Table of Contents

Delaware		4813		43-1301883
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(IRS Employer Identification Number)

Benjamin F. Stapleton, Esq. John J. O’Brien, Esq. Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Tel: (212) 558-4000 Fax: (212) 558-3588		Wayne A. Wirtz, Esq. SBC Communications Inc. 175 East Houston San Antonio, Texas 78205 Tel: (210) 821-4105 Fax: (210) 351-3467		Robert S. Feit, Esq. AT&T Corp. One AT&T Way Bedminster, New Jersey 07921 Tel: (908) 221-2000 Fax: (908) 532-1989		Steven A. Rosenblum, Esq. Stephanie J. Seligman, Esq. Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Tel: (212) 403-1000 Fax: (212) 403-2000

---

Table of Contents

The information in this document is not complete and can be changed. SBC may not issue the securities being offered by use of this document until the registration statement filed with the Securities and Exchange Commission, of which this document is part, is declared effective. This document is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where such offer, solicitation or sale is prohibited.

PRELIMINARY PROSPECTUS OF	PRELIMINARY PROXY STATEMENT OF

SBC COMMUNICATIONS INC.	AT&T CORP.

	Sincerely,
	David W. Dorman
	Chairman of the Board and Chief Executive Officer
	AT&T Corp.

---

Table of Contents

AT&T Corp.		SBC Communications Inc.
One AT&T Way		175 East Houston
Bedminster, New Jersey 07921		San Antonio, TX 78205
(908) 532-1680		(210) 821-4105
www.att.com		www.sbc.com

---

Table of Contents

	•	to adopt the merger agreement among SBC, AT&T and Merger Sub;
	•	to adjourn the meeting, if necessary, to permit further solicitation of proxies, in the event that there are not sufficient votes at the time of the meeting to adopt the merger agreement;
	•	to elect nine directors;
	•	to ratify the appointment by the Audit Committee of independent auditors to examine AT&T’s accounts; and
	•	to conduct any other business, including shareholder proposals, as may properly come before the meeting or any adjournment or postponement of the meeting.

	Robert S. Feit
	Vice President — Law and Secretary
	AT&T Corp.

---

Table of Contents

				Page
Questions and Answers About the AT&T Annual Meeting and the Merger					iv
Summary					1
	The Companies				1
	As a Result of the Merger, AT&T will Become a Wholly Owned Subsidiary of SBC				1
	In the Merger You Will Have the Right to Receive 0.77942 of a Share of SBC Common Stock for each Share of AT&T Common Stock that You Hold; In Addition, Assuming the Merger is Completed, AT&T Will Pay a Special Dividend of $1.30 per Share to Holders of AT&T Common Stock				1
	The AT&T Board of Directors Recommends that Holders of AT&T Common Stock Vote to Adopt the Merger Agreement				2
	Opinions of AT&T’s Financial Advisors				2
	Treatment of AT&T Stock Options and Stock Based Awards				3
	AT&T’s Executive Officers and Directors Have Interests in the Merger that Differ from, or Are in Addition to, Your Interests in the Merger				3
	Material United States Federal Income Tax Consequences				3
	Procedures for Exchange of AT&T Common Stock for SBC Common Stock				4
	Following the Merger, You Will Be Entitled to Receive the Dividends SBC Pays on the Common Stock				4
	Accounting Treatment				4
	Regulatory Matters Related to the Merger				4
	SBC and AT&T expect that the merger will be completed in late 2005 or early 2006				5
	You are not entitled to any Rights of Appraisal if you Dissent from the Merger				5
	The Merger Agreement				5
	Acquisition Proposals				6
	There are Conditions that Must be Satisfied or Waived Before SBC and AT&T are Required to Complete the Merger				6
	Under Some Conditions SBC or AT&T May Terminate the Merger Agreement				8
	Under Some Circumstances AT&T Will Be Required to Pay a Termination Fee to SBC if the Merger Agreement is Terminated				9
	Comparison of Stockholder Rights				9
Selected Historical Financial Data of SBC					10
Selected Historical Financial Data of AT&T					11
Selected Unaudited Pro Forma Condensed Combined Financial Data					12
Unaudited Comparative per Share Data					13
Comparative Market Data					14
Comparative per Share Market Price Data and Dividend Information					15
Risk Factors					16
	Risk Factors Relating to the Merger				16
	Risk Factors Relating to SBC Following the Merger				18
The Merger					24
	Background of the Merger				24
	SBC’s Reasons for the Merger				27
	AT&T’s Reasons for the Merger				30
	Recommendation of the AT&T Board of Directors				33
	Certain AT&T Projections				33
	Opinions of AT&T’s Financial Advisors				35
	Interests of AT&T Executive Officers and Directors in the Merger				44
	Material United States Federal Income Tax Consequences				48
		The Special Dividend			49
		The Merger			49
	Accounting Treatment				51
	Regulatory Matters Related to the Merger				52
		HSR Act and Antitrust			52
		FCC Approval			52
		State Regulatory Approvals			52
		Municipal Franchises			53
		Foreign and Certain Other Regulatory Matters			53
	Merger Fees, Costs and Expenses				53
	No Dissenters’ Rights of Appraisal				53
	Resale of SBC Common Stock				53
The Merger Agreement					54
	The Merger				54
	Closing and Effectiveness of the Merger				54

---

Table of Contents

				Page
	Surviving Corporation’s Governing Documents, Officers and Directors; SBC’s Post-Closing Directors				54
	Merger Consideration and Special Dividend				55
	Representations and Warranties				57
	Covenants and Agreements				58
	Conditions to the Merger				66
	Termination				68
	Effect of Termination				69
	Termination Fees and Expenses				69
	Amendment, Extension and Waiver				70
The Companies					71
	AT&T				71
	SBC				71
Unaudited Pro Forma Condensed Combined Financial Information					73
Directors and Management of SBC Following the Merger					80
	SBC Directors and Officers Following the Merger				80
	Biographical Information Regarding Current SBC Directors				80
	Biographical Information Regarding SBC Executive Officers				82
	Beneficial Owners of More Than 5% of SBC Common Stock
Information About the AT&T Annual Meeting					83
The AT&T Annual Meeting Proposals and Information					87
	Information About the AT&T Board of Directors and Corporate Governance				87
		The AT&T Board of Directors			87
		Election of Directors (Proposal 2 on Proxy Card)			87
		Nominees for Election as Directors			87
		The Committees of the AT&T Board of Directors and Their Functions			89
		Independence of Directors; Financial Expert			90
		Compensation of Directors			90
	Stock Ownership of AT&T Management and Directors				91
	Beneficial Ownership of More Than 5% of AT&T Common Stock				93
	Section 16(a) Beneficial Ownership Reporting Compliance				94
	Ratification of The Appointment by The Audit Committee of Independent Auditors (Proposal 3 on Proxy Card)				94
	AT&T Shareholder Proposals				94
		No Future Stock Options — AT&T Shareholder Proposal (Proposal 4 on Proxy Card)			94
		Link Restricted Stock Unit Vesting to Performance — AT&T Shareholder Proposal (Proposal 5 on Proxy Card)			95
		Executive Compensation — AT&T Shareholder Proposal (Proposal 6 on Proxy Card)			97
		Poison Pill — AT&T Shareholder Proposal (Proposal 7 on Proxy Card)			98
		Shareholder Approval of Future SERPs— AT&T Shareholder Proposal (Proposal 8 on Proxy Card)			100
		Shareholder Ratification of Severance Agreements — AT&T Shareholder Proposal (Proposal 9 on Proxy Card)			101
	Advance Notice Procedures; Nomination of Directors				103
	Other Matters to Come Before the Annual Meeting				103
	Report of the Audit Committee of the AT&T Board of Directors				104
	Review of AT&T’s Audited Financial Statements				104
	AT&T’s Independent Public Accountants				105
		Principal Auditor Fees and Services ($ in 000’s)			105
		Preapproval Policies and Procedures			106
	Five Year Performance Comparison				107
	Explanation				107
	Executive Compensation				107
		AT&T Board Compensation Committee Report on Executive Compensation			107
	Compensation Philosophy and Objectives				108
	Changes in 2004				108
	Executive Compensation Components and Practices				108
	Base Salary				109
	Short-Term Incentives				109
	Long-Term Incentives				110
	Performance Shares				110
	Stock Ownership Guidelines				111
	Compensation for the Chairman of the Board and Chief Executive Officer of AT&T				112
	Deductibility Cap on Executive Compensation				112
	Impact of the Merger with SBC				113
	Conclusion				113

ii

---

Table of Contents

				Page
		Compensation Committee Interlocks and Insider Participation			113
		Summary Compensation Table			113
		Aggregated Option/ Stock Appreciation Rights (SAR) Exercises in 2004 and Year End Values			115
		Long Term Incentive Plans — Awards in 2004			116
		Option/ SAR Grants in 2004			116
		Equity Compensation Plan Information			117
		Employment Contracts and Termination of Employment Agreements			117
		Senior Officer Separation Plan			120
		Pension Plans			121
	Certain Relationships and Related Transactions				123
		Indebtedness of Management			123
		Other Arrangements			123
	Other Information				123
	Travel and Parking Directions				124
Description of SBC Capital Stock					125
	SBC Common Stock				125
	SBC Preferred Stock				125
	No Stockholder Rights Plan				125
Comparison of Stockholder Rights					126
	Classes and Series of Capital Stock				126
	Annual Meeting of Stockholders				126
	Special Meetings of Stockholders				127
	Quorum of Stockholders				127
	Stockholder Action Without a Meeting				128
	Stockholder Nominations and Proposals				128
	Access to Corporate Records, Financial Statements and Related Matters				130
	Amendments of Certificate of Incorporation				130
	By-Law Amendments				131
	Vote on Mergers, Consolidations, Sales or Leases of Assets and Certain Other Transactions				131
	Preemptive Rights				132
	Dividends				133
	Appraisal and Dissent Rights				133
	Number and Qualification of Directors				134
	Filling Vacancies on the Board of Directors				135
	Removal of Directors				136
	Limitation of Personal Liability of Directors and Officers				136
	Indemnification of Directors and Officers				137
	Derivative Action				138
	Anti-Takeover and Ownership Provisions				138
	Voluntary Dissolution				139
Experts					141
Legal Matters					141
Shareholder Proposals					141
Cautionary Statement Concerning Forward-Looking Statements					143
Where You Can Find More Information					144
Annex A: Agreement and Plan of Merger among AT&T Corp., SBC Communications Inc. and TAU Merger Sub Corporation, Dated as of January 30, 2005					A-1
Annex B: Fairness Opinion of Credit Suisse First Boston LLC					B-1
Annex C: Fairness Opinion of Morgan Stanley & Co. Incorporated					C-1
Annex D: AT&T Corporate Governance Guidelines					D-1
EX-8.1: FORM OF OPINION OF SULLIVAN & CROMWELL LLP
EX-8.2: FORM OF OPINION OF WACHTELL, LIPTON, ROSEN & KATZ
EX-12: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
EX-23.1: CONSENT OF ERNST & YOUNG LLP
EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-23.3: CONSENT OF ERNST & YOUNG LLP
EX-23.4: CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-99.1: FORM OF PROXY CARD
EX-99.2: FORM OF INFORMATION ON VOTING PROCEDURES
EX-99.5: CONSENT OF CREDIT SUISSE FIRST BOSTON LLC
EX-99.6: CONSENT OF MORGAN STANLEY & CO. INCORPORATED

iii

---

Table of Contents

A1:	This document is being provided by, and the enclosed proxy is solicited by and on behalf of, the AT&T board of directors for use at the annual meeting of AT&T shareholders.

Q2:	When and where is the AT&T annual meeting?

A2:	The AT&T annual meeting is scheduled to be held at [l], local time, on [l], 2005 at [l], unless it is postponed or adjourned.

Q3:	What is the purpose of the AT&T annual meeting? What am I voting on?

A3:	The purpose of the annual meeting is to consider and vote upon:

	•	adoption of the Agreement and Plan of Merger, dated as of January 30, 2005 (referred to in this document as the merger agreement), among SBC, AT&T and Tau Merger Sub Corporation, a newly formed, direct and wholly owned subsidiary of SBC (referred to in this document as Merger Sub) (Proposal 1 on the enclosed proxy card);
	•	adjournment of the meeting, if necessary, to permit further solicitation of proxies in favor of adoption of the merger agreement (Proposal l.a on the enclosed proxy card);
	•	election of nine directors (Proposal 2 on the enclosed proxy card);
	•	ratification of the appointment by the Audit Committee of independent auditors (Proposal 3 on the enclosed proxy card); and
	•	action upon such other matters, including shareholder proposals, as may properly come before the meeting (Proposals 4 through 9 on the enclosed proxy card).

Q4:	Who is entitled to vote at the AT&T annual meeting?

A4:

AT&T shareholders of record at the close of business on [l], 2005, the record date for the AT&T annual meeting, are entitled to receive notice of and to vote on matters that come before the annual meeting and any adjournments or postponements of the annual meeting. However, an AT&T shareholder may only vote his or her shares if he or she is present in person or is represented by proxy at the AT&T annual meeting.

A5:

After carefully reading and considering the information contained in this document, please submit your proxy by telephone or Internet in accordance with the instructions set forth in the enclosed proxy card, or fill out, sign and date the proxy card, and then mail your signed proxy card in the enclosed envelope as soon as possible so that your shares may be voted at the annual meeting. For detailed information please see “Information about the AT&T Meeting — How do I vote?” on page 83.

A6:	Each share of AT&T common stock that you own as of the record date entitles you to one vote. On the record date, there were [l] outstanding shares of AT&T common stock. On the record date, less than

iv

---

Table of Contents

	1% of the outstanding shares of AT&T common stock were held by directors and executive officers of AT&T and their respective affiliates.

A7:	The presence of the holders of 40 percent of the shares entitled to vote at the AT&T annual meeting constitutes a quorum. Presence may be in person or by proxy. You will be considered part of the quorum if you return a signed and dated proxy card, if you vote by telephone or the Internet, or if you vote in person at the annual meeting.

	Abstentions and shares voted by a bank or broker holding shares for a beneficial owner are counted as present and entitled to vote for purposes of determining a quorum.

Q8:	What vote is required to approve each proposal? What is the effect of not voting?

A8:	To adopt the merger agreement: the affirmative vote of the holders of at least a majority of outstanding shares of AT&T common stock entitled to vote is required to adopt the merger agreement.

	Because the affirmative vote required to adopt the merger agreement is based upon the total number of outstanding shares of AT&T common stock, the failure to submit a proxy card (or to submit a proxy by telephone or by Internet or to vote in person at the annual meeting) or the abstention from voting by a shareholder will have the same effect as a vote against adoption of the merger agreement. Brokers holding shares of AT&T common stock as nominees will not have discretionary authority to vote those shares in the absence of instructions from the beneficial owners of those shares, so the failure to provide voting instructions to your broker will also have the same effect as a vote against the merger.
	Election of directors: the nine nominees who receive the most votes cast by AT&T shareholders present in person at the meeting or represented by proxy will be elected. Any AT&T shares not voted (whether by abstention or otherwise) will have no impact on the vote.
	Ratification of Independent Auditors: this proposal requires the affirmative vote of the holders of at least a majority of the votes cast. Any AT&T shares not voted (whether by abstention or otherwise) will have no impact on the vote.
	AT&T shareholder proposals: approval of each of the six AT&T shareholder proposals requires the affirmative vote of the holders of at least a majority of the votes cast. Any AT&T shares not voted (whether by abstention or otherwise) will have no impact on the vote.

Q9:	What are the recommendations of the AT&T board of directors?

A9:	The AT&T board of directors recommends a vote FOR:

	•	adoption of the merger agreement;
	•	the election of the nine nominees for director; and
	•	the ratification of the appointment of the independent auditors.

	The AT&T board of directors recommends a vote AGAINST each of the six AT&T shareholder proposals.

Q10:	What if I return my proxy but do not mark it to show how I am voting?

A10:	If your proxy card is signed and returned without specifying your choices, your shares will be voted according to the recommendations of the AT&T board of directors.

v

---

Table of Contents

Q11:	Can I change my vote after I have submitted a proxy by telephone or Internet or mailed my signed proxy card?

A11:	Yes. You can change your vote by revoking your proxy at any time before it is exercised at the AT&T annual meeting. You can revoke your proxy in one of four ways:

	•	notify AT&T’s Corporate Secretary in writing before the annual meeting that you are revoking your proxy;
	•	submit another proxy with a later date;
	•	vote again by telephone or the Internet; or
	•	vote in person at the annual meeting.

A12:	When you return a signed and dated proxy card or provide your voting instructions by telephone or the Internet, you give the AT&T proxy committee (the members of which are listed on your proxy card) the discretionary authority to vote on your behalf on any other matter that is properly brought before the annual meeting.

A13:	You must come to [l], [l], at [l], local time, on [l], 2005. For further information please see “Information about the AT&T Meeting — What do I need to do if I wish to attend the AT&T annual meeting in person?” on page 83.

Q14:	Who can help answer my additional questions about the merger or the AT&T annual meeting?

A14:	If you have questions about the merger or the annual meeting, you should contact:

	Morrow & Co., Inc. 445 Park Avenue, 5th Floor New York, New York 10022 (212) 754-8000 E-mail: att.info@morrowco.com Telephone: 1-800-206-5881

vi

---

Table of Contents

1

---

Table of Contents

2

---

Table of Contents

3

---

Table of Contents

4

---

Table of Contents

5

---

Table of Contents

6

---

Table of Contents

7

---

Table of Contents

8

---

Table of Contents

9

---

Table of Contents

10

---

Table of Contents

11

---

Table of Contents

12

---

Table of Contents

13

---

Table of Contents

14

---

Table of Contents

15

---

Table of Contents

16

---

Table of Contents

17

---

Table of Contents

	SBC may fail to realize the anticipated cost savings, revenue enhancements and other benefits expected from the merger, which could adversely affect the value of SBC common stock after the merger.

	SBC is expected to incur substantial expenses related to the integration of AT&T.

18

---

Table of Contents

	SBC expects the merger will slow its revenue growth rate in the near term following the merger.

	Uncertainties associated with the merger may cause a loss of employees.

	SBC will continue to face significant competition, which may reduce its market share and lower its profits.

	SBC’s future growth will depend upon its ability to implement its business strategy.

	SBC’s ability to maintain leading technological capabilities is uncertain.

19

---

Table of Contents

	The combined company’s indebtedness following the completion of the merger will be higher than SBC’s existing indebtedness.

	•	reduce funds available to SBC for investment in research and development and capital expenditures; or
	•	create competitive disadvantages for SBC compared to other companies with lower debt levels.

	Changes to domestic and foreign regulations may materially restrict SBC’s ability to obtain requisite regulatory approvals for its operations.

	The regulatory regime under which SBC will operate could change to the detriment of SBC.

20

---

Table of Contents

21

---

Table of Contents

22

---

Table of Contents

23

---

Table of Contents

24

---

Table of Contents

25

---

Table of Contents

26

---

Table of Contents

27

---

Table of Contents

	•	The combined company would enjoy the benefits of AT&T’s world-class assets and industry-leading capabilities, including

	—	a state-of-the-art nationwide and global communications network;
	—	advanced technological capabilities in data and IP-based services;
	—	proven sales and service expertise for complex communications solutions; and
	—	significant product and service development capabilities in AT&T Labs;

	•	The merger would combine SBC’s broad consumer and business customer base with AT&T’s high-end enterprise and government customer base; and
	•	The combined company would have a strong, diversified set of product and service offerings, including multi-feature integrated communications and business and consumer voice-over-internet (VoIP).

	•	network operations and IT, as facilities and operations would be consolidated ($900 million to $1 billion);
	•	sales and support functions of the business services organizations would be combined ($500 million to $600 million);
	•	duplicate corporate functions would be eliminated ($400 million to $500 million); and
	•	revenues would be enhanced, as SBC would migrate existing service offerings to new customer segments ($100 million to $200 million).

28

---

Table of Contents

	•	the exchange ratio of 0.77942 of a share of SBC common stock for each share of AT&T common stock, the fact that the exchange ratio is fixed, and the resulting percentage ownership interests and voting power that current SBC stockholders would have in SBC following the merger;
	•	the other financial terms of the transaction, including the special dividend of $1.30 in cash per share of AT&T common stock to be paid in connection with the merger;
	•	the terms and conditions of the merger agreement, including the conditions to the completion of the merger; the circumstances under which the merger agreement could be terminated and the impact of such a termination; and the potential payment by AT&T of a termination fee of $560 million (plus up to $40 million in expenses);
	•	historical information concerning SBC’s and AT&T’s respective businesses, financial condition, results of operations, earnings, technology positions, managements, competitive positions and prospects on a stand-alone basis and forecasted combined basis, which indicated that combining SBC and AT&T would be beneficial to stockholders of the combined company because the combined company would be better positioned to be successful over the long term than either company would be on a stand-alone basis;
	•	current financial market conditions, including relative valuations of telecommunications companies and credit market considerations, which were generally perceived as favorable in the context of making a sizable acquisition;
	•	the impact of the merger on the customers of SBC, which was anticipated to be positive because of the broader service offerings that are expected to be available from the combined company;
	•	the impact of the merger on the employees of SBC, which was generally anticipated to be positive because of the broader opportunities that would be available to the employees in the combined company;
	•	the regulatory consents required to consummate the merger and the belief of SBC’s management that the merger would be approved by the requisite authorities, without the imposition of conditions sufficiently material to preclude the merger, and would otherwise be consummated in accordance with the terms of the merger agreement; and
	•	the expectation that the merger could be completed within a reasonable time frame.

	•	the risk that, because the exchange ratio under the merger agreement would not be adjusted for changes in the market price of SBC common stock or AT&T common stock, the per share value of the consideration to be paid to AT&T stockholders on consummation of the merger could be significantly more than the per share value of the consideration immediately prior to the announcement of the proposed merger;
	•	the risk that the merger might not receive all necessary regulatory approvals, or that any governmental authorities could attempt to condition their approval of the merger or of the transfer of licenses or other entitlements on the companies’ compliance with certain conditions, including the divestiture of assets;
	•	the difficulties and management challenges inherent in completing the merger and integrating the businesses, operations and workforce of AT&T with those of SBC;
	•	the possibility of encountering difficulties in achieving expected cost savings and revenue synergies in the amounts currently estimated or in the time frames currently contemplated by SBC’s management;
	•	the risk that AT&T’s financial performance may not meet SBC’s expectations;

29

---

Table of Contents

	•	the risk that the merger might not be consummated and the possible adverse implications for customers, investor relations and employee morale under such circumstances; and
	•	the possibility that the effort required to plan for the integration of AT&T into SBC and to complete the regulatory approval process might adversely affect the ability of SBC to meet its existing business performance targets.

	•	declared that the merger and the other transactions contemplated by the merger agreement, including the special dividend, are advisable;
	•	adopted the merger agreement; and
	•	recommended that the holders of AT&T common stock adopt the merger agreement.

	•	its understanding of AT&T’s business, operations, financial condition, earnings and prospects on a stand-alone basis, in light of relevant factors, including the recent redefinition of AT&T’s business model to move away from actively competing for traditional consumer services to focus on enterprise customers;
	•	its understanding of SBC’s business, operations, financial condition, earnings and prospects on a stand-alone basis and forecasted combined basis;
	•	its understanding of the current and prospective business environment in which AT&T and SBC operate, including international, national and local economic conditions, the competitive and regulatory environment for telecommunications service providers generally, the technological trends in the telecommunications industry, and the likely effect of these factors on the combined company or, in the alternative, on AT&T on a stand-alone basis;

30

---

Table of Contents

	•	the anticipated strategic fit between SBC and AT&T, which the AT&T board of directors believed will provide the combined company with significantly greater capabilities than either company has, or could develop, on its own, including:

	—	the complementary nature of the combined company’s networks, bringing together AT&T’s global and national internet protocol (IP)-based networks with SBC’s strong local access, broadband access and wireless networks;
	—	the complementary nature of AT&T’s established, large business customers and SBC’s consumer and small business customers;
	—	the combined company’s highly diversified revenue sources, including local, long distance, wireless, data and directories; and
	—	the opportunity to combine AT&T’s technological innovation resources, including AT&T Laboratories, with the financial resources of SBC, including its investment grade credit rating, which could allow the combined company to deliver the next generation of advanced, integrated IP-based wireline and wireless communications services more quickly to customers;

	•	the significant synergies that the AT&T board of directors believed could result from the transaction, including:

	—	anticipated cost reductions in the following areas: network operations and information technology, business service organizations and the elimination of duplicate corporate functions; and
	—	potential annual revenue synergies, as the combined company rolls out expanded product offerings to new customer segments;

	•	the financial terms of the transaction, including the relative historical trading prices of AT&T common stock and SBC common stock, the fixed exchange ratio of 0.77942 of a share of SBC common stock for each share of AT&T common stock and the special dividend of $1.30 in cash per share of AT&T common stock to be paid in connection with the merger, in particular, the AT&T board of directors noted that the exchange ratio and special dividend offered a premium to AT&T shareholders based on the trading prices of the companies’ common stock prior to market rumors with respect to the merger discussions, and that the stock consideration offered AT&T shareholders the ability to become stockholders of SBC and participate in the benefit of the significant synergies that the AT&T board of directors believed could result from the transaction;
	•	the fact that, based on the closing price of SBC common stock on January 28, 2005, the last trading day before the meeting of the AT&T board of directors, the per share merger consideration, together with the special dividend of $1.30 in cash per share to be received in the merger by holders of AT&T common stock was valued at $19.71, the equivalent of the closing price of AT&T common stock on that same date and representing a premium of 6.8% over the closing price of AT&T common stock on January 26, 2005 (the last trading day before rumors of the proposed transaction began to affect the price and trading volumes of AT&T common stock) and premiums of 5.4%, 5.2%, 6.1%, 17.7% and 14.6%, respectively, over the average closing share price during the 10-day, 1-month, 3-month, 6-month and 1-year periods ended January 28, 2005, respectively;
	•	the fact that, based on the closing price of SBC common stock on January 28, 2005, the fixed exchange ratio of 0.77942 of a share of SBC common stock for each share of AT&T common stock, together with the special dividend of $1.30 in cash per share to be received in the merger by holders of AT&T common stock, represented a total effective exchange ratio of 0.834, representing a premium of 11.2% over the closing price of AT&T common stock on January 26, 2005 and premiums of 8.9%, 10.6%, 14.3%, 28.0% and 21.7%, respectively, over the average closing share price during the 10-day, 1-month, 3-month, 6-month and 1-year periods ended January 28, 2005, respectively;
	•	the financial analyses of CSFB and Morgan Stanley, AT&T’s financial advisors, and the oral and written opinions dated January 30, 2005 of CSFB that, as of such date and subject to the matters

31

---

Table of Contents

		described in its opinion, the exchange ratio was fair, from a financial point of view, to holders of AT&T common stock and the oral and written opinions dated January 30, 2005 of Morgan Stanley that, as of such date and subject to the matters and assumptions stated therein, the consideration to be received by holders of AT&T common stock in accordance with the merger agreement was fair from a financial point of view to such holders other than SBC and its affiliates (each opinion is discussed further below under “— Opinions of AT&T’s Financial Advisors”);
	•	the expectation that the merger would be accretive to the pro forma earnings per share of SBC by 2008, as discussed below under “— Opinions of AT&T’s Financial Advisors — Other Considerations”;
	•	the expectation that, based on the current annual dividends paid by AT&T and SBC, the pro forma dividend per share would represent a 5.8% premium over the current AT&T dividend per share paid to holders of AT&T common stock;
	•	the terms and conditions of the merger agreement, including the nature of the parties’ representations, warranties, covenants and agreements; in particular, the AT&T board believed, after reviewing the merger agreement with its legal advisors, that the merger agreement offered AT&T reasonable assurances as to the likelihood of consummation of the transaction, did not contain unusual conditions or other provisions, and did not impose unreasonable burdens on AT&T;
	•	the proposed board and management arrangements of the combined company, under which the current Chairman and Chief Executive Officer of AT&T will become President of the combined company and be elected to the SBC board of directors and two other AT&T directors will join an enlarged SBC board of directors, which the AT&T board of directors believed would help position the combined company with strong and experienced leadership;
	•	the retention bonus arrangements for management to be implemented in connection with the merger, which the AT&T board of directors believed would help assure the continuity of management, the likelihood of a successful integration and the successful operation of the combined company;
	•	information available to the AT&T board of directors concerning other strategic alternatives as described above under “— Background of the Merger”;
	•	the expectation that the merger would qualify as a reorganization for U.S. federal income tax purposes and that, as a result, the exchange of their AT&T common stock for SBC common stock in the merger would be tax-free to holders of AT&T common stock;
	•	the required regulatory consents and the belief that the merger would be approved by the requisite authorities, without the imposition of conditions sufficiently material to preclude the merger, and would otherwise be completed in accordance with the terms of the merger agreement; and
	•	the expectation that the merger could be completed by the first half of 2006.

	•	the difficulties and management challenges inherent in completing a merger and integrating the businesses, operations and workforce of AT&T with those of SBC;
	•	the risk that the potential benefits of the merger, including the expected synergies, might not be fully achieved;
	•	the risk that the merger might not be consummated and the possible adverse implications to customers, investor relations and employee morale under such circumstances;
	•	the risk that, although AT&T has the right under limited conditions to consider and participate in discussions and negotiations with respect to alternative acquisition proposals, the provisions of the merger agreement relating to the potential payment of a termination fee of $560 million (plus up to $40 million in expenses) to SBC may have the effect of discouraging such proposals. See “Risk

32

---

Table of Contents

		Factors — Risks Relating to the Merger — The merger agreement restricts AT&T’s ability to pursue alternatives to the merger”.

33

---

Table of Contents

			2005
Revenue			$	25.7
EBITDA				5.2
	% Margin			20.4	%
EBIT				2.7
Net Income				1.3
Earnings Per Share				1.58
Capital Expenditures				1.4
EBITDA less capital expenditures				3.8

EBITDA Margin				20.4	%
EBITDA				5.2
	Depreciation and amortization			(2.5	)
	Subtotal Operating Income (EBIT)			2.7
	Other net expenses*			(1.4	)
Net income				1.3
Margin				4.9	%

*	Other net expenses include interest expense, other income (expense), and provision for income taxes.

EBITDA less capital expenditures			$	3.8
	Add capital expenditures			1.4
EBITDA				5.2
	Other cash expenses**			(1.2	)
	Changes in working capital and other operating assets & liabilities			(0.7	)
Cash provided by operating activities			$	3.3

**	Other cash expenses primarily include taxes and interest expense.

34

---

Table of Contents

	Credit Suisse First Boston LLC Fairness Opinion

35

---

Table of Contents

	•	reviewed the merger agreement and certain publicly available business and financial information relating to AT&T and SBC;
	•	reviewed certain other information relating to AT&T and SBC, including financial forecasts for 2005 prepared and provided to CSFB by AT&T, financial forecasts for 2005 through 2007 prepared and provided to CSFB by SBC and certain publicly available research analyst estimates concerning AT&T and SBC;
	•	met with the managements of AT&T and SBC to discuss the business and prospects of AT&T and SBC, respectively;
	•	considered certain financial and stock market data of AT&T and SBC, and it compared that data with similar data for other publicly held companies in businesses it deemed similar to those of AT&T and SBC;
	•	considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which had been recently effected or announced; and
	•	considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which it deemed relevant.

36

---

Table of Contents

	Morgan Stanley & Co. Incorporated Fairness Opinion

37

---

Table of Contents

	•	reviewed certain publicly available financial statements and other information of AT&T and of SBC;
	•	reviewed certain internal financial statements and other financial and operating data concerning AT&T prepared by the management of AT&T;
	•	discussed the past and current operations and financial condition and the prospects of AT&T with senior executives of AT&T;
	•	reviewed certain financial projections for 2005 prepared by the management of AT&T and reviewed certain public research reports concerning AT&T prepared by certain equity research analysts and discussed with senior executives of AT&T such financial projections and research reports (including the financial projections contained therein) and certain estimates, prepared by the management of AT&T, as to the cost savings and other potential synergies (including the amount, timing and achievability thereof) anticipated to result from the merger;
	•	reviewed certain internal financial statements and other financial and operating data concerning SBC prepared by the management of SBC;
	•	discussed the past and current operations and financial condition and the prospects of SBC with senior executives of SBC;
	•	reviewed certain financial projections for 2005 through 2007 prepared by the management of SBC and reviewed certain public research reports concerning SBC prepared by certain equity research analysts;
	•	reviewed the reported prices and trading activity for AT&T common stock and SBC common stock;
	•	compared the financial performance of AT&T and of SBC and the prices and trading activity of AT&T common stock and SBC common stock with that of certain other comparable publicly-traded companies and their securities;
	•	reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
	•	discussed with the managements of AT&T and of SBC information regarding certain strategic, financial and operational benefits anticipated to result from the merger;
	•	reviewed the merger agreement and certain related documents; and
	•	performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

38

---

Table of Contents

	Financial Analyses

39

---

Table of Contents

	Discounted Cash Flow Analysis

40

---

Table of Contents

	Contribution Analysis

41

---

Table of Contents

	Selected Company Analysis

	•	the potential pro forma effect of the merger on the pro forma combined company’s estimated earnings per share in calendar years 2006, 2007 and 2008 both before and after giving effect to potential cost savings and other synergies anticipated to result from the merger developed jointly by SBC and AT&T and compared that data to the estimated earnings per share of AT&T and SBC on a standalone basis. Such analysis indicated that, after giving effect to potential cost savings and other synergies, the merger would be accretive to the pro forma earnings of SBC by 2008;
	•	the implied exchange ratios indicated by the historical trading prices of AT&T common stock and SBC common stock (based upon the daily closing share prices of AT&T common stock to corresponding prices for SBC common stock on January 26, 2005, which was the last trading day before reports of the proposed SBC/ AT&T merger appeared in the popular press, and the 10-day, one-month, three-month, six-month and one-year periods ending January 28, 2005) as compared to the implied effective exchange ratio of 0.834x (based on the closing share prices on January 28, 2005) and the implied premium over such implied exchange ratios:

42

---

Table of Contents

		Historical
		Exchange				Implied
		Ratio				Premium
January 26, 2005			0.751x				11.2	%
10-day average			0.767x				8.9	%
One-month average			0.754x				10.6	%
Three-month average			0.730x				14.3	%
Six-month average			0.652x				28.0	%
One-year average			0.686x				21.7	%

	•	high, low and median premiums paid in the following transactions with aggregate values greater than $10 billion since January 1, 1999, in which 50% or less of the consideration was in cash and which resulted in holders of the acquired company’s common stock owning 25% or less of the pro forma combined company’s common stock for the ten-day and six-month periods prior to announcement of the transaction:

Date
Announced		Target		Acquiror
12/04		Guidant Corp		Johnson & Johnson
6/04		SouthTrust		Wachovia
7/02		Pharmacia		Pfizer
12/01		Immunex Corp		Amgen Inc
4/01		American General		AIG
3/01		ALZA		Johnson & Johnson
12/00		Quaker Oats Co		PepsiCo Inc
9/00		Associates First Capital		Citigroup
7/00		SDL		JDS Uniphase
1/00		E-Tek Dynamics		JDS Uniphase
9/99		General Instrument		Motorola
1/99		Ascend Communications		Lucent Technologies

Such analysis indicated implied exchange ratios ranging from 0.820x, based on the lowest value obtained in the premium analysis, to 1.234x, based on the highest value obtained in the premium analysis, for the 10-day average and 0.756x, based on the lowest value obtained in the premium analysis, to 1.609x, based on the highest value obtained in the premium analysis, for the six-month average, as compared to the implied effective exchange ratio of 0.834x as of January 28, 2005.

	•	selected recent publicly available research analyst price targets from selected firms who published price targets for both AT&T and SBC as of January 28, 2005. In performing this analysis, CSFB and Morgan Stanley utilized research analyst price targets from the following firms:

	—	Lehman Brothers Inc.;
	—	Prudential Financial Inc.;
	—	Deutsche Bank Securities Inc.;
	—	RBC Dain Rauscher Inc.;
	—	CSFB; and
	—	Morgan Stanley.

43

---

Table of Contents

	For each firm, CSFB and Morgan Stanley calculated exchange ratios based on the price targets for AT&T and SBC, respectively. This analysis yielded the following exchange ratios:

Low

Median

Mean

High

Implied Effective Exchange Ratio

0.510x

0.551x

0.603x

0.821x

44

---

Table of Contents

	•	A severance payment made partially in cash and partially in the form of a “special change in control” credit to his or her cash balance pension account as set forth in the Management Pension Plan and the Excess Benefit and Compensation Plan (as described below). The cash portion of the severance payment is equal to the difference between (1) three times the sum of (A) the participant’s annual base salary and (B) the participant’s target bonus as of the year in which the change in control occurs (or if no target bonus has been set forth such year, the year immediately preceding the year in which the change in control occurs) and (2) an amount equal to 90% of the participant’s “special change in control” credit;
	•	a pro rata bonus through the date of termination for the year in which the participant’s termination of employment occurs;
	•	certain life insurance and death benefits and medical and dental coverage following the date of termination;
	•	payment of any unvested cash awards/payments;
	•	a cash payment sufficient to provide financial counseling for two years following the date of termination; and
	•	outplacement services (provided such services begin within one year of termination).

45

---

Table of Contents

	•	A pro rata target bonus for the year in which the termination occurs;
	•	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 described below) 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 under his supplemental retirement arrangement equal to 60 percent of his final three-year average total cash compensation with a 50% joint and survivor annuity to Mr. Dorman and his spouse; and
	•	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 as of immediately before completion of the merger, and Mr. Dorman will be covered under SBC’s Executive Health Plan or successor plan.

46

---

Table of Contents

47

---

Table of Contents

48

---

Table of Contents

	•	a citizen or resident of the United States;
	•	a corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized under the laws of the United States or any of its political subdivisions;
	•	a trust if it

	—	is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust, or
	—	has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or

	•	an estate that is subject to United States federal income tax on its income regardless of its source.

	The Special Dividend

	The Merger

49

---

Table of Contents

	•	a holder will not recognize any gain or loss upon receipt of SBC common stock solely in exchange for AT&T common stock, except with respect to cash received in lieu of a fractional share of SBC common stock (as discussed below);
	•	the aggregate tax basis of the shares of SBC common stock received in the merger (including any fractional shares deemed received and redeemed as described below) will be equal to the aggregate tax basis in the shares of AT&T common stock surrendered; and
	•	the holding period of the SBC common stock received in the merger (including any fractional shares deemed received and redeemed as described below) will include the holding period of the shares of AT&T common stock surrendered.

	•	if the holder’s adjusted tax basis in the AT&T common stock surrendered is less than the sum of the fair market value, as of the closing date of the merger, of the SBC common stock and the amount of cash received by the holder, then the holder will recognize gain in an amount equal to the lesser of (1) the sum of the amount of cash and the fair market value, as of the closing date of the merger, of the SBC common stock received, minus the adjusted tax basis of the AT&T common stock surrendered in exchange therefor, and (2) the amount of cash received by the holder in the exchange. However, if a holder’s adjusted tax basis in the AT&T common stock surrendered in the transaction is greater than the sum of the amount of cash and the fair market value of the SBC common stock received, the holder’s loss will not be currently allowed or recognized for United States federal income tax purposes. Holders should consult their tax advisors regarding the manner in which cash and SBC common stock should be allocated among different blocks of AT&T common stock. Any recognized gain generally will be long-term capital gain if the holder’s holding period with respect to the AT&T common stock surrendered is more than one year at the effective time of the merger. In some cases, if the holder actually or constructively owns SBC common stock other than SBC common stock received as a result of the merger, the recognized gain could be treated as having the effect of the distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. In such cases, holders that are corporations should consult their tax advisors regarding the potential applicability of the “extraordinary dividend” provisions of the Code.
	•	The aggregate tax basis of SBC common stock received (including any fractional shares deemed received and redeemed as described below) by a holder that exchanges its shares of AT&T common stock for a combination of SBC common stock and cash pursuant to the merger will be equal to the

50

---

Table of Contents

		aggregate adjusted tax basis of the shares of AT&T common stock surrendered for SBC common stock and cash, reduced by the amount of cash received by the holder pursuant to the merger (excluding any cash received instead of a fractional share of SBC common stock) and increased by the amount of gain (including any portion of the gain that is treated as a dividend as described above but excluding any gain or loss resulting from the deemed receipt and redemption of fractional shares described below), if any, recognized by the holder on the exchange.
	•	The holding period of the SBC common stock received (including fractional shares deemed received and redeemed as described below) will include the holding period of the AT&T common stock surrendered.

	•	provides a correct taxpayer identification number and any other required information to the exchange agent; or
	•	is a corporation or comes within certain exempt categories and otherwise complies with applicable requirements of the backup withholding rules.

51

---

Table of Contents

	HSR Act and Antitrust

	FCC Approval

	State Regulatory Approvals

52

---

Table of Contents

	Municipal Franchises

	Foreign and Certain Other Regulatory Matters

53

---

Table of Contents

54

---

Table of Contents

55

---

Table of Contents

	•	whole shares of SBC common stock that such holder is entitled to receive pursuant to the merger, as described in “— Conversion of AT&T Common Stock” above; and
	•	a check in the amount, after giving effect to any required tax withholdings, of any cash payable in lieu of fractional shares plus any unpaid non-stock dividends and any other dividends or other distributions that such holder has the right to receive as described in the next paragraph.

56

---

Table of Contents

	•	organization, good standing and qualification;
	•	capital structure;
	•	corporate authority, approval and fairness matters;
	•	governmental filings, absence of violations and certain contracts;
	•	AT&T’s SEC filings and financial statements;
	•	absence of certain changes;
	•	litigation and liabilities;
	•	employee benefit plans;
	•	compliance with laws and licenses;
	•	material contracts;
	•	real property;
	•	right-of-way agreements;
	•	takeover statutes;
	•	environmental matters;
	•	taxes;
	•	labor matters;
	•	intellectual property and IT assets;
	•	General Services Administration action;
	•	export controls and trade sanctions;
	•	foreign corrupt practices act; and
	•	brokers and finders.

	•	organization, good standing and qualification;
	•	capital structure of SBC
	•	capital structure of Merger Sub;
	•	corporate authority, approval and fairness matters;
	•	governmental filings, absence of violations;
	•	SBC reports and financial statements;
	•	litigation and liabilities;

57

---

Table of Contents

	•	compliance with laws; and
	•	absence of changes.

	•	a material adverse effect on the financial condition, assets, liabilities, business or results of operations of AT&T or SBC, as applicable, and its subsidiaries taken as a whole, excluding any such effects resulting from:

	—	changes in political or regulatory conditions generally;
	—	changes or conditions generally affecting the U.S. economy or financial markets or generally affecting any of the segments of the telecommunications industry in which AT&T or SBC, as applicable, or any of its subsidiaries operates; or
	—	the announcement or consummation of the merger agreement; or

	•	an effect that would prevent, materially delay or materially impair the ability of AT&T or SBC, as applicable, to consummate the merger and the other transactions contemplated by the merger agreement.

	•	adopt or propose any change in its certificate of incorporation or by-laws or amend any term of the AT&T shares;
	•	merge or consolidate AT&T or any of its subsidiaries with any other person, except for any such transactions among wholly owned subsidiaries of AT&T that are not obligors or guarantors of third-party indebtedness, or adopt a plan of liquidation;
	•	acquire assets outside of the ordinary course of business from any other person with a value or purchase price in excess of $100,000,000 in the aggregate, subject to certain exceptions;
	•	enter into any material line of business in any geographic area other than the current lines of business of AT&T or any of its subsidiaries, and in the geographic areas where they were conducted as of the date of the merger agreement, or engage in the conduct of any business in any state or foreign country

58

---

Table of Contents

		that would require the receipt or transfer of a license from a governmental entity, subject to certain exceptions;
	•	file for any license from a governmental entity outside of the ordinary course of business, subject to certain exceptions;
	•	issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of AT&T or any of its subsidiaries, any securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights to acquire any shares of such capital stock or such convertible or exchangeable securities, other than the issuance of shares pursuant to AT&T’s stock plans or pursuant to AT&T’s dividend reinvestment program;
	•	create or incur any lien material to AT&T or any of its subsidiaries on any assets of AT&T or any of its subsidiaries having a value in excess of $50,000,000, other than in connection with existing receivables facilities and securitizations and renewals thereof in the ordinary course of business, or in connection with the refinancing of AT&T’s indebtedness under its existing credit facility;
	•	make any loans, advances or capital contributions to or investments in any person in excess of $25,000,000 in the aggregate;
	•	declare, set aside or pay any dividend or distribution on any shares of AT&T common stock other than the special dividend or AT&T’s regular quarterly dividend of $.2375 per share in cash per quarter at record and payment dates consistent with past practices, or any shares of capital stock of any subsidiaries, provided that AT&T will designate the record dates for its quarterly dividends to coincide with the record dates for SBC’s quarterly dividends, beginning with the record date on July 10, 2005;
	•	reclassify, split, combine, subdivide or repurchase, redeem or otherwise acquire any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock;
	•	incur or guarantee any indebtedness for borrowed money or guarantee such indebtedness of another person, or issue or sell any debt securities or warrants or other rights to acquire any debt security of AT&T or any of its subsidiaries, except for:

	—	indebtedness incurred in the ordinary course of business not to exceed $100,000,000 in the aggregate,
	—	indebtedness in replacement of existing indebtedness on customary commercial terms,
	—	guarantees by AT&T of indebtedness of its wholly owned subsidiaries or guarantees by subsidiaries of indebtedness of AT&T, or
	—	interest rate swaps on customary commercial terms consistent with past practice and not to exceed $100,000,000 of notional debt in the aggregate in addition to notional debt currently under swap or similar arrangements;

	•	make or authorize any capital expenditure, subject to certain exceptions;
	•	other than in the ordinary course of business, enter into any contract that would have been a “material contract” for purposes of the merger agreement had it been entered into prior to the date of the merger agreement;
	•	make any changes with respect to accounting policies or procedures, except as required by changes in generally accepted accounting principles or by applicable law or as AT&T, based upon the advice of its independent auditors after consultation with SBC, determines in good faith is advisable to conform to best accounting practices;

59

---

Table of Contents

	•	settle any litigation or other proceedings before a governmental entity for an amount to be paid by AT&T or any of its subsidiaries greater than $50,000,000 or which would be reasonably likely to have any adverse impact on its or its subsidiaries’ operations, subject to certain tax-related exceptions;
	•	amend or modify in any material respect, or terminate or waive any material right or benefit under, any material contract or cancel, modify or waive any debts or claims or waive any rights having in each case a value in excess of $25,000,000, other than in the ordinary course of business;
	•	make any material tax election or take any material position on any material tax return filed on or after the date of the merger agreement or adopt any method that is inconsistent with elections made, positions taken or methods used in preparing or filing similar tax returns in prior periods, except as required by law or by any currently effective tax sharing agreement;
	•	sell, lease, license or otherwise dispose of any assets of AT&T or its subsidiaries except in the ordinary course of business or obsolete assets or sales, leases, licenses or other dispositions of assets with a fair market value of not more than $50,000,000 in respect of any one asset and not more than $100,000,000 in the aggregate, subject to certain exceptions;
	•	except as required by agreements in effect prior to the date of the merger agreement or as otherwise required by applicable law:

	—	enter into any commitment to provide any severance or termination benefits to, or amend any existing arrangement with, any director, officer or employee of AT&T or any of its subsidiaries, other than for severance or termination benefits to employees (other than certain executive officers) in the ordinary course of business consistent with past practice and pursuant to the terms of certain plans, programs or arrangements in effect prior to the date of the merger agreement or except in connection with newly hired or newly promoted employees, in each case to the extent consistent with past practice;
	—	increase the benefits payable under any existing severance or termination benefit policy or employment agreement, other than as required to be increased pursuant to the existing terms of any such policy or agreement or as a result of ordinary pay raises or promotions;
	—	enter into any employment severance, change in control, termination, deferred compensation or other similar agreement, or amend any such existing agreement, with any director, officer or employee of AT&T or any of its subsidiaries other than pursuant to the terms of any compensation or benefit plan in effect on the date of the merger agreement;
	—	establish, adopt, amend or terminate any compensation and benefit plan, except for technical amendments in the ordinary course of business consistent with past practice that do not materially increase the cost of such arrangements to AT&T;
	—	increase the compensation, bonus or other benefits of, make any new awards under any compensation and benefit plan to, or pay any bonus to any director, officer, employee, consultant or independent contractor of AT&T or any of its subsidiaries, except for increases, new awards or payments in the ordinary course of business consistent with past practice for employees other than certain executive officers or except in connection with newly hired or newly promoted employees, in each case to the extent consistent with past practice;
	—	take any action to fund, secure the payment of or accelerate the vesting or payment of compensation or benefits under any compensation and benefit plan, except as required pursuant to its terms;
	—	materially change any actuarial or other assumptions used to calculate funding obligations with respect to any compensation and benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by generally accepted accounting principles or in the ordinary course of business consistent with past practice;

60

---

Table of Contents

	—	amend the terms of any outstanding equity-based award;
	—	provide for accelerated vesting, removal of restrictions or exercisability of any stock based or stock related awards upon a change in control occurring on or prior to the effective time of the merger for any grants made after the date of the merger agreement;
	—	exercise any discretion to cash out awards pursuant to AT&T’s 1997 Long Term Incentive Program; or
	—	enter into any new collective bargaining agreements or amendments to existing collective bargaining agreements except in connection with newly hired or newly promoted employees, in each case to the extent consistent with past practice;

	•	fail to initiate appropriate steps to renew any material governmental licenses held by AT&T or any of its subsidiaries that are scheduled to terminate prior to or within 60 days after the effective time of the merger or to prosecute any pending applications for any material governmental license; or
	•	agree or commit to do any of the foregoing.

	•	adopt or propose any material change in SBC’s certificate of incorporation or by-laws or amend any term of the shares of SBC common stock;
	•	merge or consolidate SBC or Merger Sub with any other person or adopt a plan of liquidation;
	•	enter into or acquire any new line of business that is material to SBC and its subsidiaries taken as a whole and is not strategically related to the current business or operations of SBC and its subsidiaries;
	•	issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of SBC or any of its subsidiaries, or securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights to acquire any shares of such capital stock or such convertible or exchangeable securities, except for shares of SBC common stock issued for fair value in arm’s-length transactions or in the ordinary course of business consistent with past practices pursuant to SBC’s employee benefit plans;
	•	declare, set aside or pay any dividend or distribution on any shares of SBC common stock or capital stock of any of its subsidiaries other than by wholly owned subsidiaries and pro rata dividends or distributions payable to holders of interests in non wholly owned subsidiaries and other than SBC’s regular quarterly dividend, including any increases thereof, at record and payment dates consistent with past practice;

61

---

Table of Contents

	•	reclassify, split, combine or subdivide, or repurchase, redeem or otherwise acquire at prices above fair market value any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock; or
	•	agree or commit to do any of the foregoing.

	•	initiate, solicit or knowingly encourage or facilitate any inquiries or the making of any proposal or offer, which we refer to as an acquisition proposal, with respect to:

	—	a merger, reorganization, share exchange, consolidation or similar transaction involving AT&T;
	—	any purchase of an equity interest or interests representing, in the aggregate, an amount equal to or greater than a 15% voting or economic interest in AT&T; or
	—	any purchase of assets, securities or ownership interests representing an amount equal to or greater than 15% of the consolidated assets of AT&T and its subsidiaries, taken as a whole.

	•	have any discussions with, or provide any confidential information or data to, or engage in any negotiations with, any person relating to an acquisition proposal, or otherwise knowingly encourage or facilitate any effort or attempt by any person other than SBC and Merger Sub to make or implement an acquisition proposal.

	•	providing information in response to a request therefor by a person who has made an unsolicited bona fide written acquisition proposal if the AT&T board of directors receives from the person so requesting such information an executed confidentiality agreement (excluding standstill provisions) on customary terms;
	•	engaging in any discussions or negotiations with any person who has made an unsolicited bona fide written acquisition proposal if the AT&T board of directors receives from such person an executed confidentiality agreement (excluding standstill provisions) on customary terms; or
	•	recommending or agreeing to recommend such an unsolicited bona fide written acquisition proposal to the AT&T shareholders;

62

---

Table of Contents

	•	in each such case referred to in the three bullet points of the previous paragraph, the AT&T board of directors determines in good faith after consultation with outside legal counsel that such action is necessary in order for its directors to comply with their fiduciary duties under applicable law;
	•	in the case referred to in the last two bullet points of the previous paragraph, the AT&T board of directors determines in good faith, after consultation with its financial advisor and outside counsel, taking into account all legal, financial and regulatory aspects of the proposal, the likelihood of obtaining financing, and the person making the proposal, that such acquisition proposal (which must involve at least 50% of the assets or equity securities of AT&T), if consummated, is more favorable, from a financial point of view, taking into account the likelihood of consummation, to AT&T’s shareholders than the transactions contemplated by the merger agreement, in each case taking into account any revisions to the terms of the transactions contemplated by the merger agreement (any such more favorable acquisition proposal is referred to in this document as a superior proposal); and
	•	in the case referred to in the last bullet point of the previous paragraph, SBC must have had written notice of AT&T’s intention to take the action referred to that bullet point at least five business days prior to the taking of such action by AT&T and AT&T has complied with the following paragraph.

63

---

Table of Contents

	•	both the positive and negative effects of any required divestiture or other required action, restriction or agreement referred to in the preceding paragraph will be taken into account (subject to the following two bullet points);
	•	any required divestiture of any of the consumer business operations of AT&T or its subsidiaries, or of any fiber optic facilities used by AT&T or its subsidiaries to provide exchange access or local exchange services that compete with SBC’s fiber optic facilities in SBC’s region (up to an aggregate net negative effect of $100 million from the divestiture of these fiber optic facilities), will be deemed to have a net effect of zero, and
	•	the loss of any synergies anticipated by SBC from the merger with respect to any divestiture required by the FCC or DOJ in order to consummate the transactions contemplated by the merger agreement will not be taken into account.

64

---

Table of Contents

	•	cure any material violations and defaults by any of them under any applicable rules and regulations of the FCC or the Federal Aviation Administration, which is referred to as the FAA in this document, no later than the effective time of the merger;

65

---

Table of Contents

	•	comply in all material respects with the terms of, and make all necessary filings under, AT&T’s FCC licenses and the FAA rules; and
	•	take all actions reasonably requested in writing by SBC for each of them to be in compliance effective upon the closing of the merger with the provisions of Sections 271 and 272 of the Communications Act of 1934, as amended. SBC has agreed to reimburse AT&T for any reasonable out-of-pocket expenses it incurs at SBC’s request to comply with this requirement.

	•	the merger agreement will have been duly adopted by holders of a majority of the outstanding shares of AT&T common stock entitled to vote on the matter in accordance with applicable law and AT&T’s certificate of incorporation and by-laws;
	•	the waiting period applicable to the consummation of the merger under the HSR Act will have expired or been earlier terminated;
	•	if applicable, the European Commission, or a governmental entity of a member state of the European Union, as applicable, will have granted approval of the merger and the other transactions contemplated by the merger agreement;
	•	all approvals and authorizations required to be obtained in respect of AT&T’s communications licenses and from foreign and other governmental entities for the consummation of the merger will have been obtained (subject to certain exceptions);

66

---

Table of Contents

	•	no governmental entity of competent jurisdiction will have enacted, issued, promulgated, enforced or entered any order or law that is in effect and restrains, enjoins or otherwise prohibits consummation of the merger or the other transactions contemplated by the merger agreement, except for orders of governmental entities outside the United States as would not, individually or in the aggregate, reasonably be expected to have a specified material adverse effect (as defined under “Covenants and Agreements — Reasonable Best Efforts” above) and which do not provide a reasonable basis to conclude that the AT&T, SBC or their respective directors or officers would be subject to the risk of criminal liability;
	•	the registration statement of which this document forms a part will have been declared effective by the SEC under the Securities Act and no stop order suspending its effectiveness will have been issued by the SEC and no proceedings for that purpose will have been initiated or threatened by the SEC; and
	•	the shares of SBC common stock to be issued in the merger will have been authorized for listing on the NYSE upon official notice of issuance.

	•	certain specified representations and warranties made by AT&T in the merger agreement will be true and correct in all material respects as of the date of the merger agreement and as of the closing date as though made on and as of the closing date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); any failure of any of the other representations and warranties made by AT&T in the merger agreement, without giving effect to any materiality or material adverse effect qualifications contained therein, individually or in the aggregate, to be true and correct as of the date of the merger agreement and as of the closing date as though made on and as of the closing date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) will not have had, or reasonably be expected to have, a material adverse effect; and SBC will have received a certificate as to the foregoing from the chief executive officer or chief financial officer of AT&T;
	•	AT&T will have performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the closing date, and SBC will have received a certificate to such effect from the chief executive officer or chief financial officer of AT&T;
	•	no governmental entity of competent jurisdiction will have instituted (or if instituted, will not have withdrawn) any proceeding seeking any order that restrains, enjoins or otherwise prohibits the consummation of the merger or the other transactions contemplated by the merger agreement, and no governmental entity will have instituted any civil, criminal or administrative action, suit, claim, hearing, investigation or other proceeding the existence of which would, in the reasonable judgment of SBC, individually or in the aggregate, be reasonably likely to result in the failure of the condition described in the fifth bullet point under “ — Conditions to the Merger — Conditions to Each Party’s Obligation to Effect the Merger” above;
	•	All governmental consents will have been made or obtained (subject to certain exceptions). All governmental consents that have been obtained will have been obtained without the imposition of any term, condition or consequence the acceptance of which would, individually or in the aggregate, reasonably be expected to have or result in a specified material adverse effect (as defined in the merger agreement) and all required governmental consents obtained from the FCC shall have been obtained by a final order;
	•	AT&T will have obtained the consent or approval of each person whose consent or approval will be required under any material contract to which AT&T or any of its subsidiaries is a party in connection with the transactions contemplated by the merger agreement (subject to certain exceptions), except

67

---

Table of Contents

		where the failure to obtain such consent or approval, individually or in the aggregate, would not reasonably be expected to result in a material adverse effect; and
	•	SBC will have received the opinion of Sullivan & Cromwell LLP, counsel to SBC, dated the closing date, to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and that each of SBC, Merger Sub and AT&T will be a party to that reorganization within the meaning of Section 368(b) of the Code.

	•	certain specified representations and warranties made by SBC and Merger Sub in the merger agreement will be true and correct in all material respects as of the date of the merger agreement and as of the closing date as though made on and as of the closing date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); any failure of any of the other representations and warranties made by SBC and Merger Sub in the merger agreement, without giving effect to any materiality or material adverse effect qualifications contained therein, individually or in the aggregate, to be true and correct as of the date of the merger agreement and as of the closing date as though made on and as of the closing date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct as of such earlier date), will not have had, or reasonably be expected to have, an SBC material adverse effect; and AT&T will have received a certificate as to the foregoing from the chief executive officer or chief financial officer of SBC.
	•	Each of SBC and Merger Sub will have performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the closing date, and AT&T will have received a certificate to such effect from the chief executive officer or chief financial officer of SBC on behalf of SBC and Merger Sub; and
	•	AT&T will have received the opinion of Wachtell, Lipton, Rosen & Katz, counsel to AT&T, dated the closing date, to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and that each of SBC, Merger Sub and AT&T will be a party to that reorganization within the meaning of Section 368(b) of the Code.

	•	by mutual written consent of AT&T and SBC;
	•	by either AT&T or SBC if:

	—	the merger is not consummated by January 31, 2006, unless the closing conditions with respect to certain orders of governmental entities and required governmental consents have not been satisfied by January 31, 2006, in which case the termination date may be extended from time to time by SBC or AT&T one or more times to a date not beyond July 31, 2006, provided that if the closing condition with respect to governmental consents has not been satisfied solely by reason of a required governmental consent that has been obtained but is not yet a final order, neither party may terminate the merger agreement prior to the 60th day after receipt of such required governmental consent;
	—	the adoption of the merger agreement by AT&T shareholders was not obtained at the shareholders meeting or at any adjournment or postponement of such meeting; or

68

---

Table of Contents

	—	any order of a governmental entity permanently restraining, enjoining or otherwise prohibiting the consummation of the merger becomes final and non-appealable, except for any orders the existence of which would not result in the failure of the closing condition described in the fifth bullet point under “ — Conditions to the Merger — Conditions to Each Party’s Obligations to Effect the Merger” above.

	•	by AT&T if:

	—	the AT&T board of directors authorizes AT&T, subject to complying with the terms of the merger agreement, to enter into a binding written agreement concerning a transaction that constitutes a superior proposal and AT&T prior to such termination pays to SBC in immediately available funds the termination fee; or
	—	there has been a breach of any representation, warranty, covenant or agreement made by SBC or Merger Sub in the merger agreement, or any such representation or warranty becomes untrue or incorrect after the execution of the merger agreement, such that closing conditions to AT&T’s obligation to effect the merger would not be satisfied and such breach or failure to be true and correct is not curable by the termination date.

	•	by SBC if:

	—	the board of directors of AT&T has withdrawn, modified or qualified, or has agreed to withdraw, modify or qualify, in fact or in substance, its adoption of the merger agreement or its recommendation of the merger in a manner adverse to SBC;
	—	there has been a breach of any representation, warranty, covenant or agreement made by AT&T, or any such representation or warranty has become untrue or incorrect after the execution of the merger agreement, such that closing conditions to SBC’s obligation to effect to merger would not be satisfied and such breach or failure to be true or correct is not curable by the termination date;
	—	by the later of 120 days after the date of the merger agreement or 60 days after effectiveness of the registration statement of which this document forms a part, AT&T’s shareholders meeting has not been held, or the vote of AT&T’s shareholders has not been taken, unless AT&T has used its reasonable best efforts to convene the shareholders meeting and hold such vote by the later of such dates; or
	—	AT&T has knowingly and materially and not inadvertently breached its obligations under the merger agreement relating to acquisition proposals.

	•	a bona fide acquisition proposal, but substituting 40% for the 15% thresholds described under “— Covenants and Agreements — Acquisition Proposals” above, has been made to AT&T or any of its subsidiaries or its shareholders and such proposal becomes publicly known, or any person publicly

69

---

Table of Contents

		announces an intention, whether or not conditional, to make such a proposal with respect to AT&T or any of its subsidiaries, and such proposal or announced intention are not withdrawn at the time of the AT&T shareholders meeting, and:

	—	either SBC or AT&T terminates the merger agreement because the adoption of the merger agreement by AT&T shareholders was not obtained at the shareholders meeting or at any adjournment or postponement of such meeting, or
	—	SBC terminates the merger agreement because by the later of 120 days after the date of the merger agreement or 60 days after effectiveness of the registration statement of which this document forms a part, AT&T’s shareholders meeting has not been held, or the vote of AT&T’s shareholders has not been taken (unless AT&T has used its reasonable best efforts to convene the shareholders meeting and hold the vote by the later of those dates);

	•	SBC terminates the merger agreement because the board of directors of AT&T has withdrawn, modified or qualified, or has agreed to withdraw, modify or qualify, in fact or in substance, its adoption of the merger agreement or its recommendation of the merger in a manner adverse to SBC and, at the time of the withdrawal, modification or qualification of the adoption of the merger agreement or the recommendation of the merger (or the agreement to do so), a bona fide acquisition proposal described in the preceding bullet point (or any bona fide indication of interest that is reasonably capable of becoming such a bona fide acquisition proposal) has been made to AT&T or any of its subsidiaries or its shareholders, directly or indirectly through any representatives of AT&T, or any person has publicly announced an intention (whether or not conditional) to make such a bona fide acquisition proposal with respect to AT&T or any of its subsidiaries;
	•	SBC terminates the merger agreement because AT&T knowingly and materially and not inadvertently breaches its obligations under the merger agreement relating to acquisition proposals; or
	•	AT&T terminates the merger agreement because its board of directors authorizes AT&T to enter into a binding written agreement concerning a transaction that constitutes a superior proposal.

	•	any person other than SBC has acquired, by purchase, sale, assignment, lease, transfer or otherwise, in one transaction or any series of related transactions, within 15 months of such termination, a majority of the voting power of AT&T’s outstanding securities or all or substantially all of the assets of AT&T or has entered into an agreement with AT&T for such an acquisition within 15 months of such termination; or
	•	a merger, consolidation or similar business combination has been consummated between AT&T or one of its subsidiaries and such an acquiring party within such 15 month period.

70

---

Table of Contents

	•	domestic and international long distance and toll-free voice services;
	•	local services, including switched and private line voice, local data and special access services;
	•	domestic and international data and internet protocol (IP) services for a variety of network standards, including frame relay and asynchronous transfer mode (ATM);
	•	managed networking services and outsourcing solutions; and
	•	domestic and international wholesale transport services.

	•	domestic and international long distance;
	•	voice over internet protocol (VoIP);
	•	transaction-based communications services, such as operator-assisted calling services and prepaid phone cards;
	•	local calling; and
	•	internet service through AT&T Worldnet® service and AT&T digital subscriber line (DSL) service.

71

---

Table of Contents

	•	wireline subsidiaries, providing primarily land and wire based services;
	•	wireless subsidiaries, holding its investment in Cingular Wireless, which provides primarily radio-wave based services;
	•	directory subsidiaries, providing services related to directory advertising and publishing;
	•	international subsidiaries, holding investments in primarily foreign entities outside of the U.S.; and
	•	other subsidiaries, providing primarily corporate operations.

72

---

Table of Contents

73

---

Table of Contents

		Historical								Pro Forma
		SBC				AT&T				Adjustments				Combined
Total Operating Revenues		$	40,787			$	30,537			$	(1,839	)(c)		$	69,485
Operating Expenses
Cost of sales (exclusive of depreciation and amortization shown separately below)			17,383				17,528				(1,839	)(c)			32,962
											(110	)(d)
Selling, general and administrative			9,939				6,557				(194	)(d)			16,302
Depreciation and amortization			7,564				3,768				500	(b5)			10,637
											(1,080	)(g)
											(115	)(h)
Asset impairment and net restructuring and other charges			—				12,772				—	(g)			12,772
Total Operating Expenses			34,886				40,625				(2,838	)			72,673
Operating Income (Loss)			5,901				(10,088	)			999				(3,188	)
Interest expense			1,023				803				(152	)(e)			1,674
Other income (expense) — net			2,287				(138	)			—				2,149
Income (Loss) Before Income Taxes			7,165				(11,029	)			1,151				(2,713	)
Provision (benefit) for income taxes			2,186				(4,560	)			438	(i)			(1,936	)
Income (Loss) From Continuing Operations		$	4,979			$	(6,469	)		$	713			$	(777	)
Basic Earnings Per Share:
Income (Loss) From Continuing Operations		$	1.50			$	(8.14	)						$	(0.20	)(f)
Weighted Average Common Shares Outstanding (000,000)			3,310				795								3,932
Diluted Earnings Per Share:
Income (Loss) From Continuing Operations		$	1.50			$	(8.14	)						$	(0.20	)(f)
Weighted Average Common Shares Outstanding with Dilution (000,000)			3,322				795								3,932

74

---

Table of Contents

			Historical								Pro Forma
			SBC				AT&T				Adjustments				Combined
Assets
Current Assets
Cash and cash equivalents			$	760			$	3,698			$	(1,038	) (a)		$	3,420
Accounts receivable — net				5,480				3,195				—				8,675
Other current assets				2,301				2,494				—				4,795
	Total current assets			8,541				9,387				(1,038	)			16,890
Property, Plant and Equipment — Net				50,046				11,509				—				61,555
Goodwill and Other Intangibles — Net				2,054				5,263				17,828	(b5)			19,882
												(5,263	)(b5)
Investment in Equity Affiliates				1,798				—				—				1,798
Investment in and Advances to Cingular Wireless				33,687				—				—				33,687
Other Assets				12,718				6,645				(851	)(b2)			18,512
	Total Assets		$	108,844			$	32,804			$	10,676			$	152,324
Liabilities and Stockholders’ Equity
Current Liabilities
Debt maturing within one year			$	5,734			$	1,886				—			$	7,620
Other current liabilities				13,200				7,202				—				20,402
	Total current liabilities			18,934				9,088				—				28,022
Long-Term Debt				21,231				8,779				958	(b3)			30,968
Other noncurrent liabilities				28,175				7,918				1,880	(b2)			37,973
	Total noncurrent liabilities			49,406				16,697				2,838				68,941
Stockholders’ Equity
Common shares issued				3,433				799				(799	)(b4)			4,055
												622	(b1)
Capital in excess of par value				12,804				27,170				(26,132	)(b4)			27,039
												(1,038	) (a)
												14,235	(b1)
Retained earnings (deficit)				29,352				(21,180	)			21,180	(b4)			29,352
Treasury shares (at cost)				(4,535	)			—				—				(4,535	)
Accumulated other comprehensive income				(550	)			230				(230	)(b4)			(550	)
Total stockholders’ equity				40,504				7,019				7,838				55,361
	Total Liabilities and Stockholders’ Equity		$	108,844			$	32,804			$	10,676			$	152,324

75

---

Table of Contents

(a)

The Pro Forma Condensed Combined Balance Sheet has been adjusted to record the special dividend of $1.30 per share to be paid by AT&T to AT&T shareholders prior to the closing of the merger. For purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet, the dividend is calculated based on 799 million AT&T shares outstanding as of December 31, 2004. However, the actual dividend paid will be based on AT&T shares outstanding on the record date for payment of the dividend.

76

---

Table of Contents

(b)	This entry reflects the preliminary allocation of the purchase price to identifiable net assets acquired and the excess purchase price to “Goodwill and Other Intangibles — Net” as follows:

			Common				Additional
			Stock				Capital				Total
Total consideration: Issuance of SBC common stock to AT&T shareholders			$	622			$	14,235			$	14,857	(b1)
Preliminary estimate of fair value of identifiable net assets acquired:
AT&T’s equity											$	7,019
Special dividend to AT&T shareholders												(1,038	)(a)
	AT&T’s adjusted equity										$	5,981	(b4)
Elimination of AT&T goodwill and intangibles												(5,263	)(b5)
Preliminary estimate of fair value adjustment of AT&T long-term debt												(958	)(b3)
Preliminary estimate of fair value adjustment to AT&T pension and postretirement plans												(2,731	)(b2)
Preliminary estimate of fair value of identifiable net assets (liabilities) acquired											$	(2,971	)
Goodwill and Other Intangibles — Net											$	17,828	(b5)

	(b1)	The purchase price allocation included within these Unaudited Pro Forma Condensed Combined Financial Statements is based upon a purchase price of $14,857, calculated as follows:

AT&T shares outstanding at December 31, 2004			798,570,623
Exchange ratio			0.77942
SBC shares to be issued			622,421,915
Price per share(1)		$	23.87
Aggregate value of SBC consideration		$	14,857
Value attributed to par at $1 par value		$	622
Balance to capital in excess of par value		$	14,235

	(1)	Price per share is based on the average closing price of SBC common stock for the two days prior to, including and two days subsequent to the public announcement of the merger.

	It is assumed that all stock will be new issuances. However, SBC may issue treasury shares for a portion of the required SBC common stock. The actual number of newly issued shares of SBC common stock or treasury shares to be delivered in connection with the merger will be based upon the number of AT&T shares issued and outstanding when the merger closes.

	(b2)	The Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to reflect AT&T’s pension and postretirement benefit plans at fair value. The total adjustment of $2,731 represents unrecognized net losses of $1,000 and $1,298 and unrecognized prior service costs of $380 and $53 for AT&T’s pension and postretirement plans, respectively, as of December 31, 2004.

77

---

Table of Contents

		Such amounts were reflected in the balance sheet based on the plans the adjustments relate to and whether such plans were in a net asset or net liability position.
	(b3)	The Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to report AT&T’s long-term debt at fair value. The estimated fair value of AT&T’s long-term debt (including current maturities of long-term debt) was $10,928 at December 31, 2004, calculated using quotes or rates available for debt with similar terms and maturities, based on AT&T’s debt ratings at that time. The carrying value of AT&T’s long-term debt (including current maturities of long-term debt) was $9,970 at December 31, 2004, resulting in a total increase to debt of $958. The carrying value of debt with an original maturity of less than one year approximates market value. None of this fair market value adjustment was attributed to current maturities of long-term debt.
	(b4)	The Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to eliminate the historical shareholders’ equity accounts of AT&T.
	(b5)	The Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to reflect the elimination of AT&T’s historical goodwill and other purchased intangibles. The Unaudited Pro Forma Condensed Combined Financial Statements reflect a preliminary allocation of the purchase price to tangible assets and liabilities with many fair values approximating historical book values as of December 31, 2004, especially for property, plant and equipment (PP&E). The remaining unallocated purchase price was allocated to “Goodwill and Other Intangibles — Net.”

		Of the total amount allocated to “Goodwill and Other Intangibles — Net,” SBC has tentatively identified approximately $1,500 for customers acquired with a straight-line asset life of three years (amortization of this intangible is reflected in the Unaudited Pro Forma Condensed Combined Statement of Income). However, the final purchase price allocation, based on third party appraisals, may result in different allocations for tangible and intangible assets than that presented in these Unaudited Pro Forma Condensed Combined Financial Statements, and those differences could be material. The following table is presented for illustrative purposes as an example that gives the estimated annual impact on pro forma net income for every incremental $1,000 that is allocated to amortizable intangibles or PP&E with various lives.

						Estimated
						Amortization				Net income				Per share
		Lives in years				Expense				impact				impact
			3			$	333			$	206			$	0.05
			10				100				62				0.02
			20				50				31				0.01

(c)	The Unaudited Pro Forma Condensed Combined Statement of Income has been adjusted to eliminate certain intercompany revenues and expenses, consisting primarily of switched access, UNE-P and high-capacity transport services, which include DS1s and DS3s (types of dedicated high-capacity lines), and SONET (a dedicated high-speed solution for multisite businesses). Other intercompany transactions and ending intercompany balances are immaterial.
(d)	The Unaudited Pro Forma Condensed Combined Statement of Income has been adjusted to reflect lower amortization of prior service cost and unrealized losses due to the adjustment of AT&T’s pension and postretirement plans to fair value (see note b2). The adjustment reflects the elimination of amounts recorded by AT&T in 2004 for amortization of unrecognized prior service costs of $171 and amortization of losses of $133 for pension and postretirement benefits.

78

---

Table of Contents

(e)

The Unaudited Pro Forma Condensed Combined Statement of Income has been adjusted to reflect lower interest expense due to the adjustment of AT&T’s long-term debt to fair value (see note b3). The difference between the fair value and the face amount of each borrowing is amortized on a straight-line basis as a reduction to interest expense over the remaining term of the borrowing, based on the maturity date.

(f)	Pro forma combined basic and diluted earnings per common share are based on the combined weighted average shares of SBC common stock outstanding in 2004 of 3.31 billion and the assumption that the approximately 622 million shares assumed to be issued by SBC (see note b1) were outstanding for all of 2004, calculated using the loss from continuing operations.

(g)	Included in the Unaudited Pro Forma Condensed Combined Statement of Income is an impairment charge on PP&E of approximately $11,400 recorded by AT&T in the third quarter of 2004. Since the triggering event for assessing impairment of long-lived assets occurred in July 2004, the impairment charge is not adjusted in the Unaudited Pro Forma Condensed Combined Statement of Income. However, depreciation expense has been reduced by $1,080 to reflect SBC estimates of PP&E fair value for the purpose of purchase price allocation and are based on PP&E levels after the impairment. Had the value used for depreciation been assigned to PP&E as of the beginning of the year, there would be no impairment. For purposes of the Unaudited Pro Forma Condensed Combined Statement of Income, the useful lives of PP&E was two to 16 years for communications, network and other equipment and five to 40 years for buildings and improvements.
(h)	The Unaudited Pro Forma Condensed Combined Statement of Income has been adjusted to reflect the elimination of AT&T’s historical intangible asset amortization due to the elimination of AT&T’s historical intangible assets (see note b5).

(i)

The Unaudited Pro Forma Condensed Combined Statement of Income has been adjusted to reflect the aggregate pro forma income tax effect of notes (c) through (h) above and the amortization impact of item (b5). The aggregate pre-tax effect of these adjustments was $1,151 reflected as “Income (Loss) Before Income Taxes” in the Pro Forma Adjustments column on the Unaudited Pro Forma Condensed Combined Statement of Income, which was taxed at SBC’s marginal tax rate of 38.05%.

79

---

Table of Contents

80

---

Table of Contents

81

---

Table of Contents

Name		Age				Position
Edward E. Whitacre Jr.			63			Chairman of the Board of Directors and Chief Executive Officer
John H. Atterbury III			56			Group President — IP Services
James D. Ellis			61			Senior Executive Vice President and General Counsel
Randall L. Stephenson			44			Chief Operating Officer
Rayford Wilkins, Jr.			53			Group President

82

---

Table of Contents

	•	To vote as your board of directors recommends on ALL items PRESS 1
	•	To vote on each of the 10 items separately PRESS 0

	•	To vote FOR ALL nominees PRESS 1;
	•	to WITHHOLD FROM ALL nominees PRESS 9;
	•	to WITHHOLD FROM AN INDIVIDUAL nominee PRESS 0

	NOMINEES:	(01) W. F. Aldinger, (02) K. T. Derr, (03) D. W. Dorman, (04) M. K. Eickhoff-Smith, (05) H. L. Henkel, (06) F. C. Herringer, (07) J. C. Madonna, (08) D. F. McHenry and (09) T. L. White

	•	To vote FOR PRESS 1;
	•	to vote AGAINST PRESS 9;
	•	to ABSTAIN PRESS 0

83

---

Table of Contents

84

---

Table of Contents

85

---

Table of Contents

86

---

Table of Contents

	The AT&T Board of Directors

	Election of Directors (Proposal 2 on Proxy Card)

	Nominees for Election as Directors

William F. Aldinger	Age: 57	Director Since: 2003

87

---

Table of Contents

Kenneth T. Derr	Director Since: 1995

David W. Dorman	Director Since: 2002

M. Kathryn Eickhoff-Smith	Director Since: 1987

Herbert L. Henkel	Director Since: 2004

Frank C. Herringer	Director Since: 2002

Jon C. Madonna	Director Since: 2002

88

---

Table of Contents

Donald F. McHenry	Director Since: 1986

Tony L. White	Director Since: 2002

	The Committees of the AT&T Board of Directors and Their Functions

89

---

Table of Contents

Compensation

and Employee

Governance and

Name

Audit

Benefits

Nominating

Mr. Aldinger

•

•

Mr. Derr

Chair

•

Ms. Eickhoff-Smith

•

•

Mr. Henkel

•

•

Mr. Herringer

•

•

Dr. Jackson

•

•

Mr. Madonna

Chair

•

Mr. McHenry

•

Chair

Mr. White

•

•

	Independence of Directors; Financial Expert

	Compensation of Directors

90

---

Table of Contents

		Number of Shares
						Other Common								Percent
Name		Beneficially Owned(1)				Stock Equivalents(2)				Total				of Class
(a)
William F. Aldinger			3,000				11,926				14,926				*
Kenneth T. Derr			3,835	(3)			30,776				34,611				*
David W. Dorman			1,752,318	(4)			462,700				2,215,018				*
M. Kathryn Eickhoff-Smith			4,245	(5)			21,168				25,413				*
Herbert L. Henkel			0				16,558				16,558				*
Frank C. Herringer			17,936	(6)			18,970				36,906				*
Shirley Ann Jackson			2,511	(7)			20,571				23,082				*
Jon C. Madonna			3,901	(8)			12,823				16,724				*
Donald F. McHenry			3,726	(9)			26,528				30,254				*
Tony L. White			3,901	(10)			17,882				21,783				*

91

---

Table of Contents

		Number of Shares
						Other Common								Percent
Name		Beneficially Owned(1)				Stock Equivalents(2)				Total				of Class
(b)
James W. Cicconi			615,663	(11)			112,800				728,463				*
Hossein Eslambolchi			502,731	(12)			211,400				714,131				*
William J. Hannigan			218,002	(13)			299,950				517,952				*
Thomas W. Horton			399,576	(14)			187,900				587,476				*

Other Common

Percent

Name

Beneficially Owned(1)

Stock Equivalents(2)

Total

of Class

(c)

Directors and Executive Officers as a group (19 persons)

4,500,619

(15)

1,730,762(16

)

6,231,381

*

*	Less than one percent

	(1)	As of March 1, 2005, no individual director or nominee for director or named executive beneficially owned 1% or more of AT&T’s outstanding common shares, nor did the directors and executive officers as a group.
	(2)	Includes share units held in deferred compensation accounts that do not constitute beneficially owned securities and restricted stock units. The number of restricted stock units owned by each non-employee director is as follows:

William F. Aldinger		11,221 restricted stock units
Kenneth T. Derr		11,077 restricted stock units
M. Kathryn Eickhoff-Smith		11,077 restricted stock units
Herbert L. Henkel		11,088 restricted stock units
Frank C. Herringer		11,077 restricted stock units
Shirley Ann Jackson		11,077 restricted stock units
Jon C. Madonna		11,077 restricted stock units
Donald F. McHenry		11,077 restricted stock units
Tony L. White		11,077 restricted stock units

		The number of restricted stock units owned by Mr. Dorman and each of AT&T’s other named executives as of March 1, 2005, is the number set forth in the column “Other Common Stock Equivalents.”

	(3)	Includes beneficial ownership of 2,745 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
	(4)	Includes beneficial ownership of 1,521,007 shares that may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans.
	(5)	Includes 1,000 shares held in an IRA account and 100 shares held in a Keogh account. Also includes 200 shares held by a trust, as to which Ms. Eickhoff-Smith has disclaimed beneficial ownership. In addition, includes beneficial ownership of 2,745 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
	(6)	Includes 10,000 shares held by trusts, 4,000 shares held in an IRA account, 1,000 shares held in a Keogh account for his spouse, 200 shares held by trusts for each of his two daughters, 100 shares held by a trust for his niece, and five shares held by a trust for his spouse. Also includes 30 shares held in a custodial account as to which Mr. Herringer has disclaimed beneficial ownership. In addition, includes beneficial ownership of 2,401 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.

92

---

Table of Contents

(7)	Includes 78 shares owned by Dr. Jackson’s spouse. Dr. Jackson has disclaimed beneficial ownership of these shares. Also includes beneficial ownership of 2,433 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
(8)	Includes beneficial ownership of 1,501 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
(9)	Includes 381 shares held in a Keogh account. In addition, includes beneficial ownership of 2,745 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
(10)	Includes beneficial ownership of 2,401 shares that may be acquired within 60 days pursuant to stock options awarded under a non-employee director incentive compensation plan.
(11)	Includes beneficial ownership of 581,624 shares that may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans.
(12)	Includes 0.6 shares held in a 401(k) account. Also includes beneficial ownership of 497,168 shares that may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans.
(13)	Includes 150 shares held in an IRA account, 100.7394 shares held by a trust for his son, and 100 shares held by a trust for his daughter. In addition, includes beneficial ownership of 182,500 shares that may be acquired within 60 days pursuant to options awarded under employee incentive compensation plans.
(14)	Includes beneficial ownership of 389,557 shares that may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans.
(15)	Includes beneficial ownership of 4,108,901 shares that may be acquired within 60 days pursuant to stock options awarded under employee and non-employee director incentive compensation plans.
(16)	Includes 1,546,310 restricted stock units and 84,605 share units held in deferred compensation accounts.

		Number of				Percent of
Name and Address of Beneficial Owner		Shares				Class
Capital Research and Management Company			111,633,100	(1)			14.0	%
333 South Hope Street
Los Angeles, CA 90071
Dodge & Cox			103,261,885	(2)			13.0	%
555 California Street
40th Floor
San Francisco, CA 94104

(1)	Based on a Schedule 13G/ A filed on February 11, 2005, by Capital Research and Management Company, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, Capital Research is deemed to be the beneficial owner, as a result of acting as investment advisor to various companies, and has sole dispositive power with respect to 111,633,100 shares or approximately 14.0% of AT&T’s outstanding shares of common stock.
(2)	Based on a Schedule 13G/ A filed February 10, 2005, Dodge & Cox beneficially owned these shares on behalf of clients that may include investment companies registered under the Investment Company Act and/or employee benefit plans, pension funds, endowment funds or other institutional clients. Dodge & Cox has sole voting power for 96,589,398 shares, shared voting power for 1,641,180 shares, sole dispositive power for 103,261,885 shares and no shared dispositive power for any of the shares.

93

---

Table of Contents

	No Future Stock Options — AT&T Shareholder Proposal (Proposal 4 on Proxy Card)

	“RESOLVED: “That the Board of Directors take the necessary steps so that NO future NEW stock options are awarded to ANYONE, nor that any current stock options are repriced or renewed (unless there was a contract to do so on some).”
	“REASONS: “Stock option awards have gone out of hand in recent years, and some analysts MIGHT inflate earnings estimates, because earnings affect stock prices and stock options.”
	“There are other ways to “reward” executives and other employees, including giving them actual STOCK instead of options.
	“Recent scandals involving CERTAIN financial institutions have pointed out how analysts CAN manipulate earnings estimates and stock prices.
	“If you AGREE, please vote YOUR proxy FOR this resolution.”

94

---

Table of Contents

	Link Restricted Stock Unit Vesting to Performance — AT&T Shareholder Proposal (Proposal 5 on Proxy Card)

“RESOLVED, that the shareowners of AT&T Corp. (“AT&T”) ask the Compensation and Employee Benefits Committee of the Board of Directors to adopt a policy that a significant portion of restricted stock and restricted stock units granted to senior executives require the achievement of performance goals as a prerequisite to vesting. The policy should be implemented in a way that does not violate any existing employment agreement or the terms of any equity compensation plan. The policy would not apply to performance share units, which by their terms already contain performance targets.

	“AT&T uses a substantial amount of restricted stock to compensate its senior executives. From 2001 through 2003, CEO David Dorman received awards with a total value of $7,810,212, while chief technology officer Hossein Eslambochi [sic] received awards valued at $3,354,286 during that period. The vesting of these awards does not depend on the achievement of any performance goals; rather, they simply vest over time.
	“We believe that compensation policies should align the interests of senior executives with those of shareowners. Restricted stock awards advance that goal better than stock options because restricted stock grants facilitate direct ownership of shares. Restricted stock grants also have the virtue of more transparent accounting treatment than stock options, whose cost — unlike that of restricted stock — is not recognized on a company’s income statement. However, to provide appropriate incentives, we believe that restricted stock awards should have real downside risk.
	“There has been significant criticism of the incentive value of restricted stock grants without performance hurdles. An August 11, 2003 editorial in Forbes characterized restricted stock grants without performance targets as “weak incentives for improving performance.” WorldCom/ MCI corporate monitor and former SEC chairman Richard Breeden opined in his August 2003 governance

95

---

Table of Contents

	recommendations that “there is not a strong reason for granting restricted stock rather than simply paying cash unless there are performance hurdles to vesting.” Matt Ward, CEO of San Francisco-based Westward Pay Strategies, says restricted stock grants without performance targets create “the lay-low effect: just lay low and don’t get fired.”
	“Leading companies have been requiring senior executives to satisfy performance requirements before restricted stock can vest. In its widely publicized 2003 shift from stock options to restricted stock, Microsoft has imposed performance vesting targets on its 600 most senior managers. The performance share units granted to GE CEO Jeffrey Immelt in 2003 similarly require the achievement of goals relating to cash flow from operations and total shareholder return. AT&T should follow the lead of these companies.
	“The need for performance targets for the vesting of restricted stock is especially acute in light of AT&T’s stock price performance. According to the most recent proxy statement, $100 invested in AT&T’s stock on December 31, 1998 would have been worth $29 on December 31, 2003, while $100 invested in an index of peer companies would have been worth $38 on that date.
	“We urge shareowners to vote for this proposal.”

96

---

Table of Contents

	Executive Compensation — AT&T Shareholder Proposal (Proposal 6 on Proxy Card)

“Resolved: the shareowners of AT&T Corp. (“AT&T”) request that the Compensation and Employee Benefits Committee prepare a report for shareholders, at reasonable cost and excluding confidential information, to determine whether AT&T’s senior executive compensation policies create an incentive to export jobs, restructure operations or make other strategic decisions that are designed to boost short-term earnings, but may have adverse consequences for long-term shareholder value.

	“Supporting Statement

	“AT&T has used earnings-based metrics, such as “operating net income,” as criteria for determining senior executives’ bonus awards. We believe such criteria are inadequate. In our view, they create undue incentives for senior executives to make strategic decisions geared towards short-term earnings, even when those decisions may have adverse long-term consequences for AT&T and its shareholders.
	“In our view, the growing tendency of American corporations to export jobs, either directly or through third party vendors, makes this a timely issue. It appears that AT&T uses third party vendors in other countries to provide a significant and increasing share of its services for United States customers (Boston Globe, 11/17/2004).
	“At AT&T, we believe the temptation to export jobs is exacerbated by the earnings-based metrics that are used to determine bonus awards and incentive pay. These criteria may give senior executives a personal incentive to boost earnings within one- to three-year performance periods, because higher earnings may increase their own pay. Consequently, they may be rewarded for making decisions that boost earnings in the short run, before it becomes apparent that the long-term consequences are detrimental.
	“A Reuters report concluded that, “outsourcing could do more harm than good” (10/31/2003). The report cited one survey in which “66 percent of companies ... were disappointed with their outsourcing contracts.” It added that “only 39 percent of the companies [surveyed] would renew contracts with their existing outsourcing suppliers, and 15 percent planned to bring services back in-house.”
	“Business Week has reported that, “many companies [have] ended up repatriating ... work because they felt they were losing control of core businesses or found them too hard to coordinate” (2/3/2003). Other reports have expressed concerns about the security of customer and proprietary information in offshore locations (The Sunday Herald, 3/28/2004; BBC News, 4/4/2004).
	“We believe bonus awards and long-term incentives should be based on evaluations of executive performance that emphasize the long-term consequences of strategic decisions. In our opinion, the proposed report would help shareholders to judge whether our Board of Directors provides appropriate incentives to senior management.
	“We urge shareholder to vote FOR this proposal.”

97

---

Table of Contents

	Poison Pill — AT&T Shareholder Proposal (Proposal 7 on Proxy Card)

	“RESOLVED: Shareholders request that our Board adopt a policy that any future poison pill be redeemed or put to a shareholder vote within 4-months after it is adopted by our Board. And formalize this as corporate governance policy or bylaw consistent with the governing documents of our company.
	“I believe that there is a material difference between a shareholder vote within 4-months in contrast to any greater delay in a shareholder vote. For instance a 5- to 12-month delay in a shareholder vote could guarantee that a poison pill stays effective through an entire proxy contest. This can result in us as shareholders losing a profitable offer for our stock — or an exchange for shares in a more valuable company.
	“I believe that even if a special election would be needed, the cost would be almost trivial in comparison to the potential loss of a valuable offer.
	“William Steiner, 112 Abbottsford Gate, Piermont, NY 10968 submitted this proposal.

	“They [poison pills] entrench the current management, even when it’s doing a poor job. They [poison pills] water down shareholders’ votes and deprive them of a meaningful voice in corporate affairs.”

	‘[Poison pill] That’s akin to the argument of a benevolent dictator, who says, “Give up more of your freedom and I’ll take care of you.”’

	“I believe that the advantage taking the above RESOLVED step is reinforced by viewing our overall corporate governance fitness which is not impeccable. For instance in 2004 it was reported:

	•	The Corporate Library an independent investment research firm in Portland, Maine rated our company: “F” in Overall Board Effectiveness “D” in Board Composition “F” in CEO Compensation

98

---

Table of Contents

		“D” in Accounting “D” in Strategic Decisionmaking
	•	The Corporate Library said, “Overall the company’s Board Effectiveness Rating suggests that the weaknesses of the board contribute a HIGH degree of investment, credit or underwriter risk to this stock.”
	•	Kenneth Derr was designated a “problem director” by TCL because he was chairperson of the committee that set executive compensation at our company, which received a CEO Compensation grade of “F”.
	•	We had no Lead Director or Independent Chairman — independence concern.
	•	Eight directors were allowed to hold from 4 to 6 director seats each — over-extension concern.
	•	2003 CEO pay of $17 million including stock option grants. Source: http://www.aflcio.org/corporateamerica/paywatch/ceou/database.cfm
	•	If CEO pay is excessive — this could be a sign that our board is weak in its oversight of our CEO.

	“I believe the above slate of under-achievement practices reinforce the advantage to adopt the one RESOLVED statement here to help improve our corporate governance scores.

	“If a poison pill makes our company difficult to sell — the value of our stock could suffer.

99

---

Table of Contents

	Shareholder Approval of Future SERPs — AT&T Shareholder Proposal (Proposal 8 on Proxy Card)

“RESOLVED: Shareholders request that the Board adopt a policy to seek shareholder approval of any future supplemental executive retirement plan (“SERP”) or individual retirement arrangement for senior executives that provides preferential benefit formulas or supplemental pension benefits not provided to other managers under the Company’s regular tax-qualified plan. Implementation of this policy shall not breach any existing employment agreement or vested benefit.

	“Companies establish SERPs to provide supplemental retirement benefits that exceed IRS limitations on benefits that can be paid from tax-qualified pension plans. In addition to its traditional SERP, which provides contributions on salary above IRS limits, AT&T maintains a second SERP providing officers with additional contributions not available to other managers. AT&T also maintains “individual pensions” for certain officers that guarantee them lifetime pension annuities on far more generous terms than apply to other managers.
	“These plans together provide a substantial extra component of compensation. AT&T estimated that CEO Dorman and CFO Horton will receive annual payments of $1.99 million and $1.42 million, respectively, at age 65.
	“Unlike most companies with SERPs, AT&T also provides “individual non-qualified pension arrangements” to certain executive officers that have the effect of granting extra years of service credit. For example, after just four years of service, CEO Dorman is vested in a supplemental pension equal (in 2005) to 34.7% of his final three-year average total compensation — and he accrues 3.6% for each additional year of service (to a maximum 60%).
	“Dorman’s employment agreement also includes a “pension parachute.” If he terminates prior to 2010 due to a change in control, his minimum annual pension is boosted by an additional 10.8% of final compensation.
	“In comparison, prior to 1998, employees accrued 1.6% of final average pay per year of service under AT&T’s Management Pension Plan — and would have needed over 20 years service to replace 34.7% of salary in retirement. Moreover, in 1998 AT&T converted to a cash balance formula, freezing pension contributions for thousands of managers for up to 13 years, and reducing expected total benefits as much as 50% for some employees. A class action lawsuit regarding the conversion is currently pending in federal court.
	“As AT&T downsizes, we believe these gross disparities between the retirement security offered to senior executives and to other employees create potential morale problems and reputational risk, and may increase employee turnover.
	“Moreover, because these forms of pension compensation are not performance-based, they do not help to align management incentives with long-term shareholder interests. Shareholder approval of these benefits would help to ensure reasonable formulas for future agreements.
	“Because prior shareholder approval is often not practical, the Company would have the option to seek approval after the material terms of an executive’s employment agreement are determined.”

100

---

Table of Contents

	Shareholder Ratification of Severance Agreements — AT&T Shareholder Proposal (Proposal 9 on Proxy Card)

	“RESOLVED, that the shareholders of AT&T Corporation (the “Company”) amend the Company’s bylaws, in compliance with applicable law, to require that the Board of Directors (“Board”) seek

101

---

Table of Contents

shareholder 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” is defined as any agreement that dictates what an Officer can be compensated when AT&T terminates employment without cause or when there is a termination of employment following a finally approved and implemented change of control. “Severance benefits” shall mean 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. If the Board determines that it is not practicable to obtain shareholder approval in advance, the Board may seek approval after the material terms have been agreed upon. This bylaw amendment shall take effect upon adoption and apply only to agreements adopted, extended or modified after that date.

	“As a major shareholder of the Company, CalPERS supports compensation policies for Officers that strongly link pay to performance. CalPERS strongly opposes pay practices that reward under-performing Officers with large payouts when they are terminated for poor-performance, e.g., CalPERS is outraged with 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 CalPERS 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 CalPERS 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 shareholder base does not substantially change but change-in-control payments are triggered; and 4) The payment of “gross-ups” to pay federal taxes owed.
	“According to CalPERS’ Pay-for-Performance Model, for each of the years from 2001 — 2003 the Company’s top 5 officers were compensated at least 10 times the median of the industry’s top 5 (industry being defined as the four-digit Global Industry Classification System — 5010). In addition, the Corporate Library graded the Company’s CEO Compensation an “F”.
	“Since CalPERS believes the Company is high risk for continuing its weak compensation practices, CalPERS urges shareholders to vote FOR this proposal.”

102

---

Table of Contents

103

---

Table of Contents

104

---

Table of Contents

	Submitted by:
	Jon C. Madonna (Chairman)
	William F. Aldinger
	M. Kathryn Eickhoff-Smith
	Herbert L. Henkel
	Frank C. Herringer
	Donald F. McHenry

	Principal Auditor Fees and Services ($ in 000’s)

			2004				2003
Audit			$	16,616			$	12,737
Audit Related				1,886				2,732
Tax				8,657				13,855
All Other				0				374
	Total		$	27,159			$	29,698

105

---

Table of Contents

	Preapproval Policies and Procedures

	(i) the aggregate amount of such non-audit services provided to AT&T constitutes not more than 5% of the total fees paid by AT&T to PricewaterhouseCoopers LLP in the fiscal year such non-audit services are provided;
	(ii) such services were not recognized by AT&T as non-audit services at the time they were provided; and
	(iii) such services are promptly brought to the attention of the Audit Committee.

106

---

Table of Contents

			Dec-99					Dec-00					Dec-01					Dec-02					Dec-03					Dec-04
AT&T common stock				100					35					47					34					28					28
S&P 500				100					91					80					62					80					89
Diversified Telecom Services				100					62					54					36					35					38

(1)	Data Source: S&P Compustat

	AT&T Board Compensation Committee Report on Executive Compensation

107

---

Table of Contents

	•	Total compensation opportunities must be competitive yet reasonable — The value will be based on comparable companies’ pay opportunities and will be targeted at levels that will attract, motivate and retain a highly skilled workforce and enable AT&T to compete with other premier employers for the best talent.
	•	Pay must be performance-based — A significant part of each executive’s compensation is directly linked to achieving specific results that appropriately balance financial and operational performance measures and stock price appreciation, creating shareowner value in the short and long term.
	•	A significant portion of the total compensation opportunity should be equity-based — AT&T believes that an equity stake effectively aligns employee and shareowner interests and provides proper motivation for enhancing shareowner value.

	•	Revised AT&T’s position on compensation — Beginning in 2004, AT&T set an objective to target pay levels at the median level of AT&T’s peers when performance meets the set targets. This represented a reduction from AT&T’s previous goal to be a premium payer in the market. With median pay established as the baseline, actual pay should exceed the median level only when AT&T’s performance exceeds AT&T’s targeted operational objectives or the performance of AT&T’s peer companies. Similarly, actual pay should fall below the median when performance is below these reference points. As a result, AT&T’s compensation programs allow the Committee to differentiate compensation levels by executive, based on corporate performance, individual achievements and personal talents and experience.
	•	Reaffirmed AT&T’s peer groups for benchmarking purposes — AT&T’s peer groups include companies with large market capitalization and large telecommunications companies. The 2004 benchmarking analysis used data disclosed in the proxy statements and available published surveys.
	•	Introduced a policy requiring officers and executives to accumulate and hold targeted levels of common stock — AT&T believes that compensation programs fostering continued stock ownership effectively align executives with the long-term interests of shareowners and the success of AT&T.

108

---

Table of Contents

	•	Job responsibilities and scope,
	•	Competitive compensation of similar positions at comparable companies in AT&T’s peer groups, and
	•	AT&T’s targeted pay position.

	•	Strategic impact of the position,
	•	Expertise and level of experience required,
	•	Overall business performance, and
	•	Individual contributions.

	Overview

	Results for the 2004 Performance Year

109

---

Table of Contents

	Strategy Review

	•	Effectiveness of the current stock option strategy,
	•	AT&T’s yearly share usage for AT&T’s long-term incentive awards as compared to the AT&T common stock outstanding (AT&T’s “run rate”),
	•	The potential dilutive impact of the equity programs, and
	•	The impact of the depressed stock prices within the telecommunications industry.

	•	Strengthen AT&T’s ability to attract, retain and motivate top talent and performers,
	•	Provide a stronger link to performance than time-vested stock options,
	•	Better align the interests of AT&T’s senior executives and shareowners,
	•	Provide a better opportunity for senior executives to acquire and hold AT&T stock, and
	•	Lower the potential share usage levels by directly impacting the annual run rate of shares and mitigating the potential long-term dilution implications of 10-year stock options.

	2001-2003 Performance Share Plan

	2004 Performance Share Plan

110

---

Table of Contents

	Restricted Stock Units

	Run Rate and Dilution Management

	Perquisites and Personal Benefits

111

---

Table of Contents

Executive		Number of Shares
Chief Executive Officer			350,000
President & COO			175,000
CFO & Vice Chairman			125,000
Business Unit President			75,000
Other Senior Staff officers			11,000 - 60,000
			(depending
			on position)
Other Officers			7,500

	Base Salary

	Short-Term Incentives

	Long-Term Incentives

112

---

Table of Contents

	The Compensation and Employee
	Benefits Committee
	Kenneth T. Derr (Chairman)
	William F. Aldinger
	Frank C. Herringer
	Shirley Ann Jackson
	Tony L. White

113

---

Table of Contents

																			Long-Term Compensation
			Annual Compensation(2)																Awards								Payouts
															Other Annual				Restricted Stock								LTIP				All Other
Named Executives and Principal															Compensation(1)				Award(s)(2)				Options/SARs				Payouts				Compensation(3)
Position at AT&T			Year				Salary($)				Bonus($)				($)				($)				(#) AT&T				($)				($)
David W. Dorman				2004				1,325,000				1,970,000				1,163,514				2,773,890	(a)			0				2,547,488				178,912
	Chairman of the			2003				1,268,750				2,649,000				908,264				2,853,000				1,050,000				707,090				3,341,283
	Board and CEO			2002				1,080,797				2,000,000				594,024				0				1,247,416				0				3,128,663
William J. Hannigan				2004				921,649				1,147,000				1,601,728				5,060,828	(a)(b)			730,000				0				4,319,038
	President and COO			2003				0				0				2,141				0				0				0				3,435
				2002				0				0				0				0				0				0				0
Thomas W. Horton				2004				700,000				697,000				212,960				1,192,140	(a)			0				0				404,804
	Vice Chairman			2003				625,000				940,000				142,625				1,141,200				520,000				0				418,403
	and CFO			2002				280,000				600,000				1,371,367				0				519,110				0				2,491,167
Hossein Eslambolchi				2004				650,000				708,000				176,588				695,970	(a)			0				474,389				641,083
	President AT&T			2003				579,167				585,800				136,853				2,250,066				280,000				51,804				662,670
	Global Network			2002				537,500				750,000				177,465				0				428,718				56,691				673,207
	Technology Services — AT&T CTO & CIO
James W. Cicconi				2004				620,000				616,000				114,901				557,775	(a)			0				899,585				297,006
	General Counsel &			2003				605,000				840,300				125,086				951,000				350,000				134,419				82,261
	Executive Vice President			2002				593,750				840,000				139,524				0				406,766				268,564				376,970

(1)	Includes (i) payments of above-market interest on deferred compensation, (ii) dividend equivalents with respect to long term compensation paid during the year and (iii) tax payment reimbursements. In addition, includes the aggregate incremental cost to AT&T of providing perquisites and personal benefits to the named executive officers for the last three years. The amounts reported for 2004 include: (a) financial counseling for Mr. Horton in the amount of $20,800; and (b) personal use of corporate aircraft by the named executive or members of the executive’s family for Messrs. Dorman, Hannigan and Horton in the amount of $507,639, $148,903 and $43,936, respectively. The amounts reported for 2003 include: (a) financial counseling for Mr. Horton in the amount of $13,670; (b) personal use of corporate aircraft by the named executive or members of the executive’s family for Messrs. Dorman and Horton in the amount of $305,403 and $20,565, respectively; and (c) car allowance for Mr. Horton in the amount of $16,800. The amounts reported for 2002 include: (d) financial counseling for Mr. Dorman in the amount of $80,740; (e) relocation for Mr. Horton in the amount of $86,815; (f) personal use of corporate aircraft by the named executive or members of the executive’s family for Messrs. Dorman, Horton and Eslambolchi in the amount of $109,115, $39,948 and $76,911, respectively.
(2)	Restricted stock units were granted and remain outstanding as follows:

	(a)	On May 27, 2004, Messrs. Dorman, Hannigan, Horton, Eslambolchi and Cicconi received restricted stock unit awards of 166,600, 110,350, 71,600, 41,800 and 33,500 units, respectively. These AT&T restricted stock units vest 50% on May 27, 2006, 25% on May 27, 2007, and 25% on May 27, 2008. Dividend equivalents on the restricted stock units are paid in cash. The value of these awards, as of the original grant date, is reflected in the table.

114

---

Table of Contents

	(b)	On January 5, 2004, Mr. Hannigan received a grant of 150,000 restricted stock units. These AT&T restricted stock units vest 52,500 on January 31, 2005, 37,500 on November 30, 2005, 30,000 on January 31, 2006, and 30,000 on January 31, 2007. Dividend equivalents on the restricted stock units are paid in cash. The value of these awards, as of the original grant date, is reflected in the table.

	The aggregate number (and value) with respect to each of the named executives on December 31, 2004, for outstanding AT&T restricted stock units were: Mr. Dorman, 316,600 ($6,034,396); Mr. Hannigan, 260,350 ($4,962,271); Mr. Horton, 131,600 ($2,508,296); Mr. Eslambolchi, 160,100 ($3,051,506); and Mr. Cicconi, 83,500 ($1,591,510).

(3)

In 2004, includes (a) AT&T contributions to savings plans (Mr. Dorman $8,200, Mr. Hannigan $8,200, Mr. Horton $8,200, Mr. Eslambolchi $8,200 and Mr. Cicconi $8,200); (b) dollar value of the benefit of premiums paid for universal life insurance policies (unrelated to term insurance coverage) calculated on an actuarial basis (Mr. Dorman $55,962, Mr. Hannigan $34,138, Mr. Horton $21,604, Mr. Eslambolchi $17,717 and Mr. Cicconi $22,670); (c) payments equal to lost savings plan matching contributions caused by IRS limitations (Mr. Dorman $42,750, Mr. Eslambolchi $15,166 and Mr. Cicconi $16,136); (d) payment of $72,000 to Mr. Dorman and $15,000 to Mr. Hannigan for temporary housing expenses; (e) special bonus payment of $710,000 to Mr. Hannigan, equal to the target bonus from his prior employer; (f) hiring bonus of $1,000,000 paid to Mr. Hannigan; (g) two special payments, each in the amount of $525,850, to Mr. Hannigan, for replacement of restricted stock from his prior employer; (h) special one-time payment of $1,500,000 to Mr. Hannigan, associated with his transition and relocation to New Jersey; (i) payment of a special retention bonus of $375,000 to Mr. Horton; (j) special recognition payment of $600,000 to Mr. Eslambolchi; and (k) special recognition payment of $250,000 to Mr. Cicconi.

										Exercisable/Unexercisable(2)
										Number of AT&T				$ Value of AT&T
										Unexercised				In-the-Money
		Number of Shares				$ Value				Options/SARs at				Options/SARs at
Name(1)		Acquired on Exercise				Realized				Year End				Year End
David W. Dorman			0				0				1,332,917				458,062
											1,498,712				1,374,188
William J. Hannigan			0				0				0				0
											730,000				0
Thomas W. Horton			0				0				389,557				183,225
											649,553				549,675
Hossein Eslambolchi			0				0				441,118				122,150
											455,564				366,450
James W. Cicconi			0				0				517,916				152,688
											496,737				458,062

(1)	Includes the Chairman of the Board and Chief Executive Officer of AT&T and the four other most highly compensated individuals who were executive officers of AT&T at the end of 2004, as measured by salary and bonus.
(2)	Share and per share amounts have been adjusted to reflect AT&T’s April 15, 1999, three-for-two stock split; the distribution and split-off of AWS on July 9, 2001; the spin-off of AT&T Broadband and subsequent merger with Comcast on November 18, 2002; and AT&T’s November 18, 2002, one-for-five reverse stock split, as described in “— Summary Compensation Table” above.

115

---

Table of Contents

	Long Term Incentive Plans — Awards in 2004

										Estimated Future Payouts Under
						Performance				Non-Stock Price Based Plans
		Number of				Period Until
		Performance				Maturation				Threshold				Target				Maximum
Name(1)		Shares				or Payout				(#)				(#)(2)				(#)
David W. Dorman			388,700				2004-2006				194,350				388,700				583,050
William J. Hannigan			257,450				2004-2006				128,725				257,450				386,175
Thomas W. Horton			149,600				2004-2006				74,800				149,600				224,400
Hossein Eslambolchi			97,300				2004-2006				48,650				97,300				145,950
James W. Cicconi			77,800				2004-2006				38,900				77,800				116,700

(1)	Includes the Chairman of the Board and Chief Executive Officer of AT&T and the four other most highly compensated individuals who were executive officers of AT&T at the end of 2004, as measured by salary and bonus.
(2)	In May 2004, the Performance Share Awards listed in the table were made. If they remain named executives on December 31, 2006, the payout value of these awards to Messrs. Dorman, Hannigan, Horton, Eslambolchi and Cicconi would be (i) 0.13% of AT&T’s net cash provided by operating activities for each year in the performance period, divided by the total number of named executives receiving payouts for the period ending December 31, 2006, or (ii) a lesser amount, based on factors such as targets for AT&T’s earnings, return to equity, cash flow, revenue or total shareholder return for the period.

	Option/ SAR Grants in 2004

Individual Grants in AT&T

Number of

Securities

% of Total

Underlying

Options/SARs

Options/

Granted to

Exercise or

Grant Date

SARs

Employees in

Base Price

Expiration

Present

Name(1)

Granted(2)

Fiscal Year

($/Share)

Date

Value(4)($)

David W. Dorman

0

0%

William J. Hannigan(3)

730,000

100%

21.4050

01/05/2014

4,069,750

Thomas W. Horton

0

0%

Hossein Eslambolchi

0

0%

James W. Cicconi

0

0%

(1)	Includes the Chairman of the Board and Chief Executive Officer of AT&T and the four other most highly compensated individuals who were named executives of AT&T at the end of 2004, as measured by salary and bonus.
(2)	In 2004, AT&T did not grant new stock option awards. Long-term incentives in 2004 consisted of performance shares (see “— Long-Term Incentive Plans — Awards in 2004” above) and restricted stock units (see “— Summary Compensation Table” above).
(3)	These options become exercisable to the extent of one-fourth of the grant on the first, second, third and fourth anniversaries of the grant date, respectively.
(4)	The Black-Scholes option pricing model was chosen to estimate the Grant Date Present Value of the options in this table. AT&T’s use of this model should not be construed as an endorsement of its accuracy in valuing options. All stock option valuation models, including the Black-Scholes model, require a prediction about the future movement of the stock price. The following assumptions were made for purposes of calculating the Grant Date Present Value on the grants awarded on January 5, 2004: an

116

---

Table of Contents

	option term of five years, volatility of 38%, dividend yield of 4.00% and interest rate of 3.35%. The actual value, if any, of the options in this table depends upon the actual performance of AT&T common stock during the applicable period.

	Equity Compensation Plan Information

(a)

(b)

(c)

Number of Securities

Remaining Available for

Number of Securities to be

Weighted-average

Future Issuance Under

Issued Upon Exercise of

Exercise Price of

Equity Compensation Plans

Outstanding Options,

Outstanding Options,

(excluding securities

Plan Category

Warrants and Rights(2)

Warrants and Rights(2)

reflected in column(a))(2)

Shares in thousands

Equity compensation plans approved by shareholders

108,308

$

36.0501

30,758

Equity compensation plans not approved by shareholders(1)

0

$

0

0

Total

108,308

$

36.0501

30,758

(1)	With respect to equity compensation plans that AT&T has assumed in connection with mergers, acquisitions or consolidations, the aggregate number of shares of AT&T common stock to be issued upon exercise of outstanding options, warrants and rights outstanding under such plans on December 31, 2004, was 4,072,538 shares and the weighted average exercise price of such outstanding options, warrants and rights was $39.1219. These shares were granted under plans administered by companies acquired by AT&T and upon acquisition no longer provided shares for future grants. Each of these acquired plans was approved by shareholders of companies acquired by AT&T except for the US WEST Media Group 1997 Stock Option Plan and the MediaOne Group 1999 Supplemental Stock Plan.
(2)	AT&T’s 1997 Long Term Incentive Program (as amended, the 1997 LTIP) originally provided for the issuance of 150 million shares of AT&T common stock. In 1999 the 1997 LTIP was amended to provide for an annual increase in the number of shares available for awards under the 1997 LTIP equal to 1.75% of the number of shares of AT&T common stock outstanding on the first day of each year commencing January 1, 2000. Pursuant to this provision, an additional 61,992,101 shares of AT&T common stock became available for awards on January 1, 2002; 13,703,158 became available for awards on January 1, 2003; and 13,858,443 became available for awards on January 1, 2004. The 1997 LTIP limited the number of shares to be awarded other than stock options or stock appreciation rights. The 1997 LTIP expired on May 31, 2004, and no longer provides shares for future grants. AT&T’s 2004 Long Term Incentive Program was approved by shareholders for use beginning May 27, 2004, providing for the issuance of 36 million shares of AT&T common stock. As of December 31, 2004, 30.8 million shares remain available for future awards.

	Employment Contracts and Termination of Employment Agreements

	David W. Dorman

117

---

Table of Contents

118

---

Table of Contents

	William J. Hannigan

	Thomas W. Horton

119

---

Table of Contents

	Hossein Eslambolchi

	James W. Cicconi

	Senior Officer Separation Plan

120

---

Table of Contents

	Pension Plans

	Basic Formula

121

---

Table of Contents

	Alternate Formula

122

---

Table of Contents

	Indebtedness of Management

	Other Arrangements

123

---

Table of Contents

124

---

Table of Contents

125

---

Table of Contents

	•	2,500,000,000 shares of AT&T common stock, having a par value of $1.00 per share; and
	•	100,000,000 shares of AT&T preferred stock, having a par value of $1.00 per share.

	•	7,000,000,000 shares of SBC common stock, having a par value of $1.00 per share; and
	•	10,000,000 shares of SBC preferred stock, having a par value of $1.00 per share.

126

---

Table of Contents

127

---

Table of Contents

	•	specified information relating to each person whom the shareholder proposes to nominate for election or reelection as a director;
	•	as to any description of any other business desired to be brought before the meeting, the reasons for conducting such other business at the meeting and any material interest in such other business of such shareholder and beneficial owner, if any, on whose behalf the proposal is made; and
	•	as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made,

128

---

Table of Contents

	—	the name and address of such shareholder, as they appear on AT&T’s books, and of such beneficial owner; and
	—	the class and number of shares of AT&T which are owned beneficially and of record by such shareholder and such beneficial owner.

	•	by or at the direction of the board of directors; or
	•	provided that the board of directors has determined that directors shall be elected at such meeting, by any shareholder who is a shareholder of record at the time of giving of notice to AT&T, who shall be entitled to vote at the meeting and who complies with the notice procedures described above.

	•	the name and record address of such stockholder; and
	•	the class or series and number of shares of capital stock of SBC which are owned beneficially or of record by such stockholder.

	•	a brief description of the business desired to be brought before the annual meeting and the reasons for conducting the business at the annual meeting; and
	•	any material interest the stockholder has in the proposal.

	•	the name, age, business address and residence address of the nominee;
	•	the principal occupation or employment of the nominee;
	•	the class or series and number of shares of capital stock of SBC which are owned beneficially or of record by the nominee; and
	•	certain other specified information relating to the nominee and the stockholder making the nomination.

129

---

Table of Contents

	•	any person who is a shareholder of record of a corporation has the right to examine, upon at least five days’ written demand, in person or by agent or attorney, during usual business hours, its minutes of the proceedings of its shareholders and record of shareholders and to make extracts for any purpose reasonably related to such person’s interest as a shareholder; and
	•	upon the written request of any shareholder, the corporation must give or mail to such shareholder an annual balance sheet and profit and loss statement for the preceding fiscal year, and, if any interim balance sheet or profit and loss statement has been distributed to its shareholders or otherwise made available to the public, the most recent such interim balance sheet or profit and loss statement.

130

---

Table of Contents

	•	in the case of corporations like AT&T that were in existence on February 22, 1998 and that do not expressly provide in their certificates of incorporation for a majority approval of these transactions, by two-thirds of all the shares of the corporation entitled to vote on the proposal; and
	•	in case of corporations that expressly provide in their certificates of incorporation for a majority approval of these transactions or that were incorporated after February 22, 1998, by the affirmative vote by the holders of a majority of all outstanding shares of each class or series of shares entitled to vote on the proposal.

	•	the required vote for authorization by shareholders of a merger or consolidation of the corporation, pursuant to relevant provisions of the NYBCL, shall be a majority of the votes of the shares of the corporation entitled to vote, in addition to any class vote that may be required by relevant provisions of the NYBCL; and
	•	the required vote for approval by shareholders of a sale, lease, exchange or other disposition of all or substantially all of the assets of the corporation, pursuant to relevant provisions of the NYBCL, shall be a majority of the votes of all outstanding shares of the corporation entitled to vote.

	•	the merger agreement does not amend in any respect its certificate of incorporation;
	•	each share of its stock outstanding prior to the merger will be an identical share of stock following the merger; and

131

---

Table of Contents

	•	the merger will not result in the issuance of shares representing more than 20% of its common stock outstanding immediately prior to the merger.

	•	the highest per share price paid by the interested stockholder in acquiring any share of SBC common stock during the two years prior to the announcement date of the proposed business combination or in the transaction in which it became an interested stockholder (whichever is higher);
	•	the fair market value per share of SBC common stock on the day after such announcement date or on the date on which the interested stockholder became an interested stockholder (whichever is higher); or
	•	such fair market value per share multiplied by the ratio of:

	—	the highest per share price paid by the interested stockholder in acquiring any share of SBC common stock during the two years prior to such announcement to,
	—	the fair market value per share of SBC common stock on the first day in such two-year period upon which the interested stockholder acquired any shares of SBC common stock.

132

---

Table of Contents

	•	to the shareholder of a parent corporation merging with its subsidiary where the parent owns at least 90% of the subsidiary’s outstanding stock and certain additional requirements are met;
	•	to the shareholder of the surviving corporation in a merger (other than a merger described in the previous bullet item) unless the merger adversely affects certain rights of the shares held by the shareholder; or
	•	to a shareholder of shares of any class or series of stock listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.

133

---

Table of Contents

	•	listed on a national securities exchange or designated as a Nasdaq National market security; or
	•	held of record by more than 2,000 stockholders.

	•	stock of the surviving corporation;
	•	stock of another corporation which is either listed on a national securities exchange or designated as a Nasdaq National market security or held of record by more than 2,000 stockholders;
	•	cash in lieu of fractional shares; or
	•	some combination of the above.

134

---

Table of Contents

135

---

Table of Contents

	•	in the case of a corporation having cumulative voting, no director may be removed when the votes cast against such director’s removal would be sufficient to elect the director if voted cumulatively; and
	•	if a director is elected by the holders of shares of any class or series, the director may be removed only by the applicable vote of the holders of the shares of that class or series voting as a class. An action to procure a judgment removing a director for cause may be brought by the attorney general or by the holders of 10% of the outstanding shares, whether or not entitled to vote.

	•	members of a classified board of directors may be removed only for cause, unless the certificate of incorporation provides otherwise; and
	•	in the case of a corporation having cumulative voting, if less than the entire board of directors is to be removed, no director may be removed without cause if the votes cast against the director’s removal would be sufficient to elect the director if then cumulatively voted at an election of the entire board of directors or of the class of directors of which the director is a part.

	•	whose acts or omissions were in bad faith, involved intentional misconduct or a knowing violation of law;
	•	who personally gained a financial profit or other advantage to which he or she was not legally entitled; or
	•	whose acts violated certain provisions of New York law.

	•	the liability of a director if a judgment or other final adjudication adverse to him or her establishes;

	—	that his or her acts or omissions were in bad faith or involved intentional misconduct;
	—	a knowing violation of law or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled; or
	—	that his or her acts violated Section 719 of the NYBCL, which specifies certain actions for which directors of a New York corporation will be held liable; or

136

---

Table of Contents

	•	the liability of a director for any act or omission prior to the adoption of this provision by the shareholders of the corporation.

	•	breach of the duty of loyalty;
	•	acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
	•	unlawful payments of dividends, certain stock repurchases or redemptions; or
	•	any transaction from which the director derived an improper personal benefit.

	•	for any breach of the director’s duty of loyalty to the corporation or its stockholders;
	•	for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law;
	•	under Section 174 of the DGCL; or
	•	for any transaction from which a director derived an improper benefit.

137

---

Table of Contents

	•	acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or, in some circumstances, at least not opposed to its best interests; and
	•	in a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.

	•	an action may be brought in the right of a domestic or foreign corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates of the corporation or of a beneficial interest in such shares or certificates;
	•	in any such action, it shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he or she was such a holder at the time of the transaction of which he or she complains, or that his or her shares or interest therein devolved upon him by operation of law;
	•	in any such action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort; and
	•	such action shall not be discontinued, compromised or settled, without the approval of the court having jurisdiction of the action.

138

---

Table of Contents

	•	a business combination approved by the board of directors before the stock acquisition, or where the acquisition of the stock had been approved by the board of directors before the stock acquisition;
	•	a business combination approved by the affirmative vote of the holders of a majority of the outstanding voting stock not beneficially owned by the interested shareholder at a meeting for that purpose no earlier than five years after the stock acquisition; or
	•	a business combination in which the interested shareholder pays a formula price designed to ensure that all other shareholders receive at least the highest price per share that is paid by the interested shareholder and that meets certain other requirements.

	•	the board of directors has approved, before the acquisition date, either the business combination or the transaction that resulted in the person becoming an interested stockholder;
	•	upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owns at least 85% of the corporation’s voting stock, excluding shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer; or
	•	after the person or entity becomes an interested stockholder, the business combination is approved by the board of directors and authorized by the vote of at least 662/3% of the outstanding voting stock not owned by the interested stockholder.

	•	dissolution shall be authorized at a meeting of shareholders by,

	—	for corporations the certificate of incorporation of which expressly provides for dissolution to be authorized at a meeting of shareholders or corporations incorporated after February 22, 1998, a majority of the votes of all outstanding shares entitled to vote thereon; or

139

---

Table of Contents

	—	for all other corporations, two-thirds of the votes of all outstanding shares entitled to vote thereon, subject to limited exceptions; and

	•	any corporation may adopt an amendment of its certificate of incorporation providing that such dissolution shall be authorized at a meeting of shareholders by a specified proportion of votes of all outstanding shares entitled to vote thereon, provided that such proportion may not be less than a majority.

	•	if it should be deemed advisable in the judgment of the board of directors of any corporation that it should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote on the dissolution of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution;
	•	at the meeting a vote shall be taken upon the proposed dissolution, and if a majority of the outstanding stock of the corporation entitled to vote on the proposed dissolution shall vote for the proposed dissolution, a certification of dissolution shall be filed with the Secretary of State; and
	•	dissolution of a corporation may also be authorized without action of the directors if all the stockholders entitled to vote on the dissolution shall consent in writing and a certificate of dissolution shall be filed with the Secretary of State.

140

---

Table of Contents

141

---

Table of Contents

	•	the reasons for conducting the proposed business at the meeting and any material interest in the proposed business of such shareholder and beneficial owner, if any, on whose behalf the proposal is made;
	•	the name and address of such shareholder giving the notice, as they appear on AT&T’s books, and of the beneficial owner, if any, on whose behalf the proposal is made; and
	•	the class and number of shares of AT&T which are owned beneficially and of record by such shareholder and such beneficial owner.

142

---

Table of Contents

	•	the ability to obtain governmental approvals of the merger on the proposed terms and schedule;
	•	the failure of AT&T shareholders to approve the merger;
	•	the risks that the businesses of SBC and AT&T will not be integrated successfully;
	•	the risks that the cost savings and any other synergies from the merger may not be fully realized or may take longer to realize than expected;
	•	disruption from the merger making it more difficult to maintain relationships with customers, employees or suppliers;
	•	competition and its effect on pricing, spending, third-party relationships and revenues;
	•	the risks that Cingular LLC could fail to achieve, in the amount and within the timeframe expected, the synergies and other benefits expected from its acquisition of AT&T Wireless;
	•	final outcomes of various state and federal regulatory proceedings and changes in existing state, federal or foreign laws and regulations and/or enactment of additional regulatory laws and regulations;
	•	risks inherent in international operations, including exposure to fluctuations in foreign currency exchange rates and political risk;
	•	the impact of new technologies; and
	•	changes in general economic and market conditions.

143

---

Table of Contents

SBC SEC Filings		Period
Annual Report on Form 10-K		Year ended December 31, 2004
Current Reports on Form 8-K		Filed January 11, 2005, January 26, 2005, January 31, 2005, February 25, 2005, March 11, 2005.
Proxy Statement on Schedule 14A for SBC’s 2005 Annual Meeting of Stockholders
The description of SBC common stock set forth in SBC’s registration statement on Form 10, dated November 15, 1983, filed by SBC pursuant to Section 12 of the Exchange Act

AT&T SEC Filings		Period
Annual Report on Form 10-K		Year ended December 31, 2004
Current Reports on Form 8-K		Filed January 21, 2005, January 25, 2005, January 31, 2005, February 2, 2005.

144

---

Table of Contents

145

---

Table of Contents

---

Table of Contents

						Page
ARTICLE I The Merger; Closing; Effective Time
1.1.		The Merger					A-1
1.2.		Closing					A-1
1.3.		Effective Time					A-1
ARTICLE II Certificate of Incorporation and By-Laws of the Surviving Corporation
2.1.		The Certificate of Incorporation					A-2
2.2.		The By-Laws					A-2
ARTICLE III Directors and Officers
3.1.		Directors					A-2
3.2.		Officers					A-2
3.3.		Parent’s Board of Directors					A-2
ARTICLE IV Effect of the Merger on Capital Stock; Exchange of Certificates
4.1.		Effect on Capital Stock					A-2
		(a)		Merger Consideration			A-2
		(b)		Cancellation of Shares			A-3
		(c)		Merger Sub			A-3
4.2.		Exchange of Certificates for Shares					A-3
		(a)		Exchange Agent			A-3
		(b)		Exchange Procedures			A-3
		(c)		Distributions with Respect to Unexchanged Shares; Voting			A-4
		(d)		Transfers			A-4
		(e)		No Fractional Shares			A-4
		(f)		Termination of Exchange Fund			A-4
		(g)		Lost, Stolen or Destroyed Certificates			A-4
		(h)		Uncertificated Shares			A-5
4.3.		No Dissenters’ Rights					A-5
4.4.		Adjustments to Prevent Dilution					A-5
4.5.		Company Stock Based Plans					A-5
ARTICLE V Representations and Warranties
5.1.		Representations and Warranties of the Company					A-6
		(a)		Organization, Good Standing and Qualification			A-6
		(b)		Capital Structure			A-7
		(c)		Corporate Authority; Approval and Fairness			A-8
		(d)		Governmental Filings; No Violations; Certain Contracts			A-8
		(e)		Company Reports; Financial Statements			A-9
		(f)		Absence of Certain Changes			A-10
		(g)		Litigation and Liabilities			A-11

A-i

---

Table of Contents

						Page
		(h)		Employee Benefits			A-12
		(i)		Compliance with Laws; Licenses			A-14
		(j)		Material Contracts			A-15
		(k)		Real Property			A-15
		(l)		Right-of-Way Agreements			A-16
		(m)		Takeover Statutes			A-16
		(n)		Environmental Matters			A-16
		(o)		Taxes			A-18
		(p)		Labor Matters			A-18
		(q)		Intellectual Property and IT Assets			A-18
		(r)		GSA Action			A-20
		(s)		Export Controls and Trade Sanctions			A-20
		(t)		Foreign Corrupt Practices Act			A-21
		(u)		Brokers and Finders			A-21
5.2.		Representations and Warranties of Parent and Merger Sub					A-21
		(a)		Organization, Good Standing and Qualification			A-21
		(b)		Capital Structure of Parent			A-22
		(c)		Capitalization of Merger Sub			A-22
		(d)		Corporate Authority; Approval and Fairness			A-22
		(e)		Governmental Filings; No Violations; Etc			A-23
		(f)		Parent Reports; Financial Statements			A-23
		(g)		Litigation and Liabilities			A-24
		(h)		Compliance with Laws			A-25
		(i)		Absence of Changes			A-25
ARTICLE VI Covenants
6.1.		Interim Operations					A-25
6.2.		Acquisition Proposals					A-30
6.3.		Information Supplied					A-31
6.4.		Shareholders Meeting; Subsidiary Preferred Stock					A-32
6.5.		Filings; Other Actions; Notification					A-32
6.6.		Access and Reports					A-34
6.7.		Publicity					A-34
6.8.		Employee Benefits					A-34
6.9.		Expenses					A-36
6.10.		Indemnification; Directors’ and Officers’ Insurance					A-36
6.11.		Takeover Statutes					A-37
6.12.		Regulatory Compliance					A-37
6.13.		Potential Sale of Interests					A-37
6.14.		Transfer Taxes					A-38
6.15.		Taxation					A-38
6.16.		Stock Exchange Listing and De-listing					A-38
6.17.		GSA Action					A-38
6.18.		Special Dividend					A-38

A-ii

---

Table of Contents

						Page
ARTICLE VII Conditions
7.1.		Conditions to Each Party’s Obligation to Effect the Merger					A-39
		(a)		Shareholder Approval			A-39
		(b)		Regulatory Consents			A-39
		(c)		Litigation			A-39
		(d)		S-4 Registration Statement			A-39
		(e)		NYSE Listing			A-39
7.2.		Conditions to Obligations of Parent and Merger Sub					A-40
		(a)		Representations and Warranties			A-40
		(b)		Performance of Obligations of the Company			A-40
		(c)		Certain Litigation			A-40
		(d)		Governmental Consents			A-40
		(e)		Consents Under Agreements			A-41
		(f)		Tax Opinion			A-41
7.3.		Conditions to Obligation of the Company					A-41
		(a)		Representations and Warranties			A-41
		(b)		Performance of Obligations of Parent and Merger Sub			A-41
		(c)		Tax Opinion			A-41
ARTICLE VIII Termination
8.1.		Termination by Mutual Consent					A-41
8.2.		Termination by Either Parent or the Company					A-42
8.3.		Termination by the Company					A-42
8.4.		Termination by Parent					A-42
8.5.		Effect of Termination and Abandonment					A-42
ARTICLE IX Miscellaneous and General
9.1.		Survival					A-43
9.2.		Modification or Amendment					A-44
9.3.		Waiver of Conditions					A-44
9.4.		Counterparts					A-44
9.5.		GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL					A-44
9.6.		Notices					A-45
9.7.		Entire Agreement					A-45
9.8.		Third Party Beneficiaries					A-45
9.9.		Obligations of Parent and of the Company					A-45
9.10.		Definitions					A-46
9.11.		Severability					A-46
9.12.		Interpretation; Construction					A-46
9.13.		Assignment					A-46
Annex A  Defined Terms							A-A-1
Exhibit A  Charter							E-1

A-iii

---

Table of Contents

A-1

---

Table of Contents

(a) Merger Consideration. (i) Each share of Common Stock, par value $1.00 per share, of the Company (a “Share” and, collectively, the “Shares”) issued and outstanding immediately prior to the Effective Time (other than (i) Shares owned by Parent or any direct or indirect Subsidiary (as defined in Section 5.1(a)) of Parent and (ii) any Shares owned by the Company or any direct or indirect Subsidiary of the Company except, in the case of clauses (i) and (ii), for any such Shares held on behalf of third parties (each, an “Excluded Share” and collectively, “Excluded Shares”)) (each such Share not constituting an Excluded Share, an “Outstanding Share” and, collectively, the “Outstanding Shares”) shall be converted into, and become exchangeable for, 0.77942 (the “Exchange Ratio”) common shares (the “Per Share Merger Consideration”), par value $1.00 per share, of Parent (“Parent Common Stock”). At the Effective Time, all of the Shares shall cease to be outstanding, shall be cancelled and retired and shall cease to exist, and each certificate (a “Certificate”) formerly representing any of the Shares (other than Excluded Shares) shall thereafter represent only the right to receive the Per Share Merger Consideration and the right, if any, to receive pursuant to Section 4.2(e) cash in lieu of fractional

A-2

---

Table of Contents

	shares into which such Shares have been converted pursuant to this Section 4.1(a) and any dividend or distribution with respect to shares of Parent Common Stock pursuant to Section 4.2(c).
	(ii) Each Substitute Preferred Share (as defined in Section 6.4(b)) issued and outstanding immediately prior to the Effective Time shall be converted into, and become exchangeable for, one Parent Preferred Share (as defined in Section 5.2(b)) having (A) a value substantially equivalent, in the judgment of Parent, to such Substitute Preferred Share as of the Effective Time, (B) such other terms as are necessary to ensure that such Parent Preferred Shares would not constitute “non-qualified preferred stock” under Section 351(g) of the Code and (C) such other terms, if any, as are reasonably necessary so that the terms of such Parent Preferred Shares do not prevent the delivery of the tax opinions set forth in Sections 7.2(f) and 7.3(c) (collectively, the “New Parent Preferred Shares”). At the Effective Time, all of the Substitute Preferred Shares shall cease to be outstanding, shall be cancelled and retired and shall cease to exist, and each certificate formerly representing such shares shall thereafter represent only the right to receive New Parent Preferred Shares in accordance with the foregoing.
	(b) Cancellation of Shares. Each Excluded Share shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, shall be cancelled and retired without payment of any consideration therefor and shall cease to exist.
	(c) Merger Sub. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation.

A-3

---

Table of Contents

A-4

---

Table of Contents

A-5

---

Table of Contents

(a) Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, validly existing, qualified or in good standing, or to have such power

A-6

---

Table of Contents

	or authority, would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (as defined below). The Company has made available to Parent complete and correct copies of the Company’s certificate of incorporation and by-laws, each as amended to date, and each as so delivered is in full force and effect. As used in this Agreement, the term (i) “Subsidiary” means, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by such Person or by one or more of its respective Subsidiaries or by such Person and any one or more of its respective Subsidiaries, provided, however, that Cingular LLC shall be considered a Subsidiary of Parent solely for purposes of Sections 5.2(a), 5.2(e), 5.2(f)(iv) (subject to the limitation set forth in Section 5.2(f)(iv)), 5.2(g), 5.2(h), 5.2(i) and 6.1(iii) (subject to the limitation set forth in Section 6.1(iii)), and (ii) “Material Adverse Effect” means (x) a material adverse effect on the financial condition, assets, liabilities, business or results of operations of the Company and its Subsidiaries taken as a whole, excluding any such effect resulting from (I) changes in political or regulatory conditions generally, (II) changes or conditions generally affecting the U.S. economy or financial markets or generally affecting any of the segments of the telecommunications industry in which the Company or any of its Subsidiaries operates or (III) the announcement or consummation of this Agreement, or (y) an effect that would prevent, materially delay or materially impair the ability of the Company to consummate the Merger and the other transactions contemplated by this Agreement. Any determination of “Material Adverse Effect” with respect to the Company shall exclude the matters set forth in Section 5.1(a) of the Company Disclosure Letter.
	(b) Capital Structure. The authorized capital stock of the Company consists of (x) 2,500,000,000 Shares, of which 799,007,457 Shares were outstanding as of the close of business on January 27, 2005, and (y) 100,000,000 preferred shares, par value $1.00 per share (the “Company Preferred Shares”), of which 2,000,000 shares were designated Subsidiary Exchangeable Preferred Stock, Series 2 (the “Subsidiary Preferred Shares”). 768,391.4 Subsidiary Preferred Shares were outstanding as of the close of business on January 28, 2005. Each of the outstanding Subsidiary Preferred Shares is held by a wholly-owned Subsidiary of the Company, and the Subsidiaries of the Company hold no other shares of capital stock of the Company, or securities or obligations convertible or exchangeable into or exercisable for such capital stock. All of the outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable. The Company has no Shares or Company Preferred Shares reserved for issuance, except that, as of January 27, 2005, there were an aggregate of 30,733,276 Shares reserved for issuance pursuant to the Company Stock Plans. Section 5.1(b) of the Company Disclosure Letter contains a correct and complete list as of December 31, 2004 of (i) the number of outstanding Company Options under each of the Company Stock Plans, the exercise prices of all Company Options and the number of Shares issuable at each such exercise price and (ii) the number of outstanding Company Awards under each of the Company Stock Plans, the date of grant and number of Shares subject thereto. From December 31, 2004 to the date hereof the Company has not issued any shares of Common Stock except pursuant to the exercise of Company Options and the settlement of Company Awards outstanding on December 31, 2004 in accordance with their terms, and except for issuances under the Company’s dividend reinvestment plan. From December 31, 2004 through the date hereof, neither the Company nor any of its Subsidiaries has granted or issued any Company Options or Company Awards. Each of the outstanding shares of capital stock or other securities of each of the Company’s Subsidiaries has been duly authorized and validly issued and is fully paid and nonassessable and, to the extent owned by the Company or by a direct or indirect wholly-owned Subsidiary of the Company, is owned free and clear of any lien, charge, pledge, security interest, claim or other encumbrance (each, a “Lien”). Except as set forth above, as of the date of this Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or

A-7

---

Table of Contents

	outstanding. Upon any issuance of any Shares in accordance with the terms of the Company Stock Plans, such Shares will be duly authorized, validly issued, fully paid and nonassessable and free and clear of any Lien. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter. Section 5.1(b) of the Company Disclosure Letter contains a true and complete list of each Person in which the Company owns, directly or indirectly, any voting interest that may require a filing by Parent or any “Affiliate” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of Parent under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
	(c) Corporate Authority; Approval and Fairness. (i) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Merger, subject only to adoption of this Agreement by the holders of a majority of the outstanding Shares entitled to vote on such matter at a shareholders’ meeting duly called and held for the purpose (the “Company Requisite Vote”). This Agreement is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “Bankruptcy and Equity Exception”).
	(ii) The Board of Directors of the Company has (A) declared that the Merger and the other transactions contemplated hereby are advisable and has adopted this Agreement; (B) received the opinions of its financial advisors, Credit Suisse First Boston Inc. and Morgan Stanley & Co. Incorporated to the effect that the Per Share Merger Consideration, together with the Special Dividend, is fair from a financial point of view to the holders of Shares (other than Excluded Shares); (C) resolved to recommend adoption of this Agreement to the holders of Shares (such recommendations being the “Directors’ Recommendation”); and (D) directed that this Agreement be submitted to the holders of Shares for their adoption.
	(d) Governmental Filings; No Violations; Certain Contracts. (i) Other than the notices, reports, filings, consents, registrations, approvals, permits or authorizations (A) pursuant to Section 1.3; (B) required under the HSR Act, European Union Council Regulation (EC) No. 139/2000 of January 20, 2004 (the “EC Merger Regulation”) (if applicable), the Securities Act and the Exchange Act; (C) with or to the Federal Communications Commission (the “FCC”); (D) with or to those State public service or public utility commissions or similar State regulatory bodies (“State Commissions”) set forth in Section 5.1(d)(i)(D) of the Company Disclosure Letter; (E) with or to those foreign Governmental Entities regulating competition and telecommunications businesses or the use of radio spectrum or regulating or limiting investment set forth in Section 5.1(d)(i)(E) of the Company Disclosure Letter; and (F) with or to those State agencies or departments or local governments that have issued competitive access provider or other telecommunications franchises or any other similar authorizations, no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company or any of its Subsidiaries from, any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity (each a “Governmental Entity”), in connection with the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated hereby, or in connection with the continuing operation of the business of the Company and its Subsidiaries following the Effective Time, except those that the failure to make or obtain would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(ii) The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of the Company or the comparable governing documents of any of its Subsidiaries; (B) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or

A-8

---

Table of Contents

	default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of the Company or any of its Subsidiaries pursuant to any agreement, lease, license, contract, note, mortgage, indenture or other legally binding obligation (a “Contract”) binding upon the Company or any of its Subsidiaries or, assuming (solely with respect to performance of this Agreement and consummation by the Company of the Merger and the other transactions contemplated hereby) compliance with the matters referred to in Section 5.1(d)(i), any Law or governmental or non-governmental permit or license to which the Company or any of its Subsidiaries is subject; or (C) any change in the rights or obligations of any party under any Material Contract (as defined in Section 5.1(j)(i)(I)) binding upon the Company or any of its Subsidiaries (including, without limitation, any change in pricing, put or call rights, rights of first offer, rights of first refusal, tag-along or drag-along rights or any similar rights or obligations which may be exercised in connection with the Merger and the other transactions contemplated hereby), except, in the case of clause (B) or (C) above, for any such breach, violation, termination, default, creation, acceleration or change that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 5.1(d)(ii) of the Company Disclosure Letter sets forth a correct and complete list of Material Contracts of the Company or any of its Subsidiaries pursuant to which consents or waivers are or may be required prior to consummation of the transactions contemplated by this Agreement.
	(iii) As of the date of this Agreement, neither the Company nor any of its Subsidiaries holds claims, as creditor or claimant, of greater than $10,000,000 with respect to any one debtor or debtor-in-possession subject to proceedings under chapter 11 of title 11 of the United States Code.
	(e) Company Reports; Financial Statements. (i) The Company has made available to Parent each registration statement, report, proxy statement or information statement prepared by it since December 31, 2003 (the “Audit Date”) and filed with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 and the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, June 30 and September 30, 2004, each in the form (including exhibits, annexes and any amendments thereto) filed with the SEC. The Company has filed or furnished all forms, statements, reports and documents required to be filed or furnished by it with the SEC pursuant to applicable securities statutes, regulations, policies and rules since the Audit Date (the forms, statements, reports and documents filed or furnished with the SEC since the Audit Date and those filed or furnished with the SEC subsequent to the date of this Agreement, if any, including any amendments thereto, the “Company Reports”). Each of the Company Reports, at the time of its filing, complied or will comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and complied in all material respects with the then applicable accounting standards. As of their respective dates (or, if amended, as of the date of such amendment), the Company Reports did not, and any Company Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The Company Reports included or will include all certificates required to be included therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended (the “SOX Act”), and the internal control report and attestation of the Company’s outside auditors required by Section 404 of the SOX Act.
	(ii) Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents, or, in the case of Company Reports filed after the date hereof, will fairly present, the consolidated financial position of the Company and any other entity included therein and their respective Subsidiaries as of its date, and each of the consolidated statements of income, changes in shareowners’ equity and cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents, or in the case of Company Reports filed after the date hereof, will fairly present, the net income, total shareowners’ equity and net increase (decrease) in cash and cash equivalents, as the case may be, of the Company and any other entity included therein and their respective Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit

A-9

---

Table of Contents

	adjustments that will not be material in amount or effect), in each case in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently applied during the periods involved, except as may be noted therein.
	(iii) The management of the Company has (x) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the management of the Company by others within those entities, and (y) has disclosed, based on its most recent evaluation, to the Company’s outside auditors and the audit committee of the Board of Directors of the Company (A) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. Since the Audit Date, any material change in internal control over financial reporting required to be disclosed in any Company Report has been so disclosed.
	(iv) Since the Audit Date, (x) neither the Company nor any of its Subsidiaries nor, to the knowledge of the officers of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls relating to periods after the Audit Date, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing after the date hereof which have no reasonable basis), and (y) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after the Audit Date, by the Company or any of its officers, directors, employees or agents to the Board of Directors of the Company or any committee thereof or, to the knowledge of the officers of the Company, to any director or officer of the Company.
	(f) Absence of Certain Changes. Since the Audit Date the Company and its Subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than in accordance with, the ordinary course of such businesses. Since the Audit Date, there has not been any Material Adverse Effect or any event, occurrence, discovery or development which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Since the Audit Date and prior to the date hereof, there has not been:

	(i) any recapitalization of the Company or any of its Subsidiaries or any merger or consolidation of the Company or any of its Subsidiaries with any other Person (other than any such transaction involving only wholly-owned Subsidiaries);
	(ii) any acquisition of any (A) business from any other Person having a value in excess of $50,000,000 or (B) assets from any other Person having a value in excess of $50,000,000 other than in the ordinary course of business consistent with past practice;
	(iii) any creation or incurrence of any material Liens on any assets used in the businesses of the Company and its Subsidiaries having an aggregate value in excess of $50,000,000;
	(iv) any making of any material loan, advance or capital contribution to, or investment in, any Person other than (A) loans, advances or capital contributions to, or investments in, wholly-owned Subsidiaries of the Company and (B) loans, advances or capital contributions to, or investments in, any other Person in an amount not in excess of $50,000,000 in the aggregate;
	(v) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock, property or any combination thereof) with respect to any shares of capital stock of the

A-10

---

Table of Contents

	Company or any of its Subsidiaries (except for the Company’s regular quarterly cash dividend and dividends or distributions by any direct or indirect wholly-owned Subsidiary to the Company or any wholly-owned Subsidiary of the Company, and except for dividends or distributions by other Subsidiaries of the Company for which the portion of such dividends or distributions not payable to a direct or indirect wholly-owned Subsidiary of the Company did not exceed $10,000,000 in value in the aggregate for all such dividends and distributions, or any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries, directly or indirectly, of any outstanding shares of capital stock or other securities of the Company or any of its Subsidiaries;
	(vi) any incurrence of indebtedness for borrowed money or issuance of any guarantee of indebtedness of another Person by the Company or any of its Subsidiaries, or issuance or sale of any debt securities or warrants or other rights to acquire any debt security of the Company or any of its Subsidiaries, in each case, other than refinancing on ordinary commercial terms and other than involving an aggregate principal amount or guaranteed amount not in excess of $50,000,000;
	(vii) any issuance of Shares or other equity securities of the Company except pursuant to the Company Stock Plans and except pursuant to the Company’s dividend reinvestment program;
	(viii) any material change with respect to accounting policies or procedures by the Company or any of its Subsidiaries, except for any such change required by changes in GAAP or by applicable Law;
	(ix) (A) any increase in the compensation payable or to become payable to its officers or employees (except for increases in the ordinary course of business and consistent with past practice in salaries or wages of employees of the Company or any of its Subsidiaries who are not among the officers of the Company for purposes of Section 16 of the Exchange Act (“Section 16 Officers”) or (B) except for the AT&T Corp. 2004 Long Term Incentive Program, any establishment, adoption, entry into or amendment of any collective bargaining, bonus, profit sharing, thrift, compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or group of employees, except to the extent required by applicable Laws;
	(x) any sale, lease, license or other disposition of any assets of the Company or its Subsidiaries, except for (A) obsolete assets and (B) sales, leases, licenses or other dispositions of assets in the ordinary course of business or for a purchase price not in excess of, or with a fair market value not in excess of, $50,000,000 in any single transaction or series of related transactions; or
	(xi) any agreement to do any of the foregoing.

	(g) Litigation and Liabilities. (i) There are no (A) civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or proceedings pending or, to the knowledge of the officers of the Company, threatened against the Company or any of its Subsidiaries or Affiliates or (B) litigations, arbitrations, investigations or other proceedings, or injunctions or final judgments relating thereto, pending or, to the knowledge of the officers of the Company, threatened against the Company or any of its Subsidiaries or Affiliates before any Governmental Entity, including, without limitation, the FCC, except in the case of either clause (A) or (B), for those that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. None of the Company or any of its Subsidiaries or Affiliates is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Entity which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(ii) There are no liabilities or obligations of the Company or any Subsidiary of the Company, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, or any other

A-11

---

Table of Contents

	facts or circumstances that would reasonably be expected to result in any obligations or liabilities of, the Company or any of its Subsidiaries, other than:

	(A) liabilities or obligations to the extent (I) reflected on the consolidated balance sheet of the Company or (II) readily apparent in the notes thereto, in each case included in the Company’s quarterly report on Form 10-Q for the period ended September 30, 2004;
	(B) liabilities or obligations incurred in the ordinary course of business since September 30, 2004;
	(C) performance obligations under contracts required in accordance with their terms, or performance obligations, to the extent required under applicable Law, in each case to the extent arising after the date hereof; or
	(D) liabilities or obligations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

	(i) All benefit and compensation plans, programs, contracts, policies or arrangements covering current or former employees of the Company and its Subsidiaries and current or former directors of the Company, including, but not limited to, the Company Stock Plans, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation rights, performance share, performance unit, incentive compensation, performance-based compensation, stock-based compensation, bonus, employment, retention, termination, severance, other compensation, medical, health, fringe benefit or other plans, programs, contracts, policies or arrangements (the “Compensation and Benefit Plans”) other than those that did not require the payment of in excess of $500,000 per annum for the year ending December 31, 2004 individually or the payment of in excess of $2,500,000 per annum for the year ending December 31, 2004 in the aggregate (unless more than 500 employees are eligible to participate in the plan, program, contract, policy or arrangement or the plan, program, contract, policy or arrangement contains a change-in-control or similar provision) are listed in Section 5.1(h)(i) of the Company Disclosure Letter, except for Compensation and Benefit Plans exclusively covering current or former employees of the Company and its Subsidiaries and current or former directors of the Company, in each case located in jurisdictions other than the United States of America (a list of which shall be provided to Parent within 30 days following the date of this Agreement) and each Compensation and Benefit Plan that has received a favorable opinion letter from the Internal Revenue National Office, including any master or prototype plan, has been separately identified. True and complete copies of all Compensation and Benefit Plans listed in Section 5.1(h)(i) of the Company Disclosure Letter, including any trust agreement or other trust instrument, insurance contract forming a part of such Compensation and Benefit Plans, and, with respect to any employee stock ownership plan, any associated loan or credit agreement, and all amendments thereto, have been made available to Parent prior to the date hereof.
	(ii) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, all Compensation and Benefit Plans are in compliance with all applicable Laws, including the Code and, to the extent applicable, ERISA. Each Compensation and Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service (the “IRS”) covering all tax law changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001, or has applied to the IRS for such favorable determination letter within the applicable remedial amendment period under Section 401(b) of the Code, and the Company is not aware of any circumstances likely to result in the loss of the qualification of such Pension Plan under Section 401(a) of the Code. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) there is no pending or, to the knowledge of the Company, threatened litigation relating to the Compensation and Benefit Plans,

A-12

---

Table of Contents

	(B) any voluntary employees’ beneficiary association within the meaning of Section 501(c)(9) of the Code which provides benefits under a Compensation and Benefit Plan has received an opinion letter from the IRS recognizing its exempt status under Section 501(c)(9) of the Code, has timely filed notice under Section 505(c) of the Code, and the Company is not aware of circumstances likely to result in the loss of such exempt status under Section 501(c)(9) of the Code, (C) neither the Company nor any of its Subsidiaries has incurred or reasonably expects to incur a tax or penalty imposed by Section 4980F of the Code or Section 502 of ERISA, and (D) neither the Company nor any of its Subsidiaries has engaged in a transaction with respect to any Compensation and Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, would subject the Company or any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
	(iii) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company or any Subsidiary with respect to any ongoing, frozen or terminated “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”). The Company and its Subsidiaries have not contributed, or been obligated to contribute, to a multiemployer plan under Subtitle E of Title IV of ERISA at any time within the past six years, and no notice of a “reportable event”, within the meaning of Section 4043 of ERISA, for which the 30-day reporting requirement has not been waived, has been required to be filed for any Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement.
	(iv) All contributions required to be made under the terms of any Compensation and Benefit Plan as of the date hereof have been timely made and all obligations in respect of each Compensation and Benefit Plan have been properly accrued and reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Company Reports to the extent required by GAAP. As of the date of this Agreement, neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its Subsidiaries has provided, or is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
	(v) Under each Pension Plan which is a single-employer plan, as of the last day of the most recent plan year ended prior to the date of this Agreement, the actuarially determined present value of all “benefit liabilities”, within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the Pension Plan’s most recent actuarial valuation), did not exceed the then current value of the assets of such Pension Plan, and there has been no material adverse change in the financial condition of such Pension Plan since the last day of the most recent plan year.
	(vi) Except as set forth in Section 5.1(h)(vi) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries has any obligations for retiree health or life benefits under any Compensation and Benefit Plan other than as required by applicable law or the continuation of health or life benefits after a severance event pursuant to any severance plan, program, arrangement or agreement.
	(vii) The consummation of the Merger and the other transactions contemplated by this Agreement will not (w) entitle any employees of the Company or its Subsidiaries to severance pay or any increase in severance pay upon any termination of employment after the date hereof; (x) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) or trigger any payment of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Compensation and Benefit Plans; (y) limit or restrict the right of the Company or, after consummation of the transactions contemplated hereby, Parent to merge, amend or terminate any of the Compensation and Benefit Plans; or (z) result in any breach or violation of, or default under, any of the Compensation and Benefit Plans.

A-13

---

Table of Contents

	(viii) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) all Compensation and Benefit Plans covering current or former non-U.S. employees of the Company and its Subsidiaries comply with applicable local Laws and (B) the Company and its Subsidiaries have no unfunded liabilities with respect to any Pension Plan that covers such non-U.S. employees and that are not set forth in the Financial Statements.
	(i) Compliance with Laws; Licenses. (i) The businesses of each of the Company and its Subsidiaries have not been conducted in violation of any federal, state, local or foreign law, statute or ordinance, common law, or any rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Entity (collectively, “Laws”), except for such violations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the officers of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for any such investigations or reviews that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Each of the Company and its Subsidiaries has obtained and is in substantial compliance with all permits, licenses, certifications, approvals, registrations, consents, authorizations, franchises, variances, exemptions and orders issued or granted by a Governmental Entity (“Licenses”) necessary to conduct its business as presently conducted, except for any failures to have or to be in compliance with such Licenses which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(ii) Each of the Company and its Subsidiaries is in compliance in all material respects with each FCC License and State License (each as defined in Section 6.1(ii) and, collectively, the “Communications Licenses”). Each of the Company and its Subsidiaries is in compliance with (A) its obligations under each of the Company Licenses (as defined in Section 6.1(ii)) and (B) the rules and regulations of the Governmental Entity issuing such Company Licenses, except for any failures to be in compliance which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. There is not pending or, to the knowledge of the officers of the Company, threatened before the FCC, the Federal Aviation Administration (“FAA”) or any other Governmental Entity any material proceeding, notice of violation, order of forfeiture or complaint or investigation against the Company or any of its Subsidiaries relating to any of the Company Licenses, except, in the case of Company Licenses other than Communications Licenses, for any of the foregoing that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The actions of the applicable Governmental Entities granting all Company Licenses have not been reversed, stayed, enjoined, annulled or suspended, and there is not pending or, to the knowledge of the officers of the Company, threatened, any material application, petition, objection or other pleading with the FCC, the FAA or any other Governmental Entity which challenges or questions the validity of or any rights of the holder under any Company License, except, in the case of Company Licenses other than Communications Licenses, for any of the foregoing that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(iii) All of the microwave paths of the Company and its Subsidiaries in respect of which a filing with the FCC or the FAA was required have been constructed and are currently operated in all respects as represented to the FCC or the FAA in currently effective filings, and modifications to such microwave paths have been preceded by the submission to the FCC or the FAA of all required filings, in each case, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(iv) Except as would not, individually or in the aggregate, reasonably be expected to result in a non-de minimis adverse effect on the operation of transmission towers by the Company and its Subsidiaries, taken as a whole, (A) all transmission towers located on property owned or leased by the Company and its Subsidiaries are obstruction-marked and lighted to the extent required by, and in accordance with, the rules and regulations of the FAA (the “FAA Rules”), and (B) appropriate notification to the FAA has been made for each transmission tower located on property owned or leased by the Company and its Subsidiaries.

A-14

---

Table of Contents

	(j) Material Contracts. (i) Except as set forth in Schedule 5.1(j)(i) of the Company Disclosure Letter, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or bound by:

	(A) any lease of real or personal property providing for annual rentals of $15,000,000 or more;
	(B) any agreement or agreements involving more than $5,000,000 individually or $10,000,000 in the aggregate to acquire (I) a License, or an interest in an entity holding a License, that upon acquisition by the Company would become a Communications License or (II) any interest in an entity that holds a License that upon acquisition of such entity by the Company would become a Foreign License;
	(C) any partnership, joint venture or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership or joint venture material to the Company or any of its Subsidiaries or in which the Company or any of its Subsidiaries owns any interest valued at more than $10,000,000 without regard to percentage voting or economic interest (unless pursuant to such agreement or arrangement the Company and its Subsidiaries do not have a future funding obligation reasonably likely to require funding of more than $15,000,000 in the aggregate);
	(D) any Contract (other than among direct or indirect wholly-owned Subsidiaries of the Company) relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of $50,000,000;
	(E) any Contract required to be filed as an exhibit to the Company’s Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;
	(F) any non-competition Contract or other Contract that (I) purports to limit in any material respect either the type of business in which the Company or its Subsidiaries (or, after the Effective Time, Parent or its Affiliates) may engage or the manner or locations in which any of them may so engage in any business or (II) could require the disposition of any material assets or line of business of the Company or its Subsidiaries or, after the Effective Time, Parent or its Affiliates;
	(G) any Contract (other than (I) a Contract with respect to compensation or similar arrangements not involving a director of the Company or one of the Section 16 Officers and (II) any Contract entered into in the ordinary course of business) between the Company or any of its Subsidiaries and any director or officer of the Company or any Person beneficially owning, as of the date hereof, five percent or more of the outstanding Shares;
	(H) any Contract that contains a put, call or similar right pursuant to which the Company or any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any Person or assets that have a fair market value or purchase price of more than $25,000,000; and
	(I) any other Contract or group of Contracts with a single counterparty that, if terminated or subject to a default by any party thereto, would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (the Contracts described in clauses (A) – (I), together with all exhibits and schedules to such Contracts, being the “Material Contracts”).

	(ii) A true and complete copy of each Material Contract has previously been delivered or made available to Parent (subject to applicable confidentiality restrictions) and each such Contract is a valid and binding agreement of the Company or one of its Subsidiaries, as the case may be, and is in full force and effect, and neither the Company nor any of its Subsidiaries nor, to the knowledge of the officers of the Company, any other party thereto is in material default or breach under the terms of any such Material Contract.
	(k) Real Property. (i) Except in any such case as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, with respect to the real property owned by

A-15

---

Table of Contents

	the Company or its Subsidiaries (the “Owned Real Property”), (A) the Company or one of its Subsidiaries, as applicable, has good and marketable title to the Owned Real Property, free and clear of any Encumbrance, and (B) there are no outstanding options or rights of first refusal to purchase the Owned Real Property, or any portion thereof or interest therein.
	(ii) With respect to the real property leased or subleased to the Company or its Subsidiaries (the “Leased Real Property”), (A) the lease or sublease for such property is valid, legally binding, enforceable and in full force and effect, and none of the Company or any of its Subsidiaries is in breach of or default under such lease or sublease, and no event has occurred which, with notice, lapse of time or both, would constitute a breach or default by any of the Company or its Subsidiaries or permit termination, modification or acceleration by any third party thereunder, and (B) no third party has repudiated or has the right to terminate or repudiate such lease or sublease (except for the normal exercise of remedies in connection with a default thereunder or any termination rights set forth in the lease or sublease) or any provision thereof, except in each case, for such invalidity, failures to be binding, unenforceability, ineffectiveness, breaches, defaults, terminations, modifications, accelerations, repudiations and rights to terminate or repudiate that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
	(iii) For purposes of this Section 5.1(k) only, “Encumbrance” means any mortgage, lien, pledge, charge, security interest, easement, covenant, or other restriction or title matter or encumbrance of any kind in respect of such asset except for (A) specified encumbrances described in Section 5.1(k)(iii) of the Company Disclosure Letter; (B) encumbrances for current Taxes or other governmental charges not yet due and payable; (C) mechanics’, carriers’, workmen’s, repairmen’s or other like encumbrances arising or incurred in the ordinary course of business consistent with past practice relating to obligations as to which there is no default on the part of Company, or the validity or amount of which is being contested in good faith by appropriate proceedings; and (D) other encumbrances that do not, individually or in the aggregate, materially impair the continued use, operation, value or marketability of the specific parcel of Owned Real Property or Leased Real Property to which they relate or the conduct of the business of the Company and its Subsidiaries as presently conducted.
	(l) Right-of-Way Agreements. (i) Except in any such case as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) each right-of-way agreement, license agreement or other agreement permitting or requiring the Company or any of its Subsidiaries to lay, build, operate, maintain or place cable, wires, conduits or other equipment and facilities over land or underground (each, a “Right-of-Way Agreement”) is valid, legally binding, enforceable and in full force and effect, and none of the Company or any of its Subsidiaries is in breach of or default under any Right-of-Way Agreement, (B) no event has occurred which, with notice or lapse of time, would constitute a breach or default by any of the Company or its Subsidiaries or permit termination, modification or acceleration by any third party thereunder and (C) no third party has repudiated or has the right to terminate or repudiate any Right-of-Way Agreement.
	(ii) To the knowledge of the officers of the Company, the Company is not in violation of any Laws which, individually or in combination with any others, would materially and adversely affect the ability of the Company or any of its Subsidiaries to use any of the rights associated with the Right-of-Way Agreements, taken as a whole, in the manner and scope in which such rights are now being used.
	(m) Takeover Statutes. No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation (each a “Takeover Statute”) is applicable to the Company, the Shares, the Merger or the other transactions contemplated by this Agreement. The Board of Directors of the Company has taken all action so that Parent will not be prohibited from entering into a “business combination” with the Company or any of its Affiliates as an “interested shareholder” (in each case as such term is used in Section 912 of the NYBCL) as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby.
	(n) Environmental Matters. Except for such matters as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (i) the Company and its

A-16

---

Table of Contents

	Subsidiaries have complied at all times with all applicable Environmental Laws (as defined below); (ii) no property currently owned, leased or operated by the Company or any of its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) is contaminated with any Hazardous Substance (as defined below) in a manner that is or could be required to be Remediated or Removed (as such terms are defined below), that is in violation of any Environmental Law, or that is reasonably likely to give rise to any Environmental Liability; (iii) the Company and its Subsidiaries have no information that any property formerly owned, leased or operated by the Company or any of its Subsidiaries was contaminated with any Hazardous Substance during or prior to such period of ownership, leasehold, or operation; (iv) neither the Company nor any of its Subsidiaries nor any prior owner or operator has incurred in the past or is now subject to any Environmental Liabilities (as defined below); (v) neither the Company nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that the Company or any of its Subsidiaries may be in violation of or subject to liability under any Environmental Law; (vi) neither the Company nor any of its Subsidiaries is subject to any order, decree, injunction or agreement with any Governmental Entity, or any indemnity or other agreement with any third party, concerning liability or obligations relating to any Environmental Law or otherwise relating to any Hazardous Substance or any environmental, health or safety matter; and (vii) there are no other circumstances or conditions involving the Company or any of its Subsidiaries that could reasonably be expected to result in any Environmental Liability.
	As used herein, the term “Environmental Laws” means all Laws (including any common law) relating to: (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, Release or threatened release of any Hazardous Substance or (C) noise, odor, indoor air, employee exposure, electromagnetic fields, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Substance.
	As used herein, the term “Environmental Liability” means (i) any obligations or liabilities (including any notices, claims, complaints, suits or other assertions of obligations or liabilities) that are: (A) related to environment, health or safety issues (including on-site or off-site contamination by Hazardous Substances of surface or subsurface soil or water, and occupational safety and health); and (B) based upon (I) any provision of Environmental Laws or (II) any order, consent, decree, writ, injunction or judgment issued or otherwise imposed by any Governmental Entity. The term “Environmental Liabilities” includes, without limitation: (A) fines, penalties, judgments, awards, settlements, losses, damages (including consequential damages), costs, fees (including attorneys’ and consultants’ fees), expenses and disbursements relating to environmental, health or safety matters; (B) defense and other responses to any administrative or judicial action (including notices, claims, complaints, suits and other assertions of liability) relating to environmental, health or safety matters; and (C) financial responsibility for (x) cleanup costs and injunctive relief, including any Removal, Remedial or Response actions, and natural resource damages, and (y) other Environmental Laws compliance or remedial measures.
	As used herein, the term “Hazardous Substance” means any “hazardous substance” and any “pollutant or contaminant” as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”); any “hazardous waste” as that term is defined in the Resource Conservation and Recovery Act (“RCRA”); and any “hazardous material” as that term is defined in the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), as amended (including as those terms are further defined, construed, or otherwise used in rules, regulations, standards, orders, guidelines, directives, and publications issued pursuant to, or otherwise in implementation of, said Laws); and including, without limitation, any petroleum product or byproduct, solvent, flammable or explosive material, radioactive material, asbestos, lead paint, polychlorinated biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon gas, mold, mold spores, and mycotoxins.
	As used herein, the term “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, placing, discarding, abandonment, or

A-17

---

Table of Contents

	disposing into the environment (including the placing, discarding or abandonment of any barrel, container or other receptacle containing any Hazardous Substance or other material).
	As used herein, the term “Removal, Remedial or Response” actions include the types of activities covered by CERCLA, RCRA, and other comparable Environmental Laws, and whether such activities are those which might be taken by a Governmental Entity or those which a Governmental Entity or any other person might seek to require of waste generators, handlers, distributors, processors, users, storers, treaters, owners, operators, transporters, recyclers, reusers, disposers, or other persons under “removal,” “remedial,” or other “response” actions.
	(o) Taxes. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: the Company and each of its Subsidiaries (i) have prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all Tax Returns (as defined below) required to be filed by any of them and all such filed Tax Returns are complete and accurate in all material respects; and (ii) have paid all Taxes (as defined below) that are required to be paid or that the Company or any of its Subsidiaries are obligated to withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith or for which adequate reserves have been established. As of the date hereof, except as would not, individually or in the aggregate, reasonably be expected to result in an increase in Taxes that is material to the Company, there are no audits, examinations, investigations or other proceedings, in each case, pending or threatened in writing, in respect of Taxes or Tax matters. The Company has made available to Parent true and correct copies of the United States federal income Tax Returns filed by the Company and its Subsidiaries for each of the fiscal years ended December 31, 2003, 2002, 2001 and 2000. None of the Company or its Subsidiaries has been a “distributing corporation” or “controlled corporation” in any distribution occurring during the last 30 months that was purported or intended to be governed by Section 355 of the Code (or any similar provision of state, local or foreign law).
	As used in this Agreement, (i) the term “Tax” (including, with correlative meaning, the term “Taxes”) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.
	(p) Labor Matters. Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement or other Contract with a labor union or labor organization, nor (except for proceedings involving individual employees arising in the ordinary course of business) is the Company or any of its Subsidiaries the subject of any material proceeding asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or seeking to compel it to bargain with any labor union or labor organization. There is not pending or, to the knowledge of the officers of the Company, threatened, nor has there been for the past five years, any labor strike, dispute, walk-out, work stoppage, slow-down or lockout involving more than 100 employees of the Company or any of its Subsidiaries. To the knowledge of the officers of the Company, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving more than 100 employees of the Company or any of its Subsidiaries.
	(q) Intellectual Property and IT Assets. Except for such matters as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect:

	(i) All patents, patent applications, trademark and copyright registrations and applications for registration, and Internet domain name registrations claimed to be owned by the Company are owned exclusively by the Company and are valid, subsisting and, to the knowledge of the officers of the Company, enforceable.

A-18

---

Table of Contents

	(ii) The Company and/or each of its Subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all Intellectual Property necessary to conduct the business of the Company and its Subsidiaries as currently conducted, all of which rights shall survive unchanged the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereunder.
	(iii) The conduct of the business as currently conducted by the Company and its Subsidiaries and for the three (3) year period immediately preceding the date of this Agreement does not and did not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third Person. There is no claim, action or proceeding asserted, or to the knowledge of the officers of the Company threatened, against the Company or its Subsidiaries or any indemnities thereof concerning the ownership, validity, registerability, enforceability, infringement, use or licensed right to use any Intellectual Property claimed to be owned or held by the Company or its Subsidiaries or used or alleged to be used in the business of the Company or its Subsidiaries.
	(iv) To the knowledge of the officers of the Company, no third Person has for the three (3) year period immediately preceding the date of this Agreement infringed, misappropriated or otherwise violated the Intellectual Property rights of the Company or its Subsidiaries. There are no claims, actions or proceedings asserted or threatened by the Company, or decided by the Company to be asserted or threatened, that (A) a third Person infringes, misappropriates or otherwise violates, or for the three (3) year period immediately preceding the date of this Agreement infringed, misappropriated or otherwise violated, the Intellectual Property rights of the Company or its Subsidiaries; or (B) a third Person’s owned or claimed Intellectual Property interferes with, infringes, dilutes or otherwise harms the Intellectual Property rights of the Company or its Subsidiaries.
	(v) The Company and its Subsidiaries have taken reasonable measures to protect the confidentiality of all material Trade Secrets that are owned, used or held by the Company and its Subsidiaries and, to the knowledge of the officers of the Company, such material Trade Secrets have not been used, disclosed to or discovered by any Person except pursuant to valid and appropriate non-disclosure and/or license agreements which have not been breached.
	(vi) The IT Assets of the Company and its Subsidiaries operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required by the Company and its Subsidiaries for the operation of their respective businesses, and have not malfunctioned or failed within the three (3) year period immediately preceding the date of this Agreement. To the knowledge of the officers of the Company, no Person has gained unauthorized access to such IT Assets. The Company and its Subsidiaries have implemented and maintained for the three (3) year period immediately preceding the date of this Agreement reasonable and sufficient backup and disaster recovery technology consistent with industry practices.
	As used herein,
	(1) “Computer Software” means all computer software and databases (including, without limitation, source code, object code, and all related documentation).
	(2) “Intellectual Property” means, collectively, all United States and foreign (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same (collectively, “Trademarks”); (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues (collectively, “Patents”); (iii) trade secrets and confidential information and know-how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists (collectively,

A-19

---

Table of Contents

	“Trade Secrets”); (iv) published and unpublished works of authorship, whether copyrightable or not (including without limitation Computer Software and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, “Copyrights”); (v) moral rights, rights of publicity and rights of privacy; and (vi) all other intellectual property or proprietary rights.
	(3) “IT Assets” means computers, Computer Software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment and elements, and all associated documentation.

	(r) GSA Action. The Company is not subject to any debarment or suspension and has not received any notice that would reasonably be expected to result in a debarment or suspension (any of the foregoing, a “GSA Action”) from the United States General Services Administration with respect to the provision of services by the Company or any of its Subsidiaries to any United States Federal Governmental Entity.
	(s) Export Controls and Trade Sanctions. Except for such matters as would not, individually or in the aggregate, reasonably be expected to impair materially the Company’s and its Subsidiaries’ ability to engage in material export operations:

	(i) The Company and its Affiliates have complied with all statutory and regulatory requirements relating to export controls and trade sanctions under the Laws of the United States, as well as applicable Laws of each jurisdiction in which the Company or its Affiliates are doing business, including, without limitation, the International Traffic in Arms Regulations, the Export Administration Regulations, antiboycott provisions, regulations administered by the Office of Foreign Assets Control, and provisions under the Foreign Corrupt Practices Act.
	(ii) The Company and its Affiliates have developed and implemented an export control and trade sanctions compliance program which includes corporate policies and procedures to ensure compliance with applicable government export control and trade sanctions statutes, regulations, and other obligations, including obtaining licenses or other authorizations as required for access by foreign nationals in the U.S. to controlled technology.
	(iii) In connection with its export control and trade sanctions matters, there are no adverse or negative past performance evaluations or ratings by the U.S. Government, or any voluntary disclosures under the export control and trade sanctions Laws, any enforcement actions or threats of enforcement actions, or, to the knowledge of the officers of the Company, any facts that could result in any adverse or negative performance evaluation that, in each case, could affect the evaluation of the Company’s or its Affiliates’ (or their successors’) obtaining approval for future export activity.
	(iv) Neither the U.S. Government nor any other Person has notified the Company or any of its Affiliates in writing of any actual or alleged violation or breach of any statute, regulation, representation, certification, disclosure obligation, licensing obligation or other authorization or provision relating to export controls or trade sanctions.
	(v) None of the Company or its Affiliates has undergone or is undergoing any audit, review, inspection, investigation, survey or examination of records relating to the Company’s or any of its Affiliates’ export activity that would, individually or in the aggregate, reasonably be expected to affect adversely its future export activity, and, to the knowledge of the officers of the Company, there is no basis for any such audit, review, inspection, investigation, survey or examination of records.
	(vi) The Company and its Affiliates have not been and are not now under any administrative, civil or criminal investigation or indictment involving alleged false statements, false claims or other improprieties relating to the Company’s or any of its Affiliates’ export activity, nor, to the knowledge of the officers of the Company, is there any basis for any such investigation or indictment.
	(vii) The Company and its Affiliates have not been and are not now a party to any administrative or civil litigation involving alleged false statements, false claims or other improprieties

A-20

---

Table of Contents

	relating to the Company’s or any of its Affiliates’ export activity, nor, to the knowledge of the officers of the Company, is there any basis for any such proceeding.

	(t) Foreign Corrupt Practices Act. Except for such matters as would not, individually or in the aggregate, reasonably be expected to result in a material adverse impact on the ability of the Company and its Subsidiaries to conduct their operations in the ordinary course of business:

	(i) The Company and its Affiliates have developed and implemented a Foreign Corrupt Practices Act compliance program which includes corporate policies and procedures to ensure compliance with the Foreign Corrupt Practices Act.
	(ii) In connection with its compliance with the Foreign Corrupt Practices Act, there are no adverse or negative past performance evaluations or ratings by the U.S. Government, or any voluntary disclosures under the Foreign Corrupt Practices Act, any enforcement actions or threats of enforcement actions, or any facts that, in each case, could result in any adverse or negative performance evaluation related to the Foreign Corrupt Practices Act.
	(iii) Neither the U.S. Government nor any other Person has notified the Company or any of its Affiliates in writing of any actual or alleged violation or breach of the Foreign Corrupt Practices Act.
	(iv) None of the Company or its Affiliates has undergone and is undergoing any audit, review, inspection, investigation, survey or examination of records relating to the Company’s or any of its Affiliates’ compliance with the Foreign Corrupt Practice Act, and, to the knowledge of the officers of the Company, there is no basis for any such audit, review, inspection, investigation, survey or examination of records.
	(v) The Company and its Affiliates have not been and are not now under any administrative, civil or criminal investigation, charge or indictment involving alleged false statements, false claims or other improprieties relating to the Company’s or any of its Affiliates’ compliance with the Foreign Corrupt Practices Act, nor, to the knowledge of the officers of the Company, is there any basis for any such investigation or indictment.
	(vi) None of the Company or its Affiliates has been and is not now a party to any administrative or civil litigation involving alleged false statements, false claims or other improprieties relating to the Company’s or any of its Affiliates’ compliance with the Foreign Corrupt Practices Act, nor, to the knowledge of the officers of the Company, is there any basis for any such proceeding.

(u) Brokers and Finders. Neither the Company nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders, fees in connection with the Merger or the other transactions contemplated in this Agreement, except that the Company has employed Credit Suisse First Boston Inc. and Morgan Stanley & Co. Incorporated as its financial advisors, and copies of the engagement letters with such financial advisors have been provided to Parent prior to the date hereof.

(a) Organization, Good Standing and Qualification. Each of Parent and Merger Sub is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be

A-21

---

Table of Contents

	so organized, validly existing, qualified or in good standing, or to have such power or authority, would not, individually or in the aggregate, reasonably be expected (x) to result in a material adverse effect on the financial condition, assets, liabilities, business or results of operations of Parent and its Subsidiaries (with respect to Cingular LLC and its Subsidiaries, including only Parent’s interest therein) taken as a whole, excluding any such effect resulting from (I) changes in political or regulatory conditions generally, (II) changes or conditions generally affecting the U.S. economy or financial markets or generally affecting any of the segments of the telecommunications industry in which Parent or any of its Subsidiaries operates or (III) the announcement or consummation of this Agreement, or (y) to prevent, materially delay or materially impair the ability of Parent and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement (a “Parent Material Adverse Effect”). Parent has made available to the Company a complete and correct copy of the certificate of incorporation and by-laws of Parent and Merger Sub, each as in effect on the date of this Agreement.
	(b) Capital Structure of Parent. The authorized capital stock of Parent consists of 7,000,000,000 shares of Parent Common Stock, of which 3,302,815,078 shares were outstanding as of the close of business on January 28, 2005, and 10,000,000 preferred shares, par value $1.00 per share (the “Parent Preferred Shares”), of which no shares were authorized for issuance or outstanding as of the close of business on January 28, 2005. All of the outstanding shares of Parent Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. Parent has no shares of Parent Common Stock or Parent Preferred Shares reserved for issuance. As of January 28, 2005, Parent has no more than 330,000,000 shares of Parent Common Stock authorized for issuance pursuant to employee or director benefit plans (the “Parent Stock Plans”). Except as set forth above, as of the date of this Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate Parent to issue or sell any shares of capital stock or other securities of Parent or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of Parent, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Parent does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter. All shares of Parent Common Stock to be issued in the Merger will be, when issued in accordance with the terms of this Agreement, duly authorized and validly issued, fully paid and nonassessable and free and clear of all Liens.
	(c) Capitalization of Merger Sub. The authorized capital stock of Merger Sub consists solely of 1,000 shares of Common Stock, par value $0.01 per share, all of which are validly issued and outstanding. All of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly-owned Subsidiary of Parent. Merger Sub has not conducted any business prior to the date hereof and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Merger and the other transactions contemplated by this Agreement.
	(d) Corporate Authority; Approval and Fairness. (i) No vote of holders of capital stock of Parent is necessary to approve this Agreement and the Merger and the other transactions contemplated hereby. Each of Parent and Merger Sub has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Merger. This Agreement is a valid and binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.
	(ii) (A) The Board of Directors of each of Parent and Merger Sub has declared that the Merger and the other transactions contemplated hereby are advisable, the Board of Directors of Parent has approved this Agreement and the Board of Directors of Merger Sub has adopted this Agreement; and (B) Parent has received the opinion of its financial advisors, Lehman Brothers Inc. and Evercore Partners

A-22

---

Table of Contents

	Inc., to the effect that the Per Share Merger Consideration, together with the Special Dividend, is fair from a financial point of view to Parent.
	(e) Governmental Filings; No Violations; Etc. (i) Other than the reports, filings, registrations, consents, approvals, permits, authorizations and/or notices (A) pursuant to Section 1.3; (B) under the HSR Act, EC Merger Regulation (if applicable), the Securities Act and the Exchange Act; (C) with or to the FCC; (D) with or to the State Commissions set forth in Section 5.2(e)(i)(D) of the Parent Disclosure Letter; and (E) with or to those foreign Governmental Entities regulating competition and telecommunications businesses set forth in Section 5.2(e)(i)(E) of the Parent Disclosure Letter, no notices, reports or other filings are required to be made by Parent with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent or any of its Subsidiaries from, any Governmental Entity in connection with the execution, delivery and performance of this Agreement by Parent and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, except those that the failure to make or obtain would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.
	(ii) The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of Parent or Merger Sub; (B) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or a default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of Parent or any of its Subsidiaries pursuant to any material Contract binding upon Parent or any of its Subsidiaries or, assuming (solely with respect to performance of this Agreement and consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby) compliance with the matters referred to in Section 5.2(e)(i), any Law or governmental or non-governmental permit or license to which Parent or any of its Subsidiaries is subject; or (C) any change in the rights or obligations of any party under any of such material Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, termination, default, creation, acceleration or change that would not, individually or in the aggregate, reasonably be expected to prevent the ability of Parent or Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement.
	(f) Parent Reports; Financial Statements. (i) Parent has made available to the Company each registration statement, report, proxy statement or information statement prepared by it since December 31, 2003 (the “Parent Audit Date”) and filed with the SEC, including Parent’s Annual Report on Form 10-K for the year ended December 31, 2003 and Parent’s Quarterly Reports on Form  10-Q for the quarterly periods ending March 31, June 30 and September 30, 2004, each in the form (including exhibits, annexes and any amendments thereto) filed with the SEC. Parent has filed or furnished all forms, statements, reports and documents required to be filed or furnished by it with the SEC pursuant to applicable securities statutes, regulations, policies and rules since the Parent Audit Date (the forms, statements, reports and documents filed or furnished with the SEC since the Parent Audit Date and those filed or furnished with the SEC subsequent to the date of this Agreement, if any, including any amendments thereto, the “Parent Reports”). Each of the Parent Reports, at the time of its filing, complied or will comply in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and complied in all material respects with the then applicable accounting standards. As of their respective dates (or, if amended, as of the date of such amendment), the Parent Reports did not, and any Parent Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The Parent Reports included or will include all certificates required to be included therein pursuant to Sections 302 and 906 of the SOX Act, and the internal control report and attestation of Parent’s outside auditors required by Section 404 of the SOX Act.
	(ii) Each of the consolidated balance sheets included in or incorporated by reference into the Parent Reports (including the related notes and schedules) fairly presents, or, in the case of Parent Reports filed

A-23

---

Table of Contents

	after the date hereof, will fairly present the consolidated financial position of Parent and any other entity included therein and their respective Subsidiaries as of its date and each of the consolidated statements of income, shareowners’ equity and cash flows included in or incorporated by reference into the Parent Reports (including any related notes and schedules) fairly presents, or in the case of Parent Reports filed after the date hereof, will fairly present, the net income, total shareowners’ equity and net increase in cash and cash equivalents, as the case may be, of Parent and any other entity included therein and their respective Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein.
	(iii) The management of Parent has (x) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to Parent, including its consolidated Subsidiaries, is made known to the management of Parent by others within those entities, and (y) has disclosed, based on its most recent evaluation, to Parent’s outside auditors and the audit committee of the Board of Directors of Parent (A) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls over financial reporting. Since the Audit Date, any material change in internal control over financial reporting required to be disclosed in any Parent Report has been so disclosed.
	(iv) Since the Audit Date, (x) neither Parent nor any of its Subsidiaries nor, to the knowledge of the officers of Parent, any director, officer, employee, auditor, accountant or representative of Parent or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Parent or any of its Subsidiaries or their respective internal accounting controls relating to periods after the Audit Date, including any material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing after the date hereof which have no reasonable basis), and (y) no attorney representing Parent or any of its Subsidiaries, whether or not employed by Parent or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after the Audit Date, by Parent or any of its officers, directors, employees or agents to the Board of Directors of Parent or any committee thereof or, to the knowledge of the officers of Parent, to any director or officer of Parent; provided, however, that with respect to Cingular LLC and its Subsidiaries all of the representations and warranties in this Section 5.2(f)(iv) shall be only to the knowledge of the officers of Parent.
	(g) Litigation and Liabilities. (i) As of the date of this Agreement, there are no civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or proceedings pending or, to the knowledge of the officers of Parent, threatened against Parent or Merger Sub that seek to enjoin, or would reasonably be expected to have the effect of preventing, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement, except as would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect. There are no (A) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the officers of Parent, threatened against Parent or its Subsidiaries or Affiliates or (B) litigations, arbitrations, investigations or other proceedings, or injunctions or final judgments relating to, pending or, to the knowledge of the officers of Parent, threatened against Parent or any of its Subsidiaries before any Governmental Entity, including without limitation the FCC, except in the case of either clause (A) or (B), for those that would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect. None of Parent or any of its Subsidiaries or Affiliates is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award

A-24

---

Table of Contents

	of any Governmental Entity which would, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.
	(ii) There are no liabilities or obligations of Parent or any Subsidiary of Parent, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, or any other facts or circumstances that would reasonably be expected to result in any obligations or liabilities of, Parent or any of its Subsidiaries, other than:

	(A) liabilities or obligations to the extent (I) reflected on the consolidated balance sheet of Parent or (II) readily apparent in the notes thereto, in each case included in Parent’s quarterly report on Form 10-Q for the period ended September 30, 2004;
	(B) liabilities or obligations incurred in the ordinary course of business since September 30, 2004;
	(C) performance obligations under contracts required in accordance with their terms, or performance obligations, to the extent required under applicable Law, in each case to the extent arising after the date hereof; or
	(D) liabilities or obligations that would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.

	(h) Compliance with Laws. The businesses of each of Parent and its Subsidiaries have not been conducted in violation of any Laws, except for such violations that would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect. No investigation or review by any Governmental Entity with respect to Parent or any of its Subsidiaries is pending or, to the knowledge of the officers of Parent, threatened, except for any such investigations or reviews that would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect. Each of Parent and its Subsidiaries has obtained and is in substantial compliance with all Licenses necessary to conduct its business as presently conducted, except those the absence of which would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.
	(i) Absence of Changes. Since the Audit Date, Parent and its Subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than in accordance with, the ordinary course of such businesses. Since the Audit Date, there has not been any Parent Material Adverse Effect or any event, occurrence, discovery or development which would, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.

A-25

---

Table of Contents

	(a) adopt or propose any change in its certificate of incorporation or by-laws or other applicable governing instruments or amend any term of the Shares;
	(b) merge or consolidate the Company or any of its Subsidiaries with any other Person, except for any such transactions among wholly-owned Subsidiaries of the Company that are not obligors or guarantors of third-party indebtedness, or adopt a plan of liquidation;
	(c) acquire assets outside of the ordinary course of business from any other Person with a value or purchase price in excess of $100,000,000 in the aggregate, other than acquisitions pursuant to Contracts to the extent in effect immediately prior to the execution of this Agreement and as otherwise set forth in Section 6.1(i)(c) of the Company Disclosure Letter, and other than capital expenditures within the Company’s capital expenditure budget as set forth in Section 6.1(i)(l) of the Company Disclosure Letter;
	(d) (i) enter into any material line of business in any geographic area other than the current lines of business of the Company or any of its Subsidiaries, and in the geographic areas where they are currently conducted, as of the date hereof or (ii) engage in the conduct of any business in any state which would require the receipt or transfer of a Communications License or foreign country that would require the receipt or transfer of a Company License, in each case other than as expressly permitted by Section 6.1(i)(d) of the Company Disclosure Letter and other than as would not prevent or delay consummation of the Merger;
	(e) file for any Company License outside of the ordinary course of business, other than in connection with any acquisition permitted under clause (c) hereof and other than as would not prevent or delay consummation of the Merger;
	(f) other than as set forth in Section 6.1(i)(f) of the Company Disclosure Letter and other than the issuance of shares pursuant to Company Stock Plans or pursuant to the Company’s dividend reinvestment program, issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of the Company or any its Subsidiaries (other than the issuance of shares by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary), or securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or other rights of any kind to acquire any shares of such capital stock or such convertible or exchangeable securities;
	(g) other than in connection with existing receivables facilities and securitizations and renewals thereof in the ordinary course of business, or in connection with the refinancing of the Company’s indebtedness under its existing credit facility, create or incur any Lien material to the Company or any of its Subsidiaries on any assets of the Company or any of its Subsidiaries having a value in excess of $50,000,000;
	(h) make any loans, advances or capital contributions to or investments in any Person (other than the Company or any direct or indirect wholly-owned Subsidiary of the Company) in excess of $25,000,000 in the aggregate;
	(i) declare, set aside or pay any dividend or distribution (whether in cash, stock or property or any combination thereof) on (i) any shares of Company Common Stock other than pursuant to Section 6.18 of this Agreement or the Company’s regular quarterly dividend of $.2375 per share in cash per quarter at record and payment dates consistent with past practices, provided that the Company shall designate the record dates for the Company’s quarterly dividends to coincide with the record dates for Parent’s quarterly dividends set forth on Section 6.1(i) of the Parent Disclosure Letter, beginning with the record

A-26

---

Table of Contents

	date on July 10, 2005, or (ii) any shares of capital stock of any Subsidiary (other than wholly-owned Subsidiaries and pro rata dividends payable to holders of interests in non wholly-owned Subsidiaries);
	(j) reclassify, split, combine, subdivide or repurchase, redeem or otherwise acquire, directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock;
	(k) incur any indebtedness for borrowed money or guarantee such indebtedness of another Person, or issue or sell any debt securities or warrants or other rights to acquire any debt security of the Company or any of its Subsidiaries, except for (i) indebtedness for borrowed money incurred in the ordinary course of business not to exceed $100,000,000 in the aggregate, (ii) indebtedness for borrowed money in replacement of existing indebtedness for borrowed money on customary commercial terms, (iii) guarantees by the Company of indebtedness of wholly-owned Subsidiaries of the Company or guarantees by Subsidiaries of indebtedness of the Company, or (iv) interest rate swaps on customary commercial terms consistent with past practice and not to exceed $100,000,000 of notional debt in the aggregate in addition to notional debt currently under swap or similar arrangements;
	(l) except as set forth in Section 6.1(i)(l) of the Company Disclosure Letter, make or authorize any capital expenditure;
	(m) other than in the ordinary course of business, enter into any Contract that would have been a Material Contract had it been entered into prior to the date of this Agreement (other than as permitted by Section 6.1(i)(d), (e) or (k));
	(n) make any changes with respect to accounting policies or procedures, except as required by changes in GAAP or by applicable Law or except as the Company, based upon the advice of its independent auditors after consultation with Parent, determines in good faith is advisable to conform to best accounting practices;
	(o) settle any litigation or other proceedings before or threatened to be brought before a Governmental Entity for an amount to be paid by the Company or any of its Subsidiaries in excess of $50,000,000 or which would be reasonably likely to have any adverse impact on the operations of the Company or any of its Subsidiaries; provided that with respect to any Federal income tax audit of the Company and its consolidated Subsidiaries, such audit may be settled without regard to the foregoing $50,000,000 limitation; and provided, further, that with respect to such Federal audit, the Company shall consult with Parent at least 30 business days prior to the issuance of a Revenue Agent Report or an agreement with respect to a final settlement in appeals, although the final determination of such matters shall be in the sole discretion of the Company; and provided, further, that any amount of Taxes for which the Company reasonably believes that another Person will indemnify the Company pursuant to such Person’s obligations under the tax sharing agreements listed in Section 6.1(i)(q) of the Company Disclosure Letter shall not be considered as an amount paid in settlement of a litigation or other proceeding for purposes of this Section 6.1(i)(o);
	(p) other than in the ordinary course of business, (i) amend or modify in any material respect, or terminate or waive any material right or benefit under, any Material Contract (other than as permitted by Section 6.1(i)(d), (e) or (k)), or (ii) cancel, modify or waive any debts or claims held by it or waive any rights having in each case a value in excess of $25,000,000;
	(q) except as required by Law or by any currently effective tax sharing agreement listed in Section 6.1(i)(q) of the Company Disclosure Letter, make any material Tax election or take any material position on any material Tax Return filed on or after the date of this Agreement or adopt any method therefor that is inconsistent with elections made, positions taken or methods used in preparing or filing similar Tax Returns in prior periods. Anything in this Section 6.1(q) to the contrary notwithstanding, with respect to methods of accounting and elections referred to on Section 6.1(q) of the Company Disclosure Letter, the Company shall consult with Parent, although the final determination of the positions taken or the elections made shall be in the sole discretion of the Company.

A-27

---

Table of Contents

	(r) sell, lease, license or otherwise dispose of any assets of the Company or its Subsidiaries except (i) in the ordinary course of business or obsolete assets or (ii) sales, leases, licenses or other dispositions of assets with a fair market value not in excess of $50,000,000 in respect of any one asset and not in excess of $100,000,000 in the aggregate other than (x) as set forth in Section 6.1(i)(r) of the Company Disclosure Letter and (y) any dispositions of assets to the extent used as consideration for acquisitions that are permitted pursuant to Section 6.1(i)(c);
	(s) except as required pursuant to existing written, binding agreements in effect prior to the date of this Agreement or as otherwise required by applicable Law, (i) enter into any commitment to provide any severance or termination benefits to (or amend any existing arrangement with) any director, officer or employee of the Company or any of its Subsidiaries, other than for severance or termination benefits to employees (other than Section 16 Officers) in the ordinary course of business consistent with past practice and pursuant to the terms of plans, programs or arrangements in effect prior to the date of this Agreement and disclosed on Section 5.1(h) of the Company Disclosure Letter, (ii) increase the benefits payable under any existing severance or termination benefit policy or employment agreement (other than as required to be increased pursuant to the existing terms of any such policy or agreement or as a result of ordinary pay raises or promotions), (iii) enter into any employment severance, change in control, termination, deferred compensation or other similar agreement (or amend any such existing agreement) with any director, officer or employee of the Company or any of its Subsidiaries other than pursuant to the terms of any Compensation or Benefit Plan in effect on the date hereof, (iv) establish, adopt, amend or terminate any Compensation and Benefit Plan, except for technical amendments in the ordinary course of business consistent with past practice, provided that such amendments do not materially increase the cost of such arrangements to the Company, (v) increase the compensation, bonus or other benefits of, make any new awards under any Compensation and Benefit Plan to, or pay any bonus to any director, officer, employee, consultant or independent contractor of the Company or any of its Subsidiaries, except for increases, new awards or payments in the ordinary course of business consistent with past practice for employees who are not among the Company’s Section 16 Officers, (vi) take any action to fund or in any other way secure the payment of compensation or benefits under any Compensation and Benefit Plan, except as required pursuant to the terms thereof, (vii) take any action to accelerate the vesting or payment of any compensation or benefits under any Compensation and Benefit Plans, to the extent not already required in any such Compensation and Benefit Plan, (viii) other than in the ordinary course of business consistent with past practice, materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Compensation and Benefit Plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (ix) amend the terms of any outstanding equity-based award, (x) provide for accelerated vesting, removal of restrictions or exercisability of any stock based or stock related awards (including stock options, stock appreciation rights, performance units and restricted stock units) upon a change in control occurring on or prior to the Effective Time for any grants made after the date of this Agreement, (xi) exercise any discretion to cash out awards pursuant to the Company’s 1997 Long Term Incentive Program or (xii) enter into any new collective bargaining agreements (or amendments to existing collective bargaining agreements); provided, however, that the prohibitions contained in the foregoing clauses (i) and (v) shall not apply in connection with newly hired or newly promoted employees, in each case to the extent consistent with past practice;
	(t) fail to initiate appropriate steps to renew any material Company Licenses held by the Company or any of its Subsidiaries that are scheduled to terminate prior to or within 60 days after the Effective Time or to prosecute any pending applications for any material Company License; or
	(u) agree or commit to do any of the foregoing.
	(ii) The Company will provide Parent with a schedule setting forth a true and complete list as of the date of this Agreement of (A) within five (5) days of the date of this Agreement, all Licenses issued or granted to the Company or any of its Subsidiaries by the FCC (“FCC Licenses”), all Licenses issued or granted to the Company or any of its Subsidiaries by State Commissions regulating telecommunications businesses or services (“State Licenses”) and all Licenses issued or granted to the Company or any of its

A-28

---

Table of Contents

	subsidiaries by foreign Governmental Entities regulating telecommunications businesses or services or the use of radio spectrum (“Foreign Licenses”) that are identified on Section 6.1(ii)(A) of the Company Disclosure Letter; (B) within thirty (30) days, all Foreign Licenses other than those referenced in clause (A) above, all Licenses issued or granted to the Company or any of its Subsidiaries by any local government regulating telecommunications businesses or services or authorizing the Company or any of its Subsidiaries to place facilities within the boundary of such local government (“Local Licenses”), and all Licenses administered by the (v) U.S. State Department, Office of Defense Trade Controls Licensing; (w) U.S. Commerce Department, Bureau of Industry and Security; (x) U.S. Treasury Department, Office of Foreign Assets Controls; or (y) equivalent licensing requirements in any country in which the Company and its Affiliates are doing business (the FCC Licenses, State Licenses, Foreign Licenses and Local Licenses, together with all other Licenses of the Company and its Subsidiaries, the “Company Licenses”); (C) within thirty (30) days, all pending applications for Licenses that would be Company Licenses if issued or granted; (D) within thirty (30) days, all pending applications by the Company or any of its Subsidiaries for modification, extension or renewal of any Company License; and (E) within thirty (30) days, to the extent not disclosed on Schedule 5.1(j)(i) of the Company Disclosure Letter, any agreements to acquire (I) a License that upon acquisition by the Company would become a Company License or (II) any interest in an entity that holds a License that upon acquisition of such entity by the Company would become a Foreign License. The failure of the Company to provide Parent with the schedules provided in the foregoing clauses (B), (C), (D) and (E) within the time periods specified in such clauses shall not constitute a breach of this Agreement, provided that the Company has used its reasonable best efforts to provide such schedules by the applicable dates.
	(iii) Parent shall not knowingly take or permit any of its Subsidiaries to take any action or refrain from taking any action the result of which would be reasonably and foreseeably likely to prevent the consummation of the Merger by the Termination Date. Without limiting the foregoing, Parent shall not, and it shall cause its Subsidiaries not to, enter into any agreement for the acquisition of any business or Person which provides interexchange telecommunications or long distance services, other than (x) the provision of such services in de minimis amounts or (y) any provision of such services solely as a component of the provision of mobile wireless voice or data services. Without limiting the generality of the foregoing, from the date of this Agreement until the Effective Time, except (A) as otherwise expressly required by this Agreement, (B) as the Company may approve in writing (such approval not to be unreasonably withheld or delayed) or (C) as set forth in Section 6.1(iii) of the Parent Disclosure Letter, Parent will not and will not permit its Subsidiaries to:

	(a) adopt or propose any material change in Parent’s certificate of incorporation or by laws or other applicable governing instruments or amend any term of the shares of Parent Common Stock;
	(b) merge or consolidate Parent or Merger Sub with any other Person or adopt a plan of liquidation;
	(c) enter into or acquire any new line of business that (i) is material to Parent and its Subsidiaries taken as a whole and (ii) is not strategically related to the current business or operations of Parent and its Subsidiaries;
	(d) except for shares of Parent Common Stock issued for fair value in arm’s length transactions and other than the issuance of shares in the ordinary course of business consistent with past practices pursuant to Parent employee benefit plans, issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of Parent or any its Subsidiaries (other than the issuance of shares by a wholly owned Subsidiary of Parent to the Company or another wholly owned Subsidiary), or securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or other rights of any kind to acquire any shares of such capital stock or such convertible or exchangeable securities;

A-29

---

Table of Contents

	(e) declare, set aside or pay any dividend or distribution (whether in cash, stock or property or any combination thereof) on any shares of Parent Common Stock or on any shares of capital stock of any Subsidiary, other than (i) by wholly owned Subsidiaries and pro rata dividends or distributions payable to holders of interests in non wholly owned Subsidiaries and (ii) Parent’s regular quarterly dividend, including any increases thereof, at record and payment dates consistent with past practices;
	(f) reclassify, split, combine or subdivide, or repurchase, redeem or otherwise acquire at prices above fair market value, directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock; or
	(g) agree or commit to do any of the foregoing.
	Notwithstanding anything to the contrary contained in this Section 6.1(iii), to the extent they relate to Cingular LLC and its Subsidiaries, Parent’s obligations in Section 6.1(iii) shall be limited to taking such steps, such as the exercise of any veto rights, that are within the unilateral power and control of Parent and its Subsidiaries (other than Cingular LLC and its Subsidiaries), and none of the foregoing shall require any of Parent’s representatives (or require Parent to compel any of its representatives) to take any actions that would violate the fiduciary duties of such representatives under applicable Law with respect to any beneficial owners of equity securities of Cingular LLC or its Affiliates other than Parent or any of its Subsidiaries.

A-30

---

Table of Contents

A-31

---

Table of Contents

A-32

---

Table of Contents

A-33

---

Table of Contents

A-34

---

Table of Contents

A-35

---

Table of Contents

A-36

---

Table of Contents

A-37

---

Table of Contents

A-38

---

Table of Contents

	(a) Shareholder Approval. This Agreement shall have been duly adopted by holders of Shares constituting the Company Requisite Vote in accordance with applicable Law and the Company’s certificate of incorporation and by-laws.
	(b) Regulatory Consents. (i) The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been earlier terminated, (ii) if applicable, the European Commission shall have adopted a decision pursuant to the EC Merger Regulation declaring that the Merger and the other transactions contemplated hereby are compatible with the common market (or such compatibility shall have been deemed to exist under Article 10(6) of the EC Merger Regulation), or, in the event that the European Commission adopts a decision pursuant to Article 9(3)(b) of the EC Merger Regulation (or is deemed to have done so pursuant to Article 9(5) of the EC Merger Regulation) referring the review of all or part of the transactions contemplated hereby to a Governmental Entity of a member state of the European Union, such Governmental Entity (or any other Governmental Entity of such member state) shall have granted approval of the transactions or part thereof that were so referred, (iii) all approvals and authorizations required to be obtained in respect of the Communications Licenses for the consummation of the Merger shall have been obtained, (iv) all approvals and authorizations required to be obtained for the consummation of the Merger from the foreign Governmental Entities set forth on Section 7.1(b)(iv) of the Parent Disclosure Letter shall have been obtained, (v) all other Governmental Consents required to be obtained from any foreign Governmental Entities for the consummation of the Merger shall have been obtained, except for any failures to obtain such consents that would not, individually or in the aggregate, reasonably be expected to result in a Specified Material Adverse Effect, and (vi) all other Governmental Consents the failure of which to make or obtain would, individually or in the aggregate, provide a reasonable basis to conclude that the Company or its directors or officers would be subject to the risk of criminal liability, shall have been made or obtained. For purposes of this Agreement, the term “Governmental Consents” shall mean all notices, reports, filings, consents, registrations, approvals, permits or authorizations required to be made prior to the Effective Time by the Company or Parent or any of their respective Subsidiaries with, or obtained prior to the Effective Time by the Company or Parent or any of their respective Subsidiaries from, any Governmental Entity in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereby.
	(c) Litigation. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Merger or the other transactions contemplated by this Agreement (collectively, an “Order”), except for such Orders of Governmental Entities outside the United States as would not, individually or in the aggregate, reasonably be expected to have a Specified Material Adverse Effect and which do not provide a reasonable basis to conclude that the Company, Parent or their respective directors or officers would be subject to the risk of criminal liability.
	(d) S-4 Registration Statement. The S-4 Registration Statement shall have become effective under the Securities Act. No stop order suspending effectiveness of the S-4 Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened, by the SEC.
	(e) NYSE Listing. The shares of Parent Common Stock to be issued in the Merger shall have been authorized for listing on the NYSE upon official notice of issuance.

A-39

---

Table of Contents

	(a) Representations and Warranties. (i) Each of the representations and warranties of the Company set forth in Sections 5.1(a), 5.1(b) (other than the ninth, tenth (with respect to Subsidiaries of the Company only) and final sentences of such Section), 5.1(c), 5.1(d)(ii)(A) (only with respect to the certificate of incorporation and by-laws of the Company), the second sentence of Section 5.1(f) and Section 5.1(m) of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); (ii) any failure of any of the other representations and warranties of the Company set forth in this Agreement (without giving effect to any materiality or Material Adverse Effect qualifications contained therein), individually or in the aggregate, to be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) shall not have had, or reasonably be expected to have, a Material Adverse Effect; and (iii) Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company as to the matters set forth in clauses (i) and (ii) of this Section 7.2(a).
	(b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company to such effect.
	(c) Certain Litigation. No Governmental Entity of competent jurisdiction shall have instituted (or if instituted, shall not have withdrawn) any proceeding seeking any Order and no Governmental Entity shall have instituted any civil, criminal or administrative action, suit, claim, hearing, investigation or other proceeding the existence of which would, in the reasonable judgment of Parent, individually or in the aggregate, be reasonably likely to result in a failure of the condition set forth in Section 7.1(c).
	(d) Governmental Consents. All Governmental Consents (other than those described in Section 7.1(b)(i), Section 7.1(b)(ii), Section 7.1(b)(iii) and Section 7.1(b)(iv)) the failure of which to make or obtain would, individually or in the aggregate, (i) reasonably be expected to result in a Specified Material Adverse Effect or (ii) provide a reasonable basis to conclude that Parent or any of its directors or officers would be subject to the risk of criminal liability, shall have been made or obtained (such consents together with those consents that are conditions under Section 7.1(b)(i), Section 7.1(b)(ii), Section 7.1(b)(iii) and Section 7.1(b)(iv) hereof being the “Required Governmental Consents”). All Governmental Consents that have been obtained shall have been obtained without the imposition of any term, condition or consequence the acceptance of which would, individually or in the aggregate, reasonably be expected to have or result in a Specified Material Adverse Effect and all Required Governmental Consents obtained from the FCC shall have been obtained by Final Order. For the purpose of this Agreement, “Final Order” means an action or decision that has been granted as to which (A) no request for a stay or any similar request is pending, no stay is in effect, the action or decision has not been vacated, reversed, set aside, annulled or suspended and any deadline for filing such a request that may be designated by statute or regulation has passed, (B) no petition for rehearing or reconsideration or application for review is pending and the time for the filings of any such petition or application has passed, (C) no Governmental Entity has undertaken to reconsider the action on its own motion and the time within which it may effect such reconsideration has passed and (D) no appeal is pending (including other administrative or judicial review) or in effect and any deadline for filing any such appeal that may be specified by statute or rule has passed, which in any such case (A), (B), (C) or (D) is reasonably likely to result in vacating, reversing, setting aside, annulling, suspending or modifying such action or decision

A-40

---

Table of Contents

	(in the case of any modification in a manner that would impose any term, condition or consequence that would reasonably be expected to result in a Material Adverse Effect).
	(e) Consents Under Agreements. The Company shall have obtained the consent or approval of each Person whose consent or approval shall be required under any Material Contract to which the Company or any of its Subsidiaries is a party in connection with the transactions contemplated by this Agreement, except for those set forth in Section 5.1(d)(ii) of the Company Disclosure Letter and except where the failure to obtain such consent or approval, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
	(f) Tax Opinion. Parent shall have received the opinion of Sullivan & Cromwell LLP, counsel to Parent, dated the Closing Date, to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and that each of Parent, Merger Sub and the Company will be a party to that reorganization within the meaning of Section 368(b) of the Code.

	(a) Representations and Warranties. (i) Each of the representations and warranties of Parent and Merger Sub set forth in Sections 5.2(a), 5.2(b), 5.2(c), 5.2(d), 5.2(e)(ii)(A) and the second sentence of Section 5.2(i) of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); (ii) any failure of any of the other representations and warranties of Parent and Merger Sub set forth in this Agreement (without giving effect to any materiality or Material Adverse Effect qualifications contained therein), individually or in the aggregate, to be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), shall not have had, or reasonably be expected to have, a Parent Material Adverse Effect; and (iii) the Company shall have received a certificate signed on behalf of Parent and Merger Sub by the Chief Executive Officer or Chief Financial Officer of Parent as to the matters set forth in clauses (i) and (ii) of this Section 7.3(a).
	(b) Performance of Obligations of Parent and Merger Sub. Each of Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent and Merger Sub by the Chief Executive Officer or Chief Financial Officer of Parent to such effect.
	(c) Tax Opinion. The Company shall have received the opinion of Wachtell, Lipton, Rosen & Katz, counsel to the Company, dated the Closing Date, to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and that each of Parent, Merger Sub and the Company will be a party to that reorganization within the meaning of Section 368(b) of the Code.

A-41

---

Table of Contents

A-42

---

Table of Contents

(b) In the event that (i) a bona fide Acquisition Proposal (but substituting 40% for the 15% threshold set forth in the definition thereof (a “Covered Proposal”)) shall have been made to the Company or any of its Subsidiaries or its shareholders and shall have become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make a Covered Proposal with respect to the Company or any of its Subsidiaries (and such Covered Proposal or publicly announced intention shall not have been withdrawn at the time of the Shareholders Meeting) and thereafter this Agreement is terminated by either Parent or the Company pursuant to Section 8.2(b) or by Parent pursuant to Section 8.4(c), (ii) this Agreement is terminated by Parent (A) pursuant to Section 8.4(a) and, at the time of the withdrawal, modification or qualification of the adoption of this Agreement or the Directors’ Recommendation (or the agreement to do so), a Covered Proposal (or any bona fide indication of interest that is reasonably capable of becoming a Covered Proposal) shall have been made to the Company or any of its Subsidiaries or its shareholders, directly or indirectly through any Representatives of the Company, or any Person shall have publicly announced an intention (whether or not conditional) to make a Covered Proposal with respect to the Company or any of its Subsidiaries or (B) pursuant to Section 8.4(d) or (iii) this Agreement is terminated by the Company pursuant to clause (i) of Section 8.3, then the Company shall promptly, but in no event later than two days after the date of such termination (provided, however, that the fee to be paid pursuant to clause (iii) shall be paid as set forth in Section 8.3), pay Parent a termination fee of $560,000,000 (the “Termination Fee”) and shall promptly, but in no event later than two days after being notified of such by Parent, pay all of the documented out-of-pocket expenses, including those of the Exchange Agent, incurred by Parent or Merger Sub in connection with this Agreement and the transactions contemplated by this Agreement up to a maximum amount of $40,000,000, in each case payable by wire transfer of same day funds; provided, however, that no Termination Fee shall be payable to Parent pursuant to clause (i) of this paragraph (b) unless and until (I) any Person (other than Parent) (an “Acquiring Party”) has acquired, by purchase, sale, assignment, lease, transfer or otherwise, in one transaction or any series of related transactions within 15 months of such termination, a majority of the voting power of the outstanding securities of the Company or all or substantially all of the assets of the Company or shall have entered into an agreement with the Company for such an acquisition within 15 months of such termination or (II) there has been consummated a merger, consolidation or similar business combination between the Company or one of its Subsidiaries and an Acquiring Party within such 15 month period. The Company acknowledges that the agreements contained in this Section 8.5(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent and Merger Sub would not enter into this Agreement; accordingly, if the Company fails to promptly pay any amount due pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent or Merger Sub commences a suit which results in a judgment against the Company for the fee, charges or expenses to which reference is made in this paragraph (b), the Company shall pay to Parent or Merger Sub its costs and expenses (including attorneys’ fees) in connection with such suit, together with interest on the amount of the fee at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made. Notwithstanding anything to the contrary in this Agreement, the parties hereby acknowledge that in the event that the Termination Fee and/or out-of-pocket expenses become payable and are paid by the Company pursuant to this Section 8.5(b), the Termination Fee and out-of-pocket expenses shall be Parent’s and Merger Sub’s sole and exclusive remedy for monetary damages under this Agreement.

A-43

---

Table of Contents

A-44

---

Table of Contents

	If to Parent or Merger Sub:
	SBC Communications Inc.
	175 East Houston Street
	San Antonio, Texas 78205
	Attention: D. Wayne Watts, Esq., Senior Vice President and
	Assistant General Counsel
	fax: (210) 351-3257
	(with a copy to Benjamin F. Stapleton, Esq.,
	and John J. O’Brien, Esq.,
	Sullivan & Cromwell LLP,
	125 Broad Street, New York, NY 10004
	fax: (212) 558-3588).
	If to the Company:
	AT&T Corp.
	One AT&T Way
	Bedminster, New Jersey 07921
	Attention: Robert Feit, Esq.
	fax: (908) 901-4748
	(with a copy to Steven A. Rosenblum, Esq.
	and Stephanie J. Seligman, Esq.,
	Wachtell, Lipton, Rosen & Katz,
	51 West 52nd Street, New York, NY 10019
	fax: (212) 403-2000).

A-45

---

Table of Contents

A-46

---

Table of Contents

	AT&T Corp.

	By	/s/ David W. Dorman

	Name:       David W. Dorman

	Title:	Chairman and Chief Executive Officer

	SBC Communications Inc.

	By	/s/ Edward E. Whitacre, Jr.

	Name:       Edward E. Whitacre, Jr.

	Title:	Chairman and Chief Executive Officer

	Tau Merger SUB Corporation

	By	/s/ James Kahan

	Name:       James Kahan

	Title:	President

A-47

---

Table of Contents

Terms		Section
Acquiring Party		8.5(b)
Acquisition Proposal		6.2
Affected Employees		6.8
Affiliate		5.1(b)
Agreement		Preamble
Audit Date		5.1(e)
Bankruptcy and Equity Exception		5.1(c)
By-Laws		2.2
CERCLA		5.1(n)
Certificate		4.1(a)
Charter		2.1
Closing		1.2
Closing Date		1.2
Code		Recitals
Communications Licenses		5.1(i)(ii)
Company		Preamble
Company Awards		4.5(b)
Company Disclosure Letter		5.1
Company Licenses		6.1(ii)
Company Option		4.5(a)
Company Preferred Shares		5.1(b)
Company Reports		5.1(e)
Company Requisite Vote		5.1(c)
Company Severance Plans		6.8
Company Stock Agreements		4.5(a)
Company Stock Plans		4.5(a)
Compensation and Benefit Plans		5.1(h)(i)
Computer Software		5.1(q)(vi)(1)
Confidentiality Agreement		9.7
Constituent Corporations		Preamble
Contract		5.1(d)(ii)
Copyrights		5.1(q)(vi)(2)
Costs		6.10
Covered Proposal		8.5(b)
Director Designees		3.3
Directors’ Recommendation		5.1(c)(ii)
D&O Insurance		6.10(c)
EC Merger Regulation		5.1(d)
Effective Time		1.3
Encumbrance		5.1(k)(iii)
Environmental Laws		5.1(n)
Environmental Liability		5.1(n)

A-A-1

---

Table of Contents

Terms		Section
ERISA		5.1(h)(i)
ERISA Affiliate		5.1(h)(iii)
Exchange Act		5.1(b)
Exchange Agent		4.2(a)
Exchange Fund		4.2(a)
Exchange Ratio		4.1(a)
Excluded Share		4.1(a)
Excluded Shares		4.1(a)
FAA		5.1(i)(ii)
FAA Rules		5.1(i)(iv)
FCC		5.1(d)
FCC Licenses		6.1(ii)
FCC Rules		6.12
Final Order		7.2(d)
Foreign Licenses		6.1(ii)
GAAP		5.1(e)(ii)
Governmental Consents		7.1(b)
Governmental Entity		5.1(d)
GSA Action		6.17
Hazardous Substance		5.1(n)
HSR Act		5.1(b)
Indemnified Parties		6.10
Intellectual Property		5.1(q)(vi)(2)
IRS		5.1(h)(ii)
IT Assets		5.1(q)(vi)(3)
Laws		5.1(i)
Leased Real Property		5.1(k)(ii)
Licenses		5.1(i)
Lien		5.1(b)
Local Licenses		6.1(ii)
Long Term Incentive Program		6.1(i)(s)
Material Adverse Effect		5.1(a)
Material Contracts		5.1(j)(i)(I)
Maximum Annual Premium		6.10(c)
Merger		Recitals
Merger Sub		Preamble
New Parent Preferred Shares		4.1(a)(ii)
New Plans		6.8(b)
New York Certificate of Merger		1.3
Notice of Superior Proposal		6.2
NYBCL		1.1
NYSE		4.2(e)
Order		7.1(c)
Outstanding Share		4.1(a)

A-A-2

---

Table of Contents

Terms		Section
Outstanding Shares		4.1(a)
Owned Real Property		5.1(k)
Parent		Preamble
Parent Audit Date		5.2(f)
Parent Common Stock		4.1(a)
Parent Disclosure Letter		5.2
Parent Material Adverse Effect		5.2(a)
Parent Preferred Shares		5.2(b)
Parent Reports		5.2(f)
Parent Stock Plans		5.2(b)
Patents		5.1(q)(vi)(2)
Pension Plan		5.1(h)(ii)
Per Share Merger Consideration		4.1(a)
Person		4.2(b)
Potential Sale Interest		6.13
Prior Plan		6.8(b)
Prospectus/Proxy Statement		6.3
RCRA		5.1(n)
Release		5.1(n)
Removal, Remedial and Response		5.1(n)
Representatives		6.2
Required Governmental Consents		7.2(d)
Right-of-Way Agreement		5.1(l)
S-4 Registration Statement		6.3
SEC		4.5(c)
Section 16 Officers		5.1(f)(ix)
Securities Act		4.5(c)
Share		4.1(a)
Shareholders Meeting		6.4
Shares		4.1(a)
SOX Act		5.1(e)
Special Dividend		6.18
Specified Material Adverse Effect		6.5(b)
State Commissions		5.1(d)
State Licenses		6.1(ii)
Subsidiary		5.1(a)
Subsidiary Preferred Shares		5.1(b)
Substitute Preferred Shares		6.4(b)
Successor Plan		6.8(b)
Superior Proposal		6.2
Surviving Corporation		1.1
Takeover Statute		5.1(m)
Tax		5.1(o)
Tax Return		5.1(o)

A-A-3

---

Table of Contents

Terms		Section
Taxes		5.1(o)
Termination Date		8.2
Termination Fee		8.5(b)
Trade Secrets		5.1(q)(vi)(2)
Trademarks		5.1(q)(vi)(2)

A-A-4

---

Table of Contents

A-E-1

---

Table of Contents

	By:

	Name:
	Title:

A-E-2

---

Table of Contents

B-1

---

Table of Contents

	Very truly yours,

	/s/	CREDIT SUISSE FIRST BOSTON LLC

B-2

---

Table of Contents

	i)	reviewed certain publicly available financial statements and other information of the Company and of Buyer;
	ii)	reviewed certain internal financial statements and other financial and operating data concerning the Company prepared by the management of the Company;
	iii)	discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;
	iv)	reviewed certain financial projections for 2005 prepared by the management of the Company and reviewed certain public research reports concerning the Company prepared by certain equity research analysts and discussed with senior executives of the Company such financial projections and research reports (including the financial projections contained therein) and certain estimates, prepared by the management of the Company, as to the cost savings and other potential synergies (including the amount, timing and achievability thereof) anticipated to result from the Merger;
	v)	reviewed certain internal financial statements and other financial and operating data concerning Buyer prepared by the management of Buyer;
	vi)	discussed the past and current operations and financial condition and the prospects of Buyer with senior executives of Buyer;

C-1

---

Table of Contents

	vii)	reviewed certain financial projections for 2005 through 2007 prepared by the management of Buyer and reviewed certain public research reports concerning Buyer prepared by certain equity research analysts;
	viii)	reviewed the reported prices and trading activity for the Common Stock and the Buyer Common Stock;
	ix)	compared the financial performance of the Company and of Buyer and the prices and trading activity of the Common Stock and the Buyer Common Stock with that of certain other comparable publicly-traded companies and their securities;
	x)	reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
	xi)	discussed with the managements of the Company and of Buyer information regarding certain strategic, financial and operational benefits anticipated to result from the Merger;
	xii)	reviewed the Merger Agreement and certain related documents; and
	xiii)	performed such other analyses and considered such other factors as we have deemed appropriate.

C-2

---

Table of Contents

	Very truly yours,
	MORGAN STANLEY & CO. INCORPORATED

	By:	/s/ PAUL J. TAUBMAN

	Paul J. Taubman
	Managing Director

C-3

---

Table of Contents

1.	Role of the Board of Directors

2.	Code of Conduct

3.	Selection of Board Members

4.	Board Membership Criteria

D-1

---

Table of Contents

5.	Board Size

6.	Directors with Job Changes

7.	Term Limits

8.	Other Board Service

9.	Retirement Policy

10.	Director Independence

D-2

---

Table of Contents

11.	Chairman and CEO

12.	Board Meeting Schedule and Agenda

13.	Advance Distribution of Materials

14.	Executive Session

15.	Number of Committees

D-3

---

Table of Contents

16.	Committee Membership

17.	Committee Structure

18.	Committee Meetings

19.	Director Access to Officers and Employees

20.	Director Access to Outside Advisors

21.	Board’s Interaction with Third Parties

22.	Director Orientation and Continuing Education

D-4

---

Table of Contents

23.	Director Compensation

24.	Indemnification

25.	CEO Evaluation and Management Succession

26.	Annual Performance Evaluation

D-5

---

Table of Contents

Item 20.	Indemnification of Directors and Officers

II-1

---

Table of Contents

Item 21.	Exhibits and Financial Statement Schedules

Exhibit
Number				Description
	2	.1		Agreement and Plan of Merger, dated as of January 30, 2005, among AT&T Corp., SBC Communications Inc. and Tau Merger Sub Corporation (included as Annex A to the document forming a part of this Registration Statement)
	3	.1		Restated Certificate of Incorporation of SBC, filed with the Secretary of State of Delaware on June 30, 2000 (incorporated by reference to Exhibit 3-a to SBC’s 2000 Annual Report on Form 10-K)
	3	.2		Bylaws amended through April 30, 2004 (incorporated by reference to Exhibit 3-b to SBC’s Quarterly Report on Form 10-Q for the first quarter of 2004)
	5	.1		Opinion of James D. Ellis as to the validity of the securities being registered*
	8	.1		Form of Opinion of Sullivan & Cromwell LLP as to certain United States federal income tax matters
	8	.2		Form of Opinion of Wachtell, Lipton, Rosen & Katz as to certain United States federal income tax matters
	12			Computation of Ratios of Earnings to Fixed Charges of SBC Communications Inc.
	23	.1		Consent of Ernst & Young LLP, registered public accounting firm for SBC
	23	.2		Consent of PricewaterhouseCoopers LLP, registered public accounting firm for AT&T Corp.
	23	.3		Consent of Ernst & Young LLP, registered public accounting firm for Cingular Wireless LLC
	23	.4		Consent of PricewaterhouseCoopers LLP, registered public accounting firm for Omnipoint Facilities Network II, LLC
	23	.5		Consent of James D. Ellis (included as part of Exhibit 5.1 to this Registration Statement)*
	23	.6		Consent of Sullivan & Cromwell LLP (included as part of Exhibit 8.1 to this Registration Statement)*
	23	.7		Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibit 8.2 to this Registration Statement)*
	24	.1		Power of Attorney of Officer/Director of SBC**
	24	.2		Power of Attorney of Directors of SBC**
	99	.1		Form of Proxy Card
	99	.2		Form of Information on Voting Procedures
	99	.3		Opinion of Credit Suisse First Boston Inc. (included as Annex B to the proxy statement/ prospectus included in this Registration Statement)
	99	.4		Opinion of Morgan Stanley & Co. Incorporated (included as Annex C to the proxy statement/ prospectus included in this Registration Statement)
	99	.5		Consent of Credit Suisse First Boston LLC
	99	.6		Consent of Morgan Stanley & Co. Incorporated
	99	.7		Employment Agreement by and between SBC and David W. Dorman, dated as of January 30, 2005*
	99	.8		Consents of persons about to become directors of SBC*

Item 22.	Undertakings.

	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

	(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the

II-2

---

Table of Contents

	changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

	(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and
	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

II-3

---

Table of Contents

	SBC COMMUNICATIONS INC.

	By:	/s/ Richard G. Lindner

	Name: Richard G. Lindner
	Title:  Senior Executive Vice President
	and Chief Financial Officer

Principal Executive Officer:		Edward E. Whitacre, Jr.* Chairman of the Board and Chief Executive Officer
Principal Financial and Accounting Officer:		Richard G. Lindner Senior Executive Vice President and Chief Financial Officer

Directors:
Gilbert F. Amelio*		By:		/s/ Richard G. Lindner
Clarence C. Barksdale*				Richard G. Lindner,
August A. Busch III*				as attorney-in-fact for
William P. Clark*				Mr. Whitacre, the Directors,
Martin K. Eby, Jr.*				and on his own behalf
James A. Henderson*				as Principal Financial and
Lynn M. Martin*				Accounting Officer
John B. McCoy*
Mary S. Metz*		April 20, 2005
Toni Rembe*
S. Donley Ritchey*
Joyce M. Roché*
Laura D’Andrea Tyson*
Patricia P. Upton*
Edward E. Whitacre, Jr.*

*	By power of attorney

II-4

---

Table of Contents

Exhibit
Number				Description
	2	.1		Agreement and Plan of Merger, dated as of January 30, 2005, among AT&T Corp., SBC Communications Inc. and Tau Merger Sub Corporation (included as Annex A to the document forming a part of this Registration Statement)
	3	.1		Restated Certificate of Incorporation of SBC, filed with the Secretary of State of Delaware on June 30, 2000 (incorporated by reference to Exhibit 3-a to SBC’s 2000 Annual Report on Form 10-K)
	3	.2		Bylaws amended through April 30, 2004 (incorporated by reference to Exhibit 3-b to SBC’s Quarterly Report on Form 10-Q for the first quarter of 2004)
	5	.1		Opinion of James D. Ellis as to the validity of the securities being registered*
	8	.1		Form of Opinion of Sullivan & Cromwell LLP as to certain United States federal income tax matters
	8	.2		Form of Opinion of Wachtell, Lipton, Rosen & Katz as to certain United States federal income tax matters
	12	.		Computation of Ratios of Earnings to Fixed Charges of SBC Communications Inc.
	23	.1		Consent of Ernst & Young LLP, registered public accounting firm for SBC
	23	.2		Consent of PricewaterhouseCoopers LLP, registered public accounting firm for AT&T Corp.
	23	.3		Consent of Ernst & Young LLP, registered public accounting firm for Cingular Wireless LLC
	23	.4		Consent of PricewaterhouseCoopers LLP, registered public accounting firm for Omnipoint Facilities Network II, LLC
	23	.5		Consent of James D. Ellis (included as part of Exhibit 5.1 to this Registration Statement)*
	23	.6		Consent of Sullivan & Cromwell LLP (included as part of Exhibit 8.1 to this Registration Statement)*
	23	.7		Consent of Wachtell, Lipton, Rosen & Katz (included as part of Exhibit 8.2 to this Registration Statement)*
	24	.1		Power of Attorney of Officer/Director of SBC**
	24	.2		Power of Attorney of Directors of SBC**
	99	.1		Form of Proxy Card
	99	.2		Form of Information on Voting Procedures
	99	.3		Opinion of Credit Suisse First Boston Inc. (included as Annex B to the proxy statement/ prospectus included in this Registration Statement)
	99	.4		Opinion of Morgan Stanley & Co. Incorporated (included as Annex C to the proxy statement/ prospectus included in this Registration Statement)
	99	.5		Consent of Credit Suisse First Boston LLC
	99	.6		Consent of Morgan Stanley & Co. Incorporated
	99	.7		Employment Agreement by and between SBC and David W. Dorman, dated as of January 30, 2005*
	99	.8		Consents of persons about to become directors of SBC*