditional circuit-based services.

Our transport services increased $163, or 1.4%, in 2008, primarily due to continuing volume growth in Ethernet (types of high-capacity switched lines), ISDN and international private lines. These increases were partially offset by declines in usage-based transport services used by our largest business customers. In 2007, transport services revenues increased $2,640, or 29.7%, due to the acquisition of BellSouth.

Our traditional circuit-based services, which include frame relay, asynchronous transfer mode and managed packet services, decreased $423, or 14.1%, in 2008. This decrease is primarily due to lower demand as customers continue to shift to IP-based technology such as VPNs, broadband and managed Internet services. We expect these traditional services to continue to decline as a percentage of our overall data revenues. In 2007, circuit-based services revenues increased $38, or 1.3%, primarily due to the acquisition of BellSouth, which increased circuit-based services revenues $265.

Other operating revenues increased $426, or 7.2%, in 2008 and $436, or 8.0%, in 2007. Major items included in other operating revenues are integration services and customer premises equipment, government-related services and outsourcing, which account for more than 60% of total revenue for all periods. Equipment sales and related network integration and management services increased $260 in 2008, driven by an increase in management services, and decreased $274 in 2007 primarily due to less emphasis on the sale of lower-margin equipment. Governmental professional services revenue increased $100 in 2008 driven by growth across various contracts. Revenue also decreased by $70 in 2007 due to the recognition of intellectual property license fees in 2006 that did not recur in 2007. More than offsetting these declines in 2007 was incremental revenue from our acquisition of BellSouth.

Cost of sales expenses increased $911, or 2.9%, in 2008 and $3,630, or 13.3%, in 2007. Cost of sales consists of costs we incur in order to provide our products and services, including costs of operating and maintaining our networks and personnel costs, such as salary, wage and bonus accruals. Costs in this category include our repair technicians and repair services, certain network planning and engineering expenses, operator services, IT and property taxes related to elements of our network. Pension and postretirement costs, net of amounts capitalized as part of construction labor, are also included to the extent that they are associated with these employees.

Cost of sales in 2008 increased due to the following:

·   Higher nonemployee-related expenses, such as contract services, agent commissions and materials and supplies costs, of $1,056.

·   Salary and wage merit increases, other bonus accruals and higher employee levels, which increased compensation expenses by $423 and increased medical and other benefits by $239.

·   Higher cost of equipment sales and related network integration services of $60 in 2008 primarily due to increased U-verse customers partially offset by reductions due to less emphasis on sales of lower-margin equipment.

10 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Partially offsetting these increases, cost of sales in 2008 decreased due to:

·   Lower traffic compensation expenses (for access to another carrier’s network) of $633 primarily due to reduced portal fees from renegotiation of our agreement with Yahoo!, continued migration of long-distance calls onto our network and a lower volume of calls from ATTC’s declining national mass-market customer base.

·   Lower net pension and postretirement cost of $387, primarily due to changes in our actuarial assumptions, including the increase of our discount rate from 6.00% to 6.50% (a decrease to expense) and favorable prior-year investment returns on plan assets resulting in a decrease in the recognition of net losses from prior years.

In addition to the impact of the BellSouth acquisition, cost of sales in 2007 increased due to the following:

·   Higher nonemployee-related expenses, such as contract services, agent commissions and materials and supplies costs, of $605.

·   Higher expenses of $225 in 2007 due to a 2006 change in our policy regarding the timing for earning vacation days, which reduced expense in 2006.

·   Salary and wage merit increases and other bonus accruals of $165.

Partially offsetting these increases, cost of sales in 2007 decreased due to:

·   Lower traffic compensation expenses (for access to another carrier’s network) of $831 primarily due to migration of long-distance calls onto our network and a lower volume of calls from ATTC’s declining national mass-market customer base.

·   Lower net pension and postretirement cost of $398, primarily due to changes in our actuarial assumptions, including the increase of our discount rate from 5.75% to 6.00% (a decrease to expense) and favorable investment returns on plan assets resulting in a decrease in the recognition of net losses from prior years.

·   Lower cost of equipment sales and related network integration services of $300, primarily due to less emphasis on sales of lower-margin equipment. Costs associated with equipment for large-business customers typically are greater than costs associated with services that are provided over multiple years.

·   Lower expenses of $163 in 2007 due to the discontinuance of DSL Universal Service Fund fees in the third quarter of 2006.

Selling, general and administrative expenses decreased $1,535, or 10.1%, in 2008 and increased $2,954, or 24.2%, in 2007. Selling, general and administrative expenses consist of our provision for uncollectible accounts; advertising costs; sales and marketing functions, including our retail and wholesale customer service centers; centrally managed real estate costs, including maintenance and utilities on all owned and leased buildings; credit and collection functions; and corporate overhead costs, such as finance, legal, human resources and external affairs. Pension and postretirement costs are also included to the extent that they relate to those employees.

Selling, general and administrative expenses in 2008 decreased due to the following:

·   Lower other wireline support costs of $616 primarily due to higher advertising costs incurred in 2007 for brand advertising and re-branding related to the BellSouth acquisition.

·   Lower net pension and postretirement cost of $231, primarily due to changes in our actuarial assumptions, including the increase of our discount rate from 6.00% to 6.50% (a decrease to expense) and favorable prior-year investment returns on plan assets resulting in a decrease in the recognition of net losses from prior years.

·   Lower compensation expenses primarily reflecting shifts of force levels to cost of sales functions of $420 with related declines in medical and other benefits by $210.

Partially offsetting these decreases, selling, general and administrative expenses in 2008 increased due to:

·   Higher nonemployee-related expenses, such as contract services, agent commissions and materials and supplies costs, of $79.

·   Higher provision for uncollectible accounts primarily related to our business and wholesale customers of $35.

In addition to the impact of the BellSouth acquisition, selling, general and administrative expenses in 2007 increased due to the following:

·   Salary and wage merit increases and other bonus accruals of $102.

·   Higher expenses of $96 in 2007 due to a 2006 change in our policy regarding the timing for earning vacation days, which reduced expense in 2006.

·   Higher provision for uncollectible accounts of $80.

11

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Partially offsetting these increases, selling, general and administrative expenses in 2007 decreased due to:

·   Lower net pension and postretirement cost of $243, primarily due to changes in our actuarial assumptions, including the increase of our discount rate from 5.75% to 6.00% (a decrease to expense) and favorable investment returns on plan assets resulting in a decrease in the recognition of net losses from prior years.

·   Lower employee levels, which decreased expenses, primarily salary and wages, by $222.

·   Lower nonemployee-related expenses, such as contract services, agent commissions and materials and supplies costs, of $148.

Depreciation and amortization expenses decreased $266, or 2%, in 2008. We had an increase of $3,734, or 38.6%, in 2007 primarily due to higher depreciable and amortizable asset bases as a result of the acquisition of BellSouth in 2006. The relative stability in 2008 is a result of decreasing intangible amortization partially offsetting increased depreciation resulting from capital additions.

Supplemental Information

Telephone, Wired Broadband and Video Connections Summary

Our switched access lines and other services provided by our local exchange telephone subsidiaries at December 31, 2008, 2007 and 2006 are shown below and trends are addressed throughout this segment discussion.

(in 000s)										Percent Change
							Pro Forma			2008 vs.			2007 vs.
	2008			2007				2006 7		2007			2006
Switched Access Lines1
Retail Consumer		30,614			35,009			37,073			(12.6	)%		(5.6	)%
Retail Business2		21,826			22,811			23,484			(4.3	)		(2.9	)
Retail Subtotal2		52,440			57,820			60,557			(9.3	)		(4.5	)
Percent of total switched access lines		94.3	%		93.9	%		91.1	%
Sold to ATTC2		140			181			1,294			(22.7	)		(86.0	)
Sold to other CLECs2,3		2,912			3,330			4,288			(12.6	)		(22.3	)
Wholesale Subtotal2		3,052			3,511			5,582			(13.1	)		(37.1	)
Percent of total switched access lines		5.5	%		5.7	%		8.4	%
Payphone (Retail and Wholesale)4		118			251			330			(53.0	)		(23.9	)
Percent of total switched access lines		0.2	%		0.4	%		0.5	%
Total Switched Access Lines		55,610			61,582			66,469			(9.7	)		(7.4	)
Total Wired Broadband Connections2,5		15,077			14,156			12,170			6.5			16.3
Satellite service6		2,190			2,116			1,507			3.5			40.4
U-verse video		1,045			231			3			-			-
Video Connections		3,235			2,347			1,510			37.8	%		55.4	%

   1 Represents access lines served by AT&T’s ILECs and affiliates.

  2Prior period amounts restated to conform to current period reporting methodology.

3 Competitive local exchange carriers (CLECs).

4 Revenue from retail payphone lines is reported in the Other segment. We are in the process of ending our retail payphone operations.

5 Total wired broadband connections include DSL, U-verse high-speed Internet access and satellite broadband.

6 Satellite service includes connections under our agency and resale agreements.

7 Amounts shown include BellSouth’s access lines in service after the December 29, 2006 BellSouth acquisition.

12

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Advertising & Publishing

Segment Results

								Percent Change
								2008 vs.			2007 vs.
	2008		2007		2006			2007			2006
Total Segment Operating Revenues	$	5,502	$	5,851	$	3,685			(6.0	)%		58.8	%
Segment operating expenses
Cost of sales		1,716		1,645		1,121			4.3			46.7
Selling, general and administrative		1,282		1,421		616			(9.8	)		-
Depreciation and amortization		789		924		3			(14.6	)		-
Total Segment Operating Expenses		3,787		3,990		1,740			(5.1	)		-
Segment Operating Income		1,715		1,861		1,945			(7.8	)		(4.3	)
Equity in Net Income (Loss) of Affiliates		-		-		(17	)		-			-
Segment Income	$	1,715	$	1,861	$	1,928			(7.8	)%		(3.5	)%

Accounting Impacts From the BellSouth Acquisition

FAS 141 requires that BellSouth deferred revenue and expenses from directories published during the 12-month period ending with the December 29, 2006 acquisition date not be included in our consolidated results. However, for management reporting purposes we continued to amortize these balances over the life of the directory (typically 12 months). Thus, for segment disclosure purposes, our advertising & publishing segment results included revenue of $964 and expenses of $308 in 2007. See Note 4 for a discussion of FAS 141.

Operating Results

Our advertising & publishing segment operating income margin was 31.2% in 2008, 31.8% in 2007 and 52.8% in 2006. The decrease in the segment operating income margin in 2008 was primarily the result of decreased operating revenues. The decrease in the segment operating income margin in 2007 was primarily due to the addition of BellSouth’s operating results, including the amortization of BellSouth’s customer lists acquired as a part of the acquisition.

Operating revenues decreased $349, or 6.0%, in 2008 largely driven by continuing declines in print revenue of $453 and lower sales agency revenue of approximately $113 due to the sale of the independent line of business segment of the L.M. Berry Company. This decrease was partially offset by increased Internet advertising revenue of $196. In 2007, operating revenues increased $2,166, or 58.8%, primarily due to the addition of BellSouth’s operating results, which increased operating revenues approximately $2,220 in 2007. This increase was largely driven by print advertising revenue of $1,859 and Internet advertising revenue of $200.

Operating expenses decreased $203, or 5.1%, in 2008 largely driven by decreased depreciation and amortization of $135 resulting from use of an accelerated method of amortization for the customer list acquired as part of the BellSouth acquisition, and lower employee, professional and contract related expenses. These expense decreases were partially offset by increased YELLOWPAGES.COM expansion costs. In 2007, operating expenses increased $2,250 primarily due to the addition of BellSouth’s operating results, which increased total operating expenses by approximately $2,110 in 2007.

Other

Segment Results

										Percent Change
										2008 vs.			2007 vs.
	2008				2007			2006		2007			2006
Total Segment Operating Revenues		$	2,043			$	2,229	$	1,883		(8.3	)%		18.4	%
Total Segment Operating Expenses			2,929				2,040		1,764		43.6			15.6
Segment Operating Income (Loss)			(886	)			189		119		-			58.8
Equity in Net Income of Affiliates			813				676		2,020		20.3			(66.5	)
Segment Income (Loss)		$	(73	)		$	865	$	2,139		-			(59.6	)%

Our other segment operating results consist primarily of Sterling, customer information services (primarily operator services and payphone), corporate and other operations. Sterling provides business-integration software and services.

13

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Operating revenues decreased $186, or 8.3%, in 2008 and increased $346, or 18.4%, in 2007. The decrease in 2008 is primarily due to reduced revenues from our operator services and our retail payphone operations. We are in the process of ending our retail payphone operations. The increase in 2007 is primarily due to the addition of BellSouth’s other operations and increased operating revenue at Sterling partially offset by decreased revenues from our retail payphone operations.

Operating expenses increased $889, or 43.6%, in 2008 and $276, or 15.6%, in 2007. The increase in 2008 was primarily due to charges of $978 associated with our workforce reductions announced in 2008, primarily employees in non-customer-facing areas of the business as a result of the restructure of our operations from a collection of regional companies to a single national approach. This was partially offset by reduction in reserves held at our captive insurance company and by decreased operating expenses from our operator services and retail payphone operations. The increase in 2007 was primarily due to the addition of BellSouth’s other operations and increased operating expenses at Sterling partially offset by decreased expense from our retail payphone operations.

Prior to the December 29, 2006 close of the BellSouth acquisition, our other segment included our 60% proportionate share of AT&T Mobility results as equity in net income of affiliates. As a result of the BellSouth acquisition, we own 100% of AT&T Mobility and its results for the final two days of 2006 and for the year 2007 have been excluded from equity in net income of affiliates in this segment and on our consolidated statements of income.

Our other segment also includes our equity investments in international companies, the income from which we report as equity in net income of affiliates. Our earnings from foreign affiliates are sensitive to exchange-rate changes in the value of the respective local currencies. Our foreign investments are recorded under GAAP, which include adjustments for the purchase method of accounting and exclude certain adjustments required for local reporting in specific countries. Our equity in net income of affiliates by major investment is listed below:

	2008		2007		2006
América Móvil	$	469	$	381	$	274
Telmex & Telmex Internacional		324		265		222
AT&T Mobility		-		-		1,508
Other		20		30		16
Other Segment Equity in Net Income of Affiliates	$	813	$	676	$	2,020

Equity in net income of affiliates increased $137 in 2008. Equity in net income in América Móvil increased $88 in 2008 primarily due to improved operating results. Equity in net income in Telmex and Telmex Internacional increased $59 reflecting lower depreciation and tax expenses, and improved operating results.

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS

2009 Revenue Trends  We expect a challenging operating environment in 2009 due to the continuing economic recession, increasing competition and changes at the federal government level. Despite this environment, we expect a modest expansion of our operating revenues in 2009 compared to 2008, reflecting continuing growth in our wireless and broadband/data services. We expect our primary driver of growth to be wireless, especially in sales and increased use of advanced handsets including the Apple iPhone 3G, and that all our major customer categories will continue to increase their use of Internet-based broadband/data services. We expect revenue growth will also reflect the increased information and technology services to be provided under our agreements with IBM. We expect continuing declines in traditional access lines but offsets in growth in broadband and video services. We expect solid growth in broadband revenues as customers continue to choose higher-speed services. We expect to continue to expand our U-verse service offerings in 2009.

2009 Expense Trends  Our major mergerintegration projects are now largely completed. However, given our expected challenging operating environment for 2009, we will continue to focus intensely on cost-control measures. We expect our operating income margin to be stable excluding pressure from our pension and retiree benefit costs. We expect our pension and retiree benefit costs to increase significantly due to our accounting policy for handling substantial investment losses in 2008 on our retirement plans’ assets (see “Significant Accounting Policies and Estimates”). We do not expect significant pension funding requirements in 2009. Expenses related to growth initiatives (see “Expected Growth Areas”) will apply some pressure to our operating income margin.

14

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Market Conditions  During 2008, the securities and mortgage markets and the banking system in general experienced significant declines in value and liquidity. The U.S. Congress, the U.S. Treasury Department, the Federal Reserve System and various other regulators have worked together to adopt plans to restore liquidity and stability to the securities, mortgage and banking systems. Although we have issued short-term and long-term debt during this economic decline, the U.S. government has provided capital to financial institutions and has enabled access to short-term borrowings for companies with high credit ratings. We are not yet able to determine the outcome of these plans.

Included on our consolidated balance sheets are assets held by benefit plans for the payment of future benefits. The losses associated with the securities markets declines during 2008 are not expected to have an impact on the ability of our benefit plans to pay benefits. We do not expect to make significant funding contributions to our pension plans in 2009. However, because our pension plans are subject to funding requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA), a continued weakness in the markets could require us to make contributions to the pension plans in order to maintain minimum funding requirements as established by ERISA. In addition, our policy on recognizing losses on investments in the pension and other postretirement plans will accelerate the recognition of losses in 2009 earnings (see “Significant Accounting Policies and Estimates”).

The ongoing weaknesses in the general economy and in the securities, credit and mortgage markets are also affecting portions of our customer and supplier bases although, at this time, we are unable to quantify the effects. We are seeing lower demand for our services from residential wireline customers. Although business revenues remained relatively stable this past year, we experienced some softening of demand late in 2008 for usage-based services, such as voice and transport. Our print directory revenues also declined during 2008 as the economy continued to weaken. Some of our suppliers also are experiencing increased financial and operating costs and one large telecom equipment supplier recently declared bankruptcy. As of year-end, these negative trends had been offset by continued growth in our wireless business. Our wireless growth reflects both an increased demand for advanced services, as evidenced by our successful launch of the iPhone 3G and other advanced devices, and increased sales of other advanced handsets, as well as a shift in demand from our traditional wireline services. Should the economy continue to deteriorate, we likely will experience pressure on pricing and margins as we compete for both wireline and wireless customers who will have less discretionary income. We also may experience difficulty purchasing equipment in a timely manner or maintaining and replacing warranteed equipment from our suppliers.

OPERATING ENVIRONMENT OVERVIEW

AT&T subsidiaries operating within the U.S. are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the U.S. are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided, and regulation is generally limited to operational licensing authority for the provision of services to enterprise customers.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. However, since the Telecom Act was passed, the Federal Communications Commission (FCC) and some state regulatory commissions have maintained certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. Where appropriate, we are pursuing additional legislative and regulatory measures to reduce regulatory burdens that inhibit our ability to compete more effectively and offer services wanted and needed by our customers. For example, we are supporting regulatory and legislative efforts that would offer new video entrants a streamlined process for bringing new video services to market and for offering more timely competition to traditional cable television providers. In addition, states representing a majority of our local service access lines have adopted legislation that enables new video entrants to acquire a single statewide or state-approved franchise (as opposed to the need to acquire hundreds or even thousands of municipal-approved franchises) to offer competitive video services. We also are supporting efforts to update and improve regulatory treatment for retail services. Passage of legislation is uncertain and depends on many factors.

Our wireless operations operate in robust competitive markets, but are likewise subject to substantial governmental regulation. Wireless communications providers must be licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. While wireless communications providers’ prices and service offerings are generally not subject to state regulation, an increasing number of states are attempting to regulate or legislate various aspects of wireless services, such as in the area of consumer protection. Additionally, we have noted our opposition to proposals to impose extreme versions of “net neutrality” open access regulation on wireless providers. It is widely recognized that the wireless industry in the United States is characterized by innovation, differentiation, declining prices and extensive competition among handset manufacturers, service providers and applications and that additional broadband regulation and new wholesale requirements are unnecessary and counterproductive and will discourage new investment and may be appropriate only in the case of market failure.

15

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Expected Growth Areas

We expect our wireless services and data wireline products to remain the most significant portion of our business and have also discussed trends affecting the segments in which we report results for these products (see “Wireless Segment Results” and “Wireline Segment Results”). Over the next few years we expect an increasing percentage of our growth to come from: (1) our wireless service and (2) data/broadband, through existing and new services. We expect that our previous acquisitions will enable us to strengthen the reach and sophistication of our network facilities, increase our large-business customer base and enhance the opportunity to market wireless services to that customer base. Whether, or the extent to which, growth in these areas will offset declines in other areas of our business is not known.

Wireless  Wireless is our fastest-growing revenue stream and we expect to deliver continued revenue growth in the coming years. We believe that we are in a growth period of wireless data usage and that there are substantial opportunities available for next-generation converged services that combine wireless, broadband, voice and video.

Our Universal Mobile Telecommunications System/High-Speed Downlink Packet Access 3G network technology covers most major metropolitan areas of the U.S. This technology provides superior speeds for data and video services, and it offers operating efficiencies by using the same spectrum and infrastructure for voice and data on an IP-based platform. Our wireless networks also rely on digital transmission technologies known as GSM, General Packet Radio Services and Enhanced Data Rates for GSM Evolution for data communications. As of December 31, 2008, we served 77 million customers.

As the wireless industry continues to mature, we believe that future wireless growth will become increasingly dependent on our ability to offer innovative services that will encourage existing customers to upgrade their services, either by adding new types of services, such as data enhancements, or through increased use of existing services, such as through equipment upgrades. These innovative services should attract customers from other providers, as well as minimize customer churn. We intend to accomplish these goals by continuing to expand our network coverage, improve our network quality and offer a broad array of products and services, including exclusive devices such as the Apple iPhone 3G and free mobile-to-mobile calling among our wireless customers. Minimizing customer churn is critical to our ability to maximize revenue growth and to maintain and improve our operating margins.

U-verse Services  We are continuing to expand our deployment of U-verse high-speed broadband and TV services. As of December 31, 2008, we have passed approximately 17 million living units (constructed housing units as well as platted housing lots) and are marketing the services to almost 65 percent of those units. Our deployment strategy is to enter each new area on a limited basis in order to ensure that all operating and back-office systems are functioning successfully and then expand within each as we continue to monitor these systems. In these expansions, we expect to continue to use contracted outside labor in addition to our employees as installers; our rate of expansion will be slowed if we cannot hire and train an adequate number of qualified contractors and technicians to keep pace with customer demand or if we cannot obtain all required local building permits in a timely fashion. We also continue to work with our vendors on improving, in a timely manner, the requisite hardware and software technology. Our deployment plans could be delayed if we do not receive required equipment and software on schedule.

We believe that our U-verse TV service is subject to federal oversight as a “video service” under the Federal Communications Act. However, some cable providers and municipalities have claimed that certain IP services should be treated as a traditional cable service and therefore subject to the applicable state and local cable regulation. Certain municipalities have delayed our request or have refused us permission to use our existing right-of-ways to deploy or activate our U-verse-related services and products, resulting in litigation. Pending negotiations and current or threatened litigation involving municipalities could delay our deployment plans in those areas. In July 2008, the U.S. District Court for Connecticut affirmed its October 2007 ruling that AT&T’s U-verse TV service is a cable service in Connecticut. We have appealed that decision on the basis that state legislation rendered the case moot. If courts having jurisdiction where we have significant deployments of our U-verse services were to decide that federal, state and/or local cable regulation were applicable to our U-verse services, it could have a material adverse effect on the cost, timing and extent of our deployment plans.

16

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

REGULATORY DEVELOPMENTS

Set forth below is a summary of the most significant developments in our regulatory environment during 2008. While these issues, for the most part, apply only to certain subsidiaries in our wireline segment, the words “we,” “AT&T” and “our” are used to simplify the discussion. The following discussions are intended as a condensed summary of the issues rather than as a precise legal description of all of these specific issues.

International Regulation  Our subsidiaries operating outside the U.S. are subject to the jurisdiction of regulatory authorities in the market where service is provided. Our licensing, compliance and advocacy initiatives in foreign countries primarily enable the provision of enterprise (i.e., large business) services. AT&T is engaged in multiple efforts with foreign regulators to open markets to competition, reduce network costs and increase our scope of fully authorized network services and products.

Federal RegulationA summary of significant 2008 Federal regulatory developments follows.

Wireless

Wireless Spectrum Auction  In March 2008, the FCC announced that we were the winning bidder of 227 B Block 700 MHz Band wireless spectrum licenses in an auction conducted by the FCC. Accordingly, in April 2008, we paid the FCC $6,136, which was in addition to the $500 deposit that we provided to the FCC at the start of the auction. This purchase was funded using cash from operations and debt. In April 2008, we submitted our license application to the FCC, requesting that the FCC grant the wireless licenses on which we were the high bidder. The FCC granted the licenses on January 6, 2009. We will use this spectrum as we build out our network for next generation wireless services.

Order on Recommendations of the Hurricane Katrina Panel In October 2007, the FCC issued an order that was intended to improve the reliability, interoperability and recovery of telecommunications in future disasters. The order required carriers to maintain backup power at certain points in the network, such as cell sites and remote terminals. In February 2008, the D.C. Circuit granted a stay of the effective date of the Katrina Order's backup power rules, pending review of a filed appeal. In November 2008, the FCC asked the court to dismiss the appeal as moot and further indicated that it would begin a new rulemaking proceeding to establish revised backup power rules. To date, the court has not acted on the FCC’s request.

E911 Order  In September 2007, the FCC adopted an order (the E911 Order) that would have substantially increased accuracy requirements in connection with providing the location of a wireless caller to dispatchers of 911 emergency services. Compliance with interim accuracy benchmarks would have been required in March 2009.

Under FCC rules, carriers are required to attempt to deliver location data to Public Safety Answering Points (PSAPs) when callers dial 911. We use a network-based location solution that employs triangulation to estimate the location of the caller. Location data for this network-based solution must be accurate within 300 meters on 95 percent of all calls and within 100 meters on 67 percent of all calls. The current rules permit these percentages to be calculated based on all calls, network-wide, for purposes of measuring location accuracy. The E911 Order would have required wireless carriers to achieve E911 location accuracy measured in each of the local areas served by the approximately 6,000 PSAPs across the country. Carriers would have had until September 2012 to achieve PSAP-level accuracy, and would have had to demonstrate compliance with certain incremental location accuracy benchmarks in 2009 and 2010. The PSAP-level accuracy requirement in the E911 Order was not attainable throughout our wireless network using currently available commercial technology.

In March 2008, the United States Court of Appeals for the D.C. Circuit (Court of Appeals) granted motions filed by AT&T and other carriers seeking a stay of the E911 Order pending a ruling on the merits of the appeals of that order. Subsequently, the FCC filed a motion with the Court of Appeals asking that the E911 Order be vacated and remanded. The Court of Appeals vacated the E911 Order in September 2008. As of the date of this report, discussions are continuing between the FCC, wireless carriers, and the public safety community as to what steps should be taken regarding improved E911 accuracy.

Wireless Universal Service  AT&T Mobility is currently a Competitive Eligible Telecommunications Carrier (CETC) for purposes of receiving federal universal service support in several states. To maintain these designations, the state must certify that the carrier is entitled to receive the funds for the subsequent calendar year based on federal and applicable state CETC requirements. We are current on our certifications and have a process to review these requirements on an annual basis. In May 2008, the FCC adopted an Order capping high-cost universal service support received by CETCs – predominantly wireless carriers – at a statewide level. The state-specific cap will be set based on the amount of support that CETCs in that state were eligible to receive in March 2008 on an annualized basis. Notably, while AT&T previously consented to a voluntary cap on its receipt of federal universal service support as of June 30, 2007 in order to obtain approval for the acquisition of Dobson, this commitment was superseded by the industry-wide CETC cap adopted in the May 2008 Order. The industry-wide cap was implemented in the third quarter of 2008. AT&T Mobility received approximately $211 million in federal high-cost support in 2008.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

State Regulation  A summary of significant 2008 state regulatory developments follows.

Video Service Legislation  A number of states in which we operate have adopted legislation or issued clarifying opinions that will make it easier for telecommunications companies to offer video service.

California High Cost Fund  In June 2006, the California Public Utilities Commission (CPUC) opened a rulemaking to review the California High Cost Fund B (CHCF-B). The CHCF-B program was established in 1996 and was designed to support universal service goals by ensuring that basic telephone service remains affordable in high-cost areas within the service territories of the state’s major incumbent local exchange carriers. In September 2007, the CPUC adopted a decision that changed how the CHCF-B is calculated. We estimate the change will reduce our payments from the CHCF-B by approximately $100 in 2009 compared to 2008 payments. In September 2008, the CPUC adopted a related decision, which permits but does not require, increases to basic rates of prescribed amounts over a two-year phase-in period beginning January 1, 2009. This two-year transition period concludes with full pricing flexibility for basic residential service starting January 1, 2011.

COMPETITION

Competition continues to increase for telecommunications and information services. Technological advances have expanded the types and uses of services and products available. In addition, lack of or a reduced level of regulation of comparable alternatives (e.g., cable, wireless and VoIP providers) has lowered costs for these alternative communications service providers. As a result, we face heightened competition as well as some new opportunities in significant portions of our business.

Wireless

We face substantial and increasing competition in all aspects of our wireless business. Under current FCC rules, six or more PCS licensees, two cellular licensees and one or more enhanced specialized mobile radio licensees may operate in each of our service areas, which results in the potential presence of multiple competitors. Our competitors are principally three national (Verizon Wireless, Sprint Nextel Corp. and T-Mobile) and a larger number of regional providers of cellular, PCS and other wireless communications services. More than 95% of the U.S. population lives in areas with three mobile telephone operators and more than half the population lives in areas with at least five competing carriers.

We may experience significant competition from companies that provide similar services using other communications technologies and services. While some of these technologies and services are now operational, others are being developed or may be developed in the future. We compete for customers based principally on price, service offerings, call quality, coverage area and customer service.

We were a winning bidder in the FCC 700 MHz spectrum auctions that began in January 2008, and in 2008, we purchased additional spectrum licenses covering 196 million people in the 700 MHz frequency band. The availability of this additional spectrum from the auctions could increase the effectiveness of existing competition, or result in new entrants in the wireless arena.

Wireline

Our wireline subsidiaries expect continued competitive pressure in 2009 from multiple providers, including wireless, cable and other VoIP providers, interexchange carriers and resellers. In addition, economic pressures are forcing customers to terminate their traditional local wireline service and substitute wireless and Internet-based services, intensifying a pre-existing trend toward wireless and Internet use. At this time, we are unable to quantify the effect of competition on the industry as a whole, or financially on this segment. However, we expect both losses of revenue share in local service and gains resulting from business initiatives, especially in the area of bundling of products and services, including wireless and video, large-business data services and broadband. In most markets, we compete with large cable companies, such as Comcast Corporation, Cox Communications, Inc. and Time Warner Inc., for local, high-speed Internet and video services customers and other smaller telecommunications companies for both long-distance and local services customers.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Our wireline subsidiaries generally remain subject to regulation by state regulatory commissions for intrastate services and by the FCC for interstate services. In contrast, our competitors are often subject to less or no regulation in providing comparable voice and data services or the extent of regulation is in dispute. Under the Telecom Act, companies seeking to interconnect to our wireline subsidiaries’ networks and exchange local calls enter into interconnection agreements with us. Any unresolved issues in negotiating those agreements are subject to arbitration before the appropriate state commission. These agreements (whether fully agreed-upon or arbitrated) are then subject to review and approval by the appropriate state commission.

Recently, in a number of the states in which we operate as an ILEC, state legislatures or the state public utility commissions have concluded that the voice telecommunications market is competitive and have allowed for greater pricing flexibility for non-basic residential retail services, including bundles, promotions and new products and services. While it has been a number of years since we have been allowed to raise local service rates in certain states, some of these state actions have been challenged by certain parties and are pending court review.

In addition to these rates and service regulations noted above, our wireline subsidiaries (excluding rural carrier affiliates) operate under state-specific elective “price-cap regulation” for retail services (also referred to as “alternative regulation”) that was either legislatively enacted or authorized by the appropriate state regulatory commission. Under price-cap regulation, price caps are set for regulated services and are not tied to the cost of providing the services or to rate-of-return requirements. Price-cap rates may be subject to or eligible for annual decreases or increases and also may be eligible for deregulation or greater pricing flexibility if the associated service is deemed competitive under some state regulatory commission rules. Minimum customer service standards may also be imposed and payments required if we fail to meet the standards.

We continue to lose access lines due to competitors (e.g., wireless, cable and VoIP providers) who can provide comparable services at lower prices because they are not subject to traditional telephone industry regulation (or the extent of regulation is in dispute) and consequently have lower cost structures. In response to these competitive pressures, for several years we have utilized a bundling strategy that rewards customers who consolidate their services (e.g., local and long-distance telephone, DSL, wireless and video) with us. We continue to focus on bundling wireline and wireless services, including combined packages of minutes and video service through our AT&T U-verse service and our relationships with satellite television providers. We will continue to develop innovative products that capitalize on our expanding fiber network.

Additionally, we provide local, domestic intrastate and interstate, international wholesale networking capacity and switched services to other service providers, primarily large Internet Service Providers using the largest class of nationwide Internet networks (Internet backbone), wireless carriers, CLECs, regional phone ILECs, cable companies and systems integrators. These services are subject to additional competitive pressures from the development of new technologies and the increased availability of domestic and international transmission capacity. The introduction of new products and service offerings and increasing satellite, wireless, fiber-optic and cable transmission capacity for services similar to those provided by us continues to provide competitive pressures. We face a number of international competitors, including Equant, British Telecom and SingTel; as well as competition from a number of large systems integrators, such as Electronic Data Systems.

Advertising & Publishing

Our advertising & publishing subsidiaries face competition from approximately 100 publishers of printed directories in their operating areas. Competition also exists from other advertising media, including newspapers, radio, television and direct-mail providers, as well as from directories offered over the Internet. Through our wholly-owned subsidiary, YPC, we compete with other providers of Internet-based advertising and local search.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

ACCOUNTING POLICIES AND STANDARDS

Significant Accounting Policies and Estimates  Because of the size of the financial statement line items they relate to, some of our accounting policies and estimates have a more significant impact on our financial statements than others. The policies below are presented in the order in which the topics appear in our consolidated statements of income.

Allowance for Uncollectibles  We maintain an allowance for doubtful accounts for estimated losses that result from the failure of our customers to make required payments. When determining the allowance, we consider the probability of recoverability based on past experience, taking into account current collection trends as well as general economic factors, including bankruptcy rates. Credit risks are assessed based on historical write-offs, net of recoveries, and an analysis of the aged accounts receivable balances with reserves generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific collection issues are known to exist, such as pending bankruptcy or catastrophes. The analysis of receivables is performed monthly and the bad-debt allowances are adjusted accordingly. A 10% change in the amounts estimated to be uncollectible would result in a change in uncollectible expense of approximately $130.

Pension and Postretirement Benefits  Our actuarial estimates of retiree benefit expense and the associated significant weighted-average assumptions are discussed in Note 11. One of the most significant of these assumptions is the return on assets assumption, which was 8.50% for the year ended December 31, 2008. In setting the long-term assumed rate of return, management considers capital markets future expectations and the asset mix of the plans’ investments. The actual long-term return can, in relatively stable markets, also serve as a factor in determining future expectations. However, the dramatic adverse market conditions in 2008 have skewed the calculation of the long-term actual return; the actual 10-year return was 4.21% through 2008 compared with 9.18% through 2007. The severity of the 2008 losses will make the 10-year actual return less of a relevant factor in management’s evaluation of future expectations. Based on future expectations and the plans’ asset mix, management has left unchanged the long-term assumed rate of return for 2009. If all other factors were to remain unchanged, we expect that a 1.0% decrease in the assumed long-term rate of return would cause 2009 combined pension and postretirement cost to increase $650 over 2008. Under GAAP, the expected long-term rate of return is calculated on the market-related value of assets (MRVA). GAAP requires that actual gains and losses on pension and postretirement plan assets be recognized in the MRVA equally over a period of up to five years. We use a methodology, allowed under GAAP, under which we hold the MRVA to within 20% of the actual fair value of plan assets, which can have the effect of accelerating the recognition of excess actual gains and losses into the MRVA in less than five years. We expect that use of this policy will increase precapitalization pension and postretirement costs by $1,577 in 2009. This methodology did not have a significant additional effect on our 2008, 2007 or 2006 combined net pension and postretirement costs. Note 11 also discusses the effects of certain changes in assumptions related to medical trend rates on retiree health care costs.

Depreciation  Our depreciation of assets, including use of composite group depreciation and estimates of useful lives, is described in Notes 1 and 5. We assign useful lives based on periodic studies of actual asset lives. Changes in those lives with significant impact on the financial statements must be disclosed, but no such changes have occurred in the three years ended December 31, 2008. However, if all other factors were to remain unchanged, we expect that a one-year increase in the useful lives of the largest categories of our plant in service (which accounts for more than three-fourths of our total plant in service) would result in a decrease of approximately $2,160 in our 2009 depreciation expense and that a one-year decrease would result in an increase of approximately $3,390 in our 2009 depreciation expense.

Asset Valuations and Impairments  We account for acquisitions using the purchase method as required by FAS 141. Under FAS 141, we allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values of intangible assets acquired are based on the expected discounted cash flows of the identified customer relationships, patents, tradenames and licenses. In determining the future cash flows, we consider demand, competition and other economic factors.

Customer relationships, which are finite-lived intangible assets, are primarily amortized using the sum-of-the-months-digits method of amortization over the period in which those relationships are expected to contribute to our future cash flows. The sum-of-the-months-digits method is a process of allocation, not of valuation, and reflects our belief that we expect greater revenue generation from these customer relationships during the earlier years of their lives. Alternatively, we could have chosen to amortize customer relationships using the straight-line method, which would allocate the cost equally over the amortization period. Amortization of other intangibles, including patents and amortizable tradenames, is determined using the straight-line method of amortization over the expected remaining useful lives. We do not amortize indefinite-lived intangibles, such as wireless FCC licenses or certain tradenames (see Note 6).

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Goodwill and wireless FCC licenses are not amortized but tested annually for impairment in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (FAS 142). We review other long-lived assets for impairment under Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” whenever events or circumstances indicate that the carrying amount may not be recoverable over the remaining life of the asset or asset group. In order to determine that the asset is recoverable, we verify that the expected future cash flows directly related to that asset exceed its fair value, which is based on the undiscounted cash flows. The discounted cash flow calculation uses various assumptions and estimates regarding future revenue, expense and cash flows projections over the estimated remaining useful life of the asset.

Cost investments are evaluated to determine whether mark-to-market declines are temporary and reflected in other comprehensive income, or other than temporary and recorded as an expense in the income statement. This evaluation is based on the length of time and the severity of decline in the investment’s value. At the end of 2008, we concluded the severity of decline in the latter half of 2008 had led to an other than temporary decline in the value of assets contained in an independently managed trust for certain BellSouth employee benefits (see Note 11).

Income Taxes  Our estimates of income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 10 and reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or the final review of our tax returns by federal, state or foreign tax authorities.

In 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) and began accounting for uncertain tax positions under the provisions of FIN 48. As required by FIN 48, we use our judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We regularly review our uncertain tax positions and adjust our unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our unrecognized tax benefits may affect our income tax expense. Settlement of uncertain tax positions may require use of our cash.

New Accounting Standards

FAS 161  In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (FAS 161). FAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities to improve the transparency of financial reporting. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. FAS 161 is expected to increase quarterly and annual disclosures but will not have an impact on our financial position and results of operations.

FSP 157-3  In October 2008, the FASB issued FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset When the Market of that Asset is not Active” (FSP 157-3). FSP 157-3 provides an example that clarifies and reiterates certain provisions of the existing fair value standard, including basing fair value on orderly transactions and usage of management and broker inputs. FSP 157-3 is effective immediately but is not expected to have a material impact on our financial position or results of operations.

FSP FAS 142-3In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact that FSP FAS 142-3 will have on our accounting for intangible assets.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

FSP FAS 132(R)-1In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP FAS 132(R)-1). FSP FAS 132(R)-1 amends FASB Statement No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefit” (FAS 132(R)). This FASB Staff Position replaces the requirement to disclose the percentage of fair value of total plan assets with a requirement to disclose the fair value of each major asset category. It also amends FASB Statement No. 157, “Fair Value Measurements” (FAS 157), to clarify that defined benefit pension or other postretirement plan assets are not subject to FAS 157’s disclosure requirements. FSP FAS 132(R)-1 is effective for fiscal years ending after December 2009. This FSP will significantly increase the amount of disclosures for plan assets in our 2009 Annual Report.

EITF 08-6  In November 2008, the Emerging Issues Task Force (EITF) reached a consensus on EITF 08-6, “Equity Method Investment Accounting Considerations.” EITF 08-6 provides guidance on the application of the equity method. It states equity-method investments should be recognized using a cost accumulation model. Also, it requires that equity method investments as a whole be assessed for other-than-temporary impairment in accordance with Accounting Principles Board Opinion No. 18. EITF 08-6 is effective on a prospective basis for transactions in an investee’s shares occurring or impairments recognized in fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. This EITF will not have a material impact on our financial position and results of operations.

EITF 08-7  In November 2008, the EITF reached a consensus on EITF 08-7, “Accounting for Defensive Intangible Assets.” EITF 08-7 provides that intangible assets that an acquirer intends to use as defensive assets, intangible assets acquired in a business combination or an asset acquisition that an entity does not intend to actively use but does intend to prevent others from using, are a separate unit of account from the existing intangible assets of the acquirer. It also states that a defensive intangible asset should be amortized over the period that the fair value of the defensive intangible asset diminishes. EITF 08-7 is effective on a prospective basis for transactions occurring in fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. This EITF will require AT&T to recognize at fair value certain assets associated with trademarks for the non-surviving companies of acquisitions and amortize these trademarks over the period they are expected to contribute directly or indirectly to the entity’s future cash flows.

OTHER BUSINESS MATTERS

Retiree Phone Concession Litigation  In May 2005, we were served with a purported class action in U.S. District Court, Western District of Texas (Stoffels v. SBC Communications Inc.), in which the plaintiffs, who are retirees of Pacific Bell Telephone Company, Southwestern Bell and Ameritech, contend that the telephone concession provided by the company is, in essence, a “defined benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In October 2006, the Court certified two classes. The issue of whether the concession is an ERISA pension plan was tried before the judge in November 2007. In May 2008, the court ruled that the concession was an ERISA pension plan. We asked the court to certify this ruling for interlocutory appeal and in August 2008, the court denied our request. A trial on the appropriate remedy has been set for December 7, 2009. We believe that an adverse outcome having a material effect on our financial statements in this case is unlikely, but will continue to evaluate the potential impact of this suit on our financial results as it progresses.

NSA Litigation  There are 24 pending lawsuits that allege that we and other telecommunications carriers unlawfully provided assistance to the National Security Agency (NSA) in connection with intelligence activities that were initiated following the events of September 11, 2001. In the first filed case, Hepting et al v. AT&T Corp., AT&T Inc. and Does 1-20, a purported class action filed in U.S. District Court in the Northern District of California, plaintiffs allege that the defendants have disclosed and are currently disclosing to the U.S. Government content and call records concerning communications to which plaintiffs were a party. Plaintiffs seek damages, a declaratory judgment, and injunctive relief for violations of the First and Fourth Amendments to the United States Constitution, the Foreign Intelligence Surveillance Act, the Electronic Communications Privacy Act, and other federal and California statutes. We filed a motion to dismiss the complaint. The United States asserted the “state secrets privilege” and related statutory privileges and also filed a motion asking the court to dismiss the complaint. The court denied the motions to dismiss of both parties

We and the U.S. Government filed interlocutory appeals. The case was argued before a panel of the U.S. Court of Appeals for the Ninth Circuit in August 2007. In August 2008, the court remanded the case to the district court without deciding the issue in light of the passage of the FISA Amendments Act discussed below.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

In July 2008, the President signed into law, the FISA (Foreign Intelligence Surveillance Act) Amendments Act of 2008 (the Act), a provision of which addresses the allegations in these pending lawsuits (immunity provision). The immunity provision requires the pending lawsuits to be dismissed if the Attorney General certifies to the court either that the alleged assistance was undertaken by court order, certification, directive, or written request or that the telecom entity did not provide the alleged assistance. In September 2008, the Attorney General filed his certification and asked the court to dismiss all of the lawsuits pending against the telecommunications companies. In October 2008, the plaintiffs filed an opposition to the certification and motion to dismiss arguing that the Act is unconstitutional and, alternatively, that the Government failed to meet its burden of justifying dismissal. The court heard argument on the Government’s motion to dismiss on December 2, 2008. We are awaiting the court’s decision. We believe that the immunity provision is constitutional, that the Government has met its burden of proof, and that the lawsuits pending against us will eventually be dismissed.

In addition, a lawsuit seeking to enjoin the immunity provision’s application on grounds that it is unconstitutional was filed the day after the Act was signed by the President. That case has been referred to the Joint Panel on Multidistrict Litigation, which has conditionally transferred the case to the Northern District of California, the court referred to above that is considering the Attorney General’s certification and motion to dismiss. On January 6, 2009, the transfer order was filed in the MDL docket, giving the Northern District of California jurisdiction over the case.

Management believes these actions are without merit and intends to defend these matters vigorously.

Prepaid Calling Card Patent Litigation In September 2007, a jury in Texas found that ATTC willfully infringed two patents owned by TGIP Inc. (TGIP) relating to point-of-sale prepaid cards sold by ATTC and awarded TGIP $156 in damages. (TGIP Inc. v. AT&T Corp. et al., U.S. District Court for the Eastern District of Texas). AT&T filed a motion requesting that the court overturn the jury’s verdict as a matter of law. In October 2007, the court overturned the jury’s finding of infringement, the jury’s $156 award of damages and the jury’s finding of willfulness. TGIP appealed the court's decision. In April 2008, the parties settled the litigation resulting in no additional expense accrual.

Broadcom Patent Dispute  A number of our handsets, as well as those provided by other wireless carriers, were subject to a patent dispute at the U.S. International Trade Commission (ITC) between Broadcom Corporation and Qualcomm Incorporated (Qualcomm). In October 2008, the Court of Appeals for the Federal Circuit vacated and remanded the ITC's finding that Qualcomm had infringed a Broadcom patent and vacated the ITC’s limited exclusion order applicable to certain handsets containing Qualcomm technology. The court held that the ITC did not have authority to issue a limited exclusion order affecting handset suppliers and retailers, such as AT&T, unless those parties were also named in the lawsuit. While this ruling would allow us to continue to sell to our customers handsets using the disputed Qualcomm chips, we do not currently offer any such handsets.

DIRECTV Agreement  In September 2008, we announced an agreement to market and sell DIRECTV's service as a co-branded satellite television service after January 31, 2009. We did offer, market and sell co-branded AT&T | DISH Network services through January 31, 2009. After that date, existing AT&T | DISH Network customers will continue to receive DISH Network service under the existing AT&T | DISH Network agreement.

Centennial Communications Acquisition  In November 2008, we agreed to acquire Centennial Communications, Corp., a regional provider of wireless and wired communications services with 1.1 million customers, for $944 plus net debt of approximately $2,000. The acquisition is subject to regulatory approval and is expected to close by mid-year 2009.

Environmental  We are subject from time to time to judicial and administrative proceedings brought by various governmental authorities under federal, state or local environmental laws. Although we are required to reference in our Forms 10-Q and 10-K any of these proceedings that could result in monetary sanctions (exclusive of interest and costs) of one hundred thousand dollars or more, we do not believe that any of them currently pending will have a material adverse effect on our results of operations.

LIQUIDITY AND CAPITAL RESOURCES

We had $1,792 in cash and cash equivalents available at December 31, 2008. Cash and cash equivalents included cash of $958 and money market funds and other cash equivalents of $834. Cash and cash equivalents decreased $178 since December 31, 2007. During 2008, cash inflow was primarily provided by cash receipts from operations, the issuance of long-term debt, net cash received from dispositions of non-strategic real estate and the sale of marketable securities and other assets. These inflows were offset by cash used to meet the needs of the business including, but not limited to, payment of operating expenses, funding capital expenditures, acquisition of wireless spectrum, repurchase of common shares, repayment of debt, dividends to stockholders and payment of interest on debt. We discuss many of these factors in detail below.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Cash Provided by or Used in Operating Activities

During 2008, cash provided by operating activities was $33,656 compared to $34,242 in 2007. Operating cash flows decreased primarily due toincreased tax payments of $1,294 partially offset by improvement in operating income excluding depreciation. During 2008, tax payments were higher primarily due to increased income. The timing of cash payments for income taxes, which is governed by the IRS and other taxing jurisdictions, will differ from the timing of recording tax expense and deferred income taxes, which are reported in accordance with GAAP.

During 2007, our primary source of funds was cash from operating activities of $34,242 compared to $15,688 in 2006. Operating cash flows increased primarily due to an increase of more than $4,500 in operating income reflecting additional cash provided by the BellSouth acquisition and our success in achieving merger synergies and operational efficiencies, partially offset by increased interest payments of approximately $1,800 and tax payments of $1,200. Tax payments were higher due primarily to a $1,000 deposit related to the IRS examination of our 2000 – 2002 income tax returns.

Cash Used in or Provided by Investing Activities

During 2008, cash used in investing activities consisted of:

·   $19,676 in capital expenditures, excluding interest during construction.

·   $659 in interest during construction.

·   $9,497 for the purchase of spectrum licenses including the 700 MHz Band wireless spectrum auction and the acquisition of licenses from Aloha Partners, L.P.

·   $350 related to a customer list acquisition.

·   $697 related to various wireless-related acquisitions.

·   $275 for the acquisition of Wayport.

·   $153 related to other acquisitions.

During 2008, cash provided by investing activities consisted of:

·   $1,501 from dispositions of non-strategic assets.

·   $436 from EchoStar from an investment made in 2003.

·   $114 from the sale of marketable and equity securities.

·   $113 related to other activities.

Our capital expenditures are primarily for our wireless and wireline subsidiaries’ networks, our U-verse services, and support systems for our communications services. Capital spending (excluding interest during construction) in our wireless segment increased 42.1% in 2008, primarily for network capacity expansion, integration and upgrades to our Universal Mobile Telecommunications System/High-Speed Packet Access network, as well as for IT and other support systems for our wireless service. Capital expenditures in the wireline segment, which represented 69.4% of our capital expenditures, increased 2.5% in 2008, primarily due to the continued deployment of our U-verse services.

The other segment capital expenditures were less than 2% of total capital expenditures for 2008. Included in the other segment are equity investments, which should be self-funding as they are not direct AT&T operations; as well as corporate, diversified business and Sterling operations, which we expect to fund using cash from operations. We expect to fund any advertising & publishing segment capital expenditures using cash from operations.

Cash Used in or Provided by Financing Activities

In December 2007, our Board of Directors authorized a new share repurchase plan of 400 million shares, which replaces our previous share repurchase authorization from March 2006. During 2008, we repurchased 164 million shares at a cost of $6,077. These 2008 share repurchases are the only ones made under the current authorization. This new authorization represents approximately 6.7% of AT&T's shares outstanding at December 31, 2008 and expires at the end of 2009. We have repurchased, and may continue to repurchase, a portion of the shares pursuant to plans that comply with the requirements of Rule 10b5-1(c) under the Securities Exchange Act of 1934. We will fund any additional share repurchases through a combination of cash from operations, borrowings dependent upon market conditions, and cash from the disposition of certain non-strategic investments. However, we anticipate concentrating on reducing debt levels rather than share repurchases in 2009.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

We paid dividends of $9,507 in 2008, $8,743 in 2007 and $5,153 in 2006, reflecting the issuance of additional shares for the BellSouth and ATTC acquisitions and dividend rate increases. In December 2008, our Board of Directors approved a 2.5% increase in the quarterly dividend from $0.40 to $0.41 per share. This increase recognizes our expectations for growth and follows a 12.7% dividend increase approved by AT&T's Board in December 2007. Dividends declared by our Board of Directors totaled $1.61 per share in 2008, $1.465 per share in 2007 and $1.35 per share in 2006. Our dividend policy considers both the expectations and requirements of stockholders, internal requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to approval by our Board of Directors.

At December 31, 2008, we had $14,119 of debt maturing within one year, which included $9,503 of long-term debt maturities and $4,616 of commercial paper borrowings and other borrowings. Most of our commercial paper borrowings are due within 90 days. We continue to examine our mix of short- and long-term debt in light of interest rate trends and current credit market conditions.

During 2008, we received net proceeds of $12,416 from the issuance of $12,475 in long-term debt. Debt proceeds were used for general corporate purposes and parts of the proceeds were used for repurchases of our common stock. Long-term debt issuances consisted of:

·   $2,500 of 5.5% global notes due in 2018.

·   $2,000 of floating rate notes due 2010 in a private offering, which can be redeemed by the holder early (which is classified as debt maturing in one year).

·   €1,250 of 6.125% global notes due 2015 (equivalent to approximately $1,975 when issued).

·   $1,500 of 4.95% global notes due in 2013.

·   $1,250 of 6.4% global notes due 2038.

·   $1,000 of 5.6% global notes due 2018.

·   $750 of 6.3% global notes due in 2038.

·   $1,500 of 6.7% global notes due in 2013.

Beginning in May 2009, a $500 zero-coupon puttable note may be presented for redemption by the holder at specified dates but not more frequently than annually, excluding 2011. If the note is held to maturity in 2022, the redemption amount will be $1,030.

In November 2008, we agreed to acquire Centennial Communications, a wireless operator in portions of the United States and Puerto Rico, including its outstanding debt of approximately $2,000. All of Centennial’s debt was callable after January 2009. The various debt agreements contain a number of restrictive operating covenants, which make it likely that we will call such debt upon closing of the acquisition.

We entered into fixed-to-fixed cross-currency swaps on our 2015 euro-denominated debt instruments to hedge our exposure to changes in foreign currency exchange rates. These hedges also include interest rate swaps of a fixed euro-denominated interest rate to a fixed U.S.-denominated interest rate, which results in a U.S.-denominated semiannual rate of 5.77%.

During 2008, debt repayments totaled $4,010 and consisted of:

·   $3,915 related to debt repayments with a weighted-average interest rate of 3.98%.

·   $66 related to repayments of Edge Wireless term loan.

·   $29 related to scheduled principal payments on other debt and repayments of other borrowings.

We have a five-year $10,000 credit agreement with a syndicate of investment and commercial banks, which we have the right to increase up to an additional $2,000, provided no event of default under the credit agreement has occurred. One of the participating banks is Lehman Brothers Bank, Inc., which recently declared bankruptcy. We are unable to determine the status of its stated commitment of $595 at this time. The current agreement will expire in July 2011. We also have the right to terminate, in whole or in part, amounts committed by the lenders under this agreement in excess of any outstanding advances; however, any such terminated commitments may not be reinstated. Advances under this agreement may be used for general corporate purposes, including support of commercial paper borrowings and other short-term borrowings. There is no material adverse change provision governing the drawdown of advances under this credit agreement. This agreement contains a negative pledge covenant, which requires that, if at any time we or a subsidiary pledge assets or otherwise permits a lien on its properties, advances under this agreement will be ratably secured, subject to specified exceptions. We must maintain a debt-to-EBITDA (earnings before interest, income taxes, depreciation and amortization, and other modifications described in the agreement) financial ratio covenant of not more than three-to-one as of the last day of each fiscal quarter for the four quarters then ended. We comply with all covenants under the agreement. At December 31, 2008, we had no borrowings outstanding under this agreement (see Note 8).

25

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

During 2008, proceeds of $319 from the issuance of treasury shares were related to the settlement of share-based awards.

During 2007, we paid $190 to minority interest holders and $47 to terminate interest rate swaps with notional amounts totaling $1,800 acquired as a result of our acquisition of BellSouth.

In February of 2009, we issued $1,000 of 4.85% global notes due 2014, $2,250 of 5.8% global notes due 2019 and $2,250 of 6.55% global notes due 2039.

We plan to fund our 2009 financing activities through a combination of debt issuances and cash from operations. Our financing activities emphasis will be on the repayment of debt. We will continue to examine opportunities to fund our activities by issuing debt at favorable rates and with cash from the disposition of certain other non-strategic investments.

Other

Our total capital consists of debt (long-term debt and debt maturing within one year) and stockholders’ equity. Our capital structure does not include debt issued by our international equity investees. Our debt ratio was 43.8%, 35.7%, and 34.1% at December 31, 2008, 2007 and 2006. The debt ratio is affected by the same factors that affect total capital. Total capital decreased $8,144 in 2008 compared to an increase of $4,146 in 2007. The 2008 total capital decrease was due to a $16,677 decrease in accumulated other comprehensive loss that reflects a decrease in retirement plans funded status partially offset by an increase in debt of $10,876 related to our financing activities. Our stockholders’ equity balance was down $19,020 primarily due to the decrease in retirement plan funded status discussed above.

The primary factor contributing to the increase in our 2007 debt ratio was the increase in debt of $4,319 related to our financing activities. Our stockholders’ equity balance decreased $173 and included our increase in net income and current adjustments for unrealized pension and postretirement gains, which were more than offset by our increased share repurchase activity and dividend distributions.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

Current accounting standards require us to disclose our material obligations and commitments to making future payments under contracts, such as debt and lease agreements, and under contingent commitments, such as debt guarantees. We occasionally enter into third-party debt guarantees, but they are not, nor are they reasonably likely to become, material. We disclose our contractual long-term debt repayment obligations in Note 8 and our operating lease payments in Note 5. Our contractual obligations do not include expected pension and postretirement payments as we maintain pension funds and Voluntary Employee Beneficiary Association trusts to fully or partially fund these benefits (see Note 11). In the ordinary course of business, we routinely enter into commercial commitments for various aspects of our operations, such as plant additions and office supplies. However, we do not believe that the commitments will have a material effect on our financial condition, results of operations or cash flows.

Our contractual obligations as of December 31, 2008, are in the following table. The purchase obligations that follow are those for which we have guaranteed funds and will be funded with cash provided by operations or through incremental borrowings. The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contract. Since termination penalties would not be paid every year, such penalties are excluded from the table. Other long-term liabilities were included in the table based on the year of required payment or an estimate of the year of payment. Such estimate of payment is based on a review of past trends for these items, as well as a forecast of future activities. Certain items were excluded from the following table as the year of payment is unknown and could not be reliably estimated since past trends were not deemed to be an indicator of future payment.

26

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Substantially all of our purchase obligations are in our wireline and wireless segments. The table does not include the fair value of our interest rate swaps. Our capital lease obligations have been excluded from the table due to the immaterial value at December 31, 2008. Many of our other noncurrent liabilities have been excluded from the following table due to the uncertainty of the timing of payments, combined with the absence of historical trending to be used as a predictor of such payments. Additionally, certain other long-term liabilities have been excluded since settlement of such liabilities will not require the use of cash. However, we have included in the following table obligations which primarily relate to benefit funding and severance due to the certainty of the timing of these future payments. Our other long-term liabilities are: deferred income taxes (see Note 10) of $19,196; postemployment benefit obligations (see Note 11) of $31,930; and other noncurrent liabilities of $14,610, which included deferred lease revenue from our agreement with American Tower of $539 (see Note 5).

	Payments Due By Period
Contractual Obligations	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Long-term debt obligations1	$	68,444	$	9,504	$	11,303	$	10,721	$	36,916
Interest payments on long-term debt		57,593		4,091		7,075		5,543		40,884
Commercial paper obligations		4,575		4,575		-		-		-
Other short-term borrowings		41		41		-		-		-
Operating lease obligations		20,444		2,382		4,133		3,359		10,570
Unrecognized tax benefits2		6,801		1,759		-		-		5,042
Purchase obligations3, 4		9,911		3,112		4,398		1,885		516
Other long-term obligations5		475		175		148		66		86
Total Contractual Obligations	$	168,284	$	25,639	$	27,057	$	21,574	$	94,014

1 The impact of premiums/discounts and derivative instruments included in debt amounts on the balance sheet are excluded from the table.

2 The non-current portion of the unrecognized tax benefits is included in the “More than 5 Years” column as we cannot reasonably estimate the timing or amounts of additional cash payments, if any, at this time. See Note 10 for additional information.

3 We have contractual obligations to utilize network facilities from local exchange carriers with terms greater than one year. Since the contracts have no minimum volume requirements and are based on an interrelationship of volumes and discounted rates, we assessed our minimum commitment based on penalties to exit the contracts, assuming that we had exited the contracts on December 31, 2008. At December 31, 2008, the termination fees we would have incurred to exit all of these contracts would have been $213. These termination fees could be $167 in 2009, $45 in the aggregate for 2010 and 2011 and $1 for 2012, assuming that all contracts are exited. These termination fees are excluded from the above table as the fees would not be paid every year and the timing of such payments, if any, is uncertain.

4 We calculated the minimum obligation for certain agreements to purchase goods or services based on termination fees that can be paid to exit the contract. If we elect to exit these contracts, termination fees for all such contracts in the year of termination could be approximately $368 in 2009, $418 in the aggregate for 2010 and 2011, $185 in the aggregate for 2012 and 2013 and $35 in the aggregate, thereafter. Certain termination fees are excluded from the above table as the fees would not be paid every year and the timing of such payments, if any, is uncertain.

5 Other long-term obligations include commitments with local exchange carriers for dedicated leased lines.

MARKET RISK

We are exposed to market risks primarily from changes in interest rates and foreign currency exchange rates. In managing exposure to these fluctuations, we may engage in various hedging transactions that have been authorized according to documented policies and procedures. On a limited basis, we use certain derivative financial instruments, including foreign currency exchange contracts and combined interest rate foreign currency contracts, to manage these risks. We do not use derivatives for trading purposes, to generate income or to engage in speculative activity. Our capital costs are directly linked to financial and business risks. We seek to manage the potential negative effects from market volatility and market risk. The majority of our financial instruments are medium- and long-term fixed rate notes and debentures. Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these notes and debentures. It is our policy to manage our debt structure and foreign exchange exposure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. Where appropriate, we will take actions to limit the negative effect of interest and foreign exchange rates, liquidity and counterparty risks on stockholder value.

We enter into foreign currency contracts to minimize our exposure to risk of adverse changes in currency exchange rates. We are subject to foreign exchange risk for foreign currency-denominated transactions, such as debt issued, recognized payables and receivables and forecasted transactions. At December 31, 2008, our foreign currency exposures were principally Mexican pesos, Euros, Danish krone, Swedish krona and Canadian dollars.

27 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

QUANTITATIVE INFORMATION ABOUT MARKET RISK

In order to determine the changes in fair value of our various financial instruments, we use certain financial modeling techniques. We apply rate-sensitivity changes directly to our interest rate swap transactions and forward rate sensitivity to our foreign currency-forward contracts.

The changes in fair value, as discussed below, assume the occurrence of certain market conditions, which could have an adverse financial impact on AT&T and do not represent projected gains or losses in fair value that we expect to incur. Future impacts would be based on actual developments in global financial markets. We do not foresee any significant changes in the strategies used to manage interest rate risk, foreign currency rate risk or equity price risk in the near future.

Interest Rate Sensitivity  The principal amounts by expected maturity, average interest rate and fair value of our liabilities that are exposed to interest rate risk are described in Notes 8 and 9. Following are our interest rate derivatives, subject to interest rate risk as of December 31, 2008. The interest rates illustrated in the interest rate swaps section of the table below refer to the average expected rates we would receive and the average expected rates we would pay based on the contracts. The notional amount is the principal amount of the debt subject to the interest rate swap contracts. The net fair value asset (liability) represents the amount we would receive or pay if we had exited the contracts as of December 31, 2008.

	Maturity
																					Fair
																After					Value
	2009			2010			2011			2012			2013			2013			Total		12/31/08
Interest Rate Derivatives
Interest Rate Swaps:
Receive Fixed/Pay Variable
Notional Amount		-			-		$	1,250		$	1,750		$	1,750		$	1,000		$	5,750	$	564
Variable Rate Payable1		2.8	%		2.4	%		3.4	%		3.6	%		4.0	%		4.1	%
Weighted-Average Fixed
Rate Receivable		5.6	%		5.6	%		5.5	%		5.3	%		5.6	%		5.6	%

1 Interest payable based on current and implied forward rates for Three or Six Month LIBOR plus a spread ranging between approximately 36 and 175 basis points.

We had fair value interest rate swaps with a notional value of $5,750 with a net carrying and fair value asset of $564 at December 31, 2008. At December 31, 2007, we had notional value of $3,250 with an asset of $88.

Foreign Exchange Forward Contracts  The fair value of foreign exchange contracts is subject to changes in foreign currency exchange rates. For the purpose of assessing specific risks, we use a sensitivity analysis to determine the effects that market risk exposures may have on the fair value of our financial instruments and results of operations. To perform the sensitivity analysis, we assess the risk of loss in fair values from the effect of a hypothetical 10% change in the value of foreign currencies (negative change in the value of the U.S. dollar), assuming no change in interest rates. See Note 9 to the consolidated financial statements for additional information relating to notional amounts and fair values of financial instruments.

For foreign exchange forward contracts outstanding at December31, 2008, assuming a hypothetical 10% depreciation of the U.S. dollar against foreign currencies from the prevailing foreign currency exchange rates, the fair value of the foreign exchange forward contracts (net liability) would have decreased approximately $13. Because our foreign exchange contracts are entered into for hedging purposes, we believe that these losses would be largely offset by gains on the underlying transactions.

The risk of loss in fair values of all other financial instruments resulting from a hypothetical 10% change in market prices was not significant as of December31, 2008.

28 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

QUALITATIVE INFORMATION ABOUT MARKET RISK

Foreign Exchange Risk  From time to time, we make investments in businesses in foreign countries, receive dividends and proceeds from sales or borrow funds in foreign currency. Before making an investment, or in anticipation of a foreign currency receipt, we often will enter into forward foreign exchange contracts. The contracts are used to provide currency at a fixed rate. Our policy is to measure the risk of adverse currency fluctuations by calculating the potential dollar losses resulting from changes in exchange rates that have a reasonable probability of occurring. We cover the exposure that results from changes that exceed acceptable amounts. We do not speculate in foreign exchange markets.

Interest Rate Risk  We issue debt in fixed and floating rate instruments. Interest rate swaps are used for the purpose of controlling interest expense by managing the mix of fixed and floating rate debt. Interest rate forward contracts are utilized to hedge interest expense related to debt financing. We do not seek to make a profit from changes in interest rates. We manage interest rate sensitivity by measuring potential increases in interest expense that would result from a probable change in interest rates. When the potential increase in interest expense exceeds an acceptable amount, we reduce risk through the issuance of fixed-rate (in lieu of variable-rate) instruments and the purchase of derivatives.

Issuer Equity Repurchases

On December 10, 2007, our Board of Directors authorized a new share repurchase plan of 400 million shares, which replaces our previous share repurchase authorization. During 2008, we repurchased 164 million shares at a cost of $6,077. This new authorization represents approximately 6.7% of AT&T's shares outstanding at December 31, 2008, and expires at the end of 2009. We may continue to repurchase, a portion of the shares pursuant to plans that comply with the requirements of Rule 10b5-1(c) under the Securities Exchange Act of 1934. We will fund any share repurchases through a combination of cash from operations, borrowings dependent upon market conditions and cash from the disposition of certain non-strategic investments but anticipate concentrating on reducing debt levels rather than share repurchases in 2009.

Purchase Period	Total Number of Shares Purchased		Average Price Paid per Share1	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 30, 2008 – January 31, 2008	10,000,000	$$	35.70	10,000,000	390,000,000
February 1, 2008 – February 29, 2008	77,133,333	$$	36.78	77,133,333	312,866,667
March 3, 2008 – March 31, 2008	24,500,000	$$	35.77	24,500,000	288,366,667
May 6, 2008 – May 30, 2008	23,700,000	$$	39.38	23,700,000	264,666,667
June 2, 2008 – June 30, 2008	28,900,000	$$	37.08	28,900,000	235,766,667
Total	164,233,333	$$	36.99	164,233,333	235,766,667

1 Average Price Paid per Share excludes transaction costs.

29 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

 Stock Performance Graph

The comparison above assumes $100 invested on December 31, 2003, in AT&T common stock, Standard & Poor’s 500 Index (S&P 500), and Standard & Poor's 500 Integrated Telecom Index (Telecom Index). Total return equals stock price appreciation plus reinvestment of dividends on a quarterly basis.

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER

As required under the rules of the New York Stock Exchange (NYSE), our chief executive officer has timely submitted to the NYSE his annual certification that he is not aware of any violation by the company of NYSE corporate governance standards. Also as required under the rules of the NYSE, readers are advised that the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 are not included in this report but instead are included as exhibits to our Annual Report on Form 10-K for 2008.

30 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

RISK FACTORS

In addition to the other information set forth in this document, including the matters contained under the caption “Cautionary Language Concerning Forward-Looking Statements,” you should carefully read the matters described below. We believe that each of these matters could materially affect our business. We recognize that most of these factors are beyond our ability to control and therefore to predict an outcome. Accordingly, we have organized them by first addressing general factors, then industry factors and, finally, items specifically applicable to us.

A worsening U.S. economy would magnify our customers’ and suppliers’ current financial difficulties and could materially adversely affect our business.

We provide services and products to consumers and large and small businesses in the United States and to larger businesses throughout the world. The current economic recession in the U.S. has adversely affected our customers’ demand for and ability to pay for existing services, especially local landline service, and their interest in purchasing new services. Our suppliers are also facing higher financing and operating costs. Should these current economic conditions worsen, we likely would experience both a further decrease in revenues and an increase in certain expenses, including expenses relating to bad debt and equipment and software maintenance. We also may incur difficulties locating financially stable equipment and other suppliers thereby affecting our ability to offer attractive new services. We are also likely to experience greater pressure on pricing and margins as we continue to compete for customers who would have even less discretionary income. While our largest business customers have been less affected by these adverse changes in the U.S. economy, if the continued adverse economic conditions in the U.S., Europe and other foreign markets persist or worsen, those customers would likely be affected in a similar manner.

Adverse changes in medical costs and the U.S. securities markets and interest rates could materially increase our benefit plan costs.

Our pension and postretirement costs are subject to increases, primarily due to continuing increases in medical and prescription drug costs and can be affected by lower returns in prior years on funds held by our pension and other benefit plans, which are reflected in our financial statements over several years. Investment returns on these funds depend largely on trends in the U.S. securities markets and the U.S. economy. In calculating the annual costs included on our financial statements of providing benefits under our plans, we have made certain assumptions regarding future investment returns, medical costs and interest rates. If actual investment returns, medical costs and interest rates are worse than those previously assumed, our annual costs will increase. We experienced significant actual investment losses during 2008, which will cause a significant increase in our benefit plan costs during 2009.

The FASB required companies to recognize the funded status of defined benefit pension and postretirement plans as an asset or liability in our statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. Therefore, an increase in our costs will have a negative effect on our balance sheet.

The ongoing uncertainty in global financial markets could materially adversely affect our ability and our larger customers' ability to access capital needed to fund business operations.

The recent instability in the global financial markets and ongoing uncertainty affecting these markets have resulted in extreme volatility in the credit, equity and fixed income markets. This volatility has limited, in some cases severely, most companies’ access to the credit markets, leading to significantly higher borrowing costs for companies or, in many cases, the inability of these companies to fund their ongoing operations. As a result, our larger customers, who tend to be heavy users of our data and wireless services, may be forced to delay, reduce or be unable to finance, purchases of our products and services and may delay payment or default on outstanding bills to us. In addition, we contract with large financial institutions to support our own treasury operations, including contracts to hedge our exposure on interest rates and foreign exchange, and the funding of credit lines and other short-term debt obligations, including commercial paper. While we have been successful in continuing to access the credit and fixed income markets when needed, a financial crisis could render us unable to access these markets, severely affecting our business operations.

31 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

Changes in available technology could increase competition and our capital costs.

The telecommunications industry has experienced rapid changes in the last several years. The development of wireless, cable and IP technologies has significantly increased the commercial viability of alternatives to traditional wireline telephone service and enhanced the capabilities of wireless networks. In order to remain competitive, we have begun to deploy a more sophisticated wireline network and continue to deploy a more sophisticated wireless network, as well as research other new technologies. If the new technologies we have adopted or on which we have focused our research efforts fail to be cost-effective and accepted by customers, our ability to remain competitive could be materially adversely affected.

Changes to federal, state and foreign government regulations and decisions in regulatory proceedings could materially adversely affect us.

Our wireline subsidiaries are subject to significant federal and state regulation while many of our competitors are not. In addition, our subsidiaries and affiliates operating outside the U.S. are also subject to the jurisdiction of national and supranational regulatory authorities in the market where service is provided. Our wireless subsidiaries are regulated to varying degrees by the FCC and some state and local agencies. The adoption of new regulations or changes to existing regulations could significantly increase our costs, which either would reduce our operating margins or potentially increase customer turnover should we attempt to increase prices to cover our increased costs. In addition, the development of new technologies, such as IP-based services, has created or potentially could create conflicting regulation between the FCC and various state and local authorities, which may involve lengthy litigation to resolve and may result in outcomes unfavorable to us.

Increasing competition in our wireline markets could adversely affect wireline operating margins.

We expect competition in the telecommunications industry to continue to intensify. We expect this competition will continue to put pressure on pricing, margins and customer retention. A number of our competitors that rely on alternative technologies (e.g., wireless, cable and VoIP) are typically subject to less (or no) regulation than our wireline and ATTC subsidiaries and therefore are able to operate with lower costs. These competitors also have cost advantages compared to us, due in part to a nonunionized workforce, lower employee benefits and fewer retirees (as most of the competitors are relatively new companies). We believe such advantages can be offset by continuing to increase the efficiency of our operating systems and by improving employee training and productivity; however, there can be no guarantee that our efforts in these areas will be successful.

Increasing competition in the wireless industry could adversely affect our operating results.

On average, we have three to four other wireless competitors in each of our service areas and compete for customers based principally on price, service/device offerings, call quality, coverage area and customer service. In addition, we are likely to experience growing competition from providers offering services using alternative wireless technologies and IP-based networks as well as traditional wireline networks. We expect intense industry competition and market saturation may cause the wireless industry’s customer growth rate to moderate in comparison with historical growth rates. We expect that the availability of additional 700 MHz spectrum could increase competition and the effectiveness of existing competition. This competition will continue to put pressure on pricing and margins as companies compete for potential customers. Our ability to respond will depend, among other things, on continued improvement in network quality and customer service and effective marketing of attractive products and services, and cost management. These efforts will involve significant expenses and require strategic management decisions on, and timely implementation of equipment choices, marketing plans and financial budgets.

Equipment failures, natural disasters and terrorist attacks may materially adversely affect our operations.

Major equipment failures or natural disasters, including severe weather, terrorist acts or other breaches of network or IT security that affect our wireline and wireless networks, including telephone switching offices, microwave links, third-party owned local and long-distance networks on which we rely, our cell sites or other equipment, could have a material adverse effect on our operations. While we have insurance coverage for some of these events, our inability to operate our wireline or wireless systems, even for a limited time period, may result in significant expenses, a loss of customers or impair our ability to attract new customers, which could have a material adverse effect on our business, results of operations and financial condition.

32 

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Dollars in millions except per share amounts

The success of our U-verse services initiative will depend on the timing, extent and cost of deployment; the development of attractive and profitable service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability and reliability of the various technologies required to provide such offerings.

The trend in telecommunications technology is to shift from the traditional circuit- and wire-based technology to IP-based technology. IP-based technology can transport voice and data, as well as video, from both wired and wireless networks. IP-based networks also potentially cost less to operate than traditional networks. Our competitors, many of which are newer companies, are deploying this IP-based technology. In order to continue to offer attractive and competitively priced services, we are deploying a new broadband network to offer IP-based voice, data and video services. Using a new and sophisticated technology on a very large scale entails risks but also presents opportunities to expand service offerings to customers. Should deployment of our network be delayed or costs exceed expected amounts, our margins would be adversely affected and such effects could be material. Should regulatory requirements be different than we anticipated, our deployment could be delayed, perhaps significantly, or limited to only those geographical areas where regulation is not burdensome. In addition, should the delivery of services expected to be deployed on our network be delayed due to technological or regulatory constraints, performance of suppliers, or other reasons, or the cost of providing such services becomes higher than expected, customers may decide to purchase services from our competitors, which would adversely affect our revenues and margins, and such effects could be material.

A majority of our workforce is represented by labor unions. Absent the successful negotiation of certain agreements, we could experience lengthy work stoppages when these contracts expire during 2009.

A majority of our employees are represented by labor unions as of year-end 2008. Labor contracts covering many of these employees will expire during 2009. We experienced a work stoppage in 2004 when the contracts involving our wireline employees expired, and we may experience additional work stoppages this year. A work stoppage could adversely affect our business operations, including a loss of revenue and strained relationships with customers, and we can not predict the length of any such strike. We can not predict what will be the unions' requirements for a new contract nor the impact of a new contract on our financial condition.

33

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

·   Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability to access financial markets.

·   Changes in available technology and the effects of such changes including product substitutions and deployment costs.

·   Increases in our benefit plans’ costs including increases due to adverse changes in the U.S. and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates, and adverse medical cost trends.

·   The final outcome of Federal Communications Commission proceedings and reopenings of such proceedings and judicial review, if any, of such proceedings, including issues relating to access charges, broadband deployment, unbundled loop and transport elements and wireless services.

·   The final outcome of regulatory proceedings in the states in which we operate and reopenings of such proceedings, and judicial review, if any, of such proceedings, including proceedings relating to interconnection terms, access charges, universal service, unbundled network elements and resale and wholesale rates, broadband deployment including our U-verse services, performance measurement plans, service standards and traffic compensation.

·   Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments.

·   Our ability to absorb revenue losses caused by increasing competition and economic pressure, including offerings using alternative technologies (e.g., cable, wireless and VoIP), and our ability to maintain capital expenditures.

·   The extent of competition and the resulting pressure on access line totals and wireline and wireless operating margins.

·   Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.

·   The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).

·   The timing, extent and cost of deployment of our U-verse services (our Lightspeed initiative); the development of attractive and profitable service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.

·   The outcome of pending or threatened litigation including patent claims by or against third parties.

·   The impact on our networks and business of major equipment failures, severe weather conditions, natural disasters or terrorist attacks.

·   The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.

·   The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations; and the resolution of disputes with any taxing jurisdictions.

·   Our ability to adequately fund our wireless operations, including access to additional spectrum; network upgrades and technological advancements.

·   Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, to respond to competition and regulatory, legislative and technological developments.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

34 

AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
	2008			2007			2006
Operating Revenues
Wireless service	$	44,249		$	38,568		$	223
Voice		37,321			40,798			33,714
Data		24,372			23,206			18,317
Directory		5,416			4,806			3,634
Other		12,670			11,550			7,167
Total operating revenues		124,028			118,928			63,055
Operating Expenses
Cost of services and sales (exclusive of depreciation and
amortization shownseparately below)		49,895			46,705			28,854
Selling, general and administrative		31,187			30,242			14,006
Depreciation and amortization		19,883			21,577			9,907
Total operating expenses		100,965			98,524			52,767
Operating Income		23,063			20,404			10,288
Other Income (Expense)
Interest expense		(3,390	)		(3,507	)		(1,843	)
Equity in net income of affiliates		819			692			2,043
Other income (expense) – net		(589	)		615			393
Total other income (expense)		(3,160	)		(2,200	)		593
Income Before Income Taxes		19,903			18,204			10,881
Income taxes		7,036			6,253			3,525
Net Income	$	12,867		$	11,951		$	7,356
Basic Earnings Per Share	$	2.17		$	1.95		$	1.89
Diluted Earnings Per Share	$	2.16		$	1.94		$	1.89
The accompanying notes are an integral part of the consolidated financial statements.

35 

AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	December 31,
	2008			2007
Assets
Current Assets
Cash and cash equivalents	$	1,792		$	1,970
Accounts receivable – net of allowances for uncollectibles of $1,270 and $1,364		16,047			16,185
Prepaid expenses		1,538			1,524
Deferred income taxes		1,014			2,044
Other current assets		2,165			2,963
Total current assets		22,556			24,686
Property, Plant and Equipment – Net		99,088			95,890
Goodwill		71,829			70,713
Licenses		47,306			37,985
Customer Lists and Relationships – Net		10,582			14,505
Other Intangible Assets – Net		5,824			5,912
Investments in Equity Affiliates		2,332			2,270
Postemployment Benefit		-			17,291
Other Assets		5,728			6,392
Total Assets	$	265,245		$	275,644
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year	$	14,119		$	6,860
Accounts payable and accrued liabilities		20,032			21,399
Advanced billing and customer deposits		3,849			3,571
Accrued taxes		1,874			5,027
Dividends payable		2,416			2,417
Total current liabilities		42,290			39,274
Long-Term Debt		60,872			57,255
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		19,196			24,939
Postemployment benefit obligation		31,930			24,011
Other noncurrent liabilities		14,610			14,798
Total deferred credits and other noncurrent liabilities		65,736			63,748
Stockholders’ Equity
Common shares ($1 par value, 7,000,000,000 authorized: issued
6,495,231,088 at December 31, 2008 and 2007)		6,495			6,495
Capital in excess of par value		91,728			91,638
Retained earnings		36,591			33,297
Treasury shares (602,221,825 at December 31, 2008,
and 451,685,839 at December 31, 2007, at cost)		(21,410	)		(15,683	)
Accumulated other comprehensive income (loss)		(17,057	)		(380	)
Total stockholders’ equity		96,347			115,367
Total Liabilities and Stockholders’ Equity	$	265,245		$	275,644
The accompanying notes are an integral part of the consolidated financial statements.

36 

AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
	2008			2007			2006
Operating Activities
Net income	$	12,867		$	11,951		$	7,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,883			21,577			9,907
Undistributed earnings from investments in equity affiliates		(654	)		(297	)		(1,946	)
Provision for uncollectible accounts		1,796			1,617			586
Deferred income tax expense (benefit)		5,889			(240	)		(87	)
Net (gain) loss from impairment and sale of investments		517			(11	)		(10	)
Gain on license exchange		-			(409	)		-
Changes in operating assets and liabilities:
Accounts receivable		(1,421	)		(1,491	)		519
Other current assets		827			(1,020	)		30
Accounts payable and accrued liabilities		(5,563	)		672			(2,213	)
Share-based payment tax benefit		(15	)		(173	)		(18	)
Other – net		(470	)		2,066			1,564
Total adjustments		20,789			22,291			8,332
Net Cash Provided by Operating Activities		33,656			34,242			15,688
Investing Activities Construction and capital expenditures:
Capital expenditures		(19,676	)		(17,717	)		(8,320	)
Interest during construction		(659	)		(171	)		(73	)
Net investments in affiliates		-			-			(1,104	)
Acquisitions, net of cash acquired		(10,972	)		(2,873	)		368
Dispositions		1,615			1,594			756
Proceeds from sale of securities, net of investments		68			455			-
Sale of other investments		436			-			-
Other		45			36			7
Net Cash Used in Investing Activities		(29,143	)		(18,676	)		(8,366	)
Financing Activities
Net change in short-term borrowings with original maturities of three months or less		2,017			(3,411	)		3,649
Issuance of long-term debt		12,416			11,367			1,491
Repayment of long-term debt		(4,010	)		(6,772	)		(4,242	)
Purchase of treasury shares		(6,077	)		(10,390	)		(2,678	)
Issuance of treasury shares		319			1,986			589
Dividends paid		(9,507	)		(8,743	)		(5,153	)
Share-based payment tax benefit		15			173			18
Other		136			(224	)		198
Net Cash Used in Financing Activities		(4,691	)		(16,014	)		(6,128	)
Net increase (decrease) in cash and cash equivalents		(178	)		(448	)		1,194
Cash and cash equivalents beginning of year		1,970			2,418			1,224
Cash and Cash Equivalents End of Year	$	1,792		$	1,970		$	2,418

The accompanying notes are an integral part of the consolidated financial statements.

37 

AT&T Inc.
Consolidated Statements of Stockholders’ Equity
Dollars and shares in millions except per share amounts
	2008						2007							2006
	Shares			Amount			Shares			Amount			Shares			Amount
Common Stock
Balance at beginning of year		6,495		$	6,495			6,495		$	6,495			4,065		$	4,065
Issuance of shares		-			-			-			-			2,430			2,430
Balance at end of year		6,495		$	6,495			6,495		$	6,495			6,495		$	6,495
Capital in Excess of Par Value
Balance at beginning of year				$	91,638					$	91,352					$	27,499
Issuance of shares					87						225						63,637
Stock-based payment					3						61						216
Balance at end of year				$	91,728					$	91,638					$	91,352
Retained Earnings
Balance at beginning of year				$	33,297					$	30,375					$	29,106
Net income ($2.16, $1.94 and $1.89 per share)					12,867						11,951						7,356
Dividends to stockholders ($1.61, $1.47 and $1.35 per share)					(9,506	)					(8,945	)					(6,079	)
Adoption of FIN 48					-						(50	)					-
Other					(67	)					(34	)					(8	)
Balance at end of year				$	36,591					$	33,297					$	30,375
Treasury Shares
Balance at beginning of year		(451	)	$	(15,683	)		(256	)	$	(7,368	)		(188	)	$	(5,406	)
Purchase of shares		(164	)		(6,077	)		(267	)		(10,390	)		(84	)		(2,678	)
Issuance of shares		13			350			72			2,075			16			716
Balance at end of year		(602	)	$	(21,410	)		(451	)	$	(15,683	)		(256	)	$	(7,368	)
Additional Minimum Pension Liability Adjustment
Balance at beginning of year				$	-					$	-					$	(218	)
Required adjustments, net of tax $6					-						-						10
Adoption of FAS 158					-						-						208
Balance at end of year				$	-					$	-					$	-
Accumulated Other Comprehensive Income (Loss), net of tax
Balance at beginning of year				$	(380	)				$	(5,314	)				$	(356	)
Foreign currency translation adjustments,
net of taxes of $(239), $10 and $9					(443)						19						17
Net unrealized gains (losses) on securities:
Unrealized gains (losses), net of taxes of $(139), $35 and $7					(259	)					65						13
Less reclassification adjustment realized in net income,
net of taxes of $(9), $(19) and $(4)					(16	)					(35	)					(8	)
Net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses), net of taxes of $(148), $(38) and $2					(274	)					(71	)					2
Less reclassification adjustment realized in net income,
net of taxes of $9, $9 and $8					17						17						15
Defined benefit postretirement plans (see Note 11):
Net actuarial gains and prior service cost arising during period, net of taxes of $(9,298) and $3,411					(15,582	)					4,734						-
Amortization of net actuarial loss and prior service benefit included in net income, net of taxes of $(74) and $125					(120	)					206						-
Other					-						(1	)					2
Other comprehensive income (loss)					(16,677	)					4,934						41
Adoption of FAS 158, net of tax					-						-						(4,999	)
Balance at end of year				$	(17,057	)				$	(380	)				$	(5,314	)
Total Comprehensive Income
Net income				$	12,867					$	11,951					$	7,356
Additional minimum pension liability adjustments per above					-						-						10
Other comprehensive income (loss) per above					(16,677	)					4,934						41
Total Comprehensive Income (Loss)				$	(3,810	)				$	16,885					$	7,407
The accompanying notes are an integral part of the consolidated financial statements.

38

Notes to Consolidated Financial Statements

Dollars in millions except per share amounts

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation  Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry throughout the U.S. and internationally, providing wireless and wireline telecommunications services and equipment as well as directory advertising and publishing services.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships, joint ventures, and less-than-majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our year end (see Note 7).

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates.

FAS 160  In December 2007, the Fincancial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (FAS 160). FAS 160 requires noncontrolling interests held by parties other than the parent in subsidiaries to be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. FAS 160 is effective for fiscal years beginning after December 15, 2008. At December 31, 2008, we had $375 of noncontrolling interests to be reclassified.

FAS 141(R) In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (FAS 141(R)). FAS 141(R) is a revision of FAS 141 and requires that costs incurred to effect the acquisition (i.e., acquisition-related costs) be recognized separately from the acquisition. In addition, in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (FAS 141), restructuring costs that the acquirer expected but was not obligated to incur, which included changes to benefit plans, were recognized as if they were a liability assumed at the acquisition date. FAS 141(R) requires the acquirer to recognize those costs separately from the business combination. FAS 141(R) is effective for us in 2009, and its impact will vary with each acquisition.

FAS 161  In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (FAS 161). FAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities to improve the transparency of financial reporting. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. FAS 161 is expected to increase quarterly and annual disclosures but will not have an impact on our financial position and results of operations.

FSP 157-3  In October 2008, the FASB issued FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset When the Market of that Asset is not Active” (FSP 157-3). FSP 157-3 provides an example that clarifies and reiterates certain provisions of the existing fair value standard, including basing fair value on orderly transactions and usage of management and broker inputs. FSP 157-3 is effective immediately but is not expected to have a material impact on our financial position or results of operations.

FSP FAS 142-3In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact that FSP FAS 142-3 will have on our accounting for intangible assets.

FSP FAS 132(R)-1In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP FAS 132(R)-1). FSP FAS 132(R)-1 amends FASB Statement No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefit” (FAS 132(R)). This FASB Staff Position replaces the requirement to disclose the percentage of fair value of total plan assets with a requirement to disclose the fair value of each major asset category. It also amends FASB Statement No. 157, “Fair Value Measurements” (FAS 157), to clarify that defined benefit pension or other postretirement plan assets are not subject to FAS 157’s disclosure requirements. FSP FAS 132(R)-1 is effective for fiscal years ending after December 2009. This FSP will significantly increase the amount of disclosures for plan assets in our 2009 Annual Report.

39

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

EITF 08-6  In November 2008, the Emerging Issues Task Force (EITF) reached a consensus on EITF 08-6, “Equity Method Investment Accounting Considerations.” EITF 08-6 provides guidance on the application of the equity method. It states equity-method investments should be recognized using a cost accumulation model. Also, it requires that equity method investments as a whole be assessed for other-than-temporary impairment in accordance with Accounting Principles Board Opinion No. 18. EITF 08-6 is effective on a prospective basis for transactions in an investee’s shares occurring or impairments recognized in fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. This EITF will not have a material impact on our financial position and results of operations.

EITF 08-7  In November 2008, the EITF reached a consensus on EITF 08-7, “Accounting for Defensive Intangible Assets.” EITF 08-7 provides that intangible assets that an acquirer intends to use as defensive assets, intangible assets acquired in a business combination or an asset acquisition that an entity does not intend to actively use but does intend to prevent others from using, are a separate unit of account from the existing intangible assets of the acquirer. It also states that a defensive intangible asset should be amortized over the period that the fair value of the defensive intangible asset diminishes. EITF 08-7 is effective on a prospective basis for transactions occurring in fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. This EITF will require AT&T to recognize at fair value certain assets associated with trademarks for the non-surviving companies of acquisitions and amortize these trademarks over the period they are expected to contribute directly or indirectly to the entity’s future cash flows.

Valuation and Other Adjustments Included in the current liabilities reported on our consolidated balance sheet are accruals established under EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination” (EITF 95-3). The liabilities include accruals for severance, lease terminations and equipment removal costs associated with our acquisitions of AT&T Corp., BellSouth Corporation (BellSouth) and Dobson Communications Corporation. Following is a summary of the accruals recorded under EITF 95-3 at December 31, 2007, cash payments made during 2008 and the adjustments thereto.

		12/31/07		Cash		Adjustments			12/31/08
		Balance		Payments		and Accruals			Balance
Severance accruals paid from:
Company funds	$	540	$	(321)	$	(79)	$	140
Pension and postemployment benefit plans		129		(26)		-		103
Lease terminations		425		(110)		72		387
Equipment removal and other related costs		161		(62)		(11)		88
Total	$	1,255	$	(519)	$	(18)	$	718

Split-Dollar Life Insurance  In 2007, the EITF ratified the consensus on EITF 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (EITF 06-4) and EITF 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (EITF 06-10). EITF 06-4 and EITF 06-10 cover split-dollar life insurance arrangements (where the company owns and controls the policy) and provides that an employer should recognize a liability for future benefits in accordance with Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (FAS 106). These are effective for fiscal years beginning after December 15, 2007. We adopted EITF 06-4 and EITF 06-10 on January 1, 2008, recording additional postretirement liabilities of $101 and a decrease to retained earnings of $63.

Reclassifications  We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

40

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Income Taxes  We adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) on January 1, 2007. With our adoption of FIN 48, we provide deferred income taxes for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of assets and liabilities computed pursuant to FIN 48. Under FIN 48, the tax bases of assets and liabilities are based on amounts that meet the FIN 48 recognition threshold and are measured pursuant to the measurement requirement in FIN 48. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for which the realization is uncertain. We review these items regularly in light of changes in federal and state tax laws and changes in our business.

Investment tax credits earned prior to their repeal by the Tax Reform Act of 1986 are amortized as reductions in income tax expense over the lives of the assets, which gave rise to the credits. Additionally, we report taxes imposed by governmental authorities on revenue-producing transactions between us and our customers in the income statement on a net basis.

Cash Equivalents  Cash and cash equivalents include all highly-liquid investments with original maturities of three months or less and the carrying amounts’ approximate fair value. At December 31, 2008, we held $958 in cash and $834 in money market funds and other cash equivalents.

Investment Securities  Investments in securities principally consist of available-for-sale instruments. Short-term and long-term investments in money market securities are carried as held-to-maturity securities. Available-for-sale securities consist of various debt and equity securities that are long term in nature. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income. Our investment securities maturing within one year are recorded in “Other current assets” and instruments with maturities of more than one year are recorded in “Other Assets” on the consolidated balance sheets. Unrealized losses that are considered other than temporary are recorded in Other Income (Expense) with the corresponding reduction to the carrying basis of the investment (see Note 11).

Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157) requires disclosures for financial assets and liabilities that are remeasured at fair value at least annually. FAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Substantially all of our available-for-sale securities are valued using quoted market prices (referred to as Level 1). Adjustments to fair value are recorded in other comprehensive income until the investment is sold or they are impaired (see Note 2). The fair market value of these securities was $1,632 at December 31, 2008.

Revenue Recognition  Revenues derived from wireless, local telephone, long-distance, data and video services are recognized when services are provided. This is based upon either usage (e.g., minutes of traffic processed), period of time (e.g., monthly service fees) or other established fee schedules. Our wireless service revenues are billed either in advance, arrears or are prepaid. Our wireless Rollover® rate plans include a feature whereby unused anytime minutes do not expire each month but rather are available, under certain conditions, for future use for a period not to exceed one year from the date of purchase. Using historical subscriber usage patterns, we defer these revenues based on an estimate of the portion of unused minutes expected to be utilized prior to expiration.

We record an estimated revenue reduction for future adjustments to customer accounts, other than a provision for doubtful accounts, at the time revenue is recognized based on historical experience. Service revenues also include billings to our customers for various regulatory fees imposed on us by governmental authorities. Cash incentives given to customers are recorded as a reduction of revenue. When required as part of providing service, revenues and associated expenses related to nonrefundable, upfront service activation and setup fees are deferred and recognized over the associated service contract period. If no service contract exists, those fees are recognized over the average customer relationship period. Associated expenses are deferred only to the extent of such deferred revenue. For contracts that involve the bundling of services, revenue is allocated to the services based on their relative fair value. We record the sale of equipment to customers as gross revenue when we are the primary obligor in the arrangement, when title is passed and when the products are accepted by customers. For agreements involving the resale of third-party services in which we are not considered the primary obligor of the arrangement, we record the revenue net of the associated costs incurred. For contracts in which we provide customers with an indefeasible right to use network capacity, we recognize revenue ratably over the stated life of the agreement.

41

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

We recognize revenues and expenses related to publishing directories on the amortization method, which recognizes revenues and expenses ratably over the life of the directory title, typically 12 months.

Traffic Compensation Expense  We use various estimates and assumptions to determine the amount of traffic compensation expenses recognized during any reporting period. Switched traffic compensation costs are accrued utilizing estimated rates by product, formulated from historical data and adjusted for known rate changes and volume levels. Such estimates are adjusted monthly to reflect newly-available information, such as rate changes and new contractual agreements. Bills reflecting actual incurred information are generally not received until three to nine months subsequent to the end of the reporting period, at which point a final adjustment is made to the accrued switched traffic compensation expense. Dedicated traffic compensation costs are estimated based on the number of circuits and the average projected circuit costs. These costs are adjusted to reflect actual expenses over the three months following the end of the reporting period as bills are received.

Allowance for Uncollectibles  We maintain an allowance for doubtful accounts for estimated losses that result from the failure or inability of our customers to make required payments. When determining the allowance, we consider the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends as well as general economic factors, including bankruptcy rates. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances with reserves generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific collection issues are known to exist, such as pending bankruptcy or catastrophes. The analysis of receivables is performed monthly and the bad-debt allowances are adjusted accordingly.

Inventory  Inventories are included in “Other current assets” on our consolidated balance sheet and were $862 and $1,119 at December 31, 2008 and 2007, respectively. Wireless handsets and accessories, which are valued at the lower of cost or market value (determined using current replacement cost) amount to $749 and $836 for the years 2008 and 2007. The remainder of our inventory includes new and reusable supplies and network equipment of our local telephone operations, which are stated principally at average original cost, except that specific costs are used in the case of large individual items. Inventories of our other subsidiaries are stated at the lower of cost or market.

Property, Plant and Equipment  Property, plant and equipment is stated at cost, except for assets acquired using purchase accounting, which are recorded at fair value (see Note 2). The cost of additions and substantial improvements to property, plant and equipment is capitalized. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses. Property, plant and equipment is depreciated using straight-line methods over their estimated economic lives. Certain subsidiaries follow composite group depreciation methodology; accordingly, when a portion of their depreciable property, plant and equipment is retired in the ordinary course of business, the gross book value is reclassified to accumulated depreciation; no gain or loss is recognized on the disposition of this plant.

Property, plant and equipment is reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss shall be recognized only if the carryingamount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

The fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred if a reasonable estimate of fair value can be made. In periods subsequent to initial measurement, period-to-period changes in the liability for an asset retirement obligation resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows are recognized. The increase in the carrying value of the associated long-lived asset is depreciated over the corresponding estimated economic life.

Software Costs  It is our policy to capitalize certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in “Property, Plant and Equipment” on our consolidated balance sheets and are primarily amortized over a three-year period. Software costs that do not meet capitalization criteria are expensed immediately.

42

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Goodwill and Other Intangible Assets  Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. We have completed our annual impairment testing for 2008 and determined that no impairment exists.

Intangible assets that have finite useful lives are amortized over their useful lives, a weighted average of 7.4 years. Customer relationships are amortized using primarily the sum-of-the-months-digits method of amortization over the expected period in which those relationships are expected to contribute to our future cash flows based in such a way as to allocate it as equitably as possible to periods during which we expect to benefit from those relationships.

A significant portion of intangible assets in our wireless segment are Federal Communications Commission (FCC) licenses that provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communications services. While FCC licenses are issued for a fixed time, renewals of FCC licenses have occurred routinely and at nominal cost. Moreover, we have determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our FCC licenses, and therefore the FCC licenses are an indefinite-lived intangible asset under the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

In accordance with EITF No. 02-7, “Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets,”we test FCC licenses for impairment on an aggregate basis, consistent with the management of the business on a national scope. During the fourth quarter of 2008, we completed the annual impairment tests for indefinite-lived FCC licenses. These annual impairment tests resulted in no impairment of indefinite-lived FCC licenses.

Advertising Costs  Advertising costs for advertising products and services or for promoting our corporate image are expensed as incurred.

Foreign Currency Translation  Our foreign investments and foreign subsidiaries generally report their earnings in their local currencies. We translate our share of their foreign assets and liabilities at exchange rates in effect at the balance sheet dates. We translate our share of their revenues and expenses using average rates during the year. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income in the accompanying consolidated balance sheets. Gains and losses resulting from exchange-rate changes on transactions denominated in a currency other than the local currency are included in earnings as incurred.

We have also entered into foreign currency contracts to minimize our exposure to risk of adverse changes in currency exchange rates. We are subject to foreign exchange risk for foreign currency-denominated transactions, such as debt issued, recognized payables and receivables and forecasted transactions. At December 31, 2008, our foreign currency exposures were principally Mexican pesos, Euros, Danish krone, Swedish krona and Canadian dollars.

Derivative Financial Instruments  We record derivatives on the balance sheet at fair value. We do not invest in derivatives for trading purposes. We use derivatives from time to time as part of our strategy to manage risks associated with our contractual commitments. These derivatives are designated as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). Our derivative financial instruments primarily include interest rate swap agreements and foreign currency exchange contracts. For example, we use interest rate swaps to manage our exposure to changes in interest rates on our debt obligations (see Note 9). We account for our interest rate swaps using mark-to-market accounting and include gains or losses from interest rate swaps when paid or received in interest expense in our consolidated statements of income. Amounts paid or received on interest rate forward contracts are amortized over the period of the related interest payments.

All other derivatives are not formally designated for accounting purposes (undesignated). These derivatives, although undesignated for accounting purposes, are entered into to hedge economic risks.

43

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

We record changes in the fair value of fair value hedges, along with the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk. Gains or losses upon termination of our fair value hedges are recognized as interest expense when the hedge instrument is settled.

We record changes in the fair value of cash flow hedges, along with the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk, in “Accumulated other comprehensive income,” which is a component of Stockholders' Equity. This includes the foreign currency contracts noted above. The settlement gains or costs on our cash flow hedges are amortized as interest expense over the term of the interest payments of the related debt issuances.

Changes in the fair value of undesignated derivatives are recorded in other income (expense), net, along with the change in fair value of the underlying asset or liability, as applicable.

Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.

When hedge accounting is discontinued, the derivative is adjusted for changes in fair value through other income (expense), net. For fair value hedges, the underlying asset or liability will no longer be adjusted for changes in fair value, and any asset or liability recorded in connection with the hedging relationship (including firm commitments) will be removed from the balance sheet and recorded in current-period earnings. For cash flow hedges, gains and losses that were accumulated in other comprehensive income as a component of stockholders' equity in connection with hedged assets or liabilities or forecasted transactions will be recognized in other income (expense) - net, in the same period the hedged item affects earnings.

Employee Separations  In accordance with Statement of Financial Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits,” (FAS 112) we establish obligations for expected termination benefits provided under existing plans to former or inactive employees after employment but before retirement. These benefits include severance payments, workers’ compensation, disability, medical continuation coverage and other benefits. At December 31, 2008, we had severance accruals under FAS 112 of $752. At December 31, 2007, we had severance accruals of $127.

Pension and Postretirement Benefits  See Note 11 for a comprehensive discussion of our pension and postretirement benefit expense, including a discussion of the actuarial assumptions.

NOTE 2.  ACQUISITIONS, DISPOSITIONS, VALUATION AND OTHER ADJUSTMENTS

Acquisitions

Dobson  In November 2007, we acquired Dobson Communications Corporation (Dobson) for approximately $2,500. Under the purchase method of accounting, the transaction was valued, for accounting purposes, at $2,580. Our December 31, 2007 consolidated balance sheet included the preliminary valuation of the fair value of Dobson’s assets and liabilities, including goodwill of $2,623, licenses of $2,230, customer lists of $517 and other intangible assets totaling $8 associated with this transaction. Final adjustments to the preliminary valuation included an increase to goodwill of $990, a decrease in licenses of $781 and a decrease in customer lists of $12. The resulting balances are $3,613 for goodwill, $1,449 for licenses and $505 for customer lists. Adjustments were primarily related to changes in the valuation of certain licenses and an increase in the estimate of relative obsolescence of property, plant and equipment resulting in a decrease in value and shorter average remaining economic life, and an adjustment to the value of the markets included in the divestiture order by the FCC. Pursuant to the order, we exchanged certain properties, spectrum and $355 in cash for other licenses and properties. Deferred tax adjustments are associated with the above-mentioned items. Dobson marketed wireless services under the Cellular One brand and had provided roaming services to AT&T subsidiaries since 1990. Dobson had 1.7 million subscribers across 17 states. Dobson’s operations were incorporated into our wireless operations following the date of acquisition.

BellSouth Corporation  In December 2006, we acquired BellSouth under FAS 141, issuing 2.4 billion shares. BellSouth was the leading communications service provider in the southeastern U.S., providing wireline communications services, including local exchange, network access, long-distance services and Internet services to substantial portions of the population across nine states. BellSouth also provided long-distance services to enterprise customers throughout the country.

44

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

We and BellSouth jointly owned AT&T Mobility and the Internet-based publisher YELLOWPAGES.COM (YPC). In the AT&T Mobility joint venture, we held a 60% economic interest and BellSouth held a 40% economic interest, and in the YPC joint venture, we held a 66% economic interest and BellSouth held a 34% economic interest. For each joint venture, control was shared equally. We and BellSouth each accounted for the joint ventures under the equity method of accounting, recording the proportional share of AT&T Mobility’s and YPC’s income as equity in net income of affiliates on the respective consolidated statements of income and reporting the ownership percentage of AT&T Mobility’s net assets as “Investments in and Advances to AT&T Mobility” and the ownership percentage of YPC’s net assets as “Investments in Equity Affiliates” on the respective consolidated balance sheets. After the BellSouth acquisition, BellSouth, AT&T Mobility and YPC became wholly-owned subsidiaries of AT&T, and the operational results of these companies have been included in our consolidated financial statements since the December 29, 2006 acquisition date.

Under the purchase method of accounting, the transaction was valued, for accounting purposes, at approximately $66,800 and the assets and liabilities of BellSouth were recorded at their respective fair value at the date of acquisition.

Other Acquisitions  During 2008, we acquired Easterbrooke Cellular Corporation, Windstream Wireless, Wayport Inc. and the remaining 64% of Edge Wireless for a combined $663, recording $449 in goodwill. The acquisitions of these companies are designed to expand our wireless and Wi-Fi coverage area.

During 2007, we acquired Interwise®, a global provider of voice, Web and video conferencing services to businesses, for $122 and Ingenio®, a provider of Pay Per Call® technology for directory and local search business, for $195, net of cash. We recorded $304 of goodwill related to these acquisitions.

During 2006, we acquired Comergent Technologies, Nistevo Corporation and USinternetworking, Inc., for a combined $500, recording $333 in goodwill. The acquisitions of these companies are designed to enhance our service offerings for Web hosting and application management.

Dispositions

In April 2008, we sold to Local Insight Regatta Holdings, Inc., the parent company of Local Insight Yellow Pages, the Independent Line of Business segment of the L.M. Berry Company for $230.

In May 2007, we sold to Clearwire Corporation (Clearwire), a national provider of wireless broadband Internet access, education broadband service spectrum and broadband radio service spectrum valued at $300. Sale of this spectrum was required as a condition to the approval of our acquisition of BellSouth.

Other Adjustments

As ATTC and BellSouth stock options that were converted at the time of the respective acquisitions are exercised, the tax effect on those options may further reduce goodwill. During 2008, we recorded $1 in related goodwill reductions for ATTC and $9 for BellSouth.

45

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 3.  EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for the years ended December 31, 2008, 2007 and 2006 are shown in the table below:

Year Ended December 31,	2008		2007		2006
Numerators
Numerator for basic earnings per share:
Net Income	$	12,867	$	11,951	$	7,356
Dilutive potential common shares:
Other share-based payment		9		8		7
Numerator for diluted earnings per share	$	12,876	$	11,959	$	7,363
Denominators (000,000)
Denominator for basic earnings per share:
Weighted-average number of common
shares outstanding		5,927		6,127		3,882
Dilutive potential common shares:
Stock options		9		24		4
Other share-based payment		22		19		16
Denominator for diluted earnings per share		5,958		6,170		3,902
Basic earnings per share	$	2.17	$	1.95	$	1.89
Diluted earnings per share	$	2.16	$	1.94	$	1.89

At December 31, 2008, 2007 and 2006, we had issued and outstanding options to purchase approximately 204 million, 231 million and 309 million shares of AT&T common stock. The exercise prices of options to purchase a weighted-average of 144 million, 93 million and 201 million shares in 2008, 2007 and 2006 exceeded the average market price of AT&T stock. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the respective periods. At December 31, 2008, the exercise price of 20 million share options was below market price.

46

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer different products and services and are managed accordingly. We analyze our various operating segments based on segment income before income taxes. Interest expense, interest income and other income (expense) – net are managed only on a total company basis and are, accordingly, reflected only in consolidated results. The wireless segment includes minority interest reported as other income (expense) – net in the consolidated statements of income. Therefore, these items are not included in the calculation of each segment’s percentage of our consolidated results. As a result of the December 29, 2006 acquisition of BellSouth we have revised our segment reporting to represent how we now manage our business, restating prior periods to conform to the current segments. The customers and long-lived assets of our reportable segments are predominantly in the United States. We have four reportable segments: (1) wireless, (2) wireline, (3) advertising & publishing and (4) other.

The wireless segment provides voice, data and other wireless communications services, and includes 100% of the results of AT&T Mobility, which was our wireless joint venture with BellSouth prior to the December 29, 2006 acquisition and is now a wholly-owned subsidiary of AT&T. Prior to the acquisition, we analyzed AT&T Mobility’s revenues and expenses under the wireless segment, and we eliminated the wireless segment in our consolidated financial statements. In our 2006 and prior consolidated financial statements we reported our 60% proportionate share of AT&T Mobility’s results as equity in net income of affiliates.

The wireline segment provides both retail and wholesale landline communications services, including local and long-distance voice, switched access, Internet protocol and Internet access data, messaging services, managed networking to business customers, AT&T U-verseSM TV service and satellite television services through our agency agreements with EchoStar Communications Corp. (EchoStar) and the DIRECTV Group, Inc.

The advertising & publishing segment includes our directory operations, which publish Yellow and White Pages directories and sell directory advertising and Internet-based advertising and local search. This segment includes the results of YPC, which was a joint venture with BellSouth prior to the December 29, 2006 acquisition and is now a wholly-owned subsidiary of AT&T. For segment reporting disclosure, we have carried forward the deferred revenue and deferred cost balances for BellSouth at the acquisition date in order to reflect how the segment is managed. This is different for consolidated reporting purposes as under FAS 141, BellSouth deferred revenue and expenses from directories published during the 12-month period ending with the December 29, 2006 acquisition date, are not recognized and therefore were not included in the opening balance sheet. For management reporting purposes, we continue to amortize these balances over the life of the directory. Thus, our advertising & publishing segment results in 2007 include revenue of $964 and expenses of $308, related to directories published in the Southeast region during 2006, prior to our acquisition of BellSouth. These amounts are eliminated in the consolidations and eliminations column in the following reconciliation.

The other segment includes results from Sterling Commerce, Inc., customer information services and all corporate and other operations. This segment includes our portion of the results from our international equity investments. Also included in the other segment are impacts of corporate wide decisions for which the individual operating segments are not being evaluated. Prior to December 29, 2006, this segment also included our results from AT&T Mobility as equity in net income of affiliates, as discussed above.

In the following tables, we show how our segment results are reconciled to our consolidated results reported in accordance with GAAP. The Wireless, Wireline, Advertising & Publishing and Other columns represent the segment results of each such operating segment. The Consolidation and Elimination column adds in those line items that we manage on a consolidated basis only: interest expense, interest income and other income (expense) – net. This column also eliminates any intercompany transactions included in each segment’s results as well as the advertising & publishing revenue and expenses in 2007 related to directories published in the Southeast region during 2006, mentioned previously. In 2006, since our 60% share of the results from AT&T Mobility is already included in the Other column, the Wireless Elimination column removes the non-consolidated results shown in the wireless segment. In the “Segment assets” line item, we have eliminated the value of our investments in our fully consolidated subsidiaries and the intercompany financing assets as these have no impact to the segments’ operations.

47

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Segment results, including a reconciliation to AT&T consolidated results, for 2008, 2007 and 2006 are as follows:

At December 31, 2008 or for the year ended
						Advertising &					Consolidation			Consolidated
	Wireless			Wireline		Publishing		Other			and Elimination			Results
Revenues from external customers	$	49,174		$	67,668	$	5,416	$	1,770		$	-		$	124,028
Intersegment revenues		161			2,186		86		273			(2,706	)		-
Total segment operating revenues		49,335			69,854		5,502		2,043			(2,706	)		124,028
Operations and support expenses		32,481			45,553		2,998		2,755			(2,705	)		81,082
Depreciation and amortization expenses		5,770			13,150		789		174			-			19,883
Total segment operating expenses		38,251			58,703		3,787		2,929			(2,705	)		100,965
Segment operating income		11,084			11,151		1,715		(886	)		(1	)		23,063
Interest expense		-			-		-		-			3,390			3,390
Equity in net income of affiliates		6			-		-		813			-			819
Minority interest		(256	)		-		-		-			256			-
Other income (expense) – net		-			-		-		-			(589	)		(589	)
Segment income before income taxes	$	10,834		$	11,151	$	1,715	$	(73	)	$	(3,724	)	$	19,903
Segment assets	$	112,146		$	157,501	$	11,038	$	8,769		$	(24,209	)	$	265,245
Investment in equity method investees		2			-		-		2,330			-			2,332
Expenditures for additions to long-lived assets		5,869			14,129		20		317			-			20,335

At December 31, 2007 or for the year ended
						Advertising &				Consolidation			Consolidated
	Wireless			Wireline		Publishing		Other		and Elimination			Results
Revenues from external customers	$	42,574		$	69,571	$	5,771	$	1,976	$	(964	)	$	118,928
Intersegment revenues		110			2,012		80		253		(2,455	)		-
Total segment operating revenues		42,684			71,583		5,851		2,229		(3,419	)		118,928
Operations and support expenses		28,585			46,177		3,066		1,882		(2,763	)		76,947
Depreciation and amortization expenses		7,079			13,416		924		158		-			21,577
Total segment operating expenses		35,664			59,593		3,990		2,040		(2,763	)		98,524
Segment operating income		7,020			11,990		1,861		189		(656	)		20,404
Interest expense		-			-		-		-		3,507			3,507
Equity in net income (loss) of affiliates		16			-		-		676		-			692
Minority interest		(198	)		-		-		-		198			-
Other income (expense) – net		-			-		-		-		615			615
Segment income before income taxes	$	6,838		$	11,990	$	1,861	$	865	$	(3,350	)	$	18,204
Segment assets	$	103,559		$	158,338	$	13,103	$	2,859	$	(2,215	)	$	275,644
Investment in equity method investees		13			-		-		2,257		-			2,270
Expenditures for additions to long-lived assets		3,840			13,767		25		256		-			17,888

48 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

For the year ended December 31, 2006
						Advertising					Consolidation
	Wireless			Wireline		& Publishing			Other		and Elimination			Wireless Elimination			Consolidated Results
Revenues from external customers	$	37,537		$	57,468	$	3,634		$	1,707	$	-		$	(37,291	)	$	63,055
Intersegment revenues		-			5		51			176		(232	)		-			-
Total segment operating revenues		37,537			57,473		3,685			1,883		(232	)		(37,291	)		63,055
Operations and support expenses		26,503			39,593		1,737			1,602		(232	)		(26,343	)		42,860
Depreciation and amortization expenses		6,462			9,682		3			162		(1	)		(6,401	)		9,907
Total segment operating expenses		32,965			49,275		1,740			1,764		(233	)		(32,744	)		52,767
Segment operating income		4,572			8,198		1,945			119		1			(4,547	)		10,288
Interest expense		-			-		-			-		1,843			-			1,843
Equity in net income (loss) of affiliates		40			-		(17	)		2,020		-			-			2,043
Minority interest		(169	)		-		-			-		4			165			-
Other income (expense) – net		-			-		-			-		393			-			393
Segment income before income taxes	$	4,443		$	8,198	$	1,928		$	2,139	$	(1,445	)	$	(4,382	)	$	10,881

49 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized as follows at December 31:

	Lives (years)		2008		2007
Land		-	$	1,730	$	1,860
Buildings		35-45		23,372		23,670
Central office equipment		3-10		75,054		70,632
Cable, wiring and conduit		10-50		72,109		68,676
Other equipment		5-15		34,434		32,606
Software		3-5		8,348		9,298
Under construction		-		3,532		3,776
				218,579		210,518
Accumulated depreciation and amortization				119,491		114,628
Property, plant and equipment – net			$	99,088	$	95,890

Our depreciation expense was $15,313 in 2008, $15,625 in 2007 and $8,874 in 2006.

Certain facilities and equipment used in operations are leased under operating or capital leases. Rental expenses under operating leases were $2,733 for 2008, $2,566 for 2007 and $869 for 2006. At December 31, 2008, the future minimum rental payments under noncancelable operating leases for the years 2009 through 2013 was $2,382, $2,182, $1,951, $1,763 and $1,596 with $10,570 due thereafter. Certain real estate operating leases contain renewal options that may be exercised. Capital leases are not significant.

American Tower Corp. Agreement

In August 2000, we reached an agreement with American Tower Corp. (American Tower) under which we granted American Tower the exclusive rights to lease space on a number of our communications towers. In exchange, we received a combination of cash and equity instruments as complete prepayment of rent with the closing of each leasing agreement. The value of the prepayments were recorded as deferred revenue and recognized in income as revenue over the life of the leases. The balance of deferred revenue was $539 in 2008, $569 in 2007 and $598 in 2006.

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amounts of goodwill, by segment, for the years ended December 31, 2008 and 2007, are as follows:

	Wireless			Wireline			Advertising & Publishing			Other			Total
Balance as of January 1, 2007	$	28,110		$	32,942		$	5,664		$	941		$	67,657
Goodwill acquired:		2,623			133			171			-			2,927
Goodwill adjustment related to BellSouth acquisition		1,989			(1,554	)		-			-			435
Settlement of IRS audit		-			(123	)		-			-			(123	)
Goodwill adjustments for prior-year acquisitions and FIN 48		-			(44	)		(51	)		(32	)		(127	)
Other		(9	)		(53	)		4			2			(56	)
Balance as of December 31, 2007		32,713			31,301			5,788			911			70,713
Goodwill acquired		264			185			-			-			449
Goodwill adjustments for prior-year acquisitions and FIN 48		990			(95	)		(26	)		-			869
Other		(116	)		(10	)		(68	)		(8	)		(202	)
Balance as of December 31, 2008	$	33,851		$	31,381		$	5,694		$	903		$	71,829

Segment goodwill is tested annually for impairment, with any impairments being expensed in that period’s income statement. During our allocation period, we completed purchase accounting adjustments to the AT&T Mobility and BellSouth goodwill in 2007 and Dobson goodwill in 2008 (see Note 2). Other changes to goodwill include adjustments totaling $10 in 2008 for the tax effect of stock options exercised.

50 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Our other intangible assets are summarized as follows:

	December 31, 2008				December 31, 2007
Other Intangible Assets	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists and relationships:
AT&T Mobility	$	10,429	$	6,409	$	10,526	$	4,549
BellSouth		9,215		4,062		9,205		2,205
ATTC		3,100		2,038		3,050		1,653
Other		788		441		429		298
Subtotal		23,532		12,950		23,210		8,705
Other		1,724		1,130		1,873		1,191
Total	$	25,256	$	14,080	$	25,083	$	9,896
Indefinite life intangible assets not subject to amortization:
Licenses	$	47,306			$	37,985
Trade name		5,230				5,230
Total	$	52,536			$	43,215

Amortized intangible assets are definite-life assets, and as such, we record amortization expense based on a method that most appropriately reflects our expected cash flows from these assets with a weighted-average amortization period of 7.4 years (7.3 years for customer lists and relationships and 9.6 years for other). Amortization expense for definite-life intangible assets was $4,570, $5,952 and $1,033 for the years ended December 31, 2008, 2007 and 2006, respectively. Amortization expense is estimated to be $3,670 in 2009, $2,840 in 2010, $1,890 in 2011, $1,230 in 2012 and $670 in 2013.

Licenses include FCC licenses of $47,267 and $37,948 at December 31, 2008 and 2007, respectively, that provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communications services. While FCC licenses are issued for a fixed time, renewals of FCC licenses have occurred routinely and at nominal cost. Moreover, we have determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our FCC licenses and therefore, treat the FCC licenses as indefinite-lived intangible assets.

NOTE 7. EQUITY METHOD INVESTMENTS

Investments in partnerships, joint ventures and less-than majority-owned subsidiaries in which we have significant influence are accounted for under the equity method. Until our acquisition of BellSouth in December 2006 (see Note 2), we accounted for our 60% economic interest in AT&T Mobility under the equity method since we shared control equally with BellSouth, our 40% economic partner. We had equal voting rights and representation on the board of directors that controlled AT&T Mobility. As a result of the BellSouth acquisition, AT&T Mobility became a wholly-owned subsidiary of AT&T and is reported in our wireless segment and our consolidated statements of income.

AT&T Mobility  Beginning December 29, 2006, we have reported AT&T Mobility as a wholly-owned subsidiary.

51 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

The following table presents summarized operating results for AT&T Mobility prior to the December 29, 2006 BellSouth acquisition:

	2006
Income Statements
Operating revenues	$	37,291
Operating income		4,547
Net income		2,513

Other Equity Method Investments Our investments in equity affiliates include primarily international investments. As of December 31, 2008, our investments in equity affiliates included a 9.7% interest in Teléfonos de México, S.A. de C.V. (Telmex), Mexico’s national telecommunications company, and an 8.6% interest in América Móvil S.A. de C.V. (América Móvil), primarily a wireless provider in Mexico with telecommunications investments in the United States and Latin America. In 2007, Telmex’s Board of Directors and shareholders approved a strategic initiative to split off its Latin American businesses and its Mexican yellow pages business to a new holding company, Telmex Internacional S.A.B. de C.V. (Telmex Internacional). Our investment in Telmex Internacional is 9.8%. We are a member of consortiums that hold all of the class AA shares of Telmex, América Móvil and Telmex Internacional. In each case, another member of the consortium has the right to appoint a majority of the directors.

The following table is a reconciliation of our investments in equity affiliates as presented on our consolidated balance sheets:

	2008			2007
Beginning of year	$	2,270		$	1,995
Additional investments		-			8
Equity in net income of affiliates		819			692
Dividends received		(164	)		(395	)
Currency translation adjustments		(574	)		(18	)
Other adjustments		(19	)		(12	)
End of year	$	2,332		$	2,270

Undistributed earnings from equity affiliates were $2,989 and $2,335 at December 31, 2008 and 2007. The currency translation adjustment for 2008 and 2007 primarily reflects the effect of exchange rate fluctuations on our investments in Telmex, Telmex Internacional and América Móvil.

The fair value of our investment in Telmex, based on the equivalent value of Telmex L shares at December 31, 2008, was $1,884. The fair value of our investment in América Móvil, based on the equivalent value of América Móvil L shares at December 31, 2008, was $4,447. The fair value of our investment in Telmex Internacional, based on the equivalent value of Telmex Internacional L shares at December 31, 2008, was $1,022.

52 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 8. DEBT

Long-term debt of AT&T and its subsidiaries, including interest rates and maturities, is summarized as follows at December 31:

					2008			2007
Notes and debentures
	Interest Rates		Maturities
		2.95% – 5.99%		2008 – 2054	$	28,796		$	23,324
		6.00% – 7.99%		2008 – 2097		31,794			29,282
		8.00% – 9.10%		2008 – 2031		7,107			7,114
		Other				138			136
		Fair value of interest rate swaps recorded in debt				527			88
						68,362			59,944
Unamortized premium, net of discount						1,846			2,049
Total notes and debentures						70,208			61,993
Capitalized leases						167			201
Total long-term debt, including current maturities						70,375			62,194
Current maturities of long-term debt						(9,503	)		(4,939	)
Total long-term debt					$	60,872		$	57,255

We have debt instruments that may require us to repurchase the debt or which may alter the interest rate associated with that debt. We have $1,000 of Puttable Reset Securities (PURS) at 5.0% maturing in 2021 with an annual put option by the holder. If the holders of our PURS do not require us to repurchase the securities, the interest rate will be reset based on current market conditions. Since these securities can be put to us annually, the balance is included in current maturities of long-term debt in our balance sheet.

Beginning in May 2009, our $500 zero-coupon puttable note may be presented for redemption by the holder at specified dates, but not more frequently than annually, excluding 2011. If the note is held to maturity in 2022, the redemption amount will be $1,030.

As of December 31, 2008 and 2007, we were in compliance with all covenants and conditions of instruments governing our debt. Substantially all of our outstanding long-term debt is unsecured. Excluding capitalized leases and the effect of interest rate swaps, the aggregate principal amounts of long-term debt and the corresponding weighted-average interest rate scheduled for repayment are as follows:

	2009			2010			2011			2012			2013			Thereafter
Debt repayments	$	9,504		$	3,767		$	7,536		$	4,896		$	5,825		$	36,916
Weighted-average interest rate		4.3	%		5.2	%		7.1	%		6.6	%		5.6	%		6.5	%

Financing Activities

Debt  During 2008, debt repayments totaled $4,010 and consisted of:

·   $3,915 related to debt repayments with a weighted-average interest rate of 3.98%.

·   $66 related to repayments of Edge Wireless term loan.

·   $29 related to scheduled principal payments on other debt and repayments of other borrowings.

53

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

During 2008, we received net proceeds of $12,416 from the issuance of $12,475 in long-term debt. Debt proceeds were used for general corporate purposes and parts of the proceeds were used for repurchases of our common stock. Long-term debt issuances consisted of:

·   $2,500 of 5.5% global notes due in 2018.

·   $2,000 of floating rate notes due 2010 in a private offering, which can be redeemed by the holder early (which is classified as debt maturing in one year).

·   €1,250 of 6.125% global notes due 2015 (equivalent to approximately $1,975 when issued).

·   $1,500 of 4.95% global notes due in 2013.

·   $1,250 of 6.4% global notes due 2038.

·   $1,000 of 5.6% global notes due 2018.

·   $750 of 6.3% global notes due in 2038.

·   $1,500 of 6.7% global notes due in 2013.

Debt maturing within one year consists of the following at December 31:

		2008		2007
Commercial paper	$	4,575	$	1,859
Current maturities of long-term debt		9,503		4,939
Bank borrowings1		41		62
Total	$	14,119	$	6,860

1 Primarily represents borrowings, the availability of which is contingent on the level of cash held by some of our foreign subsidiaries.

The weighted-average interest rate on commercial paper debt at December 31, 2008 and 2007 was 1.1% and 4.2%, respectively.

In February of 2009, we issued $1,000 of 4.85% global notes due 2014, $2,250 of 5.8% global notes due 2019 and $2,250 of 6.55% global notes due 2039.

Credit Facility  We have a five-year $10,000 credit agreement with a syndicate of investment and commercial banks, which we have the right to increase up to an additional $2,000, provided no event of default under the credit agreement has occurred. One of the participating banks is Lehman Brothers Bank, Inc., which recently declared bankruptcy. We are unable to determine the status of its stated commitment of $595 at this time. The current agreement will expire in July 2011. We also have the right to terminate, in whole or in part, amounts committed by the lenders under this agreement in excess of any outstanding advances; however, any such terminated commitments may not be reinstated. Advances under this agreement may be used for general corporate purposes, including support of commercial paper borrowings and other short-term borrowings. There is no material adverse change provision governing the drawdown of advances under this credit agreement. This agreement contains a negative pledge covenant, which requires that, if at any time we or a subsidiary pledge assets or otherwise permits a lien on its properties, advances under this agreement will be ratably secured, subject to specified exceptions. We must maintain a debt-to-EBITDA (earnings before interest, income taxes, depreciation and amortization, and other modifications described in the agreement) financial ratio covenant of not more than three-to-one as of the last day of each fiscal quarter for the four quarters then ended. We comply with all covenants under the agreement. We had no borrowings outstanding under committed lines of credit as of December 31, 2008 or 2007.

Defaults under the agreement, which would permit the lenders to accelerate required payment, include nonpayment of principal or interest beyond any applicable grace period; failure by AT&T or any subsidiary to pay when due other debt above a threshold amount that results in acceleration of that debt (commonly referred to as “cross-acceleration”) or commencement by a creditor of enforcement proceedings within a specified period after a money judgment above a threshold amount has become final; acquisition by any person of beneficial ownership of more than 50% of AT&T common shares or a change of more than a majority of AT&T’s directors in any 24-month period other than as elected by the remaining directors (commonly referred to as a “change-of-control”); material breaches of representations in the agreement; failure to comply with the negative pledge or debt-to-EBITDA ratio covenants described above; failure to comply with other covenants for a specified period after notice; failure by AT&T or certain affiliates to make certain minimum funding payments under Employee Retirement Income Security Act of 1974, as amended (ERISA); and specified events of bankruptcy or insolvency.

54 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 9. FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments, are summarized as follows at December 31:

	2008				2007
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Notes and debentures	$	70,208	$	70,955	$	61,993	$	62,544
Commercial paper		4,575		4,575		1,859		1,859
Bank borrowings		41		41		62		62
Available-for-sale equity securities		1,632		1,632		2,735		2,735
EchoStar note receivable		-		-		491		489

The fair values of our notes and debentures were estimated based on quoted market prices, where available, or on the net present value method of expected future cash flows using current interest rates. The carrying value of debt with an original maturity of less than one year approximates market value.

Our available-for-sale equity securities are carried at fair value, and realized gains and losses on these equity securities were included in “Other income (expense) – net” in the consolidated statements of income. The fair value of our available-for-sale equity securities was principally determined based on quoted market prices, and the carrying amount of the remaining securities approximates fair value.

Our short-term investments, other short-term and long-term held-to-maturity investments and customer deposits are recorded at amortized cost, and the carrying amounts approximate fair values. We held other short-term marketable securities of $25 at December 31, 2008 compared to $1 at December 31, 2007.

Derivatives  We use interest rate swaps, interest rate forward contracts and foreign currency exchange contracts to manage our market risk changes in interest rates and foreign exchange rates. We do not use financial instruments for trading or speculative purposes. Each swap matches the exact maturity dates of the underlying debt to which they are related, allowing for perfectly-effective hedges. Each utilized forward contract matches the interest payments of the underlying debt to which they are related, allowing for perfectly-effective hedges.

Interest Rate SwapsWe had fair value interest rate swaps with a notional value of $5,750 at December 31, 2008, and $3,250 at December 31, 2007, with a net carrying and fair value asset of $564 and $88, respectively.

Interest Rate Foreign Currency Swaps  We have combined interest rate foreign currency swap agreements for Euro-denominated debt and British pound sterling-denominated debt, which hedge our risk to both interest rate and currency movements. In April 2008, we entered into fixed-to-fixed cross-currency swaps on Euro-denominated debt instruments with a U.S. dollar notional value of $1,975 to hedge our exposure to changes in foreign currency exchange rates. These hedges include initial and final exchanges of principal from fixed foreign denominations to fixed U.S.-denominated amounts, to be exchanged at a specified rate, which was determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed foreign-denominated rate to a fixed U.S.-denominated interest rate. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of $(930) at December 31, 2008. These swaps are valued using current market quotes, which were obtained from dealers.

Interest Rate Locks  We entered into interest rate forward contracts to partially hedge interest expense related to our debt issuances. At December 31, 2008, we carried an unutilized interest rate lock with a notional value of $250 and a fair value of $7. During 2009, we expect to reclassify into earnings net settlement expenses of approximately $12 to $16, net of tax. The following table summarizes our interest rate lock activity:

Rate Lock	Notional		Utilized Notional		Settlement Gain /			Settlement Gain /
Execution Period	Amount		Amount		(Cost)			(Cost) – net of tax
2008	$	750	$	500	$	(5	)	$	(3	)
2007		1,800		1,800		(8	)		(5	)
2006		750		600		4			3
2005		500		500		(2	)		(1	)

55 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Foreign Currency Forward Contracts  We enter into foreign currency forward contracts to manage our exposure to changes in currency exchange rates related to foreign currency-denominated transactions. At December 31, 2008 and 2007, our foreign exchange contracts consisted principally of Mexican pesos, Euros, Danish krone, Swedish krona and Canadian dollars. At December 31, 2008, the notional amounts under contract were $243, of which none were designated as net investment hedges. At December 31, 2007, the notional amounts under contract were $345, of which none were designated as net investment hedges. The remaining contracts in both periods were not designated for accounting purposes. At December 31, 2008 and 2007, these foreign exchange contracts had a net carrying and fair value asset of less than $14 and fair value liability of less than $3, respectively. These contracts were valued using current market quotes, which were obtained from independent sources.

NOTE 10. INCOME TAXES

Significant components of our deferred tax liabilities (assets) are as follows at December 31:

	2008			2007
Depreciation and amortization	$	18,269		$	17,004
Intangibles (nonamortizable)		1,990			1,990
Equity in foreign affiliates		275			231
Employee benefits		(14,825	)		(6,121	)
Currency translation adjustments		(491	)		(287	)
Allowance for uncollectibles		(368	)		(388	)
Net operating loss and other carryforwards		(2,220	)		(2,838	)
Investment in wireless partnership		16,028			13,997
Other – net		(1,666	)		(1,763	)
Subtotal		16,992			21,825
Deferred tax assets valuation allowance		1,190			1,070
Net deferred tax liabilities	$	18,182		$	22,895
Net long-term deferred tax liabilities	$	19,196		$	24,939
Less: Net current deferred tax assets		(1,014	)		(2,044	)
Net deferred tax liabilities	$	18,182		$	22,895

At December 31, 2008, we had combined net operating and capital loss carryforwards (tax effected) for federal, and for state and foreign income tax purposes of $673 and $1,142, respectively, expiring through 2027. The federal net operating loss carryforward primarily relates to the acquisitions of AT&T Wireless Services, Inc. in 2004 and Dobson in 2007. Additionally, we had federal and state credit carryforwards of $105 and $300, respectively, expiring primarily through 2025.

We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Our valuation allowances at December 31, 2007 and 2008 relate primarily to state net operating loss carryforwards.

On January 1, 2007, we adopted FIN 48 and, as required, we reclassified $6,225 from net deferred tax liabilities to unrecognized tax benefits. As a result of the implementation of FIN 48, we recognized a $50 increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the change in our unrecognized tax benefits (UTB) balance from January 1, 2008 to December 31, 2008, and January 1, 2007 to December 31, 2007 is as follows:

56 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Federal, State and Foreign Tax	2008			2007
Balance at beginning of year	$	5,901		$	4,895
Increases for tax positions related to the current year		811			429
Increases for tax positions related to prior years		715			1,324
Decreases for tax positions related to prior years		(1,237	)		(478	)
Settlements		-			(269	)
Balance at end of year		6,190			5,901
Accrued Interest and Penalties		1,802			1,678
Gross Unrecognized Income Tax Benefits		7,992			7,579
Less: Deferred Federal and State Income Tax Benefits		(998	)		(676	)
Less: tax attributable to timing items included above		(3,371	)		(3,911	)
Less: UTB included above that relate to acquired entities that would impact goodwill if recognized		-			(797	)
Total UTB that, if recognized, would impact the effective income tax rate as of the end of the year	$	3,623		$	2,195

During 2008 we made deposits totaling $191 to several taxing jurisdictions and, in the fourth quarter of 2007, we made a deposit of $1,000 related to the AT&T Inc. 2000 – 2002 IRS examination cycle. These deposits are not included in the reconciliation above but reduce our unrecognized tax benefits balance. Net of these deposits, our unrecognized tax benefits balance at December 31, 2008, was $6,801, of which $5,042 was included in “Other noncurrent liabilities” and $1,759 was included in “Accrued taxes” on our consolidated balance sheets. Net of the 2007 deposit, our unrecognized tax benefits balance at December 31, 2007, was $6,579, of which $5,894 was included in “Other noncurrent liabilities” and $685 was included in “Accrued taxes” on our consolidated balance sheets.

A portion of our unrecognized tax benefits relates to pre-acquisition uncertain tax positions of ATTC, BellSouth and AT&T Mobility. After the effective date of FAS 141(R), adjustment of these unrecognized tax benefits will be reflected in income tax expense.

We record interest and penalties related to federal, state and foreign unrecognized tax benefits in income tax expense. Accrued interest and penalties included in unrecognized tax benefits were $1,802 and $1,678 as of December 31, 2008 and 2007, respectively. Interest and penalties included in our consolidated statements of income were $152 for 2008 and $303 for both 2007 and 2006.

The Company and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our income tax returns are regularly audited and reviewed by the IRS as well as by state and foreign taxing authorities.

The IRS has completed field examinations of AT&T’s tax returns through 2002, and all audit periods prior to 1998 are closed for federal purposes. We were unable to reach agreement with the IRS regarding treatment of Universal Service Fund receipts on our 1998 and 1999 tax returns and, as a result, we have filed a refund suit in U.S. District Court. The court proceeding is currently scheduled for mid-2009. We are engaged with the IRS Appeals Division (Appeals) in settling our 2000 – 2002 returns and may reach a resolution of this examination cycle during the next 12 months. At this time, we are not able to determine the impact that resolution may have on our unrecognized tax benefits. The IRS has indicated that in early 2009 they will issue their final Revenue Agent’s Report (RAR), as a result of their completion of examination procedures pertaining to our 2003 through 2005 income tax returns. It is expected that this RAR will assess additional taxes related primarily to the timing of certain deductions related to our network assets. We expect to make a deposit in the $800 to $1,200 range to reduce the accrual of interest while we continue to work with the IRS to resolve any contested issues. The IRS plans to begin their examination of our 2006-2007 income tax returns in early 2009.

The IRS has completed the examination of all acquired entity tax returns through 2003 (ATTC through 2005) and, with the exception of BellSouth, all years through 2001 are closed. In 2009, we expect the IRS to complete their examination of the BellSouth and Mobility 2004-2005 income tax returns and to begin their examination of the final pre-acquisition period returns.

57 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

The components of income tax expense are as follows:

	2008			2007			2006
Federal:
Current	$	1,174		$	5,903		$	3,344
Deferred – net		5,163			(413	)		(139	)
Amortization of investment tax credits		(14	)		(31	)		(28	)
		6,323			5,459			3,177
State, local and foreign:
Current		(13	)		621			295
Deferred – net		726			173			53
		713			794			348
Total	$	7,036		$	6,253		$	3,525

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate (35%) to income before income taxes, income from discontinued operations, extraordinary items and cumulative effect of accounting changes is as follows:

	2008			2007			2006
Taxes computed at federal statutory rate	$	6,966		$	6,371		$	3,809
Increases (decreases) in income taxes resulting from:
State and local income taxes – net of federal income tax benefit		497			549			234
Effects of international operations		(157	)		(178	)		(200	)
Medicare reimbursements		(90	)		(120	)		(123	)
Equity in net income of affiliates		-			-			(218	)
Other – net		(180	)		(369	)		23
Total	$	7,036		$	6,253		$	3,525
Effective Tax Rate		35.4	%		34.4	%		32.4	%

Effects of international operations include items such as foreign tax credits, sales of foreign investments and the effects of undistributed earnings from international operations. We do not provide deferred taxes on the undistributed earnings of subsidiaries operating outside the United States that have been or are intended to be permanently reinvested. The amount of undistributed earnings for which we have not recorded deferred taxes is not material.

NOTE 11. PENSION AND POSTRETIREMENT BENEFITS

Pension Benefits

Substantially all of our U.S. employees are covered by one of our noncontributory pension and death benefit plans. Many of our management employees participate in pension plans that have a traditional pension formula (i.e., a stated percentage of employees’ adjusted career income) and a frozen cash balance or defined lump sum formula. In 2005, the management pension plan for those employees was amended to freeze benefit accruals previously earned under a cash balance formula. Each employee’s existing cash balance continues to earn interest at a variable annual rate. After this change, those management employees, at retirement, may elect to receive the portion of their pension benefit derived under the cash balance or defined lump sum as a lump sum or an annuity. The remaining pension benefit, if any, will be paid as an annuity if its value exceeds a stated monthly amount. Management employees of former ATTC, BellSouth and AT&T Mobility participate in cash balance pension plans. Nonmanagement employees’ pension benefits are generally calculated using one of two formulas: benefits are based on a flat dollar amount per year according to job classification or are calculated under a cash balance plan that is based on an initial cash balance amount and a negotiated annual pension band and interest credits. Most nonmanagement employees can elect to receive their pension benefits in either a lump sum payment or an annuity.

At November 1, 2008, BellSouth pension plans and U.S. Domestic Participant T bargained were merged in the AT&T Pension Benefit Plan. At December 31, 2007, defined pension plans formerly sponsored by Ameritech Publishing Ventures and AT&T Mobility were merged in the AT&T Pension Benefit Plan. At December 31, 2006, certain defined pension plans formerly sponsored by ATTC and AT&T Mobility were also merged into the AT&T Pension Benefit Plan.

57 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Postretirement Benefits

We provide a variety of medical, dental and life insurance benefits to certain retired employees under various plans and accrue actuarially-determined postretirement benefit costs as active employees earn these benefits.

Obligations and Funded Status

For defined benefit pension plans, the benefit obligation is the “projected benefit obligation,” the actuarial present value, as of our December 31 measurement date, of all benefits attributed by the pension benefit formula to employee service rendered to that date. The amount of benefit to be paid depends on a number of future events incorporated into the pension benefit formula, including estimates of the average life of employees/survivors and average years of service rendered. It is measured based on assumptions concerning future interest rates and future employee compensation levels.

For postretirement benefit plans, the benefit obligation is the “accumulated postretirement benefit obligation,” the actuarial present value as of a date of all future benefits attributed under the terms of the postretirement benefit plan to employee service rendered to that date.

The following table presents this reconciliation and shows the change in the projected benefit obligation for the years ended December 31:

	Pension Benefits						Postretirement Benefits
	2008			2007			2008			2007
Benefit obligation at beginning of year	$	53,522		$	55,949		$	40,385		$	44,137
Service cost - benefits earned during the period		1,173			1,257			429			511
Interest cost on projected benefit obligation		3,319			3,220			2,550			2,588
Amendments		(15	)		246			(4	)		-
Actuarial loss (gain)		(1,450	)		(2,044	)		(3,406	)		(4,752	)
Special termination benefits		70			56			5			7
Settlements		-			(15	)		-			-
Benefits paid		(5,795	)		(5,312	)		(2,548	)		(2,316	)
Other		(2	)		165			120			210
Benefit obligation at end of year	$	50,822		$	53,522		$	37,531		$	40,385

The following table presents the change in the value of plan assets for the years ended December 31 and the plans’ funded status at December 31:

	Pension Benefits						Postretirement Benefits
	2008			2007			2008			2007
Fair value of plan assets at beginning of year	$	70,810		$	69,284		$	16,999		$	17,145
Actual return on plan assets		(18,190	)		6,833			(4,688	)		1,209
Benefits paid1		(5,795	)		(5,312	)		(2,301	)		(1,694	)
Contributions		-			-			165			255
Other		3			5			-			84
Fair value of plan assets at end of year	$	46,828		$	70,810		$	10,175		$	16,999
Funded (unfunded) status at end of year2	$	(3,994	)	$	17,288		$	(27,356	)	$	(23,386	)

1	At our discretion, certain postretirement benefits are paid from AT&T cash accounts and do not reduce Voluntary Employee Beneficiary Association (VEBA) assets. Future benefit payments may be made from VEBA trusts and thus reduce those asset balances.
2	Funded status is not indicative of our ability to pay ongoing pension benefits nor of our obligation to fund retirement trusts. Required pension funding is determined in accordance with ERISA regulations.

59 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Amounts recognized on our consolidated balance sheets at December 31 are listed below:

	Pension Benefits					Postretirement Benefits
	2008			2007		2008			2007
Postemployment Benefit	$	-		$	17,288	$	-		$	-
Current portion of employee benefit obligation1		-			-		(729	)		(249	)
Employee benefit obligation2		(3,994	)		-		(26,627	)		(23,137	)
Net amount recognized	$	(3,994	)	$	17,288	$	(27,356	)	$	(23,386	)

1 Included in “Accounts payable and accrued liabilities.”

2 Included in “Postemployment benefit obligation.”

Amounts included in our accumulated other comprehensive income that have not yet been recognized in net periodic benefit cost at December 31 are listed below:

	Pension Benefits				Postretirement Benefits
	2008		2007		2008			2007
Net loss	$	23,004	$	661	$	3,695		$	1,125
Prior service cost (benefit)		562		722		(1,999	)		(2,355	)
Total	$	23,566	$	1,383	$	1,696		$	(1,230	)

The accumulated benefit obligation for our pension plans represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels. The accumulated benefit obligation for our pension plans was $48,618 at December 31, 2008, and $51,357 at December 31, 2007.

Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income

Our combined net pension and postretirement cost recognized in our consolidated statements of income was $324, $1,078 and $1,635 for the years ended December 31, 2008, 2007 and 2006.

The following tables present the components of net periodic benefit obligation cost and other changes in plan assets and benefit obligations recognized in other comprehensive income:

Net Periodic Benefit Cost

	Pension Benefits									Postretirement Benefits
	2008			2007			2006			2008			2007			2006
Service cost - benefits earned during the period	$	1,173		$	1,257		$	1,050		$	429		$	511		$	435
Interest cost on projected benefit obligation		3,319			3,220			2,507			2,550			2,588			1,943
Expected return on plan assets		(5,602	)		(5,468	)		(3,989	)		(1,327	)		(1,348	)		(935	)
Amortization of prior service cost
(benefit) and transition asset		133			142			149			(360	)		(359	)		(359	)
Recognized actuarial loss		10			241			361			(1	)		294			473
Net pension and postretirement cost (benefit)1	$	(967	)	$	(608	)	$	78		$	1,291		$	1,686		$	1,557

1 During 2008, 2007 and 2006, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 reduced postretirement benefit cost by $263, $342 and $349. This effect is included in several line items above.

60 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

	Pension Benefits								Postretirement Benefits
	2008			2007			2006		2008			2007			2006
Net loss (gain)	$	13,857		$	(2,131	)	$	2,650	$	1,716		$	(2,525	)	$	3,404
Prior service cost (credit)		(16	)		139			387		32			(28	)		(1,655	)
Amortization of net loss (gain)		4			154			-		-			181			-
Amortization of prior service cost		83			78			-		(222	)		(223	)		-
Total recognized in net pension and postretirement cost and other comprehensive income	$	13,928		$	(1,760	)	$	3,037	$	1,526		$	(2,595	)	$	1,749

The estimated net loss and prior service cost for pension benefits that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $665 and $111, respectively. The estimated prior service benefit for postretirement benefits that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $360.

Assumptions

In determining the projected benefit obligation and the net pension and postemployment benefit cost, we used the following significant weighted-average assumptions:

	2008			2007			2006
Discount rate for determining projected benefit obligation at December 31		7.00	%		6.50	%		6.00	%
Discount rate in effect for determining net cost (benefit)1		6.50	%		6.00	%		5.75	%
Long-term rate of return on plan assets		8.50	%		8.50	%		8.50	%
Composite rate of compensation increase for determining projected benefit obligation and net pension cost (benefit)		4.00	%		4.00	%		4.00	%

1   Discount rate in effect for determining net cost (benefit) of BellSouth and AT&T Mobility pension and postretirement plans for the two-day period ended December 31, 2006, was 6.00%.

Approximately 10% of pension and postretirement costs are capitalized as part of construction labor, providing a small reduction in the net expense recorded. While we will continue our cost-control efforts, certain factors, such as investment returns, depend largely on trends in the U.S. securities markets and the general U.S. economy. In particular, uncertainty in the securities markets and U.S. economy could result in investment returns less than those assumed. GAAP requires that actual gains and losses on pension and postretirement plan assets be recognized in the MRVA equally over a period of not more than five years. We use a methodology, allowed under GAAP, under which we hold the MRVA to within 20% of the actual fair value of plan assets, which can have the effect of accelerating the recognition of excess actual gains and losses into the MRVA to less than five years. Due to investment losses on plan assets experienced in the last year, we expect this methodology to contribute approximately $1,577 to our combined net pension and postretirement cost in 2009 as compared with not using this methodology. This methodology did not have a significant effect on our 2008, 2007 and 2006 combined net pension and postretirement benefits. Should the securities markets decline or medical and prescription drug costs increase at a rate greater than assumed, we would expect increasing annual combined net pension and postretirement costs for the next several years. Additionally, should actual experience differ from actuarial assumptions, combined net pension and postretirement cost would be affected in future years.

Discount Rate  Our assumed discount rate of 7.00% at December 31, 2008, reflects the hypothetical rate at which the projected benefit obligations could be effectively settled or paid out to participants on that date. We determined our discount rate based on a range of factors, including a yield curve comprised of the rates of return on high-quality, fixed-income corporate bonds available at the measurement date and the related expected duration for the obligations. For the year ended December 31, 2008, we increased our discount rate by 0.50%, resulting in a decrease in our pension plan benefit obligation of $2,176 and a decrease in our postretirement benefit obligation of $2,154. For the year ended December 31, 2007, we increased our discount rate by 0.50%, resulting in a decrease in our pension plan benefit obligation of $2,353 and a decrease in our postretirement benefit obligation of $2,492. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement benefit cost would be affected in future years.

61

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Expected Long-Term Rate of Return  Our expected long-term rate of return on plan assets of 8.50% for 2009 and 2008 reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In setting the long-term assumed rate of return, management considers capital markets future expectations and the asset mix of the plans’ investments. Actual long-term return can, in relatively stable markets, also serve as a factor in determining future expectations. However, the dramatic adverse market conditions in 2008 have skewed traditional measure of long-term return, such as the 10-year return, which was 4.21% through 2008, compared with 9.18% through 2007. The severity of the 2008 losses will make the 10-year return less of a relevant factor in future expectations. Based on the future expectations for the target asset mix, this assumption will remain unchanged for 2009. We consider many factors that include, but are not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. The target asset allocation is determined based on consultations with external investment advisors. This assumption, which is based on our long-term expectations of market returns in future years, is one of the most significant of the weighted-average assumptions used to determine our actuarial estimates of pension and postretirement benefit expense. If all other factors were to remain unchanged, we expect that a 1% decrease in the expected long-term rate of return would cause 2009 combined pension and postretirement cost to increase $650 over 2008.

Composite Rate of Compensation Increase  Our expected composite rate of compensation increase of 4% reflects the long-term average rate of salary increases.

Health Care Cost Trend  Our health care cost trend assumptions are developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. Additionally, to recognize the disproportionate growth in prescription drug costs, we have developed separate trend assumptions for medical and prescription drugs. In addition to the health care cost trend, we assume an annual 3% growth in administrative expenses and an annual 3% growth in dental claims. Due to benefit design changes in recent years (e.g., increased co-pays and deductibles for prescription drugs and certain medical services), we continue to experience a better than expected claims experience. The following table provides our assumed average health care cost trend based on the demographics of plan participants.

	2009			2008
Health care cost trend rate assumed for current year
Retirees 64 and under		5.21	%		5.76	%
Retirees 65 and over		5.36	%		6.36	%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%
Year that rate reaches the ultimate trend rate	2010			2010

A one percentage-point change in the assumed combined medical and dental cost trend rate would have the following effects:

	One Percentage- Point Increase			One Percentage- Point Decrease
Increase (decrease) in total of service and interest cost components		$	390		$	(315	)
Increase (decrease) in accumulated postretirement benefit obligation			3,629			(3,034	)

For the majority of our labor contracts that contain an annual dollar value cap for the purpose of determining contributions required from nonmanagement retirees who retire during the term of the labor contract, we have waived the cap during the relevant contract periods and thus not collected contributions from those retirees, and we have similarly waived the cap for nonmanagement retirees who retired prior to inception of the labor contract. Therefore, in accordance with the substantive plan provisions required in accounting for postretirement benefits under GAAP, we do not account for the cap in the value of our accumulated postretirement benefit obligation (i.e., for GAAP purposes, we assumed the cap would be waived for all future contract periods).

62

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Plan Assets

Plan assets consist primarily of private and public equity, government and corporate bonds, and real estate. The asset allocations of the pension plans are maintained to meet ERISA requirements. Any plan contributions, as determined by ERISA regulations, are made to a pension trust for the benefit of plan participants. We maintain VEBA trusts to partially fund postretirement benefits; however, there are no ERISA or regulatory requirements that these postretirement benefit plans be funded annually.

The principal investment objectives are to ensure the availability of funds to pay pension and postretirement benefits as they become due under a broad range of future economic scenarios, to maximize long-term investment return with an acceptable level of risk based on our pension and postretirement obligations, and to be broadly diversified across and within the capital markets to insulate asset values against adverse experience in any one market. Each asset class has a broadly diversified style. Substantial biases toward any particular investing style or type of security are sought to be avoided by managing the aggregation of all accounts with portfolio benchmarks. Asset and benefit obligation forecasting studies are conducted periodically, generally every two to three years, or when significant changes have occurred in market conditions, benefits, participant demographics or funded status. Decisions regarding investment policy are made with an understanding of the effect of asset allocation on funded status, future contributions and projected expenses. The current asset allocation policy for the pension plan is based on a study completed during 2007. The current asset allocation policy for the VEBA assets is based on a study completed in 2008.

The plans’ weighted-average asset target and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories at December 31, are as follows:

	Pension Assets									Postretirement (VEBA) Assets
	Target			2008			2007			Target			2008			2007
Equity securities
Domestic		33% – 43	%		34	%		39	%		34% – 44	%		39	%		49	%
International		13% – 23	%		16			18			16% – 26	%		21			24
Debt securities		23% – 33	%		30			27			20% – 30	%		25			17
Real estate		6% – 12	%		11			9			0% – 6	%		3			2
Other		4% – 10	%		9			7			9% – 15	%		12			8
Total					100	%		100	%					100	%		100	%

At December 31, 2008, AT&T securities represented less than one half of a percent of assets held by our pension plans and VEBA trusts.

Estimated Future Benefit Payments

Expected benefit payments are estimated using the same assumptions used in determining our benefit obligation at December 31, 2008. Because benefit payments will depend on future employment and compensation levels, average years employed and average life spans, among other factors, changes in any of these factors could significantly affect these expected amounts. The following table provides expected benefit payments under our pension and postretirement plans:

	Pension Benefits		Postretirement Benefits		Medicare Subsidy Receipts
2009	$	5,018	$	2,588	$	(121	)
2010		4,713		2,686		(131	)
2011		4,655		2,769		(140	)
2012		4,583		2,794		(155	)
2013		4,484		2,819		(170	)
Years 2014 – 2018		20,777		14,180		(1,086	)

Supplemental Retirement Plans

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. While these plans are unfunded, we have assets in a designated nonbankruptcy remote trust that are independently managed and used to provide for these benefits. At the end of 2008, we concluded the severity of decline in the latter half of 2008 had led to an other-than-temporary decline in the value of these assets, writing them down $332, recording the amount in other income and expense. Sales within the trust also generated $180 in net realized losses in 2008. These plans include supplemental pension benefits as well as compensation deferral plans, some of which include a corresponding match by us based on a percentage of the compensation deferral.

63

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

We use the same significant assumptions for the discount rate and composite rate of compensation increase used in determining the projected benefit obligation and the net pension and postemployment benefit cost. The following tables provide the plans’ benefit obligations and fair value of assets at December 31 and the components of the supplemental retirement pension benefit cost. The net amounts recorded as “Other noncurrent liabilities” on our consolidated balance sheets at December 31, 2008 and 2007 were $2,114 and $2,301, respectively.

The following table provides information for our supplemental retirement plans with accumulated benefit obligations in excess of plan assets:

	2008			2007
Projected benefit obligation	$	(2,114	)	$	(2,301	)
Accumulated benefit obligation		(2,023	)		(2,155	)
Fair value of plan assets		-			-

The following tables present the components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income:

Net Periodic Benefit Cost	2008		2007
Service cost - benefits earned during the period	$	13	$	16
Interest cost on projected benefit obligation		141		147
Amortization of prior service cost		6		6
Recognized actuarial loss		21		27
Net supplemental retirement pension cost	$	181	$	196

Other Changes Recognized in Other Comprehensive Income1	2008			2007
Net loss (gain)	$	(66	)	$	(60	)
Prior service cost (credit)		-			11
Amortization of net loss (gain)		11			15
Amortization of prior service cost		4			3
Total recognized in net supplemental pension cost and other comprehensive income	$	(51	)	$	(31	)

1  FAS 158 required prospective application for fiscal years ending after December 15, 2006.

The estimated net loss and prior service cost for our supplemental retirement plan benefits that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $11 and $5, respectively.

Deferred compensation expense was $54 in 2008, $106 in 2007 and $39 in 2006. Our deferred compensation liability, included in “Other noncurrent liabilities,” was $1,054 at December 31, 2008, and $1,116 at December 31, 2007.

Non-U.S. Plans

As part of our ATTC acquisition, we acquired certain non-U.S. operations that have varying types of pension programs providing benefits for substantially all of their employees and, to a limited group, postemployment benefits. The following table provides the plans’ benefit obligations and fair value of assets and a statement of the funded status at December 31.

64 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

The net amounts recorded as “Postemployment benefit obligation” on our consolidated balance sheets at December 31, 2008 and 2007 were $(7) and $(48), respectively.

	2008			2007
Benefit obligations at end of year	$	(786	)	$	(1,016	)
Fair value of plan assets		793			1,064
(Unfunded) benefit obligation	$	7		$	48

The following table provides information for certain non-U.S. defined-benefit pension plans with plan assets in excess of accumulated benefit obligations:

	2008		2007
Projected benefit obligation	$	785	$	1,015
Accumulated benefit obligation		700		892
Fair value of plan assets		793		1,064

In determining the projected benefit obligation for certain non-U.S. defined-benefit pension plans, we used the following significant weighted-average assumptions:

	2008			2007
Discount rate for determining projected benefit obligation at December 31		6.20	%		5.57	%
Discount rate in effect for determining net cost (benefit)		5.57	%		4.86	%
Long-term rate of return on plan assets		6.13	%		6.15	%
Composite rate of compensation increase for determining projected benefit obligation at December 31		4.06	%		4.25	%
Composite rate of compensation increase for determining net pension cost		4.25	%		4.36	%

The following tables present the components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income:

Net Periodic Benefit Cost	2008			2007
Service cost - benefits earned during the period	$	25		$	25
Interest cost on projected benefit obligation		54			52
Expected return on assets		(60	)		(54	)
Amortization of prior service cost		(5	)		(1	)
Net pension cost	$	14		$	22

Other Changes Recognized in Other Comprehensive Income1	2008			2007
Net loss (gain)	$	70		$	(105	)
Amortization of net loss (gain)		(2	)		(2	)
Amortization of prior service cost		-			-
Total recognized in net pension cost and other comprehensive income	$	68		$	(107	)

1  FAS 158 required prospective application for fiscal years ending after December 15, 2006. 

The estimated net gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $13.

Contributory Savings Plans

We maintain contributory savings plans that cover substantially all employees. Under the savings plans, we match in cash or company stock a stated percentage of eligible employee contributions, subject to a specified ceiling. There are no debt-financed shares held by the Employee Stock Ownership Plans, allocated or unallocated.

65

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

Our match of employee contributions to the savings plans is fulfilled with purchases of our stock on the open market or company cash. Benefit cost is based on the cost of shares or units allocated to participating employees’ accounts and was $664, $633 and $412 for the years ended December 31, 2008, 2007 and 2006.

NOTE 12. SHARE-BASED PAYMENT

We account for share-based compensation plans using Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (FAS 123(R)). Our accounting under FAS 123(R) may affect our ability to fully realize the value shown on our balance sheet of deferred tax assets associated with compensation expense. Full realization of these deferred tax assets requires stock options to be exercised at a price equaling or exceeding the sum of the strike price plus the fair value of the option at the grant date. The provisions of FAS 123(R) do not allow a valuation allowance to be recorded unless the company’s future taxable income is expected to be insufficient to recover the asset. Accordingly, there can be no assurance that the current stock price of our common shares will rise to levels sufficient to realize the entire tax benefit currently reflected in our balance sheet. However, to the extent that additional tax benefits are generated in excess of the deferred taxes associated with compensation expense previously recognized, the potential future impact on income would be reduced.

At December 31, 2008, we had various share-based compensation plans, which are described as follows. The compensation cost recognized for those plans for the years ended December 31 was $166 in 2008, $720 in 2007 and $301 in 2006 and is included in “Selling, general and administrative” in our consolidated statements of income. The total income tax benefit recognized in the consolidated statements of income for share-based payment arrangements for the years ended December 31, 2008, 2007 and 2006 was $63, $275 and $116.

Under our various plans, senior and other management and nonmanagement employees and nonemployee directors have received stock options, performance stock units and other nonvested stock units. Stock options issued through December 31, 2008 carry exercise prices equal to the market price of our stock at the date of grant. Beginning in 1994 and ending in 1999, certain employees of AT&T Teleholdings, Inc. (formerly known as Ameritech) were awarded grants of nonqualified stock options with dividend equivalents. Prior to 2006, depending on the grant, stock options vesting could occur up to five years from the date of grant, with most options vesting ratably over three years. Stock options granted as part of a deferred compensation plan do not have a vesting period; since 2006, these are the only options issued by AT&T. Performance stock units, which are nonvested stock units, are granted to key employees based upon the stock price at the date of grant and are awarded in the form of common stock and cash at the end of a two- to three-year period, subject to the achievement of certain performance goals. Other nonvested stock units are valued at the market price of our stock at the date of grant and vest typically over a two- to five-year period. As of December 31, 2008, we were authorized to issue up to 125 million shares of stock (in addition to shares that may be issued upon exercise of outstanding options or upon vesting of performance stock units or other nonvested stock units) to officers, employees and directors pursuant to these various plans.

The compensation cost that has been charged against income for our share-based compensation plans is as follows:

	2008			2007		2006
Performance stock units	$	152		$	620	$	282
Stock option expense		11			14		13
Restricted stock		9			68		6
Other		(6	)		18		-
Total	$	166		$	720	$	301

66 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

The estimated fair value of the options when granted is amortized to expense over the options’ vesting or required service period. The fair value for these options was estimated at the date of grant based on the expected life of the option and historical exercise experience, using a Black-Scholes option pricing model with the following weighted-average assumptions:

	2008			2007			2006
Risk-free interest rate		3.96	%		5.01	%		4.94	%
Dividend yield		4.36	%		3.65	%		4.75	%
Expected volatility factor		18.76	%		20.75	%		21.79	%
Expected option life in years		7.00			7.00			8.00

A summary of option activity as of December 31, 2008, and changes during the period then ended, is presented below (shares in millions):

Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value 1
Outstanding at January 1, 2008		231		$	40.03
Granted		2			36.66
Exercised		(10	)		31.37
Forfeited or expired		(19	)		50.71
Outstanding at December 31, 2008		204		$	39.41		2.41	$	118
Exercisable at December 31, 2008		202		$	39.44		2.33	$	118

1  Aggregate intrinsic value includes only those options with intrinsic value (options where the exercise price is below the market price).

The weighted-average fair value of each option granted during the year ended December 31 was $5.04 in 2008, $7.71 in 2007 and $4.78 in 2006. The total intrinsic value of options exercised during the year was $78 in 2008, $667 in 2007 and $134 in 2006.

It is our policy to satisfy share option exercises using our treasury shares. The actual tax benefit realized for the tax deductions from option exercises from these arrangements for the years ended December 31, 2008, 2007 and 2006 totaled $10, $77 and $28.

A summary of the status of our nonvested stock units, which includes performance stock units as of December 31, 2008, and changes during the year then ended is presented as follows (shares in millions):

Nonvested Stock Units	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2008		36		$	29.49
Granted		10			35.92
Vested		(21	)		26.03
Forfeited		(1	)		35.20
Other		-			-
Nonvested at December 31, 2008		24		$	35.18

As of December 31, 2008, there was $335 of total unrecognized compensation cost related to nonvested share-based payment arrangements granted. That cost is expected to be recognized over a weighted-average period of 1.62 years. The total fair value of shares vested during the years ended December 31, 2008, 2007 and 2006 was $554, $345 and $246.

67 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 13. STOCKHOLDERS’ EQUITY

From time to time, we repurchase shares of common stock for distribution through our employee benefit plans or in connection with certain acquisitions. In December 2007, the Board of Directors authorized the repurchase of up to 400 million shares of our common stock. This authorization replaced previous authorizations and will expire on December 31, 2009. As of December 31, 2008, we had repurchased approximately 164 million shares under this program.

NOTE 14. ADDITIONAL FINANCIAL INFORMATION

				December 31,
Balance Sheets				2008			2007
Accounts payable and accrued liabilities:
Accounts payable				$	6,921		$	7,059
Accrued rents and other					4,437			4,321
Accrued payroll and commissions					2,401			3,419
Deferred directory revenue					1,984			2,348
Accrued interest					1,471			1,149
Compensated future absences					609			637
Current portion of employee benefit obligation					729			249
Other					1,480			2,217
Total accounts payable and accrued liabilities				$	20,032		$	21,399
Deferred compensation (included in Other noncurrent liabilities)				$	1,648		$	2,141
Statements of Income	2008			2007				2006
Advertising expense	$	3,073		$	3,430		$	1,530
Interest expense incurred	$	4,049		$	3,678		$	1,916
Capitalized interest		(659	)		(171	)		(73)
Total interest expense	$	3,390		$	3,507		$	1,843
Statements of Cash Flows	2008			2007				2006
Cash paid during the year for:
Interest	$	3,727		$	3,445		$	1,666
Income taxes, net of refunds		5,307			4,013			2,777

Statements of Stockholders’ Equity	2008			2007			2006
Accumulated other comprehensive income (loss) is comprised of the following components, net of taxes, at December 31:
Foreign currency translation adjustment	$	(912	)	$	(469	)	$	(488	)
Unrealized gains on securities		100			375			345
Unrealized (losses) on cash flow hedges		(483	)		(226	)		(172	)
Defined benefit postretirement plan		(15,761	)		(59	)		(4,999	)
Other		(1	)		(1	)		-
Accumulated other comprehensive (loss)	$	(17,057	)	$	(380	)	$	(5,314	)

No customer accounted for more than 10% of consolidated revenues in 2008, 2007 or 2006.

A majority of our employees are represented by labor unions as of year-end 2008. Labor contracts with these employees will expire during 2009.

68 

Notes to Consolidated Financial Statements (continued)

Dollars in millions except per share amounts

NOTE 15. TRANSACTIONS WITH AT&T MOBILITY

Prior to our December 29, 2006 acquisition of BellSouth (see Note 2), we and BellSouth, the two owners of AT&T Mobility, each made a subordinated loan to AT&T Mobility (shareholder loans) and entered into a revolving credit agreement with AT&T Mobility to provide short-term financing for operations. Following the BellSouth acquisition, both our shareholder loan and revolving credit agreement with AT&T Mobility were consolidated and do not appear on our consolidated balance sheets. The shareholder loan carries an annual 6.0% interest rate and we earned interest income on this loan of $246 during 2006.

Prior to our BellSouth acquisition, we generated revenues of $1,466 in 2006 for services sold to AT&T Mobility. These revenues were primarily from access and long-distance services sold to AT&T Mobility on a wholesale basis and commissions revenue related to customers added through AT&T sales sources.

NOTE 16. CONTINGENT LIABILITIES

In addition to issues specifically discussed elsewhere, we are party to numerous lawsuits, regulatory proceedings and other matters arising in the ordinary course of business. In accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies,” in evaluating these matters on an ongoing basis, we take into account amounts already accrued on the balance sheet. In our opinion, although the outcomes of these proceedings are uncertain, they should not have a material adverse effect on our financial position, results of operations or cash flows.

We have contractual obligations to purchase certain goods or services from various other parties. Our purchase obligations are expected to be approximately $3,112 in 2009, $4,398 in total for 2010 and 2011, $1,885 in total for 2012 and 2013 and $516 in total for years thereafter.

NOTE 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table represents our quarterly financial results:

											Stock Price
Calendar  Quarter	Total Operating Revenues		Operating Income		Net Income		Basic Earnings Per Share1		Diluted Earnings Per Share1		High		Low		Close
2008
First	$	30,744	$	5,980	$	3,461	$	0.58	$	0.57	$	41.94	$	32.95	$	38.30
Second		30,866		6,567		3,772		0.64		0.63		40.70		32.63		33.69
Third		31,342		5,618		3,230		0.55		0.55		33.58		27.51		27.92
Fourth		31,076		4,898		2,404		0.41		0.41		30.65		20.90		28.50
Annual	$	124,028	$	23,063	$	12,867		2.17		2.16
2007
First	$	28,969	$	4,664	$	2,848	$	0.46	$	0.45	$	39.86	$	33.20	$	39.43
Second		29,478		4,944		2,904		0.47		0.47		41.54		38.38		41.50
Third		30,132		5,304		3,063		0.50		0.50		42.97		36.53		42.31
Fourth		30,349		5,492		3,136		0.52		0.51		42.79		36.25		41.56
Annual	$	118,928	$	20,404	$	11,951		1.95		1.94

1   Quarterly earnings per share impacts may not add to full-year earnings per share impacts due to the difference in weighted-average shares for the quarters versus the weighted-average shares for the year.

69 

Report of Management

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The integrity and objectivity of the data in these financial statements, including estimates and judgments relating to matters not concluded by year-end, are the responsibility of management, as is all other information included in the Annual Report, unless otherwise indicated.

The financial statements of AT&T Inc. (AT&T) have been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm. Management has made available to Ernst & Young LLP all of AT&T’s financial records and related data, as well as the minutes of stockholders’ and directors’ meetings. Furthermore, management believes that all representations made to Ernst & Young LLP during its audit were valid and appropriate.

Management maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by AT&T is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.

Management also seeks to ensure the objectivity and integrity of its financial data by the careful selection of its managers, by organizational arrangements that provide an appropriate division of responsibility and by communication programs aimed at ensuring that its policies, standards and managerial authorities are understood throughout the organization.

The Audit Committee of the Board of Directors meets periodically with management, the internal auditors and the independent auditors to review the manner in which they are performing their respective responsibilities and to discuss auditing, internal accounting controls and financial reporting matters. Both the internal auditors and the independent auditors periodically meet alone with the Audit Committee and have access to the Audit Committee at any time.

Assessment of Internal Control

The management of AT&T is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934. AT&T’s internal control system was designed to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

AT&T management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on its assessment, AT&T management believes that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on those criteria.

Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report, has issued an attestation report on the company’s internal control over financial reporting. The attestation report is included on Page 78.

/s/ Randall Stephenson.	/s/ Richard G. Lindner.
Randall Stephenson	Richard G. Lindner
Chairman of the Board,	Senior Executive Vice President and
Chief Executive Officer and President	Chief Financial Officer

70 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

AT&T Inc.

We have audited the accompanying consolidated balance sheets of AT&T Inc. (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 12, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Antonio, Texas

February 12, 2009

71 

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

The Board of Directors and Stockholders

AT&T Inc.

We have audited AT&T Inc.’s (the Company) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008, of the Company and our report dated February 12, 2009, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Antonio, Texas

February 12, 2009

72

EX-21

Exhibit 21

PRINCIPAL SUBSIDIARIES OF

AT&T INC., AS OF DECEMBER 31, 2008

2008 AT&T INC. REPORT TO STOCKHOLDERS

SECURITIES AND EXCHANGE COMMISSION ("SEC")

FORM 10-K filed February 25, 2009

Legal Name	State of Incorporation/Formation	Conducts Business Under
Illinois Bell Telephone Company	Illinois	AT&T Illinois; AT&T Wholesale
Indiana Bell Telephone Company, Incorporated	Indiana	AT&T Indiana; AT&T Wholesale
Michigan Bell Telephone Company	Michigan	AT&T Michigan; AT&T Wholesale
Nevada Bell Telephone Company	Nevada	AT&T Nevada; AT&T Wholesale
Pacific Bell Telephone Company	California	AT&T California; AT&T Wholesale; AT&T DataComm
AT&T International, Inc.	Delaware	AT&T International
SBC Internet Services, Inc.	California	AT&T Internet Services; AT&T Entertainment Services
SBC Long Distance, LLC	Delaware	AT&T Long Distance
AT&T Teleholdings, Inc.	Delaware	AT&T Midwest; AT&T West; AT&T East
Southwestern Bell Telephone Company	Missouri	AT&T Arkansas; AT&T Kansas; AT&T Missouri; AT&T Oklahoma; AT&T Texas; AT&T Southwest; AT&T DataComm; AT&T Wholesale
Southwestern Bell Yellow Pages, Inc.	Missouri	AT&T Advertising  Solutions
Sterling Commerce, Inc.	Delaware	same
The Ohio Bell Telephone Company	Ohio	AT&T Ohio; AT&T Wholesale
The Southern New England Telephone Company	Connecticut	AT&T Connecticut; AT&T Woodbury
Wisconsin Bell, Inc.	Wisconsin	AT&T Wisconsin; AT&T Wholesale

EX-23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Annual Report (Form 10-K) of AT&T Inc. (AT&T) of our reports dated February 12, 2009, with respect to the consolidated financial statements of AT&T and the effectiveness of internal control over financial reporting of AT&T, included in the 2008 Annual Report to Stockholders of AT&T.

Our audits also included the financial statement schedules of AT&T listed in Item 15(a). These schedules are the responsibility of AT&T's management. Our responsibility is to express an opinion based on our audits. In our opinion, as to which the date is February 23, 2009, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-111026) pertaining to the AT&T Savings Plan and certain other plans,

(2) Registration Statement (Form S-8 No. 333-34062) pertaining to the Stock Savings Plan,

(3) Registration Statement (Form S-8 No. 333-95887) pertaining to the 1995 Management Stock Option Plan,

(4) Registration Statements (Form S-8 No. 333-30669 (1996 Plan only)) and (333-54398) pertaining to the 1996 Stock and Incentive Plan and the 2001 Incentive Plan,

(5) Registration Statement (Form S-8 No. 333-120894) pertaining to the AT&T Stock Purchase and Deferral Plan and Cash Deferral Plan,

(6) Registration Statement (Form S-8 No. 333-129814) pertaining to the AT&T Savings Plan and certain other plans,

(7) Registration Statement (Form S-3 No. 333-143180) of AT&T and the related Prospectuses,

(8) Registration Statement (Form S-8 No. 333-135517) pertaining to the 2006 Incentive Plan,

(9) Registration Statement (Form S-8 No. 333-139749) pertaining to the BellSouth Retirement Savings Plan and other certain BellSouth plans,

(10) Registration Statement (Form S-8 No. 333-141864) pertaining to the AT&T Inc. Savings Plan, AT&T Inc. Savings and Security Plan, AT&T Corp. Long Term Savings Plan for Management Employees, AT&T Corp. Long Term Savings and Security Plan, AT&T Corp. Retirement Savings and Profit Sharing Plan, AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees, and AT&T of Puerto Rico, Inc. Long Term Savings and Security Plan; and

(11)  Registration Statement (Form S-8 No. 333-152822) pertaining to the AT&T Non-Employee Director Stock Purchase Plan

of our reports dated February 12, 2009, with respect to the consolidated financial statements of AT&T and the effectiveness of internal control over financial reporting of AT&T, incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules of AT&T included in this Annual Report (Form 10-K) of AT&T for the year ended December 31, 2008.

/s/ Ernst & Young LLP

San Antonio, Texas

February 23, 2009

EX-24

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is an officer and a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens,  or any one of them, all of the City of Dallas and State of Texas, his attorneys for him and in his name, place and stead, and in each of his offices and capacities in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Randall L. Stephenson

Randall L. Stephenson

Chairman of the Board,

Chief Executive Officer and

President

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Gilbert F. Amelio

Gilbert F. Amelio

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ William F. Aldinger III

William F. Aldinger III

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Reuben V. Anderson

Reuben V. Anderson

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ James H. Blanchard

James H. Blanchard

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ August A. Busch III

August A. Busch III

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Jaime Chico Pardo

Jaime Chico Pardo

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ James P. Kelly

James P. Kelly

Director

Exhibit 24

 POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Jon C. Madonna

Jon C. Madonna

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ John B. McCoy

John B. McCoy

Lead Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Lynn M. Martin

Lynn M. Martin

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Mary S. Metz

Mary S. Metz

Director

Exhibit 24

 POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Joyce M. Roché

Joyce M. Roché

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th  day of January 2009.

/s/ Laura D'Andrea Tyson

Laura D'Andrea Tyson

Director

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, AT&T INC., a Delaware corporation, hereinafter referred to as the "Corporation," proposes to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Randall L. Stephenson, Wayne Watts, Jon P. Klug, Richard G. Lindner, John J. Stephens, or any one of them, all of the City of Dallas and State of Texas, the attorneys for the undersigned and in the undersigned’s name, place and stead, and in the undersigned’s office and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and concerning the premises, as fully to all intents and purposes as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 30th day of January 2009.

/s/ Patricia P. Upton

Patricia P. Upton

Director

EX-31.1

Exhibit 31.1

I, Randall Stephenson, certify that:

1.   I have reviewed this report on Form 10-K of AT&T Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 25, 2009

/s/ Randall Stephenson 

Randall Stephenson

Chairman of the Board, Chief Executive Officer

and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard G. Lindner, certify that:

1.   I have reviewed this report on Form 10-K of AT&T Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 25, 2009

/s/ Richard G. Lindner 

Richard G. Lindner

Senior Executive Vice President

     and Chief Financial Officer

EX-32

Exhibit 32

Certification of Periodic Financial Reports

Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of AT&T Inc. (the “Company”) hereby certifies that the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 25, 2009                                                                               February 25, 2009

By:     /s/ Randall Stephenson	By:   /s/ Richard G. Lindner
Randall Stephenson	Richard G. Lindner

Chairman of the Board, Chief Executive Officer  Senior Executive Vice President

      and President      and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.  This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to liability under that section.  This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to AT&T Inc. and will be retained by AT&T Inc. and furnished to the Securities and Exchange Commission or its staff upon request.