EMPLOYEE BENEFITS AGREEMENT
BETWEEN
AT&T CORP.
AND
LUCENT TECHNOLOGIES INC.
DATED AS OF
FEBRUARY 1, 1996
AND
AMENDED AND RESTATED AS OF
MARCH 29, 1996
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of February 1, 1996, and
amended and restated as of March 29, 1996, is by and between
AT&T and Lucent.
Capitalized terms used herein (other than the formal names of AT&T Plans (as
defined below) and related trusts of AT&T) and not otherwise defined shall have
the respective meanings assigned to them in Article I hereof or as assigned to
them in the Separation and Distribution Agreement (as defined below).
WHEREAS, the Board of Directors of AT&T has determined that it is in
the best interests of AT&T and its shareholders to separate AT&T's existing
businesses into three independent businesses;
WHEREAS, in furtherance of the foregoing, AT&T, Lucent and NCR have
entered into a Separation and Distribution Agreement, dated as of the date
hereof (the "Separation and Distribution Agreement") and certain other
agreements that will govern certain matters relating to the Separation, the IPO,
the Distribution and the relationship of AT&T, Lucent and NCR and their
respective Subsidiaries following the IPO and the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, AT&T
and Lucent have agreed to enter into this agreement allocating assets,
liabilities and responsibilities with respect to certain employee compensation
and benefit plans and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 414(l)(1) AMOUNT is defined in Section 3.2(b)(i)(A).
1.2 1992 COLLECTIVE BARGAINING AGREEMENT is defined in
Section 5.18.
1.3 AGREEMENT means this Employee Benefits Agreement,
including all the
Schedules and Exhibits hereto.
1.4 AGGREGATE LUCENT STOCK VALUE means the Lucent Stock Value
multiplied by the number of shares of Lucent Common Stock issued and outstanding
as of Immediately after the Distribution Date.
1.5 ASA is defined in Section 8.11.
1.6 ASA AGREEMENT means the agreement with ASA
described in Section
8.11.
1.7 ASO CONTRACT is defined in Section 5.7(a)(i).
1.8 ASSIGNED SPLIT DOLLAR POLICIES is defined in Section
6.9.
1.9 ATTIMCO means the AT&T Investment Management
Corporation, a
Delaware corporation.
1.10 AT&T DEFERRED SEVERANCE ACCOUNT means an account established on
the financial books and records of AT&T or an AT&T Entity to reflect a liability
to pay a deferred severance benefit to an AT&T Executive.
1.11 AT&T ENTITY means any Person that is, at the relevant time, an
Affiliate of AT&T, except that, for periods beginning on and after the
Participation Commencement Date, the term "AT&T Entity" shall not include Lucent
or a Lucent Entity.
1.12 AT&T EXECUTIVE means an employee or former employee of AT&T, an
AT&T Entity, Lucent or a Lucent Entity, who immediately before the Close of the
Distribution Date is eligible to participate in or receive a benefit under any
AT&T Executive Benefit Plan.
1.13 AT&T GROUP PENSION TRUST is defined in Section 3.1.
1.14 AT&T LEAVE OF ABSENCE PROGRAMS means the Local Leave, Disability
Leave, Educational Leave of Absence, Accompanying AT&T Employed Spouse-Foreign
Assignment Leave, Personal Leave, Union Business Leave, Anticipated Disability
Leave, Care of Newborn/Newly Adopted Child Leave, Family Care Leave, Military
Leave, Transition Leave, Special Leave, Enhanced Leave, and ELOA Plus Leave
Programs offered from time to time under the personnel policies and practices of
AT&T.
1.15 AT&T LTD PLANS means the AT&T Long-Term Disability Plan for
Management Employees and the AT&T Long Term Disability Plan for Occupational
Employees.
1.16 AT&T MANAGEMENT SAVINGS GROUP TRUST means the group
trust under
IRS Rev. Rul. 81-100 established in connection with the AT&T
LTSPME and the AT&T
RSPSP pursuant to a group trust agreement between AT&T and
Fidelity Management
Trust Company.
1.17 AT&T MPP means the AT&T Management Pension Plan. Unless the
context indicates otherwise, AT&T MPP includes disability pensions payable from
the AT&T LTD VEBA and death benefits payable under the AT&T Special Accidental
Death Insurance Policy.
1.18 AT&T OCCUPATIONAL SAVINGS GROUP TRUST means the
group trust under
IRS Rev. Rul. 81-100 established in connection with the AT&T LTSSP
pursuant to a
group trust agreement between AT&T and Bankers Trust Company.
1.19 AT&T PP means the AT&T Pension Plan. Unless the context indicates
otherwise, AT&T PP includes disability pensions payable from the AT&T LTD VEBA
and death benefits payable under the AT&T Special Accidental Death Insurance
Policy.
1.20 AT&T SADBP means the AT&T Sickness and Accident
Disability Benefit
Plan.
1.21 AT&T SPECIAL EXECUTIVE DEFERRAL ACCOUNT means an account
established on the financial books and records of any member of the AT&T Group
to reflect a liability to
pay a special pension enhancement, hiring bonus or benefit to an
AT&T Executive
pursuant to an Individual Agreement.
1.22 AT&T STOCK VALUE means the average of the daily high and low
per-share prices of the AT&T Common Stock as listed on the NYSE during each of
the five trading days immediately preceding the ex-dividend date for the
Distribution.
1.23 AT&T TRANSFERRED EMPLOYEE means an individual who (a) on the
Participation Commencement Date, is either actively employed by or on leave of
absence from Lucent or a Lucent Entity (including for purposes of this
definition any division or business unit of AT&T on the Participation
Commencement Date that is part of the Lucent Business), if such individual is
part of a work group or organization that, at any time before the Close of the
Distribution Date, moves to the employ of AT&T or an AT&T Entity and that, after
such move, performs substantially the same functions as before such move; (b) on
the Participation Commencement Date, is either actively employed by or on leave
of absence from a Subsidiary of AT&T that becomes a Lucent Entity before the
Close of the Distribution Date, if such individual, at any time before the Close
of the Distribution Date, moves to the employ of AT&T or an AT&T Entity that
does not become a Lucent Entity before the Close of the Distribution Date; or
(c) on the Participation Commencement Date, is either actively employed by or on
leave of absence from Lucent or a Lucent Entity in a common support function, is
at any time before the Close of the Distribution Date designated by AT&T for
transfer to AT&T or an AT&T Entity and, at any time after the Participation
Commencement Date and before the Close of the Distribution Date, moves to the
employ of AT&T or an AT&T Entity. In addition, AT&T and Lucent may designate, by
mutual agreement, any other individual or group of individuals as AT&T
Transferred Employees.
1.24 AT&T WCP means the AT&T Workers' Compensation Program, comprised
of the various arrangements established by AT&T or an AT&T Entity to comply with
the workers' compensation requirements of the states in which AT&T and its
Affiliates conduct business.
1.25 AUDITING PARTY is defined in Section 8.7(b)(i).
1.26 AWARD means an award under a Long Term Incentive
Plan or a Short
Term Incentive Plan.
1.27 BDEC is defined in Section 5.16(a).
1.28 BDS is defined in Section 5.16(a).
1.29 CECRA, when immediately preceded by "AT&T," means the AT&T
Child/Elder Care Reimbursement Account Plan. When immediately preceded by
"Lucent," CECRA means the child/elder care reimbursement account plan to be
established by Lucent pursuant to Section 2.3.
1.30 CHANGE is defined in Section 5.8(b)(i).
1.31 CLOSE OF THE DISTRIBUTION DATE means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the Distribution Date.
1.32 COBRA means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code Section
4980B and ERISA
Sections 601 through 608.
1.33 CODE means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
1.34 COLLECTIVE BARGAINING AGREEMENT means the National AT&T/CWA/IBEW
Memorandum of Understanding, including all Attachments, National Items and
letters included as a part thereof, executed by AT&T and the CWA and IBEW as of
May 28, 1995, and such local collective bargaining agreements into which the
National AT&T/CWA/IBEW Memorandum of Understanding has been incorporated.
1.35 CORPORATE-OWNED LIFE INSURANCE means the life insurance policies
owned by AT&T insuring the lives of certain AT&T Executives and certain other
highly compensated employees of AT&T or an AT&T Entity that were purchased by
AT&T between the years 1985 and 1992.
1.36 COVERED AT&T AWARDS means any AT&T Options or non-vested AT&T
performance shares, stock units, restricted stock or restricted stock units held
as of the Close of the Distribution Date by Transferred Individuals who as of
the Distribution Date are either active employees of or on a leave of absence
from Lucent or a Lucent Entity.
1.37 CWA means the Communication Workers of America,
AFL-CIO.
1.38 DEFERRAL PLAN, when immediately preceded by "AT&T," means the AT&T
Senior Management Incentive Award Deferral Plan. When immediately preceded by
"Lucent," Deferral Plan means the senior management incentive award deferral
plan to be established by Lucent pursuant to Section 2.3.
1.39 DOL means the United States Department of Labor.
1.40 ERISA means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific provision of ERISA also includes any
proposed, temporary, or final regulation in force under that provision.
1.41 ESOP, when immediately preceded by "AT&T," means the AT&T Employee
Stock Ownership Plan. When immediately preceded by "Lucent," ESOP means the
employee stock ownership plan to be established by Lucent pursuant to Section
2.3.
1.42 ESOP TRUST, when immediately preceded by "AT&T," means the trust
established by AT&T forming part of the AT&T ESOP. When immediately preceded by
"Lucent," ESOP Trust has the meaning set forth in Section 4.3(a).
1.43 EXECUTIVE BENEFIT PLANS, when immediately preceded by "AT&T,"
means the executive benefit and nonqualified plans, programs, and arrangements
established, maintained, agreed upon, or assumed by AT&T or an AT&T Entity for
the benefit of employees and former employees of AT&T or an AT&T Entity before
the Close of the Distribution Date, including the plans listed in Schedule 1,
but excluding the Senior Management Ground Transportation Program. When
immediately preceded by "Lucent," Executive
Benefit Plans means the executive benefit plans and programs to be established
by Lucent pursuant to Section 2.3 that correspond to the respective AT&T
Executive Benefit Plans.
1.44 EXISTING ACQUISITION LOAN is defined in Section
4.2(c)(ii).
1.45 FMLA means the Family and Medical Leave Act of
1993, as amended.
1.46 FOREIGN PLAN means a Plan maintained by AT&T, an AT&T Entity,
Lucent, or a Lucent Entity for the benefit of employees outside the U.S.
1.47 FUNDING POLICY AMOUNT is defined in Section
3.2(b)(i)(A).
1.48 GROSS VALUE OF THE ASSUMED STOCK AWARDS means the sum of (a) the
Lucent Stock Value multiplied by the number of shares of Lucent Common Stock
that Immediately after the Distribution Date would be issuable in respect of
then outstanding Covered AT&T Awards, assuming all then outstanding Covered AT&T
Awards were converted into replacement Awards as of such time in accordance with
the terms of Section 6.4(a), plus (b) the aggregate amount paid to AT&T by
Lucent on or after the Closing Date and prior to the Close of the Distribution
Date pursuant to Section 8.2(f)(i) and (iii), plus (c) the aggregate of the
exercise prices paid to AT&T on or after the Closing Date and prior to the Close
of the Distribution Date in respect of the exercise of all AT&T Options that
constitute Covered AT&T Awards and for which payments are made by Lucent to AT&T
pursuant to Section 8.2(f)(i) as a result of such exercise.
1.49 GROUP INSURANCE POLICIES is defined in Section
5.7(b)(i).
1.50 GROUP LIFE PROGRAM, when immediately preceded by "AT&T," means the
AT&T Dependent Accidental Loss Insurance Plan, the AT&T Dependent Group Life
Insurance Plan, the AT&T Group Life Insurance Plan, the AT&T Supplementary
Accidental Loss Insurance Plan and the AT&T Supplementary Life Insurance Plan.
When immediately preceded by "Lucent," Group Life Program means the life
insurance plans and programs to be established by Lucent pursuant to Section 2.3
that correspond to the respective AT&T Group Life Programs.
1.51 HCFA means the Health Care Financing Administration.
1.52 HCRA PLAN, when immediately preceded by "AT&T," means the AT&T
Health Care Reimbursement Account Plan. When immediately preceded by "Lucent,"
HCRA Plan means the Health Care Reimbursement Account Plan to be established by
Lucent pursuant to Section 2.3.
1.53 HEALTH AND WELFARE PLANS, when immediately preceded by "AT&T,"
means the health and welfare plans listed on Schedule II established and
maintained by AT&T for the benefit of employees and retirees of AT&T and certain
AT&T Entities, and such other welfare plans or programs as may apply to such
employees and retirees as of the Distribution Date. When immediately preceded by
"Lucent," Health and Welfare Plans means the health and welfare plans to be
established by Lucent pursuant to Section 2.3 that correspond to the respective
AT&T Health and Welfare Plans.
1.54 HEALTH PLANS, when immediately preceded by "AT&T," means the AT&T
Dental Expense Plan for Active Employees, the AT&T Dental Expense Plan for
Retired Employees, the AT&T Medical Plans, the AT&T HCRA
Plan and the AT&T
Vision Care
Plan. When immediately preceded by "Lucent," Health Plans means the health plans
to be established by Lucent pursuant to Section 2.3 that correspond to the
respective AT&T Health Plans.
1.55 HEALTH PLANS BENEFIT TRUST, when immediately preceded by "AT&T,"
means the American Telephone and Telegraph Company Health Plans
Benefit Trust.
When immediately preceded by "Lucent," Health Plans Benefit Trust means the
trust to be established by Lucent pursuant to Section 5.1 that corresponds to
the AT&T Health Plans Benefit Trust.
1.56 HEALTH TRUSTS, when immediately preceded by "AT&T," means the AT&T
Health Plans Benefit Trust, the AT&T Management VEBA, and the AT&T Union VEBA.
When immediately preceded by "Lucent," Health Trusts means the trusts to be
established by Lucent pursuant to Section 5.1 that correspond to the respective
AT&T Health Trusts.
1.57 HMO means a health maintenance organization that provides benefits
under the AT&T Medical Plans or the Lucent Medical Plans.
1.58 HMO AGREEMENTS is defined in Section 5.7(c)(i).
1.59 HPSS is defined in Section 5.21(c)(v).
1.60 HWLI COMMITTEE means the Health, Welfare and Life Insurance
Committee established pursuant to Section 5.9.
1.61 IBEW means the International Brotherhood of
Electrical Workers.
1.62 IMMEDIATELY AFTER THE DISTRIBUTION DATE means 12:00 A.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the day after the Distribution Date.
1.63 INITIAL ALLOCATION AMOUNT is defined in Section
3.2(b)(i)(A).
1.64 INDIVIDUAL AGREEMENT means an individual contract or agreement
(whether written or unwritten) entered into between AT&T, an AT&T Entity, Lucent
or a Lucent Entity and an AT&T Executive that establishes the right of such
individual to special executive compensation or benefits, including a
supplemental pension benefit, hiring bonus, loan, guaranteed payment, special
allowance, tax equalization or disability benefit, or share units granted (and
payable in the form of cash or otherwise) under individual phantom share
agreements, or that provides benefits similar to those identified in Schedule I.
1.65 IRS means the Internal Revenue Service.
1.66 LEGALLY PERMISSIBLE is defined in Section
5.15(a)(iv).
1.67 LEGALLY PERMITTED is defined in Section B.4 of
Exhibit B.
1.68 LESOP, when immediately preceded by "AT&T," means the portion of
the AT&T LTSSP that is a leveraged employee stock ownership plan. When
immediately preceded by "Lucent," LESOP means the portion of the Lucent LTSSP
that is a leveraged employee stock ownership plan.
1.69 LESOP TRUST, when immediately preceded by "AT&T," means the trust
established by AT&T under Article 20 of the AT&T LTSSP. When immediately
preceded by "Lucent," LESOP Trust has the meaning set forth in Section
4.2(c)(i).
1.70 LONG TERM INCENTIVE PLAN, when immediately preceded by "AT&T,"
means any of the AT&T 1984 Stock Option Plan, the AT&T 1987 Long Term Incentive
Program, and such other stock-based incentive plans assumed by AT&T by reason of
merger, acquisition, or otherwise, including incentive plans of NCR, Teradata
Corporation, AT&T Wireless Services, Inc. (formerly McCaw Cellular
Communications, Inc.), and Lin Broadcasting Corporation. When immediately
preceded by "Lucent," Long Term Incentive Plan means the long term incentive
plan to be established by Lucent pursuant to Section 2.3.
1.71 LTD VEBA, when immediately preceded by "AT&T," means the American
Telephone & Telegraph Company Long-Term Disability Plans Benefit Trust. When
immediately preceded by "Lucent," LTD VEBA means the welfare benefit fund to be
established by Lucent pursuant to Section 5.1 that corresponds to the AT&T LTD
VEBA.
1.72 LTSPME, when immediately preceded by "AT&T," means the AT&T Long
Term Savings Plan for Management Employees. When immediately preceded by
"Lucent," LTSPME means the management savings plan to be established by Lucent
pursuant to Section 2.3 that corresponds to the AT&T LTSPME.
1.73 LTSSP, when immediately preceded by "AT&T," means
the AT&T Long
Term Savings and Security Plan. When immediately preceded by
"Lucent," LTSSP
means the occupational savings plan to be established by Lucent pursuant to
Section 2.3 that corresponds to the AT&T LTSSP.
1.74 LUCENT ACQUISITION LOAN is defined in Section
4.2(c)(ii).
1.75 LUCENT ADMINISTRATIVE EMPLOYEES is defined in
Section 8.1(c).
1.76 LUCENT ENTITY means any Person that is, at the relevant time, a
Subsidiary of Lucent or is otherwise controlled, directly or indirectly, by
Lucent.
1.77 LUCENT INDIVIDUAL means any individual who (a) on the
Participation Commencement Date, is either actively employed by or on leave of
absence from Lucent or a Lucent Entity (including for purposes of this
definition any division or business unit of AT&T or an AT&T Entity on the
Participation Commencement Date that is part of the Lucent Business), other than
any AT&T Transferred Employee; (b) on the Participation Commencement Date, is
either actively employed by or on leave of absence from AT&T or an AT&T Entity
as part of a work group or organization that, at any time after the
Participation Commencement Date and before the Close of the Distribution Date,
moves to the employ of Lucent or a Lucent Entity from the employ of AT&T or an
AT&T Entity and that, after such move, performs substantially the same functions
as before such move; (c) on the Participation Commencement Date, is either
actively employed by or on leave of absence from AT&T or an AT&T Entity in a
common support function, is at any time before the Close of the Distribution
Date designated by AT&T for transfer to Lucent or a Lucent Entity and, at any
time after the Participation Commencement Date and before the Close of the
Distribution Date, moves to the employ of Lucent or a Lucent Entity from the
employ of AT&T or an AT&T Entity; (d) on the Participation Commencement Date, is
either actively employed by or on leave of absence from a Subsidiary of AT&T
that becomes a Lucent Entity before the Close of the Distribution Date, other
than any AT&T
Transferred Employee; (e) at any time after the Participation Commencement Date
and before the Close of the Distribution Date both (i) is declared to be surplus
by AT&T or an AT&T Entity and (ii) applies for, obtains and accepts employment
with Lucent or a Lucent Entity; or (f) is a Lucent Administrative Employee. In
addition, AT&T and Lucent may designate, by mutual agreement, any other
individual or group of individuals as Lucent Individuals.
1.78 LUCENT STOCK VALUE means the average of the daily high and low
per-share prices of the Lucent Common Stock as listed on the NYSE during each of
the five trading days immediately preceding the ex-dividend date for the
Distribution.
1.79 LUCENT WCP CLAIMS is defined in Section 5.15(a)(i).
1.80 MANAGEMENT EMPLOYEE means any individual who is an "Employee" as
defined under the terms of the AT&T MPP or the Pension Plan to be established by
Lucent pursuant to Section 2.3 that corresponds to the AT&T MPP.
1.81 MANAGEMENT TRANSITION PERIOD means the period beginning
Immediately after the Distribution Date and ending on the earlier of December
31, 1997 and the end of the third calendar month that ends after the
Distribution Date.
1.82 MANAGEMENT VEBA, when immediately preceded by "AT&T," means The
American Telephone and Telegraph Company Management and Nonrepresented Employees
Postretirement Health Benefits Trust. When immediately preceded by "Lucent,"
Management VEBA means the welfare benefit fund to be established by Lucent
pursuant to Section 5.1 that corresponds to the AT&T Management VEBA.
1.83 MATERIAL FEATURE means any feature of a Plan that could reasonably
be expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required to be made by participants (or their dependents
or beneficiaries) to such Plan.
1.84 MEDICAL PLANS, when immediately preceded by "AT&T," means the AT&T
Medical Expense Plan for Management Employees, the AT&T Medical Expense Plan for
Occupational Employees and the AT&T Medical Expense Plan for
Retired Employees.
When immediately preceded by "Lucent," Medical Plans means the medical plans to
be established by Lucent pursuant to Section 2.3 that correspond to the
respective AT&T Medical Plans.
1.85 MPA means the Mandatory Portability Agreement
established as of
January 1, 1985 among AT&T, American Information Technologies
Corporation, Bell
Atlantic Corporation, Bell Communications Research, Inc.,
BellSouth Corporation,
Cincinnati Bell Telephone Company, NYNEX Corporation, Pacific Telesis Group,
Inc., The Southern New England Telephone Company, Southwestern Bell Corporation
and US WEST, Inc. that provides, in accordance with Section 559 of the Tax
Reform Act of 1984, for the mutual recognition of service credit and the
transfer of benefit obligations for specified employees who terminate employment
with one "Interchange Company" as defined under such agreement and subsequently
commence employment with another such Interchange Company.
1.86 NON-EMPLOYEE DIRECTOR, when immediately preceded by "AT&T," means
a member of AT&T's Board of Directors who is not an employee of AT&T, an AT&T
Entity, Lucent, or a Lucent Entity. When immediately preceded by "Lucent,"
Non-Employee Director means a member of Lucent's Board of Directors who is not
an employee of AT&T, an AT&T Entity, Lucent or a Lucent Entity.
1.87 NON-EMPLOYEE DIRECTOR PLANS, when immediately preceded by "AT&T,"
means the AT&T Deferred Compensation Plan for Non-Employee Directors, the AT&T
Directors' Individual Life Insurance Program and the AT&T Pension Plan for
Non-Employee Directors. When immediately preceded by "Lucent," Non-Employee
Director Plans means the plans and programs to be established by Lucent pursuant
to Section 2.3 that correspond to the AT&T Non-Employee Director Plans.
1.88 NON-PARTIES is defined in Section 8.7(b)(ii).
1.89 OCCUPATIONAL EMPLOYEE means any individual who is an "Employee" as
defined under the terms of the AT&T PP or the Pension Plan to be established by
Lucent pursuant to Section 2.3 that corresponds to the AT&T PP.
1.90 OCCUPATIONAL TRANSITION PERIOD means the period beginning
Immediately after the Distribution Date and ending on May 30, 1998, the
scheduled expiration date of the Collective Bargaining Agreement as in effect on
the date hereof.
1.91 OPTION, when immediately preceded by "AT&T," means an option to
purchase AT&T Common Stock. When immediately preceded by "Lucent," Option means
an option to purchase Lucent Common Stock, in each case pursuant to a Long Term
Incentive Plan.
1.92 OUTSOURCE is defined in Sections 5.10(b) and
5.15(a)(iii) for
purposes of such respective sections.
1.93 PARTICIPATING COMPANY means (a) AT&T, (b) any Person that AT&T has
approved for participation in, and which is participating in, a Plan sponsored
by AT&T, and (c) any Person (other than an individual) which, by the terms of
such a Plan, participates in such Plan or any employees of which, by the terms
of such Plan, participate in or are covered by such Plan.
1.94 PARTICIPATION COMMENCEMENT DATE means February 1,
1996.
1.95 PBGC means the Pension Benefit Guaranty Corporation.
1.96 PENSION PLANS, when immediately preceded by "AT&T," means the AT&T
MPP and the AT&T PP. When immediately preceded by "Lucent," Pension Plans means
the respective management and occupational pension plans to be established by
Lucent pursuant to Section 2.3 that correspond to the AT&T Pension Plans.
1.97 PLAN, when immediately preceded by "AT&T" or "Lucent," means any
plan, policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy or other agreement or funding vehicle providing benefits to
employees, former employees or Non-Employee Directors of AT&T or an AT&T Entity,
or Lucent or a Lucent Entity, as applicable.
1.98 QDRO means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under any of the AT&T Pension Plans,
the AT&T Savings Plans, or the AT&T ESOP.
1.99 QMCSO means a medical child support order which qualifies under
ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under an
AT&T Health Plan.
1.100 RABBI TRUST, when immediately preceded by "AT&T," means the
American Telephone and Telegraph Company Benefits Protection Trust. When
immediately preceded by "Lucent," Rabbi Trust means the grantor trust to be
established by Lucent pursuant to Section 6.8(a) that corresponds to the AT&T
Rabbi Trust.
1.101 RABBI TRUST DETERMINATION DATE is defined in
Section 6.8(b)(i).
1.102 RATIO means the amount obtained by dividing the
AT&T Stock Value
by the Lucent Stock Value.
1.103 RFA means Retirement Funding Account.
1.104 RSPSP, when immediately preceded by "AT&T," means the AT&T
Retirement Savings and Profit Sharing Plan. When immediately preceded by
"Lucent," RSPSP means the savings plan to be established by Lucent pursuant to
Section 2.3 that corresponds to the AT&T RSPSP.
1.105 SAVINGS PLANS, when immediately preceded by "AT&T," means the
AT&T LTSPME, the AT&T LTSSP and the AT&T RSPSP. When immediately preceded by
"Lucent," Savings Plans means the Lucent LTSPME, the Lucent LTSSP and the Lucent
RSPSP.
1.106 SEPARATION AND DISTRIBUTION AGREEMENT is defined in the third
paragraph of the preamble of this Agreement.
1.107 SHORT TERM INCENTIVE PLAN, when immediately preceded by "AT&T,"
means the AT&T Short Term Incentive Plan. When immediately preceded by "Lucent,"
Short Term Incentive Plan means the AT&T Short Term Incentive Plan to be
established by Lucent pursuant to Section 2.3.
1.108 SPLIT DOLLAR LIFE INSURANCE means the life insurance policies
purchased by AT&T on behalf of certain AT&T Executives and AT&T Non-Employee
Directors under (a) the AT&T Senior Management Individual Life Insurance
Program, (b) the AT&T Senior Management Basic Life Insurance Program and (c) the
AT&T Directors' Individual Life Insurance Program, with respect to which such
AT&T Executives or AT&T Non-Employee Directors (or their assignees or
delegates), respectively, have executed collateral assignments for the benefit
of AT&T.
1.109 SPREAD is defined in Section 8.2(f).
1.110 STOCK PURCHASE PLAN, when immediately preceded by
"AT&T," means
the AT&T 1996 Employee Stock Purchase Plan. When immediately
preceded by
"Lucent,"
Stock Purchase Plan means the employee stock purchase plan to be established by
Lucent pursuant to Section 2.3.
1.111 TRANSFERRED INDIVIDUAL means any individual who, as of the Close
of the Distribution Date: (a) is either then actively employed by, or then on a
leave of absence from, Lucent or a Lucent Entity; or (b) is neither then
actively employed by, nor then on a leave of absence from, Lucent or a Lucent
Entity, but who (i) was a Lucent Individual, or (ii) whose most recent active
employment with AT&T or a past or present Affiliate of AT&T was with an entity
or a corporate division having a "Company Code," "Managed Entity Code" or "Legal
Entity Code" set forth in Schedule V, to the extent such information is
available, and who has not had an intervening period of employment covered by an
interchange agreement under which assets and liabilities with respect to the
individual were or are to be transferred from an AT&T Pension Plan, or (iii)
otherwise is identified pursuant to a methodology approved by the Lucent Senior
Vice President-Human Resources and the AT&T Senior Vice President-Benefits and
Compensation, which methodology shall be consistent with the intent of the
parties that former employees of AT&T or a past or present Affiliate of AT&T
will be aligned with the entity for which they most recently worked and based
upon the business of such entity. Transferred Individuals shall also include the
Lucent Administrative Employees and the individuals designated as such pursuant
to Section 9.2. An alternate payee under a QDRO, alternate recipient under a
QMCSO, beneficiary or covered dependent, in each case, of an employee or former
employee described in either of the preceding two sentences shall also be a
Transferred Individual with respect to that employee's or former employee's
benefit under the applicable Plans. Such an alternate payee, alternate
recipient, beneficiary, or covered dependent shall not otherwise be considered a
Transferred Individual with respect to his or her own benefits under any
applicable Plans unless he or she is a Transferred Individual by virtue of
either of the first two sentences of this definition. In addition, AT&T and
Lucent may designate, by mutual agreement, any other individuals, or group of
individuals, as Transferred Individuals. An individual may be a Transferred
Individual pursuant to this definition regardless of whether such individual is
or was a Lucent Individual and regardless of whether such individual is, as of
the Distribution Date, alive, actively employed, on a temporary leave of absence
from active employment, on layoff, terminated from employment, retired or on any
other type of employment or post-employment status relative to an AT&T Plan, and
regardless of whether, as of the Close of the Distribution Date, such individual
is then receiving any benefits from an AT&T Plan. Notwithstanding the foregoing,
if the Distribution does not occur on or before December 31, 1997, references in
this definition to the Close of the Distribution Date shall be deemed to refer
to the close of business on the earlier of the date AT&T publicly announces that
the Distribution will not occur and December 31, 1997.
1.112 TRANSITION INDIVIDUAL means any individual who:
(a) is a Transferred Individual who during the applicable
Transition Period becomes an employee of AT&T or an AT&T Entity without an
intervening period of employment covered by an interchange agreement under which
assets and liabilities with respect to the individual were or are to be
transferred from an AT&T Pension Plan; or
(b) is an employee or former employee of AT&T or an AT&T
Entity as of the Distribution Date (but is not a Transferred Individual) who
during the applicable Transition Period becomes an employee of Lucent or a
Lucent Entity without an intervening period of employment covered by an
interchange agreement under which assets and liabilities with respect to the
individual were or are to be transferred from an AT&T Pension Plan; or
(c) is an individual described in clause (a) or (b) of this
definition whose employer changes during the applicable Transition Period either
(i) from AT&T or an AT&T Entity to Lucent or a Lucent Entity, or (ii) from
Lucent or a Lucent Entity to AT&T or an AT&T Entity without an intervening
period of employment covered by an interchange agreement under which assets and
liabilities with respect to the individual were or are to be transferred from an
AT&T Pension Plan.
For these purposes, the applicable Transition Period is determined by the
positions (Management Employee or Occupational Employee) from which and into
which the individual is hired as more fully set forth in Sections 2.5(b) and
2.5(c). An alternate payee under a QDRO, alternate recipient under a QMCSO,
beneficiary or covered dependent, in each case, of an individual described in
clause (a), (b), or (c) of this definition shall also be a Transition Individual
with respect to that individual's benefit under the applicable Plans. Such an
alternate payee, alternate recipient, beneficiary, and covered dependent shall
not otherwise be considered a Transition Individual with respect to his or her
own benefits under any applicable Plans unless he or she is a Transition
Individual by virtue of clause (a), (b), or (c) of this definition.
1.113 TRANSITION PERIOD means the Management Transition
Period or the
Occupational Transition Period, as applicable.
1.114 TRUST-OWNED LIFE INSURANCE (VEBA) means the group life insurance
policies purchased from The Prudential Insurance Company of America by the
trustee of the AT&T Management VEBA.
1.115 UNFUNDED COST SHARING AGREEMENTS means the 1983 Force Adjustment
Cost Reimbursement and Indemnification Agreement established as of January 1,
1984 among AT&T, American Information Technologies Corporation, Bell Atlantic
Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group,
Inc., Southwestern Bell Corporation, and US WEST, Inc., which provides for
reimbursement by AT&T and certain AT&T Entities to the other parties of certain
expenses for medical and dental benefits and certain post-retirement pension
increases for employees designated for reassignment from the other parties to
AT&T on or about January 1, 1984, and the Unfunded Post-Retirement Benefits Cost
Sharing Agreement established as of January 1, 1984 among AT&T, Advanced Mobile
Phone Service, Inc., American Information Technologies Corporation, Bell
Atlantic Corporation, BellSouth Corporation, Central Services Organization,
NYNEX Corporation, Pacific Telesis Group, Inc., Southwestern Bell Corporation,
and US WEST, Inc., which provides for the allocation of expenses relating to
post-retirement medical, dental, specified disability and future contingent
pension increases with respect to Bell System employees who retired before
January 1, 1984 or who otherwise left the service of a Bell System Company
before that date with eligibility to continue any such benefits on or after
January 1, 1984.
1.116 UNION VEBA, when immediately preceded by "AT&T," means the
American Telephone and Telegraph Company Represented Employees Post-Retirement
Health Benefits Trust. When immediately preceded by "Lucent," Union VEBA means
the welfare benefit fund to be established by Lucent pursuant to Section 5.1
that corresponds to the AT&T Union VEBA.
1.117 U.S. means the 50 United States and the District of
Columbia.
1.118 VALUE is defined in Section 8.2(f).
1.119 VEBA, when immediately preceded by "AT&T," means any voluntary
employees' beneficiary association trust sponsored by AT&T. When immediately
preceded by "Lucent," VEBA means any voluntary employees' beneficiary
association trust sponsored by Lucent.
1.120 VEBA PLANS is defined in Section 5.3.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES.
(a) LUCENT LIABILITIES. Lucent hereby assumes and agrees to
pay, perform, fulfill and discharge, in accordance with their respective terms,
all of the following (regardless of when or where such Liabilities arose or
arise or were or are incurred): (i) all Liabilities to or relating to Lucent
Individuals and Transferred Individuals, and their respective dependents and
beneficiaries, in each case relating to, arising out of or resulting from
employment by AT&T or an AT&T Entity before becoming Lucent Individuals or
Transferred Individuals, respectively (including Liabilities under AT&T Plans
and Lucent Plans); (ii) all other Liabilities to or relating to Lucent
Individuals, Transferred Individuals and other employees or former employees of
Lucent or a Lucent Entity, and their dependents and beneficiaries, to the extent
relating to, arising out of or resulting from future, present or former
employment with Lucent or a Lucent Entity (including Liabilities under AT&T
Plans and Lucent Plans); (iii) all Liabilities relating to, arising out of or
resulting from any other actual or alleged employment relationship with Lucent
or a Lucent Entity; (iv) all Liabilities relating to, arising out of or
resulting from the imposition of withdrawal liability under Subtitle E of Title
IV of ERISA as a result of a complete or partial withdrawal of AT&T Network
Construction Services, Inc. from a "multiemployer plan" within the meaning of
ERISA Section 4021, except to the extent that such withdrawal liability is
imposed solely as a result of the Separation, the IPO, or the Distribution; and
(v) all other Liabilities relating to, arising out of or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by
Lucent, a Lucent Entity, or a Lucent Plan pursuant to this Agreement.
Notwithstanding the foregoing, Lucent shall not, by virtue of any provision of
this Agreement or the Separation and Distribution Agreement, be deemed to have
assumed any Excluded Liability or to have agreed to alter or amend any provision
of Article VI of the Separation and Distribution Agreement.
(b) EXCLUDED LIABILITIES. All Liabilities to or relating to
AT&T Transferred Employees and their respective dependents and beneficiaries
relating to, arising out of or resulting from employment by Lucent or a Lucent
Entity before becoming AT&T Transferred Employees or employment by AT&T or an
AT&T Entity (including Liabilities under AT&T Plans) shall be "Excluded
Liabilities" within the meaning of the Separation and Distribution Agreement.
2.2 LUCENT PARTICIPATION IN AT&T PLANS.
(a) PARTICIPATION IN AT&T PENSION, SAVINGS, HEALTH AND WELFARE
AND EXECUTIVE BENEFIT PLANS. Effective as of the Participation Commencement Date
and subject to the terms and conditions of this Agreement, Lucent shall become a
Participating Company in the AT&T Plans in effect as of the Participation
Commencement Date. Each Lucent Entity that is, as of the date of this Agreement,
a Participating Company in any of
the AT&T Plans shall continue as such. Effective as of any date on or after the
Participation Commencement Date and before the Distribution Date, a Lucent
Entity not described in the preceding sentence may, at its request and with the
consent of AT&T (which shall not be unreasonably withheld), become a
Participating Company in any or all of the AT&T Plans. Without Lucent consent,
neither Lucent nor any Lucent Entity shall become a Participating Company in an
AT&T Plan established after the Participation Commencement Date.
(b) PARTICIPATION IN AT&T STOCK PURCHASE PLAN. If the AT&T
Stock Purchase Plan is approved by the shareholders of AT&T at the 1996 annual
meeting, then (i) effective as of July 1, 1996, Lucent shall become a
Participating Company in the AT&T Stock Purchase Plan; and (ii) effective as of
July 1, 1996, any Lucent Entity may (at the discretion of AT&T in accordance
with the terms of the AT&T Stock Purchase Plan) become a Participating Company
in the AT&T Stock Purchase Plan.
(c) AT&T'S GENERAL OBLIGATIONS AS PLAN SPONSOR. AT&T shall
continue through the Close of the Distribution Date to administer, or cause to
be administered, in accordance with their terms and applicable law, the AT&T
Plans, and shall have the sole discretion and authority to interpret the AT&T
Plans as set forth therein. Before the Close of the Distribution Date, AT&T
shall not, without first consulting with Lucent (on behalf of itself and each
Lucent Entity which is a Participating Company), amend any Material Feature of
any AT&T Plan in which Lucent or a Lucent Entity is a Participating Company,
except to the extent such amendment would not affect any benefits of Lucent
Individuals or Transferred Individuals under such Plan or as may be necessary or
appropriate to comply with any collective bargaining agreement or applicable
law.
(d) LUCENT'S GENERAL OBLIGATIONS AS
PARTICIPATING COMPANY.
Lucent shall perform with respect to its participation in the
AT&T Plans, and
shall cause each other Lucent Entity that is a Participating
Company in any AT&T
Plan to perform, the duties of a Participating Company as set forth in such
Plans or any procedures adopted pursuant thereto, including: (i) assisting in
the administration of claims, to the extent requested by the claims
administrator of the applicable AT&T Plan; (ii) cooperating fully with AT&T Plan
auditors, benefit personnel and benefit vendors; (iii) preserving the
confidentiality of all financial arrangements AT&T has or may have with any
vendors, claims administrators, trustees or any other entity or individual with
whom AT&T has entered into an agreement relating to the AT&T Plans; and (iv)
preserving the confidentiality of participant health information (including
health information in relation to FMLA leaves).
(e) TERMINATION OF PARTICIPATING COMPANY STATUS. Effective as
of the Close of the Distribution Date, Lucent and each Lucent Entity shall cease
to be a Participating Company in the AT&T Plans, except that Lucent and each
Lucent Entity shall cease to be a Participating Company in the AT&T Rabbi Trust
as of the Rabbi Trust Determination Date.
2.3 ESTABLISHMENT OF LUCENT PLANS. Effective Immediately after the
Distribution Date, Lucent shall adopt, or cause to be adopted, the Lucent
Pension Plans, the Lucent Savings Plans, the Lucent ESOP, the Lucent Stock
Purchase Plan (if the AT&T Stock Purchase Plan is then in existence), the Lucent
Health and Welfare Plans, and the Lucent Executive Benefit Plans for the benefit
of the Transferred Individuals and other current, future, and former employees
of Lucent and the Lucent Entities. Except for the Lucent Long Term Incentive
Plan and the Lucent Stock Purchase Plan, the foregoing Lucent Plans as in effect
Immediately after the Distribution Date shall be substantially identical in all
Material Features to the corresponding AT&T Plans as in effect as of the Close
of the Distribution Date. The Lucent Long Term Incentive Plan and the Lucent
Stock Purchase Plan shall be adopted by Lucent and approved by AT&T as sole
shareholder of Lucent, before the Closing Date, to become effective Immediately
after the Distribution Date. Effective as of the Closing Date, Lucent shall
adopt, or cause to be adopted, the Lucent Non-Employee Director Plans, for the
benefit of Lucent Non-Employee Directors who were, immediately before the
Closing Date, AT&T Non-Employee Directors. The Lucent Non-Employee Director
Plans shall be substantially identical in all Material Features to the
corresponding AT&T Non-Employee Director Plans as in effect on the Closing Date,
except that they need not provide for the accrual of additional benefits after
the Closing Date. In addition, before the Closing Date, Lucent may adopt, and in
that event AT&T shall approve as sole shareholder of Lucent, a plan or other
arrangement for the payment of compensation of the Lucent Non-Employee Directors
in Lucent Common Stock, under which the number of shares permitted to be issued
before the Close of the Distribution Date shall not exceed 10,000 in the
aggregate.
2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS
IN LUCENT PLANS
AND LUCENT NON-EMPLOYEE DIRECTORS IN LUCENT NON-EMPLOYEE DIRECTOR
PLANS.
(a) LUCENT PLANS. The Lucent Plans shall be, with respect to
Transferred Individuals, in all respects the successors in interest to, and
shall not provide benefits that duplicate benefits provided by, the
corresponding AT&T Plans. AT&T and Lucent shall agree on methods and procedures,
including amending the respective Plan documents, to prevent Transferred
Individuals from receiving duplicative benefits from the AT&T Plans and the
Lucent Plans. Lucent shall not permit any Lucent Plan to commence benefit
payments to any Transferred Individual until it receives notice from AT&T
regarding the date on which payments under the corresponding AT&T Plan shall
cease. With respect to Transferred Individuals, each Lucent Plan shall provide
that all service, all compensation and all other benefit-affecting
determinations that, as of the Close of the Distribution Date, were recognized
under the corresponding AT&T Plan shall, as of Immediately after the
Distribution Date, receive full recognition, credit, and validity and be taken
into account under such Lucent Plan to the same extent as if such items occurred
under such Lucent Plan, except to the extent that duplication of benefits would
result. The provisions of this Agreement for the transfer of assets from certain
trusts relating to AT&T Plans (including Foreign Plans) to the corresponding
trusts relating to Lucent Plans (including Foreign Plans) are based upon the
understanding of the parties that each such Lucent Plan will assume all
Liabilities of the corresponding AT&T Plan to or relating to Transferred
Individuals, as provided for herein. If any such Liabilities are not effectively
assumed by the appropriate Lucent Plan, then the amount of assets transferred to
the trust relating to such Lucent Plan from the trust relating to the
corresponding AT&T Plan shall be recomputed, ab initio, as set forth below but
taking into account the retention of such Liabilities by such AT&T Plan, and
assets shall be transferred by the trust relating to such Lucent Plan to the
trust relating to such AT&T Plan so as to place each such trust in the position
it would have been in, had the initial asset transfer been made in accordance
with such recomputed amount of assets.
(b) LUCENT NON-EMPLOYEE DIRECTOR PLANS. The Lucent
Non-Employee Director Plans shall be, with respect to the Lucent Non-Employee
Directors who participated in the corresponding AT&T Non-Employee Director
Plans, in all respects the successors in interest to, and shall not provide
benefits that duplicate benefits provided by such AT&T Plans.
2.5 TRANSITION INDIVIDUALS. Portability of benefits
(without
duplication thereof) for Transition Individuals shall be set forth
in the
separate agreements provided for below.
(a) MANDATORY PORTABILITY AGREEMENT. Effective as of the
Participation Commencement Date, AT&T shall designate Lucent as, and Lucent
shall become, an Interchange Company under the MPA, with all the applicable
rights and obligations of such an Interchange Company. Each Lucent Entity that
is an Interchange Company as of the date of this Agreement shall continue as
such. Effective as of any date on or after the Participation Commencement Date,
any other Lucent Entity that becomes a Participating Company in the AT&T Pension
Plans pursuant to Section 2.2 may, at its request and with the consent of AT&T
(which shall not be unreasonably withheld), become an Interchange Company.
Effective Immediately after the Distribution Date, the Lucent Pension Plans
shall be "Interchange Company Pension Plans" under, and subject to the terms of,
the MPA. AT&T shall use its reasonable best efforts to seek an amendment of the
MPA to allow Lucent to become a "Tier II Signatory Company" under the MPA with
the same rights and obligations as have been granted to AirTouch International,
Inc. as a Tier II Signatory Company. Lucent shall take any and all action,
including any action reasonably requested by AT&T, to become a Tier II Signatory
Company under the MPA. During the applicable Transition Periods, neither AT&T
nor Lucent shall permit any Transition Individual covered by the Interchange
Agreements described above to waive portability under the MPA with respect to
movement as a Transition Individual.
(b) MANAGEMENT INTERCHANGE AGREEMENT. On or before the Closing
Date, AT&T and Lucent shall enter into an Interchange Agreement providing for
(among other things) the portability of benefits and mutual recognition of
service during the Management Transition Period with respect to Transition
Individuals who terminate employment with AT&T or an AT&T Entity and who become
Management Employees (or employees covered by an alternate benefit program) of
Lucent or a Lucent Entity and Transition Individuals who terminate employment
with Lucent or a Lucent Entity and who become Management Employees (or employees
covered by an alternate benefit program) of AT&T or an AT&T Entity after the
Distribution Date, as more fully described in Section 2.5(d).
(c) OCCUPATIONAL INTERCHANGE AGREEMENT. On or before the
Closing Date, AT&T and Lucent shall enter into an Interchange Agreement
providing for the portability of benefits and mutual recognition of service
during the Occupational Transition Period with respect to Transition Individuals
who cease employment with AT&T or an AT&T Entity and who become Occupational
Employees of Lucent or a Lucent Entity and Transition Individuals who cease
employment with Lucent or a Lucent Entity and who become Occupational Employees
of AT&T or an AT&T Entity after the Distribution Date, as more fully described
in Section 2.5(d).
(d) TERMS OF THE MANAGEMENT AND
OCCUPATIONAL INTERCHANGE
AGREEMENTS. The Interchange Agreements described in Sections 2.5(b) and 2.5(c)
shall provide in a mutually agreeable manner for the following with respect to
Transition Individuals: (i) prohibition of the commencement of benefits under
any transferor AT&T or Lucent Pension Plan, and suspension of any benefits
already commenced, with respect to any individual for whom the liability for
benefits is transferred either from the AT&T Pension Plans to the Lucent Pension
Plans or from the Lucent Pension Plans to the AT&T Pension Plans; (ii) transfer
of service credit between the AT&T Plans and the Lucent Plans, where
appropriate; (iii) transfer of assets and liabilities between the AT&T Pension
Plans and the Lucent Pension Plans in the same manner and in accordance with the
same methods and assumptions as prescribed by the MPA, regardless of whether
such employees are covered by the
MPA (but in no event shall a Transition Individual be entitled to obtain
overlapping benefits under both the MPA and the Interchange Agreement); (iv)
transfer of accounts between the AT&T Savings Plans and the Lucent Savings
Plans; (v) transfer of accounts between the AT&T ESOP and the Lucent ESOP; (vi)
transfer of accounts between the AT&T Stock Purchase Plan and the Lucent Stock
Purchase Plan; (vii) mutual maintenance and recognition by the AT&T Health and
Welfare Plans and the Lucent Health and Welfare Plans of the coverage elections
and all amounts applied to deductibles and out-of-pocket maximums met under the
other company's Health and Welfare Plans for plan years in the applicable
Transition Period; (viii) mutual maintenance and recognition by the AT&T Health
and Welfare Plans and the Lucent Health and Welfare Plans of all lifetime
maximum benefits reached under the other company's Health and Welfare Plans;
(ix) transfer of service credit, assets, and liabilities between the AT&T
Executive Benefit Plans and the Lucent Executive Benefit Plans and the related
trusts, insurance policies and other funding vehicles; (x) allocation and
transfer of RFA assets and liabilities between the applicable AT&T Health and
Welfare Plans and the applicable Lucent Health and Welfare Plans and the related
trusts, insurance policies and other funding vehicles; and (xi) assumption of
Individual Agreements. Each of the service crediting provisions described above
shall be subject to any applicable "service bridging" or "break in service"
rules under the AT&T Plans and the Lucent Plans.
(e) RESTRICTION ON PLAN AMENDMENTS. During the Management
Transition Period, neither AT&T nor Lucent shall adopt any amendment, or allow
any amendment to be adopted, to any of their respective Pension Plans, Savings
Plans or ESOPs that would violate Code Section 411(d)(6) or that would create an
optional form of benefit subject to Code Section 411(d)(6).
ARTICLE III
DEFINED BENEFIT PLANS
3.1 ESTABLISHMENT OF MIRROR PENSION TRUSTS. Before the Close of the
Distribution Date, AT&T shall cause the trust presently established under the
AT&T Pension Plans to be amended and restated as a group trust under IRS Rev.
Rul. 81-100 (the "AT&T Group Pension Trust") in a form reasonably satisfactory
to Lucent. AT&T shall establish, or cause to be established, a new master
pension trust under the AT&T Pension Plans, which shall be substantially
identical in all Material Features to the trust established under the AT&T
Pension Plans as in effect before such amendment and restatement and which shall
be a participating trust in the AT&T Group Pension Trust. Effective Immediately
after the Distribution Date, Lucent shall establish, or cause to be established,
a master pension trust qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a)(1), and forming part of the Lucent
Pension Plans, which shall be a participating trust in the AT&T Group Pension
Trust, subject to ratification of such participation by the Board of Directors
of Lucent or its authorized delegate after the Close of the Distribution Date
(and Lucent shall seek such ratification within 60 days after the Close of the
Distribution Date).
3.2 ASSUMPTION OF PENSION PLAN LIABILITIES AND ALLOCATION
OF INTERESTS
IN THE AT&T MASTER PENSION TRUST.
(a) ASSUMPTION OF LIABILITIES BY LUCENT PENSION PLAN.
Immediately after the Distribution Date, all Liabilities to or relating to
Transferred Individuals under the AT&T MPP or AT&T PP, as applicable, shall
cease to be Liabilities of the AT&T MPP or AT&T PP, as applicable, and shall be
assumed by the corresponding Lucent Pension Plan.
(b) ASSET ALLOCATIONS AND TRANSFERS.
(i) CALCULATION OF ASSET ALLOCATION.
(A) As soon as practicable after the
Close of the
Distribution Date, AT&T shall cause to be calculated, for the AT&T MPP and the
corresponding Lucent Pension Plan, as of Immediately after the Distribution
Date, (1) the "Funding Policy Amount," which shall be consistent with the
minimum amount necessary to satisfy AT&T's pension funding policy as set forth
in Schedule VI, as applied to the AT&T MPP and the corresponding Lucent Pension
Plan; (2) the "414(l)(1) Amount," which shall equal the minimum amount necessary
to fully fund benefits under the AT&T MPP and the corresponding Lucent Pension
Plan on a "termination basis" (as that term is defined in Treas. Reg. Section
1.414(l)-1(b)(5)); and (3) the "Initial Allocation Amount," which shall equal
the Funding Policy Amount for that particular Pension Plan, plus one-half times
the difference (positive or negative) between (x) the amount of assets as of the
Close of the Distribution Date of the AT&T MPP and (y) the sum of the Funding
Policy Amounts for the AT&T MPP and the corresponding Lucent Pension Plan. The
assumptions used in determining the 414(l)(1) Amount for each Pension Plan shall
be those used in the determination of the minimum required contribution under
ERISA for the Plan year beginning January 1, 1996, except that the discount
rates shall be the rates issued by the PBGC for valuing annuities in terminating
single-employer pension plans during the month containing the Close of the
Distribution Date.
(B) If the aggregate amount of the
assets of the AT&T
MPP as of the Close of the Distribution Date is not less than the sum of the
414(l)(1) Amounts for the AT&T MPP and the corresponding Lucent Pension Plan,
then such assets shall be allocated between the AT&T MPP and the corresponding
Lucent Pension Plan in accordance with the following: (1) if the Initial
Allocation Amount is greater than or equal to the 414(l)(1) Amount for the AT&T
MPP, and the Initial Allocation Amount is greater than or equal to the 414(l)(1)
Amount for the corresponding Lucent Pension Plan, then the amounts of assets
allocated to the AT&T MPP and the corresponding Lucent Pension Plan shall equal
their respective Initial Allocation Amounts; (2) if the Initial Allocation
Amount is greater than or equal to the 414(l)(1) Amount for the AT&T MPP, but
the Initial Allocation Amount is less than the 414(l)(1) Amount for the
corresponding Lucent Pension Plan, then the amount of assets allocated to the
Lucent Pension Plan shall equal the 414(l)(1) Amount for that Pension Plan, and
the amount of assets allocated to the AT&T MPP shall equal the excess of (x) the
total amount of assets, as of the Close of the Distribution Date, of the AT&T
MPP over (y) the 414(l)(1) Amount for the corresponding Lucent Pension Plan; and
(3) if the Initial Allocation Amount is less than the 414(l)(1) Amount for the
AT&T MPP, but the Initial Allocation Amount is greater than or equal to the
414(l)(1) Amount for the corresponding Lucent Pension Plan, then the amount of
assets allocated to the AT&T MPP shall equal the 414(l)(1) Amount for the AT&T
MPP, and the amount of assets allocated to the corresponding Lucent Pension Plan
shall equal the excess of (x) the total amount of assets, as of the Close of the
Distribution Date, of the AT&T MPP over (y) the 414(l)(1) Amount for the AT&T
MPP.
(C) If the aggregate amount of the
assets of the AT&T
MPP as of the Close of the Distribution Date is less than the sum of the
414(l)(1) Amounts for the AT&T MPP and the corresponding Lucent Pension Plan,
then such assets shall be allocated between the AT&T MPP and the corresponding
Lucent Pension Plan as follows: (i) AT&T
and Lucent shall obtain a quote from a mutually agreeable insurance company for
the provision of immediate and deferred annuities payable under the AT&T MPP and
the corresponding Lucent Pension Plan for all accrued benefits under the AT&T
MPP as of the Close of the Distribution Date; (ii) if the amount of assets as of
the Close of the Distribution Date is not less than the amount of such quote,
the amount of assets allocated to the AT&T MPP and the corresponding Lucent
Pension Plan shall equal the portion of the quote allocable to each plan plus
one-half of the excess, if any, over such quote; and (iii) if the amount of
assets as of the Close of the Distribution Date is less than the amount of such
quote, the amount of assets allocated to the AT&T MPP and the corresponding
Lucent Pension Plan shall be determined on a plan termination basis in
accordance with ERISA Section 4044 using the same assumptions as those used in
computing the 414(l)(1) Amounts.
(ii) CALCULATION OF THE AT&T PP'S ASSET
ALLOCATION. The asset
allocation of the AT&T PP and the corresponding Lucent Pension
Plan shall be
determined by applying Section 3.2(b)(i) but substituting "AT&T
PP" for "AT&T
MPP" wherever it appears in that section.
(iii) SEGREGATION OF LUCENT PENSION PLANS' INTERESTS WITHIN
THE AT&T GROUP PENSION TRUST. The actual segregation of the interests of the
Lucent Pension Plans in the AT&T Group Pension Trust into separate trust
accounts shall occur as soon as practicable after the calculation of such
interests pursuant to Section 3.2(b)(i) and (ii), but in no event before AT&T
determines that the calculation and the data on which it is based are acceptably
complete, accurate and consistent. In addition, the interests so calculated
shall be adjusted as of the date of the actual segregation by AT&T to the extent
necessary or appropriate to reasonably and appropriately reflect additional
pension contributions, interest, investment gains and losses, and benefit
payments and data corrections, enhancements, and computational refinements from
Immediately after the Distribution Date through the date of the actual
segregation of such interests. If the master pension trust established by Lucent
pursuant to the last sentence of Section 3.1 is for any reason not then a
participating trust in the AT&T Group Pension Trust, such master pension trust
shall be entitled to receive its allocable share of the assets of the AT&T Group
Pension Trust as determined pursuant to the foregoing provisions of this Section
3.2(b) in redemption of the interests therein of the Lucent Pension Plans as
promptly as prudently practicable. Such allocable share shall consist of
Lucent's allocable share of each class of assets in the AT&T Group Pension
Trust, unless AT&T and Lucent agree otherwise.
ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 LTSPMEs AND RSPSPs.
(a) MANAGEMENT SAVINGS PLAN TRUSTS. Effective Immediately after the
Distribution Date, Lucent shall establish, or cause to be established, separate
trusts qualified under Code Section 401(a), exempt from taxation under Code
Section 501(a)(1), and forming part of the Lucent LTSPME and Lucent RSPSP, which
shall be participating trusts in the AT&T Management Savings Group Trust.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS.
Effective
Immediately after the Distribution Date: (i) the Lucent LTSPME and
the Lucent
RSPSP shall assume and be solely responsible for all Liabilities
to or relating
to Transferred Individuals under the AT&T LTSPME and the AT&T
RSPSP,
respectively; and (ii) AT&T shall cause
the accounts of the Transferred Individuals under the AT&T LTSPME and the AT&T
RSPSP which are held by their related trusts as of the Close of the Distribution
Date to be transferred to the Lucent LTSPME and the Lucent RSPSP, respectively,
and their related trusts, and Lucent shall cause such transferred accounts to be
accepted by such plans and trusts. Effective no later than Immediately after the
Distribution Date, Lucent shall use its reasonable best efforts to enter into
such agreements satisfactory to Lucent to accomplish such assumptions and
transfers, the maintenance of the necessary participant records, the appointment
of Fidelity Institutional Trust Company as initial trustee under the Lucent
LTSPME and the Lucent RSPSP, and the engagement of Fidelity Records Management
Company as initial recordkeeper under such plans.
4.2 LTSSPS AND LESOPS.
(a) OCCUPATIONAL SAVINGS PLAN TRUSTS. Effective Immediately
after the Distribution Date, Lucent shall establish, or cause to be established,
a separate trust, qualified in accordance with Code Section 401(a), exempt from
taxation under Code Section 501(a)(1), and forming part of the Lucent LTSSP,
which shall be a participating trust in the AT&T Occupational Savings Group
Trust.
(b) ASSUMPTION OF LTSSP LIABILITIES. Effective Immediately
after the Distribution Date: (i) the Lucent LTSSP shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
the AT&T LTSSP, other than Liabilities referred to in Section 4.2(c); and (ii)
AT&T shall cause the accounts of the Transferred Individuals under the AT&T
LTSSP which are held by its related trust as of the Close of the Distribution
Date to be transferred to the Lucent LTSSP and its related trust, and Lucent
shall cause such transferred accounts to be accepted by such plans and trusts.
Effective no later than Immediately after the Distribution Date, Lucent shall
use its reasonable best efforts to enter into agreements satisfactory to Lucent
to accomplish such assumption and transfer, the maintenance of the necessary
participant records, the appointment of the then-current trustee under the AT&T
LTSSP as initial trustee under the Lucent LTSSP, and the engagement of the
then-current recordkeeper of the AT&T LTSSP as initial recordkeeper under such
plans.
(c) LEVERAGED STOCK OWNERSHIP PLAN.
(i) Effective Immediately after the
Distribution
Date, Lucent shall establish, or cause to be established, a separate trust (the
"Lucent LESOP Trust"), qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a), and forming part of the Lucent LTSSP.
(ii) Before the Distribution Date, AT&T
and Lucent
shall use their reasonable best efforts to renegotiate the note agreement
between Bankers Trust Company, as trustee of the AT&T LESOP, and various lenders
dated March 9, 1990 (the "Existing Acquisition Loan") so that it is restructured
into two note agreements for two loans, the principal amount of one being
attributable to the accounts to be transferred to the Lucent LESOP Trust
pursuant to Section 4.2(c)(iii) (the "Lucent Acquisition Loan") and the
principal amount of the other being attributable to the accounts remaining in
the AT&T LESOP (the "AT&T Acquisition Loan"). The principal amount of the Lucent
Acquisition Loan shall be determined by multiplying the principal amount of the
Existing Acquisition Loan as of the Distribution Date by the fraction described
in Section 4.2(c)(iii). AT&T and Lucent shall use their reasonable best efforts
to cause the terms of the AT&T Acquisition Loan and the Lucent Acquisition Loan
to be as favorable to Lucent and AT&T, respectively, as the
terms of the Existing Acquisition Loan, and, to the extent permitted by
applicable law, including Code Section 133, the terms of the Lucent Acquisition
Loan to be no less favorable to Lucent and the Lucent LESOP Trust than the terms
of the AT&T Acquisition Loan are to AT&T and the AT&T LESOP Trust.
(iii) Effective Immediately after the
Distribution
Date: (A) the Lucent LTSSP shall assume and be solely responsible for all
Liabilities to or relating to Transferred Individuals under the AT&T LTSSP that
relate to, arise out of or result from the AT&T LESOP; (B) AT&T shall cause the
accounts of the Transferred Individuals under the AT&T LTSSP which are held by
the AT&T LESOP Trust as of the Close of the Distribution Date to be transferred
to the Lucent LTSSP and the Lucent LESOP Trust; (C) if the Existing Acquisition
Loan has been restructured into, and subject to the terms of, the AT&T
Acquisition Loan and the Lucent Acquisition Loan, AT&T shall cause the trustee
of the AT&T LESOP Trust to transfer to the Lucent LESOP Trust a portion of the
assets held in the "Suspense Account" (as defined in Article 20 of the AT&T
LTSSP) attributable to the Transferred Individuals, determined by multiplying
the number of shares of AT&T Common Stock and the fair market value of any other
assets held in such suspense account as of the Close of the Distribution Date by
a fraction, the numerator of which is the amount deemed to be employer matching
contributions attributable to Lucent Individuals and other employees of Lucent
and the Lucent Entities for the latest calendar month that ends on or before the
Distribution Date, and the denominator of which is the total amount deemed to be
employer matching contributions for all participants in the AT&T LTSSP for such
calendar month; and (D) Lucent shall cause all accounts transferred pursuant to
clauses (B) and (C) to be accepted by such plan and trust. Effective no later
than Immediately after the Distribution Date, Lucent shall use its reasonable
best efforts to enter into agreements acceptable to Lucent to accomplish such
assumption and transfers, the maintenance of the necessary participant and
suspense account records, the appointment of Bankers Trust Company as initial
trustee of the Lucent LESOP Trust, and the engagement of the then-current
recordkeeper of the AT&T LESOP as initial recordkeeper of the Lucent LESOP.
(iv) The parties intend that, as the
result of the
above-described transactions, after the Close of the Distribution Date, each of
them will be the sponsor of an "employee stock ownership plan" as defined in
Code Section 4975(e)(7), and that the AT&T Acquisition Loan and Lucent
Acquisition Loan will be exempt from the prohibited transaction rules of the
Code and ERISA pursuant to Code Section 4975(d)(3).
(v) The parties acknowledge that, as a
result of the
transfer of assets described in Section 4.2(c)(iii) and the Distribution, both
the AT&T LESOP and the Lucent LESOP will, after the Close of the Distribution
Date, hold shares of both AT&T Common Stock and Lucent Common Stock. The parties
further acknowledge that applicable law generally prohibits such plans from
holding securities that are not "qualifying employer securities" within the
meaning of Code Section 409 for more than a reasonable time after the
Distribution Date unless the IRS grants an extension of time.
Accordingly, AT&T
and Lucent shall each request the IRS to grant an extension of such holding
period as their financial advisors shall deem prudent to allow the AT&T LESOP to
dispose of the shares of Lucent Common Stock received by it as a result of the
Distribution and to allow the Lucent LESOP to dispose of the shares of AT&T
Common Stock it holds as a result of the transfer of accounts pursuant to
Section 4.2(c)(iii), and, in each case, to reinvest in qualifying employer
securities, in a manner consistent with the best interests of the LESOP
participants. In furtherance of such dispositions and reinvestments, AT&T and
Lucent shall take all actions necessary or appropriate to permit the exchange of
shares of Lucent Common Stock held by the AT&T LESOP Trust for shares of AT&T
Common Stock held by the Lucent
LESOP Trust, including the engagement of a fiduciary not affiliated with either
AT&T or Lucent to advise the parties regarding the time and manner (including
the exchange ratio) of such exchange. If the restructuring of the Existing
Acquisition Loan results in any prepayment or "make whole" penalty, or if the
interest rate payable pursuant to the Lucent Acquisition Loan exceeds the
interest rate payable pursuant to the AT&T Acquisition Loan or vice versa, then
Lucent and AT&T and their respective LESOPs shall bear the cost of such
penalties and the excess interest expense so incurred in proportion to the
relative initial principal amounts of the Lucent Acquisition Loan and the AT&T
Acquisition Loan, taking into account any tax benefits realized or tax
detriments suffered in connection therewith.
(vi) Notwithstanding the foregoing, if
it is
determined by AT&T or Lucent before the Distribution Date that the restructuring
of the Existing Acquisition Loan is not practicable on commercially reasonable
terms and conditions, then, unless AT&T and Lucent agree otherwise, AT&T shall
terminate the AT&T LESOP and its related trust before the Distribution Date, and
shall direct the trustee of the AT&T LESOP trust to sell sufficient shares of
AT&T Common Stock held under the AT&T LESOP trust to repay the Existing
Acquisition Loan. Any remaining "Financed Shares" (as defined in the AT&T LESOP)
that are released after repayment of the loan and not the subject of any
subsequent refinancing shall be used by the Participating Companies to make
matching contributions with respect to periods before the Close of the
Distribution Date to the AT&T LTSSP in accordance with their obligations under
the AT&T LTSSP.
4.3 ESOPS.
(a) ESOP TRUST. Effective Immediately after the Distribution
Date, Lucent shall establish, or cause to be established, a separate trust (the
"Lucent ESOP Trust"), qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a), and forming part of the Lucent ESOP.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF
ASSETS.
(i) Effective Immediately after the
Distribution
Date, the Lucent ESOP shall assume and be solely responsible for all Liabilities
to or relating to Transferred Individuals under the AT&T ESOP, and AT&T shall
cause the accounts of the Transferred Individuals under the AT&T ESOP as of the
Close of the Distribution Date to be transferred to the Lucent ESOP and the
Lucent ESOP Trust, and Lucent shall cause such plan and trust to accept such
assets. Effective no later than Immediately after the Distribution Date, Lucent
shall use its reasonable best efforts to enter into agreements acceptable to
Lucent to accomplish such assumptions and transfers, the maintenance of the
necessary participant records, the appointment of Midlantic Bank as initial
trustee of the Lucent ESOP Trust and the engagement of American Transtech Inc.
as initial recordkeeper of the Lucent ESOP.
(ii) The parties acknowledge that, as a
result of the
transfer of assets described in Section 4.3(b)(i) and the Distribution, both the
AT&T ESOP and the Lucent ESOP will, after the Distribution Date, hold shares of
both AT&T Common Stock and Lucent Common Stock and that, in order to continue to
qualify as employee stock ownership plans, each such plan will be required to
dispose of securities that are not qualifying employer securities and reinvest
in qualifying employer securities. The parties further acknowledge that
applicable law generally prohibits such plans from holding securities that are
not "qualifying employer securities" within the meaning of Code Section 409 for
more than a reasonable time after the Distribution Date unless the IRS grants an
extension of time. Accordingly, AT&T and Lucent shall each request the IRS to
grant an extension of such
holding period as their financial advisors shall deem prudent to allow the AT&T
ESOP to dispose of the shares of Lucent Common Stock received by it as a result
of the Distribution and to allow the Lucent ESOP to dispose of the shares of
AT&T Common Stock it holds as a result of the transfer of accounts pursuant to
Section 4.3(b)(i), and, in each case, to reinvest in qualifying employer
securities, in a manner consistent with the best interests of the ESOP
participants. In furtherance of such dispositions and reinvestments, AT&T and
Lucent shall take all actions necessary or appropriate to permit the exchange of
shares of Lucent Common Stock held by the AT&T ESOP Trust for shares of AT&T
Common Stock held by the Lucent ESOP Trust, including the engagement of a
fiduciary not affiliated with either AT&T or Lucent to advise the parties
regarding the time and manner (including the exchange ratio) of such exchange.
ARTICLE V
HEALTH AND WELFARE PLANS
5.1 ESTABLISHMENT OF MIRROR HEALTH AND WELFARE PLAN TRUSTS. On or
before the Distribution Date, Lucent shall establish, or cause to be
established: (a) the Lucent Health Plans Benefit Trust, for the purpose of
funding claims, other than for post-retirement benefits, under the Lucent Health
Plans; (b) the Lucent Management VEBA, for the purpose of funding claims for
post-retirement benefits of employees not covered by any collective bargaining
agreement under the Lucent Health Plans; (c) the Lucent Union VEBA, for the
purpose of funding claims for post-retirement benefits under the Lucent Health
Plans of employees covered by a collective bargaining agreement; and (d) the
Lucent LTD VEBA, for the purpose of funding long-term disability and disability
pension benefits under the Lucent Health and Welfare Plans. Such trusts shall
meet the requirements of Code Sections 419, 419A, 501(a), and 501(c)(9). Lucent
shall use its reasonable best efforts to enter into agreements satisfactory to
Lucent for the appointment as initial trustee under each such trust of the
trustee of the corresponding AT&T trust.
5.2 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) Immediately after the Distribution Date, all Liabilities
to or relating to Transferred Individuals under the AT&T Health and Welfare
Plans shall cease to be Liabilities of the AT&T Health and Welfare Plans and
shall be assumed by the corresponding Lucent Health and Welfare Plans.
(b) Notwithstanding Section 5.2(a), all treatments which have
been pre-certified for or are being provided to a Transferred Individual as of
the Close of the Distribution Date shall be provided without interruption under
the appropriate AT&T Health and Welfare Plan until such treatment is concluded
or discontinued pursuant to applicable plan rules and limitations, but Lucent
shall continue to be responsible for all Liabilities relating to, arising out of
or resulting from such on-going treatments as of the Close of the Distribution
Date.
(c) Lucent shall assume, effective Immediately after the
Distribution Date, all Liabilities relating to, arising out of or resulting from
special commitments made by AT&T before the Close of the Distribution Date to
provide benefits to or with respect to Transferred Individuals for custodial
care or other services not covered by any AT&T Health and Welfare Plans (but
only if such special commitments were made with the prior written consent of the
Lucent Senior Vice President, Human Resources or his delegate, to
Exhibit 5.2
April 1, 1996
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, N.J. 07974
Dear Sirs:
With reference to the registration statement on Form S-1 (No.
333-00703; the "Registration Statement") filed by Lucent Technologies Inc. (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, relating to 127,650,000 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), we are of the opinion
that:
1. the Company is a duly organized and validly
existing
corporation under the laws of the State of
Delaware;
2. the issuance of the Common Stock has been duly
authorized by
appropriate corporate action; and
3. when the Common Stock has been issued, paid for
and delivered
pursuant to a sale in the manner described in
the Registration
Statement, such Common Stock will be validly
issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission in connection with the filing of the Registration
Statement. We also consent to the making of the statement with respect to us in
the related prospectus under the heading "Legal Opinions".
Very truly yours,
/s/ Wachtell, Lipton,
Rosen & Katz
the extent such commitments are made after the Participation Commencement Date).
Before the Close of the Distribution Date, AT&T shall transfer to Lucent copies
of all documentation, and a complete written description, of the terms of all
such special commitments to Transferred Individuals.
5.3 VEBA ASSET TRANSFERS. This Section 5.3 shall govern the transfer of
assets from the AT&T Health Trusts (other than the AT&T Health Plans Benefit
Trust) to the corresponding Lucent Health Trusts and from the AT&T LTD VEBA to
the Lucent LTD VEBA, except to the extent that Section 5.5 is applicable. As
soon as practicable after the Close of the Distribution Date, AT&T shall
determine the aggregate present value, as of the Close of the Distribution Date,
of the future benefit obligations of each AT&T Plan funded by a VEBA ("VEBA
Plans"), with respect to Transferred Individuals who are eligible to receive
benefits under the applicable VEBA Plan as of the Close of the Distribution Date
(and, in the case of any post-retirement health benefits, who have terminated
employment as of the Close of the Distribution Date). As soon as practicable
after such determination is made, there shall be transferred from each AT&T VEBA
to the corresponding Lucent VEBA an amount of assets having a fair market value
on the date of transfer equal to the amount determined by dividing such
aggregate present value of future benefit obligations for the applicable VEBA
Plans of Lucent by the aggregate of all such present values of all the
applicable VEBA Plans of AT&T and all the applicable VEBA Plans of Lucent,
multiplied by the fair market value of the assets of the AT&T VEBA on the date
of transfer, adjusted to take into account the extent to which AT&T and/or
Lucent has opted to forego reimbursement from the applicable VEBA of any benefit
obligation that was paid by AT&T or Lucent, as applicable, on or after the
Participation Commencement Date and before the Close of the Distribution Date.
5.4 TRANSFER OF RETIREMENT FUNDING ACCOUNT ASSETS. This Section 5.4
shall apply to AT&T Health and Welfare Plans with group term life insurance
policies that have RFAs maintained for the purpose of accumulating, through
employer contributions in advance of employee retirements, a fund to be used to
pay all or a portion of the costs for continuing life insurance protection for
employees after their retirement. As soon as practicable after the Close of the
Distribution Date, there shall be transferred to the corresponding RFA of Lucent
an amount of assets (determined by AT&T subject to audit by Coopers & Lybrand)
having a fair market value as of the Close of the Distribution Date equal to the
product of (a) the present value, as of the Close of the Distribution Date, of
the future benefit obligation with respect to Transferred Individuals to be
discharged from the RFA, divided by the present value of the future benefit
obligations with respect to all individuals whose benefits are to be discharged
from the RFA assets as of the Close of the Distribution Date times (b) the fair
market value of all RFA assets as of the Close of the Distribution Date. AT&T
and Lucent shall adopt, and shall use their reasonable best efforts to cause
their insurers to adopt, procedures to implement such asset transfers in a
reasonable and expeditious manner that is consistent with the underlying group
life insurance contracts and applicable legal requirements. Nothing in this
Agreement shall be interpreted to provide that any assets so transferred have
reverted to AT&T or Lucent.
5.5 VEBAs FUNDED WITH TRUST-OWNED LIFE INSURANCE. This Section 5.5
shall govern transfers of assets of AT&T VEBAs that are funded, in whole or in
part, with trust-owned life insurance policies.
(a) GENERAL PROVISIONS. As soon as practicable
after the Close
of the Distribution Date, AT&T shall cause each such AT&T VEBA to
transfer to
the corresponding Lucent VEBA such assets as are attributable to
Transferred
Individuals who are eligible to
receive post-retirement health benefits under the AT&T Health Plans with respect
to such AT&T VEBA; provided, that AT&T shall not be required to cause such
transfer to occur before AT&T has obtained appropriate rulings from regulatory
agencies indicating that the transfers do not contravene any statute,
regulation, or technical pronouncement.
(b) AT&T MANAGEMENT VEBA: TRUST-OWNED LIFE INSURANCE (VEBA).
To accomplish the transfers required by Section 5.5(a), all or a portion of the
Trust-Owned Life Insurance (VEBA) policies and any residual assets in the AT&T
Management VEBA shall be allocated between the trustee of the AT&T Management
VEBA, and the trustee of the Lucent Management VEBA, in accordance with the
following procedures.
(i) AT&T shall determine the extent to
which the
assets of the AT&T Management VEBA are sufficient to satisfy all Liabilities to
or relating to Transferred Individuals who have terminated employment and are
eligible to receive post-retirement health benefits under the AT&T Health Plans
with respect to the AT&T Management VEBA as of the Close of the Distribution
Date.
(ii) AT&T shall instruct the trustee of
the AT&T
Management VEBA to transfer one of the Trust-Owned Life Insurance (VEBA)
policies to the Lucent Management VEBA. AT&T shall determine which policy shall
be transferred based on the present values of relative post-retirement health
liabilities (benefit obligations) retained by AT&T and assumed by Lucent
pursuant to this Agreement, without regard to which entity employs the insured
individuals, provided, that before such transfer, AT&T shall instruct the
trustee of the AT&T Management VEBA to adjust and/or allocate the cash values
under the Trust-Owned Life Insurance (VEBA) policies such that the policy to be
transferred to the Lucent Management VEBA shall have a proportionate cash value
consistent with the proportion of post-retirement health liabilities (benefit
obligations) to be assumed by Lucent. Upon such assignment, the trustee of the
Lucent Management VEBA shall assume and be solely responsible for all
Liabilities relating to, arising out of or resulting from such policy, including
the payment of any premiums and any loan repayments required, and shall be
entitled to all benefits, under the policy.
(c) OTHER ASSET TRANSFERS. To accomplish
the transfers
required by Section 5.5(a), a portion of the assets of the AT&T
Management VEBA
(other than Trust-Owned Life Insurance (VEBA) policies) shall be transferred to
the Lucent Management VEBA to the extent necessary so that immediately after
such transfer and the transfer pursuant to Section 5.5(b), the ratio of the
assets of each such VEBA trust to the liabilities payable therefrom as described
in Section 5.5(b)(i), is equal.
(d) ADMINISTRATION. Lucent and AT&T shall share all
information necessary to determine when and whether any individuals insured by
the Trust-Owned Life Insurance (VEBA) policies owned by the trustees of the AT&T
Management VEBA and Lucent Management VEBA, respectively, are deceased, and as
otherwise necessary to administer their respective Management VEBAs.
5.6 CONTRIBUTIONS TO, INVESTMENTS OF AND DISTRIBUTIONS FROM VEBAS.
Before the Close of the Distribution Date, AT&T shall have sole authority to
direct the trustee of the AT&T Health Trusts and AT&T LTD VEBA as to the timing
and manner of any contributions to the AT&T Health Trusts and AT&T LTD VEBA, the
investment of any trust assets, and the distributions and/or transfers of trust
assets to AT&T, Lucent, any Participating Company in the trusts, any paying
agent, any successor trustee, or any other Person.
5.7 VENDOR CONTRACTS.
(a) THIRD-PARTY ASO CONTRACTS.
(i) AT&T shall use its reasonable best
efforts to
amend each administrative services only contract with a third-party
administrator that relates to any of the AT&T Health and Welfare Plans (an "ASO
Contract") in existence as of the date of this Agreement to permit Lucent to
participate in the terms and conditions of such ASO Contract from Immediately
after the Distribution Date until the expiration of the financial fee guarantees
in effect under such ASO Contract as of the Close of the Distribution Date. AT&T
shall use its reasonable best efforts to cause all ASO Contracts into which AT&T
enters after the date of this Agreement but before the Close of the Distribution
Date (including contracts with a subrogation vendor, a COBRA administration
vendor and a Disability 2000 vendor) to allow Lucent to participate in the terms
and conditions thereof effective Immediately after the Distribution Date on the
same basis as AT&T.
(ii) AT&T shall have the right to
determine, and
shall promptly notify Lucent of, the manner in which Lucent's participation in
the terms and conditions of ASO Contracts as set forth above shall be
effectuated. The permissible ways in which Lucent's participation may be
effectuated include automatically making Lucent a party to the ASO Contracts or
obligating the third party to enter into a separate ASO Contract with Lucent
providing for the same terms and conditions as are contained in the ASO
Contracts to which AT&T is a party. Such terms and conditions shall include the
financial and termination provisions, performance standards, methodology,
auditing policies, quality measures, reporting requirements and target claims.
Lucent hereby authorizes AT&T to act on its behalf to extend to Lucent the terms
and conditions of the ASO Contracts. Lucent shall fully cooperate with AT&T in
such efforts, and Lucent shall not perform any act, including discussing any
alternative arrangements with any third party, that would prejudice AT&T's
efforts.
(iii) If AT&T determines that it will
not be
successful in negotiating contract language that will permit compliance with
Sections 5.7(a)(i) and 5.7(a)(ii), AT&T shall so notify Lucent promptly, but in
no event later than July 20,1996, and after such notification, Lucent shall be
released from the restriction contained in the last sentence of Section
5.7(a)(ii). In such case, AT&T shall offer a contingency plan for the
administration of the portion of the Lucent Health and Welfare Plans affected by
the unavailability of such ASO Contract, including, if possible, an offer by the
third-party administrator under the relevant ASO Contract of its services under
a separate contract with Lucent, with terms and conditions as similar as
practicable to those of the ASO Contract with AT&T. Lucent shall, effective
Immediately after the Distribution Date, either adopt its own contingency plan
or the contingency plan established by AT&T for such arrangement.
(b) GROUP INSURANCE POLICIES.
(i) This Section 5.7(b) applies to
group insurance
policies not subject to allocation or transfer pursuant to the foregoing
provisions of this Article V ("Group Insurance Policies").
(ii) AT&T shall use its reasonable best
efforts to
amend each Group Insurance Policy in existence as of the date of this Agreement
for the provision or administration of benefits under the AT&T Health and
Welfare Plans to permit Lucent to
participate in the terms and conditions of such policy from Immediately after
the Distribution Date until the expiration of the financial fee and rate
guarantees in effect under such Group Insurance Policy as of the Close of the
Distribution Date. AT&T shall use its reasonable best efforts to cause all Group
Insurance Policies into which AT&T enters or which AT&T renews after the date of
this Agreement but before the Close of the Distribution Date to allow Lucent to
participate in the terms and conditions thereof effective Immediately after the
Distribution Date on the same basis as AT&T.
(iii) Lucent's participation in the
terms and
conditions of each such Group Insurance Policy shall be effectuated by
obligating the insurance company that issued such insurance policy to AT&T to
issue one or more separate policies to Lucent. Such terms and conditions shall
include the financial and termination provisions, performance standards and
target claims. Lucent hereby authorizes AT&T to act on its behalf to extend to
Lucent the terms and conditions of such Group Insurance Policies. Lucent shall
fully cooperate with AT&T in such efforts, and Lucent shall not perform any act,
including discussing any alternative arrangements with third parties, that would
prejudice AT&T's efforts.
(iv) If AT&T determines that it will
not be
successful in negotiating policy provisions that will permit compliance with
Sections 5.7(b)(ii) and 5.7(b)(iii), AT&T shall so notify Lucent promptly, but
in no event later than July 20, 1996, and after such notification, Lucent shall
be released from the restriction contained in the last sentence of Section
5.7(b)(iii). In such case, AT&T shall use its reasonable best efforts to either
continue to cover Lucent under its Group Insurance Policies or procure a
separate policy for Lucent until Lucent has procured such separate insurance
policy or made other arrangements for replacement coverage, and Lucent shall
bear all costs incurred by AT&T to continue such coverage.
(c) HMO AGREEMENTS.
(i) Before the Distribution Date, AT&T
shall use its
reasonable best efforts to amend all letter agreements with HMOs that provide
medical services under the AT&T Medical Plans for 1996 ("HMO Agreements") in
existence as of the date of this Agreement to permit Lucent to participate in
the terms and conditions of such HMO Agreements, in each case, from Immediately
after the Distribution Date until December 31, 1996. AT&T shall use its
reasonable best efforts to cause all HMO Agreements into which AT&T enters after
the date of this Agreement but before the Close of the Distribution Date to
allow Lucent to participate in the terms and conditions of such HMO Agreements
from Immediately after the Distribution Date until December 31, 1996 on the same
basis as AT&T.
(ii) AT&T shall have the right to
determine, and
shall promptly notify Lucent of, the manner in which Lucent's participation in
the terms and conditions of all HMO Agreements as set forth above shall be
effectuated. The permissible ways in which Lucent's participation may be
effectuated include automatically making Lucent a party to the HMO Agreements or
obligating the HMOs to enter into letter agreements with Lucent which are
identical to the HMO Agreements. Such terms and conditions shall include the
financial and termination provisions of the HMO Agreements. Lucent hereby
authorizes AT&T to act on its behalf to extend to Lucent the terms and
conditions of the HMO Agreements. Lucent shall fully cooperate with AT&T in such
efforts, and Lucent shall not perform any act, including discussing any
alternative arrangements with any third-party, that would prejudice AT&T's
efforts.
(iii) If AT&T determines that it will
not be
successful in negotiating arrangements that will permit compliance with Sections
5.7(c)(i) and 5.7(c)(ii), AT&T shall so notify Lucent promptly, but no event
later than July 20, 1996, and after such notification, Lucent shall be released
from the restriction contained in the last sentence of Section 5.7(c)(ii). In
such case, Lucent shall enter into letter agreements with one or more HMOs to
provide benefits under the Lucent Medical Plans, at least through December 31,
1996, in the geographic area serviced by the HMOs covered by AT&T's notice. AT&T
shall, if requested by Lucent and permitted by the HMOs, arrange for the
continued provision under its HMO Agreements of medical services to Lucent
Medical Plan participants from Immediately after the Distribution Date through
December 31, 1996, and Lucent shall bear all costs incurred by AT&T to continue
such services.
(iv) Notwithstanding anything in this
Article V to
the contrary, Lucent shall have the sole discretion to determine which HMOs to
offer to the participants in the Lucent Medical Plans for 1997 and subsequent
years, and all HMO Agreements in which Lucent participates pursuant to this
Section 5.7(c) shall provide Lucent with the right to discontinue its
participation effective January 1, 1997.
(d) EFFECT OF CHANGE IN RATES. AT&T and Lucent shall use their
reasonable best efforts to cause each of the insurance companies, HMOs,
point-of-service vendors and third-party administrators providing services and
benefits under the AT&T Health and Welfare Plans and the Lucent Health and
Welfare Plans to maintain the premium and/or administrative rates based on the
aggregate number of participants in both the AT&T Health and Welfare Plans and
the Lucent Health and Welfare Plans through the expiration of the financial fee
or rate guarantees in effect as of the Close of the Distribution Date under the
respective ASO Contracts, Group Insurance Policies, and HMO Agreements. To the
extent they are not successful in such efforts, AT&T and Lucent shall each bear
the revised premium or administrative rates attributable to the individuals
covered by their respective Health and Welfare Plans.
5.8 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS,
ADMINISTRATIVE
PRACTICES, AND VENDOR CONTRACTS.
(a) AMENDMENTS TO PLAN DOCUMENTS. From Immediately after the
Distribution Date through December 31, 1998, no amendment to any AT&T Health and
Welfare Plan or Lucent Health and Welfare Plan shall be effective unless the
party intending to amend its Health and Welfare Plan has: (i) given the other
party written notice of the intention to amend, accompanied by a copy of the
proposed amendment, at least 30 days in advance of the earlier of (A) the
proposed amendment effective date, or (B) the proposed amendment adoption date;
(ii) agreed to bear all of the costs of implementing the amendment incurred by
third-party administrators, insurance companies and other vendors and passed
through to one or both of the parties; and (iii) certified to the other party,
and provided to the other party the written concurrence of all third-party
administrators, insurance companies and other vendors providing services in
connection with such Plan, that (after taking into account the effect of clause
(ii)) the proposed amendment to the Health and Welfare Plan will have no
material adverse impact (financial, administrative or otherwise) on the
corresponding Health and Welfare Plan sponsored by the other party.
(b) CHANGES IN VENDOR CONTRACTS, GROUP INSURANCE
POLICIES,
PLAN DESIGN, AND ADMINISTRATION PRACTICES AND PROCEDURES.
(i) From Immediately after the
Distribution Date
through the earlier of the expiration of the financial fee or rate guarantees in
effect as of the Close of the Distribution Date under the applicable ASO
Contract, Group Insurance Policy or HMO Agreement, and
December 31, 1998,
neither AT&T nor Lucent shall materially modify, or take other action which
would have a material effect on, any of the following (each such modification, a
"Change") without complying with Section 5.8(b)(ii): (A) the termination date,
administration, or operation of (1) an ASO contract between AT&T or Lucent and a
third-party administrator, (2) a Group Insurance Policy issued to AT&T or
Lucent, or (3) an HMO Agreement with AT&T or Lucent, in each case, the material
terms and conditions of which contracts and policies are extended to Lucent or
to which Lucent becomes a party pursuant to Section 5.7; (B) the design of
either an AT&T Health and Welfare Plan or a Lucent Health and Welfare Plan; or
(C) the financing, operation, administration or delivery of benefits under
either an AT&T Health and Welfare Plan or a Lucent Health and Welfare Plan.
(ii) Neither AT&T nor Lucent shall make
any Change
unless the party intending to make the Change has: (A) given the other party
written notice of the intention to make the Change, accompanied by a written
description of the Change, at least 180 days in advance of the proposed
effective date of the Change; (B) agreed to bear all of the costs of
implementing the Change which are incurred by all third-party administrators,
insurance companies, HMOs and other vendors and passed through to one or both of
the parties; and (C) certified to the other party, and provided to the other
party the written concurrence of each third-party administrator, insurance
company, HMO or other vendor associated with or performing services in
connection with the Health and Welfare Plan affected by the Change, that (after
taking into account the effect of clause (B)) the proposed Change will have no
material adverse impact (financial, administrative or otherwise) on the
corresponding Health and Welfare Plan sponsored by the other party.
(iii) SUBMISSION TO HEALTH, WELFARE AND
LIFE
INSURANCE COMMITTEE. If AT&T or Lucent desires to make a Change that requires
compliance with, but cannot satisfy all of the conditions of, Section
5.8(b)(ii), the party desiring to make the Change may submit a written request
for approval of the Change, accompanied by a written description of the Change,
to the HWLI Committee. If such a request is made, the desired Change may be
implemented only after the Change is approved in writing by the HWLI Committee.
(c) EMPLOYEE CONTRIBUTIONS. Notwithstanding the provisions of
Sections 5.8(a) and 5.8(b), as of the first January 1 after the Distribution
Date, AT&T and Lucent shall each have the independent right, in its sole
discretion and without compliance with Sections 5.8(a) and 5.8(b), to increase
or decrease the amount of employee contributions under their respective Health
and Welfare Plans.
5.9 HEALTH, WELFARE AND LIFE INSURANCE COMMITTEE. From the date of this
Agreement through December 31, 1998, the management of the ASO Contracts, Group
Insurance Policies, and HMO Agreements and other vendor contracts that are
subject to Section 5.8 and the administration of the AT&T Health and Welfare
Plans and the Lucent Health and Welfare Plans associated therewith shall be
conducted under the supervision of the HWLI Committee. The HWLI Committee shall
be comprised of an equal number of representatives from AT&T and Lucent at the
District Manager or equivalent level, and shall provide
strategic oversight and direction of the cohesive administration of the AT&T
Health and Welfare Plans and the Lucent Health and Welfare Plans. Issues that
cannot be resolved by the HWLI Committee shall be decided, at the request of
either party, by the Executive Oversight Committee comprised of the Lucent
Senior Vice President-Human Resources and the AT&T Senior Vice
President-Benefits and Compensation.
5.10 AT&T SICKNESS AND ACCIDENT DISABILITY, LONG TERM
DISABILITY AND
PENSION DISABILITY BENEFITS.
(a) ADMINISTRATION OF AT&T SADBP CLAIMS. AT&T shall administer
claims incurred under the AT&T SADBP by Transferred Individuals, Lucent
Individuals and other employees and former employees of Lucent and the Lucent
Entities on or after the Participation Commencement Date but before the Close of
the Distribution Date, to the extent such claims are not administered by Lucent
pursuant to the terms of the AT&T SADBP as in effect on the date of this
Agreement. Any determination made or settlements entered into by AT&T with
respect to such claims shall be final and binding. If claims incurred before the
Close of the Distribution Date under the AT&T SADBP by Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities were administered by Lucent before the Close of the Distribution
Date, such claims shall continue to be administered by Lucent after the Close of
the Distribution Date, unless outsourced pursuant to Section 5.10(b). AT&T shall
transfer to Lucent, effective Immediately after the Distribution Date,
responsibility for administering all claims incurred by Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities before the Close of the Distribution Date that are administered
by AT&T as of the Close of the Distribution Date. Lucent shall administer such
claims in the same manner, and using the same methods and procedures, as AT&T
used in administering such claims. Lucent shall have sole discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims.
(b) OUTSOURCING OF CLAIMS. AT&T, pursuant to its Disability
2000 project or otherwise, shall have the right to engage a third-party
administrator or insurance company to administer ("outsource") claims incurred
under the AT&T SADBP that are being administered by AT&T pursuant to Section
5.10(a), claims incurred under the AT&T LTD Plans, and claims incurred under the
pension disability provisions of the AT&T Pension Plans, including claims
incurred by Transferred Individuals, Lucent Individuals and other employees and
former employees of Lucent and the Lucent Entities before the Close of the
Distribution Date. AT&T may determine the manner and extent of such outsourcing,
including the selection of one or more third-party administrators or insurance
companies and the ability to transfer the liability for such claims to one or
more independent insurance companies. AT&T shall promptly notify Lucent of its
intent to outsource such claims, and the material terms and condition of the
outsourcing, before the effective date thereof. Lucent shall have the right to
notify AT&T, within a reasonable period of time after Lucent receives AT&T's
notice of intent to outsource, of Lucent's desire to participate in the proposed
outsourcing. If Lucent gives such notice, all claims incurred by Transferred
Individuals, Lucent Individuals and other employees and former employees of
Lucent and the Lucent Entities before the Close of the Distribution Date that
are administered by Lucent pursuant to Section 5.10(a) shall be included in the
proposed outsourcing. In the event Lucent elects to participate in such
outsourcing, Lucent shall be bound by the terms and conditions thereof
(including all consequences of any transfer of liability) and to any
determinations and settlements entered into by the third-party administrator
pursuant thereto.
5.11 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS.
(a) As soon as practicable after the Distribution Date, AT&T
shall provide Lucent with a list of all Transferred Individuals who are, to the
best knowledge of AT&T, eligible to receive retiree medical or dental coverage
under the AT&T Health Plans as of the Distribution Date and/or post-retirement
life insurance coverage under the AT&T Group Life Program, and the type of
retiree medical or dental coverage and the level of life insurance coverage for
which they are eligible, as applicable.
(b) Effective Immediately after the Distribution Date, Lucent
shall (i) assume and continue through December 31, 1998 the company-sponsored
retiree care accounts provided under the AT&T Medical Expense Plan for Retired
Employees pursuant to collective bargaining agreements for all Transferred
Individuals under the Lucent Medical Expense Plan for Retired Employees and (ii)
honor and maintain all other-covered-charges buy-up lifetime maximum elections
made by Transferred Individuals under the AT&T Medical Expense Plan for Retired
Employees.
5.12 GROUP LIFE PROGRAMS. Effective as of the Close of the Distribution
Date, AT&T shall cause the insurance carrier that provides basic active life
insurance coverage, supplemental life insurance coverage, dependent life
insurance coverage, accidental life insurance coverage and the portion of the
post-retirement life insurance benefit which exceeds $50,000 per participant
under the AT&T Group Life Program to: (a) perform an experience rating; (b)
allocate the applicable premium stabilization reserves between AT&T and Lucent
on an actuarial basis; (c) allocate pending claim reserves based on actual
claims data; and (d) allocate unreported claim reserves based on expected claims
by coverage.
5.13 COBRA AND DIRECT PAY. Through the Close of the Distribution Date,
AT&T shall be responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the AT&T Health and Welfare
Plans with respect to Transferred Individuals, Lucent Individuals and other
employees and former employees of Lucent and the Lucent Entities and
beneficiaries and dependents thereof and Lucent and the Lucent Entities shall be
responsible for filing all necessary employee change notices with respect to
their respective employees in accordance with applicable AT&T policies and
procedures. Effective Immediately after the Distribution Date, Lucent shall
solely be responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the Lucent Health and Welfare
plans, and, with respect to Transferred Individuals, the AT&T Health and Welfare
Plans.
5.14 LEAVE OF ABSENCE PROGRAMS AND FMLA.
(a) Through the Close of the Distribution Date, AT&T shall be
responsible for administering compliance with the AT&T Leave of Absence Programs
and FMLA with respect to Lucent Individuals and all other employees of Lucent
and the Lucent Entities. Lucent and the Lucent Entities shall be responsible for
determining whether their respective employees are eligible for leave under the
AT&T Leave of Absence Programs and FMLA in accordance with such programs and
FMLA, respectively.
(b) Effective Immediately after the Distribution Date: (i)
Lucent shall adopt, and shall cause each Lucent Entity to adopt, leave of
absence programs which are substantially identical in all Material Features to
the AT&T Leave of Absence Programs as in effect on the Distribution Date; (ii)
Lucent shall honor, and shall cause each Lucent Entity to honor, all terms and
conditions of leaves of absence which have been granted to any
Transferred Individual under an AT&T Leave of Absence Program or FMLA before the
Close of the Distribution Date by AT&T, Lucent, or a Lucent Entity, including
such leaves that are to commence after the Distribution Date; (iii) Lucent and
each Lucent Entity shall be solely responsible for administering leaves of
absence and compliance with FMLA with respect to their employees; and (iv)
Lucent and each Lucent Entity shall recognize all periods of service of
Transferred Individuals with AT&T or an AT&T Entity, as applicable, to the
extent such service is recognized by AT&T for the purpose of eligibility for
leave entitlement under the AT&T Leave of Absence Programs and FMLA; provided,
that no duplication of benefits shall be required by the foregoing.
(c) As soon as administratively possible after the Close of
the Distribution Date, AT&T shall provide to Lucent copies of all records
pertaining to the AT&T Leave of Absence Programs and FMLA with respect to all
Transferred Individuals to the extent such records have not been provided
previously to Lucent or a Lucent Entity.
5.15 AT&T WORKERS' COMPENSATION PROGRAM.
(a) ADMINISTRATION OF CLAIMS.
(i) Through the Close of the
Distribution Date or
such earlier date as may be agreed by AT&T and Lucent, (A) AT&T shall continue
to be responsible for the administration of all claims that (1) are, or have
been, incurred under the AT&T WCP before the Close of the Distribution Date by
Transferred Individuals, Lucent Individuals and other employees and former
employees of Lucent and the Lucent Entities through the Close of the
Distribution Date ("Lucent WCP Claims") and (2) have been historically
administered by AT&T or its insurance company, and (B) Lucent shall continue to
be responsible for the administration of all Lucent WCP Claims that have been
historically administered by the Lucent Business.
(ii) Effective immediately after the
Distribution
Date or such earlier date as may be agreed by AT&T and Lucent, (A) Lucent shall,
to the extent Legally Permissible (as defined below), be responsible for the
administration of all Lucent WCP Claims, whether those claims were previously
administered by AT&T or Lucent, and (B) AT&T shall be responsible for the
administration of all Lucent WCP Claims not administered by Lucent pursuant to
clause (A), whether previously administered by AT&T or Lucent and whether under
the self-insured or insured portion of the AT&T WCP. Any determination made, or
settlement entered into, by either party or its insurance company with respect
to Lucent WCP Claims for which it is administratively responsible shall be final
and binding upon the other party.
(iii) Each party shall fully cooperate
with the other
with respect to the administration and reporting of Lucent WCP Claims, the
payment of Lucent WCP Claims determined to be payable, and the transfer of the
administration of any Lucent WCP Claims to the other party as determined under
Section 5.15(a)(ii). Either party shall have the right to "outsource" (i.e.,
transfer the administration of claims to a third party administrator or cause
claims to be paid through insurance) any and all Lucent WCP Claims for which it
is administratively responsible.
(iv) For purposes of this Section
5.15(a), "Legally
Permissible" shall be determined on a state-by-state basis, and
shall mean that
administration of Lucent
WCP Claims by Lucent both (A) is permissible under the applicable state's
workers' compensation laws (taking into account all relevant facts, including
that Lucent may have a self-insurance certificate in that state) and (B) would
not have a material adverse effect on AT&T's self-insurance certificate within
that state. If it is determined that, in a particular state, it is Legally
Permissible for Lucent to administer Lucent WCP Claims, then Lucent shall be
responsible for the administration of all Lucent WCP Claims incurred in that
state, whether previously administered by AT&T, Lucent, or an insurance company.
If it is determined that, in a particular state, it is not Legally Permissible
for Lucent to administer Lucent WCP Claims, then AT&T shall be responsible for
the administration of all Lucent WCP Claims incurred in that state, whether
previously administered by AT&T, Lucent, or an insurance company.
(b) SELF-INSURANCE STATUS.
(i) AT&T shall amend its certificates of
self-insurance with respect to workers' compensation and any applicable group
insurance policies to include Lucent until the Close of the Distribution Date,
and Lucent shall fully cooperate with AT&T in obtaining such amendments. All
costs incurred by AT&T in amending such certificates or group insurance
policies, including filing fees, adjustments of security and excess loss
policies and amendment of safety programs, shall be shared equally by AT&T and
Lucent. AT&T shall use its reasonable best efforts to obtain self-insurance
status for workers' compensation for Lucent effective Immediately after the
Distribution Date in each jurisdiction in which Lucent conducts business and in
which AT&T is self-insured, if AT&T determines that such status is beneficial to
Lucent. Lucent hereby authorizes AT&T to take all actions necessary and
appropriate on its behalf in order to obtain such self-insurance status.
(ii) AT&T shall also arrange a
contingent insured or
other arrangement for payment of workers' compensation claims, into which Lucent
shall enter if and to the extent that AT&T fails to obtain self-insured status
for Lucent as provided in Section 5.15(b)(i), unless Lucent obtains another such
arrangement that is effective Immediately after the Distribution Date, in which
event Lucent shall reimburse AT&T for any expenses incurred by AT&T in procuring
such contingent arrangement.
(c) INSURANCE POLICY.
(i) In the event the workers'
compensation insurance
policy that AT&T maintains under the AT&T WCP expires before the Distribution
Date, AT&T shall use its reasonable best efforts to renew such policy and to
cause the issuing insurance company to issue a separate policy to Lucent. If
AT&T is not able to cause such insurance company to issue such separate
insurance policy, Lucent shall use its reasonable best efforts to procure a
separate policy from another insurance company or to obtain self-insurance
status, and AT&T shall use its reasonable best efforts to continue to cover
Lucent under its renewed policy until the earlier of (A) the date on which
Lucent's application for such self-insurance status is approved or (B) the date
on which a separate insurance policy is procured. Lucent shall compensate AT&T
for all costs incurred by AT&T to continue such coverage. Any claims incurred by
Transferred Individuals after the Close of the Distribution Date that will be
covered under and during any such continuation of coverage shall be treated as
being incurred before the Close of the Distribution Date for purposes of
determining the party responsible for the administration of benefits.
(ii) AT&T shall use its best effort to
maintain the
premium rates for all workers' compensation insurance policies for both AT&T and
Lucent in effect for periods through the Close of the Distribution Date to be
based on the aggregate number of employees covered under the workers'
compensation insurance policies of both AT&T and Lucent. Any premiums due under
the separate workers' compensation insurance issued to Lucent shall be payable
by Lucent.
5.16 AMERICAN TRANSTECH INC. AND BENEFIT DIRECTIONS
ENROLLMENT CENTER.
AT&T shall cause American Transtech Inc. to enter into an
agreement with Lucent
for the provision of data and enrollment services and customer
service for
enrollment and eligibility matters through the 1996 fall open
enrollment period
using the Benefit Directions Enrollment Center (the "BDEC") and
the Benefit
Direction System (the "BDS") database. Such services shall be
provided by
American Transtech Inc. to Lucent on terms and conditions and at
prices
comparable to those on which American Transtech Inc. provides
similar services
to AT&T.
5.17 AT&T EMPLOYEE ASSISTANCE PROGRAM. Effective Immediately after the
Distribution Date, Lucent shall either (a) provide a centralized Lucent Employee
Assistance Program staff to provide case management services for chemical
dependency/substance abuse treatments to Transferred Individuals or (b) contract
with the mental health network vendor used by AT&T to provide such services. As
of the Close of the Distribution Date, the AT&T Employee Assistance Program
shall cease to have any responsibility to provide case management services for
any Transferred Individuals' chemical dependency/substance abuse treatments.
5.18 AT&T WORK AND FAMILY PROGRAM. Before the Close of the Distribution
Date, AT&T and Lucent shall use their reasonable best efforts to agree on the
manner in which the Work and Family Program, including the Family Care
Development Fund, will be jointly funded, operated and administered. Until an
agreement is reached, AT&T will have sole responsibility for determining the
1996 grant payments to be made under the occupational and management Family Care
Development Fund. After an agreement is reached, but no later than the Close of
the Distribution Date, Lucent will have sole discretion to determine whether and
at what rate to make payments for the Lucent Fund for Management Employees. In
addition, Lucent will have sole discretion for administering the Lucent Family
Development Fund Program, provided that it funds its proportionate share of the
grants required by the National AT&T/CWA/IBEW Memorandum of Understanding
executed by AT&T and the CWA and IBEW as of May 31, 1992 (the "1992 Collective
Bargaining Agreement") and the Collective Bargaining Agreement. The share will
be determined in accordance with a methodology agreed upon by AT&T and Lucent,
and if they fail to agree upon a methodology, Lucent's allocable share shall be
that portion of the total of such grants that bears the same relationship to
such total grants as the number of Lucent Individuals who are occupational
employees bears to total number of occupational employees of AT&T, the AT&T
Entities, Lucent and the Lucent Entities as of the Participation Commencement
Date. Until all of the foregoing obligations under the 1992 Collective
Bargaining Agreement and the Collective Bargaining Agreement have been
satisfied, Lucent will provide AT&T with quarterly reports of occupational
grants funded. Before the Close of the Distribution Date, AT&T shall use its
reasonable best efforts to cause its agreement with its Work and Family vendors
to permit Lucent to participate in the terms and conditions of such agreements
until the expiration of the agreements. These efforts shall substantially
conform to the guidelines set forth in Section 5.7(a) as if such agreements were
ASO Contracts.
5.19 WORLD WIDE WEB. Before the Close of the Distribution Date, AT&T and
Lucent shall jointly continue to explore (including by participation in a
testing program) the feasibility of offering participants in their Plans on-line
computer access to the point-of-service provider directories, fee schedules,
enrollment and other benefit communication materials through the AT&T customized
Internet World Wide Web developed by AT&T Bell Laboratories and a third-party
vendor. Lucent shall have the right to offer Lucent Plan participants these
on-line computer services after the Distribution Date, provided that Lucent
exercises this right by giving written notice of its intent to do so to AT&T on
or before the Distribution Date. If the portion of AT&T Bell Laboratories
responsible for developing and maintaining the AT&T customized Internet World
Wide Web is transferred to Lucent pursuant to the Separation and Distribution
Agreement, AT&T shall have the right to use, and Lucent agrees to maintain, this
service pursuant to a contract entered into between AT&T and Lucent as soon as
practicable after the Close of the Distribution Date. If the portion of AT&T
Bell Laboratories responsible for developing and maintaining the AT&T customized
Internet World Wide Web remains with AT&T pursuant to the Separation and
Distribution Agreement, Lucent shall have the right to use, and AT&T agrees to
maintain, this service pursuant to a contract entered into between AT&T and
Lucent as soon as practicable after the Close of the Distribution Date.
5.20 UNEMPLOYMENT INSURANCE TAX MANAGEMENT PROGRAM.
(a) AT&T shall cause Lucent to be covered under the AT&T
Unemployment Insurance Tax Management Program from the Participation
Commencement Date through the Close of the Distribution Date. Lucent shall
reimburse AT&T for its allocable share of fees paid by AT&T to its unemployment
insurance tax management vendor for services rendered during such period. Lucent
shall cooperate with the unemployment insurance tax management vendor by
providing information in its possession that is necessary for administration of
the AT&T Unemployment Insurance Tax Management Program.
(b) Before the Distribution Date, AT&T shall use its
reasonable best efforts to cause its agreement with its unemployment insurance
tax management vendor and any successor thereto to permit Lucent to participate
in the terms and conditions of such agreements from Immediately after the
Distribution Date through June 30, 1997. These efforts shall substantially
conform to the guidelines set forth in Section 5.7(a) as if such agreements were
ASO Contracts. AT&T shall use its reasonable best efforts to cause such
agreements to provide that Lucent's participation shall include administration
of all unemployment compensation claims of Transferred Individuals, Lucent
Individuals and other employees and former employees of Lucent and the Lucent
Entities, regardless of whether such claims were filed before, on, or after the
Distribution Date.
5.21 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND
MAXIMUM
BENEFITS.
(i) Lucent shall cause the Lucent
Health and Welfare
Plans to recognize and maintain all coverage and contribution elections made by
Transferred Individuals under the AT&T Health and Welfare Plans and apply such
elections under the Lucent Health and Welfare Plans for the remainder of the
period or periods for which such elections are by their terms applicable. The
transfer or other movement of employment from AT&T to Lucent at any time before
the Close of the Distribution Date shall neither constitute nor be treated as a
"status change" under the AT&T Health and Welfare Plans or the Lucent Health and
Welfare Plans.
(ii) Lucent shall cause the Lucent
Health and Welfare
Plans to recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to which such expenses have been incurred by Transferred Individuals
under the AT&T Health and Welfare Plans for the remainder of the year in which
the Distribution occurs, and (B) all benefits paid to Transferred Individuals
under the AT&T Health and Welfare Plans for purposes of determining when such
persons have reached their lifetime maximum benefits under the Lucent Health and
Welfare Plans.
(iii) Lucent shall recognize and
maintain through
December 31, 1998 all eligible populations covered by the AT&T Health and
Welfare Plans (as defined in the applicable AT&T Health and Welfare Plan
documents), including Class I and Class II dependents, term and temporary
employees, alternate benefit plan employees, and all categories of part-time
employees (which are fully and non-fully eligible for company contributions).
(iv) Lucent shall (A) provide coverage
to Transferred
Individuals under the Lucent Group Life Program without the need to undergo a
physical examination or otherwise provide evidence of insurability, and (B)
recognize and maintain all irrevocable assignments and accelerated benefit
option elections made by Transferred Individuals under the AT&T Group Life
Program.
(b) ADMINISTRATION.
(i) COORDINATION OF BENEFITS FOR
SPOUSES AND
DEPENDENTS. Effective as of the first January 1 that occurs on or after the
Distribution Date, Lucent shall cause the Lucent Health and Welfare Plans to
permit eligible Transferred Individuals to cover their lawful spouses as
dependents if such lawful spouses are active or retired AT&T employees. As of
the first January 1 that occurs on or after the Distribution Date, AT&T shall
cause the AT&T Health and Welfare Plans to permit eligible AT&T and AT&T Entity
employees to cover their lawful spouses as dependents if such lawful spouses are
active or retired Lucent employees. All benefits provided under either the
Lucent Health and Welfare Plans or the AT&T Health and Welfare Plans to a lawful
spouse dependent of the other company's plans shall be coordinated pursuant to
the terms and conditions of the applicable Health and Welfare Plans. Effective
as of January 1, 1997, eligible dependents of AT&T and Lucent lawful spouse
employees or lawful spouse retirees may be covered under both the Lucent Health
and Welfare Plans and the AT&T Health and Welfare Plans, and the benefits
provided under both plans shall be coordinated pursuant to the applicable terms
and conditions of the respective Health and Welfare Plans in effect as of such
date and thereafter as amended from time to time.
(ii) HCFA DATA MATCH. Immediately after
the
Distribution Date, Lucent shall assume all Liabilities relating to, arising out
of or resulting from claims verified by AT&T or Lucent under the HCFA data match
reports that relate to Transferred Individuals. Lucent and AT&T shall share all
information necessary to verify HCFA data match reports regarding Transferred
Individuals. Lucent shall not change any employee identification numbers
assigned by AT&T without notifying AT&T of the change and the new Employee
Identification Number. To the extent that AT&T enters into any settlement
negotiations between its health plan carriers or claims administrators and HCFA
before the end of the Occupational Transition Period, Lucent shall have the
right to participate in such negotiations.
(c) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) AT&T HCRA PLAN. To the extent any
Transferred
Individual contributed to an account under the AT&T HCRA Plan during the
calendar year that includes the Distribution Date, effective as of the Close of
the Distribution Date, AT&T shall transfer to the Lucent HCRA Plan the account
balances of Transferred Individuals for such calendar year under the AT&T HCRA
Plan, regardless of whether the account balance is positive or negative.
(ii) AT&T CHILD/ELDER CARE
REIMBURSEMENT ACCOUNT
PLAN. To the extent any Transferred Individual contributed to the AT&T CECRA
Plan during the calendar year that includes the Distribution Date, AT&T shall
transfer the account balances of Transferred Individuals for such calendar year
in the AT&T CECRA Plan to the Lucent CECRA Plan.
(iii) POST-RETIREMENT MEDICAL PLAN.
Pursuant to Code
SectionSection 401(h) and 420, Lucent shall comply with all cost maintenance
period requirements and benefit maintenance period requirements that are
applicable to post-retirement health benefits under the Lucent Health Plans for
any pension asset transfers pursuant to Code Section 420 by or on behalf of AT&T
for qualified current retiree health liabilities (as defined under Code Section
420). With respect to any pension asset transfers pursuant to Code Section 420,
Lucent shall obtain AT&T's prior written approval before amending any Lucent
Health Plan with respect to the provision of post-retirement health benefits
during the cost maintenance or benefit maintenance periods to which the AT&T
Health Plans are subject pursuant to Code Section 420. No pension asset transfer
pursuant to Code Section 420 shall be made after the date hereof and before the
Close of the Distribution Date unless Lucent and AT&T so agree.
(iv) HEALTH AND WELFARE PLANS
SUBROGATION RECOVERY.
After the Close of the Distribution Date, AT&T shall pay to Lucent or the Lucent
Health Trusts (as appropriate) any amounts AT&T recovers from time to time
through subrogation or otherwise for claims incurred by or reimbursed to any
Transferred Individual. If Lucent recovers any amounts through subrogation or
otherwise for claims incurred by or reimbursed to employees and former employees
of AT&T or an AT&T Entity and their respective beneficiaries and dependents
(other than Transferred Individuals), Lucent shall pay such amounts to AT&T or
the AT&T Health Trusts (as appropriate).
(v) EXCHANGE OF HISTORICAL DATA. Both
AT&T and Lucent
shall have access to claims data configured on the Medical Information Data
Analysis System database (or archived, if applicable) and to eligibility data
configured on the eligibility database (or archived, if applicable) and to
disability, medical and demographic data configured on the Health Planning
Support System ("HPSS") database (or archived, if applicable) for all historical
periods beginning January 1, 1989, up to and including eligibility, incurred
claims and HPSS data for the calendar year that includes the Distribution Date,
for all vendors administering the AT&T Medical Plans and Lucent Medical Plans.
AT&T and Lucent shall cooperate in the collection of claims, eligibility and
HPSS data during the period from the first January 1 that occurs after the
Distribution Date through December 31, 1998, and share all such data. Both AT&T
and Lucent shall have the right to access and use eligibility, incurred claims,
and HPSS data for periods through December 31, 1998 for such purposes as each
determines.
5.22 APPLICATION OF ARTICLE V TO LUCENT ENTITIES. Any
reference in this
Article V to "Lucent" shall include a reference to a Lucent Entity
when and to
the extent Lucent has
caused the Lucent Entity to (a) become a party to a vendor contract, group
insurance contract, or HMO letter agreement associated with a Lucent Health and
Welfare Plan, (b) become a self-insured entity for the purposes of one or more
Lucent Health and Welfare Plans, (c) assume all or a portion of the liabilities
or administrative responsibilities for benefits which arose before the Close of
the Distribution Date under an AT&T Health and Welfare Plan and which were
expressly assumed by Lucent pursuant to the terms of this Agreement, or (d) take
any other action, extend any coverage, assume any other liability or fulfill any
other responsibility that Lucent would otherwise be required to take under the
terms of this Article V, unless it is clear from the context that the particular
reference is not intended to include a Lucent Entity. In all such instances in
which a reference in this Article V to "Lucent" includes a reference to a Lucent
Entity, Lucent shall be responsible to AT&T for ensuring that the Lucent Entity
complies with the applicable terms of this Agreement and the Transferred
Individuals allocated to such Lucent Entity shall have the same rights and
entitlements to benefits under the applicable Lucent Health and Welfare Plans
that the Transferred Individual would have had if he or she had instead been
allocated to Lucent.
ARTICLE VI
EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS
6.1 ASSUMPTION OF OBLIGATIONS. Effective Immediately after the
Distribution Date, Lucent and the Lucent Entities shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
all AT&T Executive Benefit Plans, other than any Liabilities to or relating to
executives or former executives of NCR pursuant to separate agreements with such
executives entered into in connection with AT&T's acquisition of NCR.
6.2 CONSENTS AND NOTIFICATIONS. AT&T and Lucent shall use their
reasonable best efforts to obtain, or cause to be obtained, to the extent
necessary, the written consent of each Transferred Individual who is a party to
an Individual Agreement and/or a participant in any AT&T Executive Benefit Plan,
and of each Lucent Non-Employee Director who is a participant in any AT&T
Non-Employee Director Plan, to the treatment of such Individual Agreement,
Executive Benefit Plan and/or AT&T Non-Employee Director Plan, as applicable, in
accordance with this Article VI, including the assumption by Lucent and the
Lucent Entities, of sole responsibility for, and the release of AT&T and the
AT&T Entities from, all Liabilities thereunder; provided, that no failure to
seek or to obtain any such consent shall have any effect upon the obligations of
Lucent and the Lucent Entities with respect to such Liabilities.
6.3 AT&T SHORT TERM INCENTIVE PLAN. Lucent shall be
responsible for
determining, with respect to all Awards that would otherwise be
payable under
the AT&T Short Term Incentive Plan to Transferred
Individuals for the 1996
performance year, (a) the extent to which established performance criteria (as
interpreted by Lucent, in its sole discretion, after taking into account the
effects of the IPO and the Distribution) have been met and (b) the payment level
for each Transferred Individual.
6.4 AT&T LONG TERM INCENTIVE PLANS. AT&T and Lucent shall use their
reasonable best efforts to take all actions necessary or appropriate so that
each outstanding Award granted under any AT&T Long Term Incentive Plan held by
any Transferred Individual shall be replaced as set forth in this Section 6.4
with an Award under the Lucent Long Term Incentive Plan.
(a) TRANSFERRED INDIVIDUALS WHO ARE ACTIVE
EMPLOYEES OF
LUCENT.
(i) STOCK OPTIONS. Lucent shall cause
each Award
consisting of an AT&T Option that is outstanding as of the Close of the
Distribution Date (or, in the case of a Lucent Administrative Employee, such
later date as he or she becomes a Transferred Individual) and is held by a
Transferred Individual who, as of the Distribution Date (or, in the case of a
Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual), is an active employee of or on leave of absence from
Lucent or a Lucent Entity to be replaced, effective Immediately after the
Distribution Date, with a Lucent Option. Such Lucent Option shall provide for
the purchase of a number of shares of Lucent Common Stock equal to the number of
shares of AT&T Common Stock subject to such AT&T Option as of the Close of the
Distribution Date, multiplied by the Ratio, and then rounded down to the nearest
whole share. Lucent shall pay to the holder of such replacement Award, at the
time of such replacement, cash in lieu of any fractional share equal to the
product of (A) the fraction represented by such fractional share times (B) (1)
the excess of the Lucent Stock Value over (2) the per-share exercise price of
such AT&T Option as of the Close of the Distribution Date divided by the Ratio.
The per-share exercise price of such Lucent Option shall equal the per-share
exercise price of such AT&T Option as of the Close of the Distribution Date
divided by the Ratio. Each such Lucent Option shall otherwise have the same
terms and conditions as were applicable to the corresponding AT&T Option as of
the Close of the Distribution Date, except that references to AT&T and its
Affiliates shall be amended to refer to Lucent and its Affiliates.
(ii) PERFORMANCE SHARES AND STOCK
UNITS. Lucent shall
cause each Award consisting of AT&T performance shares or AT&T stock units that
is outstanding as of the Close of the Distribution Date (or, in the case of a
Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual) and is held by a Transferred Individual who, as of the
Distribution Date (or, in the case of a Lucent Administrative Employee, such
later date as he or she becomes a Transferred Individual), is an active employee
of or on leave of absence from Lucent or a Lucent Entity to be replaced,
effective Immediately after the Distribution Date, with a new performance share
award or a new stock unit award, as the case may be, consisting of a number of
Lucent performance shares or Lucent stock units, as the case may be, equal to
the number of AT&T performance shares or AT&T stock units, as the case may be,
constituting such Award immediately before the Distribution Date, multiplied by
the Ratio, and then rounded down to the nearest whole share. Lucent shall pay to
the holder of such replacement Award, at the time of such replacement, cash in
lieu of any fractional share based on the Lucent Stock Value. Each such
replacement Award shall otherwise have the same terms and conditions as were
applicable to the corresponding AT&T Award as of the Close of the Distribution
Date, except that references to AT&T and its Affiliates shall be amended to
refer to Lucent and its Affiliates and dividend equivalent payments, if any,
shall be payable after the Close of the Distribution Date with reference to
dividends on Lucent Common Stock.
(iii) RESTRICTED STOCK AND RESTRICTED
STOCK UNITS.
Lucent shall cause each Award that consists of non-vested restricted shares of
AT&T Common Stock or restricted stock units relating to shares of AT&T Common
Stock that is outstanding as of the Close of the Distribution Date (or, in the
case of a Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual) and is held by a Transferred Individual who, as of the
Close of the Distribution Date (or, in the case of a Lucent Administrative
Employee, such later date as he or she becomes a Transferred Individual), is an
active employee of or on leave of absence from Lucent or a Lucent Entity to be
replaced, effective Immediately after the Distribution Date, with a new Award
consisting of a number
of non-vested restricted shares of Lucent Common Stock and/or restricted stock
units relating to shares of Lucent Common Stock equal to the number of
non-vested restricted shares or restricted stock units of AT&T Common Stock
constituting such Award as of the Close of the Distribution Date multiplied by
the Ratio, and then rounded down to the nearest whole share. Lucent shall pay to
the holder of such replacement Award, at the time of such replacement, cash in
lieu of any fractional share based on the Lucent Stock Value. Each such
replacement Award shall otherwise have the same terms and conditions as were
applicable to the corresponding AT&T Award as of the Close of the Distribution
Date, except that references to AT&T and its Affiliates shall be amended to
refer to Lucent and its Affiliates and dividend equivalent payments, if any,
shall be payable after the Distribution Date with reference to dividends on
Lucent Common Stock.
(iv) SPECIAL PAYMENT. On the thirtieth
day following
the Distribution Date, AT&T shall pay to Lucent an amount in cash equal to the
excess, if any, of (a) the Gross Value of the Assumed Stock Awards over (b)
seven percent (7%) of the Aggregate Lucent Stock Value.
(b) TRANSFERRED INDIVIDUALS WHO ARE NOT ACTIVE EMPLOYEES OF
LUCENT. Each outstanding Award that is held by a Transferred Individual who, as
of the Close of the Distribution Date (or, in the case of a Lucent
Administrative Employee, such later date as he or she becomes a Transferred
Individual), is not an active employee of or on leave of absence from Lucent or
a Lucent Entity shall remain outstanding Immediately after the Distribution Date
in accordance with its terms as applicable as of the Close of the Distribution
Date, subject to such adjustments as may be applicable to outstanding Awards
held by individuals who remain active employees of or on leave of absence from
AT&T or an AT&T Entity after the Distribution Date.
6.5 AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN. Each
Transferred Individual who has a deferred AT&T share unit account under the AT&T
Deferral Plan shall be permitted an irrevocable election to have the share units
in such account converted to their cash value and transferred to the cash
account under the AT&T Deferral Plan, which election shall be made in accordance
with procedures established by AT&T, in its sole discretion, before and
effective as of the Close of the Distribution Date. Immediately after the
Distribution Date, the balance of any Transferred Individual in either an AT&T
share unit account or a cash account under the AT&T Deferral Plan as of the
Close of the Distribution Date shall be transferred to a Lucent share unit
account or cash account, respectively, under the Lucent Deferral Plan, with a
number of Lucent share units equal to the number of AT&T share units under the
AT&T Deferral Plan as of the Close of the Distribution Date multiplied by the
Ratio.
6.6 NON-EMPLOYEE DIRECTOR BENEFITS.
(a) NON-EMPLOYEE DIRECTOR PLANS. As of the Closing Date,
Lucent shall assume and be solely responsible for all Liabilities under the AT&T
Non-Employee Director Plans to or relating to Lucent Non-Employee Directors.
(b) DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
Each Lucent Non-Employee Director who has a deferred AT&T share unit account
under the AT&T Deferred Compensation Plan for Non-Employee Directors shall be
permitted an irrevocable election to have the share units in such account
converted to their cash value and
transferred to the cash account under the AT&T Deferred Compensation Plan for
Non-Employee Directors, which election shall be made in accordance with
procedures established by AT&T, in its sole discretion, before and effective as
of the Closing Date. As of the Closing Date, the balance of any Lucent
Non-Employee Director in either an AT&T share unit account or a cash account
under the AT&T Deferred Compensation Plan for Non-Employee Directors shall be
transferred to a Lucent share unit account or cash account, respectively, under
the Lucent Deferred Compensation Plan for Non-Employee Directors, with a number
of Lucent share units equal to the number of AT&T share units under the AT&T
Deferred Compensation Plan for Non-Employee Directors as of the Closing Date
multiplied by the amount obtained by dividing (A) the average of the daily high
and low per-share prices of the AT&T Common Stock as listed on the NYSE during
each of the five trading days Immediately after the Closing Date, by (B) the
average of the daily high and low per-share prices of the Lucent Common Stock as
listed on the NYSE during each of the five trading days Immediately after the
Closing Date.
6.7 NON-COMPETITION GUIDELINES.
(a) AT&T NON-COMPETITION GUIDELINE. Effective as of the Close
of the Distribution Date, AT&T shall cause the AT&T Non-Competition Guideline to
be amended to provide that until the end of the eighteenth calendar month that
ends after the Close of the Distribution Date, employment by Lucent or a Lucent
Entity shall not be a violation of the guideline.
(b) LUCENT NON-COMPETITION GUIDELINE. Effective Immediately
after the Distribution Date, Lucent shall adopt a non-competition guideline,
applicable to employees of Lucent and the Lucent Entities who are similarly
situated to those employees of AT&T and the AT&T Entities who are subject to the
AT&T Non-Competition Guideline, which guideline shall expressly provide that
until the end of the eighteenth calendar month that ends after the Close of the
Distribution Date, employment by AT&T shall not constitute a violation of the
guideline.
(c) CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision
of the Separation and Distribution Agreement shall be deemed to release any
individual for any violation of the AT&T Non-Competition Guideline or any
agreement or policy pertaining to confidential or proprietary information of
AT&T or any of its Affiliates, or otherwise relieve any individual of his or her
obligations under such Guideline or any such agreement or policy.
6.8 RABBI TRUST AND CORPORATE-OWNED LIFE INSURANCE.
(a) ESTABLISHMENT OF MIRROR RABBI TRUST. Effective no later
than Immediately after the Distribution Date, Lucent shall establish, or cause
to be established, the Lucent Rabbi Trust as a grantor trust subject to Code
SectionSection 671 et seq., which shall be substantially identical in all
Material Features to the AT&T Rabbi Trust, other than the definitions of the
terms "potential change in control" and "change in control." Lucent shall
appoint as trustee under the Lucent Rabbi Trust the then-current trustee of the
AT&T Rabbi Trust.
(b) FUNDING OF LUCENT RABBI TRUST.
(i) As of the earlier of the Close of
the
Distribution Date and the date when assets are first transferred or contributed
to the Lucent Rabbi Trust (the "Rabbi
Trust Determination Date"), AT&T shall determine the amount of the liabilities
under the AT&T Executive Benefits Plans (other than the AT&T Senior Management
Incentive Award Deferral Plan) that are payable from the AT&T
Rabbi Trust. AT&T
shall then cause the trustee of the AT&T Rabbi Trust to transfer to the trustee
of the Lucent Rabbi Trust (A) the most recently purchased trust-owned life
insurance policy held by the AT&T Rabbi Trust if more than one such policy is
then so held (regardless of which entity employs the insured individuals), and
(B) if AT&T, in its sole discretion, so determines, all cash then held in the
AT&T Rabbi Trust that is not invested in trust-owned life insurance. If AT&T
determines (or projects) that immediately after such transfer the ratio of the
value of the assets in the Lucent Rabbi Trust to the liabilities under the
Lucent Executive Benefit Plans (other than the Lucent Senior Management
Incentive Award Deferral Plan) that are payable from the Lucent Rabbi Trust will
be less than the ratio of the value of the assets in the AT&T Rabbi Trust
(before the allocation of assets to the Lucent Rabbi Trust) to the liabilities
under the AT&T Executive Benefit Plans (other than the AT&T Senior Management
Incentive Award Deferral Plan) (before the allocation of liabilities to the
Lucent Rabbi Trust), then Lucent shall make an additional contribution to the
Lucent Rabbi Trust from its general assets in cash, simultaneously with the
transfer of assets from the AT&T Rabbi Trust to the Lucent Rabbi Trust, in an
amount such that, immediately following the transfer of assets from the AT&T
Rabbi Trust to the Lucent Rabbi Trust, the ratio of the value of the assets in
the Lucent Rabbi Trust to the liabilities under the Lucent Executive Benefit
Plans (other than the Lucent Senior Management Incentive Award Deferral Plan)
will immediately thereafter be equal to the ratio of assets to liabilities under
the AT&T Rabbi Trust (other than liabilities associated with the AT&T Senior
Management Incentive Award Deferral Plan) immediately before the allocation of
assets and liabilities to the Lucent Rabbi Trust. For purposes of this Section
6.8(b)(i), liabilities shall be determined based upon the "Full Funding Amount"
as defined in Section 2.5 of the AT&T Rabbi Trust.
(ii) As of the Rabbi Trust
Determination Date, Lucent
and AT&T shall identify the Transferred Individuals and other individuals
insured by trust-owned life insurance polices held by the trustee of the AT&T
Rabbi Trust and (after any transfers described in Section 6.8(b)(i)) the trustee
of the Lucent Rabbi Trust, and shall share (and shall cause the trustees of
their respective Rabbi Trusts to share) such information as may be necessary for
each to determine when and whether such individuals are deceased.
(c) CORPORATE-OWNED LIFE INSURANCE. Lucent and AT&T shall take
all actions, including creating any trust arrangements necessary to replicate
the manner in which AT&T has heretofore held such policies, and executing or
accepting delivery of any assignments reasonably requested by either party or
any insurance company insuring one or more lives under the Corporate-Owned Life
Insurance, as may be necessary or appropriate in order to assign those policies
insuring Transferred Individuals to Lucent, effective Immediately after the
Distribution Date. If a Corporate-Owned Life Insurance Policy is so assigned to
Lucent, Lucent shall assume and be solely responsible for all Liabilities, and
shall be entitled to all benefits, thereunder, effective as of the earlier of
(i) the Close of the Distribution Date and (ii) the date of such assignment.
AT&T and Lucent shall continue, liquidate and/or administer such Corporate-Owned
Life Insurance Policies on terms and conditions agreed to by AT&T and Lucent.
Lucent and AT&T shall share all information that may be necessary to identify
the individuals insured by the Corporate-Owned Life Insurance policies owned by
AT&T and Lucent and to determine when and whether such individuals are deceased.
6.9 AT&T SPLIT DOLLAR LIFE INSURANCE. AT&T and Lucent
shall take all
actions necessary or appropriate to assign to Lucent, AT&T's
rights and
interests in the Split Dollar
Life Insurance policies under the Senior Management Individual Life Insurance
Program and the Senior Management Basic Life Insurance Program issued by
Metropolitan Life Insurance Company, Hartford Life Insurance Company, and
Confederation Life Insurance Company (or their successors in interest, including
Pacific Mutual Life Insurance Company), and any additional split dollar life
insurance program that may be implemented by AT&T before the Close of the
Distribution Date, with respect to Transferred Individuals, effective
Immediately after the Distribution Date, and under the AT&T Non-Employee
Director Plans with respect to AT&T Non-Employee Directors who become Lucent
Non-Employee Directors, effective as of the Closing Date (such policies, the
"Assigned Split Dollar Policies"). Such actions shall include Lucent's
acceptance of any collateral assignments, policy endorsements or such other
documentation executed by or on behalf of Transferred Individuals and Lucent
Non-Employee Directors, or any trustee of any trust to which such individual's
policy rights or incidents of ownership under the Assigned Split Dollar Policies
have been assigned, and Lucent's entering into such agreements as may be
necessary to fulfill any obligations of AT&T to any insurance company or
insurance agent or broker under the Assigned Split Dollar Policies. From and
after the date of the assignment of any Assigned Split Dollar Policy to Lucent,
Lucent shall assume and be solely responsible for all Liabilities, and shall be
entitled to all benefits, of AT&T under such policy and under the Senior
Management Life Insurance Program, the Senior Management Basic Life Insurance
Program, the AT&T Non-Employee Director Plans and any additional split dollar
life insurance program that may be implemented by AT&T before the Close of the
Distribution Date, as the case may be, with respect to such policies, and any
related agreements entered into by Transferred Individuals or Lucent
Non-Employee Directors.
ARTICLE VII
MISCELLANEOUS BENEFITS
7.1 TRANSFER OF STOCK PURCHASE PLAN RECORDKEEPING
ACCOUNTS. If the AT&T
Stock Purchase Plan is in effect as of the Close of the
Distribution Date, AT&T
shall cause the recordkeeping accounts under the AT&T Stock Purchase Plan of all
Transferred Individuals to be transferred, as of the Close of the Distribution
Date or as soon as practicable thereafter, to, and Lucent shall cause the
accounts to be accepted by, the recordkeeper for the Lucent Stock Purchase Plan.
Lucent shall use its reasonable best efforts to enter into agreements
satisfactory to Lucent with the recordkeeper of the AT&T Stock Purchase Plan to
ensure the transfer and maintenance of the participant records. Through the end
of the Occupational Transition Period, Lucent shall use a recordkeeper and an
enrollment vendor under the Lucent Stock Purchase Plan compatible with the
recordkeeper and enrollment vendor under the AT&T Stock Purchase Plan.
7.2 CONCESSION TELEPHONE SERVICE. Effective Immediately after the
Distribution Date through June 30, 1998, Lucent shall continue to provide a
concession telephone service program for Transferred Individuals who are then
retired or who retire on or before June 30, 1998, which shall be substantially
identical in all Material Features to the corresponding AT&T concession
telephone service program (provided, that Lucent shall only reimburse or pay for
long-distance services provided by AT&T to such Transferred Individuals).
7.3 SERVICE ANNIVERSARY AND RETIREMENT AWARD PROGRAM.
(a) Before the Close of the Distribution Date, AT&T shall use
its reasonable best efforts to amend the service anniversary merchandise vendor
contract in existence as of
the date of this Agreement and related to the AT&T Service Anniversary and
Retirement Award Program to permit Lucent and the Lucent Entities to participate
in the terms and conditions of such contract effective Immediately after the
Distribution Date. These efforts shall substantially conform with the guidelines
set forth in Section 5.7(a) as if the service anniversary merchandise vendor
contract were an ASO Contract.
(b) Lucent and the Lucent Entities may provide to their
employees service anniversary merchandise bearing the name and/or logo of AT&T
ordered by AT&T before the date of this Agreement and delivered under the Lucent
Service Anniversary and Retirement Award Program to Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities whose service anniversary occurs on or before December 31, 1996,
subject to the terms and conditions of any separate agreement between AT&T and
Lucent regarding the use of the corporate names, logos, service marks and other
intellectual property of AT&T and an AT&T Entity. No service anniversary
merchandise bearing the corporate name and/or logo of AT&T shall be delivered to
any Transferred Individuals, Lucent Individuals or other employees and former
employees of Lucent and the Lucent Entities with respect to a service
anniversary on or after January 1, 1997, without the express written consent of
AT&T.
7.4 SHARES FOR GROWTH PROGRAM. Effective Immediately after the
Distribution Date, Lucent shall assume and be solely responsible for all
Liabilities relating to, arising out of or resulting from awards to Transferred
Individuals under the Shares for Growth Program provided for in the Collective
Bargaining Agreement. Awards to Transferred Individuals payable after the Close
of the Distribution Date shall be made in shares of Lucent Common Stock rather
than shares of AT&T Common Stock, and in determining the number of shares of
Lucent Common Stock Transferred Individuals will receive for such awards, the
August 1995 reference price for a share of Lucent Common Stock shall be
calculated by dividing the August 1995 reference price for a share of AT&T
Common Stock as set forth in the Collective Bargaining Agreement by the Ratio.
7.5 THEODORE N. VAIL AWARD TRUST ASSETS. Lucent shall have the option
to continue to offer the Theodore N. Vail Memorial Fund Awards program to its
employees after the Close of the Distribution Date, provided that it exercises
this option by giving written notice of its intent to AT&T before the Close of
the Distribution Date. If Lucent elects to offer the Theodore N. Vail Awards
program, and it is determined by AT&T to be legally permissible to transfer
assets from the AT&T Theodore N. Vail Awards trust to a trust established by
Lucent for purposes of the Lucent Theodore N. Vail Awards program, AT&T shall
transfer from the AT&T Theodore N. Vail Awards trust to such trust established
by Lucent assets determined by AT&T to have a fair market value that bears the
same relationship to the fair market value of the total assets in such AT&T
trust as the number of Transferred Individuals bears to the total number of
employees and former employees of AT&T, the AT&T Entities, Lucent and the Lucent
Entities as of the Close of the Distribution Date. AT&T shall have the sole
discretion to determine whether such assets will be transferred to the Lucent
trust in the form of AT&T Stock or cash or a combination thereof.
7.6 1996 MANAGEMENT INCENTIVE COMPENSATION PAYMENTS. Effective
Immediately after the Distribution Date, Lucent shall be responsible for
determining, with respect to company performance awards, unit performance
awards, and merit awards that would otherwise be payable under AT&T's management
compensation program to Transferred Individuals for the 1996 performance year,
(a) the extent to which established performance criteria (as interpreted by
Lucent, in its sole discretion, after taking into account the effects
of the IPO and the Distribution) have been met and (b) the payment
level for
each Transferred Individual.
ARTICLE VIII
GENERAL AND ADMINISTRATIVE
8.1 PAYMENT OF 1996 ADMINISTRATIVE COSTS AND EXPENSES.
(a) SHARED COSTS. The estimated budget for 1996 for AT&T's
Benefits and Compensation organization is set forth on Schedule VII. AT&T and
Lucent shall each be responsible for their allocable share of such budgeted
costs as set forth on Schedule VII. Lucent shall pay to AT&T one-twelfth of its
allocable share of such budgeted costs each month during 1996. AT&T shall
provide, as soon as practicable after the date of this Agreement, such
information as may reasonably be requested by Lucent concerning the
determination of such budgeted costs.
(b) ADDITIONAL UNANTICIPATED EXPENSES. If there are additional
expenses not anticipated in the 1996 budget for AT&T's Benefits and Compensation
organization, then Lucent shall pay to AT&T one-half of such unanticipated
expenses, but only to the extent that the additional expenses are (i) reasonable
and necessary and (ii) incurred as a direct result of, and solely for the
purpose of, the normal administration (as currently projected for 1996) of the
AT&T Plans and the Lucent Plans during 1996. If any unanticipated expenses are
incurred at the request of Lucent or a Lucent Entity, they shall be the sole
responsibility of Lucent. Any other unanticipated expenses shall be the sole
responsibility of AT&T.
(c) ADMINISTRATIVE PERSONNEL. A schedule of the individuals
employed in AT&T's Benefits and Compensation organization who have been
designated to become employees of Lucent or a Lucent Entity (the "Lucent
Administrative Employees") has been agreed to by Lucent and AT&T. The Lucent
Administrative Employees shall remain on AT&T's payroll until December 31, 1996
unless AT&T and Lucent agree to a different date. If AT&T and Lucent elect that
the Lucent Administrative Employees be placed on the Lucent payroll before
January 1, 1997, then Lucent's direct cost with respect to the Lucent
Administrative Employees (including salary and loading for benefit related
charges) for each month after they leave AT&T's payroll shall be subtracted from
the monthly amount payable by Lucent in accordance with Section 8.1(a). Such
individuals shall become Transferred Individuals when they are placed on the
payroll of Lucent or a Lucent Entity if such date is after the Close of the
Distribution Date. Regardless of whether the Lucent Administrative Employees are
on the payroll of AT&T or Lucent or a Lucent Entity, they shall be subject to
the supervision of AT&T's Senior Vice President, Benefits and Compensation, or
his delegates, through December 31, 1996.
(d) POST-DISTRIBUTION ADMINISTRATION IN
1996. From the
Distribution Date through December 31, 1996, AT&T's Senior Vice President,
Benefits and Compensation, and his staff (including the Lucent Administrative
Employees) shall have full authority and responsibility to administer the Lucent
Plans to the same extent as if AT&T's Senior Vice President, Benefits and
Compensation, and his staff were employees of Lucent or a Lucent Entity.
Notwithstanding the foregoing, Lucent shall retain all fiduciary responsibility
for the administration of the Lucent Plans and, subject to the need to conform
the administration of the AT&T Plans and the Lucent Plans during 1996, Lucent
shall have the right to
direct AT&T's Senior Vice President, Benefits and
Compensation, in the manner in which it intends the
Lucent Plans to be
administered.
8.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED
MATTERS.
(a) ACTUARIAL AND ACCOUNTING METHODOLOGIES AND ASSUMPTIONS.
For purposes of this Agreement, unless specifically indicated otherwise: (i) all
actuarial methodologies and assumptions used for a particular Plan shall (except
to the extent otherwise determined by AT&T and Lucent to be reasonable or
necessary) be substantially the same as those used in the actuarial valuation of
that Plan used to determine minimum funding requirements under ERISA Section 302
and Code Section 412 for 1996, or, if such Plan is not subject to such minimum
funding requirements, used to determine AT&T's deductible contributions under
Code Section 419A or, if such Plan is not subject to Code Section 419A, the
assumptions used to prepare AT&T's audited financial statements for 1996, as the
case may be; and (ii) the value of plan assets shall be the value established
for purposes of audited financial statements of the relevant plan or trust for
the period ending on the date as of which the valuation is to be made. Lucent
Liabilities relating to, arising out of or resulting from the status of Lucent
and the Lucent Entities as Participating Companies in AT&T Plans, as provided
for in Section 2.2 and all accruals relating thereto shall be determined by AT&T
using actuarial assumptions and methodologies (including with respect to
demographics, medical trends and other relevant factors) determined by AT&T in a
manner consistent with AT&T's practice as in effect on the Participation
Commencement Date and in conformance with the generally accepted actuarial
principles promulgated by the American Academy of Actuaries, the Code, ERISA,
and/or generally accepted accounting principles, as applicable, in each case as
interpreted by AT&T consistent with past practice. Except as otherwise
contemplated by this Agreement or as required by law, all determinations as to
the amount or valuation of any assets of or relating to any AT&T Plan (whether
or not such assets are being transferred to a Lucent Plan) shall be made
pursuant to procedures to be established by the parties before the Closing Date.
(b) PAYMENT OF LIABILITIES; DETERMINATION OF EMPLOYEE STATUS.
Lucent shall pay directly, or reimburse AT&T promptly for, all Liabilities
assumed by it pursuant to this Agreement, including all compensation payable to
Lucent Individuals and Transferred Individuals for services rendered while in
the employ of AT&T or an AT&T Entity before becoming a Lucent Individual or
Transferred Individual, respectively (to the extent not charged for pursuant to
Section 8.1 or another Ancillary Agreement). To the extent the amount of such
Liabilities is not yet determinable because the status of individuals as Lucent
Individuals or Transferred Individuals is not yet determined, except as
otherwise specified herein or in another Ancillary Agreement with respect to
particular Liabilities, Lucent shall make such payments or reimbursements based
upon AT&T's reasonable estimates of the amounts thereof, and when such status is
determined, Lucent shall make additional reimbursements or payments, or AT&T
shall reimburse Lucent, to the extent necessary to reflect the actual amount of
such Liabilities. In determining the number of individuals in any particular
group of employees described in this Agreement (such as "Transferred Individuals
and Lucent Individuals"), no individual shall be counted twice (even if, for
example, he or she is both a Lucent Individual and a Transferred Individual).
Determinations of what entity employs or employed a particular individual shall
be made by reference to the applicable legal entity and/or other appropriate
accounting code, to the extent possible.
(c) CONTRIBUTIONS TO TRUSTS. Lucent shall pay
its share of any
contributions made to any trust maintained in connection with an
AT&T Plan with
respect to any
period while Lucent or a Lucent Entity is a Participating Company in that AT&T
Plan; provided, however, that Lucent shall not be required to contribute to the
AT&T Rabbi Trust after the date of this Agreement. Lucent's share of any
contributions to the AT&T Health Benefits Trust shall be determined based on
AT&T's reasonable estimate of the claims under the AT&T Plans funded through
such trust that are paid to or for the benefit of Lucent Individuals and other
employees and former employees of Lucent and the Lucent Entities, Transferred
Individuals and beneficiaries and dependents thereof, until a cash benefit
payment procedure for daily check presentments separately to Lucent and the
Lucent Entities for such claims is implemented, after which Lucent's share of
such contributions shall be determined based upon such procedure. Lucent's share
of any contributions to any other such trust shall be determined by AT&T by
computing separate contribution amounts for AT&T and Lucent, as if Lucent and
the Lucent Entities were not Affiliates of AT&T and the AT&T Entities, but
followed the same funding policy and used the same funding assumptions as AT&T
and the AT&T Entities with respect to such trust; provided, that if the sum of
the amounts so determined is less than or exceeds the total contribution to be
made to such trust in accordance with such funding policy as applied to AT&T,
the AT&T Entities, Lucent and the Lucent Entities as a group, then Lucent's
share of such contribution shall be determined by increasing or reducing both
such amounts, as applicable, proportionately so as to eliminate such difference.
(d) PARTICIPANT CONTRIBUTIONS; SETTLEMENTS, REFUNDS, AND
SIMILAR PAYMENTS. Until such time as a cash benefit payment procedure is
implemented pursuant to which the participant contributions made under any AT&T
Health and Welfare Plan made by Lucent Individuals, Transferred Individuals and
other employees and former employees of Lucent and the Lucent Entities and
beneficiaries and dependents thereof can be specifically identified as such, for
purposes of determining the Lucent Liabilities associated with such Plan, such
individuals shall be deemed to have made such contributions in an amount that
bears the same relationship to the total contributions by all participants to
such Plan as the number of such individuals who are participants in such Plan
bears to the total number of participants in such Plan. If AT&T or an AT&T
Entity receives any amount that represents an offset to or reduction of any
Liability relating to, arising out of or resulting from any AT&T Plan (including
any amount received in settlement of a dispute regarding the amount of benefits
payable under such Plan and any refund of premiums paid to an insurer of
benefits under such Plan) with respect to a period before the Close of the
Distribution Date, then except to the extent Section 5.21(c)(iv) is applicable,
AT&T shall pay to Lucent a portion of such amount that bears the same
relationship to the total of such amount as the number of Lucent Individuals,
Transferred Individuals and other employees and former employees of Lucent and
the Lucent Entities who were participants in such Plan during the period to
which such amount relates bears to the total number of participants in such
Plan.
(e) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST. To the
extent not charged for pursuant to Section 8.1 or another Ancillary Agreement or
the ASA Agreement and to the extent not chargeable to a trust established in
connection with an AT&T Plan, Lucent shall be responsible, through either direct
payment from its own cash or reimbursement of AT&T from its own cash, for the
following expenses in the administration of the AT&T Plans while Lucent or a
Lucent Entity is a Participating Company in such Plans (and except as expressly
provided below, Lucent's allocable share of the following administrative
expenses shall be that portion of the total such expenses that bears the same
relationship to such total expenses as the number of Lucent Individuals,
Transferred Individuals and other employees and former employees of Lucent and
the Lucent Entities who are participants in the applicable Plan bears to total
number of participants in
such Plan): (i) the costs incurred in the administration of the AT&T Pension
Plans and other Plans providing benefits to retired individuals, including the
cost of managing any trust assets and performing actuarial calculations (which
shall be shared equally between Lucent and AT&T); (ii) the recordkeeping costs
(including expenses in development and operation of the daily valuation
recordkeeping system for the AT&T LTSSP) and other costs incurred in the
administration of the AT&T Savings Plans (including expenses in employee
communications materials for the AT&T Savings Plans and consultant and other
out-of-pocket fees and expenses generally related to the design or
administration of the AT&T Savings Plans); (iii) the fees paid to benefit
delivery vendors under AT&T Health and Welfare Plans; (iv) COBRA administrative
costs (of which Lucent's allocable share shall be that portion of the total such
costs that bears the same relationship to such total costs as the number of
Lucent Individuals, Transferred Individuals and other employees and former
employees of Lucent and the Lucent Entities and beneficiaries and dependents
thereof who are participants in the applicable Plan bears to total number of
participants in such Plan); (v) the cost of administrative services for the
Family Care Development Fund and other Work and Family programs; (vi) the costs
incurred in the administration of the AT&T Executive Benefits Plans, including
payments made to insurance agents and brokers (such as the agents and brokers
who administer corporate-owned life insurance and trust-owned life insurance
programs), and payments made to vendors (such as the vendor(s) who administer
the AT&T Senior Management Financial Counseling Program); (vii) the expenses
incurred in establishing the AT&T Stock Purchase Plan and its recordkeeping
system; (viii) the consultant and other out-of-pocket fees and expenses
(including accounting, actuarial, consulting, and legal fees, and photocopying,
printing, and similar expenses) generally related to the design or
administration of the AT&T Plans (which shall be shared equally between Lucent
and AT&T); (ix) the payments for administration of the AT&T Rabbi Trust and for
actuarial and legal work in connection with the AT&T Rabbi Trust (which shall be
shared equally between Lucent and AT&T); and (x) the payments for the management
of the assets of the AT&T Rabbi Trust (which shall be prorated between Lucent
and AT&T based on relative value of Lucent's and AT&T's share of the liabilities
funded by AT&T Rabbi Trust assets with respect to AT&T and Lucent Executives as
reflected in the IPO Registration Statement).
(f) STOCK AWARD CHARGEBACKS. Lucent shall pay AT&T the
following amounts: (i) with respect to each AT&T Option that is exercised by a
Lucent Individual or another employee of Lucent or a Lucent Entity at any time
after the Closing Date, the Spread on such Option; (ii) with respect to each
purchase of AT&T Common Stock pursuant to the AT&T Stock Purchase Plan by a
Lucent Individual or another employee of Lucent or a Lucent Entity at any time
after the Closing Date, the Spread with respect to such purchase; (iii) with
respect to the vesting or delivery at any time after the Closing Date of shares
of AT&T Common Stock pursuant to an Award (other than an AT&T Option) held by a
Lucent Individual or another employee of Lucent or a Lucent Entity, the Value of
such AT&T Common Stock on the date of such vesting or delivery. AT&T shall bill
Lucent for such amounts from time to time (but only after the exercise,
purchase, vesting or delivery that gives rise to the obligation to make any such
payment), and Lucent shall pay such amounts promptly after receipt of such
bills. The "Spread" on an Option or with respect to a purchase pursuant to the
AT&T Stock Purchase Plan means the excess, if any, of the Value of the purchased
shares on the date of exercise of such Option or the date of such purchase, as
applicable, over the price paid for such shares. The "Value" of a share of AT&T
Common Stock on a given date means the average of the high and the low per-share
prices of the AT&T Common Stock as listed on the NYSE on such date, or if there
is no trading on the NYSE on such date, on the most recent previous date on
which such trading takes place.
8.3 1984 AT&T UNFUNDED DIVESTITURE REIMBURSEMENT AGREEMENTS. In order
to permit AT&T to continue to honor any obligations it may have for on-going
reimbursement costs payable periodically to the seven Regional Bell Holding
Companies and Bell Communications Research, Inc. in accordance with the
provisions of the Unfunded Cost Sharing Agreements, Lucent shall provide, on an
annual basis and in accordance with the schedule provided to Lucent by AT&T, at
no cost to AT&T, any information in its possession required to enable AT&T to
determine, validate, and reconcile the AT&T offset amounts specified in the
Unfunded Cost Sharing Agreements. Lucent shall also provide AT&T with
information in its possession to the extent requested by a party to an Unfunded
Cost Sharing Agreement pursuant to its rights thereunder to audit information
provided by Lucent to AT&T. If Lucent or any Lucent Entity grants an "ad hoc
pension increase" as defined in either of the Unfunded Cost Sharing Agreements,
as a result of which AT&T or any AT&T Entity is required to pay pursuant to
either or both of the Unfunded Cost Sharing Agreements any amounts in excess of
the amounts it would have been required to pay absent such ad hoc pension
increase, then Lucent shall reimburse AT&T for the amount of such excess, as and
when it is paid by AT&T or such AT&T Entity. The parties agree that any such ad
hoc increase made by Lucent or any Lucent Entity to the extent not in excess of
a prior ad hoc increase by AT&T or any AT&T Entity made after the date hereof
will not give rise to any reimbursement obligation pursuant to the foregoing
sentence, but an ad hoc increase made by Lucent or any Lucent Entity prior to
any ad hoc increase made by AT&T or any AT&T Entity will give rise to such
reimbursement obligation (with no reduction in such reimbursement obligation due
to the subsequent ad hoc increase by AT&T or any AT&T Entity). Except as
specifically provided in the preceding two sentences, the foregoing shall not be
deemed to give rise to any liability of Lucent under the Unfunded Cost Sharing
Agreements.
8.4 SHARING OF PARTICIPANT INFORMATION. AT&T and Lucent shall share,
AT&T shall cause each applicable AT&T Entity to share, and Lucent shall cause
each applicable Lucent Entity to share, with each other and their respective
agents and vendors (without obtaining releases) all participant information
necessary for the efficient and accurate administration of each of the AT&T
Plans and the Lucent Plans during the respective Transition Periods applicable
to such Plans, and with respect to each of the AT&T Health and Welfare Plans and
Lucent Health and Welfare Plans, any additional periods during which such Plan
is subject to the restrictions of Section 5.8. AT&T and Lucent and their
respective authorized agents shall, subject to applicable laws on
confidentiality, be given reasonable and timely access to, and may make copies
of, all information relating to the subjects of this Agreement in the custody of
the other party, to the extent necessary for such administration. Until the
Close of the Distribution Date, all participant information shall be provided in
the manner and medium applicable to Participating Companies in the AT&T Plans
generally, and thereafter until December 31, 1998, all participant information
shall be provided in a manner and medium that is compatible with the data
processing systems of AT&T as in effect of the Close of the Distribution Date,
unless otherwise agreed to by AT&T and Lucent.
8.5 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS. While
Lucent is a Participating Company in the AT&T Plans, Lucent shall take, and
shall cause each other applicable Lucent Entity to take, all actions necessary
or appropriate to facilitate the distribution of all AT&T Plan-related
communications and materials to employees, participants and beneficiaries,
including summary plan descriptions and related summaries of material
modification, summary annual reports, investment information, prospectuses,
notices and enrollment material for the Lucent Plans. Lucent shall pay AT&T the
cost relating to the copies of all such documents provided to Lucent, except to
the extent such costs are charged pursuant to Section 8.1 or pursuant to an
Ancillary Agreement or the ASA Agreement. Lucent shall assist, and Lucent shall
cause each other applicable Lucent Entity to assist, AT&T in complying with all
reporting and disclosure requirements of ERISA, including the preparation of
Form 5500 annual reports for the AT&T Plans, where applicable.
8.6 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement or the Separation and Distribution Agreement shall
be construed to create any right, or accelerate entitlement, to any compensation
or benefit whatsoever on the part of any Lucent Individual, Transferred
Individual or other future, present or former employee of AT&T, an AT&T Entity,
Lucent, or a Lucent Entity under any AT&T Plan or Lucent Plan or otherwise.
Without limiting the generality of the foregoing: (i) neither the Distribution
nor the termination of the Participating Company status of Lucent or a Lucent
Entity shall cause any employee to be deemed to have incurred a termination of
employment which entitles such individual to the commencement of benefits under
any of the AT&T Plans, any of the Lucent Plans, or any of the Individual
Agreements; and (ii) except as expressly provided in this Agreement, nothing in
this Agreement shall preclude Lucent, at any time after the Close of the
Distribution Date, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Lucent Plan, any benefit
under any Plan or any trust, insurance policy or funding vehicle related to any
Lucent Plan.
8.7 PLAN AUDITS.
(a) AUDIT RIGHTS WITH RESPECT TO THE ALLOCATION OR TRANSFER OF
PLAN ASSETS. The allocation of Pension Plan assets and liabilities pursuant to
Section 3.2, the transfer of assets from AT&T VEBAs pursuant to Sections 5.3 and
5.5, the transfer of RFA assets pursuant to Section 5.4 and the transfer of
assets from the AT&T Rabbi Trust pursuant to Section 6.8 shall be audited on
behalf of both AT&T and Lucent by the consulting firm of Milliman & Robertson.
The scope of such audit shall be limited to the accuracy of the data and the
accuracy of the computation and adherence to the methodology specified in this
Agreement and except as set forth in the last sentence of this Section 8.7(a),
such audit shall not be binding on the parties. Milliman & Robertson shall
provide its report to both AT&T and Lucent. No other audit shall be conducted
with respect to the transfer or allocation of Plan assets. The costs of such
audit shall be shared equally by AT&T and Lucent, or, at each company's
discretion and to the extent allocable thereto, by their respective Pension
Plans. To the extent such audit recommends a change to the value of assets
allocated to a Lucent Plan of less than 0.25%, the original determination shall
be binding on the parties and shall not be subject to the dispute resolution
process provided under the Separation and Distribution Agreement. To the extent
such audit recommends such a change of 0.25% or more, any unresolved dispute
between the parties as to whether and how to make any change in response to such
recommendation shall be subject to the dispute resolution process provided under
the Separation and Distribution Agreement.
(b) AUDIT RIGHTS WITH RESPECT TO INFORMATION
PROVIDED.
(i) Each of AT&T and Lucent, and their
duly
authorized representatives, shall have the right to conduct audits with respect
to all information provided to it by the other party. The party conducting the
audit (the "Auditing Party") shall have the sole discretion to determine the
procedures and guidelines for conducting audits and the selection of audit
representatives under this Section 8.7(b); provided, that audits with respect to
the allocation or transfer of Plan assets and liabilities shall be subject only
to Section 8.7(a). The Auditing Party shall have the right to make copies of any
records at its expense, subject to the confidentiality provisions set forth in
the Separation and Distribution Agreement, which are incorporated by reference
herein. The party being audited shall provide the Auditing Party's
representatives with reasonable access during normal business hours to its
operations, computer systems and paper and electronic files, and
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provide workspace to its representatives. After any audit is completed, the
party being audited shall have the right to review a draft of the audit findings
and to comment on those findings in writing within five business days after
receiving such draft.
(ii) The Auditing Party's audit rights
under this
Section 8.7(b) shall include the right to audit, or participate in an audit
facilitated by the party being audited, of any Subsidiaries and Affiliates of
the party being audited and of any benefit providers and third parties with whom
the party being audited has a relationship, or agents of such party, to the
extent any such persons are affected by or addressed in this Agreement
(collectively, the "Non-parties"). The party being audited shall, upon written
request from the Auditing Party, provide an individual (at the Auditing Party's
expense) to supervise any audit of a Non-party. The Auditing Party shall be
responsible for supplying, at the Auditing Party's expense, additional personnel
sufficient to complete the audit in a reasonably timely manner. The
responsibility of the party being audited shall be limited to providing, at the
Auditing Party's expense, a single individual at each audited site for purposes
of facilitating the audit.
(c) AUDITS REGARDING VENDOR CONTRACTS. From Immediately after
the Distribution Date through December 31, 1998, AT&T and Lucent and their duly
authorized representatives shall have the right to conduct joint audits with
respect to any vendor contracts that relate to both the AT&T Health and Welfare
Plans and the Lucent Health and Welfare Plans. The scope of such audits shall
encompass the review of all correspondence, account records, claim forms,
canceled drafts (unless retained by the bank), provider bills, medical records
submitted with claims, billing corrections, vendor's internal corrections of
previous errors and any other documents or instruments relating to the services
performed by the vendor under the applicable vendor contracts. AT&T and Lucent
shall agree on the performance standards, audit methodology, auditing policy and
quality measures and reporting requirements relating to the audits described in
this Section 8.7 and the manner in which costs incurred in connection with such
audits will be shared.
8.8 BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Transferred Individuals for AT&T Plans shall be transferred to and be in full
force and effect under the corresponding Lucent Plans until such beneficiary
designations are replaced or revoked by the Transferred Individual who made the
beneficiary designation.
8.9 REQUESTS FOR IRS RULINGS AND DOL OPINIONS.
(a) COOPERATION. Lucent shall cooperate fully with AT&T on any
issue relating to the transactions contemplated by this Agreement for which AT&T
elects to seek a determination letter or private letter ruling from the IRS or
an advisory opinion from the DOL. AT&T shall cooperate fully with Lucent with
respect to any request for a determination letter or private letter ruling from
the IRS or advisory opinion from the DOL with respect to any of the Lucent Plans
relating to the transactions contemplated by this Agreement.
(b) APPLICATIONS. AT&T and Lucent shall make such applications
to regulatory agencies, including the IRS and DOL, as may be necessary to ensure
that any transfers of assets from the AT&T Health Trusts to the Lucent Health
Trusts and from the AT&T LTD VEBA to the Lucent LTD VEBA will neither (i) result
in any adverse tax, legal or fiduciary consequences to AT&T and Lucent, the AT&T
Health Trusts and the AT&T LTD VEBA, the Lucent Health Trusts and the Lucent LTD
VEBA, any participant therein or beneficiaries thereof, or any of AT&T Health
Trusts and the AT&T LTD
VEBA, any successor welfare benefit funds established by or on behalf of Lucent,
or the trustees of such trusts, nor (ii) contravene any statute, regulation or
technical pronouncement issued by any regulatory agency. Before the Close of the
Distribution Date, Lucent shall prepare all forms required to obtain favorable
tax-exempt determination letters from the IRS for the Lucent Health Trusts and
the Lucent LTD VEBA, and, if applicable, the Lucent Union VEBA.
Lucent and AT&T
agree to cooperate with each other to fulfill any filing and/or regulatory
reporting obligations with respect to such transfers.
(c) LIFE INSURANCE. To the extent the transfer or allocation
of all or a portion of any life insurance policies results in any adverse tax or
legal consequences, including (i) any finding that such transfer results in the
creation of a modified endowment contract within the meaning of Code Section
7702A, a transfer for value within the meaning of Code Section 101(a), or a lack
of insurable interest for either AT&T or Lucent (or their respective trusts, if
any), or (ii) multiple claims for insurance proceeds, AT&T and Lucent shall take
such steps as may be necessary to contest any such finding and, to the extent of
any final determination that such adverse tax or legal consequences will result,
AT&T and Lucent shall make such further adjustments so as to place both parties
in the proportionate financial position that they each would have been in
relative to the other but for such adverse tax or legal consequences.
8.10 FIDUCIARY MATTERS.
(a) FIDUCIARY STATUS. AT&T and Lucent each acknowledges that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and no party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good faith determination that
to do so would violate such a fiduciary duty or standard.
(b) INDEPENDENT FIDUCIARY. Lucent shall retain a fiduciary
independent of AT&T to review and approve the types and value of the assets to
be transferred to the Lucent Plans from the AT&T Plans as described in Articles
III and IV of this Agreement to the extent that such Plans are subject to Part 4
of Title I of ERISA. The foregoing shall not prevent Lucent from engaging any
fiduciaries for any other purposes.
8.11 AGREEMENT WITH ACTUARIAL SCIENCES ASSOCIATES, INC. Lucent shall
enter into an agreement with Actuarial Sciences Associates, Inc. ("ASA"), in a
form substantially similar to Exhibit A. Within 60 days after the Distribution
Date, such agreement shall be presented for ratification by Lucent's Board of
Directors or its authorized delegate.
8.12 COLLECTIVE BARGAINING. To the extent any provision of this
Agreement is contrary to the provisions of the Collective Bargaining Agreement
or any other collective bargaining agreement to which AT&T or any Affiliate of
AT&T is a party, the terms of such collective bargaining agreement shall
prevail. Should any provisions of this Agreement be deemed to relate to a topic
determined by an appropriate authority to be a mandatory subject of collective
bargaining, AT&T or Lucent may be obligated to bargain with the union
representing affected employees concerning those subjects. Neither party will
agree to a modification of the Collective Bargaining Agreement without the
consent of the other. In the event a force surplus affecting members of a
bargaining unit in both AT&T or any AT&T Entity (on the one hand) and Lucent or
any Lucent Entity (on the other hand) directly results, due to the provisions of
the Collective Bargaining Agreement, in an
employee involuntarily leaving the payroll of the party not declaring the
surplus, then the party declaring the surplus shall bear the cost of any
severance payable to such employee.
8.13 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, AT&T and Lucent shall use their reasonable best
efforts to implement the applicable provisions of this Agreement to the full
extent practicable. If any provision of this Agreement cannot be implemented due
to the failure of such third party to consent, AT&T and Lucent shall negotiate
in good faith to implement the provision in a mutually satisfactory manner. The
phrase "reasonable best efforts" as used herein shall not be construed to
require the incurrence of any non-routine or unreasonable expense or liability
or the waiver of any right.
8.14 POST-DISTRIBUTION BENEFIT
DELIVERY/ADMINISTRATION. Lucent shall
continue to use the P2000 benefit administration system and a compatible pension
payment system, to administer the Lucent Pension Plans through the end of the
Management Transition Period.
8.15 QUIET PERIODS. Lucent shall take such action as is necessary to
ensure that participants in the Lucent LTSSP, the Lucent LTSPME, and the Lucent
RSPSP are notified that a quiet period will occur beginning on or about October
1, 1996, during which changes in investment direction with respect to
participants' accounts generally will not be permitted.
ARTICLE IX
MISCELLANEOUS
9.1 FOREIGN PLANS. As soon as practicable after the date of this
Agreement, AT&T and Lucent shall enter into an agreement regarding the treatment
of Foreign Plans consistent with the principles set forth in Exhibit B hereto.
9.2 RESOURCE LINK EMPLOYEES. The following individuals who are
employees of AT&T or an AT&T Entity as of the Close of the Distribution Date
shall become employees of Lucent or a Lucent Entity Immediately after the
Distribution Date, and shall be Transferred Individuals: (a) a maximum of 208
such individuals who, as of the Close of the Distribution Date, are on Resource
Link assignments to Lucent or a Lucent Entity as of that time, or whose most
recent Resource Link assignment before the Close of the Distribution Date was
with Lucent or a Lucent Entity; (b) a maximum of 48 additional individuals who
are, as of the Close of the Distribution Date, on Resource Link assignment to
common support functions or whose most recent Resource Link assignment before
the Close of the Distribution Date was to common support functions; and (c) term
employees who are, as of the Close of the Distribution Date, on Resource Link
assignments with Lucent or a Lucent Entity.
9.3 EFFECT IF DISTRIBUTION DOES NOT OCCUR. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of the Close of the Distribution Date, Immediately after
the Distribution Date, or otherwise in connection with the Distribution, shall
not be taken or occur except to the extent specifically agreed by Lucent and
AT&T.
9.4 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
9.5 AFFILIATES. Each of AT&T and Lucent shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth in this Agreement to be performed by an AT&T Entity or a
Lucent Entity, respectively.
9.6 INCORPORATION OF SEPARATION AND DISTRIBUTION AGREEMENT PROVISIONS.
The following provisions of the Separation and Distribution Agreement are hereby
incorporated herein by reference, and unless otherwise expressly specified
herein, such provisions shall apply as if fully set forth herein (references in
this Section 9.6 to an "Article" or "Section" shall mean Articles or Sections of
the Separation and Distribution Agreement, and, except as expressly set forth
below, references in the material incorporated herein by reference shall be
references to the Separation and Distribution Agreement): Article V (relating to
Mutual Releases and Indemnification); Article VIII (relating to Exchange of
Information and Confidentiality); Article IX (relating to Arbitration and
Dispute Resolution); Article X (relating to Further Assurances and Additional
Covenants); Article XI (relating to Termination); and Article XII (relating to
Miscellaneous) other than Section 12.2 (relating to Governing Law).
9.7 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of New York, irrespective of the choice of
laws principles of the State of New York, as to all matters, including matters
of validity, construction, effect, performance and remedies.
IN WITNESS WHEREOF, the parties have caused this Employee
Benefits Agreement to be duly executed as of the day and year first above
written.
AT&T CORP.
By: /s/
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Name:
Title:
LUCENT TECHNOLOGIES INC.
By: /s/
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Name:
Title: