Edgar Filing: AT&T INC.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )

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Check the appropriate box:

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14a-6(e)(2))

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-12

AT&T Inc.
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[LOGO]

[front cover]

[AT&T LOGO]

2006
NOTICE OF
ANNUAL MEETING &
PROXY STATEMENT

AT&T INC.

[LOGO]

Notice of
Annual Meeting of Stockholders

The 2006 Annual Meeting of Stockholders of AT&T Inc., formerly known as SBC
Communications Inc. ("AT&T" or the "Company"), a Delaware corporation, will be
held at 9:00 a.m. Central Time on Friday, April 28, 2006, at the Alzafar Shrine
Temple, 901 North Loop 1604 West, San Antonio, Texas. The items of business are:

. Election of 17 Directors

. Approval of appointment of Ernst & Young LLP as independent auditors of
AT&T for 2006

. Approval of 2006 Stock Incentive Plan

. Approval of amendment to AT&T Inc. Restated Certificate of Incorporation

. Act upon such other matters, including certain stockholder proposals if
submitted, as may properly come before the meeting.

Holders of AT&T common stock of record at the close of business on March 1,
2006, are entitled to vote at the meeting and any adjournment of the meeting. A
list of these stockholders will be available for inspection during business
hours from April 13 through April 27, 2006, at 175 E. Houston, San Antonio,
Texas, and will also be available at the Annual Meeting.

By Order of the Board of Directors.

Ann Effinger Meuleman
Vice President and Secretary
March 11, 2006

IMPORTANT NOTICE

If you do not plan to attend the Annual Meeting to vote your shares, please
complete, date, sign and promptly mail the enclosed proxy card in the return
envelope provided. No postage is necessary if mailed in the United States.
Stockholders of record may also give their proxy by telephone or through the
Internet in accordance with the instructions accompanying the proxy card. Any
person giving a proxy has the power to revoke it at any time, and stockholders
who are present at the meeting may withdraw their proxies and vote in person.

PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AT&T Inc. ("AT&T") for use at the 2006
Annual Meeting of Stockholders of AT&T. The meeting will be held at 9:00 a.m.
Central Time on Friday, April 28, 2006, at the Alzafar Shrine Temple, 901 North
Loop 1604 West, San Antonio, Texas. The purposes of the meeting are set forth
in the Notice of Annual Meeting of Stockholders. This Proxy Statement and the
accompanying proxy card are being mailed beginning March 11, 2006, to
stockholders of record of AT&T's common stock, $1.00 par value per share, at
the close of business on March 1, 2006. Each share entitles the registered
holder to one vote. As of January 31, 2006, there were 3,879,759,768 shares of
AT&T common stock outstanding.

All shares represented by proxies will be voted by one or more of the
persons designated on the enclosed proxy card in accordance with the
stockholders' directions. If the proxy card is signed and returned without
specific directions with respect to the matters to be acted upon, the shares
will be voted in accordance with the recommendations of the Board of Directors.
Any stockholder giving a proxy may revoke it at any time before such proxy is
voted at the meeting by giving written notice of revocation to the Vice
President and Secretary of AT&T, by submitting a later-dated proxy, or by
attending the meeting and voting in person. The Chairman of the Board and Chief
Executive Officer will announce the closing of the polls during the Annual
Meeting. Proxies must be received prior to the closing of the polls in order to
be counted.

Instead of submitting a signed proxy card, stockholders may submit their
proxies by telephone or through the Internet using the instructions
accompanying the proxy card. Telephone and Internet proxies must be used in
conjunction with, and will be subject to, the information and terms contained
on the proxy card. Similar procedures may also be available to stockholders who
hold their shares through a broker, nominee, fiduciary or other custodian.

The proxy card, or a proxy submitted by telephone or through the Internet,
will also serve as voting instructions to the plan administrator or trustee for
any shares held on behalf of a participant under any of the following employee
benefit plans: the AT&T Savings Plan, the AT&T Savings and Security Plan, the
Old Heritage Advertising & Publishers, Inc. Profit Sharing Plan, the AT&T
PAYSOP, the Pacific Telesis Group Employee Stock Ownership Plan, the Tax
Reduction Act Stock Ownership Plan (the "TRASOP") sponsored by The Southern New
England Telephone Company, the AT&T Long Term Savings Plan for Management
Employees, the AT&T Long Term Savings and Security Plan, the AT&T Retirement
Savings and Profit Sharing Plan, the AT&T of Puerto Rico, Inc. Long Term
Savings Plan for Management Employees, the AT&T of Puerto Rico, Inc. Long Term
Savings and Security Plan, the AT&T Employee Stock Ownership Plan, and the
Cingular Wireless 401(k) Savings Plan. Shares in each of the foregoing employee
benefit plans (except the Old Heritage plan) for which voting instructions are
not received, subject to the trustees' fiduciary obligations, will be voted by
the trustees in the same proportion as the shares for which voting instructions
are received from other participants in each such plan. For shares held in the
Old Heritage plan, the trustee has discretionary authority to vote the shares
for which no voting instructions are received. To allow sufficient time for
voting by the trustees and/or administrators of the plans, your voting
instructions must be received by April 25, 2006.

In addition, the proxy card or a proxy submitted by telephone or through the
Internet will constitute voting instructions to the plan administrator pursuant
to The DirectSERVICE Investment Program sponsored and administered by
Computershare Trust Company, N.A. (AT&T's Transfer Agent) for shares held on
behalf of plan participants.

If a stockholder participates in these plans and/or maintains stockholder
accounts under more than one name (including minor differences in registration,
such as with or without a middle initial), the stockholder may receive more
than one set of proxy materials. To ensure that all shares are voted, please
sign and return every proxy card received or submit a proxy by telephone or
through the Internet for each proxy card.

Only one annual report and one Proxy Statement are being delivered to
multiple stockholders sharing an address, unless AT&T has received contrary
instructions from one or more of the stockholders at that address. Stockholders
may request a separate copy of the most recent annual report and/or the Proxy
Statement by writing the transfer agent at: Computershare Trust Company, N.A.,
P.O. Box 43078, Providence, RI 02940-3078, or by calling (800) 351-7221.
Stockholders calling from outside the United States may call (781) 575-4729.
Requests will be responded to promptly. Stockholders sharing an address who
desire to receive multiple copies, or who wish to receive only a single copy,
of the annual report and/or the Proxy Statement may write or call the transfer
agent at the above address or phone numbers to request a change.

A stockholder may designate a person or persons other than those persons
designated on the proxy card to act as the stockholder's proxy by striking out
the name(s) appearing on the enclosed proxy card, inserting the name(s) of
another person(s) and delivering the signed card to such person(s). The
person(s) designated by the stockholder must present the signed proxy card at
the meeting in order for the shares to be voted.

Where the stockholder is not the record holder, such as where the shares are
held through a broker, nominee, fiduciary or other custodian, the stockholder
must provide voting instructions to the record holder of the shares in
accordance with the record holder's requirements in order to ensure the shares
are properly voted.

The cost of soliciting proxies will be borne by AT&T. Officers, agents and
employees of AT&T and its subsidiaries and other solicitors retained by AT&T
may, by letter, by telephone or in person, make additional requests for the
return of proxies and may receive proxies on behalf of AT&T. Brokers, nominees,
fiduciaries and other custodians will be requested to forward soliciting
material to the beneficial owners of shares and will be reimbursed for their
expenses. AT&T has retained D. F. King & Co., Inc. to aid in the solicitation
of proxies at a fee of $15,000, plus expenses.

Stockholders who represent 40% of the common stock outstanding and are
entitled to vote must be present or represented by proxy in order to constitute
a quorum to conduct business at the meeting. A list of eligible voters will be
available at the Annual Meeting.

If you plan to attend the meeting in person, please bring the admission
ticket (which is attached to the proxy card) to the Annual Meeting. If you do
not have an admission ticket, you will be admitted upon presentation of
identification at the door.

AT&T's executive offices are located at 175 E. Houston, San Antonio, Texas
78205.

Your vote is important. Please sign, date and return your proxy card or
submit your proxy and/or voting instructions by telephone or through the
Internet promptly so that a quorum may be represented at the meeting.

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BOARD OF DIRECTORS

The Board of Directors is responsible for the management and direction of
AT&T Inc. and for establishing broad corporate policies. The Board of Directors
and various committees of the Board regularly meet to receive and discuss
operating and financial reports presented by the Chairman of the Board and
Chief Executive Officer as well as reports by experts and other advisors.
Corporate review sessions are also offered to Directors to help familiarize
them with AT&T's businesses, technology, and operations. Members of the Board
are encouraged to attend Board meetings in person, unless the meeting is held
by teleconference. The Board held nine meetings in 2005. All of the Directors
attended at least 75% of the aggregate number of meetings of the Board and
Committees on which each served, except for William F. Aldinger III, who was
appointed a Director in November in connection with the acquisition of AT&T
Corp. and was unable to attend the only remaining Board meeting of the year due
to a scheduling conflict. Similarly, Directors are expected to attend the
Annual Meeting absent unusual circumstances, although AT&T has no formal policy
on the matter. All of the Directors were present at the 2005 Annual Meeting.

At least four times a year, the non-employee members of the Board of
Directors meet in executive session, i.e., without employee Directors or
management personnel present. James A. Henderson has been appointed the Lead
Director to preside over these meetings for 2006. Responsibilities of the Lead
Director include:

. Preparing the agenda for the executive session with the non-management
Directors.

. Presiding over each session of the non-management Directors.

. Acting as the principal liaison between the non-management Directors and
the Chairman and Chief Executive Officer and coordinating the activities
of the non-management Directors when acting as a group.

. Advising the Chairman and Chief Executive Officer as to the quality,
quantity and timeliness of the flow of information from management.

Interested persons may contact the Lead Director or the non-employee
Directors by sending written comments through the Office of the Secretary of
AT&T Inc. The Office will either forward the original materials as addressed or
provide Directors with summaries of the submissions, with the originals
available for review at the Directors' request.

Under AT&T's Bylaws, the Board of Directors has the authority to determine
the size of the Board and to fill vacancies. Currently, the Board is comprised
of 17 Directors, two of whom are executive officers of AT&T. Biographical
information about the Directors is provided on pages xx-xx. Holdings of AT&T
common stock by AT&T Directors are shown on the table on page x.

In January 2005, AT&T Inc. (then known as SBC Communications Inc.) entered
into an agreement to acquire AT&T Corp. ("Old AT&T"), which was completed in
November 2005, at which time Old AT&T became a wholly-owned subsidiary of AT&T
Inc. Pursuant to the acquisition agreement, AT&T Inc. increased the size of the
Board to 18 members and appointed Directors David W. Dorman, William F.
Aldinger III and Jon C. Madonna to the Board, each of whom were formerly
Directors of Old AT&T. Effective January 26, 2006, Mr. Dorman resigned from the
Board, and the Board subsequently reduced its size to 17 Directors. There are
no vacancies on the Board.

The Corporate Governance and Nominating Committee is responsible for
identifying candidates who are eligible under the qualification standards set
forth in AT&T's Corporate Governance Guidelines

to serve as members of the Board. It is authorized to retain search firms and
other consultants to assist it in identifying candidates and fulfilling its
other duties. The Committee is not limited to any specific process in
identifying candidates and will consider candidates suggested by stockholders.
Candidates are recommended to the Board after consultation with the Chairman of
the Board. In recommending Board candidates, the Committee considers a
candidate's: (1) general understanding of elements relevant to the success of a
large publicly traded company in the current business environment,
(2) understanding of AT&T's business, and (3) educational and professional
background. The Committee also gives consideration to a candidate's judgment,
competence, anticipated participation in Board activities, experience,
geographic location and special talents or personal attributes. Stockholders
who wish to suggest qualified candidates should write to the Vice President and
Secretary, AT&T Inc., 175 E. Houston, San Antonio, Texas 78205, stating in
detail the qualifications of such persons for consideration by the Committee.

Board Committees

From time to time the Board establishes permanent standing committees and
temporary special committees to assist the Board in carrying out its
responsibilities. The Board has established seven standing committees of
Directors, the principal responsibilities of which are described below. The
charters for each of these committees may be found on AT&T's web site:
http://www.att.com. The biographical information included later in this Proxy
Statement identifies committee memberships held by each Director.

Audit Committee--The Committee met 12 times in 2005. It consists of six
non-employee Directors. The Audit Committee oversees the integrity of the
financial statements of AT&T, the independent auditor's qualifications and
independence, the performance of the internal audit function and independent
auditors, and the compliance by AT&T with legal and regulatory matters. The
Committee is responsible for the appointment, compensation, retention and
oversight of the work of the independent auditor. The independent auditing firm
examines the accounting records of AT&T and its subsidiaries.

Corporate Development Committee--The Committee met one time in 2005. It
consists of five non-employee Directors and one employee Director. The
Committee reviews mergers, acquisitions, dispositions, and similar transactions.

Corporate Governance and Nominating Committee--The Committee met eight times in
2005 and consists of four non-employee Directors. It is responsible for
recommending candidates to be nominated by the Board for election by the
stockholders or to be appointed by the Board of Directors to fill vacancies
consistent with the criteria approved by the Board, periodically assessing
AT&T's Corporate Governance Guidelines and making recommendations to the Board
for amendments, recommending to the Board the compensation of Directors, taking
a leadership role in shaping corporate governance, and overseeing an annual
evaluation of the Board.

Executive Committee--The Committee did not meet in 2005. It consists of six
non-employee Directors, each of whom is the chairperson of a standing
committee, and the Chairman of the Board. The Committee assists the Board of
Directors by acting upon matters when the Board is not in session. The
Committee has the full power and authority of the Board to the extent permitted
by law, including the power and authority to declare a dividend or to authorize
the issuance of common stock.

Finance/Pension Committee--The Committee met four times in 2005. It consists of
six non-employee Directors and one employee Director. The Committee assists the
Board in its oversight of AT&T's finances, including recommending the payment
of dividends and reviewing the management of AT&T's debt and investment of
AT&T's cash reserves.

Human Resources Committee--The Committee met six times in 2005. It consists of
four non-employee Directors. The Committee oversees the management of human
resources activities of AT&T, including the design of employee benefit plans.
The Committee is also responsible for establishing the compensation of the
Chief Executive Officer and other officers, as determined by the Committee.

Public Policy and Environmental Affairs Committee--The Committee met three
times in 2005. It consists of five non-employee Directors. The Committee
assists the Board in its oversight of corporate policies, including legislative
and environmental matters.

Independence of Directors

The New York Stock Exchange ("NYSE") has recently adopted new independence
standards for companies listed on the NYSE, including AT&T. These standards
require a majority of the Board to be independent and every member of each of
the Audit Committee, Human Resources Committee, and Corporate Governance and
Nominating Committee to be independent. A Director is considered independent
only if the Board of Directors "affirmatively determines that the Director has
no material relationship with the listed company (either directly or as a
partner, stockholder or officer of an organization that has a relationship with
the company)." In addition, the Board of Directors has adopted certain
additional standards for determining the independence of its members. In
accordance with the following standards of the NYSE, a Director is not
independent if:

. The Director is, or has been within the last three years, an employee of
AT&T, or an immediate family member is, or has been within the last three
years, an executive officer, of AT&T.

. The Director has received, or has an immediate family member who has
received, during any 12-month period within the last three years, more
than $100,000 in direct compensation from AT&T, other than director and
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service).

. (A) The Director or an immediate family member is a current partner of a
firm that is AT&T's internal or external auditor; (B) the Director is a
current employee of such a firm; (C) the Director has an immediate family
member who is a current employee of such a firm and who participates in
the firm's audit, assurance or tax compliance (but not tax planning)
practice; or (D) The Director or an immediate family member was within
the last three years (but is no longer) a partner or an employee of such
a firm and personally worked on AT&T's audit within that time period.

. The Director or an immediate family member is, or has been within the
last three years, employed as an executive officer of another company
where any of AT&T's present executives officers at the same time serves
or served on that company's compensation committee.

. The Director is a current employee, or an immediate family member is a
current executive officer, of a company that has made payments to, or
received payments from, AT&T for property or services in an amount which,
in any of the last three fiscal years, exceeds the greater of $1 million,
or 2% of such other company's consolidated gross revenues.

The following are additional standards for determining independence of
Directors, established by the AT&T Board of Directors:

. A Director who owns, together with any ownership interests held by
members of the Director's immediate family, 10% of another company that
makes payments to, or receives payments from, AT&T (together with its
consolidated subsidiaries) for property or services in an amount which,
in any single fiscal year, exceeds the greater of $1 million or 2% of
such other company's consolidated gross revenues, is not independent
until three years after falling below such threshold.

. A Director who is, or whose immediate family member is, a director,
trustee or officer of a charitable organization, or holds a similar
position with such an organization, and AT&T (together with its
consolidated subsidiaries) makes contributions to the charitable
organization in an amount which exceeds, in any single fiscal year, the
greater of $1 million per year or at least 5% of such organization's
consolidated gross revenues, is not independent until three years after
falling below such threshold.

The Board of Directors, using the above standards for determining the
independence of its members, has determined that the following Directors are
independent: William F. Aldinger III, Gilbert F. Amelio, August A. Busch III,
Martin K. Eby, Jr., James A. Henderson, Jon C. Madonna, Lynn M. Martin, John B.
McCoy, Mary S. Metz, Toni Rembe, S. Donley Ritchey, Joyce M. Roche, Laura
D'Andrea Tyson, and Patricia P. Upton. In addition, the Board has determined
that every member of the Audit Committee, the Human Resources Committee and the
Corporate Governance and Nominating Committee is independent.

Compensation of Directors

Directors who are also employees of AT&T or its subsidiaries receive no
separate compensation for serving as Directors or as members of Board
committees. Directors who are not employees of AT&T or its subsidiaries receive
a $65,000 annual retainer, $2,000 for each Board meeting and review session
attended, and $1,700 for each committee meeting attended. Excluding employee
Directors, the Chairperson of each committee receives an additional annual
retainer of $5,000, except for the Chairperson of the Audit Committee who
receives an additional annual retainer of $15,000, and the Lead Director who
receives an additional annual retainer of $10,000.

Directors may elect to take their retainer in the form of AT&T common stock
or cash. Directors may also elect to defer the receipt of their fees and all or
part of their retainers into either Deferred Stock Units or into a Cash
Deferral Account. Each Deferred Stock Unit is equivalent to a share of common
stock and earns dividend equivalents in the form of additional Deferred Stock
Units. Deferred Stock Units are converted to common stock and paid out as
elected by the Director in up to 15 annual installments after the Director
ceases service with the Board. Each Director also receives an annual

award of Deferred Stock Units equal in value to one and one-half times the base
annual retainer. In addition, each non-employee Director who joined the Board
after November 21, 1997, and before September 24, 2004, receives an annual
grant of Deferred Stock Units equal to $13,000, limited to 10 annual grants.
Deferrals into the Cash Deferral Account earn interest during the calendar year
at a rate equal to the Moody's Long Term Corporate Bond Yield Average for
September of the preceding year ("Moody's"). Annually, Directors may elect to
convert their Cash Deferral Accounts into Deferred Stock Units at the fair
market value of AT&T stock at the time of the conversion.

AT&T provides each non-employee Director with travel accident insurance
while the Director is on AT&T business, along with $100,000 of group life
insurance. The total premiums during 2005 for these policies were $1,238 for
travel accident insurance and $6,585 for group life insurance. Directors and
former Directors also receive certain telecommunications and satellite TV
services and equipment. The value of the services and equipment received by
Directors who served at any time during 2005, or for whom reimbursement was
provided, together with amounts necessary to offset the Directors' applicable
tax liabilities resulting from such services and benefits, computed at maximum
marginal rates, averaged $7,796 per non-employee Director in 2005. Employee
Directors receive similar services and equipment in connection with their
service as officers of AT&T.

AT&T does not offer non-employee Directors a retirement plan or pension.
However, Directors who joined the Board prior to 1997 have vested rights in a
former pension plan no longer offered to Directors. Only benefits that have
already vested are payable under the plan. Each Director who is vested in the
former pension plan, upon retirement, will receive annually 10% of the annual
retainer in effect at the time of his or her retirement multiplied by the
number of years of service, not to exceed 10 years. The payments will continue
for the life of the Director. If the Director dies before receiving 10 years of
payments, the Director's beneficiaries will receive the payments for the
remainder of the 10-year period.

Upon the acquisition of Pacific Telesis Group ("PTG") by AT&T on April 1,
1997, certain of the former PTG Directors joined the AT&T Board. As part of
their service with PTG, these Directors previously received stock options (the
last of which expire in 2006) and PTG Deferred Stock Units, the latter of which
were issued in exchange for a waiver by the Directors of certain retirement
benefits. The PTG Deferred Stock Units earn dividend equivalents and are paid
out in the form of cash after the retirement of the Director. After the
acquisition of PTG, both the Deferred Stock Units and the stock options were
modified so that their value was based on AT&T stock instead of PTG stock.
Service as a Director of AT&T is deemed service with PTG for these benefits. In
addition, PTG Directors were allowed to elect during 1997 to have their prior
deferrals of PTG retainers and fees continued until they leave the AT&T Board.
These deferrals earn a rate of interest equal to Moody's plus 4% for deferrals
from 1985 through 1992; Moody's plus 2% for deferrals from 1993 through 1995;
and the 10-year Treasury Note average for the month of September for the prior
year plus 2% for deferrals after 1995.

Upon the acquisition of Old AT&T by AT&T Inc. on November 18, 2005, certain
of the former non-employee Directors of Old AT&T joined the AT&T Inc. Board. As
part of their service with Old AT&T, these AT&T Directors received Restricted
Stock Units. Each unit is converted into a share of AT&T Inc. stock at vesting
and, until vested, receives cash payments equal to dividends on an equivalent
amount of AT&T Inc. stock. Under the terms of the grant, these units vest 50%
in 2007 and 25% in each of 2008 and 2009, or upon the earlier death or
disability of the Director. Termination of their membership on the AT&T Inc.
Board will result in forfeiture of any unvested units.

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COMMON STOCK OWNERSHIP

Certain Beneficial Owners

The following table sets forth the beneficial ownership of each person
holding more than 5% of AT&T's outstanding common stock as of December 31, 2005
(as reported in filings made with the Securities and Exchange Commission on
Schedule 13G by the respective stockholders listed below).

Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
-------------- --------------------------------- ----------- --------

Common stock, Capital Research & Management Co. 319,794,781 8.2%
$1.00 par value 333 South Hope Street
Los Angeles, CA 90071

Directors and Officers

The following table sets forth the beneficial ownership of AT&T common stock
as of December 31, 2005, held by each Director, nominee and officer named in
the Compensation Table on page xx. As of that date, each Director and officer
listed below, and all Directors and executive officers as a group, owned less
than one percent of the outstanding AT&T common stock. Except as noted below,
the persons listed in the table have sole voting and investment power with
respect to the securities indicated.

Total AT&T Total AT&T
Beneficial Non- Beneficial Non-
Ownership Voting Ownership Voting
Name of (including Stock Name of (including Stock
Beneficial Owner options)(1) Units(2) Beneficial Owner options)(1) Units(2)
------------------ ----------- -------- -------------------------- ----------- ---------

William F.
Aldinger III 11,083 4070 Laura D'Andrea Tyson 11,648 27,668
Gilbert F. Amelio 5,397 37,267 Patricia P. Upton 13,053 25,401
August A. Busch
III (3) 46,354 83,018 Edward E. Whitacre, Jr. 10,258,346 9,645
Martin K. Eby, Jr. 26,856 39,186 James D. Ellis 1,479,094 492,691
James A.
Henderson 13,476 33,471 Forrest E. Miller 671,765 51,697
Charles F. Knight 24,978 45,635 Randall L. Stephenson 764,619 158,535
Jon C. Madonna 12,999 4070 Rayford Wilkins, Jr. 832,844 24,568
Lynn M. Martin 10,827 24,189
John B. McCoy 31,584 45,908 All executive officers and 18,143,976 1,496,579
Mary S. Metz 7,510 29,118 Directors as a group
Toni Rembe (4) 19,440 35,538 (consisting of 26
S. Donley Ritchey 10,434 41,959 persons, including
Joyce M. Roche 2,041 37,675 those named above)

(1)This table includes presently exercisable stock options and stock options
that will become exercisable within 60 days of the date of this table. The
following Directors and officers hold the number of options set forth
following their respective names: Mr. Madonna--2,496, Dr. Metz--2,924,
Ms. Rembe--2,924, Mr. Ritchey--2,924, Mr. Whitacre--8,496,566,
Mr. Ellis--1,441,680, Mr. Miller--646,640, Mr. Stephenson--746,721,
Mr. Wilkins-769,370 and all executive officers and Directors as a
group--15,762,558.
This table also includes shares held in an employee benefit plan for the
following persons, who have sole voting power but no investment power with
respect to the number of shares set forth following their respective names:
Mr. Whitacre--1,154; Mr. Ellis--1,210; Mr. Miller--16; Mr. Stephenson--63;
and Mr. Wilkins--606. In addition, of the shares shown in the above table,
the following persons share voting and investment power with other persons
with respect to the number of shares set forth following their respective
names: Dr. Amelio--5,381, Mr. Busch--6,600, Dr. Metz--1,592,
Ms. Rembe--2,541, Mr. Ritchey--7,508, Dr. Tyson--11,648, Ms. Upton--5,025,
Mr. Whitacre--31,668, Mr. Ellis--15,475 Mr. Miller--24,473 and
Mr. Wilkins--16,297.

(2)Represents number of Stock Units held by the Director or officer, where each
Stock Unit is convertible into a share of AT&T stock at times specified by
the relevant plan. None of the Stock Units listed may be converted into
common stock within 60 days of the date of this table. As noted under
"Compensation of Directors," non-employee Directors may acquire Stock Units
by deferring the receipt of fees and retainers into Stock Units. Directors
also receive yearly grants of Stock Units. Officers may acquire Stock Units
by participating in stock-based compensation deferral plans. Stock Units
earn dividend equivalents at the same rate as the underlying stock, which
are reinvested in additional Stock Units. Stock Units carry no voting
rights. Also includes Restricted Stock Units held by former Directors of Old
AT&T.
(3)Mr. Busch disclaims beneficial ownership of 3,300 shares held in a trust for
a sister.
(4)Ms. Rembe disclaims beneficial ownership of 2,145 shares held in a trust for
her spouse and 396 shares held by her spouse's corporation.

--------------------------------------------------------------------------------
MATTERS TO BE VOTED UPON

Voting

Each share of AT&T common stock represented at the Annual Meeting is
entitled to one vote on each matter properly brought before the meeting.
Directors are elected by a plurality of the votes cast. The Amendment of the
AT&T Inc.'s Restated Certificate of Incorporation (Item 4) will require the
two-thirds majority vote of the total number of shares outstanding and entitled
to vote to pass. All other matters will be determined by a majority of the
votes cast. Shares represented by proxies marked to withhold authority to vote
with respect to the election of one or more nominees as Directors, by proxies
marked "abstain" on other proposals, and by proxies marked to deny
discretionary authority on other matters will not be counted in determining the
vote obtained on such matters. If no directions are given and the signed card
is returned, the person or persons designated on the card will vote the shares
for the election of the Board of Directors' nominees and in accordance with the
recommendations of the Board of Directors on the other subjects listed on the
proxy card and at their discretion on any other matter that may properly come
before the meeting.

Under the rules of the New York Stock Exchange, on certain routine matters,
brokers may, at their discretion, vote shares they hold in "street name" on
behalf of beneficial owners who have not returned voting instructions to the
brokers. Routine matters include the election of Directors and the approval of
the appointment of the independent auditors. In instances where brokers are
prohibited from exercising discretionary authority (so-called "broker
non-votes"), the shares they hold are not included in the vote totals. At the
2006 Annual Meeting, brokers will be prohibited from exercising discretionary
authority with respect to the Approval of the 2006 Incentive Plan (Item 3), the
Amendment of the Certificate of Incorporation (Item 4) and each of the
stockholder proposals (Items 5 through 9). Because broker non-votes are not
included in the vote, they will have no effect on the vote for any of the
proposals except for the Amendment of the Certificate of Incorporation. Because
this proposal requires a 2/3 majority of the outstanding shares, broker
non-votes will have the effect of votes against the proposal.

.. Election of Directors (Item 1 on Proxy Card)

The following persons, each of whom is currently a Director of AT&T, have
been nominated by the Board of Directors on the recommendation of the Corporate
Governance and Nominating Committee for election to one-year terms of office
that would expire at the 2007 Annual Meeting.

EDWARD E. WHITACRE, JR., age 64, is Chairman of the Board and Chief Executive
Officer of AT&T Inc. and has served in this capacity since January 1990.
Mr. Whitacre has been a Director of AT&T Inc. since October 1986. He is the
Chairman of the Executive Committee and a member of the Corporate Development
Committee and the Finance/Pension Committee. He is a Director of Anheuser-Busch
Companies, Inc. and Burlington Northern Santa Fe Corporation.

WILLIAM F. ALDINGER III, age 58, retired. Mr. Aldinger was Chairman and Chief
Executive Officer of HSBC North America Holdings Inc. (a financial services
company), Prospect Heights, Illinois, from January 2004 until April 2005. He
also served as Chairman from 1996 and Chief Executive Officer from 1994 of HSBC
Finance Corporation (formerly Household International, Inc.) until April 2005.
Mr. Aldinger was elected a Director of AT&T Inc. in November 2005. He served as
a Director of AT&T Corp. from 2003 until the company was acquired by AT&T Inc.
in November 2005. Mr. Aldinger is a member of the Audit Committee and the
Finance/Pension Committee. He is a Director of Illinois Tool Works Inc.; KKR
Financial Corp.; Charles Schwab Corporation; and MasterCard International.

GILBERT F. AMELIO, age 63, is Senior Partner of Sienna Ventures (a
privately-held venture capital firm), Sausalito, California, and has served in
this capacity since April 2001. He has also been Chairman and Chief Executive
Officer of Acquicor Technology, Inc. (an emerging information technology
company) since July 2005. Dr. Amelio was Chairman and Chief Executive Officer
of Beneventure Capital, LLC (a full-service venture capital firm), San
Francisco, California, from 1999 to 2005 and was Principal of Aircraft
Ventures, LLC (a consulting firm), Newport Beach, California, from April 1997
to December 2004. In 2003, AmTech, LLC (a high technology investments and
consulting services firm), where Dr. Amelio served as Chairman and Chief
Executive Officer from 1999 to April 2004, declared bankruptcy. Dr. Amelio was
elected a Director of AT&T Inc. in February 2001 and had previously served as
an Advisory Director of AT&T Inc. from April 1997 to February 2001. He served
as a Director of Pacific Telesis Group from 1995 until the company was acquired
by AT&T Inc. in 1997. He is a member of the Audit Committee and the Human
Resources Committee.

AUGUST A. BUSCH III, age 68, is Chairman of the Board of Anheuser-Busch
Companies, Inc. (a brewing, packaging, and family entertainment holding
company), St. Louis, Missouri, and has served in this capacity since 1977.
Mr. Busch also served as Chief Executive Officer of Anheuser-Busch Companies,
Inc. from 1975 until June 2002. Mr. Busch has been a Director of AT&T Inc.
since October 1983. He served as a Director of Southwestern Bell Telephone
Company from 1980 to 1983. He is Chairman of the Corporate Governance and
Nominating Committee and a member of the Corporate Development Committee and
the Executive Committee. Mr. Busch is a Director of Anheuser-Busch Companies,
Inc. and Emerson Electric Co.; and an Advisory Member of the Board of Directors
of Grupo Modelo, S.A. de C.V.

MARTIN K. EBY, JR., age 71, retired. Mr. Eby was Chairman of the Board of The
Eby Corporation (a commercial general contractor holding company), Wichita,
Kansas, from April 1979 until his retirement in July 2004. Mr. Eby was also
President and Chief Executive Officer of The Eby Corporation from June 1967 to
December 1997. He has been a Director of AT&T Inc. since June 1992. He is a
member of the Audit Committee and the Human Resources Committee.

JAMES A. HENDERSON, age 71, retired. Mr. Henderson was Chairman of the Board
from 1995 and Chief Executive Officer from 1994 of Cummins Inc. (manufacturer
of diesel and natural gas engines), Columbus, Indiana, until his retirement in
December 1999. Mr. Henderson has been a Director of AT&T Inc. since October
1999. He served as a Director of Ameritech Corporation from 1983 until the
company was acquired by AT&T Inc. in 1999. He also served as a Director of
Indiana Bell Telephone Company (which became a subsidiary of Ameritech) from
1978 until 1983. He is the Chairman of the Human Resources Committee and a
member of the Executive Committee and the Finance/Pension Committee.
Mr. Henderson is a Director of International Paper Company; Nanophase
Technologies Corporation; and Ryerson Inc.

CHARLES F. KNIGHT, age 70, retired. Mr. Knight was Chairman of the Board of
Emerson Electric Co. (manufacturer of electrical and electronic equipment), St.
Louis, Missouri, from 1974 until his retirement in September 2004, when he was
elected to the honorary position of Chairman Emeritus. Mr. Knight was also
Chief Executive Officer of Emerson Electric Co. from 1973 to 2000. He has been
a Director of AT&T Inc. since October 1983. He served as a Director of
Southwestern Bell Telephone Company from 1974 to 1983. He is the Chairman of
the Corporate Development Committee and a member of the Executive Committee and
the Finance/Pension Committee. Mr. Knight is a Director of Anheuser-Busch
Companies, Inc. and International Business Machines Corporation.

JON C. MADONNA, age 62, retired. Mr. Madonna was Chairman and Chief Executive
Officer of KPMG (an international accounting and consulting firm), New York,
New York. He was with KPMG for 28 years where he held numerous senior
leadership positions throughout his career and served as Chairman from 1990 to
1996. Subsequent to his retirement from KPMG in 1996, Mr. Madonna served as
Vice Chairman of Travelers Group, Inc. from 1997 to 1998 and President and
Chief Executive Officer of Carlson Wagonlit Corporate Travel, Inc. from 1999 to
2000. He was Chief Executive Officer of DigitalThink, Inc. from 2001 to 2002,
and was Chairman of DigitalThink, Inc. from April 2002 to May 2004. Mr. Madonna
was elected a Director of AT&T Inc. in November 2005. He served as a Director
of AT&T Corp. from 2002 until the company was acquired by AT&T Inc. in November
2005. Mr. Madonna is a member of the Audit Committee and the Corporate
Development Committee. He is a Director of Albertson's, Inc.; Phelps Dodge
Corporation; and Tidewater Inc.

LYNN M. MARTIN, age 66, is President of The Martin Hall Group, LLC (a human
resources consulting firm), Chicago, Illinois, and has served in this capacity
since January 2005. Ms. Martin was Chair of the Council for the Advancement of
Women and Advisor to the firm of Deloitte & Touche LLP (an auditing and
management consulting services firm), Chicago, Illinois, from 1993 until
September 2005. She served as U.S. Secretary of Labor from 1991 to 1993 and as
a member of the U.S. House of Representatives from Illinois from 1981 to 1991.
Ms. Martin has been a Director of AT&T Inc. since October 1999. She served as a
Director of Ameritech Corporation from 1993 until the company was acquired by
AT&T Inc. in 1999. Ms. Martin is a member of the Finance/Pension Committee and
the Public Policy and Environmental Affairs Committee. She is a Director of
Constellation Energy Group, Inc.; certain Dreyfus Funds; The Procter & Gamble
Company; and Ryder System, Inc.

JOHN B. MCCOY, age 62, retired. Mr. McCoy was Chairman from November 1999 and
Chief Executive Officer from October 1998 of Bank One Corporation (commercial
and consumer bank) until his retirement in December 1999, and Chairman and
Chief Executive Officer of its predecessor, Banc One Corporation, from 1987 to
1998. Mr. McCoy has been a Director of AT&T Inc. since October 1999. He served
as a Director of Ameritech Corporation from 1991 until the company was acquired
by AT&T Inc. in 1999. He is the Chairman of the Finance/Pension Committee and a
member of the Audit Committee and the Executive Committee. He is a Director of
Cardinal Health, Inc.; ChoicePoint Inc.; and Onex Corporation.

MARY S. METZ, age 68, is Chair of the Board of Trustees of American
Conservatory Theater (a nonprofit nationally renowned theater and an accredited
conservatory), San Francisco, California, and has served in this capacity since
November 2004. Dr. Metz is also President Emerita of Mills College. She was
President of S. H. Cowell Foundation, San Francisco, California, from January
1999 until her retirement in March 2005 and was Dean of the University
Extension of the University of California, Berkeley, from 1991 until 1998.
Dr. Metz has been a Director of AT&T Inc. since April 1997. She served as a
Director of Pacific Telesis Group from 1986 until the company was acquired by
AT&T Inc. in 1997. She is a member of the Corporate Governance and Nominating
Committee and the Public Policy and Environmental Affairs Committee. Dr. Metz
is a Director of Longs Drug Stores Corporation; Pacific Gas and Electric
Company; and UnionBanCal Corporation.

TONI REMBE, age 69, retired. Ms. Rembe was a partner in the law firm of
Pillsbury Winthrop LLP, San Francisco, California, from 1971 until her
retirement in December 2004. Ms. Rembe was elected a Director of AT&T Inc. in
January 1998 and had previously served as an Advisory Director of AT&T Inc.
from April 1997 to January 1998. She served as a Director of Pacific Telesis
Group from 1991 until the company was acquired by AT&T Inc. in 1997. She is a
member of the Corporate Development Committee and the Public Policy and
Environmental Affairs Committee. Ms. Rembe is a Director of AEGON N.V.

S. DONLEY RITCHEY, age 72, is Managing Partner of Alpine Partners (a family
investment general partnership), Danville, California, and has served in this
capacity since 1981. Mr. Ritchey was Chairman of the Board of Lucky Stores,
Inc. from 1981 until his retirement in 1986 as well as Chief Executive Officer
from 1980 to 1985. Mr. Ritchey has been a Director of AT&T Inc. since April
1997. He served as a Director of Pacific Telesis Group from 1984 until the
company was acquired by AT&T Inc. in 1997. He is the Chairman of the Audit
Committee and a member of the Corporate Governance and Nominating Committee and
the Executive Committee. Mr. Ritchey is a Director of The McClatchy Company.

JOYCE M. ROCHE, age 58, is President and Chief Executive Officer of Girls
Incorporated (a national nonprofit research, education, and advocacy
organization), New York, New York, and has served in this capacity since
September 2000. Ms. Roche was an independent marketing consultant from 1998 to
2000. She was President and Chief Operating Officer of Carson, Inc. from 1996
to 1998, and Executive Vice President of Global Marketing of Carson, Inc. from
1995 to 1996. Ms. Roche has been a Director of AT&T Inc. since October 1998.
She served as a Director of Southern New England Telecommunications Corporation
from 1997 until the company was acquired by AT&T Inc. in 1998. She is a member
of the Corporate Governance and Nominating Committee and the Public Policy and
Environmental Affairs Committee. She is a Director of Anheuser-Busch Companies,
Inc.; Federated Department Stores, Inc.; and Tupperware Corporation.

RANDALL L. STEPHENSON, age 45, is Chief Operating Officer of AT&T Inc. and has
served in this capacity since April 2004. He was Senior Executive Vice
President and Chief Financial Officer of AT&T Inc. from August 2001 through May
2004. Prior to becoming Chief Financial Officer, Mr. Stephenson held a variety
of high-level finance and marketing positions with AT&T Inc. or its
subsidiaries since 1996. He first joined AT&T Inc. through its subsidiary,
Southwestern Bell Telephone Company, in 1982. He was elected a Director of AT&T
Inc. in June 2005. Mr. Stephenson is a Director of Cingular Wireless
Corporation.

LAURA D'ANDREA TYSON, age 58, is Dean of London Business School, London,
England, and has served in this capacity since January 2002. Dr. Tyson was Dean
of the Walter A. Haas School of Business at the University of California,
Berkeley, from July 1998 to December 2001. Dr. Tyson served as Professor of
Economics and Business Administration at the University of California,
Berkeley, from 1997 to 1998. She served as National Economic Adviser to the
President of the United States from 1995 to 1996 and as Chair of the White
House Council of Economic Advisers from 1993 to 1995. Dr. Tyson has been a
Director of AT&T Inc. since October 1999. She served as a Director of Ameritech
Corporation from 1997 until the company was acquired by AT&T Inc. in 1999. She
is a member of the Corporate Development Committee and the Finance/Pension
Committee. Dr. Tyson is a Director of Eastman Kodak Company and Morgan Stanley.

PATRICIA P. UPTON, age 67, is President and Chief Executive Officer of
Aromatique, Inc. (manufacturer and wholesaler of decorative fragrances), Heber
Springs, Arkansas, and has served in this capacity since 1982. Ms. Upton has
been a Director of AT&T Inc. since June 1993. She is the Chairwoman of the
Public Policy and Environmental Affairs Committee and a member of the Executive
Committee and the Human Resources Committee.

Shares represented by the accompanying form of proxy will be voted for the
election of the nominees unless other instructions are shown on the proxy card
or provided through the telephone or Internet proxy. If one or more of the
nominees should at the time of the meeting be unavailable or unable to serve as
a Director, the shares represented by the proxies will be voted to elect the
remaining nominees and any substitute nominee or nominees designated by the
Board. The Board knows of no reason why any of the nominees would be
unavailable or unable to serve.

Your Board of Directors Recommends a Vote "FOR"
Its Nominees Listed as Directors.

.. Approval of Appointment of Ernst & Young LLP as Independent Auditors
(Item 2 on Proxy Card)

The Audit Committee of the Board of Directors has appointed the firm of
Ernst & Young LLP to serve as independent auditors of AT&T for the fiscal year
ending December 31, 2006, subject to stockholder approval. This firm has
audited the accounts of AT&T since 1983. If stockholders do not approve this
appointment, the Committee will consider other independent auditors. One or
more members of Ernst & Young LLP are expected to be present at the Annual
Meeting, will be able to make a statement if they so desire, and will be
available to respond to appropriate questions.

Your Board of Directors Recommends a Vote "FOR" Approval
of the Appointment of Ernst & Young LLP as Independent Auditors.

.. Approval of the 2006 Incentive Plan
(Item 3 on Proxy Card)

Your Board of Directors has adopted the 2006 Incentive Plan ("Incentive
Plan") for the purpose of replacing the 2001 Incentive Plan (the "2001 Plan"),
previously approved by our stockholders in 2001. The Incentive Plan, like the
2001 Plan, permits AT&T to compensate eligible managers with equity and cash
awards. New awards will not be made under the Incentive Plan until stockholder
approval is obtained for the Incentive Plan.

The Incentive Plan provides your Directors with the flexibility to
compensate managers through a variety of possible awards. These awards may be
tied to the financial or operational performance of the Company as well as to
the performance of the stock. Because of the key role the Incentive Plan plays
in the compensation of your executives, your Directors urge you to vote for
approval of the Incentive Plan, including its performance standards.

The terms of the Incentive Plan are summarized below. In addition, the full
text of the Incentive Plan is set forth in Appendix A to this Proxy Statement.
The following summary is qualified in its entirety by reference to the text of
the Incentive Plan.

Summary of the Incentive Plan

Performance Awards. The Incentive Plan allows certain committees of your
Directors (each, a "Plan Committee") to issue "performance shares" and
"performance units." These are contingent incentive awards that are converted
into stock and/or cash and paid out to the participant only if specific
performance goals are achieved over performance periods of not less than one
year. If the performance goals are not achieved, the awards are forfeited or
reduced. Performance shares are each equivalent in value to a share of common
stock (payable in cash and/or stock), while performance units are equal to a
specific amount of cash. In any calendar year, no participant may receive
performance shares having a potential payout of performance shares (whether in
the form of cash and/or stock) exceeding 1% of the shares approved for issuance
under the Incentive Plan. Similarly, no participant may receive performance
units having a potential payout exceeding an amount equivalent to 1% of the
approved shares as of the date of the grant. Unless otherwise provided by the
Plan Committee, participants receive dividend equivalents on performance shares.

Performance Goals. The performance goals set by the Plan Committee 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. The
performance goals may include, or be offset by, any of the following criteria
or any combination thereof:

. 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.

. 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.

. 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.

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

Except to the extent otherwise provided by the Plan 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 as defined in the
Incentive Plan.

Stock Options. The Incentive Plan permits the Plan Committee to issue
non-qualified stock options to managers, which directly link their financial
success to that of AT&T's stockholders. Incentive Stock Options, which are more
costly for a company to issue, are not permitted under the Incentive Plan. The
Plan Committee shall determine the number of shares subject to options and all
other terms and conditions of the options, including vesting requirements. In
no event, however, may the exercise price of a stock option be less than 100%
of the fair market value of AT&T common stock on the date of the stock option's
grant, nor may any option have a term of more than 10 years. During any
calendar year, no single employee may receive options on shares representing
more than 1% of the shares authorized for issuance under the Plan.

If the Plan Committee determines that an option recipient is engaging in
competitive activity with AT&T or its subsidiaries, the Plan Committee may
cancel any option granted to the recipient. In addition, under certain
circumstances, AT&T may recover profits from options exercised within six
months of the employee engaging in competitive activities.

Restricted Stock. The Incentive Plan also permits the Plan Committee to
grant restricted stock awards. Each share of restricted stock shall be subject
to such terms, conditions, restrictions, and/or limitations, if any, as the
Plan Committee deems appropriate, including, but not by way of limitation,
restrictions on transferability and continued employment. In order to qualify a
restricted stock grant under Section 162(m) of the Code, the Plan Committee may
condition vesting of the award on the attainment of performance goals, using
the same performance criteria as that used for performance shares and units.
The vesting period for restricted stock shall be determined by the Committee,
which may accelerate the vesting of any such award. The Plan Committee may also
grant restricted stock units

that have the same terms as Restricted Stock, except that units have no voting
rights, may receive dividend equivalents, and may be paid in cash or stock. The
Plan Committee may also grant unrestricted stock under this provision. No
manager may receive in any calendar year restricted stock (including restricted
stock units and stock without restrictions) representing more than 1% of the
shares authorized to be issued under the Incentive Plan.

Eligible for Participation. All management employees of AT&T or its
Subsidiaries, representing approximately 79,000 managers, are eligible to be
selected to participate in the Incentive Plan. Actual selection of any eligible
manager to participate in the Incentive Plan is within the sole discretion of
the Plan Committee.

Available Shares. The Incentive Plan authorizes the Plan Committee to issue,
over a 10-year period, up to 90 million shares of common stock to participants,
net of shares withheld for taxes and lapsed awards.

After April 30, 2011, no further awards may be issued under the Incentive
Plan.

Federal Income Tax Matters Relating to Stock Options. AT&T believes that,
under present law, the following is a summary of the principal U.S. Federal
income tax consequences of the issuance and exercise of stock options granted
under the Incentive Plan. This summary is not intended to be exhaustive and,
among other things, does not describe state or local tax consequences.

A participant will not be deemed to have received any income subject to tax
at the time a non-qualified stock option is granted, nor will AT&T be entitled
to a tax deduction at that time. However, when a non-qualified stock option is
exercised, the participant will be deemed to have received an amount of
ordinary income equal to the excess of the fair market value of the shares of
common stock purchased over the exercise price. AT&T will be allowed a tax
deduction in the year the option is exercised in an amount equal to the
ordinary income which the participant is deemed to have received.

Other Information. The Incentive Plan may be amended in whole or in part by
the Board of Directors or the Human Resources Committee. Unless the Plan
Committee provides otherwise in advance of the grant, in the event of a Change
in Control (as defined in the Incentive Plan), if the employee is involuntarily
terminated or leaves for "Good Reason," options and restricted stock (including
restricted stock units) shall vest. In addition, 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. "Good
Reason" means in connection with a termination of employment by a Participant
within two years following a Change in Control, (a) an 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 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 50 miles from the location where the
participant was principally employed 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).

The closing price of AT&T's common stock reported on the New York Stock
Exchange for February 1, 2006, was $26.55 per share.

Your Board of Directors Recommends a Vote "FOR"
Approval of the 2006 Incentive Plan.

.. Approval of Amendment to ARTICLE SEVEN of AT&T Inc.'s Restated Certificate
of Incorporation (Item 4 on Proxy Card)

Approval of this provision by the stockholders will cause ARTICLE SEVEN of
AT&T's Inc.'s Restated Certificate of Incorporation to be amended by deleting
the language struck-through below:

The Board of Directors is expressly authorized to adopt, amend or repeal
the Bylaws of the Corporation[, except that any Bylaw of the corporation
providing for the maximum number of Directors that may serve on the Board of
Directors, or providing for a classified Board of Directors with staggered
terms of office or requiring the approval by the shareholders or the Board
of Directors of any business combination may only be amended or repealed by
a two-thirds majority vote of the total number of shares of stock of the
corporation then outstanding and entitled to vote].

[ ] denotes language that was struck through

The company's Restated Certificate of Incorporation now provides that
certain provisions of the Bylaws of the Company may not be amended except upon
the affirmative vote of two-thirds of the outstanding shares of the company.
These provisions include amending or repealing provisions for a classified
Board of Directors, amending a requirement of the approval of two-thirds of the
outstanding stockholders to approve certain business combinations involving the
Company and amendments to the maximum number of Directors. Your Directors
recently submitted to stockholders, which was approved at the last annual
meeting, a proposal to remove a provision providing for staggered 3-year terms
for Directors. As a result, Directors are now elected annually. The same
proposal removed the maximum number of Directors. As to the provision relating
to business combinations, Delaware law currently contains provisions regarding
the approvals required by stockholders in connection with business combinations
involving the company. As a result, your Directors believe these provisions are
no longer necessary and propose to amend the Restated Certificate of
Incorporation to permit amendment of these provisions without the two-thirds
majority vote. Upon effectiveness of the amendments, the provisions in the
Bylaws relating to the stockholder approval of certain business combinations
will be removed.

Your Board of Directors Recommends a Vote "FOR"
Approval of the Amendment to ARTICLE SEVEN
of AT&T Inc.'s Restated Certificate of Incorporation.

.. Stockholder Proposals (Items 5 through 9 on Proxy Card)

Certain stockholders have advised the Company that they intend to introduce
at the 2006 Annual Meeting the proposals set forth below. The names and
addresses of, and the number of shares owned by, each such stockholder will be
provided upon request to the Secretary of AT&T.

Stockholder Proposal A (Item 5 on Proxy Card)

POLITICAL CONTRIBUTIONS REPORT

Resolved: The shareholders of SBC Communications (the "Company") hereby request
that the Company provide a report updated semi-annually, disclosing the
Company's:

1. Policies and procedures for political contributions (both direct and
indirect) made with corporate funds.

2. Monetary and non-monetary contributions to political candidates,
political parties, political committees and other political entities
organized and operating under 26 USC Sec. 527 of the Internal Revenue
Code including the following:

a. An accounting of the Company's funds contributed to any of the
persons described above;

b. The business rationale for the Company's political contributions;
and

c. Identification of the person or persons in the Company who
participated in making the decisions to contribute.

This report shall be posted on the company's website to reduce costs to
shareholders.

Supporting Statement: As long-term shareholders of SBC Communications, we
support policies that apply transparency and accountability to corporate
political giving.

Company executives exercise wide discretion over the use of corporate resources
for political purposes. They make decisions without a stated business rationale
for such donations. We believe shareholders are entitled to know how their
company is spending its funds for political purposes. However, although there
are various disclosure requirements for political contributions, this
information is difficult for shareholders to access and is not complete.

Although the Bi-Partisan Campaign Reform Act enacted in 2002 prohibits
corporate contributions to political parties at the federal level, corporate
soft money state-level contributions are legal in 49 states, and disclosure
standards vary widely. Corporations can also make unlimited contributions to
"Section 527" organizations, political committees formed for the purpose of
influencing elections, but not supporting or opposing specific candidates.
These do not have to be reported.

In the 2004 election cycle, our company contributed approximately $560,000 to
Section 527 organizations (Derived from data provided by
http://www.PoliticalMoneyLine.com, an independent campaign finance disclosure
website). In 2001-02, SBC made at least $1,480,645.00 in political
contributions. (The Center for Responsive Politics:
http://www.opensecrets.org/softmoney/index.asp.)

Relying only on the limited data available from the Federal Election
Commission, the Internal Revenue Service, and the Center for Responsive
Politics, a leading campaign finance watchdog organization, and Political Money
Line provides an incomplete picture of the Company's political donations.
Current disclosure is insufficient to allow the Company's Board and its
shareholders to fully evaluate the political use of corporate assets.

Absent a system of accountability, corporate executives will be free to use the
Company's assets for political objectives that are not shared by and may be
inimical to the interests of the Company and its shareholders, potentially
harming long-term shareholder value.

There is currently no single source of information that provides the
information sought by this resolution. This report should represent a minimal
cost to the company, as presumably management already monitors corporate
resources used for such purposes. We believe that transparency and
accountability in this area will advance our company's interests, and help
build long-term shareholder value. We urge your support for this critical
governance reform.

YOUR DIRECTORS' POSITION

Political contributions, where permitted, are an important part of the
legislative process. Your company is subject to legislation that significantly
impacts its operations, including rates it can charge customers, its
profitability and even how it must provide services to competitors. It is
important that your company participate in the political process to protect
your interests as stockholders. AT&T complies with all applicable Federal and
state laws concerning political contributions.

Each year, your Board of Directors authorizes maximum aggregate
contributions that can be made by your company, as permitted by, and in strict
compliance with, applicable law, for the purposes of supporting or opposing any
party, committee, candidate for public office, or ballot measure, or for any
other political purpose. Except for contributions for ballot measures, no
expenditure over $1,000 may be made unless approved by the Chief Executive
Officer (lesser amounts may be approved by delegates). All expenditures must be
submitted to the company's attorneys to confirm that each contribution is
lawful.

In addition, no company funds, by law, are expended to make Federal
political contributions. Federal law has long prohibited corporate
contributions to Federal candidates or their political committees. With the
enactment of the Bi-Partisan Campaign Finance Reform Act of 2002 (known as the
"McCain Feingold Act"), corporate contributions to Federal political parties
and Leadership Committees are prohibited, effective November 6, 2002.

As to state and local contributions, state laws determine when and under
what circumstances political contributions are permissible. Moreover, a number
of states in which AT&T operates have extensive reporting requirements. These
rules, in general, are applicable to all participants in the political process.
This proposal, on the other hand, would impose a set of rules only on your
company.

This proposal would require an unwarranted expenditure of funds by your
company and would be uniquely applicable only to your Company and not to our
competitors, unions or any other participants in the process. Your Directors
believe that any reporting requirements that go beyond those required under
existing law should be applicable to all participants in the process, not just
to AT&T as the proponent asks.

Your Board of Directors Recommends a
Vote "AGAINST" this Proposal.

Stockholder Proposal B (Item 6 on Proxy Card)

6 - Independent Board Chairman

RESOLVED: Stockholders request that our Board of Directors change our governing
documents (Charter or Bylaws if practicable) to require that the Chairman of
our Board serve in that capacity only

and have no management duties, titles, or responsibilities. This proposal gives
our company an opportunity to cure our Chairman's loss of independence should
it exist or occur once this proposal is adopted.

The primary purpose of our Chairman and Board of Directors is to protect
shareholders' interests by providing independent oversight of management,
including the CEO. Separating the roles of Chairman and CEO can promote greater
management accountability to shareholders and lead to a more objective
evaluation of our CEO.

When one person acts as our Chairman and CEO, a vital separation of power is
eliminated - and we as the owners of our company are deprived of both a crucial
protection against conflicts of interest and also of a clear and direct channel
of communication to our company through our Chairman.

54% Yes-Vote

Twenty (20) shareholder proposals on this topic won an impressive 54% average
yes-vote in 2005. The Council of Institutional Investors www.cii.org, whose
members have $3 trillion invested, recommends adoption of this proposal topic.

CEO to Receive Lifetime Access to Company Aircraft

I believe the following text based on The Corporate Library's "Board Analyst
Profile" for SBC supports adoption of an Independent Board Chairman: It is not
only current [CEO] compensation levels that are a cause of concern.
Post-retirement benefits are also excessive. Annual pension benefits are
predicted to be just under $5.5 million. In addition the CEO is due to receive
lifetime access to company aircraft, an automobile and automobile benefits, and
office facilities and support staff. In addition to the pension benefits, the
CEO is due to be retained as a consultant for three years following retirement,
with wholly unnecessary annual fees set at 50% of salary; in other words, well
over $1 million yearly.

Moreover

It is well to remember that at Enron, WorldCom, Tyco, and other legends of
mis-management and/or corruption, the Chairman also served as CEO. When a
Chairman runs a company as Chairman and CEO, the information given to directors
may or may not be accurate. If a CEO wants to cover up improprieties and
directors disagree, with whom do they lodge complaints? The Chairman?

Independent Board Chairman
Yes on 6

YOUR DIRECTORS' POSITION

Your Board of Directors believes that AT&T and its stockholders are best
served by having one person serve as Chairman and CEO. This practice is
consistent with that of most other large companies. Under this structure, your
Company has received many awards, including being named as America's Most
Admired Telecommunications Company (Fortune magazine, 1996 - 1998, 2000 - 2004).

In addition, the Board has taken several steps to ensure the Board
effectively carries out its responsibility for the oversight of management. The
Board has appointed a Lead Director (currently, Mr. Henderson, an independent
member of the Board) who presides over regular executive sessions of the
non-management members of the Board. Members of management do not attend these
sessions. The appointment of the Lead Director and the use of executive
sessions of the Board, along with the Board's strong committee system and
overwhelming majority of independent Directors allows the Board to maintain
effective oversight of management.

Your Directors also note that out of 17 Directors, only two are members of
management: Mr. Whitacre and Mr. Stephenson. Key committees, such as the Audit,
Human Resources and Corporate Governance and Nominating Committees, are made up
solely of independent Directors. Moreover, your Board is overwhelmingly
independent with strong leadership from its independent Directors and Lead
Director.

Your Board believes that a single person, acting in the capacities of
Chairman and CEO, serves as a bridge between the Board and management and
provides critical leadership for carrying out your company's strategic
initiatives and confronting its challenges. In short, the Board currently
believes that a Chairman of the Board who is also a member of the management
team is better situated to execute the company's strategy and business plans to
maximize stockholder value.

For these reasons, the Board believes that the adoption of a rigid policy
requiring the election of a non-management Chairman of the Board is not in the
best interests of AT&T's stockholders.

Your Board of Directors Recommends a
Vote "AGAINST" this Proposal.

Stockholder Proposal C (Item 7 on Proxy Card)

SBC Corporation Executive Compensation

WHEREAS, excesses in executive compensation have become a major issue for
stakeholders. Opposition to excessive pay packages continues to mount,
particularly among investors angry at compensation seemingly unrelated to
financial performance. In fact, many mainstream investors have voted NO on
compensation packages they felt were unreasonable. We also believe that boards,
in setting executive compensation, should consider social and environmental
performance, as well as financial performance.

. The relationship between compensation and the social responsibility and
environmental performance is an important question. For instance,
shouldn't the pay of top officers be reconsidered if the company is found
guilty of systematic sexual harassment or race discrimination or poor
environmental performance, especially if the result is costly fines or
expensive, protracted litigation?

. Too often top executives have received considerable increases in
compensation packages even when the company's financial performance or
social responsibility performance has been mediocre or poor. When
compensation is tied to social responsibility, better social
responsibility performance will inevitably follow.

. Business Week reports that executive compensation has skyrocketed from 42
to 1 in 1982 to over 400 times the pay of average employees in 2004.

. "The size of the CEO compensation is simply out of hand," said Business
Week in an April 22, 2002 editorial. Also the Conference Board issued a
September 17, 2002 report acknowledging that executive compensation has
become excessive in many instances and bears no relationship to a
company's long-term performance.

. New York Federal Reserve Bank President, William J. McDonough, said:
"CEOs and their boards should simply reach the conclusion that executive
pay is excessive and adjust to more reasonable and justifiable levels."

. Companies involved in significant downsizing of employees don't "share
the pain," but escalate executive pay.

. Many Board compensation committees fall prey to the desire to have their
CEO paid in the top quartile of CEOs, thus creating a magnet effect
pulling all executive compensation upward, regardless of contribution to
shareholder value.

Resolved: The shareholders request the Board Compensation Committee undertake a
special executive compensation review and provide a summary report to investors
by Summer 2006. The report shall supplement information in the proxy statement.

Questions to be addressed in the review and report shall include:

1. The rationale for the compensation packages for our top executives,
including an explanation of whether the Committee has considered a cap
on the size of the compensation package for the future.

2. How or if executive compensation is compared to the pay package of the
average employee and if the increasing ratio between the two over the
last decade is taken into account.

3. How social and environmental performance is integrated into the formula
for executive compensation and whether our corporation's employee
downsizing or outsourcing is considered.

4. An evaluation of whether our top executive compensation packages
(including options, benefits, pension and retirement agreements) are
excessive and should be modified.

5. A summary description of opposition registered by stakeholders to our
compensation package.

YOUR DIRECTORS' POSITION

Each year, in AT&T's annual Proxy Statement, the Human Resources Committee
includes an extensive report on the company's compensation policies for
executive officers. In its report, the Human Resources Committee explains the
methods it uses to determine compensation, including the use of outside
consultants. This report is subject to detailed and complex rules of the
Securities and Exchange Commission.

Moreover, in 2003, all new members joined the Human Resources Committee and
immediately began, with the aid of outside consultants, a comprehensive review
of AT&T's executive compensation program, including the strategic use of
salaries, short-term bonuses and long-term incentive awards. As a result, the
Human Resources Committee made numerous changes to the program and adopted a
set of principles with respect to AT&T's executive compensation that it
included in its detailed report.

Your Directors believe that requiring the Human Resources Committee to
undertake yet another review of this report would result in unnecessary costs
to the company, would repeat efforts made in the prior review, and is unlikely
to produce any additional benefits.

Your Board of Directors Recommends a
Vote "AGAINST" this Proposal.

Stockholder Proposal D (Item 8 on Proxy Card)

Director Compensation-SBC

WHEREAS:

Excessive CEO pay is a matter of national concern and debate. There is evidence
that directors who enjoy high director compensation are more likely to pay
excessive CEO compensation and that high director pay coupled with high CEO pay
correlates with underperformance of the company. (Note 1) We believe that many
employees regard excessive CEO compensation as a breach of trust and demeaning
of their value as employees and human beings. We believe that directors who
recommend excessive CEO pay packages should be held accountable. One way to do
this is to allow shareholders to vote on the directors' compensation.

There are indications that our board has not paid sufficient attention to CEO
compensation:

1. In 2004, the CEO's total compensation was $15.7 million or $14.9 million,
depending on whether total compensation includes the value of options
granted in 2004 or instead gains from the exercise of stock options in 2004.
(Note 2) The average total compensation for CEOs of 367 leading corporations
was $11.8 million. (Note 3.) Based on total shareholder return, $100
invested in our company's stock on 12/31/99 was worth about $64 on 12/31/04
compared to about $75 for a peer group on companies. (Note 4).

2. Evaluating CEO pay relative to shareholder return on a scale of one to five,
Business Week rated the company a one, the worst rating. (Note 5)

3. Forbes ranked the company 168th worst out 189 companies in its measure of
CEO performance versus CEO pay. (Note 6)

4. The Corporate Library's Board Analyst Service graded the board F for its
compensation of the CEO and D for its overall effectiveness. (Note 7)

RESOLVED, the shareholders request the the following of the board:

1. Annually ask the shareholders to approve every future compensation package
for non-employee directors, excluding any element to which the company is
contractually bound as of the end of the 2006 annual meeting.

2. In its submission, identify every benefit and perquisite of serving as a
director that involves an expenditure or use of company assets, including
contributions to charities of particular interest to the director.

3. If the package receives at least half of the shareholder votes cast, make
the package effective as of the effective date specified in the submission.
If the package fails to receive at least half of the shareholder votes cast,
leave the existing non-employee director compensation package in effect
until the shareholders approve a different one.

NOTES

1. See Lucian Bebchuk and Jesse Fried, Pay Without Performance: The Unfulfilled
Promise of Executive Compensation, Harvard University Press (2004), and Ivan
E Brick, Oded Palmon, and John K. Wald, CEO Compensation, Director
Compensation, and Firm Performance: Evidence of Cronyism?,
http://www.personal.psu.edu/faculty/j/k/jkw10/jcf_052705.pdf. (April 13,
2005).

2. 2005 Proxy Statement

3. Sarah Anderson et al., Executive Excess 2005--12th Annual CEO Compensation
Survey, http://www.faireconomy.org/press/2005/EE2005_pr.html (total includes
options exercised but not options granted).

4. 2005 Proxy Statement

5. Business Week, April 18, 2005.

6. Forbes, http://www.forbes.com/2005/04/20/05ceoland.html.

7. Board Analyst, www.boardanalyst.com.

YOUR DIRECTORS' POSITION

The Boards of Directors of public companies, as at AT&T, are permitted to
establish reasonable compensation for Board members. At AT&T, the Corporate
Governance and Nominating Committee periodically recommends compensation to the
Board after consulting with an independent compensation consultant. Based on a
comparison of other similarly sized companies by the independent consultant,
your Board believes its overall compensation is reasonable and well within the
range of compensation paid by companies of similar size and complexity.
Management members of the Board receive no additional compensation for their
service.

Your Board is responsible for the corporate governance of the company, which
has received high ratings from these major corporate governance reviewers:

. Institutional Shareholder Services, the world's leading provider of proxy
voting and corporate governance services, has rated AT&T as outperforming
96% of the companies in the S&P 500 index of companies and as
outperforming 100% of the companies in the telecommunications services
group.

. Governance Metrics International ("GMI"), a global corporate governance
ratings agency, gave AT&T a rating of 8.5 globally and 8.0 for its home
market. According to GMI ratings of 7.5 to 8.5 are above average.

Compensation received by AT&T Directors is subject to extensive disclosure
under the securities laws, including a detailed discussion contained in the
annual Proxy Statement. This detailed disclosure ensures that stockholders are
fully informed.

The Board believes that the process it uses to gather and review the
appropriate information and to make prudent decisions about Director
compensation is appropriate and transparent, and ensures stockholders are
provided with extensive details of its decision-making process. Therefore, the
Board does not believe the expense of implementing this proposal is in the best
interests of stockholders.

Your Board of Directors Recommends a
Vote "AGAINST" this Proposal.

Stockholder Proposal E (Item 9 on Proxy Card)

RESOLVED, that the shareowners of SBC Communications Inc. (the "Company")
amend the Company's bylaws, in compliance with applicable law, to require that
the Board of Directors ("Board") seek shareowner ratification of any Severance
Agreement with any Officer that provides Severance Benefits with a total
present value exceeding 2.99 times the sum of the Officer's base salary plus
target bonus. "Severance Agreement" means any agreement that dictates what an
Officer will be compensated when the Company terminates employment without
cause or when there is a termination of employment following a finally approved
and implemented change of control. "Severance Benefits" means the value of all
cash and non-cash benefits, including, but not limited to, the following:
(i) cash benefits; (ii) perquisites, (iii) consulting fees, (iv) equity and the
accelerated vesting of equity, (v) the value of "gross-up" payments, i.e.,
payments to off-set taxes, and (vi) the value of additional service credit or
other special additional benefits under the Company's retirement system.
"Officer" means any senior executive officer. If the Board determines that it
is not practicable to obtain shareowner approval of the Severance Agreement in
advance, the Board may seek approval of the shareowners after the material
terms of the Severance Agreement have been agreed upon. This bylaw amendment
shall take effect upon adoption and apply only to Severance Agreements adopted,
extended or modified after that date.

SUPPORTING STATEMENT

This proponent supports compensation policies for Officers that link pay to
performance. This proponent opposes pay practices that reward under-performing
Officers with large payouts when they are terminated for poor-performance,
e.g., this proponent is outraged by the $140 million severance payment made by
the Disney Corporation to Michael Ovitz after 14 months of employment. The
adoption of this by-law amendment, in this proponent's opinion, will put a
reasonable cap on what can be paid out to Officers who are terminated for
under-performance while allowing the Company the flexibility it needs to
attract qualified individuals to serve in demanding positions of senior
management.

This proposal, in this proponent's opinion, will also address the risk of
egregious severance packages being paid out by the Company as a result of a
merger, acquisition or spin-off by limiting: 1) The inappropriate acceleration
of the vesting of options for Officers in mergers, etc.; 2) Inappropriate links
between severance/change-of-control payments and post-merger economic
performance; 3) Recapitalizations where the management and shareowner base does
not substantially change but change-in-control payments are triggered; and 4)
The payment of "gross-ups" to pay federal taxes owned.

According to this proponent's Pay-for-Performance Model, the Company's CEO
compensation ranks in the bottom quintile. The Company significantly out-pays
its CEO relative to the Company's peers and has financial performance slightly
below its peers. The Corporate Library, utilizing its own compensation
analysis, graded the Company's CEO compensation "F".

An identical binding proposal to the one proposed here was passed by over
66% of AT&T Corporation's shareowner's at its 2005 annual meeting. However,
that proposal will not take effect because of the acquisition of AT&T
Corporation by the Company.

Please join this proponent in voting FOR this proposal.

YOUR DIRECTORS' POSITION

Your Board believes that this proposal is unnecessary because the Company is
already taking steps to limit the amount of compensation that may be payable in
connection with a change in control. First, the Human Resources Committee has
determined to reduce the benefits under the current Change in Control Severance
Agreements, effective with their expiration in January 2007. Currently, the
agreements provide for the payment of up to 3 times the following: annual
salary, the most recently paid short-term award and the most recent target
long-term award. The Committee is eliminating the long term component and
providing for a severance payment equal to 2.99 times the annual base salary
and the target short-term incentive award.

In order to further reduce the benefit, payments to offset excise taxes
resulting from the severance payments will no longer be made after expiration
of the current agreements, except in those situations where the excise tax is
triggered because of prior deferrals of income.

Similarly, in the 2006 Incentive Plan being submitted to stockholders at the
2006 Annual Meeting, the Board has further cut back the benefits from a change
in control of the company. Under the prior plan, stock options, restricted
stock and performance awards would vest at a change in control. Under the new
plan, stock options and restricted stock will vest only if the employee is
involuntarily terminated or leaves for good reason (adverse adjustment in
responsibilities, base salary, target short-term award, or relocation).
Long-term and short-term performance grants will no longer vest upon a change
in control, but will continue to be subject to the achievement of performance
targets under the new plan.

The Board believes that these actions of the Human Resources Committee have
substantially implemented the intent of this proposal in a fair and reasonable
manner, making the proposal unnecessary.

Your Board of Directors Recommends a
Vote "AGAINST" this Proposal.

--------------------------------------------------------------------------------
AUDIT COMMITTEE

The Audit Committee oversees the integrity of the financial statements of
AT&T, the independent auditors' qualifications and independence, the
performance of the internal audit function and independent auditors, and the
compliance by AT&T with legal and regulatory matters. The members of the Audit
Committee are Messrs. Ritchey (Chairman), Aldinger, Amelio, Eby, Madonna and
McCoy, each of whom was appointed by the Board of Directors. The Board has
adopted a written charter for the Audit Committee, which is attached as
Appendix B to this Proxy Statement. The Audit Committee is composed entirely of
independent Directors in accordance with the applicable independence standards
of the New York Stock Exchange and AT&T. The Board of Directors has determined
that the simultaneous service of each of Messrs. Aldinger and Madonna on the
Audit Committee and the three other public company audit committees on which
they each now serve would not impair the ability of either such member to
effectively serve on AT&T's Audit Committee.

The Board of Directors has determined that the Messrs. Ritchey and Madonna
are "audit committee financial experts" and are independent as defined in the
listing standards of the New York Stock Exchange and in accordance with AT&T's
additional standards. Although the Board of Directors has determined that these
individuals have the requisite attributes defined under the rules of the
Securities and Exchange Commission, their responsibilities are the same as
those of the other Audit Committee members. They are not AT&T's auditors or
accountants, do not perform "field work" and are not full-time employees. The
Commission has determined that an audit committee member who is designated as
an audit committee financial expert will not be deemed to be an "expert" for
any purpose as a result of being identified as an audit committee financial
expert. The Audit Committee is responsible for oversight of management in the
preparation of AT&T's financial statements and financial disclosures. The Audit
Committee relies on the information provided by management and the independent
auditors. The Audit Committee does not have the duty to plan or conduct audits
or to determine that AT&T's financial statements and disclosures are complete
and accurate. AT&T's Audit Committee charter provides that these are the
responsibility of management and the independent auditors.

Report of the Audit Committee [Draft Report]

The Audit Committee: (1) reviewed and discussed with management AT&T's
audited financial statements for the year ended December 31, 2005;
(2) discussed with the independent auditors the matters required by Statement
on Auditing Standards No. 61, Communication with Audit Committees, as amended
by Statement on Auditing Standards No. 90, Audit Committee Communications;
(3) received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees; and (4) discussed with the auditors the
auditors' independence.

Based on the review and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements for the year ended
December 31, 2005, be included in AT&T's Annual Report on Form 10-K for filing
with the Securities and Exchange Commission.

February 16, 2006

The Audit Committee:

Principal Accountant Fees and Services

Ernst & Young LLP acts as the principal auditor for AT&T and also provides
certain audit-related, tax and other services. The Audit Committee has
established a pre-approval policy for services to be performed by Ernst &
Young. Under this policy the Audit Committee approves specific engagements when
the engagements have been presented in reasonable detail to the Audit Committee
before services are undertaken.

This policy also allows for the approval of certain services in advance of
the Audit Committee being presented details concerning the specific service to
be undertaken. These services must meet service definitions and fee limitations
previously established by the Audit Committee. Additionally, engagements
exceeding $500,000 must receive advance concurrence from the Audit Committee
Chairman. After an auditor is engaged under this authority, the services must
be described in reasonable detail to the Audit Committee at the next meeting.

All pre-approved services must commence, if at all, within 14 months of the
approval.

The fees for services provided by Ernst & Young to AT&T in 2005 and 2004
were as follows (dollars in millions):

. Audit Fees were $16.7 and $14.7 for 2005 and 2004, respectively. Included
in this category are fees for the annual financial statement audit,
quarterly financial statement reviews, and audits required by Federal and
state regulatory bodies.

. Audit-Related Fees were $3.1 and $2.6 for 2005 and 2004, respectively.
These fees, which are for assurance and related services other than those
included in Audit Fees, include charges for employee benefit plan audits,
SAS 70 attestations, consultations concerning financial accounting and
reporting standards, and audits and due diligence in conjunction with
proposed or consummated acquisitions and dispositions.

. Tax Fees were $1.9 and $1.9 for 2005 and 2004, respectively. These fees
include charges for various Federal, state, local and international tax
compliance and research projects, as well as tax services for AT&T
employees working in foreign countries.

. All Other Fees were $0 and $0.1 for 2005 and 2004, respectively. These
fees were for assessing processes used by AT&T to accumulate and analyze
operating data.

--------------------------------------------------------------------------------
HUMAN RESOURCES COMMITTEE

The Human Resources Committee, composed entirely of independent,
non-employee Directors, is responsible for the compensation of AT&T's
executives and overseeing the compensation practices of AT&T, including the
Named Officers (defined on page xx). No employee of AT&T serves on this
Committee. The current members of the Committee are: James A. Henderson
(Chairman), Gilbert F. Amelio, Martin K. Eby, Jr., and Patricia P. Upton.

Report of the Human Resources Committee
on Executive Compensation

In 2003, the Board of Directors adopted a number of corporate governance
initiatives, including a new Code of Ethics, new Corporate Governance
Guidelines and a new committee devoted to corporate governance matters and
Director nominations. Previously, the Human Resources Committee had carried out
many of the new committee's functions, and the Board determined to move all the
members of the then Human Resources Committee to the new Corporate Governance
and Nominating Committee. As a result, the current members, all new to the
Committee, were appointed to the Human Resources Committee in March 2003.
Because annual compensation had been set the preceding January, the new
Committee first was able to affect annual compensation in January 2004.

Review of AT&T's Executive Compensation Program

Upon assuming office in 2003, the current Committee undertook a
comprehensive review of the SBC Communications Inc. (now AT&T Inc.) executive
compensation program, including the use of salaries, short-term bonuses and
long-term incentive awards. The Committee, assisted by independent consultants,
analyzed current compensation trends, studied published recommendations of
respected business organizations on the subject of executive compensation,
reviewed proxy statements of other companies, and compared our program to those
of other leading companies. The Committee also solicited input from former
members of the Committee and the Board of Directors.

The Committee found that our compensation programs were sound and consistent
with those of other firms of similar size. They had enabled us to attract and
retain a high quality management team. An individual and business unit
performance evaluation system based upon financial and non-financial objectives
was in place and rigorously followed. Executive pay was targeted to the 62nd
percentile for annual cash compensation and at the 50th percentile for
long-term compensation as compared with other firms of similar size and
financial performance (except for the CEO which is covered later in this
report.)

The Committee found that there were opportunities to tie the incentive pay
of executives more directly to performance and to minimize dilution from
equity-based compensation programs.

As a result of its review, the new Committee adopted the following
principles with respect to executive compensation:

. Maximize the alignment of executive compensation with the long-term
interests of stockholders.

. Provide competitive compensation to attract, retain and motivate
executives.

. Base both short-term bonuses and long-term compensation on performance
measures.

. Balance equity-based compensation awarded to executives with the
interests of stockholders concerning dilution.

. Establish short-term incentives with a view toward achievement of
long-term corporate goals.

. Provide opportunities for executives to acquire and hold AT&T Inc. stock
and establish minimum ownership requirements.

These principles were employed by the new Committee members in setting
annual compensation beginning in 2004.

2005 Compensation

To help properly implement the Committee's policies and to determine
appropriate compensation, the Committee employs independent compensation and
benefits consultants to assist in establishing compensation and analyzing the
actual compensation of executives. The Committee reviews compensation including
salaries, short-term incentives and long-term incentives at a group of
companies (the "Comparator Group") selected with the advice of an outside
independent compensation consultant. The Comparator Group consists of large
companies in diverse businesses and telecommunications companies, including,
among others, companies subject to comparable governmental regulation.
Compensation data from the Comparator Group is adjusted using statistical
analysis to eliminate differences arising from the relative sizes of the
companies in the Comparator Group in comparison to AT&T Inc. This market data
is then used to establish a target compensation range for each executive
officer position.

AT&T Inc. (at the time known as SBC Communications Inc.) acquired AT&T Corp.
("Old AT&T") in November of 2005. Compensation paid in 2005 is in accordance
with a combination of pre-acquisition AT&T Inc. plans and Old AT&T plans in
effect for the year. The Human Resources Committee was responsible for
pre-acquisition AT&T Inc. executive compensation for the full year and Old AT&T
executive compensation from the date of the acquisition.

Annual Base Salaries The Committee determined executive officer salaries
(other than the Chief Executive Officer) for 2005 for pre-acquisition AT&T Inc.
executive officers by targeting the 50th percentile of the salary market data
for the Comparator Group and by considering individual performance, level of
responsibility and experience.

Short-Term Incentives In 2005, the Committee used short-term incentives in
the form of performance based annual cash bonuses to compensate executive
officers as well as other executives. The Committee established performance
targets for executive officers using financial and/or operational goals linking
pre-acquisition AT&T Inc. to the company's overall performance. Target bonuses
for executive officers (except the Chief Executive Officer) were established by
targeting the 62nd percentile of cash compensation (salary plus annual bonus)
for the Comparator Group, adjusting for individual performance, level of
responsibility and experience.

The Committee also considered individual performance, level of
responsibility and experience to determine the final target bonus amounts.
Bonuses are paid at the discretion of the Committee based on the accomplishment
of company and/or business unit performance targets set at the beginning of the
year and individual performance.

The 2005 financial and operational targets for bonuses for executive
officers were based on pre-acquisition AT&T Inc. net income (wireline operating
income for certain of the executive officers other than the Chief Executive
Officer), free cash flow (or business unit operating income for part of the
year for one named officer), customer satisfaction and customer churn (weighted
50%, 30%, 10% and 10%, respectively); similar targets were established for
non-executive officers and business units with more weight placed on business
unit performance.

Targets are established by the Committee after a review of the business plan
and a determination of the short-term business metrics the Committee desires
the managers to focus most on to drive results. If the objectives are not
completely met, the bonuses are

reduced, or if certain minimum targets are not met, bonuses are eliminated. If
a target is exceeded, the payout increases, subject to a cap at 125% of the
target opportunity. In addition, the Committee provided for an extraordinary
bonus payment of up to 10% of the short term award if certain aggressive year
over year revenue targets for pre-acquisition AT&T were also achieved. The
Committee reviewed the performance objectives and corresponding results for
2005 and determined that the executive officers, including all of the Named
Officers, had exceeded the net income, free cash flow and customer measures,
but that the year over year revenue growth, while positive, did not meet
targets. The Committee authorized bonuses at 125% of the target for executive
officers (122% for one named officer whose target was based, in part, on the
operating income of his business unit as noted above), together with special
discretionary awards based on individual performance for certain officers.
Executive officers that were executive officers of Old AT&T before the
acquisition exceeded targets set by the acquired company for performance during
the entire year, including the period after the acquisition of Old AT&T and
were awarded bonuses of 186%. For the year 2006, and beyond, all officers will
have substantially the same short-term incentive plan structure, including the
125% cap.

Long-Term Incentives In 2005, the Committee granted executive officers
long-term incentives in the form of performance shares for the 2005-2007
performance period. The Committee determined the total amount of long-term
incentives to grant each executive officer (except the Chief Executive Officer)
by using the 50th percentile of the long-term market data for the Comparator
Group and adjusting for individual performance, level of responsibility and
experience.

In 2002 and before, the long-term incentive was made up of 40% performance
shares, typically with three year performance periods, and 60% stock options.
In 2003, the previous committee modified the mix of those elements to one-third
performance shares, one-third stock options and one-third restricted stock. The
performance objectives for performance shares granted in 2002 and 2003 were
based on a net income target for each year in the three-year performance cycle.

For the 2004-2006 performance period, the new Committee decided to deliver
the entire long-term incentive in the form of performance shares and continued
that policy in 2005 for the 2005-2007 performance period. While stock options
and time-based restricted stock are linked to the interests of stockholders,
they do not have a performance component or measure. In addition, current
accounting rules cause stock options to be dilutive in calculating earnings per
share. Therefore, the Committee decided to grant performance shares exclusively
in 2004 and 2005 and did not use stock options or time-based restricted stock
as long-term compensation. The value of performance shares fluctuates directly
with changes in the price of AT&T stock (each performance share is equal in
value to a share of AT&T stock), which ties managers' interests directly to
those of stockholders. The performance shares are paid out only to the extent
specific internal financial and/or operational objectives are achieved. No
payout is made if minimum objectives are not met. Payouts, when earned, are to
be paid in a combination of stock and cash which reduces dilution.

-----------------------------------------------------------------------------
Comparison of the Compensation Elements Used for
Delivering Value in Long-Term Compensation Plans
-----------------------------------------------------------------------------
2002 Long-Term 2003 Long-Term 2004 and 2005 Long-Term
Compensation Compensation Compensation
-----------------------------------------------------------------------------
Performance Shares (Paid Performance Shares Performance Shares
in 2005) (Paid in 2006) (Paid in 2007 and beyond)
Stock Options Stock Options
Restricted Stock
(Vested in 2006)
-----------------------------------------------------------------------------

The Committee also determined to use return on invested capital instead of
net income as the long-term performance measure for target awards beginning in
2004. This measurement is calculated by averaging over the three year
performance period: (1) the company's annual net income before extraordinary
items plus after-tax interest expense, divided by 2) the average debt and
average stockholder equity for the relevant year. This encourages managers to
not only focus on net income, but also to ensure that the company's capital is
invested effectively.

Another change made by the Committee provided that if the target is
exceeded, more shares can be earned, but the number of shares that can be
earned is capped at 150% of the target award. For performance awards granted in
2002 and 2003 up to 200% of target awards could be paid out based upon
performance.

In 2005, pre-acquisition AT&T Inc. officers, including the executive
officers and the Chief Executive Officer, received the payout of their
performance share awards for the 2002-2004 performance period, having
substantially met the performance goals set by the Committee. These goals were
set with a recognition that the company was reacting to new market entrants and
transforming into a national communications company offering a wide range of
services. The performance goals for these awards were annual net income targets
averaged over the three-year performance period from 2002 to 2004. (By
comparison, the annual bonus described above covers only the 2005 performance
period.) In accordance with a predetermined formula, 100% of the target
performance shares were distributed. However, since the AT&T share price at the
time of distribution was approximately 67% of the price it was at the time of
the establishment of the incentive target, the payout value was correspondingly
reduced to 67% of the target amount.

Upon closing of the acquisition of Old AT&T, that company's executive
officers received a payout of their long-term performance awards and restricted
stock in accordance with Old AT&T's change in control plans. The long term
performance awards were for the 2004-2006 and 2005-2007 performance periods and
were prorated based on the portion of the performance period completed. The
payout based on performance, before reduction for the pro-ration, was 121% and
163%, respectively. Under the Old AT&T change in control plans, restricted
stock was vested in full at completion of the acquisition of Old AT&T.

Compensation for the Chief Executive Officer

Employment Contract In 2001, the previous Committee initiated and approved
an Employment Contract to retain Mr. Whitacre as the Chief Executive Officer of
AT&T Inc., which at the time was known as SBC Communications Inc., for a period
of five years which coincides with his reaching the normal retirement age of
65. The Employment Contract was subsequently reviewed and approved by the Board
of Directors and was effective November 16, 2001.

The contract was designed to assure AT&T Inc. of the services of
Mr. Whitacre for this five-year period. In return, the contract provided:

. 2.5 million stock options at $39.13 to vest in part at three years and,
in total, at five years

. post-retirement benefits including a three-year consulting agreement

. target compensation for salary, total cash compensation and long-term
incentives would be set at the 75th percentile

. the provision that Mr. Whitacre's yearly salary and incentive targets
expressed in dollars would not be reduced for the life of the contract.

During 2004, the Committee conducted a review of the Employment Contract
with the assistance of independent outside consultants. The target compensation
established in 2001 was analyzed based on 2001 market data, CEO employment
agreements for other telecommunication companies and current market data. Based
on this review and the competitive demand for CEOs in the telecommunications
industry, the Committee has determined that the 2001 target compensation levels
were appropriate.

The contract was entered into at a time when telecommunications and
technology companies were, in general, performing well and in favor with
investors. Equity markets were at an all-time high, which drove compensation
packages. Compensation for experienced CEOs was at especially high levels. It
was not clear which companies were going to emerge as "winners." Several major
companies were searching for new CEOs. The Committee at the time was facing an
extraordinarily competitive environment for executives with proven track
records in telecommunications and technology.

The provisions of the contract, including the post-retirement benefits and
the stipulation that salary and incentive targets not be reduced, were
consistent with compensation practice for long-serving and successful CEOs at
the time.

2005 Compensation As in 2004, the Committee again made no change to
Mr. Whitacre's base salary or to short-term and long-term incentive target
awards for 2005, which were set in accordance with his contract. As with other
executive officers, Mr. Whitacre's annual bonus and long-term incentives are
based exclusively on performance measures and will be realized only if targets
are met. In order to tie Mr. Whitacre's long-term compensation even more
closely to the interests of the stockholders, the long-term performance shares
granted in each of 2004 and 2005 for Mr. Whitacre, which, assuming attainment
of targets, will be paid in 2007 and 2008, respectively, are based 75% on
return on invested capital (described above) with the ability to receive a
payout of up to 150% of the target award in the same manner as the other
executive officers. However, another 25% of the award is based on the
comparison of AT&T's total stockholder return (stock appreciation plus
reinvestment of dividends) compared to relevant companies in the North American
Telecom Index, which excluded equipment manufacturers and companies with a
market capitalization of under $5 billion, and added several cable company
competitors not in the Index. The following chart shows the potential payouts
based on total stockholder return:

-----------------------------------------------------------------------------------------------
AT&T Total Stockholder Return compared to the Payout
adjusted North American Telecom Index Percentage
-----------------------------------------------------------------------------------------------
AT&T is the top company 200%
AT&T in top 75 - 99% of the Index 150%
AT&T in top 50 - 74.99% of the Index 100%
AT&T in top 25 - 49.99% of the Index 50%
AT&T below 25% of the Index 0%
(if results exceed a 20%
return, then 10% payout)
-----------------------------------------------------------------------------------------------
In each case, the payout is reduced by 10% if AT&T's total stockholder
return is negative.
-----------------------------------------------------------------------------------------------

As noted above, all the executive officers, including Mr. Whitacre, exceeded
the net income, cash flow and customer satisfaction targets. After considering
his achievements and performance, the Committee determined to pay Mr. Whitacre
125% of his target bonus in accordance with a pre-determined formula. The
Committee also determined that for the 2002-2004 performance period, the
company substantially met the cumulative income targets under the performance
share grant and Mr. Whitacre received a payout of 100% of the target
performance shares. However, since the AT&T share price at the time of
distribution was approximately 67% of the price at the time the incentive
target was established, the payout value was reduced to 67% of the target value.

Under Mr. Whitacre's leadership in 2005, the company offset much of the
unfavorable telecommunications regulation by improved revenue, customer network
connections and margin growth. In addition, Mr. Whitacre has also positioned
the company into high growth areas of the telecommunications industry through
two "transforming" acquisitions. By acquiring AT&T Wireless in late 2004, our
Cingular Wireless subsidiary (owned 60% by AT&T Inc.) became the largest
wireless provider in the U.S. The acquisition of AT&T Corp, the former parent
of the company, will allow the company to become an end-to-end provider for
major companies in the United States and also expand its global reach. To
recognize Mr. Whitacre's efforts in acquiring and integrating AT&T Wireless,
the Committee made a special long term incentive grant (set out in the
long-term compensation table) tied to the cumulative pre-tax net income of
Cingular Wireless (based on AT&T's 60% interest) for the 2005 to 2006
performance period. Similarly, in recognition of Mr. Whitacre's leadership and
vision in acquiring AT&T Corp., the Committee awarded him a special long-term
incentive for the 2006 to 2007 performance period that is based upon the
cumulative pre-tax earnings of AT&T's wireline business. Under the terms of
each award, Mr. Whitacre will earn nothing unless the relevant two year
cumulative pre-tax income meets the projections upon which the Board voted to
proceed with the transactions. For each award, if the projections are met, he
will earn 50% of the relevant award. Each award is capped at 100% and will be
earned in full if the relevant two year cumulative pre-tax income falls within
a range of between $1.4 billion and $1.5 billion above the projections on which
the relevant transaction was approved. Certain other executive officers who
participated in the AT&T Corp acquisition received cash bonuses and additional
long-term incentives in 2005.

Stock Ownership Guidelines

The Committee has established stock ownership guidelines for the Chief
Executive Officer, other executive officers, and all other officer level
employees. The guidelines were increased in 2005 to a minimum level of
ownership of five times base salary for the Chief Executive Officer, and were
continued at the lesser of three times base salary or 50,000 shares for other
executive officers and the lesser of one times base salary or 25,000 shares for
all other officers. Newly appointed officers are expected to be in compliance
with the ownership guidelines within five years of their appointments.

To encourage all employees, as well as officers, to acquire and hold AT&T
stock, the company offers several ways to invest in AT&T through payroll
deductions, a limited portion of which AT&T matches in AT&T stock. AT&T offers
a tax-qualified savings plan that allows employees to purchase AT&T stock,
among other investment choices. The company also offers the Stock Purchase and
Deferral Plan, in which middle managers and above may receive stock options
based on the amount of AT&T stock purchased with payroll deductions.

Change in Control Provisions

The Committee has determined to reduce the benefits under the current Change
in Control Severance Agreements, effective with their expiration in January
2007. Currently, the agreements provide for the payment of up to 3 times the
following: annual salary, the most recently paid short-term award and the most
recent target long-term award. Effective January 2007, the Committee has
eliminated the long term component and instead provided for a total severance
payment of 2.99 times the annual base salary and the target short-term
incentive award in the future.

In order to further reduce the benefit, the Committee eliminated payments to
offset excise taxes resulting from the severance payments, except in those
situations where the excise tax is triggered because of prior deferrals of
income.

Similarly, in the 2006 Incentive Plan being submitted to stockholders at the
2006 Annual Meeting, the Committee and the Board have further reduced the
benefits from a change in control of the company. Under the prior plan, stock
options, restricted stock and performance awards would vest at a change in
control. Under the new plan, stock options and restricted stock will vest only
if the employee is terminated or leaves for Good Reason (adverse adjustment in
responsibilities, base salary, target short-term award, or relocation). Long-
and short-term performance grants will no longer vest upon a change in control,
but will continue to be subject to the achievement of performance targets under
the new plan.

Supplemental Employee Retirement Plan Benefit

The Committee has also reduced benefits under the 2005 Supplemental Employee
Retirement Plan (SERP) for new executives. The SERP provides a target annual
retirement benefit, expressed as a percentage of an executive's salary and
annual incentive bonuses paid in the highest 36 consecutive months in the last
ten years worked. The target annual retirement benefit may be reduced for
retirement with less than 30 years of service or increased based on service
credits earned after 30 years of service.

Under the prior agreements, the SERP target retirement percentage could
range up to 75%. The Committee has reduced the target retirement percentage to
50% for all new participants. This retirement percentage may be adjusted only
based on service.

Any executive with an existing SERP target retirement percentage in excess
of 50% will have his or her target percentage capped at its current level,
subject to adjustments for length of service.

Limit on Deductibility of Certain Compensation

Federal income tax law prohibits publicly held companies, such as AT&T, from
deducting certain compensation paid to a Named Officer that exceeds one million
dollars during the tax year. To the extent that compensation is based upon the
attainment of performance goals set by the Committee pursuant to plans approved
by the stockholders, the compensation is not included in the computation of the
limit. The Committee intends, to the extent feasible and where it believes it
is in the best interests of AT&T and its stockholders, to attempt to qualify
executive compensation as tax deductible where it does not adversely affect the
Committee's development and execution of effective compensation plans. The
Committee intends to maintain the flexibility to take actions it considers to
be in the best interests of AT&T and its stockholders.

February 10, 2006
The Human Resources Committee:

James A. Henderson, Chairman Martin K. Eby, Jr.
Gilbert F. Amelio Patricia P. Upton

SUMMARY COMPENSATION TABLE

The table below contains information concerning annual and long-term
compensation provided to the Chairman of the Board and Chief Executive Officer
and the other most highly compensated executive officers of AT&T (the "Named
Officers").

Long-Term Compensation
--------------------------------
Annual Compensation Awards Payouts
--------------------------------------- --------------------- ----------
Number of
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name Year Salary Bonus Compensation Award(s) Options Payouts Compensation
---- ---- ---------- ---------- ------------ ---------- ---------- ---------- ------------

Edward E.
Whitacre, Jr. 2005 $2,124,000 $7,125,000 $2,672,953 $ 0 63,624 $4,792,631 $ 249,588
Chairman & Chief 2004 $2,124,000 $6,213,000 $1,638,771 $ 0 400,000 $3,466,930 $ 730,594
Executive
Officer 2003 $2,122,000 $5,700,000 $ 937,516 $7,197,990 1,352,128 $2,444,000 $1,227,272

James D. Ellis 2005 $ 807,167 $2,125,000 $ 539,031 $ 0 99,973 $ 829,491 $ 125,525
Senior Executive
Vice President 2004 $ 783,667 $1,981,000 $ 368,195 $ 0 97,377 $ 578,440 $ 201,703
and General
Counsel 2003 $ 744,500 $ 925,000 $ 215,646 $1,334,001 265,712 $ 480,197 $ 219,607

Forrest E. Miller 2005 $ 684,667 $1,405,000 $ 512,656 $ 0 3,595 $ 710,999 $ 49,623
Group President, 2004 $ 664,333 $ 963,560 $ 213,105 $ 0 3,248 $ 250,669 $ 52,557
AT&T
Communications
Corp. 2003 $ 634,000 $ 884,000 $ 115,768 $ 999,990 145,824 $ 147,324 $ 49,661

Randall L.
Stephenson 2005 $ 934,500 $1,975,000 $ 506,829 $ 0 105,405 $ 758,387 $ 45,219
Chief Operating
Officer 2004 $ 819,167 $1,044,586 $ 306,340 $ 0 44,600 $ 324,195 $ 40,268
2003 $ 566,500 $ 775,000 $ 126,694 $1,199,997 227,354 $ 72,025 $ 28,786

Rayford Wilkins,
Jr. 2005 $ 819,000 $1,335,826 $ 350,312 $ 0 14,649 $ 710,999 $ 40,364
Group President 2004 $ 814,500 $1,057,301 $ 238,973 $ 0 13,319 $ 578,440 $ 41,201
2003 $ 777,000 $ 950,000 $ 137,536 $1,133,993 174,090 $ 327,423 $ 39,739

Notes:
(1)Amounts shown under Restricted Stock Awards represent the grant date values
of AT&T restricted stock (including stock units having the same terms as
restricted stock, but payable in cash) awarded to the Named Officers.
One-third of each grant vests on each anniversary of the grant and entirely
vests upon the retirement of the recipient. However, stock is
non-transferable until the third anniversary of the grant and is forfeited
if, at the third anniversary, the Company is in material default on the
payment of a dividend. The number of shares remaining unvested, and their
values as of December 31, 2005, are as follows: Mr. Whitacre--98,657
restricted shares valued at $2,416,102; Mr. Ellis--18,284 restricted shares
valued at $447,775; Mr. Miller--13,706 restricted shares valued at $335,660;
Mr. Stephenson--16,447 restricted shares valued at $402,795, and
Mr. Wilkins--15,543 restricted shares valued at $380,640. Dividends or
dividend equivalents are paid on all restricted stock.
(2)Other Annual Compensation includes earnings on long-term incentive plan
compensation and amounts reimbursed for the payment of taxes. In accordance
with SEC regulations, if a Named Officer receives personal benefits that
exceed $50,000, these benefits are also included in the column and any
benefit that exceeds 25% of an officer's total benefits is disclosed below.
In valuing personal benefits, AT&T uses the incremental cost of the benefit
to the company. Personal benefits include personal transportation, club
memberships, home security, financial counseling, tax preparation and
executive health benefits. The Securities and Exchange Commission has
recently issued interpretive guidance regarding the reporting of personal
benefits, which is reflected in this report. Under the new guidance, for
example, payments for club memberships (dues and initiation fees) are now
included as personal benefits even if the use is primarily for business;
only if the use is exclusively for business may the amounts be omitted.

Personal benefits reported under Other Annual Compensation for 2005, 2004
and 2003, respectively, include personal flights on Company transportation
for Mr. Whitacre of $44,588, $32,312, and $45,567; and Mr. Ellis of $55,403,
$42,594, and $34,007. Mr. Miller had $125,231 of personal flights reported
for 2005, and Mr. Stephenson had $32,255 and $15,646 reported for 2005 and
2004, respectively. Mr. Whitacre had $24,350 of club memberships reported
for 2004.
(3)All Other Compensation for 2005 includes benefits imputed to the Named
Officers with respect to premiums on AT&T-owned life insurance, as
determined in accordance with IRS guidelines. For Messrs. Whitacre, Ellis,
Miller, Stephenson and Wilkins, this amount was $20,214, $4,721, $602, $993,
and $1,628, respectively. All Other Compensation also includes the
difference between market interest rates determined pursuant to SEC rules
and actual rates used to determine earnings on deferred compensation for
Messrs. Whitacre, Ellis, Miller, Stephenson and Wilkins of $128,574,
$82,682, $16,773, $0 and $0, respectively. All other amounts reported under
this heading represent employer matching contributions made to employee
benefit plans.

Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values

The purpose of the following table is to report exercises of stock options
and stock appreciation rights ("SARs") by the Named Officers during 2005 and
the value of their unexercised stock options and SARs as of December 31, 2005.
AT&T has not issued any SARs to the Named Officers. "Value of Unexercised
In-the-Money Options" figures are based on the year end, December 30, 2005,
AT&T common stock price of $24.49.

Number of Securities Value of Unexercised In-
Shares Underlying Unexercised the-Money Options at Fiscal
Acquired Options at Fiscal Year End Year End
on Value ------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------- -------- -------- ----------- ------------- ----------- -------------

Edward E. Whitacre, Jr. 427,884 $137,132 8,094,653 1,406,338 $294,570 $53,003
James D. Ellis 62,380 $ 17,710 1,361,372 163,449 $ 67,059 $52,676
Forrest E. Miller 0 $ 0 596,830 51,214 $208,290 $ 4,304
Randall L. Stephenson 5,996 $ 3,269 673,493 162,548 $ 29,864 $54,899
Rayford Wilkins, Jr. 0 $ 0 706,436 68,601 $ 8,591 $10,537

Long-term Incentive Plans--Awards in Last Fiscal Year

The table below reports long-term performance based awards granted to the
Named Officers during the last fiscal year, applicable to the performance
periods indicated.

Number
of Performance or
Shares, Other Estimated Future Payouts Under
Units or Period Until Non-Stock Price-Based Plans
Other Maturation ------------------------------
Name Rights or Payout Threshold Target Maximum
----------------------- -------- -------------- --------- ------- ---------

Edward E. Whitacre, Jr. 864,371 2005-2007 0 864,371 1,404,603
100,000 2005-2006 0 100,000 100,000
160,000 2006-2007 0 160,000 160,000
James D. Ellis 152,122 2005-2007 0 152,122 228,183
40,000 2006-2007 0 40,000 40,000
Forrest E. Miller 108,086 2005-2007 0 108,086 162,129
Randall L. Stephenson 160,128 2005-2007 0 160,128 240,192
Rayford Wilkins, Jr. 100,080 2005-2007 0 100,080 150,120

Each performance share is equivalent in value to one share of AT&T common
stock. At the end of the 2005-2007 three-year performance period, a percentage
of the performance shares is converted 50% into cash and 50% into AT&T common
stock. For the 2005 - 2007 Performance Period, the percentage of performance
shares earned is dependent upon the achievement of a performance objective
based on return on invested capital. In addition, 25% of Mr. Whitacre's award
is based on the total stockholder return of AT&T as compared to a group of
telecommunications companies. Each level of achievement of a performance
objective is assigned a payout percentage ranging from 0% to 150% (0% to 200%
for the total stockholder return measurement), with higher percentages
reflecting greater performance achievement. Achievement of the target objective
results in a 100% payout.

For the 2005-2006 Performance Period, the performance goal for determining
any payout is the cumulative pre-tax net income of Cingular Wireless LLC
attributable to AT&T's 60% ownership interest in Cingular Wireless LLC. Each
level of achievement of the performance goal is assigned a payout percentage
ranging from 0% to 100%, with higher percentages reflecting greater performance
achievement. Failure to achieve a certain minimum goal, results in forfeiture
of the award.

For the 2006-2007 Performance Period, the performance goal for determining
payouts is the earnings before tax of AT&T, excluding the amortization of
merger-related intangibles from the acquisition of AT&T Corp. and excluding
income from Cingular Wireless, LLC, AT&T's Directory operations, and its
international equity investments. Each level of achievement of the performance
goal is assigned a payout percentage ranging from 0% to 100%, with higher
percentages reflecting greater performance achievement. Failure to achieve a
certain minimum goal, results in forfeiture of the award.

Option Grants in Last Fiscal Year

The table below contains the estimated present value of stock options
granted in 2005 as of their issue date. The options were issued under a stock
purchase plan where mid-level and above managers received options based on the
number of AT&T shares they purchased.

Number of
Securities Percent of Total
Underlying Options Granted Exercise or Grant Date
Options to Employees in Base Price Expiration Present
Name Grant Granted Fiscal Year ($/Share) Date Value

Edward E. Whitacre, Jr. A 59,199 2.03% $23.92 1/30/2015 $202,165
B 4,425 0.15% $24.01 6/15/2015 $ 14,886

James D. Ellis A 16,832 0.58% $23.92 1/30/2015 $ 57,481
B 83,141 2.86% $24.01 6/15/2015 $279,686

Forrest E. Miller A 2,191 0.08% $23.92 1/30/2015 $ 7,482
B 1,404 0.05% $24.01 6/15/2015 $ 4,723

Randall L. Stephenson A 16,085 0.55% $23.92 1/30/2015 $ 54,930
B 89,320 3.07% $24.01 6/15/2015 $300,472

Rayford Wilkins, Jr. A 8,982 0.31% $23.92 1/30/2015 $ 30,674
B 5,667 0.19% $24.01 6/15/2015 $ 19,064

The option values in the table represent the estimated present value of the
options as of their issue date. These values were determined in accordance with
a Black-Scholes option valuation model. The significant assumptions
incorporated in the Black-Scholes model in estimating the value of the options
include the following:

. Options were issued with an exercise price equal to the fair market
value of stock on the date of issuance. The term of each option is 10
years (unless otherwise shortened or forfeited due to termination of
employment). The expected life of the option grants are eight years.

. In calculating the value of the options, the model assumed an interest
rate of 4.17% for grant A and 4.13% for grant B. These interest rates
represent the interest rates on U.S. Treasury securities on the date
of grant with maturity dates corresponding to that of the expected
option lives.

. Expected volatility was calculated for each grant using daily stock
prices for the period prior to the grant date corresponding with the
expected option life, resulting in volatility of 22.63% for grant A
and 22.29% for grant B.

. The model reflected an expected annual dividend yield of 5.39% for
grant A and 5.37% for grant B.

The ultimate value of the options will depend on the future market price of
AT&T's common stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, that an optionee will realize upon exercise of an option
will depend on the excess of the market value of AT&T's common stock over the
exercise price on the date the option is exercised.

Pension Plans

AT&T has noncontributory pension plans that cover almost all of its
employees. Management employees, including each of the Named Officers, are
generally entitled to receive the greater of the Cash Balance Benefit or the
Career Average Minimum (CAM) Benefit, each of which is subject to Internal
Revenue Code limitations on pay used to calculate pensions. Certain employees,
other than the Named Officers, receive different benefits as a result of
pension formulas offered to employees at companies acquired by AT&T. A
participant's Cash Balance Benefit is equal to the balance in the participant's
cash balance account, which is made up of (a) an opening account balance as of
June 1, 1997, which reflects the lump sum present value of the participant's
approximate age 65 accrued benefit under the old plan design, (b) subsequent
monthly basic benefit credits equal to 5% of the participant's compensation
(generally, base pay, commissions, and group incentive awards), (c) monthly
interest credits on the participant's cash balance account, and (d) a
transition benefit, which was based on an estimate of what the participant's
account balance would have been if the cash balance design had been applied
throughout the participant's employment with AT&T, plus additional credits for
those participants whose age plus service exceeded 25 on May 1, 1997. The Cash
Balance Benefit for managers was frozen as of January 14, 2005, so that they
will no longer receive future accruals, but interest credits will continue to
apply. The interest rate is equal to the published average annual yield for the
30-year Treasury Bond, reset quarterly as of the middle of the preceding
quarter. The CAM Benefit is equal to the sum of 1.6% of a participant's average
compensation (generally, base pay, commissions, and group incentive awards) for
the five years ended December 31, 1999, multiplied by the number of years of
service through the end of the averaging period, plus 1.6% of the participant's
pension compensation subsequent to the averaging period.

Pension amounts are not subject to reduction for Social Security benefits or
any other offset amounts. The Internal Revenue Code places certain limitations
on pensions that may be paid under Federal income tax qualified plans. Benefits
that are so limited are restored for officers and certain senior managers from
the general funds of AT&T either under the Supplemental Retirement Income Plan
or its successor, the 2005 Supplemental Employee Retirement Plan (see paragraph
below), or another AT&T non-qualified plan. If they continue in their current
positions at their current levels of compensation and retire at the mandatory
retirement age of 65, the total estimated annual pension amounts from the
Pension Benefit Plan and the estimated credited years of service at retirement
under the Plan for Messrs. Whitacre, Ellis, Miller, Stephenson, and Wilkins
would be $113,312 (44 years), $97,605 (36 years), $98,784 (33 years), $132,790
(43 years), and $121,056 (42 years), respectively.

AT&T offers a non-qualified pension for the named executive officers and
certain other officers and senior managers, which is neither funded by nor a
part of the Pension Benefit Plan or any other qualified pension plan of AT&T.
As a result of changes in the tax laws, participants ceased accruing benefits
based on service or compensation effective December 31, 2004, under the
original plan, known as the Supplemental Retirement Income Plan ("SRIP");
future benefits are earned under the 2005 Supplemental Employee Retirement Plan
("SERP"). Separate distribution elections (annuity or lump sum) are made by the
participants for benefits accrued before 2005 (under the SRIP) and for benefits
accrued in and after 2005 (under the SERP). Elections for the portion of the
pension that accrues in and after 2005, however, must be made when the officer
first participates in the plan.

Under the non-qualified pension, a target annual retirement benefit is
established, stated as a percentage of their annual salaries and annual
incentive bonuses averaged over a specified averaging

period described below ("Average Annual Compensation"). The percentage is
increased by .715% for each year of actual service in excess of, or decreased
by 1.43% (.715% for mid-career hires) for each year of actual service below, 30
years of service for executive officers and other officers and 35 years of
service for eligible senior managers. Average Annual Compensation is determined
by averaging salaries and actual annual incentive bonuses (or such other
portion of the target or annual bonus amount as the Human Resources Committee
may determine) earned during the 36-consecutive-month period out of the last
120 months preceding retirement that generates the highest average earnings.
The target percentages of Average Annual Compensation are: Chairman of the
Board and Chief Executive Officer-75% and other executive officers-55% to 70%.
All new agreements will have a 50% target percentage. Existing participants
will be capped at current levels, subject to adjustment for length of service.
In the event the participant retires before reaching his or her 60th birthday,
a discount of .5% for each month remaining until the participant's 60th
birthday is applied to reduce the amount payable under this plan, except for
officers who have 30 years or more of service at the time of retirement.

Benefits may be received as an annuity payable for the greater of the life
of the participant or 10 years. If the participant dies before the 10th
anniversary of his or her termination of employment, then the payments for the
balance of the 10 years will be paid to the participant's beneficiary.
Alternatively, the Participant can elect to have the annuity payable for life
with 100% or 50% payable upon his death to his beneficiary for the
beneficiary's life. The amounts paid under each alternative (and the lump sum
alternative described below) are actuarially equivalent. As noted above,
separate distribution elections are made for pre-2005 benefits and 2005 and
later benefits.

Participants may elect to receive the actuarially determined net present
value of the benefit as a lump sum if they are at least 55 years old upon
termination, rather than in the form of an annuity. Participants also may elect
to defer distribution of a portion or all of their lump sum benefit. Those who
elect to defer any portion also have to elect the time period, not to exceed 20
years after their termination of employment, and the manner in which the lump
sum will be paid. The participant is not permitted to receive more than 30% of
the lump sum benefit prior to the third anniversary of the termination of
employment, unless he or she is at least 60 years old at termination, in which
case the participant may receive 100% of the lump sum benefit as early as six
months after the termination of employment. Participants receiving their entire
lump sum after six months from their termination must enter into a written
non-competition agreement with the company, and agree to forfeit and repay the
lump sum if they breach that agreement. Regardless of the payment form, no
benefits under the SERP are payable until six months after termination of
employment.

The non-qualified pension pays only the difference, if any, between the
target amount and that which would be payable under the Pension Benefit Plan
calculated as if the benefits under the Pension Benefit Plan were paid in the
form of an immediate annuity for life.

If they continue in their current positions and if they retire at the normal
retirement age of 65, the estimated annual retirement amounts that will be paid
in accordance with the SRIP (for benefits earned prior to 2005) for Messrs.
Whitacre, Ellis, Miller, Stephenson and Wilkins would be $5,380,795, $986,988,
$490,121, $488,534, and $803,267, respectively.

Each of Messrs. Whitacre, Ellis, Miller, Stephenson and Wilkins have elected
to receive SERP (2005 and later) benefits in a lump sum. If they continue in
their present positions and if they retire at the normal retirement age of 65,
using their current Average Annual Compensation and the discount rate

applicable to terminations that occur in 2006, the amounts they will be paid in
accordance with the SERP are $18,804,737 (lump sum), $2,637,398 (lump sum),
$5,135,840 (lump sum), $8,879,109 (lump sum), and $4,386,518 (lump sum),
respectively. Unless the officer elects a later distribution date, each benefit
is payable six months after termination of employment. Pending distribution,
amounts earn interest at the same rate as the discount rate. The discount rate
is the interest rate used by the Company to value plan liabilities at the end
of the year before retirement. The rate for 2006 is 6.00%. Mr. Ellis elected to
receive his payment three years after retirement. Messrs. Miller, Stephenson
and Wilkins have also elected to receive delayed distributions, but only in the
event they retire before age 60.

Contracts With Management

Each of the Named Officers and certain other officers have entered into
Change in Control Severance Agreements (the "Agreements") with AT&T. The
purpose of the Agreements is to reinforce and encourage the officers to
maintain objectivity and a high level of attention to their duties without
distraction from the possibility of a change in control of AT&T. These
Agreements provide that in the event of a change in control of AT&T, as that
term is defined in the Agreements and summarized below, each officer is
entitled to certain benefits (the "Severance Benefits") upon the subsequent
termination or constructive termination of his or her employment, unless such
termination is due to death or disability, or the termination is by AT&T for
cause (as defined in the Agreements); or the termination is by the officer for
other than good reason (as defined in the Agreements).

As discussed in the Report of the Human Resources Committee, severance
benefits are being substantially reduced effective January 1, 2007. The
following describes the severance benefits in effect through 2006 pending the
effectiveness of the new provisions. The Severance Benefits include the payment
of the officer's full base salary through the date of termination plus all
other amounts to which the officer is entitled under any compensation plan of
AT&T in effect immediately prior to the change in control. Also, each officer
is entitled to a lump sum payment equal to three (Messrs. Whitacre and Ellis)
or two (other executive officers) times the sum of (a) the officer's annual
base salary in effect immediately prior to termination, (b) the most recently
paid amount under the Short Term Incentive Plan or as a Key Executive Officer
Short Term Award under the 2001 Incentive Plan, and (c) the cash value of the
target award of performance shares granted under the 2001 Incentive Plan
applicable to each officer for the most current performance cycle.
Additionally, each officer will be provided with life and health benefits,
including supplemental medical, vision and dental benefits, for three years
from the date of termination, if the officer is not otherwise entitled to the
same.

In the event any payment or benefit received or to be received by an officer
in connection with a change in control or the termination of his or her
employment, whether pursuant to his or her Agreement and/or under a benefit
plan (the "Total Payments"), is determined to be an excess parachute payment as
defined in the Internal Revenue Code and thus subject to the 20% Federal excise
tax, AT&T will pay the officer an amount equal to the excise tax and all
Federal and applicable state taxes resulting from the payment of the excise tax
or from payment of such Federal and state taxes.

Under the Agreements, in general, change in control is deemed to occur if:
(a) anyone (other than an employee benefit plan of AT&T) acquires more than 20%
of AT&T's common stock, (b) within a two-year period, the Directors at the
beginning of such period (together with any new Directors elected or nominated
for election by a two-thirds majority of Directors then in office who were
Directors at the beginning of such period or whose election or nomination for
election was previously so approved)

cease to constitute a majority of the Board, or (c) AT&T's stockholders either
approve a merger or consolidation that results in someone other than the
stockholders immediately prior thereto holding more than 35% of the voting
power of the surviving entity or approve the complete liquidation of AT&T or
the disposition of substantially all of AT&T's assets.

In 2001, AT&T entered into an employment agreement with Mr. Whitacre to act
as Chairman of the Board and Chief Executive Officer for a five-year term
ending November 15, 2006. During the term of the contract, his base salary, the
target for his bonus, and the value of his long-term awards will not be less
than that in effect for calendar year 2001. The bonus and long-term award are
not guaranteed, but are subject to attainment of performance objectives.
Pursuant to the agreement, AT&T granted Mr. Whitacre options that expire in
2011 to acquire 2,500,000 shares of AT&T at $39.13 per share. Three-fifths of
the options vested on the third anniversary of the agreement and, assuming his
continued employment, the remaining options vest on the fifth anniversary; the
options also vest if his employment is terminated without cause. AT&T will
provide Mr. Whitacre with office facilities and support staff, automobile
benefits, limited access to AT&T's aircraft, and health care for the rest of
his life. If the Company terminates his employment without cause before the end
of the term or if he is unable to perform his duties because of disability or
accident, he shall be entitled to continue to receive his salary and other
benefits through the end of the term.

Upon retirement, Mr. Whitacre has agreed to provide consulting services and
advice to AT&T for three years after his termination of employment in exchange
for an annual fee equal to 50% of his annual salary at retirement. In the event
Mr. Whitacre receives a change in control payment under the Change in Control
Severance Agreements (described above), his employment term will immediately
expire, and the consulting term will be extended by the same period the
employment term was reduced.

AT&T Inc. entered into an employment agreement, dated as of January 30,
2005, with Mr. Dorman. Pursuant to the agreement, Mr. Dorman was elected a
Director and President of AT&T Inc. at the closing of the acquisition of AT&T
Corp. on November 18, 2005. He resigned as Director effective January 26, 2006,
and as President January 31, 2006. Mr. Dorman received no compensation as a
Director, but was to be paid an annual base salary that was no less than his
annual base salary for 2005. The agreement also provided for him to receive a
bonus for the portion of 2005 where he worked for AT&T Inc., which was to be at
least at the same target percentage of annual base salary as was established by
AT&T Corp. for 2005. Accordingly, he received a 2005 bonus of $504,186 for his
AT&T Inc. employment and continued his annual salary of $1,370,000 until his
termination of employment. Upon completion of the merger, all of Mr. Dorman's
options to purchase shares of Old AT&T common stock were converted into vested
AT&T Inc. options and each will remain exercisable for the remainder of its
full term as provided by its terms. In addition, all other Old AT&T
equity-based or other long or short-term incentive awards held by Mr. Dorman
were vested or paid out, as the case may be, and any performance awards were
distributed as provided by their terms. Mr. Dorman was also eligible to
participate on the same terms as peer executives of AT&T Inc. and its
affiliates in all long-term incentive plans of AT&T Inc.; however, because of
his termination of employment, no further awards were granted. He also was to
participate in employee benefit and perquisite arrangements no less favorable
than those generally applicable or made available to peer executives of AT&T
Inc. and, during the first six months of the term, those generally applicable
or made available to Mr. Dorman prior to completion of the acquisition.

Under the agreement, as a result of Mr. Dorman terminating his employment
with AT&T Inc. during the first six months of the term, he will receive
approximately $11,316,232 representing an amount equal to the amount Mr. Dorman
would have been entitled to receive under any plan, agreement or program of
AT&T (other than his AT&T SERP) had his employment been terminated without
cause immediately after completion of the merger (subject to Mr. Dorman's
execution of any release required under any such plan, agreement or program);
vesting and full term exercisability (as provided by their terms) for all AT&T
equity based awards; payment of an annuity of $2,147,140 per year under his
supplemental retirement arrangement (the "AT&T SERP") that equals 60% of his
final three-year average total cash compensation with a 50% survivor annuity
payable to Mr. Dorman's spouse; lifetime medical and dental benefits on the
same terms and at the same cost as such benefits would have been provided had
Mr. Dorman terminated employment immediately before completion of the merger,
and Mr. Dorman will be covered under AT&T Inc.'s Executive Health Plan or
successor plan.

Pursuant to the agreement, as a result of Mr. Dorman's termination of
employment, Mr. Dorman and AT&T Inc. entered into a consulting agreement
whereby Mr. Dorman will provide consulting services for a three-year period
following his termination as may be reasonably requested by the Board of
Directors of AT&T Inc. or the Chief Executive Officer of AT&T Inc. In
consideration for providing such services, Mr. Dorman will be granted
400,000 shares of restricted stock of AT&T Inc. that will vest in three equal
annual installments on the first three anniversaries of the date of grant. If
Mr. Dorman's consulting services are terminated during the term of the
consulting agreement on account of his death, disability or by AT&T Inc. other
than for cause, the restrictions on the then remaining shares of restricted
stock, if any, will immediately lapse. If Mr. Dorman voluntarily terminates the
consulting agreement or is terminated by AT&T Inc. for cause, then any unvested
shares of restricted stock will be forfeited.

Under the employment agreement, Mr. Dorman is restricted from revealing
confidential information of AT&T Inc. and, during Mr. Dorman's employment and
consultancy and, in the event that Mr. Dorman's employment or consultancy is
terminated by AT&T Inc. for cause, for a one-year period after such
termination, Mr. Dorman may not solicit for employment any employees of AT&T
Inc. and may not compete with AT&T Inc. Mr. Dorman will also receive under the
Agreement an estimated $11,127,981 to offset certain excise taxes under
Section 4999 of the Internal Revenue Code so that he would remain in the same
after-tax position he would have been in had the excise tax not been imposed.

One member of the immediate family of Mr. Ellis as well as two members of
the immediate family of each of Mr. Stephenson and Mr. Whitacre were employed
by subsidiaries of AT&T and were paid a total of approximately $376,000 in
2005. Amounts paid to these employees include salary and bonus, and are
comparable to compensation paid to other employees performing similar job
functions.

--------------------------------------------------------------------------------
EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2005, concerning
shares of AT&T common stock authorized for issuance under AT&T's existing
equity compensation plans.

Equity Compensation Plan Information (1)

--------------------------------------------------------------------------------

Number of securities to Weighted-average Number of securities remaining
be issued upon exercise price of available for future issuance
exercise of outstanding outstanding under equity compensation
options, warrants and options, warrants plans (excluding securities
rights and rights reflected in column (a))
Plan Category (a) (b) (c)
------------- ----------------------- ----------------- ------------------------------

Equity compensation
plans approved by
security holders 63,136,273 $37.86 76,875,043(2)
Equity compensation
plans not approved by
security holders (3) 114,906,255 $39.69 309,868
----------- ------ ----------
Total 178,042,528 $39.04 81,267,893
=========== ====== ==========

(1)In addition to the shares shown in the above table, certain stock options
issued by companies acquired by AT&T were converted into options to acquire
AT&T stock. As of December 31, 2005, there were 97,964,442 shares of AT&T
common stock subject to the converted options, having a weighted-average
exercise price of $42.54. No further grants may be issued under the assumed
plans.
(2)Of the shares reported, no more than 23,192,007 shares may be issued as
performance shares under the 2001 Incentive Plan and its predecessor, and of
these shares, no more than 4,504,034 shares may be issued as restricted
stock.
(3)Plans that have not been approved by stockholders include the 1995
Management Stock Option Plan ("1995 Plan"), 2001 Stock Option Grant to
Bargained-for and Certain Other Employees ("Bargained-For Plan"), and the
Non-Employee Director Stock and Deferral Plan ("Non-Employee Director
Plan"). The 1995 Plan and the Bargained-For Plan provide for grants of stock
options to management employees (10-year terms) and Bargained-For employees
(5-year terms), respectively, subject in each case to vesting requirements
and shortened exercise terms upon termination of employment. No further
options may be issued under these plans. Under the Non-Employee Director
Plan, participants may elect to receive stock units in lieu of retainers and
fees. In addition, each non-employee Director receives an annual award of
stock units equal in value to one and one-half times the annual retainer.
Directors who become board members after November 21, 1997, but before
September 24, 2004, also receive up to 10 annual grants of stock units equal
to $13,000 each. The stock units are paid out in the form of AT&T stock only
after the termination of their employment as a Director. Under the plan,
309,868 shares remain available for future issuance and are included in the
table.
Also included in column (c) are up to 4,082,982 shares that may be purchased
under the Stock Savings Plan with reinvested dividend equivalents on
deferred Share Units purchased by mid-level and above managers and limited
company partial matching contributions. No new contributions may be made to
the plan. The shares purchased are not delivered to the employee until after
termination of employment, subject to certain accelerated delivery
provisions. In addition, participants receive 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. The Stock Savings Plan was last approved by stockholders in 1994.
The plan 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 amounts shown for non-approved plans in
columns (a) and (c) include these additional shares. Shares subject to
outstanding options that were previously approved by stockholders are
included under approved plans.

--------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH

Comparison of Five Year Cumulative Total Return
SBC, S&P 500 and Peer Group

Peer
AT&T Group S&P 500
---- ----- -------

12/31/2000 100 100 100
12/31/2001 84 97 99
12/31/2002 60 77 69
12/31/2003 61 77 88
12/31/2004 64 88 98
12/31/2005 64 75 103

Assumes $100 invested on December 31, 2000, in AT&T common stock, Standard &
Poor's 500 Index ("S&P 500") and a Peer Group of other large U.S.
telecommunications companies (BellSouth Corporation and Verizon, Inc.). The
index of telecommunications companies ("Peer Group") is weighted according to
the market capitalization of its component companies at the beginning of each
period. Total return equals stock price appreciation plus reinvestment of
dividends on a quarterly basis.

--------------------------------------------------------------------------------
OTHER BUSINESS

The Board of Directors is not aware of any matters that will be presented at
the meeting for action on the part of stockholders other than those described
herein.

A copy of AT&T's Annual Report to the Securities and Exchange Commission on
Form 10-K for the year 2005 may be obtained without charge upon written request
to AT&T Stockholder Services, 175 E. Houston, Room 7-F-8, San Antonio, Texas
78205.

AT&T's Corporate Governance Guidelines, Code of Ethics, and Committee
Charters may also be viewed online at www.att.com.

Stockholder Proposals

Proposals of stockholders intended for presentation at the 2007 Annual
Meeting must be received by AT&T for inclusion in its Proxy Statement and form
of proxy relating to that meeting by November 11, 2006. Such proposals should
be sent in writing by certified mail to the Vice President and Secretary of
AT&T at 175 E. Houston, San Antonio, Texas 78205.

Stockholders whose proposals are not included in the Proxy Statement but who
still intend to submit a proposal at an Annual Meeting and stockholders who
intend to submit nominations for Directors at an Annual Meeting are required to
notify the Vice President and Secretary of AT&T of their proposal or
nominations and to provide certain other information not less than 120 days,
nor more than 150 days, before the meeting, in accordance with AT&T's Bylaws.

APPENDIX A

2006 INCENTIVE PLAN

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 shall become effective on May 1,
2006, provided that the stockholders of the Company have approved the
Plan prior to that time.

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.

(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

A-1

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.

A-2

(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.

A-3

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,

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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.

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(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.

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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

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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.

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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.

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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

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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.

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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. 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.

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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 Performance 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

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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.

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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 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

A-15

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.

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.

A-16

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) an 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 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 (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).

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 payments or deliveries due as
a result of a Termination of Employment may 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.

A-17

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.

A-18

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

A-19

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.

A-20

APPENDIX B

AUDIT COMMITTEE CHARTER

AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
AT&T INC.
CHARTER

Purpose

The Audit Committee (the "Committee") is appointed by the Board of Directors of
AT&T Inc. to assist the Board in its oversight of: (1) the integrity of the
financial statements of the Company, (2) the independent auditor's
qualifications and independence, (3) the performance of the Company's internal
audit function and independent auditors, and (4) the compliance by the Company
with legal and regulatory requirements. References in this Charter to "AT&T" or
the "Company" shall be to AT&T Inc. and its consolidated subsidiaries unless
the context requires otherwise.

The Committee shall prepare the report required by the rules of the Securities
and Exchange Commission (the "Commission") to be included in the Company's
proxy statement for the Annual Meeting of Stockholders.

Committee Membership

At the first meeting of the Board of Directors following each Annual Meeting of
Stockholders, the Board, after receiving the recommendations of the Corporate
Governance and Nominating Committee, shall appoint the members of the Committee
and shall determine the Chairperson of the Committee, each to serve at the
pleasure of the Board. Committee members shall not have a fixed term. The
Committee shall consist of no fewer than three members, including the
Chairperson. Each member of the Committee shall meet the independence and
experience requirements of the listing standards of the New York Stock Exchange
and the independence requirements of Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules of the Commission
thereunder. The Board shall periodically determine (i) whether each Committee
member meets such independence and experience requirements and (ii) whether or
not any member of the Committee is an "audit committee financial expert" as
that term is defined by the rules and regulations of the Commission. Committee
members may not accept, directly or indirectly, any consulting, advisory, or
other compensatory fee from the Company other than in their capacity as a
Director.

Procedures

The Committee shall meet as often as it determines, but not less than six times
a year. The Committee shall meet periodically with management, the senior
internal auditing executive, the independent auditor and the general counsel in
separate executive sessions. The Committee may request any officer or employee
of the Company or the Company's outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. After the Committee meets or otherwise takes
action, it shall, as soon as practicable, make a report of its activities at a
meeting of the Board.

B-1

The Committee may form and delegate authority to subcommittees when determined
by the Committee to be necessary or appropriate.

Committee Authority and Responsibilities

The Committee shall have the authority, to the extent it deems necessary or
appropriate, to conduct investigations and to retain independent legal,
accounting or other advisors. The Committee may authorize and direct the
payment of compensation by the Company to the independent auditor for the
purpose of preparing or issuing an audit report or for other services and to
any advisors employed by the Committee as well as the payment of ordinary
administrative expenses of the Committee that are necessary or appropriate in
carrying out its duties.

The Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Corporate Governance and Nominating
Committee. The Committee shall annually evaluate the Committee's own
performance and share such evaluation with the Corporate Governance and
Nominating Committee.

Oversight of the Company's Relationship with the Independent Auditor

1. The Committee shall be directly responsible for the appointment,
compensation, retention and oversight of the work of the independent auditor
employed by the Company for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services (including resolution of
disagreements between management and the independent auditor regarding
financial reporting). The independent auditor shall report directly to the
Committee.

2. The independent auditor may be engaged by the Company to perform audit
services and, to the extent permitted by applicable Federal securities laws and
rules thereunder, non-audit services, in each case only where the Committee has
pre-approved each such service, subject to the de minimus exception for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act. The
Committee may either approve such audit and non-audit services or adopt
pre-approval policies and procedures provided that the policies and procedures
are detailed as to the particular service provided and the Committee is
informed of each such service. As a part of such policies and procedures, the
Committee may delegate authority to subcommittees consisting of one or more
members to grant pre-approvals of audit and permitted non-audit services.

3. The Committee shall establish policies for the Company's hiring of
employees or former employees of the independent auditor.

4. The Committee shall obtain and review a report from the independent
auditor at least annually regarding: (a) the independent auditor's internal
quality-control procedures, (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out by
the firm, (c) any steps taken to deal with any such issues, and (d) all
relationships between the independent auditor and the Company. After reviewing
the foregoing report and the independent auditor's work during the year, the
Committee shall evaluate the qualifications, performance and independence of
the independent auditor, taking into account the opinions of management and the
senior internal auditing executive. As a part of this evaluation, the Committee
shall review and evaluate the performance and qualifications of the lead
partner of the independent auditor.

B-2

5. The Committee shall, as appropriate, discuss with management the timing
and process for the rotation of the lead audit partner, the concurring partner
and any other active audit engagement team partner and consider whether, in
order to assure continuing auditor independence, it is appropriate to rotate
the independent auditing firm.

6. The Committee shall meet with the independent auditor prior to the audit
to discuss the planning and staffing of the audit.

Financial Statement and Disclosure Matters

7. The Committee shall review and discuss with management and the
independent auditor, prior to filing the Company's Form 10-K with the
Commission, the annual audited financial statements, including the specific
disclosures made under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and recommend to the Board whether the
audited financial statements should be included in the Company's Form 10-K.

8. The Committee shall review and discuss with management and the
independent auditor, prior to filing the Company's Form 10-Q with the
Commission, the quarterly financial statements, including disclosures made
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the results of the independent auditor's review of the
quarterly financial statements.

9. The Committee shall periodically review and discuss with management and
the independent auditor: (a) any major issues regarding accounting principles
and financial statement presentations, including any significant changes in the
Company's selection or application of accounting principles, and major issues
as to the adequacy of the Company's internal controls and any special audit
steps adopted in light of material control deficiencies; (b) analyses prepared
by management and/or the independent auditor setting forth significant
financial reporting issues and judgments made in connection with the
preparation of the financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements; and (c) the effect of
regulatory and accounting initiatives, as well as off-balance sheet structures,
on the financial statements of the Company.

10. The Committee shall review and discuss with management and the
independent auditor reports from the independent auditor on:

a. All critical accounting policies and practices to be used;

b. All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments, and
the treatment preferred by the independent auditor; and

c. Other material written communications between the independent auditor
and management, such as any management letter or schedule of unadjusted
differences.

B-3

11. The Committee shall review and discuss with management the Company's
earnings press releases as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done generally
(i.e., discussion of the types of information to be disclosed and the type of
presentation to be made). The Committee need not discuss in advance each
earnings release or each instance in which the Company may provide earnings
guidance.

12. The Committee shall review and discuss with management the Company's
major financial risk exposures and the steps management has taken to monitor
and control such exposures, including the Company's risk assessment and risk
management policies.

13. The Committee shall annually discuss with the independent auditor the
matters required to be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any difficulties encountered in
the course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with
management. The discussion shall address, to the extent applicable, any
accounting adjustments that were noted or proposed by the independent auditor
but were "passed" (as immaterial or otherwise), any communications between the
audit team and the auditor's national office with respect to auditing or
accounting issues presented by the engagement and any "management" or "internal
control" letter issued, or proposed to be issued, by the independent auditor.

14. The Committee shall review disclosures made to the Committee by the
Company's Chief Executive Officer and Chief Financial Officer during their
certification process for the Form 10-K and Forms 10-Q about significant
deficiencies or material weaknesses in the design or operation of internal
control over financial reporting and any fraud involving management or other
employees who have a significant role in the Company's internal control over
financial reporting. The Committee shall review with management, the senior
internal auditing executive, and the independent auditor, as appropriate,
attestations and reports by the independent auditor on the assessments made by
management as to internal control over financial reporting.

Oversight of the Company's Internal Audit Function

15. The Committee shall review with management the appointment and
replacement of the senior internal auditing executive and shall annually
evaluate his or her performance.

16. The Committee shall review with the senior internal auditing executive
the significant reports to management prepared by the internal auditing
department and management's responses.

17. The Committee shall review with the senior internal auditing executive,
the independent auditor and management the internal audit department
responsibilities, budget and staffing and the internal audit plan for the
coming year.

Compliance Oversight Responsibilities

18. The Committee shall obtain from the independent auditor assurance that
Section 10A(b) of the Exchange Act (relating to reports by the independent
auditor made to the Company of illegal acts discovered by the independent
auditor) has not been implicated.

B-4

19. The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees or other interested persons, of concerns regarding
questionable accounting or auditing matters.

20. The Committee shall discuss with management and the independent auditor
any correspondence with regulators or governmental agencies and any published
reports made known to AT&T's executive officers that raise material issues
regarding the Company's financial statements or accounting policies.

21. The Committee shall discuss with the Company's General Counsel any
significant legal, compliance or regulatory matters that may have a material
impact on the financial statements or the Company's compliance policies. The
Committee shall oversee the administration and enforcement of the Code of
Business Conduct and Code of Ethics.

Other

22. The Committee shall be responsible for any other matters expressly
delegated to the Committee by the Board from time to time.

Limitation of Committee's Role

While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.

B-5

[back cover]

[AT&T LOGO]

at&t

175 E. Houston
P.O. Box 2933
San Antonio, TX 78299-2933

www.att.com

[recycle logo]

AT&T Inc. Annual Meeting of Stockholders Admission Ticket

Friday, April 28, 2006 [MAP] [MAP]
Alzafar Shrine Temple
901 North Loop 1604 West
San Antonio, TX
Doors open at 8:00 a.m. CT
Meeting begins at 9:00 a.m. CT
* The Alzafar
Shrine Temple is
located in San
Antonio on the
westbound
frontage road of
North Loop 1604
between the Stone
Oak Parkway and
Blanco Road exits.

--------------------------------------------------------------------------------

This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on April 28, 2006.

The undersigned hereby appoints Edward E. Whitacre, Jr. and Richard G. Lindner,
and each of them, proxies, with full power of substitution, to vote all common
shares of the undersigned in AT&T Inc. at the Annual Meeting of Stockholders to
be held on April 28, 2006, and at any adjournment thereof, upon all subjects
that may properly come before the meeting, including the matters described in
the proxy statement furnished herewith, in accordance with the directions
indicated on the reverse side of this card or provided through the telephone or
Internet proxy procedures, and at the discretion of the proxies on any other
matters that may properly come before the meeting. If specific voting
directions are not given with respect to the matters to be acted upon and the
signed card is returned, the proxies will vote such shares (except for shares
held in the employee benefit plans noted below) in accordance with the
Directors' recommendations on the matters listed on the reverse side of this
card and at the discretion of the proxies on any other matters that may
properly come before the meeting.

The Board of Directors recommends a vote FOR each of the Director proposals
(Items 1, 2, 3 and 4) and AGAINST each of the stockholder proposals (Items 5,
6, 7, 8 and 9) listed on the reverse side of this card (each of which is
described in the proxy statement). The Board of Directors knows of no other
matters that are to be presented at the meeting.

Please sign on the reverse side of this card and return promptly in the
enclosed envelope or, if you choose, you can submit your proxy by telephone or
through the internet.

This proxy card, when signed and returned, or your telephone or Internet proxy,
will also constitute voting instructions to the plan administrator or trustee
for any shares held on your behalf under any of the following employee benefit
plans: the AT&T Savings Plan, the AT&T Savings and Security Plan, the Old
Heritage Advertising & Publishers, Inc. Profit Sharing Plan, the AT&T PAYSOP,
the Pacific Telesis Group Employee Stock Ownership Plan, the Tax Reduction Act
Stock Ownership Plan (the "TRASOP") sponsored by The Southern New England
Telephone Company, the AT&T Long Term Savings Plan for Management Employees,
the AT&T Long Term Savings and Security Plan, the AT&T Retirement Savings and
Profit Sharing Plan, the AT&T of Puerto Rico, Inc. Long Term Savings Plan for
Management Employees, the AT&T of Puerto Rico, Inc. Long Term Savings and
Security Plan, the AT&T Stock Ownership Plan, and the Cingular Wireless 401(k)
Savings Plan. Shares in each of the foregoing employee benefit plans (except
the Old Heritage plan) for which voting instructions are not received, subject
to the trustees' fiduciary obligations, will be voted by the trustees in the
same proportion as the shares for which voting instructions are received from
other participants in each such plan. For shares held in the Old Heritage plan,
the trustee has discretionary authority to vote the shares for which no voting
instructions are received. Similarly, the proxy card or telephone or Internet
proxy will constitute voting instructions to the plan administrator for any
shares held on your behalf pursuant to The DirectSERVICE Investment Program
(dividend reinvestment plan).

(Please mark your proxy and sign on the reverse side.)

Telephone and Internet Voting Instructions

Instead of mailing your proxy, you can vote by telephone OR Internet. Available
24 hours a day 7 days a week.

To vote using the Telephone (within To vote using the Internet
U.S. and Canada)
. Call toll free 1-866-731-VOTE . Go to the following web
(8683) any time on a touch- tone site:WWW.COMPUTERSHARE.COM/US/PROXY
telephone. There is NO CHARGE to
you for the call.
. Follow the simple instructions . Enter the information requested
provided by the recorded message. on your computer screen and
follow the simple instructions.

If you vote by telephone or the Internet, please DO NOT mail back this proxy
card.
Proxies submitted by telephone or the Internet must be received by 11:59 p.m.,
Central Time, on April 27, 2006.
THANK YOU FOR VOTING!

[back of card]

[AT&T logo] Annual Meeting Admission Ticket

2006 Annual Meeting of AT&T Inc. Stockholders
April 28, 2006, 9:00 a.m. Central Time
Alzafar Shrine Temple
901 North Loop 1604 West
San Antonio, TX

Upon arrival, please present this admission ticket and photo identification at
the registration desk.

PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTRANET VOTING INSTRUCTIONS.

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Annual Meeting Proxy Card

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[_] Please mark this box with an X if your address has changed and print the
new address below.
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A Election of Directors
The Board of Directors recommends a vote FOR the listed nominees.

1. Nominees: For Withhold For Withhold

01 - William F. Aldinger III [_] [_] 10 - Mary S. Metz [_] [_]

02 - Gilbert F. Amelio [_] [_] 11 - Toni Rembe [_] [_]

03 - August A. Busch III [_] [_] 12 - S. Donley Ritchey [_] [_]

04 - Martin K. Eby, Jr. [_] [_] 13 - Joyce M. Roche [_] [_]

05 - James A. Henderson [_] [_] 14 - Randall L. Stephenson [_] [_]

06 - Charles F. Knight [_] [_] 15 - Laura D'Andrea Tyson [_] [_]

07 - Jon C. Madonna [_] [_] 16 - Patricia P. Upton [_] [_]

08 - Lynn M. Martin [_] [_] 17 - Edward E. Whitacre, Jr. [_] [_]

09 - John B. McCoy [_] [_]

B Proposals

The Board of Directors recommends a vote FOR Items 2, 3 and 4. For Against Abstain

2. Approve appointment of independent auditors [_] [_] [_]

3. Approve 2006 Incentive Plan [_] [_] [_]

4. Approve amendment to Restated Certificate of Incorporation [_] [_] [_]

The Board of Directors recommends a vote AGAINST Items 5, 6, 7, 8 and 9.

5. Stockholder Proposal A [_] [_] [_]

6. Stockholder Proposal B [_] [_] [_]

7. Stockholder Proposal C [_] [_] [_]

8. Stockholder Proposal D [_] [_] [_]

9. Stockholder Proposal E [_] [_] [_]

Discontinue mailing Annual Reports for this account because I already receive
multiple copies at this address. [ ]

C Authorized Signatures - This section must be completed for your instructions
to be executed.

Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title.

Signature 1 - Please keep signature Signature 2 - Please keep signature
within the box within the box Date (mm/dd/yyyy)
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[Broker Card]

PROXY CARD

[logo]

This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on April 28, 2006.

The nominees for the Board of Directors are:

1) William F. Aldinger III 6) Charles F. Knight 10) Mary S. Metz 14) Randall L. Stephenson
2) Gilbert F. Amelio 7) Jon C. Madonna 11) Toni Rembe 15) Laura D'Andrea Tyson
3) August A. Busch III 8) Lynn M. Martin 12) S. Donley Ritchey 16) Patricia P. Upton
4) Martin K. Eby, Jr. 9) John B. McCoy 13) Joyce M. Roche 17) Edward E. Whitacre, Jr.
5) James A. Henderson

Please sign on the reverse side of this card and return promptly in the
enclosed envelope or, if you choose, you can submit your proxy by telephone or
through the internet.

(Please mark your proxy and sign on the reverse side.)

AT&T INC. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

Your Directors recommend a vote FOR Items 1, 2, 3 and 4.

Withhold
For All Authority For All Exception*
1. Election of Directors (SEE REVERSE) [_] [_] [_]
*For all, except withhold authority to vote from the
following nominee(s):
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For Against Abstain
2. Approve Appointment of Independent Auditors [_] [_] [_]
3. Approve 2006 Incentive Plan [_] [_] [_]
4. Approve amendment to Restated Certificate of Incorporation [_] [_] [_]

Your Directors recommend a vote AGAINST Items 5, 6, 7, 8 and 9.
For Against Abstain
5. Stockholder Proposal A [_] [_] [_]
6. Stockholder Proposal B [_] [_] [_]
7. Stockholder Proposal C [_] [_] [_]
8. Stockholder Proposal D [_] [_] [_]
9. Stockholder Proposal E [_] [_] [_]

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Signature Signature (joint owner) Date