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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _________ to _________
Commission File Number 1-1105
AT&T CORP.
A NEW YORK I.R.S. EMPLOYER
CORPORATION NO. 13-4924710
32 Avenue of the Americas, New York, New York 10013-2412
Telephone Number 212-387-5400
Securities registered pursuant to Section 12(b) of the Act: See attached
SCHEDULE A.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes....x.... No........
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
At January 31, 1996, the aggregate market value of the voting stock held by
non-affiliates was $ 106,686,856,743.
At January 31, 1996, 1,598,725,455 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to security holders for
the year ended December 31, 1995 (Part II)
(2) Portions of the registrant's definitive proxy statement dated
February 27, 1996, issued in connection with the annual meeting of
shareholders (Part III)
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SCHEDULE A
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Shares # New York, Boston, Chicago,
(Par Value $1 Per Share) ## Philadelphia and Pacific Stock
# Exchanges
#
Three Year 4-1/2% Notes, #
due February 15, 1996 #
#
Thirty-Four Year 4-3/8% Debentures, #
due October 1, 1996 #
#
Thirty-Seven Year 4-3/4% Debentures, #
due June 1, 1998 #
#
Thirty-Six Year 4-3/8% Debentures, #
due May 1, 1999 #
#
Thirty-Three Year 6% Debentures, #
due August 1, 2000 #
#
Thirty-Five Year 5-1/8% Debentures, # New York Stock Exchange
due April 1, 2001 #
#
Ten Year 7-1/8% Notes, #
due January 15, 2002 #
#
Ten Year 6-3/4% Notes, #
due April 1, 2004 #
#
Ten Year 7% Notes, #
due May 15, 2005 #
#
Twelve Year 7-1/2% Notes, #
due June 1, 2006 #
#
Twelve Year 7 -3/4% Notes, #
due March 1, 2007 #
#
Thirty Year 8-1/8% Debentures, #
due January 15, 2022 #
#
Medium Term Note 8.2% #
due February 15, 2005 #
#
Thirty Year 8.35% Debentures, #
due January 15, 2025 #
#
Thirty-Two Year 8-1/8% Debentures, #
due July 15, 2024 #
#
Forty Year 8-5/8% Debentures, #
due December 1, 2031 #
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TABLE OF CONTENTS
PART I
Item Description Page
1. Business ........................................................ 1
2. Properties ...................................................... 9
3. Legal Proceedings ............................................... 9
4. Submission of Matters to a Vote of Security-Holders ............. 10
PART II
Description
5. Market for Registrant's Common Equity and Related Stockholder
Matters ....................................................... 12
6. Selected Financial Data ......................................... 12
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 12
8. Financial Statements and Supplementary Data ..................... 12
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ...................................... 12
PART III
Description
10. Directors and Executive Officers of the Registrant .............. 12
11. Executive Compensation .......................................... 12
12. Security Ownership of Certain Beneficial Owners and Management .. 12
13. Certain Relationships and Related Transactions .................. 12
PART IV
Description
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 13
See page 11 for "Executive Officers of the Registrant."
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PART I
ITEM 1. BUSINESS.
GENERAL
AT&T Corp. ("AT&T" or "Company") was incorporated in 1885 under the laws of
the State of New York and has its principal executive offices at 32 Avenue of
the Americas, New York, New York 10013-2412 (telephone number 212-387-5400).
As used herein, "AT&T" and the "Company" refer to AT&T Corp., unless the
context otherwise requires.
AT&T is currently a major participant in two industries: the global
information movement and management industry and the financial services and
leasing industry.
On September 20, 1995, AT&T announced a plan to separate (the "Separation")
into three publicly-held stand-alone global companies that will each be
focused on serving certain core businesses: communication services (to be
carried on by the new AT&T, which will also include AT&T Universal Card
Services Corp. ("AT&T Universal Card Services")), communications systems and
technology (to be carried on by the newly formed Lucent Technologies Inc.
("Lucent")), and transaction-intensive computing (to be carried on by NCR
Corporation ("NCR", formerly AT&T Global Information Solutions Company)). The
new AT&T (other than AT&T Universal Card Services), Lucent and NCR are
participants in the global information movement and management industry. The
Separation is to be accomplished via spin-offs of Lucent and NCR to AT&T's
shareholders, which in the case of Lucent will be preceded by a public
offering of less than 20% of its shares. The decision to pursue the
Separation was based on a comprehensive evaluation of business, economic,
financial, public policy and technological factors with the goal to remove
complexity from the businesses, minimize internal conflicts, and, otherwise,
to improve the strategic position of each of the new companies. On September
20, 1995, AT&T also announced plans to pursue the public or private sale of
its remaining interest in AT&T Capital Corporation ("AT&T Capital"), although
AT&T cannot predict the timing or terms of any such transaction.
The Separation is targeted to be completed by the end of 1996, but remains
subject to a number of conditions. These conditions include the receipt of a
favorable tax ruling, other required approvals and the absence of events or
developments that would have a material adverse impact on AT&T or its
shareholders. On February 5, 1996, Lucent filed a registration statement with
the Securities and Exchange Commission with respect to the proposed public
offering of less than 20% of its shares.
For a discussion of the stand-alone results of each of the new AT&T, Lucent
and NCR, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
NEW AT&T CORP.
COMMUNICATIONS SERVICES GROUP
The Communications Services Group ("CSG") addresses the needs of large and
small businesses, the Federal government, state and local governments and
consumers for voice, data and video telecommunications services. Business
units within this group provide regular and custom long distance
communications services, including message telecommunications services
("MTS"), wide area telecommunications services ("WATS"), satellite transponder
services, data transmission services, AT&T True Connections 500 services,
toll-free or 800 services, 900 services, private line services, Software
Defined Network services ("SDN"), integrated services digital network ("ISDN")
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technology based services, and electronic mail, electronic data interchanges
and enhanced facsimile services. CSG introduced a variety of services this
year, including AT&T WorldNet* Service, a service providing dedicated and
dial-up access to the Internet; AT&T Network Notes, a network based workgroup
service; AT&T NetWare Connect Services, a wide area network solution; and AT&T
Business Network, an online service providing business news and information.
CSG also provides special long distance services, including AT&T Calling Card
services and special calling plans and the Company's domestic and
international operators. AT&T provides communications services
internationally, including transaction services, global networks, network
management and value added network services (i.e., services offered over
communications transmission facilities that employ computer processing
applications) and sells and maintains submarine cable systems.
AT&T provides interstate and intrastate long distance telecommunications
services throughout the continental United States and provides, or joins in
providing with other carriers, telecommunications services to and from Alaska,
Hawaii, Puerto Rico and the Virgin Islands and international
telecommunications services to and from virtually all nations and territories
around the world.
In the continental United States, AT&T provides long distance
telecommunications services over its own network. Virtually all switched
services are computer controlled and digitally switched and interconnected by
a packet switched signaling network. Transmission facilities consist of
approximately 2 billion circuit-miles using lightwave, satellite, wire and
coaxial cable and microwave radio technology. International
telecommunications services are provided via multiple international
transoceanic submarine cable (primarily lightwave) systems and via
international satellite and radio facilities.
AT&T Solutions, established in 1995, assists corporations in global network
and computer management. AT&T Solutions designs, builds and operates
corporate clients computer networks, designs software and manages data centers
for its clients.
AT&T WIRELESS SERVICES
AT&T Wireless Services Inc. is the nation's largest cellular communications
company and operates the fifth largest U.S. messaging service, serving more
than 5 million customers in over 100 cities. The operations of AT&T Wireless
Services Inc. were primarily previously conducted by McCaw Cellular
Communications, Inc. ("McCaw"), which was merged with a special-purpose
subsidiary of AT&T in September 1994. At that time, McCaw owned 52% of LIN
Broadcasting Corporation ("LIN"). In September 1995, AT&T acquired the
remaining 48% publicly-held interest in LIN at an aggregate price of
approximately $3.3 billion.
In connection with the McCaw merger, AT&T, McCaw and the United States
Department of Justice ("DOJ") agreed to enter into a proposed antitrust
consent decree (the "Proposed Consent Decree") on July 15, 1994, which, when
entered, would have settled a suit challenging the merger filed the same day
by the DOJ in the United States District Court for the District of Columbia
(the "court"). In February 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") became law and effectively superseded the future
operation of the Proposed Consent Decree. As a result, the conditions imposed
by the Proposed Consent Decree on the operations of AT&T and McCaw will no
longer apply.
__________________
* Service Mark
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On March 13, 1995, the Federal Communications Commission ("FCC") announced
the conclusion of the broadband Personal Communications Services ("PCS")
auction commenced on December 5, 1994. The auction involved a total of 99 PCS
licenses in 51 Major Trading Areas ("MTAs") authorizing service on 30 MHZ of
spectrum in the 1.8 GHz band. AT&T bid a total of $1.685 billion to win
broadband PCS licenses covering 21 MTAs. AT&T is required to provide adequate
service to at least one-third of the population in its licensed areas within
five years of being licensed and two-thirds of the population in its licensed
areas within ten years of being licensed. The licenses are granted for ten
year terms from the original date of issuance and may be renewed by AT&T by
meeting the FCC's renewal criteria and upon compliance with the FCC's renewal
procedures.
AT&T UNIVERSAL CARD SERVICES
AT&T Universal Card Services began operations in early 1990. The AT&T
Universal Card is a combined general-purpose consumer credit card and AT&T
Calling Card that at year-end had receivables in excess of $14 billion in
1995, $12.3 billion in 1994, $9.2 billion in 1993, $6.6 billion in 1992, and
$3.8 billion in 1991. The AT&T Universal Card is offered directly through
AT&T Universal Financial Corp., a Utah industrial loan company, and Universal
Bank, N.A., in Columbus, Georgia, which are both wholly owned by AT&T, and
under an affinity relationship with Columbus Bank and Trust Company in
Columbus, Georgia, a subsidiary of Synovus Financial Corp. AT&T Universal Card
Services provides marketing and customer support for the AT&T Universal Card
program and it purchases cardholder receivables generated by the AT&T
Universal Card program.
Some seasonality exists in the consumer credit card industry, with a higher
number of purchases occurring during the year-end holiday season. The Company
believes that the AT&T Universal Card program is one of the top three or four
bankcard/credit card programs, based on generally available industry
information, and on the number of cardholder accounts in the United States.
REGULATION AND LEGISLATIVE DEVELOPMENTS
Telecommunications Act of 1996
The Telecommunications Act preempts state and local requirements which
prohibit or have the effect of prohibiting an entity from providing
telecommunications services. In addition, the Telecommunications Act requires
incumbent local exchange carriers ("LECs"), including the Regional Bell
Operating Companies ("RBOCs"), to implement a checklist of conditions that are
designed to foster local exchange competition. These conditions include
requiring incumbent LECs to provide to competing service providers (i) local
exchange services for resale at wholesale rates, (ii) interconnection and
access to unbundled network elements at any technically feasible point and at
cost-based rates, (iii) number portability, (iv) dialing parity and (v) access
to rights of way. Although the Telecommunications Act permits interexchange
carriers and others to begin providing local exchange service at any time,
negotiations with LECs over access and interconnection agreements and the
adoption of implementing rules and regulations will be necessary before
effective local exchange competition commences.
The Telecommunications Act also permits an RBOC to petition the FCC at any
time for permission to provide interexchange services originating in any state
in its region. The FCC cannot approve such a request unless (i) approval is
consistent with the public interest, convenience and necessity; (ii) the FCC
has consulted with the DOJ and given the DOJ's views substantial weight; (iii)
the RBOC has implemented the Telecommunications Act checklist of conditions
throughout such state; and (iv) either (A) the RBOC has entered into a binding
interconnection agreement, approved by the relevant state, with one or more
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unaffiliated competing providers of telephone exchange service to residential
and business subscribers which are offered either exclusively or predominantly
over such competitors' own facilities, or (B) the RBOC has received no such
requests for interconnection within the statutory prescribed time period.
Once approved to provide interexchange services in a single in-region state,
an RBOC is also permitted to begin manufacturing telecommunications equipment.
Furthermore, the Telecommunications Act permits immediate RBOC provision
of interexchange services outside of their home service areas and certain
incidental interexchange services in their home service areas, such as those
provided in conjunction with commercial mobile and cellular services,
information services, alarm monitoring and video and audio programming
services within their home service area.
AT&T believes that the Telecommunications Act's provisions for the opening
of local exchange markets to competitive entry are significant and that the
restrictions placed on RBOC entry into in-region interexchange services should
promote service competition in the RBOC's monopoly markets before RBOC
provision of in-region interexchange services. Nonetheless, there is no
assurance that, in the administration of the Telecommunications Act, the rules
and regulations to be adopted will result in meaningful facilities-based
competition prior to RBOC provision of in-region interexchange service.
To the extent that such implementing rules and regulations do not contain
adequate provision for facilities-based local exchange competition, there is a
substantial risk that AT&T and other interexchange service providers would be
at a disadvantage to the RBOCs in the provision of local exchange services.
In addition, regardless of provisions for facilities-based local exchange
competition, the simultaneous entrance of seven RBOC competitors for
interexchange services is likely to adversely affect AT&T's long-distance
revenues and could adversely affect earnings. There is still a significant
amount of uncertainty as to the extent, timing and impact on AT&T of the RBOCs
entrance into interexchange services.
Similarly, the impact of AT&T's entrance into local services cannot
reasonably be predicted. Notwithstanding the strong local entry provisions
contained in the Telecommunications Act, various factors, including start-up
costs associated with entering new markets, local conditions and obstacles,
and the final form of implementing rules and regulations could adversely
affect future revenues and earnings. Nevertheless, the Telecommunications
Act, plus other public policy and technological changes, will likely open new
markets for AT&T in different areas of communications services. AT&T's
competitive strategy includes using its networking capabilities, respected
brand name and other resources to take advantage of these new opportunities as
they arise.
Proceedings are also pending before a number of state regulatory
commissions, including New York, California and Illinois, concerning changes
in the nature of the state regulation of telecommunication services and the
removal of constraints on local service providers. The Telecommunications Act
should require substantial changes to certain of these proceedings and provide
more uniform opportunities for local entry throughout the nation.
At the time the Telecommunications Act was enacted, numerous significant
matters were pending before the DOJ and the court concerning the Modification
of Final Judgement of 1982 (the"MFJ"). Those pending matters included a
motion to vacate the MFJ, a motion to allow Ameritech Corporation, subject to
certain conditions and DOJ supervision, to provide interexchange services
within certain LATA in its home service area after local competition is found
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to exist, and a motion to allow U S West, Inc. to provide interexchange
services outside its home service area in conjunction with its planned
out-of-region competitive local telephone services. Because the
Telecommunications Act regulates the provisions of interexchange services by
the RBOCs and thereby effectively superseded future operation of the MFJ, it
is anticipated that continuing MFJ restrictions and pending waiver requests
will be discontinued.
Regulation of Rates
AT&T is subject to the jurisdiction of the FCC with respect to interstate
and international rates, lines and services, and other matters. For many
years prior to July 1, 1989, the system of regulation used by the FCC for AT&T
was rate-of-return regulation. Effective July 1, 1989, the FCC adopted a new
system of regulating AT&T known as "price caps" under which AT&T's prices,
rather than its earnings, were limited. On October 12, 1995, recognizing a
decade of enormous change in the long distance market and finding that AT&T
lacks market power in the interstate long distance market, the FCC
reclassified AT&T as a "non-dominant" carrier for its domestic interstate
services. As a result, AT&T is now subject to the same regulations as its
long distance competitors for such services. Thus, AT&T is no longer subject
to price cap regulation for these services, is able to file tariffs that are
presumed lawful on one day's notice, and is free of other regulations and
reporting requirements that apply only to dominant carriers.
Like its long distance competitors, AT&T remains subject to the statutory
requirements of Title II of the Communications Act. It must offer service
under rates, terms and conditions that are just, reasonable and not
unreasonably discriminatory, it is subject to the FCC's complaint process, and
it must give notice to the FCC and affected customers prior to discontinuance,
reduction, or impairment of service. AT&T has also made certain commitments
that address concerns that had been raised with regard to the potential impact
of declaring AT&T to be non-dominant. These include: (i) a three-year rate
assurance for low income and low usage residential users; (ii) a three year
commitment to provide 5 days advance notice of any geographically specific
tariff filing that departs from AT&T's traditional approach to geographic rate
averaging for interstate residential direct dial services; (iii) a three-year
limit on, and 5 days advance notice for, rate increases on 800 directory
assistance and analog private line services; and (iv) commitments regarding
the treatment of carriers that resell AT&T's services.
AT&T's international private line services have been classified as non-
dominant for several years. AT&T's switched international services are
subject to similar competitive challenges as its domestic services though AT&T
has not received non-dominant treatment for those services. The FCC is
considering a request by AT&T for non-dominant treatment of those services.
AT&T's intrastate telecommunications services are subject to regulation in
many states by public service commissions or similar state authorities having
regulatory power over intrastate rates, lines and services and other matters.
The system of regulation used in many states, at least for some of AT&T's
services, is rate-of-return regulation. In recent years, recognizing the
competitive nature of AT&T's services, many states have adopted different
systems of regulation, such as: complete removal of rate-of-return regulation,
pricing flexibility rules for some or all of AT&T's services, price caps, and
incentive regulation.
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LUCENT TECHNOLOGIES INC.
Lucent is one of the world's leading designers, developers and
manufacturers of telecommunications systems, software and products. Lucent is
a global market leader in the sale of public telecommunications network
systems, business communications systems and microelectronic components for
communications applications. Further, Lucent is the largest supplier in the
United States of telecommunications products for consumers. In addition,
Lucent supports network operators and businesses with engineering,
installation, maintenance and operations support services. Lucent's research
and development activities are conducted through Bell Laboratories.
Lucent's systems enable network operators to provide wireline and wireless
local, long-distance and international voice, data and video services.
Lucent's networks include switching, transmission and cable systems packaged
and customized with application software, operations support systems and
associated professional services. Lucent's business systems are primarily
customer premises-based telecommunications systems that enable businesses to
communicate within and between locations. Lucent designs, develops and sells
high-performance integrated circuits, electronic power systems and
optoelectronic components for communications applications both for third
parties and for incorporation into these microelectronic products as important
components of its own systems and products. Lucent offers a wide range of
communications products in the United States for consumers and small
businesses, including corded, cordless and cellular telephones, telephone
answering systems and related accessories.
NCR CORPORATION
NCR offers computing and communications solutions together to provide
customers easy access to information and to each other. These solutions are
comprised of computer products and systems, as well as software and
professional services and support.
During the third quarter of 1995, NCR engaged in a strategic restructuring
pursuant to which it would consolidate its lines of business operations,
discontinue the manufacturing of personal computers, reduce the number of its
employees and consolidate facilities throughout the U.S. and internationally.
The plan is expected to be completed before the end of 1996.
NCR's primary focus after its restructuring is on three industries:
financial, retail and communications. Key product lines include: Financial
Systems, such as automated teller machines, image capture systems and
financial processing systems; Decision Enabling Systems, such as commercial
massively parallel processing and database systems; Platforms and Systems,
including scalable multiprocessing systems, systems software and processing
systems; Software Products, including groupware, messaging, and distributed
computing middleware; Network Products, including networking tools and
management systems such as OneVision* Network Management Solutions. The unit
also has a fully integrated business, Systemedia, that provides business forms
and media products. In addition, Worldwide Services provides comprehensive
multi-vendor support and professional services.
______________
* Service Mark
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AT&T CAPITAL CORPORATION
AT&T Capital is a full-service, diversified equipment leasing and finance
company that operates in the United States, Canada, Europe, the Asia-Pacific
region and Mexico. In August 1993, an initial public offering combined with a
management stock offering took place, which totaled approximately 14 percent
of AT&T Capital's common stock. As a result of the stock offerings,
approximately 86 percent of the outstanding common stock of AT&T Capital
(approximately 82% on a fully-diluted basis) is owned by AT&T indirectly
through its wholly owned subsidiaries. On September 20, 1995, AT&T announced
plans to pursue the public or private sale of its remaining 86% interest in
AT&T Capital, although AT&T cannot predict the timing or terms of any such
transaction.
AT&T Capital provides customized financing for AT&T's customers acquiring
AT&T and associated equipment. AT&T Capital also provides financing in
connection with general equipment used by AT&T entities and the AT&T employee
vehicle leasing program. AT&T Capital's captive programs are dependent upon
sales of products by AT&T and its affiliates and the continued acceptance of
these products in the marketplace.
AT&T Capital also leases and finances non-AT&T equipment including office,
manufacturing, data center and data processing and transportation equipment.
Additionally, AT&T Capital provides inventory financing for equipment dealers
and distributors, Small Business Administration lending, and asset management
and remarketing services.
AT&T Capital's business is diversified by customer, customer type,
equipment segments, geographic location of its customers and maturity of
receivables. In 1994 and 1995, AT&T Capital expanded its international
equipment leasing and financial services operations to customers in Europe,
Hong Kong, Australia and Mexico.
COMPETITION
AT&T currently faces significant competition in the global information
movement and management industry and expects that the level of competition
will continue to increase. As public policy and technological changes occur,
including those occasioned by the enactment of the Telecommunications Act,
AT&T anticipates that new and different competitors will enter and expand
their position in the communications services and equipment markets. These
may include entrants from other segments of the telecommunications and
information services industries and/or global competitors seeking to expand
their market opportunities. Many such new competitors are likely to enter
with a strong market presence, well recognized names and pre-existing direct
customer relationships.
The financial services industry is also highly competitive. Participants
in the industry compete through price (including the ability to control
costs), risk management, innovation and customer service. Principal cost
factors include the cost of funds, the cost of selling to or acquiring new
end-user customers and vendors, and the cost of managing portfolios
(including, for example, billing, collection, credit risk management and
residual management).
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SEGMENT, OPERATING REVENUE AND RESEARCH
AND DEVELOPMENT EXPENSE INFORMATION
For information about the Company's industry and geographic segments, see
Note 15 to the Consolidated Financial Statements. Such information is
incorporated herein by reference pursuant to General Instruction G(2). For
information about the consolidated operating revenues contributed by the
Company's major classes of products and services and about consolidated
research and development expenses, see revenue tables and descriptions on
pages 24 through 27 and Consolidated Statements of Income on page 34 of the
Company's annual report to security holders for the year ended December 31,
1995. Such information is incorporated herein by reference pursuant to
General Instruction G(2).
EMPLOYEE RELATIONS
At December 31, 1995 AT&T employed approximately 300,000 persons in its
operations, approximately 250,000 of whom are located domestically . On
January 2, 1995, AT&T announced its intention to eliminate approximately
40,000 positions. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations." About 38% of the domestically
located employees of AT&T are represented by unions. Of those so represented,
about 79% are represented by the Communications Workers of America ("CWA"),
which is affiliated with the AFL-CIO; about 20% by the International
Brotherhood of Electrical Workers ("IBEW"), which is also affiliated with the
AFL-CIO; and the remainder by other unions. Labor agreements with most of
these unions extend through May, 1998.
ENVIRONMENTAL MATTERS
The operations of the Company involve the release of materials to the
environment that are subject to regulation under environmental protection
laws. The Company is involved in a number of remedial actions to clean up
hazardous wastes in accordance with the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA", or "Superfund"), the Resource
Conservation and Recovery Act ("RCRA") and state environmental laws. Such
statutes require that certain parties fund remedial actions regardless of
fault. During 1995, as in prior years, the Company has been making capital
expenditures for environmental control facilities. See "Item 3. Legal
Proceedings."
An estimate of the costs of remedial actions or the amounts of capital
expenditures for future periods is subject to a number of uncertainties
including the following: the developing nature of administrative regulations
being promulgated under CERCLA, RCRA and other environmental protection laws;
the availability of other responsible parties at a site; the availability of
information regarding conditions at potential sites; uncertainty as to how the
laws and regulations may be applied to such sites; multiple choices and costs
associated with diverse technologies that may be used in corrective actions at
such sites; and the time periods (which may be quite lengthy) over which
eventual remediation may occur. In the opinion of the Company's management,
capital expenditures and expenses in connection with remedial actions to
comply with the present environmental protection laws will not have a material
effect upon the Company's future expenditures, annual consolidated financial
statement or competitive position beyond that provided for at year-end.
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ITEM 2. PROPERTIES.
The properties of AT&T consist primarily of plant and equipment used to
provide long distance telecommunications services, manufacturing plants at
which the Company's products and systems are produced and administrative
office buildings.
Telecommunications plant and equipment consists of: central office
equipment, including switching and transmission equipment; connecting lines
(cables, wires, poles, conduits, etc.); land and buildings; and miscellaneous
properties (work equipment, furniture, plant under construction, etc.). The
majority of the connecting lines are on or under public roads, highways and
streets and international and territorial waters. The remainder are on or
under private property.
AT&T operates 96 manufacturing facilities located throughout the United
States and abroad which at December 31, 1995, had a total of about 27 million
square feet. Approximately 24 million square feet are in owned facilities and
the remaining 3 million square feet are in leased premises. Some of the
non-U.S. operations are operated through joint ventures with other parties.
AT&T also operates a number of sales offices, service, repair and distribution
centers, and other facilities, such as research and development laboratories.
AT&T continues to manage the deployment and utilization of its assets in
order to meet its global growth objectives while at the same time ensuring
that these assets are generating economic value added for the shareholder.
AT&T will continue to manage its asset base consistent with globalization
initiatives, marketplace forces, productivity growth and technology change.
A substantial number of the administrative offices of AT&T are in leased
buildings. Substantially all of the important communications facilities are
in buildings owned by AT&T or leased from the regional holding companies
created at divestiture. Substantially all of the major manufacturing plants
and major centers are in owned buildings. Many of the smaller facilities are
in rented quarters. Most of the important buildings are on land held in fee,
but a few are on land held under long-term leases.
On January 2, 1996, AT&T announced that it would take charges relating to
the Separation, portions of which relate to asset impairment and facility
closings. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
ITEM 3. LEGAL PROCEEDINGS.
In the normal course of business, AT&T is subject to proceedings, lawsuits
and other claims, including proceedings under government laws and regulations
related to environmental and other matters. Such matters are subject to many
uncertainties and outcomes are not predictable with assurance. Consequently,
AT&T is unable to ascertain the ultimate aggregate amount of monetary
liability or financial impact with respect to these matters at December 31,
1995. While these matters could affect operating results of any one quarter
when resolved in future periods, it is management's opinion that after final
disposition, any monetary liability or financial impact to AT&T beyond that
provided for at year-end would not be material to AT&T's annual consolidated
financial statements.
<PAGE> -10-
On February 14, 1996, Bell Atlantic Corporation and DSC Communications
Corporation filed a complaint against AT&T and Lucent in the United States
District Court for the Eastern District of Texas. The complaint alleges,
among other things, that AT&T has monopolized or attempted to monopolize
alleged markets for communications transmission equipment, related software
and caller identification services. The complaint seeks injunctive relief and
damages, after trebling, of approximately $3.5 billion. AT&T does not believe
that the complaint has merit and intends to defend the lawsuit vigorously.
On July 31, 1991, the United States Environmental Protection Agency Region
III issued a complaint pursuant to Section 3008a of the Resource Conservation
and Recovery Act alleging violations of various waste management regulations
at the Company's Richmond Works, Richmond, Virginia. The complaint seeks a
total of $4,184,304 in penalties. The Company is contesting both liability
and the penalties.
In addition, on July 31, 1991, the United States Environmental Protection
Agency filed a civil complaint in the U.S. District Court for the Southern
District of Illinois against the Company and nine other parties seeking
enforcement of its CERCLA Section 106 cleanup order, issued in November 1990
for the NL Granite City Superfund site, Granite, Illinois, past costs, civil
penalties of $25,000 per day and treble damages related to certain United
States' costs. The Company is contesting liability.
During 1994, AT&T Nassau Metals Corporation ("Nassau"), a wholly owned
subsidiary of AT&T, and the New York State Department of Environmental
Conservation ("NYSDEC") were engaged in negotiations over a study and cleanup
of the Nassau plant located on Richmond Valley Road in Staten Island, New
York. During these negotiations, in June 1994, NYSDEC presented Nassau with a
draft consent order which included not only provisions relating to site
investigation and remediation but also a provision for payment of a $3.5
million penalty for alleged violations of hazardous waste management
regulations. No formal proceeding has been commenced by NYSDEC. Nassau has
denied most of the allegations and is also contesting the penalty.
Negotiations and discussions are still continuing.
The foregoing environmental proceedings are not material to the
consolidated financial statements or business of the Company and would not be
reported but for Instruction 5 C. of Item 103 of Regulation S-K, which
requires disclosure of such matters.
See also the discussion herein in Item 1. Business, for additional
information about environmental matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matter was submitted to a vote of security holders in the fourth quarter
of the fiscal year covered by this report.
<PAGE>
<PAGE>
-11-
Executive Officers of the Registrant
(as of February 1, 1996)
Became AT&T
Executive
Officer On
Name Age
Robert E. Allen* ....... 61 Chairman of the Board and Chief
Executive Officer ............ 9-86
Harold W. Burlingame ... 55 Executive Vice President, Human
Resources .................... 9-86
Pier Carlo Falotti...... 53 President, AT&T International ..... 1-96
Marilyn Laurie ......... 56 Executive Vice President, Public
Relations & Employee
Information.................. 2-87
Alex J. Mandl**......... 52 President and Chief Operating
Officer....................... 8-91
Gail J. McGovern........ 44 Executive Vice President,
Business Markets Division..... 1-96
Richard W. Miller ...... 55 Senior Executive Vice President
and Chief Financial Officer... 8-93
Joseph P. Nacchio....... 46 Executive Vice President,
Consumer & Small Business
Division...................... 1-96
Lars Nyberg............. 44 Chief Executive Officer of NCR
Corporation................... 6-95
John Petrillo........... 46 Executive Vice President,
Strategy & New Service
Innovation.................... 1-96
Ron J. Ponder........... 52 Executive Vice President,
Operations & Service Management
and Chief Information
Officer....................... 1-96
Henry B. Schacht**...... 61 Chairman-designate and Chief
Executive Officer of Lucent
Technologies Inc. ............ 2-96
John D. Zeglis ......... 48 Senior Executive Vice President,
Policy Development & Operations
Support....................... 9-86
___________
*Member of the Board of Directors and Chairman of the Executive
and Proxy Committees.
**Member of the Board of Directors.
All of the above executive officers have held high level managerial
positions with AT&T or its affiliates for more than the past five years,
except Messrs. Mandl, Miller, Falotti, Ponder, Nyberg and Schacht who have
been officers or employees of AT&T since August 1, 1991, August 9, 1993,
February 10, 1994, June 11, 1993, June 1, 1995 and January 1, 1996,
respectively. Prior to joining AT&T, Mr. Mandl was Chairman and Chief
Executive Officer of Sea-Land Service, Inc., an ocean transportation and
distribution services company, for four years and prior thereto held executive
positions at CSX Corporation. Prior to joining AT&T, Mr. Miller was with Wang
Laboratories, Inc., a computer company, from 1989 through 1993, serving as
President and Chief Operating Officer and later as Chairman, President and
Chief Executive Officer. Mr. Falotti was President and Chief Executive
Officer of the ASK Group, a software company, from 1992 to 1994 prior to
joining AT&T. Prior to that, Mr. Falotti was President and Chief Executive
<PAGE> -12-
Officer of Digital Equipment Corporation Europe, a computer company. Prior to
joining AT&T, Mr. Ponder was Executive Vice President and Chief Information
Officer for Sprint Corporation, a telecommunications company, from 1991 to
1993 and prior to that Mr. Ponder was Chief Information Officer with the
Federal Express Company, an express delivery company. Prior to joining AT&T,
Mr. Nyberg was Chairman and Chief Executive Officer of Philips' Communications
Systems Division of Philips Electronics NV, a telecommunications equipment
company, from 1993 to 1995. From 1990 to 1993 he held other positions with
Philips Electronics NV. Prior to joining AT&T, Mr. Schacht was Chairman of
Cummins Engine Company, Inc., a manufacturer of diesel engines, from 1977 to
1995 and was Chief Executive Officer from 1973 to 1994.
Officers are not elected for a fixed term of office but hold office until
their successors have been elected.
PART II
Items 5. through 8.
The information required by these items is included in pages 22 through 52
and on the inside back cover of the Company's annual report to security
holders for the year ended December 31, 1995. The referenced pages of the
Company's annual report to security holders have been filed as Exhibit 13 to
this document. Such information is incorporated herein by reference, pursuant
to General Instruction G(2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no changes in independent auditors and no disagreements
with independent auditors on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure during the last
two years.
PART III
Items 10. through 13.
Based upon its review of the reports furnished to the Company during and
with respect to 1995 pursuant to Section 16(a) of the Securities Exchange Act
of 1934, the Company notes that no Form 5 for 1995 has been filed to date by
Richard A. McGinn, an Executive Vice President.
Information regarding executive officers required by Item 401 of Regulation
S-K is furnished in a separate disclosure in Part I of this report because the
Company did not furnish such information in its definitive proxy statement
prepared in accordance with Schedule 14A.
The other information required by Items 10 through 13 is included in the
Company's definitive proxy statement dated February 27, 1996, on page 6, the
penultimate paragraph on page 7 through page 12 and on page 25 through page
42. Such information is incorporated herein by reference, pursuant to General
Instruction G(3).
<PAGE> -13-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as a part of the report:
(1) Financial Statements:
Pages
Report of Management ................................ *
Report of Independent Auditors ...................... *
Statements:
Consolidated Statements of Income ................ *
Consolidated Balance Sheets ...................... *
Consolidated Statements of Changes in
Stockholder's Equity............................. *
Consolidated Statements of Cash Flows ............ *
Notes to Consolidated Financial Statements ....... *
(2) Financial Statement Schedules:
Report of Independent Auditors ...................... 17
Schedules:
II -- Valuation and Qualifying Accounts ............. 18
Separate financial statements of subsidiaries not
consolidated and 50 percent or less owned persons are
omitted since no such entity constitutes a
"significant subsidiary" pursuant to the provisions of
Regulation S-X, Article 3-09.
(3) Exhibits:
Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission ("SEC"), are incorporated
herein by reference as exhibits hereto.
Exhibit
Number
(3)a Restated Certificate of Incorporation of the
registrant filed January 10, 1989, Certificate of
Correction of the registrant filed June 8, 1989,
Certificate of Change of the registrant filed March
18, 1992, Certificate of Amendment of the registrant
filed June 1, 1992, and Certificate of Amendment of
the registrant filed April 20, 1994. (Exhibit 4 to
Registration Statement No. 333-00573).
(3)b By-Laws of the registrant, as amended May 18, 1994
Exhibit (3)b to Form 10-K for 1994, File No. 1-1105).
____________
*Incorporated herein by reference to the appropriate portions of the
Company's annual report to security holders for the year ended
December 31, 1995. (See Part II.)
<PAGE>
<PAGE>
-14-
Exhibit
Number
(4) No instrument which defines the rights of holders of
long term debt, of the registrant and all of its
consolidated subsidiaries, is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant
to this regulation, the registrant hereby agrees to
furnish a copy of any such instrument to the SEC upon
request.
(10)(i)1 Separation and Distribution Agreement by and among
Lucent Technologies Inc., AT&T Corp. and NCR
Corporation, dated as of February 1, 1996.
(10)(i)2 Tax Sharing Agreement by and among Lucent
Technologies Inc., AT&T Corp. and NCR Corporation,
dated as of February 1, 1996.
(10)(ii)(B)1 General Purchase Agreement by and between AT&T Corp.
and Lucent Technologies Inc., dated February 1, 1996.
(10)(iii)(A)1 AT&T Short Term Incentive Plan as amended March, 1994
(Exhibit (10)(iii)(A)1 to Form 10-K for 1994, File
No. 1-1105).
(10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended
July 17, 1989 (Exhibit (10)(iii)(A)2 to Form SE dated
March 24, 1993, File No. 1-1105).
(10)(iii)(A)3 AT&T Senior Management Individual Life Insurance
Program dated January 1, 1987 (Exhibit (10)(iii)(A)1
to Form SE, dated March 25, 1987, File No. 1-1105)
and as revised December 1, 1994 (Exhibit
(10)(iii)(A)3 to Form 10-K for 1994, File No. 1-
1105).
(10)(iii)(A)4 AT&T Senior Management Long Term Disability and
Survivor Protection Plan dated February 23, 1984
(Exhibit (10)(iii)(A)1 to Form SE, dated February 21,
1986, File No. 1-1105).
(10)(iii)(A)5 AT&T Senior Management Financial Counseling Program
dated December 29, 1994 (Exhibit (10)(iii)(A)5 to
Form 10-K for 1994, File No. 1-1105).
(10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee
Directors, as amended December 15, 1993 (Exhibit
(10)(iii)(A)6 to Form 10-K for 1993, File No. 1-1105).
(10)(iii)(A)7 AT&T Directors Individual Life Insurance Program
dated January 1, 1987 (Exhibit (10)(iii)(A)3 to
Form SE, dated March 25, 1987, File No. 1-1105).
(10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident
Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for
1990, File No. 1-1105).
<PAGE> -15-
Exhibit
Number
(10)(iii)(A)9 Extract from AT&T (formerly Bell System) Management
Pension Plan regarding limitations on and payments of
pension amounts which exceed the limitations
contained in The Employee Retirement Income Security
Act, with amendments effective October 1, 1985
(Exhibit (10)(iii)(A)2 to Form SE, dated February 21,
1986, File No. 1-1105).
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, (with amendments
effective June 1, 1988) (Exhibit 10(iii)(A)10 to
Form SE, dated March 26, 1990, File No. 1-1105).
(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan,
as amended January 20, 1994 and March 25, 1994
(Exhibit (10)(iii)(A)11 to Form 10-K for 1994, File
No. 1-1105).
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective
January 1, 1988, including AT&T Mid-Career Pension
Plan, as amended May 15, 1985 (Exhibit (10)(iii)(A)4
to Form SE, dated March 25, 1988, File No. 1-1105).
(10)(iii)(A)13 AT&T 1984 Stock Option Plan, as modified December 19,
1984 (Exhibit 10(t) to Form SE, dated February
27,1985, File No. 0-13247).
(10)(iii)(A)14 Form of Indemnification Contract for Officers and
Directors (Exhibit (10)(iii)(A)6 to Form SE, dated
March 25, 1987, File No. 1-1105).
(10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised
February 20, 1989 (Exhibit (10)(iii)(A)(15) to Form
10-K for 1993, File No. 1-1105).
(10)(iii)(A)16 AT&T Senior Management Basic Life Insurance Program
(Exhibit (10)(iii)(A)16 to Form 10-K for 1990, File
No. 1-1105).
(10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement
(Exhibit (10)(iii)(A)17 to Form SE, dated March 25,
1992, File No. 1-1105).
(10)(iii)(A)18 Employment Agreement between American Telephone and
Telegraph Company and Alex J. Mandl dated August 1,
1991 (Exhibit (10)(iii)(A) 18 to Form 10-K for 1993,
File No. 1-1105).
(10)(iii)(A)19 Employment Agreement between American Telephone and
Telegraph Company and Richard W. Miller dated August
9, 1993.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Specified portions (pages 22 through 52 and the
inside back cover) of the Company's Annual
Report to security holders for the year ended
December 31, 1995.
<PAGE> -16-
Exhibit
Number
(21) List of subsidiaries of AT&T.
(23) Consent of Coopers & Lybrand L.L.P.
(24) Powers of Attorney executed by officers and
directors who signed this report.
(27) Financial Data Schedule.
AT&T will furnish, without charge, to a security holder upon
request a copy of the annual report to security holders and the proxy
statement, portions of which are incorporated herein by reference
thereto. AT&T will furnish any other exhibit at cost.
(b) Reports on Form 8-K:
Form 8-K dated October 18, 1995 was filed pursuant to Item 5
(Other Events).
<PAGE>
<PAGE>
-17-
REPORT OF INDEPENDENT AUDITORS
To the Shareowners of AT&T Corp.:
Our report on the consolidated financial statements of AT&T Corp. and
subsidiaries has been incorporated by reference in this Form 10-K from page 33
of the 1995 Annual Report to the Shareowners of AT&T Corp. In connection with
our audits of such financial statements, we have also audited the related
consolidated financial statement schedule listed in the index on page 13 of
this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required
to be included therein.
As discussed in our report referred to above and in Note 3 to the
consolidated financial statements, in 1993 the Company changed its methods of
accounting for postretirement benefits, postemployment benefits and income
taxes.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
January 25, 1996
<PAGE>
<PAGE>
-18-
<TABLE>
Schedule II--Sheet 1
<CAPTION>
AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Millions of Dollars)
- -----------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------
Additions
------------------------
(1) (2)
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions(a) of Period
- -----------------------------------------------------------------------------------------------------------------------
Year 1995
<S> <C> <C> <C> <C> <C>
Allowances for doubtful accounts (b) ..... $1,460 $2,378 $ 52(c) $2,049 $1,841
Reserves related to business
restructuring and facility
consolidation (d) ...................... $ 894 $4,444 $(83) $ 478 $4,777
Deferred tax asset valuation allowance ... $ 178 $ 293 $ -- $ 117 $ 354
Inventory valuation....................... $ 763 $ 773(f) $ -- $ 285 $1,251
Year 1994
Allowances for doubtful accounts (b) ..... $1,225 $1,929 $ 59(c) $1,753 $1,460
Reserves related to business
restructuring, including force
and facility consolidation (d) ......... $1,440 $ 34 $(115) $ 465 $ 894
Deferred tax asset valuation allowance ... $ 212 $ 41 $ -- $ 75 $ 178
Inventory valuation....................... $ 669 $ 198 $ -- $ 104 $ 763
<FN>
The Notes on Sheet 2 are an integral part of this Schedule.
</TABLE>
<PAGE>
<PAGE>
- -19-
<TABLE>
Schedule II--Sheet 2
<CAPTION>
AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Millions of Dollars)
- -----------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------
Additions
------------------------
(1) (2)
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions(a) of Period
- -----------------------------------------------------------------------------------------------------------------------
Year 1993
<S> <C> <C> <C> <C> <C>
Allowances for doubtful accounts (b) ..... $1,013 $1,665 $66(c) $1,519 $1,225
Reserves related to business
restructuring, including force
and facility consolidation (d) ......... $2,006 $ 416 $ 5 $ 987(e) $1,440
Deferred tax asset valuation allowance ... $ 212 $ -- $-- $ -- $ 212
Inventory valuation....................... $ 633 $ 141 $-- $ 105 $ 669
<FN>
____________
(a) Amounts written off as uncollectible, payments and reversals.
(b) Includes allowances for doubtful accounts on long-term receivables of $258, $209 and $185 in 1995, 1994 and 1993,
respectively (included in Finance receivables in the Consolidated Balance Sheets).
(c) Amounts previously written off which were credited directly to this account when recovered.
(d) Included primarily in Other current liabilities and in Other liabilities in the Consolidated Balance Sheets.
(e) Upon adoption in 1993 of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," $412 of business restructuring reserves established before 1993 were reclassified to postemployment benefit
liabilities.
(f) Includes $631 of inventory write-downs associated with the 1995 restructuring and other charges.
</TABLE>
<PAGE>
<PAGE>
-20-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AT&T Corp.
By S. L. Prendergast
Vice President and Treasurer
February 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Executive Officer: #
#
Robert E. Allen Chairman #
of the Board #
#
#
Principal Financial Officer: #
#
Richard W. Miller Senior Executive #
Vice President and #
Chief Financial #
Officer #
#
Principal Accounting Officer: #
#
Maureen B. Tart Vice President ## By S. L. Prendergast
and Controller # (attorney-in-fact)*
#
Directors: #
# February 27, 1996
Robert E. Allen #
Kenneth T. Derr #
M. Kathryn Eickhoff #
Philip M. Hawley #
Carla A. Hills #
Belton K. Johnson #
Ralph S. Larsen #
Drew Lewis #
Alex J. Mandl #
Donald F. McHenry #
Victor A. Pelson #
Donald S. Perkins #
Michael I. Sovern #
Franklin A. Thomas #
Thomas H. Wyman #
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibits identified in parentheses below, on file with the SEC, are
incorporated herein by reference as exhibits hereto.
Exhibit
Number
(3)a Restated Certificate of Incorporation of the registrant
filed January 10, 1989, Certificate of Correction of the
registrant filed June 8, 1989, Certificate of Change of the
registrant filed March 18, 1992, Certificate of Amendment of
the registrant filed June 1, 1992, and Certificate of
Amendment of the registrant filed April 20, 1994. (Exhibit 4
to Registration Statement No. 333-00573).
(3)b By-Laws of the registrant, as amended May 18, 1994 (Exhibit
(3)b to Form 10-K for 1994, Form No. 1-1105).
(4) No instrument which defines the rights of holders of long
term debt, of the registrant and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
(10)(i)1 Separation and Distribution Agreement by and among Lucent
Technologies Inc., AT&T Corp. and NCR Corporation, dated as
of February 1, 1996.
(10)(i)2 Tax Sharing Agreement by and among Lucent Technologies Inc.,
AT&T Corp., and NCR Corporation, dated as of February 1,
1996.
(10)(ii)(B)1 General Purchase Agreement by and between AT&T Corp., and
Lucent Technologies Inc., dated February 1, 1996.
(10)(iii)(A)1 AT&T Short Term Incentive Plan as amended March, 1994
(Exhibit (10)(iii)(A)1 to Form 10-K for 1994, File No. 1-
1105).
(10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended July 17,
1989 (Exhibit (10)(iii)(A)2 to Form SE dated March 24, 1993,
File No. 1-1105).
(10)(iii)(A)3 AT&T Senior Management Individual Life Insurance Program
dated January 1, 1987 (Exhibit (10)(iii)(A)1 to Form SE,
dated March 25, 1987, File No. 1-1105) and as revised
December 1, 1994 (Exhibit (10)(iii)(A)3 to Form 10-K for
1994, Form No. 1-1105).
(10)(iii)(A)4 AT&T Senior Management Long Term Disability and Survivor
Protection Plan dated February 23, 1984 (Exhibit
(10)(iii)(A)1 to Form SE, dated February 21, 1986, File No.
1-1105).
<PAGE>
<PAGE>
(10)(iii)(A)5 AT&T Senior Management Financial Counseling Program dated
December 29, 1994 (Exhibit (10)(iii)(A)5 to Form 10-K for
1994, File No. 1-1105).
(10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee Directors,
as amended December 15, 1993 (Exhibit (10)(iii)(A)6 to Form
10-K for 1993, File No. 1-1105).
(10)(iii)(A)7 AT&T Directors Individual Life Insurance Program dated
January 1, 1987 (Exhibit (10)(iii)(A)3 to Form SE, dated
March 25, 1987, File No. 1-1105).
(10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident
Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for 1990, File
No. 1-1105).
(10)(iii)(A)9 Extract from AT&T (formerly Bell System) Management Pension
Plan regarding limitations on and payments of pension
amounts which exceed the limitations contained in The
Employee Retirement Income Security Act, with amendments
effective October 1, 1985 (Exhibit (10)(iii)(A)2 to Form SE,
dated February 21, 1986, File No. 1-1105).
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, (with amendments effective
June 1, 1988) (Exhibit 10(iii)(A)10 to Form SE, dated March
26, 1990, File No. 1-1105).
(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan, as
amended January 20, 1994 and March 25, 1994 (Exhibit
(10)(iii)(A)11 to Form 10-K for 1994, File No. 1-1105).
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January 1,
1988, including AT&T Mid-Career Pension Plan, as amended May
15, 1985 (Exhibit (10)(iii)(A)4 to Form SE, dated March 25,
1988, File No. 1-1105).
(10)(iii)(A)13 AT&T 1984 Stock Option Plan, as modified December 19, 1984
(Exhibit 10(t) to Form SE, dated February 27, 1985, File No.
0-13247).
(10)(iii)(A)14 Form of Indemnification Contract for Officers and Directors
(Exhibit (10)(iii)(A)6 to Form SE, dated March 25, 1987,
File No. 1-1105).
(10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised
February 20, 1989 (Exhibit (10)(iii)(A)(15) to Form 10-K for
1993, File No. 1-1105).
(10)(iii)(A)16 AT&T Senior Management Basic Life Insurance Program (Exhibit
(10)(iii)(A)16 to Form 10-K for 1990, File No. 1-1105).
(10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement (Exhibit
(10)(iii)(A)17 to Form SE, dated March 25, 1992, File No.
1-1105).
(10)(iii)(A)18 Employment Agreement between American Telephone and
Telegraph Company and Alex J. Mandl dated August 1, 1991
(Exhibit (10)(iii)(A) 18 to Form 10-K for 1993, File No. 1-1105).
<PAGE>
<PAGE>
(10)(iii)(A)19 Employment Agreement between American Telephone and
Telegraph Company and Richard W. Miller dated August 9,
1993.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Specified portions (pages 22 through 52 and the inside
back cover) of the Company's Annual Report to security
holders for the year ended December 31, 1995.
(21) List of subsidiaries of AT&T.
(23) Consent of Coopers & Lybrand L.L.P.
(24) Powers of Attorney executed by officers and directors who
signed this report.
(27) Financial Data Schedule.
<PAGE>
EXHIBIT (10)(i)1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
AT&T CORP.,
LUCENT TECHNOLOGIES INC.
AND
NCR CORPORATION
DATED AS OF
FEBRUARY 1, 1996
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.1. Action.............................................. 2
1.2. Affiliate........................................... 2
1.3. Agent............................................... 2
1.4. Agreement........................................... 2
1.5. American Ridge...................................... 2
1.6. Ancillary Agreements................................ 2
1.7. Applicable Deadline................................. 2
1.8. Arbitration Act..................................... 2
1.9. Arbitration Demand Date............................. 2
1.10. Arbitration Demand Notice........................... 2
1.11. Assets.............................................. 2
1.12. AT&T................................................ 4
1.13. AT&T Common Stock................................... 4
1.14. AT&T CP Rate........................................ 4
1.15. AT&T General Purchase Agreement..................... 4
1.16. AT&T Group.......................................... 4
1.17. AT&T Indemnitees.................................... 4
1.18. AT&T Laboratories................................... 4
1.19. AT&T Services Business.............................. 4
1.20. AT&T Services Group................................. 4
1.21. AT&T Ventures....................................... 4
1.22. ATTI................................................ 4
1.23. Brand License Agreement............................. 5
1.24. Change of Control................................... 5
1.25. Closing............................................. 5
1.26. Closing Date........................................ 5
1.27. Code................................................ 5
1.28. Commission.......................................... 5
1.29. Consents............................................ 5
1.30. Contingent Claim Committee, Contingent Gain and
Contingent Liabilities.............................. 5
1.31. CPR................................................. 5
1.32. Delayed Transfer Assets............................. 5
1.33. Delayed Transfer Liabilities........................ 5
1.34. Determination Request............................... 5
1.35. Distribution........................................ 6
1.36. Distribution Date................................... 6
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1.37. Effective IPO Date.................................. 6
1.38. Effective Time...................................... 6
1.39. Employee Benefits Agreement......................... 6
1.40. Environmental Law................................... 6
1.41. Environmental Liabilities........................... 6
1.42. Escalation Notice................................... 6
1.43. Excess Portion...................................... 6
1.44. Exchange Act........................................ 6
1.45. Excluded Assets..................................... 6
1.46. Excluded Liabilities................................ 6
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1.47. Exclusive AT&T Contingent Gain, Exclusive AT&T Con-
tingent Liability, Exclusive Lucent Contingent Gain,
Exclusive Lucent Contingent Liability, Exclusive NCR
Contingent Gain, Exclusive NCR Contingent Liability
and Exclusive Contingent Liability.................. 7
1.48. Financing Facility.................................. 7
1.49. Governmental Approvals.............................. 7
1.50. Governmental Authority.............................. 7
1.51. Group............................................... 7
1.52. Identified Bell Labs Services....................... 7
1.53. Indemnifying Party.................................. 7
1.54. Indemnitee.......................................... 7
1.55. Indemnity Payment................................... 7
1.56. Information......................................... 8
1.57. Insurance Policies.................................. 8
1.58. Insurance Proceeds.................................. 8
1.59. Interim Services and Systems Replication
Agreement........................................... 8
1.60. IPO................................................. 8
1.61. IPO Registration Statement.......................... 8
1.62. Liabilities......................................... 8
1.63. Lucent.............................................. 9
1.64. Lucent Assets....................................... 9
1.65. Lucent Balance Sheet................................ 9
1.66. Lucent Bell Laboratories............................ 9
1.67. Lucent Business..................................... 10
1.68. Lucent Common Stock................................. 10
1.69. Lucent Contracts.................................... 10
1.70. Lucent Group........................................ 11
1.71. Lucent Indemnitees.................................. 11
1.72. Lucent Liabilities.................................. 11
1.73. Lucent OFL's........................................ 11
1.74. NCR................................................. 9
1.75. NCR Business........................................ 9
1.76. NCR Common Stock.................................... 9
1.77. NCR Covered Liabilities............................. 9
1.78. NCR Distribution.................................... 9
1.79. NCR Group........................................... 9
1.80. NCR Indemnitees..................................... 9
1.81. NCR Volume Purchase Agreement....................... 9
1.82. NYSE................................................ 11
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1.83. Nassau Metals Liabilities........................... 11
1.84. Non-Lucent Assets................................... 11
1.85. Non-U.S. Plan....................................... 11
1.86. OFL's............................................... 11
1.87. Other Discontinued Operations....................... 12
1.88. Patent Assignments.................................. 12
1.89. Patent Defensive Protection Agreements.............. 12
1.90. Patent Joint Ownership Agreement.................... 12
1.91. Patent License Agreement............................ 12
1.92. Person.............................................. 12
1.93. Prime Rate.......................................... 12
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1.94. Prospectus.......................................... 12
1.95. RBOC................................................ 12
1.96. RBOC Agreements..................................... 13
1.97. RBOC Liability...................................... 13
1.98. RBOC Plan........................................... 13
1.99. Record Date......................................... 13
1.100. Related Exclusive Contingent Liabilities............ 13
1.101. Retained Receivables................................ 13
1.102. Ridge Lucent Policies............................... 13
1.103. Securities Act...................................... 13
1.104. Security Interest................................... 13
1.105. Separation.......................................... 14
1.106. Shared AT&T Percentage, Shared NCR Percentage,
Shared Lucent Percentage, Shared Percentage, Shared
Contingent Gain and Shared Contingent Liability..... 14
1.107. Submarine Systems................................... 14
1.108. Subsidiary.......................................... 14
1.109. Tax Sharing Agreement............................... 14
1.110. Taxes............................................... 14
1.111. Technology Access and Development Project
Agreement........................................... 14
1.112. Technology Assignment and Joint Ownership
Agreement........................................... 14
1.113. Technology License Agreement........................ 14
1.114. Telecommunications Service.......................... 14
1.115. Third Party Claim................................... 14
1.116. Trade Dress Assignment.............................. 14
1.117. Trademark and Service Mark Assignment............... 15
1.118. Underwriters 15
1.119. Underwriting Agreement.............................. 15
1.120. Value............................................... 15
1.121. VTNS Agreement...................................... 15
1.122. Working Capital Facility............................ 15
ARTICLE II THE SEPARATION
2.1. Transfer of Assets and Assumption of Liabilities.... 15
2.2. Lucent Assets....................................... 16
2.3. Lucent Liabilities.................................. 17
2.4. Termination of Agreements........................... 18
2.5. Documents Relating to Transfer of Real Property
Interests and Tangible Property Located Thereon..... 19
2.6. Documents Relating to Other Transfers of Assets and
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Assumption of Liabilities........................... 21
2.7. Other Ancillary Agreements.......................... 21
2.8. The Non-U.S. Plan................................... 22
2.9. AT&T Ventures; Lucent Foundation.................... 22
2.10. Disclaimer of Representations and Warranties........ 22
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<PAGE>
2.11. Financing Arrangements.............................. 23
2.12. Governmental Approvals and Consents................. 23
2.13. Novation of Assumed Lucent Liabilities.............. 24
2.14. Novation of Assumed Liabilities other than Lucent
Liabilities......................................... 25
2.15. Third Party Patent License Agreements............... 25
2.16. Certain Termination Rights.......................... 27
ARTICLE III THE IPO AND ACTIONS PENDING THE IPO
3.1. Transactions Prior to the IPO....................... 29
3.2. Proceeds of the IPO................................. 29
3.3. Conditions Precedent to Consummation of the IPO..... 29
ARTICLE IV THE DISTRIBUTION
4.1. The Distribution.................................... 30
4.2. Actions Prior to the Distribution................... 31
4.3. Conditions to Distribution.......................... 31
4.4. Fractional Shares................................... 32
4.5. The Lucent Board of Directors....................... 32
ARTICLE V MUTUAL RELEASES; INDEMNIFICATION
5.1. Release of Pre-Closing Claims....................... 33
5.2. Indemnification by Lucent........................... 35
5.3. Indemnification by AT&T and by NCR.................. 35
5.4. Indemnification Obligations Net of Insurance
Proceeds and Other Amounts.......................... 36
5.5. Procedures for Indemnification of Third Party
Claims.............................................. 37
5.6. Additional Matters.................................. 38
5.7. Remedies Cumulative................................. 39
5.8. Survival of Indemnities............................. 39
5.9. RBOC Agreement Procedures........................... 39
5.10. Alleged Infringement or Misappropriation............ 40
ARTICLE VI CONTINGENT GAINS AND CONTINGENT LIABILITIES
6.1. Definitions Relating to Contingent Gains and
Contingent Liabilities.............................. 42
6.2. Contingent Gains.................................... 45
6.3. Exclusive Contingent Liabilities.................... 46
6.4. Shared Contingent Liabilities....................... 48
6.5. Payments............................................ 48
6.6. Procedures to Determine Status of Contingent
Liability or Contingent Gain........................ 48
6.7. Certain Case Allocation Matters..................... 49
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<PAGE>
ARTICLE VII INTERIM OPERATIONS AND CERTAIN OTHER MATTERS
7.1. Insurance Matters................................... 50
7.2. Collection of Accounts Receivable................... 51
7.3. Operating Financial Liabilities..................... 55
7.4. Certain Business Matters............................ 55
7.5. Late Payments....................................... 56
7.6. Transitional Bell Labs Services..................... 56
ARTICLE VIII EXCHANGE OF INFORMATION; CONFIDENTIALITY
8.1. Agreement for Exchange of Information; Archives..... 56
8.2. Ownership of Information............................ 57
8.3. Compensation for Providing Information.............. 57
8.4. Record Retention.................................... 57
8.5. Limitation of Liability............................. 57
8.6. Other Agreements Providing for Exchange of
Information......................................... 57
8.7. Production of Witnesses; Records; Cooperation....... 57
8.8. Confidentiality..................................... 58
8.9. Protective Arrangements............................. 59
ARTICLE IX ARBITRATION; DISPUTE RESOLUTION
9.1. Agreement to Arbitrate.............................. 59
9.2. Escalation.......................................... 60
9.3. Demand for Arbitration.............................. 60
9.4. Arbitrators......................................... 61
9.5. Hearings............................................ 61
9.6. Discovery and Certain Other Matters................. 62
9.7. Certain Additional Matters.......................... 63
9.8. Limited Court Actions............................... 63
9.9. Continuity of Service and Performance............... 64
9.10. Law Governing Arbitration Procedures................ 64
ARTICLE X FURTHER ASSURANCES AND ADDITIONAL COVENANTS
10.1. Further Assurances.................................. 64
10.2. Qualification as Tax-Free Distribution.............. 66
ARTICLE XI TERMINATION
11.1. Termination by Mutual Consent....................... 66
11.2. Other Termination................................... 66
11.3. Effect of Termination............................... 66
ARTICLE XII MISCELLANEOUS
12.1. Counterparts; Entire Agreement; Corporate Power..... 66
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12.2. Governing Law....................................... 68
12.3. Assignability....................................... 68
12.4. Third Party Beneficiaries........................... 68
12.5. Notices............................................. 68
12.6. Severability........................................ 69
12.7. Force Majeure....................................... 69
12.8. Publicity........................................... 69
12.9. Expenses............................................ 69
12.10. Headings............................................ 69
12.11. Survival of Covenants............................... 69
12.12. Waivers of Default.................................. 69
12.13. Specific Performance................................ 70
12.14. Amendments.......................................... 70
12.15. Interpretation...................................... 70
Signatures...................................................... 71
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<PAGE>
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of February 1, 1996,
is by and among AT&T, Lucent and NCR. Capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned to them in Article
I hereof.
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, it is appropriate and desirable
to transfer the Lucent Assets to Lucent and its Subsidiaries and to cause Lucent
and its Subsidiaries to assume the Lucent Liabilities, all as more fully
described in this Agreement and the Ancillary Agreements;
WHEREAS, the Board of Directors of AT&T has further determined that it is
appropriate and desirable, on the terms and conditions contemplated hereby, to
cause Lucent to offer and sell for its own account in the IPO a limited number
of shares of Lucent Common Stock, and subsequently for AT&T to distribute to
holders of shares of AT&T Common Stock the outstanding shares of Lucent Common
Stock owned directly or indirectly by AT&T;
WHEREAS, the Distribution is intended to qualify as a tax-free spin-off
under Section 355 of the Code;
WHEREAS, it is also expected that, following certain additional transfers
of Assets and assignments and assumptions of Liabilities, AT&T will distribute
to its shareholders all of the capital stock of NCR held directly or indirectly
by AT&T and that, in connection therewith, AT&T and NCR will enter into such
additional agreements as may be necessary to address matters not addressed by
this Agreement or the Ancillary Agreements; and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation, the IPO and the
Distribution and certain other agreements that will govern certain matters
relating to the Separation, the IPO and the Distribution and the relationship of
AT&T, Lucent, NCR and their respective Subsidiaries following the IPO and the
Distribution.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
<PAGE>
<PAGE>
1.1. ACTION means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
1.2. AFFILIATE of any Person means a Person that controls, is controlled
by, or is under common control with such Person. As used herein, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise.
1.3. AGENT means the distribution agent to be appointed by AT&T to
distribute to the shareholders of AT&T the shares of Lucent Common Stock held by
AT&T pursuant to the Distribution.
1.4. AGREEMENT means this Separation and Distribution Agreement, including
all of the Schedules hereto.
1.5. AMERICAN RIDGE means American Ridge Insurance Company, a Vermont
corporation.
1.6. ANCILLARY AGREEMENTS means the deeds, lease assignments and
assumptions, leases, subleases and sub-subleases, and the supplemental and other
agreements and instruments related thereto, substantially in the forms attached
as Schedule 2.5, the AT&T General Purchase Agreement and the supplemental and
other agreements related thereto, the Brand License Agreement, the Employee
Benefits Agreement, the Interim Services and Systems Replication Agreement, the
NCR Volume Purchase Agreement, the Patent Assignments, the Patent Defensive
Protection Agreements, the Patent Joint Ownership Agreement, the Patent License
Agreement, the Tax Sharing Agreement, the Technology Access and Development
Project Agreement, the Technology Assignment and Joint Ownership Agreements, the
Technology License Agreement, the Trade Dress Assignment, the Trademark and
Service Mark Assignment, the VTNS Agreement, and the agreements and other
documents comprising the Non-U.S. Plan.
1.7. APPLICABLE DEADLINE has the meaning set forth in Section 9.3(b).
1.8. ARBITRATION ACT means the United States Arbitration Act, 9 U.S.C.
1-14, as the same may be amended from time to time.
1.9. ARBITRATION DEMAND DATE has the meaning set forth in Section 9.3(a).
1.10. ARBITRATION DEMAND NOTICE has the meaning set forth in Section
<PAGE>
9.3(a).
1.11. ASSETS means assets, properties and rights (including goodwill),
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether in paper,
microfilm, microfiche, computer tape or disc, magnetic tape or any other
form;
<PAGE>
<PAGE>
(b) all apparatus, computers and other electronic data processing
equipment, fixtures, machinery, equipment, furniture, office
equipment, automobiles, trucks, aircraft, rolling stock, vessels,
motor vehicles and other transportation equipment, special and general
tools, test devices, prototypes and models and other tangible personal
property;
(c) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(d) all interests in real property of whatever nature, including
easements, whether as owner, mortgagee or holder of a Security
Interest in real property, lessor, sublessor, lessee, sublessee or
otherwise;
(e) all interests in any capital stock or other equity interests of any
Subsidiary or any other Person, all bonds, notes, debentures or other
securities issued by any Subsidiary or any other Person, all loans,
advances or other extensions of credit or capital contributions to any
Subsidiary or any other Person and all other investments in securities
of any Person;
(f) all license agreements, leases of personal property, open purchase
orders for raw materials, supplies, parts or services, unfilled orders
for the manufacture and sale of products and other contracts,
agreements or commitments;
(g) all deposits, letters of credit and performance and surety bonds;
(h) all written technical information, data, specifications, research and
development information, engineering drawings, operating and
maintenance manuals, and materials and analyses prepared by
consultants and other third parties;
(i) all domestic and foreign patents, copyrights, trade names, trademarks,
service marks and registrations and applications for any of the
foregoing, mask works, trade secrets, inventions, other proprietary
information and licenses from third Persons granting the right to use
any of the foregoing;
(j) all computer applications, programs and other software, including
operating software, network software, firmware, middleware, design
software, design tools, systems documentation and instructions;
<PAGE>
(k) all cost information, sales and pricing data, customer prospect lists,
supplier records, customer and supplier lists, customer and vender
data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings,
formulations and specifications, quality records and reports and other
books, records, studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and notes
receivables;
(m) all rights under contracts or agreements, all claims or rights against
any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, choses in action or
similar rights, whether accrued or contingent;
<PAGE>
<PAGE>
(n) all rights under insurance policies and all rights in the nature of
insurance, indemnification or contribution;
(o) all licenses (including radio and similar licenses), permits,
approvals and authorizations which have been issued by any
Governmental Authority;
(p) cash or cash equivalents, bank accounts, lock boxes and other deposit
arrangements; and
(q) interest rate, currency, commodity or other swap, collar, cap or other
hedging or similar agreements or arrangements.
1.12. AT&T means AT&T Corp., a New York corporation.
1.13. AT&T COMMON STOCK means the Common Stock, $1.00 par value per share,
of AT&T.
1.14. AT&T CP RATE during any month of determination shall be equal to the
weighted average rate on all AT&T commercial paper (across all maturities) for
such month.
1.15. AT&T GENERAL PURCHASE AGREEMENT means the General Purchase
Agreement,
dated as of the date hereof, by and between AT&T and Lucent.
1.16. AT&T GROUP means AT&T and each Person (other than any member of the
Lucent Group) that is an Affiliate of AT&T immediately after the Closing Date
(including any member of the NCR Group).
1.17. AT&T INDEMNITEES has the meaning set forth in section 5.2.
1.18. AT&T LABORATORIES means the Assets of AT&T's Bell Laboratories
division described or listed on Schedule 1.18 and any other Assets of AT&T's
Bell Laboratories division that primarily relate to the AT&T Services Business
or the NCR Business.
1.19. AT&T SERVICES BUSINESS means: (a) the business and operations of the
telecommunications services divisions and Subsidiaries and the financial
services and leasing divisions and Subsidiaries of AT&T consisting principally
of the Communications Services Group, AT&T Wireless Services, Inc. and its
Subsidiaries, Universal Card Services, Inc. and its Subsidiaries, AT&T Capital
Corporation and its Subsidiaries, AT&T Solutions, AT&T Laboratories, Submarine
<PAGE>
Systems and, subject to Section 2.9(a), AT&T Ventures; (b) except as otherwise
expressly provided herein, any terminated, divested or discontinued businesses
or operations that at the time of termination, divestiture or discontinuation
primarily related to the AT&T Services Business as then conducted; and (c) the
terminated, divested or discontinued businesses and operations listed or
described on Schedule 1.19.
1.20. AT&T Services Group means each member of the AT&T Group other than
any member of the NCR Group.
1.21. AT&T Ventures means AT&T Ventures, a limited partnership.
1.22. ATTI means AT&T International Inc., a Delaware corporation.
<PAGE>
<PAGE>
1.23. BRAND LICENSE AGREEMENT means the Brand License Agreement, dated as
of the date hereof, by and between AT&T and Lucent.
1.24. CHANGE OF CONTROL of any Person means any of the following: (a) the
consummation of a merger, consolidation, or similar business
combination involving such Person, or a sale or other disposition of
all or substantially all of the assets of such Person; (b) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of 40% or more of either (i) the then
outstanding shares of common stock of such Person, or (ii) the
combined voting power of the then outstanding voting securities of
such Person entitled to vote generally in the election of directors;
or (c) individuals who, as of the Distribution Date, constitute the
Board of Directors of such Person (the "Incumbent Board") cease for
any reason to constitute at least a majority of such Board; provided,
however, that any individual becoming a director subsequent to the
Distribution Date (other than any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by
or on behalf of any Person other than the Board) whose election or
nomination for election by the stockholders of such Person was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board.
1.25. CLOSING means the receipt by Lucent of the net proceeds of the IPO in
accordance with the terms of the Underwriting Agreement.
1.26. CLOSING DATE means the first time at which any shares of Lucent
Common Stock are sold to the Underwriters pursuant to the IPO in accordance with
the terms of the Underwriting Agreement.
1.27. CODE means the Internal Revenue Code of 1986, as amended.
1.28. COMMISSION means the Securities and Exchange Commission.
1.29. CONSENTS means any consents, waivers or approvals from, or
notification requirements to, any third parties.
1.30. CONTINGENT CLAIM COMMITTEE, CONTINGENT GAIN AND CONTINGENT
<PAGE>
LIABILITIES have the respective meanings set forth in Section 6.1.
1.31. CPR means the Center for Public Resources.
1.32. DELAYED TRANSFER ASSETS means any Lucent Assets that are expressly
provided in this Agreement or any Ancillary Agreement to be transferred after
the date of this Agreement.
1.33. DELAYED TRANSFER LIABILITIES means any Lucent Liabilities that are
expressly provided in this Agreement or any Ancillary Agreement to be assumed
after the date of this Agreement.
1.34. DETERMINATION REQUEST means a written request made to the Contingent
Claim Committee, pursuant to Section 5.5(b), for a determination as to whether a
Third Party Claim specified in such request constitutes a Shared Contingent
Liability.
<PAGE>
<PAGE>
1.35. DISTRIBUTION means the distribution by AT&T on a pro rata basis to
holders of AT&T Common Stock of all of the outstanding shares of Lucent Common
Stock owned by AT&T on the Distribution Date as set forth in Article IV.
1.36. DISTRIBUTION DATE means the date determined pursuant to Section 4.1
on which the Distribution occurs.
1.37. EFFECTIVE IPO DATE means the date on which the IPO Registration
Statement is declared effective by the Commission.
1.38. EFFECTIVE TIME means 5:00 p.m., Eastern Standard Time or Eastern
Daylight Time (whichever shall be then in effect), on the Distribution Date.
1.39. EMPLOYEE BENEFITS AGREEMENT means the Employee Benefits Agreement,
dated as of the date hereof, by and between AT&T and Lucent.
1.40. ENVIRONMENTAL LAW means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or to emissions,
discharges, releases or threatened releases of any substance currently or at any
time hereafter listed, defined, designated or classified as hazardous, toxic,
waste, radioactive or dangerous, or otherwise regulated, under any of the
foregoing, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any such substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act and the Resource
Conservation and Recovery Act and comparable provisions in state, local, foreign
or international law.
1.41. ENVIRONMENTAL LIABILITIES means all Liabilities relating to, arising
out of or resulting from any Environmental Law or contract or agreement relating
to environmental, health or safety matters (including all removal, remediation
or cleanup costs, investigatory costs, governmental response costs, natural
resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability and
indemnity, contribution or similar obligations) and all costs and expenses
(including allocated costs of in-house counsel and other personnel), interest,
fines, penalties or other monetary sanctions in connection therewith.
<PAGE>
1.42. ESCALATION NOTICE has the meaning set forth in Section 9.2.
1.43. EXCESS PORTION has the meaning specified in Section 6.1.
1.44. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
1.45. EXCLUDED ASSETS has the meaning set forth in Section 2.2(b).
1.46. EXCLUDED LIABILITIES has the meaning set forth in Section 2.3(b).
<PAGE>
<PAGE>
1.47. EXCLUSIVE AT&T CONTINGENT GAIN, EXCLUSIVE AT&T CONTINGENT
LIABILITY,
EXCLUSIVE LUCENT CONTINGENT GAIN, EXCLUSIVE LUCENT CONTINGENT
LIABILITY,
EXCLUSIVE NCR CONTINGENT GAIN, EXCLUSIVE NCR CONTINGENT LIABILITY
AND EXCLUSIVE
CONTINGENT LIABILITY have the respective meanings set forth in Section 6.1.
1.48. FINANCING FACILITY means the commercial paper facility and related
credit agreement to be entered into prior to the Closing Date by and among AT&T,
Lucent, and an agent or co-agents selected by AT&T and Lucent, pursuant to
which, prior to the Closing Date, AT&T will issue commercial paper or otherwise
borrow an amount determined by AT&T and, as of the Closing Date, Lucent will
become the sole obligor and AT&T will have no further liability or obligation
thereunder.
1.49. GOVERNMENTAL APPROVALS means any notices, reports or other filings to
be made, or any consents, registrations, approvals, permits or authorizations to
be obtained from, any Governmental Authority.
1.50. GOVERNMENTAL AUTHORITY shall mean any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental authority.
1.51. GROUP means any of the AT&T Services Group, the Lucent Group or the
NCR Group, as the context requires.
1.52. IDENTIFIED BELL LABS SERVICES means:
(a) environmental, health and safety services provided by Lucent Bell
Laboratories, including (i) compatibility, product compliance,
telephone network interconnect, product design and mandatory standards
consultation services, (ii) wireless safety, radiation protection and
product safety services, (iii) groundwater remediation services, (iv)
environmental and energy management, and (v) industrial hygiene,
safety and toxicology;
(b) technical support services provided by Lucent Bell Laboratories,
including (i) technical cataloging and processing services and (ii)
product design shop services;
(c) additional research and similar services provided by Lucent Bell
Laboratories;
<PAGE>
(d) information systems reengineering center services, including systems
design and programming support for human resource, billing,
procurement and facilities systems; and
(e) services provided by Lucent Bell Laboratories relating to projects
initiated prior to the date hereof but not completed prior to the
Closing Date.
1.53. INDEMNIFYING PARTY has the meaning set forth in Section 5.4(a).
1.54. INDEMNITEE has the meaning set forth in Section 5.4(a).
1.55. INDEMNITY PAYMENT has the meaning set forth in Section 5.4(a).
<PAGE>
<PAGE>
1.56. INFORMATION means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.57. INSURANCE POLICIES means the insurance policies written by insurance
carriers unaffiliated with AT&T pursuant to which Lucent or one or more of its
Subsidiaries (or their respective officers or directors) will be insured parties
after the Closing Date.
1.58. INSURANCE PROCEEDS means those monies:
(a) received by an insured from an insurance carrier;
(b) paid by an insurance carrier on behalf of the insured; or
(c) received (including by way of set off) from American Ridge or any of
its Subsidiaries or from any third party in the nature of insurance,
contribution or indemnification in respect of any Liability (other
than pursuant to or in connection with any RBOC Agreement);
in any such case net of any applicable premium adjustments (including
reserves and retrospectively rated premium adjustments) and net of any costs or
expenses (including allocated costs of in-house counsel and other personnel)
incurred in the collection thereof.
1.59. INTERIM SERVICES AND SYSTEMS REPLICATION AGREEMENT means the
Interim
Services and Systems Replication Agreement, dated as of the date hereof, by and
among AT&T, Lucent and NCR.
1.60. IPO means the initial public offering by Lucent of shares of Lucent
Common Stock pursuant to the IPO Registration Statement.
1.61. IPO REGISTRATION STATEMENT means the registration statement on Form
S-1 to be filed under the Securities Act, pursuant to which the Lucent Common
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Stock to be issued in the IPO will be registered, together with all amendments
thereto.
1.62. LIABILITIES means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, sums of money, accounts, reckonings, bonds, specialties,
indemnities and similar obligations, exonerations, covenants, contracts,
controversies, agreements, promises, doings, omissions, variances, guarantees,
make whole agreements and similar obligations, and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever arising,
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and including those arising under any law, rule, regulation, Action, threatened
or contemplated Action (including the costs and expenses of demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all costs and expenses (including allocated costs of
in-house counsel and other personnel), whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened or
contemplated Actions), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under any
contract, commitment or undertaking, including those arising under this
Agreement or any Ancillary Agreement, in each case, whether or not recorded or
reflected or required to be recorded or reflected on the books and records or
financial statements of any Person.
1.63. LUCENT means Lucent Technologies Inc., a Delaware corporation.
1.64. LUCENT ASSETS has the meaning set forth in Section 2.2(a).
1.65. LUCENT BALANCE SHEET means the audited consolidated balance sheet of
Lucent, including the notes thereto, as of December 31, 1995.
1.66. LUCENT BELL LABORATORIES means the Assets of AT&T's Bell Laboratories
division as of the date hereof other than the Assets of AT&T Laboratories.
1.67. LUCENT BUSINESS means: (a) the business and operations of the
telecommunications equipment divisions and Subsidiaries of AT&T consisting
principally of the Network Systems Group, the Global Business Communications
Systems Group, the Consumer Products Group, the Microelectronics Group, AT&T
Paradyne and Lucent Bell Laboratories; and (b) except as otherwise expressly
provided herein, any terminated, divested or discontinued businesses or
operations that at the time of termination, divestiture or discontinuation
primarily related to the Lucent Business as then conducted.
1.68. LUCENT COMMON STOCK means the Common Stock, $.01 par value per share,
of Lucent.
1.69. LUCENT CONTRACTS means the following contracts and agreements to
which AT&T or any of its Affiliates is a party or by which it or any of its
Affiliates or any of their respective Assets is bound, whether or not in
writing, except for any such contract or agreement that is contemplated to be
retained by AT&T or any member of the AT&T Group pursuant to any provision of
this Agreement or any Ancillary Agreement:
(a) any supply or vendor contracts or agreements listed or described on
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Schedule 1.69(a);
(b) any contract or agreement entered into in the name of, or expressly on
behalf of, any division, business unit or member of the Lucent Group
(other than ATTI or any Person controlled by ATTI);
(c) any contract or agreement that relates primarily to the Lucent
Business;
(d) federal, state and local government and other contracts and agreements
that are listed or described on Schedule 1.69(d) and any other
government contracts or agreements entered into after the date hereof
and prior to the Closing Date that relate primarily to the Lucent
Business;
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(e) any contract or agreement to which ATTI or any Person controlled by
ATTI is a party (or by which any of the Assets of ATTI or any such
Person is bound), other than (i) any such contract or agreement to
which AT&T World Services, Inc. is a party that primarily relates to
AT&T's EasyLink Services business, AT&T's International Correspondence
Assistance Program, or to AT&T's Federal Systems, including the
contracts and agreements listed or described on Schedule 1.69(e)(i),
(ii) any joint venture or other contract or agreement listed or
described on Schedule 1.69(e)(ii), and (iii) any such contract or
agreement that relates primarily to the AT&T Services Business or the
NCR Business;
(f) any contract or agreement representing capital or operating equipment
lease obligations reflected on the Lucent Balance Sheet, including
obligations as lessee under those contracts or agreements listed on
Schedule 1.69(f) (as such Schedule may be supplemented by mutual
agreement of the parties after the date hereof and prior to the
Closing Date to assign capital and operating equipment lease
obligations executed and delivered after the date of the Lucent
Balance Sheet);
(g) any contract or agreement that is otherwise expressly contemplated
pursuant to this Agreement or any of the Ancillary Agreements to be
assigned to Lucent or any member of the Lucent Group;
(h) (i) any guarantee, indemnity, representation, warranty or other
Liability of any member of the Lucent Group or the AT&T Group in
respect of any other Lucent Contract, any Lucent Liability or the
Lucent Business (including guarantees of financing incurred by
customers or other third parties in connection with purchases of
products or services from the Lucent Business), and (ii) the
contracts, agreements and other documents listed or described on
Schedule 1.69(h));
(i) the arrangements between AT&T and NEC Corp. with respect to the joint
venture known as AT&T Japan Semiconductor Marketing, Ltd.; and
(j) any Lucent OFL.
No RBOC Agreement shall be deemed to be an Lucent Contract, except to the
extent expressly set forth herein.
1.70. LUCENT GROUP means Lucent, each Subsidiary of Lucent and each other
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Person that is either controlled directly or indirectly by Lucent immediately
after the Closing Date or that is contemplated to be controlled by Lucent
pursuant to the Non-U.S. Plan (other than any Person that is contemplated not to
be controlled by Lucent pursuant to the Non-U.S. Plan).
1.71. LUCENT INDEMNITEES has the meaning set forth in Section 5.3(a).
1.72. LUCENT LIABILITIES has the meaning set forth in Section 2.3(a).
1.73. LUCENT OFL'S has the meaning set forth in Section 7.3(a).
1.74. NCR means NCR Corporation (formerly named AT&T Global Information
Solutions Company), a Maryland corporation.
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1.75. NCR BUSINESS means: (a) the computer products, computer systems, data
processing and information solutions business and operations as conducted by NCR
and its Subsidiaries; (b) except as otherwise expressly provided herein, any
terminated, divested or discontinued businesses or operations (i) that at the
time of termination, divestiture or discontinuation primarily related to the NCR
Business as then conducted, or (ii) that were conducted by NCR, or any Person
that at any time was an Affiliate of NCR, prior to the acquisition of NCR by
AT&T; and (c) the terminated, divested or discontinued businesses and operations
listed or described on Schedule 1.75.
1.76. NCR COMMON STOCK means the Common Stock, par value $5.00 per share,
of NCR.
1.77. NCR COVERED LIABILITIES has the meaning set forth in Section 5.3(b).
1.78. NCR DISTRIBUTION means the distribution by AT&T on a pro rata basis
to holders of AT&T Common Stock of all of the outstanding shares of NCR owned
directly or indirectly by AT&T.
1.79. NCR GROUP means NCR, each Subsidiary of NCR and each other Person
that is either controlled directly or indirectly by NCR immediately after the
Closing or that is contemplated to be controlled by NCR pursuant to the Non-U.S.
Plan.
1.80. NCR INDEMNITEES has the meaning set forth in Section 5.2.
1.81. NCR VOLUME PURCHASE AGREEMENT means the Volume Purchase Agreement,
dated as of the date hereof, by and between NCR and Lucent.
1.82. NYSE means The New York Stock Exchange, Inc.
1.83. NASSAU METALS LIABILITIES means all Environmental Liabilities
primarily relating to, arising out of or resulting from the operations of AT&T
Nassau Metals Corporation, as conducted at any time prior to, on or after the
Closing Date.
1.84. NON-LUCENT ASSETS means any Assets of AT&T or any of its Affiliates
(including any member of the NCR Group) other than Lucent Assets.
1.85. NON-U.S. PLAN means the Non-U.S. Plan, comprised of the series of
transactions, agreements and other arrangements, pursuant to which the non-U.S.
Assets and Liabilities of AT&T and its Affiliates have been or will be assigned
among the parties hereto, which are set forth or described in Schedule 1.85 (as
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such Schedule may be supplemented by mutual consent of the parties prior to the
Closing Date).
1.86. OFL'S mean all liabilities, obligations, contingencies and
instruments and other Liabilities of any member of the AT&T Group of a financial
nature with third parties existing on the date hereof or entered into or
established between the date hereof and the Closing Date, including any of the
following:
(a) foreign exchange contracts;
(b) letters of credit;
(c) guarantees of third party loans to customers;
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(d) surety bonds (excluding surety for workers' compensation
self-insurance);
(E) interest support agreements on third party loans to customers;
(f) performance bonds or guarantees issued by third parties;
(g) swaps or other derivatives contracts; and
(h) recourse arrangements on the sale of receivables or notes.
1.87. OTHER DISCONTINUED OPERATIONS means (a) the business and operations
as conducted by any RBOC prior to its divestiture from AT&T, (b) Cincinnati Bell
Concession Service and (c) any other terminated, divested or discontinued
businesses and operations of AT&T, Lucent or NCR or of any former or current
Affiliate of AT&T, Lucent or NCR (whether such business or operations were
terminated, divested or discontinued prior to, at the time or after such Person
was, became or ceased to be an Affiliate of AT&T, Lucent or NCR) that are either
(i) not listed or described in, or on the Schedules to, the definitions of AT&T
Services Business, Lucent Business or NCR Business or on Schedule 2.3(a)(v) or
(ii) listed or described on Schedule 1.87.
1.88. PATENT ASSIGNMENTS means the six Patent Assignments, substantially in
the forms attached hereto as Schedule 1.88, to be executed and delivered by AT&T
to Lucent, NCR to AT&T, AT&T to NCR, Lucent to NCR, and Lucent to AT&T, on or
prior to the Closing Date.
1.89. PATENT DEFENSIVE PROTECTION AGREEMENTS means the two Defensive
Protection Agreements, substantially in the forms attached hereto as Schedule
1.89, to be executed and delivered between AT&T and Lucent, and between Lucent
and NCR, respectively, on or prior to the Closing Date.
1.90. PATENT JOINT OWNERSHIP AGREEMENT means the Patent Joint Ownership
Agreement, substantially in the form attached hereto as Schedule 1.90, to be
executed and delivered between AT&T and Lucent on or prior to the Closing Date.
1.91. PATENT LICENSE AGREEMENT means the Patent License Agreement,
substantially in the form attached hereto as Schedule 1.91, to be executed and
delivered by AT&T, Lucent and NCR on or prior to the Closing Date.
1.92. PERSON means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
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1.93. PRIME RATE means the rate which Chemical Bank (or any successor
thereto or other major money center commercial bank agreed to by the parties
hereto) announces from time to time as its prime lending rate, as in effect from
time to time.
1.94. PROSPECTUS means each preliminary, final or supplemental prospectus
forming a part of the IPO Registration Statement.
1.95. RBOC means each of Ameritech Corporation, Bell Atlantic Corporation,
BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group, SBC
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<PAGE>
Communications Inc., and U S West, Inc., and each of their respective
Affiliates, and the respective successors and assigns of any of the foregoing.
1.96. RBOC AGREEMENTS means the Agreement Concerning Contingent
Liabilities, Tax Matters and Termination of Certain Agreements among AT&T, and
the Bell System Operating Companies Regional Holding Companies and affiliates,
and the Agreement Regarding Sharing of Environmental Liabilities.
1.97. RBOC LIABILITY means any Liability of any member of any Group
relating to, arising out of or resulting from any RBOC Agreement.
1.98. RBOC PLAN means the Plan of Reorganization filed on December 16,
1982, in the United States District Court for the District of Columbia in United
States v. Western Electric Co., Inc., Civil Action No. 82-0192, as modified by
the Court's orders and as thereafter amended, modified or supplemented.
1.99. RECORD DATE means the close of business on the date to be determined
by the AT&T Board of Directors as the record date for determining shareholders
of AT&T entitled to receive shares of Lucent Common Stock in the Distribution.
1.100. RELATED EXCLUSIVE CONTINGENT LIABILITIES has the meaning set forth
in Section 6.1.
1.101. RETAINED RECEIVABLES means any and all accounts receivable and other
rights to payment for goods or services sold, leased or otherwise provided in
the conduct of the Lucent Business that as of the date hereof are payable by a
third Person to AT&T, whether past due, due or to become due on or prior to June
30, 1996, including any interest, sales or use taxes, finance charges, late or
returned check charges and other obligations of the account debtor with respect
thereto, and any proceeds of any of the foregoing, that are (a) reflected in the
CBS System for accounts receivable arising in the Global Business Communications
Systems Group, (b) reflected in the CARMS system for accounts receivable arising
in the Network Systems Group or the Microelectronics Group, or (c) accounts
receivables arising in the Consumer Products Group if the account debtor is one
of the 20 largest third-party domestic customers of the Consumer Products Group
as of the date hereof; provided, however, that any accounts receivable arising
in the Network Systems Group or the Microelectronics Group shall not be Retained
Receivables if such accounts receivable were more than 90 days past due as of
the date hereof.
1.102. RIDGE LUCENT POLICIES means any insurance policies written by
American Ridge or any other captive insurance company of AT&T covering the
Lucent Business or any member of the Lucent Group.
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1.103. SECURITIES ACT means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
1.104. SECURITY INTEREST means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer, or other encumbrance of any nature whatsoever.
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1.105. SEPARATION means the transfer of the Lucent Assets to Lucent and its
Subsidiaries and the assumption by Lucent and its Subsidiaries of the Lucent
Liabilities, all as more fully described in this Agreement and the Ancillary
Agreements.
1.106. SHARED AT&T PERCENTAGE, SHARED NCR PERCENTAGE, SHARED
LUCENT
PERCENTAGE, SHARED PERCENTAGE, SHARED CONTINGENT GAIN AND SHARED
CONTINGENT
LIABILITY have the respective meanings set forth in Section 6.1.
1.107. SUBMARINE SYSTEMS means the Assets, businesses and operations of
AT&T's Submarine Systems, Inc., and the additional Assets listed or described in
Section 2.2(b)(vi).
1.108. SUBSIDIARY OF ANY PERSON means any corporation or other organization
whether incorporated or unincorporated of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however that no Person that is not directly or indirectly wholly owned by any
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power or ability to control, that Person.
1.109. TAX SHARING AGREEMENT means the Tax Sharing Agreement, dated as of
the date hereof, by and among AT&T, Lucent and NCR.
1.110. TAXES has the meaning set forth in the Tax Sharing Agreement.
1.111. TECHNOLOGY ACCESS AND DEVELOPMENT PROJECT AGREEMENT means
the
Technology Access and Development Project Agreement, dated as of the date
hereof, by and between NCR and Lucent.
1.112. TECHNOLOGY ASSIGNMENT AND JOINT OWNERSHIP AGREEMENTS means
the two
Technology Assignment and Joint Ownership Agreements, substantially in the form
attached hereto as Schedule 1.112, by and between AT&T and Lucent, and by and
among AT&T, Lucent and NCR, respectively, to be executed and delivered on or
prior to the Closing Date.
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1.113. TECHNOLOGY LICENSE AGREEMENT means the Technology License
Agreement,
substantially in the form attached hereto as Schedule 1.113, by and among AT&T,
Lucent and NCR to be executed and delivered on or prior to the Closing Date.
1.114. TELECOMMUNICATIONS SERVICE means any service providing the
transmission of voice, data, image or other messages, by radio or by aid of
wire, cable or other like connection now known or later developed between the
points of origin and reception of such transmission or by means of any
combination of the foregoing, including telecommunications services commonly
characterized as local, toll (whether intraLATA or interLATA), long distance and
cellular (whether mobile or fixed).
1.115. THIRD PARTY CLAIM has the meaning set forth in Section 5.5(a).
1.116. TRADE DRESS ASSIGNMENT means the Trade Dress Assignment, dated as of
the date hereof, by AT&T to Lucent.
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1.117. TRADEMARK AND SERVICE MARK ASSIGNMENT means the Trademark and
Service Mark Assignment, dated as of the date hereof, by AT&T to Lucent.
1.118. UNDERWRITERS means the managing underwriters for the IPO.
1.119. UNDERWRITING AGREEMENT means the underwriting agreement to be
entered into among Lucent and the Underwriters with respect to the IPO.
1.120. VALUE has the meaning set forth in Section 6.1.
1.121. VTNS AGREEMENT means the Virtual Telecommunications Network Service
Agreement, between AT&T and Lucent, dated as of the date hereof.
1.122. WORKING CAPITAL FACILITY means the Working Capital Agreement to be
entered into by Lucent, as borrower, and Chemical Bank, as Agent, and the
Lending Banks named therein, to fund the working capital requirements of Lucent
following the date hereof.
ARTICLE II
THE SEPARATION
2.1. TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. (a) Each of AT&T
and
NCR hereby assigns, transfers, conveys and delivers to Lucent, and agrees to
cause its applicable Subsidiaries to assign, transfer, convey and deliver to
Lucent, and Lucent hereby accepts from each of AT&T and NCR and their respective
Subsidiaries, all of AT&T's and NCR's and their applicable Subsidiaries'
respective right, title and interest in all Lucent Assets, other than the
Delayed Transfer Assets.
(b) Lucent hereby assumes and agrees faithfully to perform and fulfill all
the Lucent Liabilities, other than the Delayed Transfer Liabilities,
in accordance with their respective terms. Lucent shall be responsible
for all Lucent Liabilities, regardless of when or where such
Liabilities arose or arise, or whether the facts on which they are
based occurred prior to or subsequent to the date hereof, regardless
of where or against whom such Liabilities are asserted or determined
(including any Lucent Liabilities arising out of claims made by
AT&T's, Lucent's or NCR's respective directors, officers, employees,
agents, Subsidiaries or Affiliates against any member of the AT&T
Group or the Lucent Group) or whether asserted or determined prior to
the date hereof, and regardless of whether arising from or alleged to
arise from negligence, recklessness, violation of law, fraud or
<PAGE>
misrepresentation by any member of the AT&T Group or the Lucent Group
or any of their respective directors, officers, employees, agents,
Subsidiaries or Affiliates.
(c) Each of the parties hereto agrees that the Delayed Transfer Assets
will be assigned, transferred, conveyed and delivered, and the Delayed
Transfer Liabilities will be assumed, in accordance with the terms of
the agreements that provide for such assignment, transfer, conveyance
and delivery, or such assumption, after the date of this Agreement or
as otherwise set forth on Schedule 2.1(c). Following such assignment,
transfer, conveyance and delivery of any Delayed Transfer Asset, or
the assumption of any Delayed Transfer Liability, the applicable
Delayed Transfer Asset or Delayed Transfer Liability shall be treated
for all purposes of this Agreement and the Ancillary Agreements as an
Lucent Asset or an Lucent Liability, as the case may be.
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(d) In the event that at any time or from time to time (whether prior to
or after the Distribution Date), any party hereto (or any member of
such party's respective Group), shall receive or otherwise possess any
Asset that is allocated to any other Person pursuant to this Agreement
or any Ancillary Agreement, such party shall promptly transfer, or
cause to be transferred, such Asset to the Person so entitled thereto.
Prior to any such transfer, the Person receiving or possessing such
Asset shall hold such Asset in trust for any such other Person.
2.2. LUCENT ASSETS. (a) For purposes of this Agreement, "Lucent Assets"
shall mean (without duplication):
(i) any and all Assets that are expressly contemplated by this Agreement
or any Ancillary Agreement (or Schedule 2.2(a)(i) or any other
Schedule hereto or thereto) as Assets to be transferred to Lucent or
any other member of the Lucent Group;
(ii) all issued and outstanding capital stock of ATTI and any and all
Assets owned by ATTI or its Subsidiaries as of the date of the
transfer of such capital stock to Lucent pursuant to Section 2.8(b),
except for the Assets contemplated to be sold or otherwise
transferred to any member of the AT&T Group pursuant to the Non-U.S.
Plan;
(iii) any Exclusive Lucent Contingent Gain and any Shared Lucent Percentage
of any Shared Contingent Gain;
(iv) (A) any amounts actually paid to AT&T after the Closing Date pursuant
to any RBOC Agreement in respect of any Lucent Liability or any
Nassau Metals Liability, (B) any rights of any member of the Lucent
Group under any RBOC Agreement in respect of any Lucent Liability or
any Nassau Metals Liability, and (C) subject to Section 7.1, any
rights of any member of the Lucent Group under any of the Insurance
Policies, including any rights thereunder arising after the
Distribution Date in respect of any Insurance Policies that are
occurrence policies;
(v) (A) any Assets that Section 2.5(b) contemplates will be transferred
to, or be retained by, any member of the Lucent Group, (B) any Lucent
Contracts and (C) all issued and outstanding capital stock of AT&T
Nassau Metals Corporation and the other Subsidiaries of AT&T listed
on Schedule 2.2(a)(v);
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(vi) any Assets reflected in the Lucent Balance Sheet as Assets of Lucent
and its Subsidiaries, subject to any dispositions of such Assets
subsequent to the date of the Lucent Balance Sheet; and
(vii) except as contemplated by Section 2.5(b), any and all Assets owned or
held immediately prior to the Closing Date by AT&T or any of its
Subsidiaries that are used primarily in the Lucent Business. The
intention of this clause (vii) is only to rectify any inadvertent
omission of transfer or conveyance of any Assets that, had the
parties given specific consideration to such Asset as of the date
hereof, would have otherwise been classified as an Lucent Asset. No
Asset shall be deemed to be an Lucent Asset solely as a result of
this clause (vii) if such Asset is within the category or type of
Asset expressly covered by the subject matter of an Ancillary
Agreement. In addition, no Asset shall be deemed an Lucent Asset
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solely as a result of this clause (vii) unless a claim with respect
thereto is made by Lucent on or prior to the first anniversary of
the Distribution Date.
Notwithstanding the foregoing, the Lucent Assets shall not in any event include
the Excluded Assets referred to in Section 2.2(b) below.
(b) For the purposes of this Agreement, "Excluded Assets" shall mean:
(i) the Assets listed or described on Schedule 2.2(b)(i);
(ii) the Retained Receivables;
(iii) any and all Assets that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Assets to be retained by AT&T or any other member of
the AT&T Group (including the NCR Group);
(iv) any contract or agreement described in clause (e)(i) through
(e)(iii) of the definition of Lucent Contract;
(v) except to the extent expressly set forth in Section 2.2(a)(iii)
or (iv), respectively, (A) any Contingent Gains and (B) any
rights in respect of, or proceeds received pursuant to, any RBOC
Agreement; and
(vi) all Assets (including land, buildings, manufacturing equipment
and inventory) of the undersea repeaters factory of Lucent's
Microelectronic Group located in Clark, New Jersey.
2.3. LUCENT LIABILITIES. (a) For the purposes of this Agreement, "Lucent
Liabilities" shall mean (without duplication):
(i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Liabilities to be assumed by Lucent or any member of
the Lucent Group, and all agreements, obligations and
Liabilities of any member of the Lucent Group under this
Agreement or any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes based on, or measured by
reference to, net income), including any employee-related
Liabilities and Environmental Liabilities, primarily relating
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to, arising out of or resulting from:
(A) the operation of the Lucent Business, as conducted at any time prior
to, on or after the Closing Date (including any Liability relating to, arising
out of or resulting from any act or failure to act by any director, officer,
employee, agent or representative (whether or not such act or failure to act is
or was within such Person's authority));
(B) the operation of any business conducted by any member of the Lucent
Group at any time after the Closing Date (including any Liability relating to,
arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative (whether or not such act or failure
to act is or was within such Person's authority)); or
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(C) any Lucent Assets (including any Lucent Contracts and any real property
and leasehold interests);
in any such case whether arising before, on or after the Closing Date;
(iii) subject to the terms of Article VI, all Exclusive Lucent Contingent
Liabilities and the Shared Lucent Percentage of any Shared Contingent
Liabilities;
(iv) all Liabilities relating to, arising out of or resulting from the
Working Capital Facility and, as of the Closing Date, the Financing
Facility;
(v) all Liabilities relating to, arising out of or resulting from any of
the terminated, divested or discontinued businesses and operations
listed or described on Schedule 2.3(a)(v);
(vi) all Liabilities of ATTI or its Subsidiaries, as of the date of the
transfer of the capital stock of ATTI to Lucent pursuant to Section
2.8(b), except for the Liabilities contemplated to be assumed by any
member of the AT&T Group pursuant to the Non-U.S. Plan, and all
Liabilities of any other member of the Lucent Group; and
(vii) all Liabilities reflected as liabilities or obligations of Lucent in
the Lucent Balance Sheet, subject to any discharge of such
Liabilities subsequent to the date of the Lucent Balance Sheet.
Notwithstanding the foregoing, the Lucent Liabilities shall not include the
Excluded Liabilities referred to in Section 2.3(b) below. Subject to Articles V
and VI hereof, the Lucent Liabilities shall not include any Nassau Metals
Liabilities.
(b) For the purposes of this Agreement, "Excluded Liabilities" shall mean:
(i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto) as Liabilities to be retained or assumed by AT&T or any
other member of the AT&T Group (including the NCR Group), and all
agreements and obligations of any member of the AT&T Group under
this Agreement or any of the Ancillary Agreements;
(ii) subject to the terms of Article VI, all Exclusive AT&T Services
Contingent Liabilities and Exclusive NCR Contingent Liabilities
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and the Shared AT&T Percentage and the Shared NCR Percentage of
any Shared Contingent Liabilities; and
(iii) except as set forth in any Ancillary Agreement, all Environmental
Liabilities accrued as of the date hereof solely relating to,
arising out of or resulting from the existence of any leasehold
interest that is an Lucent Asset if the applicable lessor,
sublessor or sub-sublessor under the applicable lease, sublease or
sub-sublease is a member of the AT&T Services Group or the NCR
Group.
2.4. TERMINATION OF AGREEMENTS. (a) Except as set forth in Section 2.4(b),
in furtherance of the releases and other provisions of Section 5.1 hereof,
Lucent and each member of the Lucent Group, on the one hand, and each of AT&T,
NCR and
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<PAGE>
the respective members of the AT&T Services Group and the NCR Group, on the
other hand, hereby terminate, any and all agreements, arrangements, commitments
or understandings, whether or not in writing, between or among Lucent and/or any
member of the Lucent Group, on the one hand, and AT&T or NCR and/or any member
of the AT&T Services Group or the NCR Group, on the other hand, effective as of
the Closing Date; provided, however, to the extent any such agreement,
arrangement, commitment or understanding is inconsistent with any Ancillary
Agreement, such termination shall be effective as of the date of effectiveness
of the applicable Ancillary Agreement. No such terminated agreement,
arrangement, commitment or understanding (including any provision thereof which
purports to survive termination) shall be of any further force or effect after
the Closing Date (or, to the extent contemplated by the proviso to the
immediately preceding sentence, after the effective date of the applicable
Ancillary Agreement). Each party shall, at the reasonable request of any other
party, take, or cause to be taken, such other actions as may be necessary to
effect the foregoing.
(b) The provisions of Section 2.4(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or
to any of the provisions thereof): (i) this Agreement and the
Ancillary Agreements (and each other agreement or instrument expressly
contemplated by this Agreement or any Ancillary Agreement to be
entered into by any of the parties hereto or any of the members of
their respective Groups); (ii) any agreements, arrangements,
commitments or understandings listed or described on Schedule
2.4(b)(ii), including the representations, warranties and product
support agreements, arrangements, commitments or understandings to be
set forth on such Schedule relating to products, services or materials
previously furnished by the Lucent Business to the AT&T Services
Business; (iii) any agreements, arrangements, commitments or
understandings to which any Person other than the parties hereto and
their respective Affiliates is a party (it being understood that to
the extent that the rights and obligations of the parties and the
members of their respective Groups under any such agreements,
arrangements, commitments or understandings constitute Lucent Assets
or Lucent Liabilities, they shall be assigned pursuant to Section
2.1); (iv) any intercompany accounts payable or accounts receivable
accrued as of the Closing Date that are reflected in the books and
records of the parties or otherwise documented in writing in
accordance with past practices; (v) any agreements, arrangements,
commitments or understandings to which AT&T Capital Corporation or any
other non-wholly owned Subsidiary of AT&T, Lucent or NCR, as the case
may be, is a party (it being understood that directors' qualifying
<PAGE>
shares or similar interests will be disregarded for purposes of
determining whether a Subsidiary is wholly owned); (vi) any written
Tax sharing or Tax allocation agreements to which any member of any
Group is a party; and (vii) any other agreements, arrangements,
commitments or understandings that this Agreement or any Ancillary
Agreement expressly contemplates will survive the Closing Date.
2.5. DOCUMENTS RELATING TO TRANSFER OF REAL PROPERTY INTERESTS
AND TANGIBLE
PROPERTY LOCATED THEREON. (a) In furtherance of the assignment, transfer and
conveyance of Lucent Assets and the assumption of Lucent Liabilities set forth
in Section 2.1(a) and (b), simultaneously with the execution and delivery hereof
or as promptly as practicable thereafter, each of AT&T, Lucent and NCR, or their
applicable Subsidiaries, is executing and delivering or will execute and deliver
deeds, lease assignments and assumptions, leases, subleases and sub-subleases
substantially in the forms attached as Schedule 2.5 (which in certain cases
includes different forms for real property and leasehold interests located
outside of the United States), with such changes as may be necessary to conform
to any laws, regulations or usage applicable in the jurisdiction in which the
relevant real property is located. Set forth in, or referenced by, such Schedule
is, among
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<PAGE>
other things, a summary of each property or interest therein to be conveyed,
assigned, leased, subleased or sub-subleased, the applicable entities relevant
to each property and their capacities with respect to each property (e.g., as
transferor, transferee, assignor, assignee, lessor, lessee, sublessor,
sublessee, sub-sublessor or sub-sublessee), and any terms applicable to each
property that are not specified in the forms of deed, lease assignment and
assumption, lease, sublease or sub-sublease (e.g., rent and term).
(b) Except as otherwise expressly provided in this Agreement or any
Ancillary Agreement, all tenant improvements, fixtures, furniture,
office equipment, servers, private branch exchanges, artwork and other
tangible property (other than equipment subject to capital or
operating equipment leases, which will be transferred or retained
based on whether the associated capital or operating equipment lease
is or is not an Lucent Contract) located as of the date hereof on any
real property that is covered by any Ancillary Agreement referred to
in Section 2.5(a), including the Schedules thereto, shall, except to
the extent expressly set forth on a Schedule referred to in Section
2.5(a), be transferred or retained as follows:
(i) DEEDS AND ASSIGNMENTS. In the case of any real property or
leasehold interests covered by an Ancillary Agreement set forth on
Schedule 2.5 that is a deed or lease assignment and assumption,
all such tangible property will be transferred to the transferee
or assignee of the applicable real property or leasehold interest;
(ii) SHARED FACILITIES WITHOUT THIRD PARTY LEASES. In the case of any
real property or leasehold interests covered by an Ancillary
Agreement set forth on Schedule 2.5 that is a lease, all such
tangible property will be retained by the lessor under the
applicable lease, except that any such tangible property (other
than tenant improvements, fixtures, furniture and artwork) used
exclusively by the lessee shall be transferred to, or retained by,
the lessee.
(iii) SHARED DOMESTIC FACILITIES WITH THIRD PARTY LEASES. In the case of
any real property or leasehold interests located in the United
States covered by an Ancillary Agreement set forth on Schedule 2.5
that is a sublease or sub-sublease, all such tangible property
will be retained by the sublessor or sub-sublessor, respectively,
under the applicable sublease or sub-sublease, except that any
such tangible property (other than tenant improvements, fixtures
and artwork), including furniture used exclusively by the
<PAGE>
sublessee or sub-sublessee, respectively, shall be transferred to,
or retained by, such sublessee or sub-sublessee.
(iv) SHARED NON-U.S. FACILITIES WITH THIRD PARTY LEASES. In the case of
any real property or leasehold interests located outside of the
United States covered by an Ancillary Agreement set forth on
Schedule 2.5 that is a sublease or sub-sublease, all such tangible
property will be retained by the sublessor or subsublessor,
respectively, under the applicable sublease or sub-sublease,
except that any such tangible property (other than tenant
improvements, fixtures, furniture and artwork) used exclusively by
the sublessee or sub-sublessee, respectively, shall be transferred
to, or retained by, such sublessee or sub-sublessee.
In the case of this Section 2.5(b), all determinations as to exclusive use by
any member of a Group shall be made without regard to infrequent and immaterial
use by the members of any other Group, if the transfer of such Asset to, or the
retention of such Asset by, such first Group would not interfere in any material
respect with either the business or operations of any such other Group.
Notwithstanding the foregoing provisions of this Section 2.5(b),
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<PAGE>
any artwork located as of the date hereof in the private office of any senior
manager or officer of any Group may, at the election of such senior manager or
officer, be retained by, or transferred to, the Group by which such executive is
employed as of the Closing Date.
(c) In the case of any real property or leasehold interest that is covered
by Section 2.5(b)(i) and any of Section 2.5(b)(ii), (iii) or (iv), all
such tangible property shall first be allocated pursuant to the
provisions of Section 2.5(b)(i) and thereafter pursuant to whichever
of such other clauses is applicable.
2.6. DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND
ASSUMPTION OF
LIABILITIES. In furtherance of the assignment, transfer and conveyance of Lucent
Assets and the assumption of Lucent Liabilities set forth in Section 2.1(a) and
(b), simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, (i) each of AT&T and NCR shall execute and deliver, and
each shall cause its respective Subsidiaries to execute and deliver, such bills
of sale, stock powers, certificates of title, assignments of contracts and other
instruments of transfer, conveyance and assignment as and to the extent
necessary to evidence the transfer, conveyance and assignment of all of AT&T's,
NCR's and their respective Subsidiaries' right, title and interest in and to the
Lucent Assets to Lucent and (ii) Lucent shall execute and deliver, to AT&T, NCR
and their respective Subsidiaries such bills of sale, stock powers, certificates
of title, assumptions of contracts and other instruments of assumption as and to
the extent necessary to evidence the valid and effective assumption of the
Lucent Liabilities by Lucent.
2.7. OTHER ANCILLARY AGREEMENTS. (a) Effective as of the date hereof,
except as provided in Section 2.7(b) or Section 2.8, each of AT&T, Lucent and
NCR will execute and deliver all Ancillary Agreements to which it is a party.
(b) After the date hereof and on or prior to the Closing Date, the parties
shall execute and deliver each of the following Ancillary Agreements
to which it is a party:
(i) the Patent Assignments;
(ii) the Patent License Agreement;
(iii) the Patent Joint Ownership Agreement;
(iv) the Patent Defensive Protection Agreements;
<PAGE>
(v) The Technology Assignment and Joint Ownership Agreements; and
(vi) the Technology License Agreement.
The parties acknowledge that the forms of the foregoing agreements attached
hereto as Schedules reflect the allocation of patents and other intellectual
property pursuant to a process conducted prior to the date hereof, and that such
agreements will be further supplemented prior to their execution to reflect a
continuation of such process for new patent applications and other intellectual
property that were not considered in the allocation process conducted prior to
the date hereof. In addition, the parties will determine no later than February
15, 1996 the appropriate amount and terms of the payments to be made pursuant to
the Patent Defensive Protection Agreements.
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<PAGE>
2.8. THE NON-U.S. PLAN. (a) Each of AT&T, Lucent and NCR shall take, and
shall cause each member of its respective Group to take, such action as
reasonably necessary to consummate the transactions contemplated by the Non-U.S.
Plan (whether prior to or after the Closing Date).
(b) After the date hereof and on or prior to the Closing Date, AT&T shall
transfer all of its right, title and interest in and to all of the
issued and outstanding capital stock in each of ATTI and NCS Ventures,
Inc., a Delaware corporation, to Lucent by means of a contribution of
such capital stock by AT&T to Lucent. The parties hereto shall
execute, or cause to be executed, such transfer instruments as they
mutually deem appropriate to effectuate and evidence such transfer.
2.9. AT&T VENTURES; LUCENT FOUNDATION. (a) On or prior to the Closing Date,
AT&T shall transfer to Lucent 35% of AT&T's interest as a limited partner in
AT&T Ventures and Lucent shall assume all Liabilities of a limited partner of
AT&T Ventures relating to such interest. AT&T and Lucent shall use reasonable
best efforts to cooperate so that Lucent will be admitted to AT&T Ventures as a
limited partner in respect of such interest. Without duplication of any such
Liability assumed in its capacity as a limited partner, Lucent shall indemnify,
defend and hold harmless each AT&T Indemnitee and each NCR Indemnitee from and
against 35% of any and all Liabilities of the AT&T Indemnitees or the NCR
Indemnitees, respectively, relating to, arising out of or resulting from AT&T
Ventures, including in respect of any capital calls or commitments and in
connection with the operation or management thereof.
(b) (i) Following the date hereof, Lucent will incorporate a private
foundation to be qualified under Section 501(c)(3) of the Code. The
AT&T Foundation will make an $18 million grant to the new foundation
formed by Lucent, as soon as is reasonably practicable following such
new foundation's request, subject to the satisfaction by such new
foundation of the following requirements: the election or appointment
of a governing board of directors or trustees, the adoption of
by-laws, the hiring of a professional staff, the formulation of a
mission statement, and commencement of the development of programs and
priorities for funding grants. The determination as to whether such
requirements have been satisfied shall be made by the trustees of the
AT&T Foundation in their sole discretion and shall be binding on all
parties. Such $18 million grant shall be payable, at the AT&T
Foundation's election, in cash or in appreciated property (or any
combination thereof). All determinations with respect to the fair
market value of any appreciated property will be made by the trustees
of the AT&T Foundation in their sole discretion and shall be binding
<PAGE>
on all parties.
(ii) The AT&T Foundation has approved a 1996 grant budget that
includes grants totalling $13 million relating to Lucent initiatives.
The staffs of the AT&T Foundation and the new foundation to be formed
by Lucent pursuant to subparagraph (i) above will work together to
administer the grants relating to these Lucent initiatives. In the
event such $13 million has not been fully disbursed prior to the
Distribution Date, the AT&T Foundation will transfer to the new
foundation formed by Lucent an amount equal to the portion of such $13
million that has not been disbursed, and such foundation will assume
the obligation to make grants equal to such remaining amount. The AT&T
Foundation will also allocate up to $1 million of its 1996
administrative budget for administrative costs related to Lucent
programs.
2.10. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. (a) Each of AT&T
(on
behalf of itself and each member of the AT&T Services Group), Lucent (on behalf
of
<PAGE>
<PAGE>
itself and each member of the Lucent Group) and NCR (on behalf of itself and
each member of the NCR Group) understands and agrees that, except as expressly
set forth herein (including in Section 7.2(g)) or in any Ancillary Agreement, no
party to this Agreement, any Ancillary Agreement or any other agreement or
document contemplated by this Agreement, any Ancillary Agreement or otherwise,
is representing or warranting in any way as to the Assets, businesses or
Liabilities transferred or assumed as contemplated hereby or thereby, as to any
consents or approvals required in connection therewith, as to the value or
freedom from any Security Interests of, or any other matter concerning, any
Assets of such party, or as to the absence of any defenses or right of setoff or
freedom from counterclaim with respect to any claim or other Asset, including
any accounts receivable, of any party, or as to the legal sufficiency of any
assignment, document or instrument delivered hereunder to convey title to any
Asset or thing of value upon the execution, delivery and filing hereof or
thereof. Except as may expressly be set forth herein or in any Ancillary
Agreement, all such Assets are being transferred on an "as is," "where is" basis
(and, in the case of any real property, by means of a quitclaim or similar form
deed or conveyance) and the respective transferees shall bear the economic and
legal risks that any conveyance shall prove to be insufficient to vest in the
transferee good and marketable title, free and clear of any Security Interest.
2.11. FINANCING ARRANGEMENTS. (a) Prior to the Closing Date, AT&T and
Lucent shall enter into the Financing Facility. AT&T and Lucent agree to take
all such reasonable action as may be necessary to permit AT&T to borrow such
amount as it shall determine under the Financing Facility prior to the Closing
Date and to assure the assignment to and the assumption by Lucent of all
obligations thereunder and the full release and discharge of each of AT&T and
any other member of the AT&T Group of all of its obligations thereunder as of
the Closing Date in accordance with the terms of the Financing Facility. AT&T
and Lucent shall participate in the preparation of all materials and
presentations as may be reasonably necessary to secure funding pursuant to the
Financing Facility, including rating agency presentations necessary to obtain
the requisite ratings needed to secure the financing under the Financing
Facility and such assignment, assumption, release and discharge. As of the time
of such assignment, assumption, release and discharge, Lucent shall pay (or
reimburse AT&T for) all expenses associated with the Financing Facility.
(b) Simultaneously with or following the execution and delivery of this
Agreement, Lucent intends to enter into the Working Capital Facility.
Lucent agrees to cause all obligations of AT&T or any other member of
the AT&T Group, if any, under the Working Capital Facility to be
terminated at the Closing Date. Lucent shall pay all expenses
associated with the Working Capital Facility.
<PAGE>
2.12. GOVERNMENTAL APPROVALS AND CONSENTS. (a) To the extent that the
Separation requires any Governmental Approvals or Consents, the parties will use
their reasonable best efforts to obtain any such Governmental Approvals and
Consents.
(b) If and to the extent that the valid, complete and perfected transfer
or assignment (or novation of any federal government contract) to the
Lucent Group of any Lucent Assets (or from the Lucent Group of any
Non-Lucent Assets) would be a violation of applicable laws or require
any Consent or Governmental Approval in connection with the
Separation, the IPO or the Distribution, then, unless AT&T shall
otherwise determine, the transfer or assignment to or from the Lucent
Group, as the case may be, of such Lucent Assets or Non-Lucent Assets,
respectively, shall be automatically deemed deferred and any such
purported transfer or assignment shall be null and void until
<PAGE>
<PAGE>
such time as all legal impediments are removed and/or such Consents or
Governmental Approvals have been obtained. Notwithstanding the
foregoing, such Asset shall be deemed an Lucent Asset for purposes of
determining whether any Liability is an Lucent Liability.
(c) If the transfer or assignment of any Assets intended to be transferred
or assigned hereunder, including pursuant to the Non-U.S. Plan, is not
consummated prior to or at the Closing Date, whether as a result of
the provisions of Section 2.12(b) or for any other reason, then the
Person retaining such Asset shall thereafter hold such Asset for the
use and benefit, insofar as reasonably possible, of the Person
entitled thereto (at the expense of the Person entitled thereto). In
addition, the Person retaining such Asset shall take such other
actions as may be reasonably requested by the Person to whom such
Asset is to be transferred in order to place such Person, insofar as
reasonably possible, in the same position as if such Asset had been
transferred as contemplated hereby and so that all the benefits and
burdens relating to such Lucent Assets (or such Non-Lucent Assets, as
the case may be), including possession, use, risk of loss, potential
for gain, and dominion, control and command over such Assets, are to
inure from and after the Closing Date to the Lucent Group (or the AT&T
Group, as the case may be).
(d) If and when the Consents and/or Governmental Approvals, the absence of
which caused the deferral of transfer of any Asset pursuant to Section
2.12(b), are obtained, the transfer of the applicable Asset shall be
effected in accordance with the terms of this Agreement and/or the
applicable Ancillary Agreement.
(e) The Person retaining an Asset due to the deferral of the transfer of
such Asset shall not be obligated, in connection with the foregoing,
to expend any money unless the necessary funds are advanced by the
Person entitled to the Asset, other than reasonable out-of-pocket
expenses, attorneys' fees and recording or similar fees, all of which
shall be promptly reimbursed by the Person entitled to such Asset.
2.13. NOVATION OF ASSUMED LUCENT LIABILITIES. (a) Each of AT&T, Lucent and
NCR, at the request of any of the others, shall use their reasonable best
efforts to obtain, or to cause to be obtained, any consent, substitution,
approval or amendment required to novate (including with respect to any federal
government contract) or assign all obligations under agreements, leases,
licenses and other obligations or Liabilities (including Lucent OFL's) of any
nature whatsoever that constitute Lucent Liabilities or Nassau Metals
<PAGE>
Liabilities, or to obtain in writing the unconditional release of all parties to
such arrangements other than any member of the Lucent Group, so that, in any
such case, Lucent and its Subsidiaries will be solely responsible for such
Liabilities; provided, however, that none of AT&T, Lucent or NCR shall be
obligated to pay any consideration therefor to any third party from whom such
consents, approvals, substitutions and amendments are requested.
(b) If AT&T, Lucent or NCR is unable to obtain, or to cause to be
obtained, any such required consent, approval, release, substitution
or amendment, the applicable member of the AT&T Services Group or the
NCR Group, as the case may be, shall continue to be bound by such
agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof (except to the extent expressly
set forth in Section 7.3 in the case of Lucent OFL's), Lucent shall,
as agent or subcontractor for AT&T, NCR or such other Person, as the
case may be, pay, perform and discharge fully all the obligations or
other Liabilities of AT&T, NCR or such other Person, as the case may
be, thereunder from and after the date hereof. Lucent shall indemnify
each AT&T Indemnitee and each NCR Indemnitee, and hold each of them
harmless against any Liabilities
<PAGE>
<PAGE>
arising in connection therewith. Except as expressly set forth in
Section 7.3 in the case of Lucent OFL's, each of AT&T and NCR, as the
case may be, shall, without further consideration, pay and remit, or
cause to be paid or remitted, to Lucent promptly all money, rights and
other consideration received by it or any member of its respective
Group in respect of such performance (unless any such consideration is
an Excluded Asset). If and when any such consent, approval, release,
substitution or amendment shall be obtained or such agreement, lease,
license or other rights or obligations shall otherwise become
assignable or able to be novated, each of AT&T and NCR, as the case
may be, shall thereafter assign, or cause to be assigned, all its
rights, obligations and other Liabilities thereunder or any rights or
obligations of any member of its respective Group to Lucent without
payment of further consideration and Lucent shall, without the payment
of any further consideration, assume such rights and obligations.
2.14. NOVATION OF ASSUMED LIABILITIES OTHER THAN LUCENT LIABILITIES.
(a) Each of AT&T, Lucent and NCR, at the request of any of the others,
shall use their reasonable best efforts to obtain, or to cause to be
obtained, any consent, substitution, approval or amendment required to
novate or assign all obligations under agreements, leases, licenses
and other obligations or Liabilities of any nature whatsoever that do
not constitute Lucent Liabilities or Nassau Metals Liabilities, or to
obtain in writing the unconditional release of all parties to such
arrangements other than any member of the AT&T Group, so that, in any
such case, the members of the AT&T Group will be solely responsible
for such Liabilities; provided, however, that none of AT&T, Lucent or
NCR shall be obligated to pay any consideration therefor to any third
party from whom such consents, approvals, substitutions and amendments
are requested.
(b) If AT&T, Lucent or NCR is unable to obtain, or to cause to be
obtained, any such required consent, approval, release, substitution
or amendment, the applicable member of the Lucent Group shall continue
to be bound by such agreements, leases, licenses and other obligations
and, unless not permitted by law or the terms thereof, AT&T shall
cause a member of the AT&T Group, as agent or subcontractor for such
member of the Lucent Group, to pay, perform and discharge fully all
the obligations or other Liabilities of such member of the Lucent
Group thereunder from and after the date hereof. AT&T shall indemnify
each Lucent Indemnitee and hold each of them harmless against any
Liabilities arising in connection therewith. Lucent shall cause each
<PAGE>
member of the Lucent Group without further consideration, to pay and
remit, or cause to be paid or remitted, to AT&T or to another member
of the AT&T Group specified by AT&T promptly all money, rights and
other consideration received by it or any member of the Lucent Group
in respect of such performance. If and when any such consent,
approval, release, substitution or amendment shall be obtained or such
agreement, lease, license or other rights or obligations shall
otherwise become assignable or able to be novated, Lucent shall
promptly assign, or cause to be assigned, all its rights, obligations
and other Liabilities thereunder or any rights or obligations of any
member of the Lucent Group to AT&T or to another member of the AT&T
Group specified by AT&T without payment of further consideration and
AT&T, without the payment of any further consideration shall, or shall
cause such other member of the AT&T Group to, assume such rights and
obligations.
2.15. THIRD PARTY PATENT LICENSE AGREEMENTS. (a) Except as otherwise set
forth in this Section 2.15, effective as of the date of execution of the Patent
Assignments and other agreements set forth in Section 2.7(b), AT&T hereby: (i)
grants to each of Lucent and NCR the right to share with AT&T the license rights
granted by any third party to AT&T pursuant to any patent license agreement
between AT&T and such third party existing as of the date hereof and (ii) grants
to Lucent the right to receive any net royalty
<PAGE>
<PAGE>
payments from third parties pursuant to the patent license agreements referred
to in clause (i) above. Except as otherwise set forth in this Section 2.15, AT&T
will retain all rights in and to the patent license agreements referred to in
this Section 2.15.
(b) The grants set forth in the first sentence of Section 2.15(a) shall
not apply to (i) the patent license agreements set forth in Schedule
2.15(b) or (ii) any other patent license agreement with respect to
which there otherwise exists, on or prior to the date of execution of
the Patent Assignments, written provision for the allocation or
sharing of rights under such patent license agreement between or among
any two or all three of AT&T, Lucent and NCR.
(c) Except as set forth in Section 2.15(d), in the event that any grant of
rights set forth in Section 2.15(a) would violate or is found to
violate the terms of, or result in the loss of rights or imposition of
penalty under, any patent license agreement covered thereby, or would
not be effective subsequent to the Distribution Date, such grant of
rights with respect to such patent license agreement shall be deemed
null and void and, in lieu thereof, (i) effective as of the
Distribution Date, AT&T hereby transfers any such patent license
agreement to Lucent without retaining any rights therein (and AT&T
waives any such right it could otherwise retain) and (ii) Lucent shall
use all reasonable efforts to arrange for the grant by the applicable
third party of comparable rights (other than any right to receive
royalty payments) to each of AT&T and NCR, provided that none of
Lucent, AT&T or NCR shall be obligated to pay any consideration
therefor.
(d) In the event that any transfer set forth in Section 2.15(c) would
violate or is found to violate the terms of, or result in the loss of
rights or imposition of penalty under, any patent license agreement
covered thereby, or would not be effective subsequent to the
Distribution Date, such transfer shall be deemed null and void and, in
lieu thereof, (i) AT&T hereby retains all rights under any such patent
license agreement, (ii) AT&T will pay over to Lucent any royalty
payments it may receive from any third party pursuant to any such
patent license agreement and (iii) AT&T shall use all reasonable
efforts to arrange for the grant by the applicable third party of
comparable rights (other than any right to royalty payments) to each
of Lucent and NCR, provided that none of Lucent, AT&T or NCR shall be
obligated to pay any consideration therefor.
<PAGE>
(e) In the event that license rights under any patent license agreement
intended to be granted or transferred to Lucent under this Section
2.15 are not effectively granted or transferred (including in the
event such grant or transfer is not effective after the Distribution
Date and/or the parties are unable to arrange for the grant by the
applicable third party of comparable license rights to Lucent), then,
at the written request of Lucent: (i) AT&T will exercise any have-made
rights it may have under the applicable third-party license agreement
to have Lucent make, and will purchase from Lucent, such products or
other materials as Lucent may direct using the applicable third-party
patents as to which AT&T has such have-made rights (at the price and
on the terms to be paid and agreed to by the Person or Persons to whom
AT&T may be directed to sell such products or other materials pursuant
to the following clause (ii)); and (ii) following any such purchase,
AT&T will sell such products or other materials to such Person or
Persons, on such terms, as may be directed by Lucent (except that AT&T
will not be required to make any representations, warranties or
commitments in respect thereof other than to provide to such Person or
Persons the representations, warranties and commitments of Lucent in
respect thereof, for which only Lucent, and not AT&T, will be
responsible). In connection with the foregoing, Lucent will cause the
Person or Persons to which such products or other materials are sold
to acknowledge in writing that only Lucent and the members of the
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<PAGE>
Lucent Group, and not AT&T or any member of the AT&T Group, will be
responsible to such Person or Persons in respect of such products or
other materials. Nothing in this Section (e) shall be construed to
require AT&T or any member of the AT&T Group to violate any applicable
laws, rules or regulations of any Governmental Authority.
(f) In the event AT&T makes any purchases and sales as directed by Lucent
under the foregoing paragraph (e), then: (i) Lucent will promptly
reimburse AT&T for all costs and expenses (including allocated costs
of in-house counsel and other personnel) that AT&T or any member of
the AT&T Group may incur in connection with such actions, plus a fee
of two percent (2%); and (ii) Lucent will indemnify and hold harmless
AT&T and each AT&T Indemnitee for all Liabilities that may arise as a
result of such actions (including any claims by the purchaser of such
products or materials, any loss incurred on the sale of such products
or materials by AT&T to the Person or Persons directed by Lucent, or
arising out of the failure of such Person or Persons to purchase such
products or materials on the terms directed by Lucent, and any claims
alleging any infringement of any patent, copyright, trademark or
misappropriation of a trade secret, any product liability claims, and
any other claims, in connection with such products or materials).
(g) Each of AT&T, Lucent and NCR agrees that it will fulfill any
obligations it may have to any third party pursuant to the patent
license agreements to which the provisions of this Section 2.15 apply.
2.16. CERTAIN TERMINATION RIGHTS. (a) Notwithstanding anything in this
Agreement or any Ancillary Agreement to the contrary, the rights granted to
Lucent and the members of the Lucent Group shall be subject to the provisions of
this Section 2.16.
(b) Except as otherwise expressly provided in this Section 2.16, in the
event that, at any time prior to the fifth anniversary of this
Agreement, Lucent or any member of the Lucent Group offers, furnishes
or provides, either directly or indirectly (whether through any
reseller or joint venture or otherwise), any Telecommunications
Services of the type offered by the AT&T Services Business as of the
Closing Date, then:
(i) pursuant to Section 2.5 and Article IX of the Brand License
Agreement, AT&T may, in its sole discretion, terminate all or any
portion of the rights granted to Lucent and the members of the
Lucent Group pursuant to the Brand License Agreement;
<PAGE>
(ii) AT&T may, in its sole discretion, terminate all or any remaining
portion of the purchase commitments made by AT&T and the members
of the AT&T Group in the AT&T General Purchase Agreement;
(iii) AT&T may, in its sole discretion, exercise either the Full Grant
rights or the Partial Grant rights described in subparagraphs
8.4(b) and 8.4(c), respectively, of the Supplemental General
Purchase Agreement, dated as of the date hereof, between AT&T and
Lucent;
(iv) AT&T may, in its sole discretion, terminate all or any portion of
the rights to patents and technology of AT&T or any member of the
AT&T Group granted to Lucent and the members of the Lucent Group
pursuant to the Patent License Agreement and the Technology
License Agreement; and
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<PAGE>
(v) at AT&T's direction, which may be given in its sole discretion,
Lucent and the members of the Lucent Group will reconvey to AT&T
or any member of the AT&T Group all of their right, title and
interest in any and all patents and technology in which Lucent or
any member of the Lucent Group was granted an undivided one-half
interest pursuant to the Patent Assignments or the Technology
Assignment and Joint Ownership Agreement.
(c) Lucent and the members of the Lucent Group shall not be deemed to
offer, furnish or provide, either directly or indirectly, any
Telecommunications Services (and Section 2.16(b) will not apply)
solely by virtue of either of the following:
(i) a passive investment by Lucent or any of the members of the Lucent
Group of, in the aggregate, (A) less than 5% of the ownership
interest in any Person that offers, furnishes or provides
Telecommunications Services in the United States or (B) not more
than 15% of the ownership interest in any Person that offers,
furnishes or provides Telecommunications Services solely outside
of the United States (it being understood that Telecommunications
Services operating outside the United States will be considered
solely outside the United States notwithstanding the ability of
such Telecommunications Services to receive transmissions from or
send transmissions to the United States, so long as such
Telecommunications Services may not be used to send and receive
transmissions solely within the United States); or
(ii) an investment by Lucent or any of the members of the Lucent Group
of, in the aggregate, not more than 40% of the ownership interest
in any Person outside the United States formed for the purpose of
building a network or similar system for the provision of
Telecommunications Services solely outside of the United States,
which network or system is built by Lucent or any members of the
Lucent Group; so long as Lucent and the members of the Lucent
Group divest such interest to, in the aggregate, not more than 15%
of the ownership interest in such Person within one year of
commencement of the provision of any Telecommunications Services
over such network or system, or such longer period as may be
necessary to permit such reduction in interest and to which AT&T
shall consent, which consent will not be unreasonably withheld; or
(iii) the offer, furnishing or provision by Lucent and the members of
the Lucent Group, either directly or indirectly, of
<PAGE>
Telecommunications Services from which the aggregate revenues in
any fiscal year do not exceed one percent of the aggregate
revenues of Lucent and the members of the Lucent Group for such
fiscal year, provided that, in determining whether such one
percent threshold has been met, any resale of Telecommunications
Services provided by AT&T or any member of the AT&T Group to
Lucent or any member of the Lucent Group pursuant to the VTNS
Agreement or any tariff or contract shall not be considered as
Telecommunications Services offered, furnished or provided by
Lucent and the members of the Lucent Group.
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<PAGE>
ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
3.1. TRANSACTIONS PRIOR TO THE IPO. (a) Subject to the conditions specified
in Section 3.6, AT&T and Lucent shall use their reasonable best efforts to
consummate the IPO. Such actions shall include, but not necessarily be limited
to, those specified in this Section 3.1.
(b) Lucent shall file the IPO Registration Statement, and such amendments
or supplements thereto, as may be necessary in order to cause the same
to become and remain effective as required by law or by the
Underwriters, including, but not limited to, filing such amendments to
the IPO Registration Statement as may be required by the Underwriting
Agreement, the Commission or federal, state or foreign securities
laws. AT&T and Lucent shall also cooperate in preparing, filing with
the Commission and causing to become effective a registration
statement registering the Lucent Common Stock under the Exchange Act,
and any registration statements or amendments thereof which are
required to reflect the establishment of, or amendments to, any
employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Distribution or the other
transactions contemplated by this Agreement and the Ancillary
Agreements.
(c) Lucent shall enter into the Underwriting Agreement, in form and
substance reasonably satisfactory to Lucent and shall comply with its
obligations thereunder.
(d) AT&T and Lucent shall consult with each other and the Underwriters
regarding the timing, pricing and other material matters with respect
to the IPO.
(e) Lucent shall use its reasonable best efforts to take all such action
as may be necessary or appropriate under state securities and blue sky
laws of the United States (and any comparable laws under any foreign
jurisdictions) in connection with the IPO.
(f) Lucent shall prepare, file and use reasonable best efforts to seek to
make effective, an application for listing of the Lucent Common Stock
issued in the IPO on the NYSE, subject to official notice of issuance.
(g) Lucent shall participate in the preparation of materials and
presentations as the Underwriters shall deem necessary or desirable.
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(h) Lucent shall pay all third party costs, fees and expenses relating to
the IPO, all of the reimbursable expenses of the Underwriters pursuant
to the Underwriting Agreement, all of the costs of producing,
printing, mailing and otherwise distributing the Prospectus, as well
as the Underwriters' discount as provided in the Underwriting
Agreement.
3.2. PROCEEDS OF THE IPO. The IPO will be a primary offering of Lucent
Common Stock and the net proceeds of the IPO will be retained by Lucent.
3.3. CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the date of this Agreement, the parties hereto shall use their
reasonable best efforts to satisfy the following conditions to the consummation
of the IPO. The obligations
<PAGE>
<PAGE>
of the parties to consummate the IPO shall be conditioned on the satisfaction,
or waiver by AT&T, of the following conditions:
(a) The IPO Registration Statement shall have been filed and declared
effective by the Commission, and there shall be no stop-order in
effect with respect thereto.
(b) The Financing Facility shall have been executed and delivered,
pursuant to which AT&T shall have borrowed an amount of funds
determined by AT&T, and AT&T shall be satisfied in its sole discretion
that as of the Closing Date it will have no further liability or
obligation whatsoever under either the Working Capital Facility or the
Financing Facility.
(c) The actions and filings with regard to state securities and blue sky
laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 3.1 shall have been taken and,
where applicable, have become effective or been accepted.
(d) The Lucent Common Stock to be issued in the IPO shall have been
accepted for listing on the NYSE, on official notice of issuance.
(e) Lucent shall have entered into the Underwriting Agreement and all
conditions to the obligations of Lucent and the Underwriters shall
have been satisfied or waived.
(f) AT&T shall be satisfied in its sole discretion that it will own at
least 80.1% of the outstanding Lucent Common Stock following the IPO
on a fully diluted basis, after giving effect to the issuance of any
shares of restricted stock or employee stock options to any employees
of Lucent, and all other conditions to permit the Distribution to
qualify as a tax-free distribution to AT&T, Lucent and AT&T's
shareholders shall, to the extent applicable as of the time of the
IPO, be satisfied and there shall be no event or condition that is
likely to cause any of such conditions not to be satisfied as of the
time of the Distribution or thereafter.
(g) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation or the IPO or any of the
other transactions contemplated by this Agreement or any Ancillary
Agreement shall be in effect.
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(h) Such other actions as the parties hereto may, based upon the advice of
counsel, reasonably request to be taken prior to the Separation and
the IPO in order to assure the successful completion of the Separation
and the IPO and the other transactions contemplated by this Agreement
shall have been taken.
(i) This Agreement shall not have been terminated.
ARTICLE IV
THE DISTRIBUTION
4.1. THE DISTRIBUTION. (a) Subject to Section 4.3 hereof, on or prior to
the Distribution Date, AT&T will deliver to the Agent for the benefit of holders
of record of
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<PAGE>
AT&T Common Stock on the Record Date, a single stock certificate, endorsed by
AT&T in blank, representing all of the outstanding shares of Lucent Common Stock
then owned by AT&T or any member of the AT&T Group, and shall cause the transfer
agent for the shares of AT&T Common Stock to instruct the Agent to distribute on
the Distribution Date the appropriate number of such shares of Lucent Common
Stock to each such holder or designated transferee or transferees of such
holder.
(b) Subject to Section 4.4, each holder of AT&T Common Stock on the Record
Date (or such holder's designated transferee or transferees) will be
entitled to receive in the Distribution a number of shares of Lucent
Common Stock equal to the number of shares of AT&T Common Stock held
by such holder on the Record Date multiplied by a fraction the
numerator of which is the number of shares of Lucent Common Stock
beneficially owned by AT&T or any other member of the AT&T Group on
the Record Date and the denominator of which is the number of shares
of AT&T Common Stock outstanding on the Record Date.
(c) Lucent and AT&T, as the case may be, will provide to the Agent all
share certificates and any information required in order to complete
the Distribution on the basis specified above.
4.2. ACTIONS PRIOR TO THE DISTRIBUTION. (a) AT&T and Lucent shall prepare
and mail, prior to the Distribution Date, to the holders of AT&T Common Stock,
such information concerning Lucent, its business, operations and management, the
Distribution and such other matters as AT&T shall reasonably determine and as
may be required by law. AT&T and Lucent will prepare, and Lucent will, to the
extent required under applicable law, file with the Commission any such
documentation and any requisite no action letters which AT&T determines are
necessary or desirable to effectuate the Distribution and AT&T and Lucent shall
each use its reasonable best efforts to obtain all necessary approvals from the
Commission with respect thereto as soon as practicable.
(b) AT&T and Lucent shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of the United States
(and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(c) AT&T and Lucent shall take all reasonable steps necessary and
appropriate to cause the conditions set forth in Section 4.3 (subject
to Sections 4.3(d)) to be satisfied and to effect the Distribution on
the Distribution Date.
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(d) Lucent shall prepare and file, and shall use its reasonable best
efforts to have approved, an application for the listing of the Lucent
Common Stock to be distributed in the Distribution on the NYSE,
subject to official notice of distribution.
4.3. CONDITIONS TO DISTRIBUTION. The AT&T Board currently intends to effect
the Distribution by December 31, 1996. Subject to any restrictions contained in
the Underwriting Agreement, the AT&T Board shall have the sole discretion to
determine the date of consummation of the Distribution at any time after the
Closing Date and on or prior to December 31, 1996. AT&T shall be obligated to
consummate the Distribution no later than December 31, 1996, subject to the
satisfaction, or waiver by the AT&T Board in its sole discretion, of the
conditions set forth below. In the event that any such condition shall not have
been satisfied or waived on or before December 31, 1996, AT&T shall consummate
the Distribution as promptly as practicable following the satisfaction or waiver
of all such conditions.
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<PAGE>
(a) a private letter ruling from the Internal Revenue Service shall have
been obtained, and shall continue in effect, to the effect that, among
other things, the Distribution will qualify as a tax-free distribution
for federal income tax purposes under Section 355 of the Code and the
transfer to Lucent of the Lucent Assets and the assumption by Lucent
of the Lucent Liabilities in connection with the Separation will not
result in the recognition of any gain or loss to AT&T, Lucent or
AT&T's or Lucent's shareholders for federal income tax purposes, and
such ruling shall be in form and substance satisfactory to AT&T in its
sole discretion;
(b) any material Governmental Approvals and Consents necessary to
consummate the Distribution shall have been obtained and be in full
force and effect;
(c) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution shall be in effect and
no other event outside the control of AT&T shall have occurred or
failed to occur that prevents the consummation of the Distribution;
and
(d) no other events or developments shall have occurred subsequent to the
Closing Date that, in the judgment of the Board of Directors of AT&T,
would result in the Distribution having a material adverse effect on
AT&T or on the shareholders of AT&T.
The foregoing conditions are for the sole benefit of AT&T and shall not
give rise to or create any duty on the part of AT&T or the AT&T Board of
Directors to waive or not waive any such condition.
4.4. FRACTIONAL SHARES. As soon as practicable after the Distribution Date,
AT&T shall direct the Agent to determine the number of whole shares and
fractional shares of Lucent Common Stock allocable to each holder of record or
beneficial owner of AT&T Common Stock as of the Record Date, to aggregate all
such fractional shares and sell the whole shares obtained thereby at the
direction of AT&T either to AT&T, in open market transactions or otherwise, in
each case at then prevailing trading prices, and to cause to be distributed to
each such holder or for the benefit of each such beneficial owner to which a
fractional share shall be allocable such holder's or owner's ratable share of
the proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting an
amount equal to all brokerage charges, commissions and transfer taxes attributed
<PAGE>
to such sale. AT&T and the Agent shall use their reasonable best efforts to
aggregate the shares of AT&T Common Stock that may be held by any beneficial
owner thereof through more than one account in determining the fractional share
allocable to such beneficial owner.
4.5. THE LUCENT BOARD OF DIRECTORS. AT&T and Lucent shall each take all
actions which may be required to elect or otherwise appoint as directors of
Lucent, on or prior to the Distribution Date, persons to be designated by a
nominating committee of Lucent's Board of Directors (which nominating committee
shall be comprised of individuals who are at such time neither officers nor
directors of AT&T) as additional or substitute members of the Board of Directors
of Lucent on the Distribution Date.
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<PAGE>
ARTICLE V
INDEMNIFICATION
5.1. RELEASE OF PRE-CLOSING CLAIMS. (a) Except as provided in Section
5.1(c), effective as of the Closing Date, Lucent does hereby, for itself and
each other member of the Lucent Group, their respective Affiliates (other than
any member of the AT&T Group), successors and assigns, and all Persons who at
any time prior to the Closing Date have been shareholders, directors, officers,
agents or employees of any member of the Lucent Group (in each case, in their
respective capacities as such), remise, release and forever discharge each of
AT&T and NCR, the respective members of the AT&T Services Group and the NCR
Group, their respective Affiliates (other than any member of the Lucent Group),
successors and assigns, and all Persons who at any time prior to the Closing
Date have been shareholders, directors, officers, agents or employees of any
member of the AT&T Services Group or the NCR Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Closing Date, including in
connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(b) Except as provided in Section 5.1(c), effective as of the Closing
Date, each of AT&T and NCR does hereby, for itself and each other
member of the AT&T Services Group and the NCR Group, their respective
Affiliates (other than any member of the Lucent Group), successors and
assigns, and all Persons who at any time prior to the Closing Date
have been shareholders, directors, officers, agents or employees of
any member of the AT&T Services Group or the NCR Group (in each case,
in their respective capacities as such), remise, release and forever
discharge Lucent, the respective members of the Lucent Group, their
respective Affiliates (other than any member of the AT&T Group),
successors and assigns, and all Persons who at any time prior to the
Closing Date have been shareholders, directors, officers, agents or
employees of any member of the Lucent Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or
<PAGE>
events occurring or failing to occur or alleged to have occurred or to
have failed to occur or any conditions existing or alleged to have
existed on or before the Closing Date, including in connection with
the transactions and all other activities to implement any of the
Separation, the IPO and the Distribution.
(c) Nothing contained in Section 5.1(a) or (b) shall impair any right of
any Person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are
specified in Section 2.4(b) or the applicable Schedules thereto not to
terminate as of the Closing Date, in each case in accordance with its
terms. Nothing contained in Section 5.1(a) or (b) shall release any
Person from:
(i) any Liability provided in or resulting from any agreement among
any members of the AT&T Services Group, the Lucent Group or the
NCR Group that is specified in Section 2.4(b) or the applicable
Schedules thereto as not to terminate as of the Closing Date, or
any other Liability specified in such Section 2.4(b) as not to
terminate as of the Closing Date;
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<PAGE>
(ii) any Liability, contingent or otherwise, assumed, transferred,
assigned or allocated to the Group of which such Person is a
member in accordance with, or any other Liability of any member of
any Group under, this Agreement or any Ancillary Agreement;
(iii) any Liability for the sale, lease, construction or receipt of
goods, property or services purchased, obtained or used in the
ordinary course of business by a member of one Group from a member
of any other Group prior to the Closing Date;
(iv) any Liability for unpaid amounts for products or services or
refunds owing on products or services due on a value-received
basis for work done by a member of one Group at the request or on
behalf of a member of another Group;
(v) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for
claims brought against the parties by third Persons, which
Liability shall be governed by the provisions of this Article V
and Article VI and, if applicable, the appropriate provisions of
the Ancillary Agreements; or
(vi) any Liability the release of which would result in the release of
any Person other than a Person released pursuant to this Section
5.1; provided that the parties agree not to bring suit or permit
any of their Subsidiaries to bring suit against any Person with
respect to any Liability to the extent that such Person would be
released with respect to such Liability by this Section 5.1 but
for the provisions of this clause (vi).
(d) Lucent shall not make, and shall not permit any member of the Lucent
Group to make, any claim or demand, or commence any Action asserting
any claim or demand, including any claim of contribution or any
indemnification, against AT&T, NCR or any member of the AT&T Services
Group or NCR Group, or any other Person released pursuant to Section
5.1(a), with respect to any Liabilities released pursuant to Section
5.1(a). AT&T shall not, and shall not permit any member of the AT&T
Services Group, to make any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or
any indemnification, against Lucent or any member of the Lucent Group,
or any other Person released pursuant to Section 5.1(b), with respect
to any Liabilities released pursuant to Section 5.1(b). NCR shall not,
and shall not permit any member of the NCR Group, to make any claim or
<PAGE>
demand, or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification, against
Lucent or any member of the Lucent Group, or any other Person released
pursuant to Section 5.1(b), with respect to any Liabilities released
pursuant to Section 5.1(b).
(e) It is the intent of each of AT&T, Lucent and NCR by virtue of the
provisions of this Section 5.1 to provide for a full and complete
release and discharge of all Liabilities existing or arising from all
acts and events occurring or failing to occur or alleged to have
occurred or to have failed to occur and all conditions existing or
alleged to have existed on or before the Closing Date, between or
among Lucent or any member of the Lucent Group, on the one hand, and
AT&T, NCR or any member of the AT&T Services Group or the NCR Group,
on the other hand (including any contractual agreements or
arrangements existing or alleged to exist between or among any such
members on or before the Closing Date), except as expressly set forth
in Section 5.1(c). At any time, at
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<PAGE>
the request of any other party, each party shall cause each member of
its respective Group to execute and deliver releases reflecting the
provisions hereof.
5.2. INDEMNIFICATION BY LUCENT. Except as provided in Section 5.4, Lucent
shall indemnify, defend and hold harmless AT&T, each member of the AT&T Services
Group and each of their respective directors, officers and employees, and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "AT&T Indemnitees"), and NCR, each member of the NCR Group
and each of their respective directors, officers and employees, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "NCR Indemnitees"), from and against any and all Liabilities of the AT&T
Indemnitees and the NCR Indemnitees, respectively, relating to, arising out of
or resulting from any of the following items (without duplication):
(a) the failure of Lucent or any other member of the Lucent Group or any
other Person to pay, perform or otherwise promptly discharge any
Lucent Liabilities, any Nassau Metals Liabilities or Lucent Contract
in accordance with their respective terms, whether prior to or after
the Closing Date or the date hereof;
(b) the Lucent Business, any Lucent Liability, any Lucent Contract or any
Nassau Metals Liabilities;
(c) any breach by Lucent or any member of the Lucent Group of this
Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, with respect to all information contained in any IPO
Registration Statement or Prospectus.
5.3. INDEMNIFICATION BY AT&T AND BY NCR. (a) AT&T shall indemnify, defend
and hold harmless Lucent, each member of the Lucent Group and each of their
respective directors, officers and employees, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Lucent
Indemnitees"), from and against any and all Liabilities of the Lucent
Indemnitees relating to, arising out of or resulting from any of the following
items (without duplication):
(i) the failure of AT&T or any other member of the AT&T Group or any
other Person to pay, perform or otherwise promptly discharge any
<PAGE>
Liabilities of the AT&T Group other than the Lucent Liabilities,
the Nassau Metals Liabilities and the NCR Covered Liabilities,
whether prior to or after the Closing Date or the date hereof;
(ii) the AT&T Services Business or any Liability of the AT&T Group
other than the Lucent Liabilities, the Nassau Metals Liabilities
and the NCR Covered Liabilities; and
(iii) any breach by AT&T or any member of the AT&T Services Group of
this Agreement or any of the Ancillary Agreements.
(b) NCR shall indemnify, defend and hold harmless each Lucent Indemnitee
from and against any and all Liabilities of the Lucent Indemnitees
relating to, arising out of or resulting from any of the following
items (without duplication): (i) the failure of
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<PAGE>
NCR or any member of the NCR Group or any other Person to pay, perform
or otherwise promptly discharge any Exclusive NCR Contingent Liability
or any Shared NCR Percentage of any Shared Contingent Liability,
whether prior to or after the Closing Date or the date hereof; and
(ii) any breach by NCR or any member of the NCR Group of this
Agreement or any of the Ancillary Agreements, or any other agreement
that is not contemplated to be terminated as of the Closing Date
pursuant to Section 2.4(b) (collectively, the "NCR Covered
Liabilities").
(c) NCR shall indemnify, defend and hold harmless each AT&T Indemnitee
from and against any and all Liabilities of the AT&T Indemnitees
relating to, arising out of or resulting from any NCR Covered
Liability.
5.4. INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND
OTHER
AMOUNTS. (a) The parties intend that any Liability subject to indemnification or
reimbursement pursuant to this Article V or Article VI will be net of Insurance
Proceeds and any amounts recovered pursuant to an RBOC Agreement that actually
reduce the amount of the Liability. Accordingly, the amount which any party (an
"Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any Insurance
Proceeds theretofore actually recovered by or on behalf of the Indemnitee in
reduction of the related Liability and by any amount actually theretofore
recovered pursuant to an RBOC Agreement. If an Indemnitee receives a payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
respect of any Liability and subsequently receives Insurance Proceeds, or
recovers any amount pursuant to an RBOC Agreement, then the Indemnitee will pay
to the Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds and/or RBOC Agreement recovery had been received,
realized or recovered before the Indemnity Payment was made.
(b) In the case of any Shared Contingent Liability, any Insurance
Proceeds, or recoveries pursuant to any RBOC Agreement actually
received, realized or recovered by any party in respect of the Shared
Contingent Liability will be shared among the parties in such manner
as may be necessary so that the obligations of the parties for such
Shared Contingent Liability, net of such Insurance Proceeds or
recovery pursuant to an RBOC Agreement, will remain in proportion to
their respective Shared Percentages, regardless of which party or
parties may actually receive, realize or recover such Insurance
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Proceeds or amount pursuant to an RBOC Agreement.
(c) An insurer who would otherwise be obligated to pay any claim shall not
be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed
that no insurer or any other third party shall be entitled to a
"windfall" (i.e., a benefit they would not be entitled to receive in
the absence of the indemnification provisions) by virtue of the
indemnification provisions hereof. Nothing contained in this Agreement
or any Ancillary Agreement shall obligate any member of any Group to
seek to collect or recover any Insurance Proceeds.
5.5. PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including any Governmental Authority) who is not a member of the AT&T Services
Group, the Lucent Group or the NCR Group of any claim or of the commencement by
any such Person of any Action (collectively, a "Third Party Claim") with respect
to which an Indemnifying
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Party may be obligated to provide indemnification to such Indemnitee pursuant to
Section 5.2 or 5.3, or any other Section of this Agreement or any Ancillary
Agreement, such Indemnitee shall give such Indemnifying Party and, if AT&T is
not the Indemnifying Party, AT&T written notice thereof within 20 days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. If any Person shall receive notice or
otherwise learn of the assertion of a Third Party Claim which may reasonably be
determined to be a Shared Contingent Liability, such Person (if other than AT&T)
shall give AT&T and any other party to this Agreement written notice thereof
within 20 days after becoming aware of such Third Party Claim. Any such notice
shall describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the failure of any Indemnitee or other Person to give notice as
provided in this Section 5.5(a) shall not relieve the related Indemnifying Party
of its obligations under this Article V, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) If the Indemnitee, the party receiving any notice pursuant to Section
5.5(a) or any other party to this Agreement believes that the Third
Party Claim is or may be a Shared Contingent Liability, such
Indemnitee or other party may make a Determination Request at any time
following any notice given by the Indemnitee to an Indemnifying Party
or given by any other Person to AT&T pursuant to Section 5.5(a). AT&T
may make such a Determination Request at any time. Unless all parties
have acknowledged that the applicable Third Party Claim is not a
Shared Contingent Liability or unless a determination to such effect
has been made in accordance with Section 6.6, AT&T shall be entitled
(but not obligated) to assume the defense of such Third Party Claim as
if it were the Indemnifying Party hereunder. In any such event, AT&T
shall be entitled to reimbursement of all the costs and expenses
(including allocated costs of in-house counsel and other personnel) of
such defense once a final determination or acknowledgment is made as
to the status of the Third Party Claim from the applicable party or
parties that would have been required to pay such amounts if the
status of the Third Party Claim had been determined immediately;
provided that, if such Third Party Claim is determined to be a Shared
Contingent Liability, such costs and expenses shall be shared as
provided in Section 5.5(c).
(c) AT&T shall assume the defense of, and may seek to settle or
compromise, any Third Party Claim that is a Shared Contingent
Liability, and the costs and expenses (including allocated costs of
in-house counsel and other personnel) thereof shall be included in the
calculation of the amount of the applicable Shared Contingent
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Liability in determining the reimbursement obligations of the other
parties with respect thereto pursuant to Section 6.4. Any Indemnitee
in respect of a Shared Contingent Liability shall have the right to
employ separate counsel and to participate in (but not control) the
defense, compromise, or settlement thereof, but all fees and expenses
of such counsel shall be the expense of such Indemnitee.
(d) Other than in the case of a Shared Contingent Liability, an
Indemnifying Party may elect to defend (and, unless the Indemnifying
Party has specified any reservations or exceptions, to seek to settle
or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30
days after the receipt of notice from an Indemnitee in accordance with
Section 5.5(a) (or sooner, if the nature of such Third Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its
election whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any
reservations or exceptions. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ
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separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such
counsel shall be the expense of such Indemnitee except as set forth in
the next sentence. In the event that (i) the Third Party Claim is not
a Shared Contingent Liability and (ii) the Indemnifying Party has
elected to assume the defense of the Third Party Claim but has
specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses
of one separate counsel for all Indemnitees shall be borne by the
Indemnifying Party.
(e) Other than in the case of a Shared Contingent Liability, if an
Indemnifying Party elects not to assume responsibility for defending a
Third Party Claim, or fails to notify an Indemnitee of its election as
provided in Section 5.5(d), such Indemnitee may defend such Third
Party Claim at the cost and expense (including allocated costs of
in-house counsel and other personnel) of the Indemnifying Party.
(f) Unless the Indemnifying Party has failed to assume the defense of the
Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim that is not
a Shared Contingent Liability without the consent of the Indemnifying
Party. No Indemnitee may settle or compromise any Third Party Claim
that is a Shared Contingent Liability without the consent of AT&T.
(g) In the case of a Third Party Claim that is not a Shared Contingent
Liability, no Indemnifying Party shall consent to entry of any
judgment or enter into any settlement of the Third Party Claim without
the consent of the Indemnitee if the effect thereof is to permit any
injunction, declaratory judgment, other order or other nonmonetary
relief to be entered, directly or indirectly, against any Indemnitee.
In the case of a Third Party Claim that is a Shared Contingent
Liability, AT&T shall not consent to entry of any judgment or enter
into any settlement of the Third Party Claim without the consent of
the Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be
entered, directly or indirectly, against any Indemnitee.
(h) The provisions of Section 5.5 and Section 5.6 shall not apply to Taxes
(which are covered by the Tax Sharing Agreement).
5.6. ADDITIONAL MATTERS. (a) Any claim on account of a Liability which does
not result from a Third Party Claim shall be asserted by written notice given by
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the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party as contemplated by this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place
of such Indemnitee as to any events or circumstances in respect of
which such Indemnitee may have any right, defense or claim relating to
such Third Party Claim against any claimant or plaintiff asserting
such Third Party Claim or against any other person. Such Indemnitee
shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense (including allocated costs of in-house
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counsel and other personnel) of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim; provided, however,
that AT&T shall be entitled to control the prosecution of any such
right, defense or claim in respect of any Shared Contingent Liability.
(c) In the event of an Action in which the Indemnifying Party is not a
named defendant, if the Indemnifying Party shall so request, the
parties shall endeavor to substitute the Indemnifying Party for the
named defendant or, in the case of a Shared Contingent Liability, add
the Indemnifying Party as a named defendant if at all practicable. If
such substitution or addition cannot be achieved for any reason or is
not requested, the named defendant shall allow the Indemnifying Party
to manage the Action as set forth in this Section and, subject to
Section 6.4 with respect to Shared Contingent Liabilities, the
Indemnifying Party shall fully indemnify the named defendant against
all costs of defending the Action (including court costs, sanctions
imposed by a court, attorneys' fees, experts' fees and all other
external expenses, and the allocated costs of in-house counsel and
other personnel), the costs of any judgment or settlement, and the
cost of any interest or penalties relating to any judgment or
settlement.
5.7. REMEDIES CUMULATIVE. The remedies provided in this Article V shall be
cumulative and, subject to the provisions of Article IX, shall not preclude
assertion by any Indemnitee of any other rights or the seeking of any and all
other remedies against any Indemnifying Party.
5.8. SURVIVAL OF INDEMNITIES. The rights and obligations of each of AT&T,
Lucent and NCR and their respective Indemnitees under this Article V shall
survive the sale or other transfer by any party of any Assets or businesses or
the assignment by it of any Liabilities.
5.9. RBOC AGREEMENT PROCEDURES. (a) With respect to the RBOC Agreements,
and except as otherwise provided in this Section 5.9 or as otherwise agreed by
the parties hereto, AT&T shall be the party to provide and receive notices and
all other information to and from the RBOCs, and otherwise to deal with the
RBOCs, in respect of all matters arising under the RBOC Agreements or the RBOC
Plan. Without limiting the foregoing, AT&T shall continue as the representative
of all Groups to the contingent liability oversight committee, except as and to
the extent AT&T and the other parties to the RBOC Agreements may otherwise
agree.
(b) After the date hereof, AT&T and Lucent will cooperate with each other
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to take reasonable steps to transfer to Lucent the responsibilities
for providing and receiving notices and other information to and from,
and for otherwise dealing with, the RBOCs in respect of Lucent
Liabilities and any Nassau Metals Liabilities that may be subject to
sharing with the RBOCs under any RBOC Agreements (other than Shared
Contingent Liabilities, which will be controlled by AT&T in accordance
with the provisions of Section 5.5(c)), including the right to receive
directly from the RBOCs any sharing payments that may be due from the
RBOCs under any RBOC Agreements in respect of Lucent Liabilities or
Nassau Metals Liabilities. Unless and until such responsibilities are
transferred to Lucent in accordance with the foregoing, the provisions
of the following paragraphs (c), (d) and (e) will apply.
(c) In the event that Lucent determines that any Lucent Liability or any
Nassau Metals Liability (other than a Shared Contingent Liability) is
or may be subject to sharing with the RBOCs pursuant to any RBOC
Agreement, and Lucent so requests, AT&T will promptly submit any
notice, claim or other information or material with respect
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thereto as may be required by such RBOC Agreement and provided by
Lucent to AT&T in accordance with the notice provisions of Section
12.5 hereof. Upon receipt of any amounts from any RBOCs with respect
to their sharing obligation under an RBOC Agreement relating to an
Lucent Liability or any Nassau Metals Liability (other than a Shared
Contingent Liability), AT&T will promptly remit such amounts to
Lucent. AT&T will also forward to Lucent, in accordance with the
notice provisions of Section 12.5 hereof, any notices, information or
other materials that it may receive from the RBOCs pursuant to such
RBOC Agreement in respect of any Lucent Liability or any Nassau Metals
Liability. Notwithstanding the foregoing, in no event shall AT&T have
any liability for its failure or delay in submitting or forwarding any
such notice, claim, information or other material except to the extent
Lucent is prejudiced thereby. AT&T shall have no obligation to send,
deliver or make any such notice or claim, or take any other action
under any RBOC Agreement in respect of any Lucent Liability or any
Nassau Metals Liability, unless Lucent shall request that AT&T do so,
and provide AT&T with any necessary notice, claim or other information
or material, as set forth above.
(d) In the event any member of the Lucent Group desires to commence an
arbitration or other proceeding to recover any amounts that may be due
under any RBOC Agreement in respect of an Lucent Liability or any
Nassau Metals Liability (other than a Shared Contingent Liability),
AT&T will take such action as such member of the Lucent Group may
reasonably request to commence such arbitration or other proceeding in
accordance with such RBOC Agreement, including consenting to be the
named party in such arbitration or other proceeding, but such
arbitration or other proceeding will be managed and controlled by such
member of the Lucent Group and such member of the Lucent Group will be
responsible for the prosecution of such arbitration or other
proceeding and all decisions made with respect thereto.
(e) Lucent will, upon receipt of any invoice therefor, promptly reimburse
AT&T for all costs or expenses (including allocated costs of in-house
counsel and other personnel) incurred in taking any actions pursuant
to the foregoing paragraphs (c) and (d), and will defend, indemnify
and hold harmless AT&T and each other AT&T Indemnitee with respect to
all matters taken at the direction of or on behalf of any member of
the Lucent Group in connection with any RBOC Agreement.
(f) Each party hereto further agrees that it will from time to time
promptly provide AT&T with all such information, notices and other
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materials (and shall make available the former, current and future
directors, officers, employees, other personnel and agents of the
members of its respective Group as witnesses and any books, records or
other documents within its control or which it otherwise has the
ability to make available) as AT&T may determine to be necessary or
advisable to permit AT&T to pursue any rights or potential rights
under each such RBOC Agreement, to perform the obligations of any
member of the AT&T Group under each such RBOC Agreement in accordance
with the respective terms thereof and to defend itself, its Affiliates
and any other Person for which AT&T may have any indirect liability
(through an indemnification obligation or otherwise) from any claims
or potential claims thereunder.
5.10. ALLEGED INFRINGEMENT OR MISAPPROPRIATION. (a) The provisions of this
Section 5.10 shall apply notwithstanding any other provisions of this Agreement
or any Ancillary Agreement. In the event of any claim, action, proceeding or
suit by a third party against any member of the AT&T Group alleging an
infringement of any patent, copyright, trademark or misappropriation of a trade
secret with respect to any product, software or
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other material provided by or ordered from the Lucent Business prior to the
Closing Date (other than any such product, software or other material provided
under and ordered pursuant to the AT&T General Purchase Agreement, or any
supplemental or related agreement thereto, with respect to which an infringement
or misappropriation indemnity is provided under such agreement) for use by the
AT&T Services Business or the NCR Business (whether used alone or in combination
with any product, software or other material provided by the Lucent Business or
by a third party), Lucent, at its expense, shall defend and hold harmless each
such member of the AT&T Group with respect to such claim, action, proceeding or
suit, subject to the conditions and exceptions stated in paragraphs (b), (c) and
(d) below. Lucent shall reimburse each such member of the AT&T Group for all
costs, expenses or attorneys' fees (including allocated costs of in-house
counsel and other personnel) incurred at Lucent's written request or
authorization, and shall indemnify each such member of the AT&T Group against
any liability assessed against it by final judgment, on account of such
infringement or misappropriation arising out of such use.
(b) If the use by any member of the AT&T Group of any such product,
software or other material referred to in Section 5.10(a) is enjoined
or in the opinion of such member of the AT&T Group is likely to be
enjoined, Lucent shall, at its expense and at the sole option of such
member of the AT&T Group, (i) replace the enjoined product, software
or materials with a substitute free of any infringement; (ii) modify
the enjoined product, software or materials so that they will be free
of the infringement; or (iii) procure for such member of the AT&T
Group a license or other right to use the enjoined product, software
or materials. In the alternative, such member of the AT&T Group, may
at its option, procure a license with a reasonable royalty rate
payable to the third party alleging infringement, and Lucent shall
reimburse, indemnify and hold harmless such member of the AT&T Group
for all liability for payment of such reasonable royalty.
(c) AT&T or another member of the AT&T Group shall give Lucent prompt
written notice of all such claims, actions, proceedings or suits
alleging infringement or misappropriation and Lucent shall have full
and complete authority to assume the sole defense thereof, including
appeals, and to settle the same; provided, however, that this does not
limit any rights of any member of the AT&T Group concerning
injunctions addressed in Section 5.10(b). The members of the AT&T
Group shall, upon Lucent's request and at Lucent's expense, furnish
all information and assistance available to such members of the AT&T
Group and cooperate in every reasonable way to facilitate the defense
and/or settlement of any such claim, action, proceeding or suit.
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(d) The foregoing indemnity will not apply to any alleged infringement or
misappropriation if and to the extent such alleged infringement or
misappropriation arises from (i) the use by any member of the AT&T
Group of any product, software or other material provided by the
Lucent Business, in combination with any product, software or other
material provided after the Closing Date by a third party (other than
any third-party product, software, other material or components
furnished to such member of the AT&T Group by any member of the Lucent
Group), or (ii) any changes made by any member of the AT&T Group after
the Closing Date in any combination of any product, software or other
material provided by the Lucent Business, with any product, software
or other material provided by a third party (other than any
third-party product, software, other material or components furnished
by the Lucent Group), except for the addition of any product, software
or other material provided by any member of the Lucent Group after the
Closing Date to any such combination in place as of the Closing Date.
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ARTICLE VI
CONTINGENT GAINS AND CONTINGENT LIABILITIES
6.1. DEFINITIONS RELATING TO CONTINGENT GAINS AND CONTINGENT
LIABILITIES.
For the purpose of this Agreement the following terms shall have the following
meanings:
(a) CONTINGENT CLAIM COMMITTEE means a committee composed of one
representative designated from time to time by each of AT&T, NCR and
Lucent that shall be established in accordance with Section 6.6.
(b) CONTINGENT GAIN means any claim or other right of AT&T, Lucent, NCR or
any their respective Affiliates, whenever arising, against any Person
other than AT&T, Lucent, NCR or any of their respective Affiliates, if
and to the extent that (i) such claim or right has accrued as of the
Closing Date (based on then existing law) and (ii) the existence or
scope of the obligation of such other Person as of the Closing Date
was not acknowledged, fixed or determined in any material respect, due
to a dispute or other uncertainty as of the Closing Date or as a
result of the failure of such claim or other right to have been
discovered or asserted as of the Closing Date. A claim or right
meeting the foregoing definition shall be considered a Contingent Gain
regardless of whether there was any Action pending, threatened or
contemplated as of the Closing Date with respect thereto. For purposes
of the foregoing, a claim or right shall be deemed to have accrued as
of the Closing Date if all the elements of the claim necessary for its
assertion shall have occurred on or prior to the Closing Date, such
that the claim or right, were it asserted in an Action on or prior to
the Closing Date, would not be dismissed by a court on ripeness or
similar grounds. Notwithstanding the foregoing, none of (i) any
payment to any member of any Group pursuant to or in respect of any of
the RBOC Agreements, (ii) any Insurance Proceeds, (iii) any Excluded
Assets, (iv) any reversal of any litigation or other reserve, or (v)
any matters relating to Taxes (which are governed by the Tax Sharing
Agreement) shall deemed to be a Contingent Gain.
(c) CONTINGENT LIABILITY means any Liability, other than Liabilities for
Taxes (which are governed by the Tax Sharing Agreement), of AT&T,
Lucent, NCR or any of their respective Affiliates, whenever arising,
to any Person other than AT&T, Lucent, NCR or any of their respective
Affiliates, if and to the extent that (i) such Liability has accrued
as of the Closing Date (based on then existing law) and (ii) the
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existence or scope of the obligation of AT&T, Lucent, NCR or any of
their respective Affiliates as of the Closing Date with respect to
such Liability was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the
Closing Date or as a result of the failure of such Liability to have
been discovered or asserted as of the Closing Date (it being
understood that the existence of a litigation or other reserve with
respect to any Liability shall not be sufficient for such Liability to
be considered acknowledged, fixed or determined). In the case of any
Liability a portion of which had accrued as of the Closing Date and a
portion of which accrues after the Closing Date, only that portion
that had accrued as of the Closing Date shall be considered a
Contingent Liability. For purposes of the foregoing, a Liability shall
be deemed to have accrued as of the Closing Date if all the elements
necessary for the assertion of a claim with respect to such Liability
shall have occurred on or prior to the Closing Date, such that the
claim, were it asserted in an Action on or prior to the Closing Date,
would not be dismissed by a court on ripeness or similar grounds. For
purposes of clarification of the foregoing, the parties agree that no
Liability relating to, arising out of or resulting from any obligation
of any Person to perform the executory portion of any contract or
agreement existing as of the Closing Date, or to satisfy
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any obligation accrued under any Plan (as defined in the Employee
Benefits Agreement) as of the Closing Date, shall deemed to be a
Contingent Liability.
(d) EXCESS PORTION means that portion, if any, of the aggregate Value of
all amounts actually paid by AT&T, Lucent or NCR (in each case,
together with any members of its respective Group), in respect of any
single Exclusive Contingent Liability of such Group or any Related
Exclusive Contingent Liabilities of such Group that is in excess of
$100 million.
(e) EXCLUSIVE AT&T CONTINGENT GAIN means any Contingent Gain if such
Contingent Gain primarily relates to any AT&T Services Business,
including the matters listed or described on Schedule 6.1(e) hereto,
or if such Contingent Gain is expressly assigned to AT&T pursuant to
this Agreement or any Ancillary Agreement.
(f) EXCLUSIVE LUCENT CONTINGENT GAIN means any Contingent Gain if such
Contingent Gain primarily relates to any Lucent Business, including
the matters listed or described on Schedule 6.1(f) hereto, or if such
Contingent Gain is expressly assigned to Lucent pursuant to this
Agreement or any Ancillary Agreement.
(g) EXCLUSIVE NCR CONTINGENT GAIN means any Contingent Gain if such
Contingent Gain primarily relates to any NCR Business, including the
matters listed or described on Schedule 6.1(g) hereto, or if such
Contingent Gain is expressly assigned to NCR pursuant to this
Agreement or any Ancillary Agreement.
(h) EXCLUSIVE AT&T CONTINGENT LIABILITY means any Contingent Liability
(other than an RBOC Liability) if such Contingent Liability primarily
relates to any AT&T Services Business, including the matters listed or
described on Schedule 6.1(e) hereto (as supplemented pursuant to
Section 6.6(d)), or if such Contingent Liability is expressly assigned
to AT&T pursuant to this Agreement or any Ancillary Agreement.
(i) EXCLUSIVE CONTINGENT LIABILITY means any Exclusive AT&T Contingent
Liability, Exclusive NCR Contingent Liability or Exclusive Lucent
Contingent Liability.
(j) EXCLUSIVE LUCENT CONTINGENT LIABILITY means any Contingent Liability
(other than an RBOC Liability) if (i) such Contingent Liability
primarily relates to any Lucent Business or to the matters listed or
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described on Schedule 2.3(a)(v), including the matters listed or
described on Schedule 6.1(f) (as supplemented pursuant to Section
6.6(d)) hereto, (ii) such Contingent Liability relates to, arises out
of or results from any Nassau Metals Liability, or (iii) such
Contingent Liability is expressly assigned to Lucent pursuant to this
Agreement or any Ancillary Agreement.
(k) EXCLUSIVE NCR CONTINGENT LIABILITY means any Contingent Liability
(other than an RBOC Liability) if such Contingent Liability primarily
relates to any NCR Business, including the matters listed or described
on Schedule 6.1(g) (as supplemented pursuant to Section 6.6(d))
hereto, or if such Contingent Liability is expressly assigned to NCR
pursuant to this Agreement or any Ancillary Agreement.
(l) RELATED EXCLUSIVE CONTINGENT LIABILITIES of any Group means:
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(i) in the case of any Exclusive Contingent Liabilities of such Group
other than Environmental Liabilities, any set or group of
Exclusive Contingent Liabilities of such Group (but not including
any Exclusive Contingent Liabilities of any other Group) arising
from:
(A) any single Action (including any group of Actions that are consolidated
as a single Action and any Action or Actions certified as a class action);
(B) any Action that is brought or threatened to be brought as a class
action and that is settled; or
(C) any group of Actions (other than workers' compensation Actions by or on
behalf of former or current employees of any member of such Group) asserting
claims in respect of repetitive stress injuries (RSIs) that arise or are alleged
to arise from the manufacture or sale of equipment, such as computer keyboards,
to third parties; and
(ii) in the case of any Exclusive Contingent Liabilities of such Group
that are Environmental Liabilities:
(A) any and all Environmental Liabilities of such Group associated with a
single site; and
(B) any and all Environmental Liabilities of such Group arising from
separate sites but listed on the National Priorities List as a single site.
Exclusive Contingent Liabilities of such Group that are Environmental
Liabilities of such Group arising from sites listed separately on the National
Priorities List shall not be deemed to be Related Exclusive Contingent
Liabilities. Whether sites not listed on the National Priorities List shall be
deemed to be a "single site" for purposes of clause (B) of this definition shall
be determined by applying the definition of "on-site" contained in 40 C.F.R.
300.5 (as in effect an as of the date of this Agreement) which provides that
"On-site means the areal extent of contamination and all suitable areas in very
close proximity to the contamination necessary for implementation of the
response action." Site identifications by a state or local Governmental
Authority similar in import to those authorized by the definition of "on-site"
in 40 C.F.R. Section 300.5 (as in effect as of the date of this Agreement) shall
similarly be determinative of whether sites not listed on the National
Priorities List shall be deemed to be a "single site" for purposes of this
definition.
(m) SHARED AT&T PERCENTAGE means 75%.
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(n) SHARED CONTINGENT GAIN means any Contingent Gain that is not an
Exclusive AT&T Contingent Gain, an Exclusive Lucent Contingent Gain or
an Exclusive NCR Contingent Gain, including any Contingent Gain
relating to, arising out of or resulting from the matters set forth on
Schedule 6.1(n).
(o) SHARED CONTINGENT LIABILITY means, without duplication:
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(i) any Contingent Liability that is not an Exclusive AT&T Contingent
Liability, an Exclusive Lucent Contingent Liability or an
Exclusive NCR Contingent Liability;
(ii) any RBOC Liability;
(iii) any Liability (other than Taxes) relating to, arising out of or
resulting from any Other Discontinued Operation; and
(iv) any Liability (other than Taxes) relating to, arising out of or
resulting from the matters set forth on Schedule 6.1(n).
(p) SHARED NCR PERCENTAGE means 3%.
(q) SHARED LUCENT PERCENTAGE means 22%.
(r) SHARED PERCENTAGE means the Shared AT&T Percentage, the Shared NCR
Percentage or the Shared Lucent Percentage, as the case may be.
(s) VALUE means the aggregate amount of all cash payments, the fair market
value of all non-cash payments and the incremental cost of providing
any goods or services made or provided in respect of any Exclusive
Contingent Liability or Related Exclusive Contingent Liabilities,
whether in satisfaction of any judgment, in settlement of any Action
or threatened Action or otherwise (including all costs and expenses
(including allocated costs of in-house counsel and other personnel),
of defending or investigating any Action or threatened Action), net
of: (i) any Insurance Proceeds received or realized in respect of the
applicable Exclusive Contingent Liability or Related Exclusive
Contingent Liabilities (applied in reduction of the applicable
Liability in the manner contemplated by Section 5.4), (ii) any Tax
benefits associated with such payments or the provision of such goods
or services (based on assumed effective Tax rate equal to the
effective Tax rate of the applicable party for the fiscal year
immediately preceding the year in which such payments are made or
goods or services provided (it being understood that the effective Tax
rate for any party whose earnings for such immediately preceding
fiscal year are consolidated for federal income tax purposes with
another corporation shall be the effective Tax rate of the corporation
filing such federal income tax return for such immediately preceding
fiscal year)), (iii) any amounts received pursuant to any RBOC
Agreement in respect of the Exclusive Contingent Liability or Related
Exclusive Contingent Liabilities, (iv) any other amounts recovered
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(including by way of set off) from a third party in connection with
any such Action or threatened Action and (v) the amount of any
reserve, account payable or similar accrual in respect of the
Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities, net of any offsetting receivables in respect of such
Exclusive Contingent Liability or Related Exclusive Contingent
Liabilities, in each case as reflected on the Lucent Balance Sheet or
the audited consolidated balance sheet of AT&T, including the notes
thereto, as of December 31, 1995 (and without giving effect to any
subsequent adjustment of any such reserve, account payable, accrual or
offsetting receivable).
6.2. CONTINGENT GAINS. (a) Each of AT&T, Lucent and NCR shall have sole and
exclusive right to any benefit received with respect to any Exclusive AT&T
Contingent Gain, Exclusive Lucent Contingent Gain or Exclusive NCR Contingent
Gain, respectively. Each of AT&T, Lucent and NCR shall have sole and exclusive
authority to commence, prosecute, settle, manage, control, conduct, waive,
forego, release, discharge,
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forgive and otherwise determine all matters whatsoever with respect to any
Exclusive AT&T Contingent Gain, Exclusive Lucent Contingent Gain or Exclusive
NCR Contingent Gain, respectively.
(b) Any benefit that may be received from any Shared Contingent Gain shall
be shared among AT&T, Lucent and NCR in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared NCR
Percentage, respectively, and shall be paid in accordance with Section
6.5. Notwithstanding the foregoing, AT&T shall have sole and exclusive
authority to commence, prosecute, settle, manage, control, conduct,
waive, forgo, release, discharge, forgive and otherwise determine all
matters whatsoever with respect to any Shared Contingent Gain. Neither
Lucent nor NCR shall take, or permit any member of their respective
Groups to take, any action (including commencing any claim) that would
interfere with such rights and powers of AT&T. AT&T shall use its
reasonable efforts to notify each of Lucent and NCR in the event that
it commences an Action with respect to a Shared Contingent Gain;
provided that the failure to provide such notice shall not give rise
to any rights on the part of Lucent or NCR against AT&T or affect any
other provision of this Section 6.2. Each of Lucent and NCR
acknowledges that AT&T may elect not to pursue any Shared Contingent
Gain for any reason whatsoever (including a different assessment of
the merits of any Action, claim or right than Lucent or NCR or any
business reasons that are in the best interests of AT&T or a member of
the AT&T Services Group, without regard to the best interests of any
member of the Lucent Group or the NCR Group) and that no member of the
AT&T Group shall have any liability to any Person (including any
member of the Lucent Group or the NCR Group) as a result of any such
determination.
(c) In the event of any dispute as to whether any claim or right is a
Contingent Gain or whether any Contingent Gain is a Shared Contingent
Gain, an Exclusive AT&T Contingent Gain, an Exclusive Lucent
Contingent Gain or an Exclusive NCR Contingent Gain, AT&T may, but
shall not be obligated to, commence prosecution or other assertion of
such claim or right pending resolution of such dispute. In the event
that AT&T commences any such prosecution or assertion and, upon
resolution of the dispute, a party other than AT&T is determined
hereunder to have the exclusive right to such claim or right, AT&T
shall, promptly upon the request of such other party, discontinue the
prosecution or assertion of such right or claim and transfer the
control thereof to the party so determined to have the right thereto.
In such event, the party having the right to such claim or right will
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reimburse AT&T for all costs and expenses (including allocated costs
of in-house counsel and other personnel), reasonably incurred prior to
resolution of such dispute in the prosecution or assertion of such
claim or right.
6.3. EXCLUSIVE CONTINGENT LIABILITIES. (a) Except as otherwise provided in
this Section 6.3, each Exclusive Contingent Liability or Related Exclusive
Contingent Liability shall constitute a Liability for which indemnification is
provided by AT&T, Lucent or NCR, as the case may be, pursuant to Article V
hereof and shall be subject to the procedures set forth in Article V with
respect thereto.
(b) Notwithstanding anything to the contrary in this Agreement, except as
set forth in paragraph (f) of this Section 6.3, if the aggregate Value
of all amounts paid by AT&T, Lucent or NCR (in each case, together
with any members of its respective Group) in respect of any single
Exclusive Contingent Liability of such Group or any Related Exclusive
Contingent Liabilities of such Group is in excess of $100 million,
each of AT&T, Lucent or NCR, as the case may be, shall be entitled to
reimbursement from
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each of the others for a share of the Excess Portion in accordance
with the following percentages:
(i) in the case of Exclusive AT&T Contingent Liabilities, AT&T shall
bear 75 percent of such Excess Portion, Lucent shall bear 22
percent of such Excess Portion, and NCR shall bear 3 percent of
such Excess Portion;
(ii) in the case of Exclusive NCR Contingent Liabilities, NCR shall
bear 50 percent of such Excess Portion, AT&T shall bear 37 percent
of such Excess Portion and Lucent shall bear 13 percent of such
Excess Portion; and
(iii) in the case of Exclusive Lucent Contingent Liabilities, Lucent
shall bear 50 percent of such Excess Portion, AT&T shall bear 47
percent of such Excess Portion and NCR shall bear 3 percent of
such Excess Portion.
(c) In the event that after any payment is made by any party to any other
party in accordance with the allocation set forth in Section 6.3(b),
any party or any member of such party's Group receives any Insurance
Proceeds, obtains any recovery pursuant to an RBOC Agreement or
obtains any other amounts that, in any such case, would reduce the
Value of all amounts paid by such party and the members of its Group
in respect of the applicable Exclusive Contingent Liability or
Liabilities, such party will promptly notify each other party of the
receipt of such Insurance Proceeds or recovery of such amount pursuant
to an RBOC Agreement or otherwise and will promptly reimburse each
other party for the amount of any payment that such first party would
not have been entitled to receive if it had received such Insurance
Proceeds or obtained such recovery pursuant to an RBOC Agreement or
otherwise on or prior to the date it received a payment pursuant to
this Section. Each such repayment will be accompanied by interest
accruing from the date of receipt of the original payment pursuant to
this Section to the date of such repayment at a rate equal to the
Prime Rate plus 2% per annum.
(d) Each party agrees to use its reasonable best efforts to advise each
other party if it becomes aware of one or more Exclusive Contingent
Liabilities that may result in a Value of $100 million or more;
provided, however, that no failure to give any such notice shall
relieve any other party of any obligation pursuant to this Agreement.
In the event of any such notice, or if any other party otherwise
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determines that any such risk may exist, the other parties will be
entitled at their own expense to monitor any such Action. In any such
event, the parties will enter into a mutually acceptable joint defense
agreement so as to maintain to the extent reasonably practicable the
attorney-client privilege with respect thereto.
(e) It shall not be a defense to any obligation by any party to pay any
amount in respect of any Excess Portion that such party was not
consulted in the defense thereof, that such party's views or opinions
as to the conduct of such defense were not accepted or adopted, that
such party does not approve of the quality or manner of the defense
thereof or that such Excess Portion was incurred by reason of a
settlement rather than by a judgment or other determination of
liability (even if, subject to Section 5.5(g), such settlement was
effected without the consent or over the objection of such party).
(f) Neither AT&T nor Lucent (nor any member of their respective Groups)
will be entitled to reimbursement pursuant to this Section 6.3 for a
share of the Excess Portion in respect of any Exclusive Contingent
Liability or Related Exclusive Contingent Liabilities that would be
subject to sharing with the RBOCs pursuant to any
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RBOC Agreement, unless the applicable party shall have pursued in good
faith any recovery to which it or any member of its Group may be
entitled under such RBOC Agreement in respect of such Exclusive
Contingent Liability or Related Exclusive Contingent Liabilities.
6.4. SHARED CONTINGENT LIABILITIES. (a) As set forth in Section 5.5(c),
AT&T shall assume the defense of, and may seek to settle or compromise, any
Third Party Claim that is a Shared Contingent Liability, and the costs and
expenses (including allocated costs of in-house counsel and other personnel)
thereof shall be included in the calculation of the amount of the applicable
Shared Contingent Liability in determining the reimbursement obligations of the
other parties with respect thereto pursuant to this Section 6.4.
(b) Each of AT&T, Lucent and NCR shall be responsible for its Shared
Percentage of any Shared Contingent Liability. It shall not be a
defense to any obligation by any party to pay any amount in respect of
any Shared Contingent Liability that such party was not consulted in
the defense thereof, that such party's views or opinions as to the
conduct of such defense were not accepted or adopted, that such party
does not approve of the quality or manner of the defense thereof or
that such Shared Contingent Liability was incurred by reason of a
settlement rather than by a judgment or other determination of
liability (even if, subject to Section 5.5(g), such settlement was
effected without the consent or over the objection of such party).
6.5. PAYMENTS. (a) Any amount owed in respect of any Shared Contingent
Liabilities (including reimbursement for the cost or expense (including
allocated costs of inhouse counsel and other personnel) of defense of (i) any
Third Party Claim that is a Shared Contingent Liability), (ii) any Excess
Portion of any Exclusive Contingent Liabilities or of any Related Exclusive
Contingent Liabilities or (iii) any Shared Contingent Gains pursuant to this
Article VI shall be remitted promptly after the party entitled to such amount
provides an invoice (including reasonable supporting information with respect
thereto) to the party owing such amount.
(b) In the case of any Shared Contingent Liability, AT&T shall be entitled
to reimbursement from Lucent and NCR in advance of a final
determination of any Action for amounts paid in respect of costs and
expenses (including allocated costs of in-house counsel and other
personnel) related thereto, from time to time as such costs and
expenses are incurred. In the case of any Shared Contingent Gain, AT&T
shall be entitled to retain from the amount of the Shared Contingent
Gain otherwise payable to Lucent and NCR, Lucent's and NCR's
<PAGE>
respective Shared Percentage of the costs and expenses (including
allocated costs of in-house counsel and other personnel) paid or
incurred by or on behalf of any member of the AT&T Services Group in
connection with such Shared Contingent Gain.
(c) Any amounts billed and properly payable in accordance with this
Article VI that are not paid within 30 days of such bill shall bear
interest at the Prime Rate plus 2% per annum.
6.6. PROCEDURES TO DETERMINE STATUS OF CONTINGENT LIABILITY OR
CONTINGENT
GAIN. (a) As of the Closing Date, and with respect to Actions not set forth on
Schedules 6.1(e), 6.1(f), 6.1(g) or 6.1(n), AT&T, Lucent and NCR will form the
Contingent Claim Committee for the purpose of resolving any disagreement among
the parties as to whether:
(i) any claim or right is a Contingent Gain;
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(ii) any Contingent Gain is a Shared Contingent Gain, an Exclusive AT&T
Contingent Gain, an Exclusive Lucent Contingent Gain or an
Exclusive NCR Contingent Gain;
(iii) any Liability is a Contingent Liability;
(iv) any Contingent Liability is a Shared Contingent Liability, an
Exclusive AT&T Contingent Liability, an Exclusive Lucent
Contingent Liability or an Exclusive NCR Contingent Liability; or
(v) any Exclusive Contingent Liabilities constitute Related Exclusive
Contingent Liabilities.
(b) Any of the parties may refer any potential Contingent Gains or
Contingent Liabilities to the Contingent Claim Committee for
resolution of a disagreement described in Section 6.6(a) and the
Contingent Claim Committee's determination (which shall be made within
30 days of such referral), if unanimous, shall be binding on all of
the parties and their respective successors and assigns. In the event
that the Contingent Claim Committee cannot reach a unanimous
determination as to the nature or status of any such Contingent
Liabilities or Contingent Gains within 30 days after such referral,
the issue will be submitted for arbitration pursuant to the procedures
set forth in Article IX of this Agreement, subject to Section 9.8. The
outcome of the arbitration pursuant to Article IX (subject to Section
9.8) shall be final and binding on all parties and their respective
successors and assigns.
(c) In resolving, with respect to any matter not set forth in Schedules
6.1(e), 6.1(f), 6.1(g) and 6.1(n), whether (i) any Contingent Gain is
a Shared Contingent Gain, an Exclusive AT&T Contingent Gain, an
Exclusive Lucent Contingent Gain or an Exclusive NCR Contingent Gain
or (ii) any Contingent Liability is a Shared Contingent Liability, an
Exclusive AT&T Contingent Liability, an Exclusive Lucent Contingent
Liability or an Exclusive NCR Contingent Liability, the categorization
of Contingent Claims and Contingent Liabilities existing as of the
Closing Date, as reflected in Schedules 6.1(e), 6.1(f), 6.1(g) and
6.1(n), shall be considered and used as a precedential guide.
(d) At any time or from time to time prior to the Closing Date, the
Solicitor General of AT&T, following consultation with representatives
of each of Lucent and NCR, may amend or supplement any of Schedules
6.1(e), 6.1(f), 6.1(g) and 6.1(n). Without limiting the foregoing,
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prior to the Closing Date, the parties will continue to review
Schedule 6.1(n) to determine whether any matter set forth therein will
be reassigned as an Exclusive Contingent Liability.
6.7. CERTAIN CASE ALLOCATION MATTERS. Lucent and NCR acknowledge that Third
Party Claims may be asserted in respect of alleged repetitive stress injuries in
a single Action (including a group of consolidated Actions) that involve both
computer keyboards or related equipment manufactured in the conduct of the NCR
Business (which would constitute an Exclusive NCR Contingent Liability) and
computer keyboards or related equipment manufactured in the conduct of the
discontinued computer operations of AT&T and its Affiliates, other than any
member of the NCR Group (which would constitute an Exclusive Lucent Contingent
Liability). Lucent and NCR agree to use their reasonable best efforts to share
responsibility (including for all costs and expenses (including allocated costs
of in-house counsel and other personnel)) for any such Third Party Claims or
Actions, notwithstanding any allocation of such Actions set forth in
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<PAGE>
Schedules 6.1(e), 6.1(f), 6.1(g) and 6.1(n), so that, to the maximum extent
reasonably practicable, the parties will have the same rights and obligations as
would have been applicable if such matters had been commenced as separate
Actions. Third Party Claims with respect to computer keyboards or related
equipment manufactured in the conduct of the NCR Business shall not be deemed to
be Related Exclusive Contingent Liabilities with Third Party Claims with respect
to any computer keyboards or related equipment manufactured in the conduct of
the discontinued computer operations of AT&T and its Affiliates (other than any
member of the NCR Group).
ARTICLE VII
INTERIM OPERATIONS AND CERTAIN OTHER MATTERS
7.1. INSURANCE MATTERS. (a) Lucent agrees that it will pay to AT&T $1
million per month (prorated on a daily basis for any partial month) in respect
of the period from the date hereof until the Distribution Date, such amount to
be payable in arrears by the 10th day of the next succeeding month, in respect
of Insurance Policies under which Lucent will continue to have coverage
following the date hereof. AT&T and Lucent agree to cooperate in good faith to
provide for an orderly transition of insurance coverage from the date hereof
through the Distribution Date and for the treatment of any Insurance Policies
that will remain in effect following the Closing Date on a mutually agreeable
basis. In no event shall AT&T, any other member of the AT&T Group or any AT&T
Indemnitee or NCR Indemnitee have liability or obligation whatsoever to any
member of the Lucent Group in the event that any Insurance Policy or other
contract or policy of insurance shall be terminated or otherwise cease to be in
effect for any reason, shall be unavailable or inadequate to cover any Liability
of any member of the Lucent Group for any reason whatsoever or shall not be
renewed or extended beyond the current expiration date.
(b) As promptly as practicable, each party shall use its reasonable best
efforts to consummate the transactions set forth on Schedule 7.1(b)
with respect to American Ridge and its Subsidiaries.
(c) (i) Except in the case of the Ridge Lucent Policies and except as
otherwise provided in any Ancillary Agreement, the parties intend by
this Agreement that Lucent and each other member of the Lucent Group
be successors-in-interest to all rights that any member of the Lucent
Group may have as of the Closing Date as a subsidiary, affiliate,
division or department of AT&T prior to the Closing Date under any
policy of insurance issued to AT&T by any insurance carrier
unaffiliated with AT&T or under any agreements related to such
policies executed and delivered prior to the Closing Date, including
<PAGE>
any rights such member of the Lucent Group may have, as an insured or
additional named insured, subsidiary, affiliate, division or
department, to avail itself of any such policy of insurance or any
such agreements related to such policies as in effect prior to the
Closing Date. At the request of Lucent, AT&T shall take all reasonable
steps, including the execution and delivery of any instruments, to
effect the foregoing; provided however that AT&T shall not be required
to pay any amounts, waive any rights or incur any Liabilities in
connection therewith.
(ii) Except in the case of the Ridge Lucent Policies and except as
otherwise contemplated by any Ancillary Agreement, after the
Closing Date, none of AT&T or Lucent or any member of their
respective Groups shall, without the consent of the other, provide
any such insurance carrier with a release, or amend, modify or
waive any rights under any such policy or agreement, if such
release, amendment, modification or
<PAGE>
<PAGE>
waiver would adversely affect any rights or potential rights of
any member of the other Group thereunder; provided however that
the foregoing shall not (A) preclude any member of any Group from
presenting any claim or from exhausting any policy limit, (B)
require any member of any Group to pay any premium or other amount
or to incur any Liability, or (C) require any member of any Group
to renew, extend or continue any policy in force. Each of Lucent
and AT&T will share such information as is reasonably necessary in
order to permit the other to manage and conduct its insurance
matters in an orderly fashion.
(d) This Agreement shall not be considered as an attempted assignment of
any policy of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of any member of the AT&T Group
in respect of any Insurance Policy or any other contract or policy of
insurance.
(e) Lucent does hereby, for itself and each other member of the Lucent
Group, their respective Affiliates (other than any member of the AT&T
Group), successors and assigns, and all Persons who at any time have
been shareholders, directors, officers, agents or employees of any
member of the Lucent Group (in each case, in their respective
capacities as such), agree that all Ridge Lucent Policies will
automatically be terminated in all respects as of the Distribution
Date (without any further action by any Person) and, as of such date,
remise, release and forever discharge each AT&T Indemnitee and each
NCR Indemnitee with respect thereto. Lucent agrees to indemnify,
defend and hold harmless each member of the AT&T Group and each AT&T
Indemnitee and NCR Indemnitee if any Person shall claim that it is
entitled to any payment from any of the foregoing in respect of any
Ridge Lucent Policy. At the request of AT&T, Lucent will take, or
cause to be taken, all action necessary to terminate any Ridge Lucent
Policies and all Liabilities of any member of the AT&T Group
thereunder, effective as of the Distribution Date.
(f) Lucent does hereby, for itself and each other member of the Lucent
Group, agree that no member of the AT&T Group or any AT&T Indemnitee
or NCR Indemnitee shall have any Liability whatsoever as a result of
the insurance policies and practices of AT&T and its Affiliates as in
effect at any time prior to the Closing Date, including as a result of
the level or scope of any such insurance, the creditworthiness of any
insurance carrier, the terms and conditions of any policy, the
adequacy or timeliness of any notice to any insurance carrier with
<PAGE>
respect to any claim or potential claim or otherwise.
(g) Nothing in this Agreement shall be deemed to restrict any member of
the Lucent Group from acquiring at its own expense any other insurance
policy in respect of any Liabilities or covering any period.
7.2. COLLECTION OF ACCOUNTS RECEIVABLE. (a) Lucent acknowledges on behalf
of itself and each other member of the Lucent Group that it is aware that the
Retained Receivables are Excluded Assets and that certain Persons that are
account debtors with respect to accounts receivables included in the Lucent
Assets (or that in the future may otherwise become payable to a member of the
Lucent Group) are also account debtors with respect to the Retained Receivables.
Lucent agrees that from and after the date hereof and prior to December 31,
1997, unless otherwise specifically directed by AT&T, Lucent, as agent for AT&T,
will take all commercially reasonable steps consistent with the Lucent
Business's current practices to service and collect the Retained Receivables.
AT&T and S&T will cooperate to establish as promptly as practicable mutually
acceptable operational procedures. In addition, Lucent will use all reasonable
best efforts to satisfy any conditions to the payment of any Retained
Receivables and to fulfill all obligations to
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<PAGE>
the applicable account debtors related to such Retained Receivables; provided,
however that if, in order to collect any Retained Receivables, Lucent is
required to engage a collection agency or to institute legal proceedings or any
other Action it shall be entitled to be reimbursed for its reasonable
out-of-pocket costs and expenses incurred in connection therewith. After
December 31, 1997, the parties will negotiate in good faith with respect to the
final disposition of any then outstanding Retained Receivables.
(b) Any payment made by an account debtor to Lucent or any member of the
Lucent Group with respect to an account receivable shall be applied to
the Retained Receivables (and paid over to AT&T in accordance with
this Section 7.2) before they are applied to any other account
receivable whenever arising for such account debtor (regardless of the
respective dates of such accounts receivable or of any specific
notation to the contrary by the applicable account debtor), unless the
applicable account debtor specifies that such payment shall be applied
to another account payable of such account debtor that (i) arose from
an order placed after the date of this Agreement and (ii) is both due
and paid prior to the first due date of any Retained Receivable or any
other account receivable of such account debtor.
(c) Each of AT&T and Lucent shall deliver to the other such schedules and
other information with respect to the Retained Receivables and the
accounts receivables included in the Lucent Assets as each shall
reasonably request from time to time in order to permit such parties
to reconcile their respective records and to monitor the collection of
all accounts receivable (whether Lucent Assets or Retained
Receivables). Each of Lucent and AT&T shall afford the other
reasonable access to its books and records relating to any accounts
receivable. Without limiting the foregoing, Lucent shall at all
times maintain the ability to provide to AT&T promptly upon request
a true and complete schedule of all Retained Receivables due and
owing as of the end of the prior month.
(d) By the 15th day of each month (or if such day is not a business day,
by the next business day), Lucent hereby irrevocably agrees to pay
over, or cause to be paid over, in immediately available funds to
AT&T, at no cost or charge to AT&T or any of its Affiliates (other
than any member of the Lucent Group), any and all amounts which were
received (or deemed received in accordance with Section 7.2(b)) during
the immediately preceding month by any member of the Lucent Group in
respect of the Retained Receivables. Any such amounts not paid over to
AT&T by the date specified in the first sentence of this Section
<PAGE>
7.2(d) shall bear interest at the Prime Rate plus 2% per annum.
(e) Nothing in this Agreement or any Ancillary Agreement shall be
construed to grant to any member of the Lucent Group any right, title
or interest in any Retained Receivable and no member of the Lucent
Group shall have any right or power to, and no member of the Lucent
Group shall, grant or suffer to exist any right of set off, lien or
any other Security Interest in any Retained Receivables or proceeds
thereof. Lucent will not, and it will not permit any member of the
Lucent Group to, extend or otherwise change the amount or other terms
of payment of any Retained Receivable, unless Lucent shall have paid
to AT&T an amount equal to the full amount of such Retained
Receivable. Lucent hereby irrevocably and unconditionally agrees that
it shall not assert (and it shall not permit any member of the Lucent
Group to assert) any offsets, claims, counterclaims or defenses in
respect of the Retained Receivables or its obligations to pay over any
such Retained Receivables to AT&T hereunder (whether existing on the
date hereof or arising hereafter and whether or not relating to the
transactions contemplated by this Agreement, any Ancillary Agreement
or otherwise).
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(f) AT&T shall retain the right to collect or seek to collect in such
manner as it may in its sole discretion determine all or any portion
of the Retained Receivables.
(g) Lucent hereby represents and warrants to AT&T that each Retained
Receivable constitutes a legal, valid and binding obligation of the
applicable account debtor enforceable against such account debtor in
accordance with its respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally,
and is not subject to any Security Interest or any other lien, claim,
defense or right of set-off.
(h) On or prior to February 15, 1996, Lucent shall deliver to AT&T a true
and correct list of each of the Retained Receivables in such form as
AT&T shall reasonably request. Such list shall specify the face amount
of each Retained Receivable and a summary of the total Retained
Receivables, including the allocations thereof among the Lucent
business units, the applicable credit loss reserve thereon and such
other information as AT&T shall reasonably request.
7.3. OPERATING FINANCIAL LIABILITIES. (a) As between Lucent and AT&T,
Lucent hereby irrevocably assumes and agrees to pay, perform, satisfy and
discharge all liabilities, obligations, contingencies and other Liabilities
under, or otherwise relating to, arising out of or resulting from, all Lucent
OFL's. For purposes of this Agreement, the term "Lucent OFL" means the OFL's
listed or described on Schedule 7.3(a) and any other OFL's that are primarily
related to, arise out of or result from any Lucent Asset, Lucent Liability
(including any Lucent Contract) or Lucent Business or that were otherwise
entered into in connection with the conduct of the Lucent Business. The parties
hereto acknowledge that there may be OFL's that are Lucent OFL's that are not
set forth or described on such Schedule 7.3(a), either because such OFL's are
entered into after the date hereof or because such OFL's were inadvertently
excluded from such Schedule. As a result, the parties agree to cooperate in good
faith to supplement Schedule 7.3(a) as any additional Lucent OFL's are
identified. In the event that any OFL is so added to such Schedule 7.3(a), AT&T
will retroactively bill Lucent in accordance with this Section 7.3 for any
amount payable by any member of the AT&T Group on or after the date hereof, and
AT&T will retroactively credit Lucent in accordance with this Section 7.3 for
any amount paid to any member of the AT&T Group on or after the date hereof,
together in each case with interest thereon from the date of payment by or to
any such member of the AT&T Group, as the case may be, to the date of settlement
of such bill or credit, at the AT&T CP Rate that would have been applicable if
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such Lucent OFL had originally been included on Schedule 7.3(a), subject to
increase pursuant to Section 7.3(c)(ii).
(b) (i) AT&T may, from time to time, set forth on Schedule 7.3(a) whether
any Lucent OFL's are to be paid, performed, satisfied and discharged
directly by Lucent. AT&T may at any time or from time to time on at
least 30 days' written notice to Lucent, modify such Schedule 7.3(a)
to change whether any Lucent OFL shall thereafter be paid, performed,
satisfied and discharged directly by Lucent or by AT&T. AT&T shall, in
the absence of any default by Lucent under this Section 7.3, pay, or
cause to be paid, all other Lucent OFL's, and Lucent agrees to
reimburse AT&T for such payments in accordance with the terms of this
Section 7.3. If Lucent is in default of any of its obligations under
this Section 7.3, AT&T shall no longer be required to pay, or cause to
be paid, any Lucent OFL's and Lucent shall be required directly to
pay, perform, satisfy and discharge such Lucent OFL's.
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(ii) In the event that payments are made by a third party under any
Lucent OFL, if Lucent is not in default of any of its obligations
under this Section 7.3, (A) if any such payment is made to any
member of the Lucent Group, such member of the Lucent Group will
be entitled to retain any such payments received by it, and (B) if
any such payment is made to any member of the AT&T Group, such
member of the AT&T Group shall, at AT&T's election, either remit
any such amounts it receives to Lucent or net such amounts against
payments AT&T is then required to make under any other Lucent OFL
or against payments then owed (whether or not then due) to AT&T by
Lucent hereunder.
(iii) In the event that payments are made by a third party under any
Lucent OFL, if Lucent is in default of any of its obligations
under this Section 7.3, (A) if any such payment is made to any
member of the Lucent Group, Lucent shall promptly remit any such
payments to AT&T, and (B) if any such payment is made to any
member of the AT&T Group, AT&T shall be entitled (but not
required) to apply any such payments to satisfy, any such breach
by Lucent, either, at AT&T's option, by netting amounts then owed
(whether or not then due) to AT&T by Lucent hereunder or by paying
over such monies in order to satisfy any obligation in respect of
any Lucent OFL.
(iv) In the event that payment or receipt of commodities or other
property is called for under any Lucent OFL, the parties will
mutually agree upon reasonable then current market-based
valuations to convert such payment or receipt into dollars, unless
Lucent determines to make delivery or take receipt under the
Lucent OFL in commodities or property.
(c) (i) AT&T shall issue a statement to Lucent for the payments due from
or payable to Lucent pursuant to this Section 7.3 in respect of any
month by the tenth business day of the following month. Each such
statement shall set forth the AT&T CP Rate for the immediately
preceding month. Interest will accrue and be payable by Lucent on all
amounts due pursuant to this Section 7.3 in respect of Lucent OFL's at
the AT&T CP Rate in effect for the month immediately preceding the
month in which the statement is issued from the date of payment of any
such amount by any member of the AT&T Group under any Lucent OFL to
the date of payment therefor to AT&T by Lucent. In the event payments
are due by AT&T to Lucent under this Section 7.3, AT&T will pay
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interest at the AT&T CP Rate in effect for the month immediately
preceding the month in which the statement is issued from the date of
receipt by AT&T under an Lucent OFL to the date of payment by AT&T.
All payments under this Section 7.3 shall be in same day funds.
(ii) Lucent agrees to pay AT&T any amounts due (including in respect of
interest) within 10 days of receipt of each statement. AT&T will
remit to Lucent any payments (including in respect of interest)
received by any member of the AT&T Group under any Lucent OFL (to
the extent not netted in accordance with Section 7.3(b)) within 10
days of the date of statement. Any amounts not paid when due shall
bear interest at the Prime Rate plus 2% per annum in lieu of the
AT&T CP Rate.
(d) (i) Lucent may prepay (or effect the early termination) of any Lucent
OFL's provided that no additional Liability is thereby created for any
member of the AT&T Group other than any Liabilities that are fully
discharged and satisfied by Lucent simultaneously with such prepayment
or early termination.
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(ii) Without AT&T's written consent, Lucent will not enter into or
permit any amendment, modification or waiver of any provision of
any Lucent OFL; provided that AT&T agrees that it will consent to
any such amendments, modifications or waivers that do not create
additional obligations or Liabilities for any member of the AT&T
Group or otherwise adversely affect any member of the AT&T Group.
(iii) Each party will give prompt notice to the other party of any
default by it or, if it becomes aware thereof, by any third party
under any Lucent OFL.
(iv) In the event that Lucent makes any payment in respect of an Lucent
OFL, Lucent will be subrogated to all rights of AT&T or any member
of the AT&T Group with respect to such Lucent OFL, including with
respect to collateral, to the extent of such payment.
7.4. CERTAIN BUSINESS MATTERS. (a) No member of any Group shall have any
duty to refrain from (i) engaging in the same or similar activities or lines of
business as any member of any other Group, (ii) doing business with any
potential or actual supplier or customer of any member of any other Group, or
(iii) engaging in, or refraining from, any other activities whatsoever relating
to any of the potential or actual suppliers or customers of any member of any
other Group.
(b) Each of AT&T, Lucent and NCR is aware that from time to time certain
business opportunities may arise which more than one Group may be
financially able to undertake, and which are, from their nature, in
the line of more than one Group's business and are of practical
advantage to more than one Group. In connection therewith, the parties
agree that if prior to (but not following) the Distribution Date, any
of AT&T, Lucent or NCR acquires knowledge of an opportunity that meets
the foregoing standard with respect to more than one Group, none of
AT&T, Lucent or NCR shall have any duty to communicate or offer such
opportunity to any of the others and may pursue or acquire such
opportunity for itself, or direct such opportunity to any other
Person, unless (i) such opportunity relates primarily to the AT&T
Services Business, the Lucent Business or the NCR Business, in which
case the party that acquires knowledge of such opportunity shall use
its reasonable best efforts to communicate and offer such opportunity
to AT&T, Lucent or NCR, respectively, or (ii) such opportunity relates
both to the AT&T Services Business and the Lucent Business but not
primarily to either one, in which case such party shall use its
reasonable best efforts to communicate and offer such opportunity to
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Lucent. Notwithstanding the foregoing, no party shall be required to
so communicate or offer any such opportunity if it would result in the
breach of any contract or agreement or violate any applicable law,
rule or regulation of any Governmental Authority, no party shall have
any obligation to finance (or provide any other assistance whatsoever)
to any other party in connection with any such opportunity. In the
event the foregoing clause (i) or (ii) is applicable, no party, other
than the party to whom the opportunity must be offered in accordance
with such clauses, shall pursue or acquire such opportunity for
itself, or direct such opportunity to any other Person, unless the
party to whom the opportunity is required to be offered does not
within a reasonable period of time begin to pursue, or does not
thereafter continue to pursue, such opportunity diligently and in good
faith.
7.5. LATE PAYMENTS. Except as expressly provided to the contrary in this
Agreement or in any Ancillary Agreement, any amount not paid when due pursuant
to this Agreement or any Ancillary Agreement (and any amounts billed or
otherwise invoiced or demanded and properly payable that are not paid within 30
days of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.
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7.6. TRANSITIONAL BELL LABS SERVICES. Prior to, on, and after the Closing
Date, AT&T and each member of the AT&T Group, shall have the right, to obtain
from Lucent or any member of the Lucent Group, the Identified Bell Labs
services, and such other services that are provided by Lucent Bell Laboratories
that AT&T may from time to time reasonably determine are necessary to assure a
smooth and orderly transition of the businesses, in each case on a commercially
reasonable basis. Each of the parties shall use their reasonable best efforts
to identify and document any such additional services on or prior to the
Closing Date; provided, however, that whether or not identified prior to the
Closing Date, prior to, on, and after the Closing Date, each member of the AT&T
Group shall continue to have the right to obtain such services, on commercially
reasonable terms, as contemplated by this Section 7.6.
ARTICLE VIII
EXCHANGE OF INFORMATION; CONFIDENTIALITY
8.1. AGREEMENT FOR EXCHANGE OF INFORMATION; ARCHIVES. (a) Each of
AT&T,
Lucent and NCR, on behalf of its respective Group, agrees to provide, or cause
to be provided, to each other Group, at any time before or after the
Distribution Date, as soon as reasonably practicable after written request
therefor, any Information in the possession or under the control of such
respective Group which the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative, tax or other proceeding or in order
to satisfy audit, accounting, claims, regulatory, litigation, tax or other
similar requirements, or (iii) to comply with its obligations under this
Agreement, any Ancillary Agreement or any Lucent OFL; provided, however, that in
the event that any party determines that any such provision of Information could
be commercially detrimental, violate any law or agreement, or waive any
attorneyclient privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(b) After the Closing Date, Lucent shall have access during regular
business hours (as in effect from time to time) to the documents and
objects of historic significance that relate to the Lucent Business
that are located in the AT&T Archives located at 5 Reineman Road,
Warren, New Jersey. Lucent may obtain copies (but not originals) of
documents for bona fide business purposes and may obtain objects for
exhibition purposes for commercially reasonable periods of time if
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required for bona fide business purposes, provided that Lucent shall
cause any such objects to be returned promptly in the same condition
in which they were delivered to Lucent and Lucent shall comply with
any rules, procedures or other requirements, and shall be subject to
any restrictions (including prohibitions on removal of specified
objects), that are then applicable to AT&T. Lucent shall pay $125 per
hour for archives research services (subject to increase from time to
time to reflect rates then in effect for AT&T generally). Nothing
herein shall be deemed to restrict the access of any member of the
AT&T Group or the NCR Group to any such documents or objects or to
impose any liability on any member of the AT&T Group if any such
documents or objects are not maintained or preserved by AT&T.
(c) After the date hereof, (i) Lucent shall maintain in effect at its own
cost and expense adequate systems and controls to the extent necessary
to enable the members of the AT&T Group to satisfy their respective
reporting, accounting, audit and other obligations, and (ii) Lucent
shall provide, or cause to be provided, to AT&T in such form as
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AT&T shall request, at no charge to AT&T, all financial and other data
and information as AT&T determines necessary or advisable in order to
prepare AT&T financial statements and reports or filings with any
Governmental Authority.
8.2. OWNERSHIP OF INFORMATION. Any Information owned by one Group that is
provided to a requesting party pursuant to Section 8.1 shall be deemed to remain
the property of the providing party. Unless specifically set forth herein,
nothing contained in this Agreement shall be construed as granting or conferring
rights of license or otherwise in any such Information.
8.3. COMPENSATION FOR PROVIDING INFORMATION. The party requesting such
Information agrees to reimburse the other party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting party. Except as may
be otherwise specifically provided elsewhere in this Agreement or in any other
agreement between the parties, such costs shall be computed in accordance with
the providing party's standard methodology and procedures.
8.4. RECORD RETENTION. To facilitate the possible exchange of Information
pursuant to this Article VIII and other provisions of this Agreement after the
Distribution Date, the parties agree to use their reasonable best efforts to
retain all Information in their respective possession or control on the
Distribution Date in accordance with the policies of AT&T as in effect on the
Closing Date. No party will destroy, or permit any of its Subsidiaries to
destroy, any Information which the other party may have the right to obtain
pursuant to this Agreement prior to the third anniversary of the date hereof
without first using its reasonable best efforts to notify the other party of the
proposed destruction and giving the other party the opportunity to take
possession of such information prior to such destruction; provided, however,
that in the case of any Information relating to Taxes or to Environmental
Liabilities, such period shall be extended to the expiration of the applicable
statute of limitations (giving effect to any extensions thereof).
8.5. LIMITATION OF LIABILITY. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Agreement which is an estimate or forecast, or which is based on an
estimate or forecast, is found to be inaccurate, in the absence of willful
misconduct by the party providing such Information. No party shall have any
liability to any other party if any Information is destroyed after reasonable
best efforts by such party to comply with the provisions of Section 8.4.
8.6. OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The
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rights and
obligations granted under this Article VIII are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in any Ancillary Agreement.
8.7. PRODUCTION OF WITNESSES; RECORDS; COOPERATION. (a) After the Closing
Date, except in the case of an adversarial Action by one party against another
party (which shall be governed by such discovery rules as may be applicable
under Article IX or otherwise), each party hereto shall use its reasonable best
efforts to make available to each other party, upon written request, the former,
current and future directors, officers, employees, other personnel and agents of
the members of its respective Group as witnesses and any books, records or other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any Action in
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which the requesting party may from time to time be involved, regardless of
whether such Action is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses
(including allocated costs of in-house counsel and other personnel) in
connection therewith.
(b) If an Indemnifying Party or AT&T chooses to defend or to seek to
compromise or settle any Third Party Claim, or if any party chooses to
prosecute or otherwise evaluate or to pursue any Contingent Gain or
any recovery in respect of any RBOC Agreement, the other parties shall
make available to such Indemnifying Party, AT&T or such other party,
as the case may be, upon written request, the former, current and
future directors, officers, employees, other personnel and agents of
the members of its respective Group as witnesses and any books,
records or other documents within its control or which it otherwise
has the ability to make available, to the extent that any such person
(giving consideration to business demands of such directors, officers,
employees, other personnel and agents) or books, records or other
documents may reasonably be required in connection with such defense,
settlement or compromise, or such prosecution, evaluation or pursuit,
as the case may be, and shall otherwise cooperate in such defense,
settlement or compromise, or such prosecution, evaluation or pursuit,
as the case may be.
(c) Without limiting the foregoing, the parties shall cooperate and
consult to the extent reasonably necessary with respect to any
Actions, Contingent Liabilities and Contingent Gains.
(d) Without limiting any provision of this Section, each of the parties
agrees to cooperate, and to cause each member of its respective Group
to cooperate, with each other in the defense of any infringement or
similar claim with respect any intellectual property and shall not
claim to acknowledge, or permit any member of its respective Group to
claim to acknowledge, the validity or infringing use of any
intellectual property of a third Person in a manner that would hamper
or undermine the defense of such infringement or similar claim.
(e) The obligation of the parties to provide witnesses pursuant to this
Section 8.7 is intended to be interpreted in a manner so as to
facilitate cooperation and shall include the obligation to provide as
witnesses inventors and other officers without regard to whether the
witness or the employer of the witness could assert a possible
business conflict (subject to the exception set forth in the first
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sentence of Section 8.7(a)).
(f) In connection with any matter contemplated by this Section 8.7, the
parties will enter into a mutually acceptable joint defense agreement
so as to maintain to the extent practicable any applicable
attorney-client privilege or work product immunity of any member of
any Group.
8.8. CONFIDENTIALITY. (a) Subject to Section 8.9, each of AT&T, Lucent and
NCR, on behalf of itself and each member of its respective Group, agrees to
hold, and to cause its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives to hold, in strict
confidence, with at least the same degree of care that applies to AT&T's
confidential and proprietary information pursuant to policies in effect as of
the Closing Date, all Information concerning each such other Group that is
either in its possession (including Information in its possession prior to any
of the date hereof, the Closing Date or the Distribution Date) or furnished by
any such other Group or its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives at any time pursuant
to this Agreement, any Ancillary Agreement or
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otherwise, and shall not use any such Information other than for such purposes
as shall be expressly permitted hereunder or thereunder, except, in each case,
to the extent that such Information has been (i) in the public domain through no
fault of such party or any member of such Group or any of their respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives, (ii) later lawfully acquired from other sources by such
party (or any member of such party's Group) which sources are not themselves
bound by a confidentiality obligation), or (iii) independently generated without
reference to any proprietary or confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be released
or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other
advisors and representatives who need to know such Information (who
shall be advised of their obligations hereunder with respect to such
Information), except in compliance with Section 8.9. Without limiting
the foregoing, when any Information is no longer needed for the
purposes contemplated by this Agreement or any Ancillary Agreement,
each party will promptly after request of the other party either
return to the other party all Information in a tangible form
(including all copies thereof and all notes, extracts or summaries
based thereon) or certify to the other party that it has destroyed
such Information (and such copies thereof and such notes, extracts or
summaries based thereon).
8.9. PROTECTIVE ARRANGEMENTS. In the event that any party or any member of
its Group either determines on the advice of its counsel that it is required to
disclose any Information pursuant to applicable law or receives any demand under
lawful process or from any Governmental Authority to disclose or provide
Information of any other party (or any member of any other party's Group) that
is subject to the confidentiality provisions hereof, such party shall notify the
other party prior to disclosing or providing such Information and shall
cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party. Subject to the foregoing,
the Person that received such request may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority.
ARTICLE IX
ARBITRATION; DISPUTE RESOLUTION
9.1. AGREEMENT TO ARBITRATE. Except as otherwise specifically provided in
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any Ancillary Agreement, the procedures for discussion, negotiation and
arbitration set forth in this Article IX shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or the
commercial or economic relationship of the parties relating hereto or thereto,
between or among any member of the AT&T Services Group, the Lucent Group and the
NCR Group. Each party agrees on behalf of itself and each member of its
respective Group that the procedures set forth in this Article IX shall be the
sole and exclusive remedy in connection with any dispute, controversy or claim
relating to any of the foregoing matters and irrevocably waives any right to
commence any Action in or before any Governmental Authority, except as expressly
provided in Sections 9.7(b) and 9.8 and except to the extent provided under the
Arbitration Act in the case of judicial review of arbitration results or awards.
Each party on behalf of
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itself and each member of its respective Group irrevocably waives any right to
any trial by jury with respect to any claim, controversy or dispute set forth in
the first sentence of this Section 9.1.
9.2. ESCALATION. (a) It is the intent of the parties to use their
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them with respect to the matters covered
hereby that may arise from time to time on a mutually acceptable negotiated
basis. In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an "Escalation Notice") demanding an
in person meeting involving representatives of the parties at a senior level of
management of the parties (or if the parties agree, of the appropriate strategic
business unit or division within such entity). A copy of any such Escalation
Notice shall be given to the General Counsel, or like officer or official, of
each party involved in the dispute, controversy or claim (which copy shall state
that it is an Escalation Notice pursuant to this Agreement). Any agenda,
location or procedures for such discussions or negotiations between the parties
may be established by the parties from time to time; provided, however, that the
parties shall use their reasonable best efforts to meet within 30 days of the
Escalation Notice.
(b) The parties may, by mutual consent, retain a mediator to aid the
parties in their discussions and negotiations by informally providing
advice to the parties. Any opinion expressed by the mediator shall be
strictly advisory and shall not be binding on the parties, nor shall
any opinion expressed by the mediator be admissible in any arbitration
proceedings. The mediator may be chosen from a list of mediators
previously selected by the parties or by other agreement of the
parties. Costs of the mediation shall be borne equally by the parties
involved in the matter, except that each party shall be responsible
for its own expenses. Mediation is not a prerequisite to a demand for
arbitration under Section 9.3.
9.3. DEMAND FOR ARBITRATION. (a) At any time after the first to occur of
(i) the date of the meeting actually held pursuant to the applicable Escalation
Notice or (ii) 45 days after the delivery of an Escalation Notice (as
applicable, the "Arbitration Demand Date"), any party involved in the dispute,
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may, unless the Applicable Deadline has occurred, make a written demand
(the "Arbitration Demand Notice") that the dispute be resolved by binding
arbitration, which Arbitration Demand Notice shall be given to the parties to
the dispute, controversy or claim in the manner set forth in Section 12.5. In
the event that any party shall deliver an Arbitration Demand Notice to another
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party, such other party may itself deliver an Arbitration Demand Notice to such
first party with respect to any related dispute, controversy or claim with
respect to which the Applicable Deadline has not passed without the requirement
of delivering an Escalation Notice. No party may assert that the failure to
resolve any matter during any discussions or negotiations, the course of conduct
during the discussions or negotiations or the failure to agree on a mutually
acceptable time, agenda, location or procedures for the meeting, in each case,
as contemplated by Section 9.2, is a prerequisite to a demand for arbitration
under Section 9.3.
(b) Except as may be expressly provided in any Ancillary Agreement, any
Arbitration Demand Notice may be given until one year and 45 days
after the later of the occurrence of the act or event giving rise to
the underlying claim or the date on which such act or event was, or
should have been, in the exercise of reasonable due diligence,
discovered by the party asserting the claim (as applicable and as it
may in a particular case be
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specifically extended by the parties in writing, the "Applicable
Deadline"). Any discussions, negotiations or mediations between the
parties pursuant to this Agreement or otherwise will not toll the
Applicable Deadline unless expressly agreed in writing by the parties.
Each of the parties agrees on behalf of itself and each member of its
Group that if an Arbitration Demand Notice with respect to a dispute,
controversy or claim is not given prior to the expiration of the
Applicable Deadline, as between or among the parties and the members
of their Groups, such dispute, controversy or claim will be barred.
Subject to Sections 9.7(d) and 9.8, upon delivery of an Arbitration
Demand Notice pursuant to Section 9.3(a) prior to the Applicable
Deadline, the dispute, controversy or claim shall be decided by a sole
arbitrator in accordance with the rules set forth in this Article IX.
9.4. ARBITRATORS. (a) Within 15 days after a valid Arbitration Demand
Notice is given, the parties involved in the dispute, controversy or claim
referenced therein shall attempt to select a sole arbitrator satisfactory to all
such parties.
(b) In the event that such parties are not able jointly to select a sole
arbitrator within such 15-day period, such parties shall each appoint
an arbitrator within 30 days after delivery of the Arbitration Demand
Notice. If one party appoints an arbitrator within such time period
and the other party or parties fail to appoint an arbitrator within
such time period, the arbitrator appointed by the one party shall be
the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected pursuant to
paragraph (a) or (b) above and, instead, two or three arbitrators are
selected pursuant to paragraph (b) above, the two or three arbitrators
will, within 30 days after the appointment of the later of them to be
appointed, select an additional arbitrator who shall act as the sole
arbitrator of the dispute. After selection of such sole arbitrator,
the initial arbitrators shall have no further role with respect to the
dispute. In the event that the arbitrators so appointed do not, within
30 days after the appointment of the later of them to be appointed,
agree on the selection of the sole arbitrator, any party involved in
such dispute may apply to CPR, New York, New York to select the sole
arbitrator, which selection shall be made by such organization within
30 days after such application. Any arbitrator selected pursuant to
this paragraph (c) shall be disinterested with respect to any of the
parties and the matter and shall be reasonably competent in the
applicable subject matter.
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(d) The sole arbitrator selected pursuant to paragraph (a), (b) or (c)
above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the
sole arbitrator pursuant to paragraph (a), (b) or (c) above and which
hearing will be no longer than 30 days (unless in the judgment of the
arbitrator the matter is unusually complex and sophisticated and
thereby requires a longer time, in which event such hearing shall be
no longer than 90 days). The final decision of such arbitrator will be
rendered in writing to the parties not later than 60 days after the
last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be New York, New York,
unless otherwise agreed by the parties.
9.5. HEARINGS. Within the time period specified in Section 9.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally contemplated to be necessary. The arbitrator shall actively
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<PAGE>
manage the arbitration with a view to achieving a just, speedy and
cost-effective resolution of the dispute, claim or controversy. The arbitrator
may, in his or her discretion, set time and other limits on the presentation of
each party's case, its memoranda or other submissions, and refuse to receive any
proffered evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the CPR Rules for Non-Administered Arbitration of Business
Disputes then prevailing (except that the arbitration will not be conducted
under the auspices of the CPR and the fee schedule of the CPR will not apply).
Except as expressly set forth in Section 9.8(b), the decision of the arbitrator
will be final and binding on the parties, and judgment thereon may be had and
will be enforceable in any court having jurisdiction over the parties.
Arbitration awards will bear interest at an annual rate of the Prime Rate plus
2% per annum. To the extent that the provisions of this Agreement and the
prevailing rules of the CPR conflict, the provisions of this Agreement shall
govern.
9.6. DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party involved in the
applicable dispute may request limited document production from the other party
or parties of specific and expressly relevant documents, with the reasonable
expenses of the producing party incurred in such production paid by the
requesting party. Any such discovery (which rights to documents shall be
substantially less than document discovery rights prevailing under the Federal
Rules of Civil Procedure) shall be conducted expeditiously and shall not cause
the hearing provided for in Section 9.5 to be adjourned except upon consent of
all parties involved in the applicable dispute or upon an extraordinary showing
of cause demonstrating that such adjournment is necessary to permit discovery
essential to a party to the proceeding. Depositions, interrogatories or other
forms of discovery (other than the document production set forth above) shall
not occur except by consent of the parties involved in the applicable dispute.
Disputes concerning the scope of document production and enforcement of the
document production requests will be determined by written agreement of the
parties involved in the applicable dispute or, failing such agreement, will be
referred to the arbitrator for resolution. All discovery requests will be
subject to the proprietary rights and rights of privilege of the parties, and
the arbitrator will adopt procedures to protect such rights and to maintain the
confidential treatment of the arbitration proceedings (except as may be required
by law). Subject to the foregoing, the arbitrator shall have the power to issue
subpoenas to compel the production of documents relevant to the dispute,
controversy or claim.
(b) The arbitrator shall have full power and authority to determine issues
<PAGE>
of arbitrability but shall otherwise be limited to interpreting or
construing the applicable provisions of this Agreement or any
Ancillary Agreement, and will have no authority or power to limit,
expand, alter, amend, modify, revoke or suspend any condition or
provision of this Agreement or any Ancillary Agreement; it being
understood, however, that the arbitrator will have full authority to
implement the provisions of this Agreement or any Ancillary Agreement,
and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the
arbitrator shall not have (i) any authority in excess of the authority
a court having jurisdiction over the parties and the controversy or
dispute would have absent these arbitration provisions or (ii) any
right or power to award punitive or treble damages. It is the
intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of this Agreement and the
Ancillary Agreements and follow applicable law (it being understood
and agreed that this sentence shall not give rise to a right of
judicial review of the arbitrator's award).
<PAGE>
<PAGE>
(c) If a party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing
party.
(d) Arbitration costs will be borne equally by each party involved in the
matter, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of
witnesses selected by such party.
9.7. CERTAIN ADDITIONAL MATTERS. (a) Any arbitration award shall be a bare
award limited to a holding for or against a party and shall be without findings
as to facts, issues or conclusions of law (including with respect to any matters
relating to the validity or infringement of patents or patent applications) and
shall be without a statement of the reasoning on which the award rests, but must
be in adequate form so that a judgment of a court may be entered thereupon.
Judgment upon any arbitration award hereunder may be entered in any court having
jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed pursuant to
Section 9.4, any party may seek one or more temporary restraining
orders in a court of competent jurisdiction if necessary in order to
preserve and protect the status quo. Neither the request for, or grant
or denial of, any such temporary restraining order shall be deemed a
waiver of the obligation to arbitrate as set forth herein and the
arbitrator may dissolve, continue or modify any such order. Any such
temporary restraining order shall remain in effect until the first to
occur of the expiration of the order in accordance with its terms or
the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and shall cause
their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of
mediation or arbitration in confidence in accordance with the
provisions of Article VIII and except as may be required in order to
enforce any award. Each of the parties shall request that any mediator
or arbitrator comply with such confidentiality requirement.
(d) In the event that at any time the sole arbitrator shall fail to serve
as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter
in accordance with the procedures set forth herein for the selection
of the initial arbitrator. The extent, if any, to which testimony
<PAGE>
previously given shall be repeated or as to which the replacement
arbitrator elects to rely on the stenographic record (if there is one)
of such testimony shall be determined by the replacement arbitrator.
9.8. LIMITED COURT ACTIONS. (a) Notwithstanding anything herein to the
contrary, in the event that any party reasonably determines the amount in
controversy in any dispute, controversy or claim (or any series of related
disputes, controversies or claims) under this Agreement or any Ancillary
Agreement is, or is reasonably likely to be, in excess of $100 million and if
such party desires to commence an Action in lieu of complying with the
arbitration provisions of this Article, such party shall so state in its
Arbitration Demand Notice. If the other parties to the arbitration do not agree
that the amount in controversy in such dispute, controversy or claim (or such
series of related disputes, controversies or claims) is, or is reasonably likely
to be, in excess of $100 million, the arbitrator selected pursuant to Section
9.4 hereof shall decide whether the amount in controversy in such dispute,
controversy or claim (or such series of related disputes, controversies or
claims) is, or is reasonably likely to be, in excess of $100 million. The
arbitrator shall set a date that is no later than ten days after the date of his
or
<PAGE>
<PAGE>
her appointment for submissions by the parties with respect to such issue. There
shall not be any discovery in connection with such issue. The arbitrator shall
render his or her decision on such issue within five days of such date so set by
the arbitrator. In the event that the arbitrator determines that the amount in
controversy in such dispute, controversy or claim (or such series of related
disputes, controversies or claims) is or is reasonably likely to be in excess of
$100 million, the provisions of Sections 9.4(d) and (e), 9.5, 9.6, 9.7 and 9.10
hereof shall not apply and on or before (but, except as expressly set forth in
Section 9.8(b), not after) the tenth business day after the date of such
decision, any party to the arbitration may elect, in lieu of arbitration, to
commence an Action with respect to such dispute, controversy or claim (or such
series of related disputes, controversies or claims) in any court of competent
jurisdiction. If the arbitrator does not so determine, the provisions of this
Article (including with respect to time periods) shall apply as if no
determinations were sought or made pursuant to this Section 9.8(a).
(b) In the event that an arbitration award in excess of $100 million is
issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date of such award, submit the dispute,
controversy or claim (or series of related disputes, controversies or
claims) giving rise thereto to a court of competent jurisdiction,
regardless of whether such party or any other party sought to commence
an Action in lieu of proceeding with arbitration in accordance with
Section 9.8(a). In such event, the applicable court may elect to rely
on the record developed in the arbitration or, if it determines that
it would be advisable in connection with the matter, allow the parties
to seek additional discovery or to present additional evidence. Each
party shall be entitled to present arguments to the court with respect
to whether any such additional discovery or evidence shall be
permitted and with respect to all other matters relating to the
applicable dispute, controversy or claim (or series of related
disputes, controversies or claims).
9.9. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article IX with respect
to all matters not subject to such dispute, controversy or claim.
9.10. LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article IX, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
<PAGE>
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 12.2.
ARTICLE X
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
10.1. FURTHER ASSURANCES. (a) In addition to the actions specifically
provided for elsewhere in this Agreement, each of the parties hereto shall use
its reasonable best efforts, prior to, on and after the Closing Date, to take,
or cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations and
agreements to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements.
<PAGE>
<PAGE>
(b) Without limiting the foregoing, prior to, on and after the Closing
Date, each party hereto shall cooperate with the other parties, and
without any further consideration, but at the expense of the
requesting party, to execute and deliver, or use its reasonable best
efforts to cause to be executed and delivered, all instruments,
including instruments of conveyance, assignment and transfer, and to
make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person
under any permit, license, agreement, indenture or other instrument
(including any Consents or Governmental Approvals), and to take all
such other actions as such party may reasonably be requested to take
by any other party hereto from time to time, consistent with the terms
of this Agreement and the Ancillary Agreements, in order to effectuate
the provisions and purposes of this Agreement and the Ancillary
Agreements and the transfers of the Lucent Assets and the assignment
and assumption of the Lucent Liabilities and the other transactions
contemplated hereby and thereby. Without limiting the foregoing, each
party will, at the reasonable request, cost and expense of any other
party, take such other actions as may be reasonably necessary to vest
in such other party good and marketable title, free and clear of any
Security Interest, if and to the extent it is practicable to do so.
(c) On or prior to the Closing Date, AT&T, Lucent and NCR in their
respective capacities as direct and indirect stockholders of their
respective Subsidiaries, shall each ratify any actions which are
reasonably necessary or desirable to be taken by AT&T, Lucent, NCR or
any other Subsidiary of AT&T, as the case may be, to effectuate the
transactions contemplated by this Agreement. On or prior to the
Closing Date, AT&T and Lucent shall take all actions as may be
necessary to approve the stock-based employee benefit plans of Lucent
in order to satisfy the requirement of Rule 16b-3 under the Exchange
Act and Section 162(m) of the Code.
(d) The parties hereto agree to take any reasonable actions necessary in
order for the Distribution to qualify as a tax-free distribution
pursuant to Section 355 of the Code.
(e) AT&T, Lucent and NCR, and each of the members of their respective
Groups, waive (and agree not to assert against any of the others) any
claim or demand that any of them may have against any of the others
for any Liabilities or other claims relating to or arising out of: (i)
the failure of Lucent or any member of the Lucent Group, on the one
hand, or of AT&T, NCR or any member of the AT&T Services Group or the
<PAGE>
NCR Group, on the other hand, to provide any notification or
disclosure required under any state Environmental Law in connection
with the Separation or the other transactions contemplated by this
Agreement, including the transfer by any member of any Group to any
member of any other Group of ownership or operational control of any
Assets not previously owned or operated by such transferee; or (ii)
any inadequate, incorrect or incomplete notification or disclosure
under any such state Environmental Law by the applicable transferor.
To the extent any Liability to any Governmental Authority or any third
Person arises out of any action or inaction described in clause (i) or
(ii) above, the transferee of the applicable Asset hereby assumes and
agrees to pay any such Liability.
(f) Prior to the Closing Date, if one or more of the parties identifies
any commercial or other service that is needed to assure a smooth and
orderly transition of the businesses in connection with the
consummation of the transactions contemplated hereby, and that is not
otherwise governed by the provisions of this Agreement or any
Ancillary Agreement, the parties will cooperate in determining whether
there is a mutually acceptable arm's-length basis on which one or more
of the other parties will provide such service.
<PAGE>
<PAGE>
10.2. QUALIFICATION AS TAX-FREE DISTRIBUTION. After the Closing Date, none
of AT&T, Lucent or NCR shall take, or permit any member of its respective Group
to take, any action which could reasonably be expected to prevent the
Distribution from qualifying as a tax-free distribution within the meaning of
Section 355 of the Code or any other transaction contemplated by this Agreement
or any Ancillary Agreement which is intended by the parties to be tax-free from
failing so to qualify. Without limiting the foregoing, after the Closing Date
and on or prior to the Distribution Date, Lucent shall not issue or grant, and
shall not permit any member of the Lucent Group to issue or grant, directly or
indirectly, any shares of Lucent Common Stock or any rights, warrants, options
or other securities to purchase or acquire (whether upon conversion, exchange or
otherwise) any shares of Lucent Common Stock (whether or not then exercisable,
convertible or exchangeable).
ARTICLE XI
TERMINATION
11.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Distribution Date by the mutual consent of AT&T, Lucent
and NCR.
11.2. OTHER TERMINATION. This Agreement may be terminated by AT&T at any
time prior to the Closing Date. The obligations of the parties under Article IV
(including the obligation to pursue or effect the Distribution) may be
terminated by AT&T if the Distribution Date shall not have occurred on or prior
to December 31, 1997.
11.3. EFFECT OF TERMINATION. (a) In the event of any termination of this
Agreement prior to the Closing Date, no party to this Agreement (or any of its
directors or officers) shall have any Liability or further obligation to any
other party.
(b) In the event of any termination of this Agreement on or after the
Closing Date, only the provisions of Article IV will terminate and the
other provisions of this Agreement and each Ancillary Agreement shall
remain in full force and effect.
ARTICLE XII
MISCELLANEOUS
12.1. COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER. (a) This
Agreement
and each Ancillary Agreement may be executed in one or more counterparts, all of
<PAGE>
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party.
(b) This Agreement, and the Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire
agreement between the parties with respect to the subject matter
hereof, supersede all previous agreements, negotiations, discussions,
writings, understandings, commitments and conversations with respect
to such subject matter and there are no agreements or understandings
between the parties other than those set forth or referred to herein
or therein.
<PAGE>
<PAGE>
(c) AT&T represents on behalf of itself and each other member of the AT&T
Services Group, Lucent represents on behalf of itself and each other
member of the Lucent Group and NCR represents on behalf of itself and
each other member of the NCR Group as follows:
(i) each such Person has the requisite corporate or other power and
authority and has taken all corporate or other action necessary in
order to execute, deliver and perform each of this Agreement and
each other Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby; and
(ii) this Agreement and each Ancillary Agreement to which it is a party
has been duly executed and delivered by it and constitutes a valid
and binding agreement of it enforceable in accordance with the
terms thereof.
(d) Each party hereto acknowledges that it and each other party hereto is
executing certain of the Ancillary Agreements by facsimile, stamp or
mechanical signature. Each party hereto expressly adopts and confirms
each such facsimile, stamp or mechanical signature made in its
respective name as if it were a manual signature, agrees that it will
not assert that any such signature is not adequate to bind such party
to the same extent as if it were signed manually and agrees that at
the reasonable request of any other party hereto at any time it will
as promptly as reasonably practicable cause each such Ancillary
Agreement to be manually executed (any such execution to be as of the
date of the initial date thereof).
(e) Notwithstanding any provision of this Agreement or any Ancillary
Agreement, neither AT&T, Lucent nor NCR shall be required to take or
omit to take any act that would violate its fiduciary duties to any
minority stockholders of AT&T Capital Corporation or any other
non-wholly owned Subsidiary of AT&T, Lucent or NCR, as the case may be
(it being understood that directors' qualifying shares or similar
interests will be disregarded for purposes of determining whether a
Subsidiary is wholly owned).
12.2. GOVERNING LAW. Except as set forth in Section 9.10, this Agreement
and, unless expressly provided therein, each Ancillary Agreement, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New York (other than as to its laws of arbitration which shall be
governed under the Arbitration Act or other applicable federal law pursuant to
Section 9.10), irrespective of the choice of laws principles of the State of New
<PAGE>
York, as to all matters, including matters of validity, construction, effect,
enforceability, performance and remedies.
12.3. ASSIGNABILITY. (a) Except as set forth in any Ancillary Agreement,
this Agreement and each Ancillary Agreement shall be binding upon and inure to
the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns; provided, however, that no party hereto or
thereto may assign its respective rights or delegate its respective obligations
under this Agreement or any Ancillary Agreement without the express prior
written consent of the other parties hereto or thereto.
(b) Lucent agrees and acknowledges on behalf of itself and each other
member of the Lucent Group that (i) AT&T and NCR may enter into a
separation and distribution agreement and other agreements and
instruments in connection with the NCR Distribution or otherwise
providing for certain arrangements between AT&T and NCR and that no
consent of any member of the Lucent Group will be required in
connection therewith, (ii) certain transfers of Assets and Liabilities
may occur after the date hereof between
<PAGE>
<PAGE>
members of the AT&T Services Group and the NCR Group and that no
consent of any member of the Lucent Group will be required in
connection therewith, (iii) AT&T shall have no obligation to proceed
with the NCR Distribution, and (iv) except as set forth below, all of
the rights and obligations of the NCR Group shall continue regardless
of whether NCR is an Affiliate of AT&T. Lucent agrees that if any
technical or other nonmaterial amendments to this Agreement or any
Ancillary Agreement are advisable in connection with the NCR
Distribution or the separation of the NCR Business from the AT&T
Services Business, Lucent will reasonably cooperate with AT&T and NCR
in connection therewith for no additional consideration. Without
limiting the foregoing, effective immediately on notice to Lucent,
without any further action required by any member of the Lucent Group,
AT&T may assume any Asset or Liability of any member of the NCR Group
hereunder or under any Ancillary Agreement (and any rights of any
member of the NCR Group in connection therewith) and all members of
the NCR Group shall thereupon automatically be released therefrom.
12.4. THIRD PARTY BENEFICIARIES. Except for the indemnification rights
under this Agreement of any AT&T Indemnitee, Lucent Indemnitee or NCR Indemnitee
in their respective capacities as such, (a) the provisions of this Agreement and
each Ancillary Agreement are solely for the benefit of the parties and are not
intended to confer upon any Person except the parties any rights or remedies
hereunder, and (b) there are no third party beneficiaries of this Agreement or
any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement
shall provide any third person with any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement or any Ancillary Agreement. No party hereto shall have any right,
remedy or claim with respect to any provision of this Agreement or any Ancillary
Agreement to the extent such provision relates solely to the other two parties
hereto or the members of such other two parties' respective Groups.
12.5. NOTICES. All notices or other communications under this Agreement or
any Ancillary Agreement shall be in writing and shall be deemed to be duly given
when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed as follows:
If to AT&T, to: AT&T Corp.
131 Morristown Road
Basking Ridge, NJ 07920
Attn: Vice President-Law and
Corporate Secretary
<PAGE>
If to Lucent, to: Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Attn: General Counsel
If to NCR, to: NCR Corporation
1700 S. Patterson Blvd.
Dayton, Ohio 45479
Attn: Chief Financial Officer
with a copy to: NCR Corporation
1700 S. Patterson Blvd.
<PAGE>
<PAGE>
DAYTON, OHIO 45479
ATTN: GENERAL COUNSEL
Any party may, by notice to the other party, change the address to which
such notices are to be given.
12.6. SEVERABILITY. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any Person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby or thereby,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original intent
of the parties.
12.7. FORCE MAJEURE. No party shall be deemed in default of this Agreement
or any Ancillary Agreement to the extent that any delay or failure in the
performance of its obligations under this Agreement or any Ancillary Agreement
results from any cause beyond its reasonable control and without its fault or
negligence, such as acts of God, acts of civil or military authority, embargoes,
epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods,
unusually severe weather conditions, labor problems or unavailability of parts,
or, in the case of computer systems, any failure in electrical or air
conditioning equipment. In the event of any such excused delay, the time for
performance shall be extended for a period equal to the time lost by reason of
the delay.
12.8. PUBLICITY. Prior to the Distribution, each of Lucent, NCR and AT&T
shall consult with each other prior to issuing any press releases or otherwise
making public statements with respect to the IPO, the Distribution or any of the
other transactions contemplated hereby and prior to making any filings with any
Governmental Authority with respect thereto.
12.9. EXPENSES. Except as expressly set forth in this Agreement (including
Section 3.1(h) hereof) or in any Ancillary Agreement, whether or not the IPO or
the Distribution is consummated, all third party fees, costs and expenses paid
or incurred in connection with the Distribution will be paid by AT&T.
12.10. HEADINGS. The article, section and paragraph headings contained in
<PAGE>
this Agreement and in the Ancillary Agreements are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or any Ancillary Agreement.
12.11. SURVIVAL OF COVENANTS. Except as expressly set forth in any
Ancillary Agreement, the covenants, representations and warranties contained in
this Agreement and each Ancillary Agreement, and liability for the breach of any
obligations contained herein, shall survive each of the Separation, the IPO and
the Distribution and shall remain in full force and effect regardless of whether
AT&T shall consummate, delay, modify or abandon the NCR Distribution.
12.12. WAIVERS OF DEFAULT. Waiver by any party of any default by the other
party of any provision of this Agreement or any Ancillary Agreement shall not be
<PAGE>
<PAGE>
deemed a waiver by the waiving party of any subsequent or other default, nor
shall it prejudice the rights of the other party.
12.13. SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any Ancillary Agreement, the party or parties who are or are to be
thereby aggrieved shall have the right to specific performance and injunctive or
other equitable relief of its rights under this Agreement or such Ancillary
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The parties agree
that the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived. Any requirements for the securing or posting of any bond with such
remedy are waived.
12.14. AMENDMENTS. (a) No provisions of this Agreement or any Ancillary
Agreement shall be deemed waived, amended, supplemented or modified by any
party, unless such waiver, amendment, supplement or modification is in writing
and signed by the authorized representative of the party against whom it is
sought to enforce such waiver, amendment, supplement or modification. Without
limiting the foregoing, the parties agree that any waiver, amendment, supplement
or modification of this Agreement or any Ancillary Agreement that solely relates
to and affects only two of the three parties hereto shall not require the
consent of the third party hereto.
(b) Without limiting the foregoing, the parties anticipate that, prior to
the Closing Date, some or all of the Schedules to this Agreement may
be amended or supplemented and, in such event, such amended or
supplemented Schedules shall be attached hereto in lieu of the
original Schedules.
12.15. INTERPRETATION. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
genders as the context requires. The terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement (or the applicable Ancillary Agreement) as a whole
(including all of the Schedules, Exhibits and Appendices hereto and thereto) and
not to any particular provision of this Agreement (or such Ancillary Agreement).
Article, Section, Exhibit, Schedule and Appendix references are to the Articles,
Sections, Exhibits, Schedules and Appendices to this Agreement (or the
applicable Ancillary Agreement) unless otherwise specified. The word "including"
and words of similar import when used in this Agreement (or the applicable
<PAGE>
Ancillary Agreement) shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified. The word "or" shall
not be exclusive. For all purposes of this Agreement, "allocated costs of
in-house counsel and other personnel" shall be determined in accordance with the
principles set forth in Schedule 12.15.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.
AT&T CORP.
By: /s/
--------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC.
By: /s/
--------------------------
Name:
Title:
NCR CORPORATION
By: /s/
--------------------------
Name:
Title:
<PAGE>
<PAGE> EXHIBIT (10)(i)2
TAX SHARING AGREEMENT
BY AND AMONG
AT&T CORP.,
LUCENT TECHNOLOGIES INC.
AND
NCR CORPORATION
DATED AS OF
FEBRUARY 1, 1996
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.1 ADJUSTMENT................................................... 1
1.2. AGREEMENT.................................................... 1
1.3. AT&T TAX ADJUSTMENT.......................................... 2
1.4. AT&T TAX BENEFIT............................................. 2
1.5. CONSOLIDATION................................................ 2
1.6. CONSOLIDATED RETURN.......................................... 2
1.7. CONTROLLING PARTY............................................ 2
1.8. CORRELATIVE ADJUSTMENT....................................... 2
1.9. DISPUTED ADJUSTMENT.......................................... 3
1.10. FINAL DETERMINATION.......................................... 3
1.11. INDEPENDENT THIRD PARTY...................................... 3
1.12. INDEMNIFIED PARTY............................................ 4
1.13. INDEMNIFYING PARTY........................................... 4
1.14. INITIAL DETERMINATION........................................ 4
1.15. INTERESTED PARTY............................................. 4
1.16. INTERESTED PARTY NOTICE...................................... 4
1.17. NCR TAX ADJUSTMENT........................................... 4
1.18. NCR TAX BENEFIT.............................................. 4
1.19. LUCENT TAX ADJUSTMENT........................................ 5
1.20. LUCENT TAX BENEFIT........................................... 5
1.21. NON-LINE OF BUSINESS ADJUSTMENT.............................. 5
1.22. RESTRUCTURING ADJUSTMENT..................................... 5
1.23. RETURN....................................................... 5
1.24. SEPARATE RETURN.............................................. 6
1.25. SEPARATION AGREEMENT......................................... 6
1.26. SIGNIFICANT OBLIGATION....................................... 6
1.27. TAX.......................................................... 6
1.28. TAX ADJUSTMENTS.............................................. 6
1.29. TAX BENEFITS................................................. 6
1.30. TAX CONTEST.................................................. 6
1.31. TAXING AUTHORITY............................................. 7
1.32. ULTIMATE DETERMINATION....................................... 7
-i-
<PAGE>
<PAGE>
ARTICLE II TAX ADJUSTMENTS/BENEFITS
2.1. IN GENERAL.................................................... 7
2.2. TAX ADJUSTMENTS AND BENEFITS.................................. 8
2.3. RESTRUCTURING ADJUSTMENTS..................................... 9
2.4. NON-LINE OF BUSINESS ADJUSTMENTS............................. 11
ARTICLE III TAX CONTESTS
3.1. NOTIFICATION OF TAX CONTESTS................................. 14
3.2. TAX CONTEST SETTLEMENT RIGHTS................................ 14
3.3. TAX CONTEST PARTICIPATION.................................... 15
3.4. TAX CONTEST WAIVER........................................... 16
3.5. TAX CONTEST DISPUTE RESOLUTION............................... 17
ARTICLE IV PROCEDURE AND PAYMENT
4.1. PROCEDURE.................................................... 20
4.2. PAYMENT...................................................... 21
4.3. INTEREST..................................................... 21
ARTICLE V OTHER TAX MATTERS
5.1. TAX POLICIES AND PROCEDURES DURING CONSOLIDATION ............ 22
5.2. COOPERATION.................................................. 23
5.3. FILING OF RETURNS............................................ 23
ARTICLE VI MISCELLANEOUS
6.1. GOVERNING LAW................................................ 24
6.2. AFFILIATES................................................... 24
6.3. INCORPORATION OF SEPARATION AGREEMENT PROVISIONS ............ 24
6.4. NOTICES...................................................... 24
6.5. CONFLICTING OR INCONSISTENT PROVISIONS....................... 25
6.6. DURATION..................................................... 25
6.7. AMENDMENT.................................................... 25
6.8. TAX ALLOCATION AGREEMENTS.................................... 26
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TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT, dated as of February 1, 1996, is
by and among AT&T, Lucent and NCR. Capitalized terms used herein shall have the
respective meanings assigned to them in the Separation Agreement unless
otherwise defined in Article I hereof.
WHEREAS, AT&T, Lucent and NCR have executed the Separation
Agreement pursuant to which AT&T's existing businesses will be separated into
three independent businesses; and
WHEREAS, it is appropriate and desirable to set forth the
principles and responsibilities of the parties to this Agreement regarding
future Adjustments with respect to Taxes, Tax Contests and other related Tax
matters.
NOW, THEREFORE, the parties, intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall
have the following meanings:
1.1. ADJUSTMENT means the deemed increase or decrease in a
Tax, determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence, resulting
from an adjustment made or proposed by a Taxing Authority with respect to any
amount reflected or required to be reflected on any Return relating to such Tax.
For purposes of determining such deemed increase or decrease in a Tax, the
following assumptions will be used: (a) in the case of any income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the adjustment
relates; and (b) such determination shall be made without regard to whether any
actual increase or decrease in such Tax will in fact be realized with respect to
the Return to which such adjustment relates.
1.2. AGREEMENT means this Tax Sharing Agreement, including any
schedules, exhibits and appendices attached hereto.
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1.3. AT&T TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the AT&T Services Business; provided, however, that any
Adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any AT&T Tax Adjustment.
1.4. AT&T TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the AT&T Services Business; provided, however, that any
Adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any AT&T Tax Benefit.
1.5. CONSOLIDATION means, as appropriate, any Taxable period
or any portion of a Taxable period during which (a) one or more members of the
Lucent Group are members of an AT&T Consolidated Return; or (b) one or more
members of the NCR Group are members of an AT&T Consolidated Return.
1.6. CONSOLIDATED RETURN means, as appropriate, (a) for any
Taxable period or any portion of a Taxable period ending or deemed to end on or
prior to the Distribution Date, any consolidated or combined Return that
includes one or more members of the AT&T Group and/or one or more members of the
Lucent Group; and (b) for any Taxable period, or any portion of a Taxable
period, beginning or deemed to begin after the Distribution Date and ending or
deemed to end on or prior to the date of the NCR Distribution, any consolidated
or combined Return that includes one or more members of the AT&T Services Group
and/or one or more members of the NCR Group.
1.7. CONTROLLING PARTY means AT&T or any other member of the
AT&T Services Group, Lucent or any other member of the Lucent Group or NCR or
any other member of the NCR Group, as the case may be, that filed or, if no such
Return has been filed, was required to file, a Return that is the subject of any
Tax Contest, or any successor and/or assign of any of the foregoing; provided,
however, that in the case of any Consolidated Return, the Person that actually
filed such Consolidated Return (or any successor and/or assign of such Person)
will be the Controlling Party.
1.8. CORRELATIVE ADJUSTMENT means, in the case of an
Adjustment comprising either a Restructuring Adjustment or Non-Line of Business
Adjustment, the net present value of any future increases or decreases in a Tax
that would be realized,
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using the assumptions set forth in the next sentence, by either AT&T or any
other member of the AT&T Services Group, Lucent or any other member of the
Lucent Group or NCR or any other member of the NCR Group, as the case may be, in
one or more Taxable periods (or any portion of a Taxable period) but only if
such increases or decreases (a) will take effect or begin to take effect in the
Taxable period or portion of a Taxable period immediately following the Taxable
period or portion of a Taxable period in which the Restructuring Adjustment or
Non-Line of Business Adjustment to such Tax was made; and (b) are a direct
result of such an Adjustment to that Tax in the immediately preceding Taxable
period or portion of such Taxable period. For purposes of determining the net
present value of any such future increases or decreases in a Tax, the following
assumptions will be used: (i) a discount rate equal to the sum of the Prime Rate
as of the date of the Final Determination relating to such Restructuring
Adjustment or Non-Line of Business Adjustment plus 3.5%; (ii) in the case of any
income Tax, the highest marginal Tax rate or, in the case of any other Tax, the
highest applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period, or portion of the Taxable period, in which the Restructuring
Adjustment or Non-Line of Business Adjustment was made; (iii) the depreciation,
amortization or credit rate or lives, if applicable, in effect for the Taxable
period, or portion of the Taxable period, in which the Restructuring Adjustment
or Non- Line of Business Adjustment was made; and (iv) such determination shall
be made without regard to whether any actual increases or decreases in such Tax
will in fact be realized with respect to the future Returns to which such
Correlative Adjustment relates.
1.9. DISPUTED ADJUSTMENT has the meaning set forth in Section
3.4(b) hereof.
1.10. FINAL DETERMINATION means (a) a decision, judgment,
decree or other order by any court of competent jurisdiction, which has become
final and is either no longer subject to appeal or for which a determination not
to appeal has been made; (b) a closing agreement made under Section 7121 of the
Code or any comparable foreign, state, local, municipal or other Taxing statute;
(c) a final disposition by any Taxing Authority of a claim for refund; or (d)
any other written agreement relating to an Adjustment between any Taxing
Authority and any Controlling Party the execution of which is final and
prohibits such Taxing Authority or the Controlling Party from seeking any
further legal or administrative remedies with respect to such Adjustment.
1.11. INDEPENDENT THIRD PARTY means a nationally recognized
law firm or any of the following accounting firms or their successors: Arthur
Andersen & Co.; Ernst & Young; KPMG Peat Marwick & Main; Deloitte & Touche;
Coopers & Lybrand; and Price Waterhouse & Co.
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1.12. INDEMNIFIED PARTY has the meaning set forth in Section
4.1 hereof.
1.13. INDEMNIFYING PARTY has the meaning set forth in Section
4.1 hereof.
1.14. INITIAL DETERMINATION has the meaning set forth in
Section 3.5(b)(i) hereof.
1.15. INTERESTED PARTY means AT&T or any other member of the
AT&T Services Group, Lucent or any other member of the Lucent Group or NCR or
any other member of the NCR Group (including any successor and/or assign of any
of each of the foregoing), as the case may be, to the extent (a) such Person is
not the Controlling Party with respect to a Tax Contest; and (b) such Person (i)
may be liable for, or required to make, any indemnity payment, reimbursement or
other payment pursuant to the provisions of this Agreement with respect to such
Tax Contest; or (ii) may be entitled to receive any indemnity payment,
reimbursement or other payment pursuant to the provisions of this Agreement with
respect to such Tax Contest; provided, however, that in no event shall a member
of either the AT&T Services Group, the Lucent Group or the NCR Group, as the
case may be, be an Interested Party in a Tax Contest in which another member of
its Group is the Controlling Party with respect to the Tax Contest.
1.16. INTERESTED PARTY NOTICE has the meaning set forth in
Section 3.4(b) hereof.
1.17. NCR TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the NCR Business; provided, however, that any Adjustment
comprising a Restructuring Adjustment shall not be considered in determining the
amount of any NCR Tax Adjustment.
1.18. NCR TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the NCR Business; provided, however, that any Adjustment
comprising a Restructuring Adjustment shall not be considered in determining the
amount of any NCR Tax Benefit.
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1.19. LUCENT TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to either the Lucent Assets or the Lucent Business; provided,
however, that any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Lucent Tax Adjustment.
1.20. LUCENT TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to either the Lucent Assets or the Lucent Business; provided,
however, that any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Lucent Tax Benefit.
1.21. NON-LINE OF BUSINESS ADJUSTMENT means, with respect to
any Taxable period or portion of a Taxable period, and as computed separately
with respect to each Tax, the net increase or decrease in each such Tax, as the
case may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each such Taxable period or
portion of a Taxable period other than (a) any Restructuring Adjustments and any
Correlative Adjustment attributable to such Restructuring Adjustments; (b) any
Tax Adjustments; and (c) any Tax Benefits.
1.22. RESTRUCTURING ADJUSTMENT means, with respect to any
Taxable period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase or decrease in each such Tax, as the case
may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each Taxable period or portion
of a Taxable period that are attributable to, or as a result of, any
transactions undertaken to effectuate the separation of AT&T's existing
businesses into three independent businesses as contemplated under the
Separation Agreement including, but not limited to, any transactions undertaken
pursuant to or relating to the Separation, the IPO, the Distribution, the
Non-U.S. Plan, the merger of RMC with and into AT&T and the NCR Distribution.
1.23. RETURN means any return, report, form or similar
statement or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim for
refund, amended return and declaration of estimated tax) that has been or is
required to be filed with any Taxing Authority or that has been or is required
to be furnished to any Taxing
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Authority in connection with the determination, assessment or collection of any
Taxes or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
1.24. SEPARATE RETURN means any Return other than a
Consolidated Return.
1.25. SEPARATION AGREEMENT means the Separation and
Distribution Agreement, dated the date hereof, by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation.
1.26. SIGNIFICANT OBLIGATION means, in the case of an
Interested Party, and with respect to any Adjustment comprising either a
Restructuring Adjustment or Non- Line of Business Adjustment, either (a) a
Shared Percentage that is greater than or equal to 30%; or (b) an obligation to
make or right to receive any indemnity payment, reimbursement or other payment
with respect to any such Adjustment (including the effect of a Correlative
Adjustment relating thereto) pursuant to the terms of this Agreement that (i) in
the case of any federal income Tax is greater than $5 million, and (ii) in the
case of any other Tax is greater than $1 million.
1.27. TAX (and, with correlative meanings, "Taxes" and
"Taxable") means, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state, local
or municipal income, alternative or add-on minimum, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or any other
tax, custom, tariff, impost, levy, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount related thereto, imposed by any
Taxing Authority.
1.28. TAX ADJUSTMENTS means any AT&T Tax Adjustment, any NCR
Tax Adjustment or any Lucent Tax Adjustment, as the case may be.
1.29. TAX BENEFITS means any AT&T Tax Benefit, any NCR Tax
Benefit or any Lucent Tax Benefit, as the case may be.
1.30. TAX CONTEST means, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in which
an Adjustment to Taxes may be proposed, collected or assessed and in respect of
which an indemnity payment, reimbursement or other payment may be sought under
this Agreement.
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1.31. TAXING AUTHORITY means any Governmental Authority or any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
1.32. ULTIMATE DETERMINATION has the meaning set forth in
Section 3.5(b)(iii) hereof.
ARTICLE II
TAX ADJUSTMENTS/BENEFITS
2.1 IN GENERAL. (a) In determining Lucent's liability and/or
obligation to make, or Lucent's right to receive, any indemnity payment,
reimbursement or other payment in respect of any Tax under this Agreement, any
Taxable period or portion of a Taxable period that includes the Distribution
Date shall be deemed to include and end on such Distribution Date and Lucent
shall have no liability and/or obligation to make, or right to receive, any
indemnity payment, reimbursement or other payment in respect of any Tax under
this Agreement with respect to any Taxable period or portion of a Taxable period
that begins or is deemed to begin after the Distribution Date.
(b) In determining NCR's liability and/or obligation to make,
or NCR's right to receive, any indemnity payment, reimbursement or other payment
in respect of any Tax under this Agreement, any Taxable period or portion of a
Taxable period that includes the date of the NCR Distribution shall be deemed to
include and end on such date and NCR shall have no liability and/or obligation
to make, or right to receive, any indemnity payment, reimbursement or other
payment under this Agreement in respect of any Tax with respect to any Taxable
period or portion of a Taxable period that begins or is deemed to begin after
the date of the NCR Distribution.
(c) Any Adjustment relating to or arising out of the
employment of employees or former employees the Liabilities with respect to
which are assumed by Lucent pursuant to Section 2.1(a) of the Employee Benefits
Agreement shall be deemed to be Adjustments that are clearly attributable to the
Lucent Business and shall be deemed to comprise a Lucent Tax Adjustment or
Lucent Tax Benefit, as the case may be. All other Adjustments relating to or
arising out of the employment of employees or former employees shall be deemed
to be Adjustments that are clearly attributable to the AT&T Services Business
and shall be deemed to comprise an AT&T Tax Adjustment or AT&T Tax Benefit, as
the case may be, except to the extent that such Adjustments arise out of or
relate to the employment of such individuals by NCR, in which case they shall
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be deemed to be Adjustments that are clearly attributable to the NCR Business
and shall be deemed to comprise a NCR Tax Adjustment or NCR Tax Benefit, as the
case may be.
2.2. TAX ADJUSTMENTS AND BENEFITS. (a) Lucent shall be liable
for, and shall indemnify and hold harmless, subject to Section 3.4 and Section
3.5 hereof, any member of the AT&T Services Group and/or the NCR Group, as
appropriate, against any and all Lucent Tax Adjustments for any Taxable period
or portion of a Taxable period ending or deemed to end on or before the
Distribution Date, in each case with respect to any Return of any member of the
Lucent Group, the AT&T Services Group or the NCR Group. Lucent shall be entitled
to receive, and shall be paid, subject to Section 3.4 and Section 3.5 hereof,
(i) by AT&T, the amount of any Lucent Tax Benefits for any Taxable period or
portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the AT&T Services
Group; and/or (ii) by NCR, the amount of any Lucent Tax Benefits for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, and subject to Section 3.4 and Section 3.5 hereof, (i)
any member of the Lucent Group against any and all AT&T Tax Adjustments for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date; and/or (ii) any member of the NCR Group against
any and all AT&T Tax Adjustments for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the date of the NCR Distribution, in
each case with respect to any Return of any member of the Lucent Group, the AT&T
Services Group or the NCR Group. AT&T shall be entitled to receive, and shall be
paid, subject to Section 3.4 and Section 3.5 hereof, (i) by Lucent, the amount
of any AT&T Tax Benefits for any Taxable period or portion of a Taxable period
ending or deemed to end on or before the Distribution Date with respect to any
Return of any member of the Lucent Group; and/or (ii) by NCR, the amount of any
AT&T Tax Benefits for any Taxable period or any portion of a Taxable period
ending or deemed to end on or before the date of the NCR Distribution with
respect to any Return of any member of the NCR Group.
(c) NCR shall be liable for, and shall indemnify and hold
harmless, as appropriate, and subject to Section 3.4 and Section 3.5 hereof, (i)
any member of the AT&T Services Group against any and all NCR Tax Adjustments
for any Taxable period or portion of a Taxable period ending or deemed to end on
or before the date of the NCR Distribution; and (ii) any member of the Lucent
Group against any and all NCR Tax Adjustments for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date,
in each case with respect to any Return of any member of the Lucent Group, the
AT&T Services Group or the NCR Group. NCR
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shall be entitled to receive, and shall be paid, subject to Section 3.4 and
Section 3.5 hereof, (i) by AT&T, the amount of any NCR Tax Benefits for any
Taxable period or portion of a Taxable period ending or deemed to end on the
date of the NCR Distribution with respect to any Return of any member of the
AT&T Services Group; and/or (ii) by Lucent, the amount of any NCR Tax Benefits
for any Taxable period or portion of a Taxable period ending or deemed to end on
the Distribution Date with respect to any Return of any member of the Lucent
Group.
2.3. RESTRUCTURING ADJUSTMENTS. (a) Lucent shall be liable
for, and shall indemnify and hold harmless, as appropriate, any member of the
AT&T Services Group and/or the NCR Group against Lucent's share, as determined
in Section 2.3(d) below, of any Restructuring Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date, in each case with respect to
any Return of any member of the Lucent Group, the AT&T Services Group or the NCR
Group. Lucent shall be entitled to receive, and shall be paid (i) by AT&T,
Lucent's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the AT&T Services Group; and/or (ii)
by NCR, Lucent's share, as determined in Section 2.3(d) below, of any
Restructuring Adjustment the amount of which decreases a Tax for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against AT&T's
share, as determined in Section 2.3(d) below, of any Restructuring Adjustment
the amount of which increases a Tax for any Taxable period or portion of a
Taxable period ending or deemed to end on or before the Distribution Date; and
(ii) any member of the NCR Group against AT&T's share, as determined in Section
2.3(d) below, of any Restructuring Adjustment the amount of which increases a
Tax for any Taxable period or portion of a Taxable period ending or deemed to
end on or before the date of the NCR Distribution, in each case with respect to
any Return of any member of the Lucent Group, the AT&T Services Group or the NCR
Group. AT&T shall be entitled to receive, and shall be paid (i) by Lucent,
AT&T's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the Lucent Group; and/or (ii) by
NCR, AT&T's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or
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deemed to end on or before the date of the NCR Distribution with respect to any
Return of any member of the NCR Group.
(c) NCR shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against NCR's
share, as determined in Section 2.3(d) below, of any Restructuring Adjustment
the amount of which increases a Tax for any Taxable period or portion of a
Taxable period ending or deemed to end on or before the Distribution Date; and
(ii) any member of the AT&T Services Group against NCR's share, as determined in
Section 2.3(d) below, of any Restructuring Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the date of the NCR Distribution, in each case with
respect to any Return of any member of the Lucent Group, the AT&T Services Group
or the NCR Group. NCR shall be entitled to receive, and shall be paid (i) by
Lucent, NCR's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the Lucent Group; and/or (ii) by
AT&T, NCR's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the date of the NCR
Distribution with respect to any Return of any member of the AT&T Services
Group.
(d) AT&T, Lucent and NCR shall share the amount of any
Restructuring Adjustment if, and to the extent, each such party is liable for
and/or has an obligation to make, or has the right to receive, as the case may
be, any indemnity payment, reimbursement or other payment with respect to such
Restructuring Adjustment under this Agreement, in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared NCR Percentage,
respectively; provided, however, that in the event that there is any Correlative
Adjustment with respect to any such Restructuring Adjustment, then AT&T, Lucent
and NCR shall share such Restructuring Adjustment in the following manner in
order to ensure that the party or parties that will bear the burden or inure to
the benefit of the Correlative Adjustment in the future will share the
Restructuring Adjustment in proportion to each of their respective Shared
Percentages after giving effect to such Correlative Adjustment:
(i) first, the amount of any such Restructuring Adjustment
shall be increased or decreased, as appropriate, by the amount of the
Correlative Adjustment, the net amount resulting from such increase or decrease
being hereinafter referred to as the "Net Restructuring Adjustment" for purposes
of this Section 2.3(d);
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(ii) second, the Net Restructuring Adjustment shall be
allocated among AT&T, Lucent and NCR in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared NCR Percentage,
respectively, to the extent each such party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, reimbursement or other payment with respect to such
Restructuring Adjustment under this Agreement; and
(iii) finally, with respect to a party to which a Correlative
Adjustment is attributable, that party's share of the Net Restructuring
Adjustment as allocated pursuant to paragraph (ii) of this Section 2.3(d) will
be increased or decreased, as appropriate, by the amount, if any, of the
Correlative Adjustment that is attributable to such party in order to arrive at
such party's share of the Restructuring Adjustment.
Notwithstanding any other provision of this Agreement or the Separation
Agreement to the contrary, in the case of any Adjustment comprising a
Restructuring Adjustment that relates to the Distribution and arises as a result
of the acquisition of all or a portion of the Lucent stock and/or its assets by
any means whatsoever by any Person other than an Affiliate of Lucent following
such Distribution, then the Shared Lucent Percentage with respect to such
Adjustment shall be 100% and each of the Shared AT&T Percentage and the Shared
NCR Percentage shall be 0%.
(e) Following the determination of a party's share of a
Restructuring Adjustment pursuant to Section 2.3(d) above, and subject to
Section 3.4 and 3.5 hereof, the Controlling Party that controls the Tax Contest
to which such Restructuring Adjustment relates shall (i) be entitled to
reimbursement from AT&T, Lucent and/or NCR, as the case may be, for each of
their respective shares, if any, of any Restructuring Adjustment the amount of
which increases a Tax; and (ii) reimburse AT&T, Lucent or NCR, as the case may
be, for each of their respective shares, if any, of any Restructuring Adjustment
the amount of which decreases a Tax.
2.4. NON-LINE OF BUSINESS ADJUSTMENTS. (a) Lucent shall be
liable for, and shall indemnify and hold harmless, as appropriate, any member of
the AT&T Services Group and/or the NCR Group against Lucent's share, as
determined in Section 2.4(d) below, of any Non-Line of Business Adjustment the
amount of which increases a Tax for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the Distribution Date, in each case
with respect to any Return of any member of the Lucent Group, the AT&T Services
Group or the NCR Group. Lucent shall be entitled to receive, and shall be paid
(i) by AT&T, Lucent's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return of any member of the
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AT&T Services Group; and/or (ii) by NCR, Lucent's share, as determined in
Section 2.4(d) below, of any Non-Line of Business Adjustment the amount of which
decreases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date with respect to any Return of
any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against AT&T's
share, as determined in Section 2.4(d) below, of any Non-Line of Business
Adjustment the amount of which increases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date;
and (ii) any member of the NCR Group against AT&T's share, as determined in
Section 2.4(d) below, of any Non-Line of Business Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the date of the NCR Distribution, in each case with
respect to any Return of any member of the Lucent Group, the AT&T Services Group
or the NCR Group. AT&T shall be entitled to receive, and shall be paid (i) by
Lucent, AT&T's share, as determined in Section 2.4(d) below, of any Non-Line of
Business Adjustment the amount of which decreases a Tax for any Taxable period
or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the Lucent Group;
and/or (ii) by NCR, AT&T's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the date of the NCR Distribution with respect to any Return of any member
of the NCR Group.
(c) NCR shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against NCR's
share, as determined in Section 2.4(d) below, of any Non-Line of Business
Adjustment the amount of which increases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date;
and (ii) any member of the AT&T Services Group against NCR's share, as
determined in Section 2.4(d) below, of any Non-Line of Business Adjustment the
amount of which increases a Tax for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the date of the NCR Distribution, in
each case with respect to any Return of any member of the Lucent Group, the AT&T
Services Group or the NCR Group. NCR shall be entitled to receive, and shall be
paid (i) by Lucent, NCR's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return of any member of the
Lucent Group; and/or (ii) by AT&T, NCR's share, as determined in Section 2.4(d)
below, of any Non-Line of Business Adjustment the amount of which decreases a
Tax for any Taxable
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period or portion of a Taxable period ending or deemed to end on or before the
date of the NCR Distribution with respect to any Return of any member of the
AT&T Services Group.
(d) AT&T, Lucent and NCR shall share the amount of any
Non-Line of Business Adjustment if, and to the extent, each such party is liable
for and/or has an obligation to make, or has the right to receive, as the case
may be, any indemnity payment, reimbursement or other payment with respect to
such Non-Line of Business Adjustment under this Agreement, in proportion to the
Shared AT&T Percentage, the Shared Lucent Percentage and the Shared NCR
Percentage, respectively; provided, however, that in the event that there is any
Correlative Adjustment with respect to any such Non-Line of Business Adjustment,
then AT&T, Lucent and NCR shall share such Non-Line of Business Adjustment in
the following manner in order to ensure that the party or parties that will bear
the burden or inure to the benefit of the Correlative Adjustment in the future
will share the Non-Line of Business Adjustment in proportion to each of their
respective Shared Percentages after giving effect to such Correlative
Adjustment:
(i) first, the amount of any such Non-Line of Business
Adjustment shall be increased or decreased, as appropriate, by the amount of the
Correlative Adjustment, the net amount resulting from such increase or decrease
being hereinafter referred to as the "Net Non-Line of Business Adjustment" for
purposes of this Section 2.4(d);
(ii) second, the Net Non-Line of Business Adjustment shall be
allocated among AT&T, Lucent and NCR in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared NCR Percentage,
respectively, to the extent each such party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, reimbursement or other payment with respect to such Non-Line
of Business Adjustment under this Agreement; and
(iii) finally, with respect to a party to which a Correlative
Adjustment is attributable, that party's share of the Net Non-Line of Business
Adjustment as allocated pursuant to paragraph (ii) of this Section 2.4(d) will
be increased or decreased, as appropriate, by the amount, if any, of the
Correlative Adjustment that is attributable to such party in order to arrive at
such party's share of the Non-Line of Business Adjustment.
(e) Following the determination of a party's share of a
Non-Line of Business Adjustment pursuant to Section 2.4(d) above, and subject to
Section 3.4 and 3.5 hereof, the Controlling Party that controls the Tax Contest
to which such Non-Line of Business Adjustment relates shall (i) be entitled to
reimbursement from AT&T, Lucent
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and/or NCR, as the case may be, for each of their respective shares, if any, of
any Non-Line of Business Adjustment the amount of which increases a Tax; and
(ii) reimburse AT&T, Lucent or NCR, as the case may be, for each of their
respective shares, if any, of any Non-Line of Business Adjustment the amount of
which decreases a Tax.
ARTICLE III
TAX CONTESTS
3.1. NOTIFICATION OF TAX CONTESTS. The Controlling Party shall
promptly notify all Interested Parties of (a) the commencement of any Tax
Contest pursuant to which such Interested Parties may be required to make or
entitled to receive an indemnity payment, reimbursement or other payment under
this Agreement; and (b) as required and specified in Section 3.4 hereof, any
Final Determination made with respect to any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive any indemnity
payment, reimbursement or other payment under this Agreement. The failure of a
Controlling Party to promptly notify any Interested Party as specified in the
preceding sentence shall not relieve any such Interested Party of any liability
and/or obligation which it may have to the Controlling Party under this
Agreement except to the extent that the Interested Party was prejudiced by such
failure, and in no event shall such failure relieve the Interested Party from
any other liability or obligation which it may have to such Controlling Party.
3.2. TAX CONTEST SETTLEMENT RIGHTS. The Controlling Party
shall have the sole right to contest, litigate, compromise and settle any
Adjustment that is made or proposed in a Tax Contest without obtaining the prior
consent of any Interested Party; provided, however, that, unless waived by the
parties in writing, the Controlling Party shall, in connection with any proposed
or assessed Adjustment in a Tax Contest for which an Interested Party may be
required to make or entitled to receive an indemnity payment, reimbursement or
other payment under this Agreement (a) keep all such Interested Parties informed
in a timely manner of all actions taken or proposed to be taken by the
Controlling Party; and (b) provide all such Interested Parties with copies of
any correspondence or filings submitted to any Taxing Authority or judicial
authority, in each case in connection with any contest, litigation, compromise
or settlement relating to any such Adjustment in a Tax Contest. The failure of a
Controlling Party to take any action as specified in the preceding sentence with
respect to an Interested Party shall not relieve any such Interested Party of
any liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Interested Party was prejudiced by
such failure, and in no event shall such failure relieve the Interested Party
from any other liability or obligation which it may have to such Controlling
Party. The Controlling Party may, in its sole discretion, take into account any
suggestions made by
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an Interested Party with respect to any such contest, litigation, compromise or
settlement of any Adjustment in a Tax Contest. All costs of any Tax Contest are
to be borne by the Controlling Party; provided, however, that (x) any costs
related to an Interested Party's attendance at any meeting with a Taxing
Authority or hearing or proceeding before any judicial authority pursuant to
Section 3.3 hereof, and (y) the costs of any legal or other representatives
retained by an Interested Party in connection with any Tax Contest that is
subject to the provisions of this Agreement, shall be borne by such Interested
Party.
3.3. TAX CONTEST PARTICIPATION. (a) Unless waived by the
parties in writing, the Controlling Party shall provide an Interested Party with
written notice reasonably in advance of, and such Interested Party shall have
the right to attend, any formally scheduled meetings with Taxing Authorities or
hearings or proceedings before any judicial authorities in connection with any
contest, litigation, compromise or settlement of any proposed or assessed
Adjustment comprising any Tax Adjustment or Tax Benefit that is the subject of
any Tax Contest pursuant to which such Interested Party may be required to make
or entitled to receive an indemnity payment, reimbursement or other payment
under this Agreement. In addition, unless waived by the parties in writing, the
Controlling Party shall provide each such Interested Party with draft copies of
any correspondence or filings to be submitted to any Taxing Authority or
judicial authority with respect to such Adjustments for such Interested Party's
review and comment. The Controlling Party shall provide such draft copies
reasonably in advance of the date that they are to be submitted to the Taxing
Authority or judicial authority and the Interested Party shall provide its
comments, if any, with respect thereto within in a reasonable time before such
submission. The failure of a Controlling Party to provide any notice,
correspondence or filing as specified in this Section 3.3(a) to an Interested
Party shall not relieve any such Interested Party of any liability and/or
obligation which it may have to the Controlling Party under this Agreement
except to the extent that the Interested Party was prejudiced by such failure,
and in no event shall such failure relieve the Interested Party from any other
liability or obligation which it may have to such Controlling Party.
(b) Unless waived by the parties in writing, the Controlling
Party shall provide an Interested Party with written notice reasonably in
advance of, and such Interested Party shall have the right to attend, any
formally scheduled meetings with Taxing Authorities or hearings or proceedings
before any judicial authorities in connection with any contest, litigation,
compromise or settlement of any proposed or assessed Adjustment comprising any
Restructuring Adjustment or Non-Line of Business Adjustment that is the subject
of any Tax Contest pursuant to which such Interested Party may be required to
make or entitled to receive an indemnity payment, reimbursement or other payment
under this Agreement, but only if the Interested Party bears, or in the good
faith judgment of the Controlling Party, may bear, a Significant Obligation with
respect to such Adjustment; provided, however, that the Controlling Party may,
in its sole
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discretion, permit an Interested Party that does not bear, or potentially bear,
such a Significant Obligation with respect to such an Adjustment comprising a
Restructuring Adjustment or Non-Line of Business Adjustment to attend any such
meetings, hearings or proceedings that relate to such Adjustment. In addition,
unless waived by the parties in writing, the Controlling Party shall provide
each such Interested Party with draft copies of any correspondence or filings to
be submitted to any Taxing Authority or judicial authority with respect to such
Adjustments for such Interested Party's review and comment. The Controlling
Party shall provide such draft copies reasonably in advance of the date that
they are to be submitted to the Taxing Authority or judicial authority and the
Interested Party shall provide its comments, if any, with respect thereto within
in a reasonable time before such submission. The failure of a Controlling Party
to provide any notice, correspondence or filing as specified in this Section
3.3(b) to an Interested Party shall not relieve any such Interested Party of any
liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Interested Party was prejudiced by
such failure, and in no event shall such failure relieve the Interested Party
from any other liability or obligation which it may have to such Controlling
Party.
3.4. TAX CONTEST WAIVER. (a) The Controlling Party shall
promptly provide written notice, sent postage prepaid by United States mail,
certified mail, return receipt requested, to all Interested Parties in a Tax
Contest (i) that a Final Determination has been made with respect to such Tax
Contest; and (ii) enumerating the amount of the Interested Party's share of each
Adjustment reflected in such Final Determination of the Tax Contest for which
such Interested Party may be required to make or entitled to receive an
indemnity payment, reimbursement or other payment under this Agreement.
(b) Within ninety (90) days after an Interested Party receives
the notice described in Section 3.4(a) hereof from the Controlling Party, such
Interested Party shall execute a written statement giving notice to the
Controlling Party (i) that the Interested Party agrees with each Adjustment (and
its share thereof) enumerated in the notice described in Section 3.4(a) hereof
except with respect to those Adjustments (and/or its shares thereof) that, in
the good faith judgment of the Interested Party, it disagrees with and has
specifically enumerated its disagreement with, including the amount of such
disagreement, in the statement (each such disagreed Adjustment (and/or share
thereof) hereinafter referred to as a "Disputed Adjustment"); and (ii) that the
Interested Party thereby waives it right to a determination by an Independent
Third Party pursuant to the provisions of Section 3.5 hereof with respect to all
Adjustments to which it agrees with its share (this statement hereinafter
referred to as the "Interested Party Notice"). The failure of an Interested
Party to provide the Interested Party Notice to the Controlling Party within the
ninety (90) day period specified in the preceding sentence shall be deemed to
indicate that such Interested Party agrees with its share of all Adjustments
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enumerated in the notice described in Section 3.4(a) hereof and that such
Interested Party waives it right to a determination by an Independent Third
Party with respect to all such Adjustments (and its shares thereof) pursuant to
Section 3.5 hereof.
(c) During the ninety (90) day period immediately following
the Controlling Party's receipt of the Interested Party Notice described in
Section 3.4(b) above, the Controlling Party and the Interested Party shall in
good faith confer with each other to resolve any disagreement over each Disputed
Adjustment that was specifically enumerated in such Interested Party Notice. At
the end of the ninety (90) day period specified in the preceding sentence,
unless otherwise extended in writing by the mutual consent of the parties, the
Interested Party shall be deemed to agree with all Disputed Adjustments that
were specifically enumerated in the Interested Party Notice and waive its right
to a determination by an Independent Third Party pursuant to Section 3.5 hereof
with respect to all such Disputed Adjustments unless, and to the extent, that at
any time during such ninety (90) day (or extended) period, either the
Controlling Party or the Interested Party has given the other party written
notice that it is seeking a determination by an Independent Third Party pursuant
to Section 3.5 hereof regarding the propriety of any such Disputed Adjustment.
(d) Notwithstanding anything in this Agreement to the
contrary, an Interested Party that does not have a Significant Obligation with
respect to an Adjustment comprising either a Restructuring Adjustment or
Non-Line of Business Adjustment has no right to a determination by an
Independent Third Party under section 3.5 hereof with respect to any such
Adjustment comprising a Restructuring Adjustment or Non-Line of Business
Adjustment.
3.5. TAX CONTEST DISPUTE RESOLUTION. (a) In the event that
either a Controlling Party or an Interested Party has given the other party
written notice as required in Section 3.4(c) hereof that it is seeking a
determination by an Independent Third Party pursuant to this Section 3.5 with
respect to any Disputed Adjustment that was enumerated in an Interested Party
Notice, then the parties shall, within ten (10) days after a party has received
such notice, jointly select an Independent Third Party to make such
determination. In the event that the parties cannot jointly agree on an
Independent Third Party to make such determination within such ten (10) day
period, then the Controlling Party and the Interested Party shall each
immediately select an Independent Third Party and the Independent Third Parties
so selected by the parties shall jointly select, within ten (10) days of their
selection, another Independent Third Party to make such determination.
(b) In making its determination as to the propriety of any
Disputed Adjustment, the Independent Third Party selected pursuant to Section
3.5(a) above shall assume that the Interested Party is not required or entitled
under applicable law to be a
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member of any Consolidated Return. In addition, the Independent Third Party
shall make its determination according to the following procedure:
(i) The Independent Third Party shall first analyze each
Disputed Adjustment for which a determination is sought pursuant to this Section
3.5 on a stand alone basis to determine whether the actual outcome reached with
respect to such Disputed Adjustment as reflected in the Final Determination of
the Tax Contest was fair and appropriate taking into account the following
exclusive criteria: (A) the facts relating to such Adjustment; (B) the
applicable law, if any, with respect to such Adjustment; (C) the position of the
applicable Taxing Authority with respect to compromise, settlement or litigation
of such Adjustment; (D) the strength of the factual and legal arguments made by
the Controlling Party in reaching the outcome with respect to such Adjustment as
reflected in the Final Determination of the Tax Contest; and (E) the strength of
the factual and legal arguments being made by the Interested Party for the
alternative outcome being asserted by such Interested Party (including the
availability of facts, information and documentation to support such alternative
outcome). Based on this analysis, the Independent Third Party shall determine
what is the fair and appropriate outcome (hereinafter referred to as the
"Initial Determination") with respect to each such Disputed Adjustment.
(ii) The Interested Party shall not be entitled to
modification of its share of a Disputed Adjustment under this Section 3.5 if, as
the case may be, either (A) the amount that would be paid by the Interested
Party under the Initial Determination with respect to such Disputed Adjustment
is 80% or more than the amount that would be paid by the Interested Party with
respect to such Disputed Adjustment under the actual outcome reached with
respect to such Disputed Adjustment; or (B) the amount that would be received by
the Interested Party under the Initial Determination with respect to such
Disputed Adjustment is 120% or less than the amount that the Interested Party
would receive with respect to such Disputed Adjustment under the actual outcome
reached with respected to such Disputed Adjustment. The Independent Third Party
will provide notice to the Controlling Party and the Interested Party in the
event the Interested Party is not entitled to modification of its share of the
Disputed Adjustment pursuant to this paragraph (ii).
(iii) If the modification of an Interested Party's share of a
Disputed Adjustment under this Section 3.5 is not prohibited pursuant to
paragraph (ii) above, then the Independent Third Party shall determine what is
the fair and appropriate outcome (hereinafter referred to as the "Ultimate
Determination") to the Interested Party with respect to such Disputed Adjustment
in the context of the entire Tax Contest as it relates to the Interested Party.
In making this determination, the Independent Third Party shall consider the
Disputed Adjustment as if it were raised in an independent audit of the
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Interested Party by the appropriate Taxing Authority and the Independent Third
Party shall take into account and give appropriate weight in its sole discretion
to the following exclusive criteria: (A) the strength of the legal and factual
support for other potential, non-frivolous Adjustments with respect to matters
that were actually raised and contested by the applicable Taxing Authority in
the Tax Contest for which the Interested Party could have been liable under this
Agreement but which were eliminated or reduced as a result of the Controlling
Party agreeing to the Disputed Adjustment as reflected in the Final
Determination of the Tax Contest; (B) the effect of the actual outcome reached
with respect to the Disputed Adjustment on other Taxable periods and on other
positions taken or proposed to be taken in Returns filed or proposed to be filed
by the Interested Party; (C) the realistic possibility of avoiding examination
of potential, non-frivolous issues for which the Interested Party could be
liable under this Agreement and that were contemporaneously identified in
writings by the party or parties during the course of the Tax Contest but which
had not been raised and contested by the applicable Taxing Authority in the Tax
Contest; and (D) the benefits to the Interested Party in reaching a Final
Determination, and the strategy and rationale with respect to the Interested
Party's Disputed Adjustment that the Controlling Party had for agreeing to such
Disputed Adjustment in reaching the Final Determination, in each case that were
contemporaneously identified in writings by the party or parties during the
course of the Tax Contest.
(iv) The Interested Party shall only be entitled to
modification of its share of a Disputed Adjustment under this Section 3.5 if, as
the case may be, either (A) the amount that would be paid by the Interested
Party under the Ultimate Determination with respect to such Disputed Adjustment
is less than 80% of the amount that would be paid by the Interested Party with
respect to such Disputed Adjustment under the actual outcome reached with
respect to such Disputed Adjustment; or (B) the amount that would be received by
the Interested Party under the Ultimate Determination with respect to such
Disputed Adjustment is more than 120% of the amount that the Interested Party
would receive with respect to such Disputed Adjustment under the actual outcome
reached with respected to such Disputed Adjustment. If an Interested Party is
entitled to modification of its share of any Disputed Adjustment under the
preceding sentence, the amount the Interested Party is entitled to receive, or
is required to pay, as the case may be, with respect to such Disputed Adjustment
shall be equal to the amount of the Ultimate Determination of such Disputed
Adjustment. The Independent Third Party will provide notice to the Controlling
Party and the Interested Party stating whether the Interested Party is entitled
to modification of its share of the Disputed Adjustment pursuant to this
paragraph (iv) and, if the Interested Party is entitled to such modification,
the amount as determined in the preceding sentence that the Interested Party is
entitled to receive from, or required to pay to, the Controlling Party with
respect to such Disputed Adjustment.
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(c) Any determination made or notice given by an Independent
Third Party pursuant to this Section 3.5 shall be (i) in writing; (ii) made
within sixty (60) days following the selection of the Independent Third Party as
set forth in Section 3.5(a) of this Agreement unless such period is otherwise
extended by the mutual consent of the parties; and (iii) final and binding upon
the parties. The costs of any Independent Third Party retained pursuant to this
Section 3.5 shall be shared equally by the parties. The Controlling Party and
the Interested Party shall provide the Independent Third Party jointly selected
pursuant to Section 3.5(a) hereof with such information or documentation as may
be appropriate or necessary in order for such Independent Third Party to make
the determination requested of it. Upon issuance of an Independent Third Party's
notice under Section 3.5(b)(ii) or Section 3.5(b)(iv) hereof, the Controlling
Party or the Interested Party, as the case may be, shall pay as specified in
Article IV of this Agreement, the amount, if any, of the Disputed Adjustment to
the appropriate party.
ARTICLE IV
PROCEDURE AND PAYMENT
4.1. PROCEDURE. (a) If an Interested Party has any liability
and/or obligation to make, or the right to receive, any indemnity payment,
reimbursement or other payment with respect to an Adjustment under this
Agreement for which it does not have a right to a determination by an Interested
Third Party under Section 3.5 hereof, then the amount of such Adjustment shall
be immediately due and payable upon receipt by the Interested Party of a notice
of Final Determination of a Tax Contest as required and specified in Section
3.4(a) hereof.
(b) If after (i) notice of a Final Determination of a Tax
Contest as required and specified in Section 3.4(a) hereof has been given by a
Controlling Party to an Interested Party; and (ii) the Interested Party
receiving such notice has either:
(A) failed to provide the Interested Party Notice specified in
Section 3.4(b) hereof within the ninety (90) day period set forth in Section
3.4(b);
(B) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
agreeing to all Adjustments (and the Interested Party's share of all such
Adjustments) and waiving the right to an Independent Third Party determination
pursuant to Section 3.5 hereof with respect to all such Adjustments (and the
Interested Party's share of such Adjustments);
(C) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
agreeing with some, but not
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all, Adjustments (and the Interested Party's share of such agreed Adjustments)
and waiving the right to an Independent Third Party Determination pursuant to
Section 3.5 hereof with respect to all such agreed Adjustments (and the
Interested Party's share of such Adjustments); or
(D) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
specifically enumerating the Disputed Adjustments to which it does not agree and
for which the notice specified in either Section 3.5(b)(ii) or Section
3.5(b)(iv) hereof relating to any such Disputed Adjustment has been given by an
independent Third Party;
then the amount of any Adjustment agreed to or deemed to be
agreed to by the Interested Party, or for which an Independent Third Party
notice has been given pursuant to either Section 3.5(b)(ii) or Section
3.5(b)(iv) hereof, as set forth in each of clause (A), (B, (C) or (D) above,
shall be immediately due and payable.
(c) Any Person entitled to any indemnification, reimbursement
or other payment under this Agreement with respect to the amount of any
Adjustment that has become immediately due and payable under this Section 4.1
(the "Indemnified Party") shall notify in writing the Person against whom such
indemnification, reimbursement or other payment is sought (the "Indemnifying
Party") of its right to and the amount of such indemnification, reimbursement or
other payment; provided, however, that the failure to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability and/or
obligation which it may have to an Indemnified Party on account of the
provisions contained in this Agreement except to the extent that the
Indemnifying Party was prejudiced by such failure, and in no event shall such
failure relieve the Indemnifying Party from any other liability or obligation
which it may have to such Indemnified Party. The Indemnifying Party shall make
such indemnity payment, reimbursement or other payment to the Indemnified Party
within thirty (30) days of the receipt of the written notice specified in the
preceding sentence.
4.2. PAYMENT. Any indemnity payment, reimbursement or other
payment required to be made pursuant to this Agreement by an Indemnifying Party
to an Indemnified Party shall be made, at the option of the Indemnifying Party,
by (a) certified check payable to the order of the Indemnified Party; or (b)
wire transfer of immediately available funds to such bank and/or other account
of the Indemnified Party as from time to time the Indemnified Party shall have
directed the Indemnifying Party, in writing.
4.3. INTEREST. Any indemnity payment, reimbursement or other
payment required to be made by an Interested Party pursuant to this Agreement
shall bear interest at the Prime Rate plus 2%, per annum, from the date such
Interested Party
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receives the notice of Final Determination made with respect to a Tax Contest as
provided in Section 3.4(a) hereof. Any indemnity payment, reimbursement or other
payment required to be made by a Controlling Party to an Interested Party
pursuant to this Agreement shall bear interest at the Prime Rate plus 2%, per
annum, from a date thirty (30) days after the date of a Final Determination made
with respect to a Tax Contest.
ARTICLE V
OTHER TAX MATTERS
5.1. TAX POLICIES AND PROCEDURES DURING CONSOLIDATION. It is
understood and agreed that during Consolidation:
(a) Members of the Lucent Group and members of the NCR Group,
respectively, shall each adopt and follow the Tax policies and procedures that
have been established by AT&T and communicated to Lucent and NCR unless, AT&T
shall otherwise consent, as provided herein. In the event that a member of the
Lucent Group and/or the NCR Group desires to adopt and follow a Tax policy or
procedure that is different from that established by AT&T, Lucent and/or NCR, as
the case may be, shall, in writing, (i) request AT&T's consent to do so; and
(ii) provide AT&T with the reasons for the request to adopt and follow such
different Tax policy or procedure. If AT&T determines in its good faith judgment
that it would be reasonable and appropriate from the perspective of the AT&T
Services Group for such member of the Lucent Group and/or the NCR Group to adopt
and follow such different Tax policy or procedure, AT&T shall provide its
written consent thereto.
(b) AT&T shall provide to Lucent and NCR timely written notice
of any material proposed change in established Tax policies or procedures.
(c) AT&T shall establish all Return positions and make all Tax
elections relating to a Consolidated Return. Members of the Lucent Group and
members of the NCR Group shall take such Consolidated Return positions and make
such Tax elections relating to a Consolidated Return as may be taken or made by
AT&T, or as reasonably requested by AT&T to be taken or made by any member of
the Lucent Group and/or any member of the NCR Group, as the case may be, unless
AT&T shall otherwise consent, as provided herein. In the event that Lucent
and/or NCR determines that it would be reasonable and appropriate for any member
of the Lucent Group or any member of the NCR Group, respectively, to take
positions or make elections relating to a Consolidated Return that are different
from those taken or made by AT&T (or reasonably requested by AT&T of any member
of the Lucent Group or any member of the NCR Group), Lucent and/or NCR, as the
case may be, shall, in writing,
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<PAGE>
(i) request AT&T's consent to do so; and (ii) provide AT&T with the reasons for
the request to take such different positions or make such different elections.
If AT&T determines in its good faith judgment that it would be reasonable and
appropriate from the perspective of the AT&T Services Group for such member of
the Lucent Group and/or the NCR Group to take such different positions or make
such different elections, AT&T shall provide its written consent thereto.
5.2. COOPERATION. Except as otherwise provided in this
Agreement, and without limiting the provisions contained in Article VIII of the
Separation Agreement which are incorporated herein by reference pursuant to
Section 6.3(a) hereof, each member of the AT&T Services Group, the Lucent Group
and/or the NCR Group, as the case may be, shall, at their own expense, cooperate
with each other in the filing of, or any Tax Contest relating to, any Return and
any other matters relating to Taxes and, in connection therewith, shall (i)
maintain appropriate books and records for any and all Taxable periods or any
portion of a Taxable period that may be required by AT&T's record retention
policies; (ii) provide to each other such information as may be necessary or
useful in the filing of, or any Tax Contest relating to, any such Return; (iii)
execute and deliver such consents, elections, powers of attorney and other
documents that may be required or appropriate for the proper filing of any such
Return or in conjunction with any Tax Contest relating to any such Return; and
(iv) make available for responding to inquiries of any other party or any Taxing
Authority, appropriate employees and officers of and advisors retained by any
member of the AT&T Services Group, the Lucent Group, or the NCR Group, as the
case may be.
5.3. FILING OF RETURNS. The Person that would be the
Controlling Party with respect to any Tax Contest relating to a Return for which
any indemnity payment, reimbursement or other payment may be sought under this
Agreement shall (a) prepare and file, or cause to be prepared and filed, any
such Return within the time prescribed for filing such Return (including all
extensions of time for filing); and (b) shall timely pay, or cause to be timely
paid, the amount of any Tax shown to be due and owing on any such Return;
provided, however, that in the case of Taxes which are Liabilities of Lucent
pursuant to Section 2.3(a)(ii) of the Separation Agreement, if AT&T or any other
member of the AT&T Group is required pursuant to this Agreement to file such
Return and pay the Taxes shown as due thereon, Lucent will pay to AT&T, in
advance of the date on which AT&T must pay such Taxes, an amount equal to the
amount of such Taxes which are Liabilities of Lucent. Such Person shall bear all
costs associated with preparing and filing, or causing to be prepared and filed,
any such Return. Except as provided in Section 5.1(c) hereof (relating to
Consolidated Returns), such Person shall establish all Return positions and make
all Tax elections relating to such Returns.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1. GOVERNING LAW. To the extent not preempted by any
applicable foreign or U.S. federal, state, or local Tax law, this Agreement
shall be governed by and 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.
6.2. AFFILIATES. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Affiliate of such party;
provided, however, that for purposes of the foregoing, no Person shall be
considered an Affiliate of a party if such Person is a member of another party's
Group.
6.3. INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. The
following provisions of the Separation Agreement are hereby incorporated herein
by reference, and unless otherwise expressly specified herein, such provisions
shall apply as if they are fully set forth herein (references in this Section
6.3 to an "Article" shall mean Articles of the Separation Agreement):
(a) Article VIII (relating to Exchange of Information and
Confidentiality); and
(b) Article XII (relating to Miscellaneous Provisions, except
as otherwise specified herein).
6.4. NOTICES. Except for any notice or other communication
required to be given by a Controlling Party under this Agreement, AT&T, Lucent
and NCR (or any other Person delegated in writing by each of the foregoing)
shall serve as the single point of contact to receive or give any notice or
other communication required or permitted to be given to any member of each of
their respective Groups under this Agreement. Unless specifically provided
otherwise in this Agreement, all notices or other communications under this
Agreement shall be in writing and shall deemed to be duly given when (a)
delivered in person; or (b) sent by facsimile; or (c) deposited in the United
States mail, postage prepaid and sent certified mail, return receipt requested;
or (d) deposited in private express mail, postage prepaid, addressed as follows:
If to any member of the AT&T Services Group, to:
AT&T Corp.
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<PAGE>
412 Mt. Kemble Avenue
Morristown, New Jersey 07960
Attn: Vice President - Taxes and Tax Counsel
Facsimile: (201) 644-6823
If to any member of the Lucent Group, to:
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Attn: Vice President - Taxes and Tax Counsel
Facsimile:
If to any member of the NCR Group, to:
NCR Corporation
1700 S. Patterson Blvd.
Dayton, Ohio 45479
Attn: Assistant Vice President & Director, Corporate Taxes
Facsimile: (513) 445-6935
Any party may, by written notice to the other parties, change the address to
which such notices are to be given.
6.5. CONFLICTING OR INCONSISTENT PROVISIONS. In the event that
any provision or term of this Agreement conflicts or is inconsistent with any
provision or term of any other agreement between or among AT&T or any other
member of the AT&T Group, Lucent or any other member of the Lucent Group and/or
NCR or any other member of the NCR Group, as the case may be, which is in effect
on or prior to the date hereof, the provision or term of this Agreement shall
control and apply and the provision or term of any other agreement shall, to the
extent of such conflict or inconsistency, be inoperative and inapplicable.
6.6. DURATION. Notwithstanding anything in this Agreement or
the Separation Agreement to the contrary, the provisions of this Agreement shall
survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof).
6.7. AMENDMENT. Without limiting the provisions contained in
Article XII of the Separation Agreement which are incorporated herein by
reference pursuant to Section 6.3(b) hereof:
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<PAGE>
(a) The parties agree that any waiver, amendment, supplement
or modification of this Agreement that solely relates to and affects only two of
the three parties hereto shall not require the consent of the third party
hereto. Without limiting the foregoing, effective immediately on notice to
Lucent, without any further action required by any member of the Lucent Group,
AT&T may assume any Liability of any member of the NCR Group and all members of
the NCR Group shall thereupon automatically be released therefrom.
(b) The parties acknowledge that the provisions of this
Agreement may not fully reflect all of their respective concerns with respect to
state and local Taxes. Consequently, the parties will cooperate in determining
whether to amend or supplement this Agreement no later than February 29, 1996.
To the extent no such amendment or supplement is executed on or prior to
February 29, 1996, the provisions of this Agreement shall remain in full force
and effect.
6.8. TAX ALLOCATION AGREEMENTS. Lucent hereby assumes and
agrees faithfully to perform and fulfill all obligations and other Liabilities
of any member of the Lucent Group under the Federal Tax Allocation Agreement and
the State and Local Income Tax Allocation Agreement, in accordance with each of
their respective terms.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Tax
Sharing Agreement to be executed by their duly authorized representatives.
AT&T CORP.
By: /s/
---------------------
Name:
Title:
LUCENT TECHNOLOGIES INC.
By: /s/
---------------------
Name:
Title:
NCR CORPORATION
By: /s/
---------------------
Name:
Title:
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<PAGE> EXHIBIT (10)(ii)(B)1
GENERAL PURCHASE AGREEMENT
BETWEEN
AT&T CORP.
AND
LUCENT TECHNOLOGIES INC.
<PAGE>
<PAGE>
GENERAL PURCHASE AGREEMENT
Table of Contents
PART I -- COMMON TERMS AND CONDITIONS...... 1
ARTICLE I -- DEFINITIONS.............................. 1
1.1 Acceptance....................................... 1
1.2 Acceptance Date............................... 2
1.3 Acceptance Test................................2
1.4 Acceptance Test Period.................... 2
1.5 Action..............................................2
1.6 Active Licensed Software Product....2
1.7 Additional Work.............................. 2
1.8 Affiliate........................................... 2
1.9 Agreement...................................... 2
1.10 Agreement Documents................... 2
1.11 Application for Payment................. 2
1.12 Applicable Deadline........................3
1.13 Application Software......................3
1.14 AR................................................. 3
1.15 Arbitration Act............................... 3
1.16 Arbitration Demand Date............... 3
1.17 Arbitration Demand Notice............. 3
1.18 ARM............................................. 3
1.19 AT&T.......................................... 3
1.20 AT&T EH&S Practices.................. 3
1.21 Beneficial Occupancy.................... 3
1.22 Bill of Materials............................ 3
1.23 Call Receipt................................... 3
1.24 Change Order................................ 4
1.25 Completion Date........................... 4
1.26 Completion Schedule.................... 4
1.27 Consultation Support.................... 4
1.28 Construction Delay....................... 4
1.29 CPR............................................. 4
1.30 Customer Software..................... 4
1.31 Customer Connectivity................. 4
1.32 Demobilization............................ 4
1.33 Designated Processor.................. 4
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1.34 Differing Site Conditions.............................4
1.35 Discontinued Availability.......................... 4
1.36 Drawings.................................................. 5
1.37 Effective Date...........................................5
1.38 Engineer...................................................5
1.39 Enhancements.......................................... 5
1.40 Export.................................................... 5
1.41 Field Order............................................. 5
1.42 Final Acceptance..................................... 5
1.43 Firmware................................................ 5
1.44 First Field Application............................ 5
1.45 Fit............................................. 5
1.46 Force Majeure........................................ 6
1.47 Form...................................................... 6
1.48 Function................................................. 6
1.49 Governmental Authority......................... 6
1.50 Hardware Deployment............................ 6
1.51 Information............................................. 6
1.52 Initial Response Time.............................. 6
1.53 Installation Complete Date...................... 6
1.54 Intellectual Property Agreements............ 6
1.55 Licensed Materials.................................. 6
1.56 Lump Sum Price..................................... 7
1.57 Major Holidays....................................... 7
1.58 Make Ready Coordination...................... 7
1.59 Mature Software Product....................... 7
1.60 Management Notification........................ 7
1.61 Method of Procedure.............................. 7
1.62 Modifications......................................... 7
1.63 NCR...................................................... 8
1.64 New Software Product........................... 8
1.65 NS-Lucent........................................ .......8
1.66 Object Code........................................... 8
1.67 On-Site Assistance...................................8
1.68 On-Site Work Force.............................. 8
1.69 Order.................................................... 8
1.70 Ordering Company.................................. 8
1.71 Ordering Company's Information............ 8
1.72 Ordering Company Notification Bulletin. 9
1.73 Ordering Company Representative......... 9
1.74 Others.................................................... 9
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1.75 Performance Metrics....................... 9
1.76 Price............................................... 9
1.77 Problem Management..................... 9
1.78 Problem Resolution........................ 9
1.79 Product.......................................... 9
1.80 Proposal.........................................9
1.81 Related Documentation..................9
1.82 Remobilization.............................. 10
1.83 Resolve........................................ 10
1.84 Resolve Time.................................10
1.85 Respond....................................... 10
1.86 Restore.......................................... 10
1.87 Scope of Work.............................. 10
1.88 Service.......................................... 10
1.89 Service Performance Reports......... 11
1.90 Service Restoration Time............... 11
1.91 Severity Level................................ 11
1.92 Severity Level One..........................11
1.93 Severity Level Two........................ 11
1.94 Severity Level Three...................... 11
1.95 Severity Level Four........................ 11
1.96 Site............................................... 11
1.97 Software....................................... 11
1.98 Software Product............................11
1.99 Software Product Defect................12
1.100 Software Product Updates.............12
1.101 Source Code.............................. ..12
1.102 Special Conditions...................... 12
1.103 Specifications.............................. 12
1.104 Specifications or Standards......... 12
1.105 Start Date................................... 12
1.106 Subcontractor..............................12
1.107 Supplemental Agreement.............12
1.108 Supplementary Specifications.......13
1.109 Supplier...................................... 13
1.110 Supplier's Information................ 13
1.111 Supplier's Manufactured Product. 13
1.112 Support Services......................... 13
1.113 System....................................... 13
1.114 Unit Adjusting Price.................. 13
1.115 Unit Price................................. 13
1.116 United States............................. 13
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1.117 Use....................... 13
1.118 Vendor Item..........14
1.119 Warranty Period... 14
1.120 Work................... 14
1.121 Work Order.......... 14
ARTICLE IA -- NATURE OF AGREEMENT......... 14
1A.1 Purpose and Scope of this Agreement 14
1A.2 Statement of Aspirations.................... 15
1A.3 Volume of Commitment..................... 15
1A.4 Governing Terms............................... 16
1A.5 Term of Agreement............................ 17
1A.6 Transition Period..................................18
1A.7 Purchases by AT&T's Affiliates........... 18
1A.8 Additional Technology Rights............ 18
ARTICLE II -- ORDERING AND DELIVERY.........19
2.1 Orders.................................................. 19
2.2 Order Acceptance................................ 20
2.3 Changes in Ordering Company's Orders...20
2.4 Changes in Products by Supplier.............20
2.5 Order Cancellation and Holds................ 21
2.6 Shipping, Packing and Delivery............22
2.7 Title and Risk of Loss......................... 23
ARTICLE III -- PRICES AND PAYMENTS........... 23
3.1 Prices.............................................. 23
3.2 Invoices and Terms of Payment......... 24
3.3 Taxes.............................................26
ARTICLE IV -- INTELLECTUAL PROPERTY RIGHTS.27
4.1 Use of Information................................. 27
4.2 Infringement and Misappropriations....... 28
4.3 No Patent Licenses.................................29
4.4 Trademarks.............................................29
4.5 Proprietary Notice................................ 30
ARTICLE V -- RISK MANAGEMENT..................... 30
5.1 Ordering Companies' Remedies..............30
5.2 Supplier Performance............................32
5.3 Insurance............................................ 32
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ARTICLE VA -- ARBITRATION;
DISPUTE RESOLUTION ..33
5A.1 Agreement to Arbitrate........................ 33
5A.2 Escalation............................................ 33
5A.3 Demand for Arbitration........................ 34
5A.4 Arbitrators............................................35
5A.5 Hearings............................................. 35
5A.6 Discovery and Certain Other Matters....36
5A.7 Certain Additional Matters................. 37
5A.8 Limited Court Actions........................ 38
5A.9 Continuity of Service and Performance.... 39
5A.10 Law Governing Arbitration Procedures....39
ARTICLE VI -- MISCELLANEOUS...........................39
6.1 Export Control.................................... 39
6.2 Publication of Agreement....................... 39
6.3 Notices................................................. 39
6.4 Ordering Company's Responsibility......... 40
6.5 Supplier's Responsibility.......................... 40
6.6 Each Party's Responsibility...................... 41
6.7 Assurance of Supply................................ 41
6.8 Publicity........................................... 41
6.9 Right of Access/Permits and Approvals.... 42
6.10 Force Majeure........................................ 42
6.11 Independent Contractor..........................42
6.12 Releases Void........................................ 43
6.13 Survival of Obligations........................... 43
6.14 Government Contract Provisions............ 43
6.15 Quality System Audit............................. 43
6.16 ISO 9000............................................ 44
6.17 Utilization of Minority- and Women-Owned
Business Enterprises. 44
6.18 Assignability............................... 45
6.19 Governing Law........................... 45
6.20 Compliance with Law.................... 45
6.21 Record Retention......................... 45
6.22 Non-Waivers............................... 46
6.23 Third Party Beneficiaries............... 46
6.24 Severability................................. 46
6.25 Headings.................................... 46
6.26 Counterparts................................ 46
6.27 Amendments................................ 46
6.28 Interpretation............................... 47
6.29 Entire Agreement......................... 47
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ARTICLE VII -- PURPOSE AND ORGANIZATION OF PART II...47
7.1 Purposes and Scopes of Pa...................47
7.2 Organization of Part II..................... 47
ARTICLE VIII -- PURCHASE OF PRODUCTS..... 48
8.1 General.............................................. 48
8.2 Product Warranty................................. 48
8.3 Continuing Product Support - Parts and
Services....51
8.4 Technical Support of Products..............52
8.5 Documentation.................................... 53
8.6 Specification.........................................53
8.7 Equipment Testing.............................. 54
8.8 Environmental/Reliability Testing.....................54
8.9 Failure Mode Analysis of Failed Components...54
8.10 Floor Plan Data Sheets....................................55
8.11 Monthly Order and Shipment Reports......... 55
8.12 Radiation Assistance...................55
8.13 Marking......................................55
8.14 Periodic Product Qualification Reviews.......55
8.15 Maintenance/Post Warranty.........................56
8.16 Planning Information for Orders
for Commercially Available Products...... 56
ARTICLE IX -- SOFTWARE........................... 57
9.1 General....................................... 57
9.2 License....................................... 57
9.3 Software..................................... 58
9.4 Access to Source Code................ 58
9.5 Restrictions and Confidentiality.... 58
9.6 Installation of Software.............. . 59
9.7 Optional Software Features......... 59
9.8 Centralized Maintenance.............. 59
9.9 Enhancements.............................. 60
9.10 Intellectual Property Rights......... 60
9.11 Training and Technical Services.. 60
9.12 Modifications............................. 60
9.13 Redesignation or Transfer of Designated
Site or Computer.. 61
9.14 Software Acceptance.................. 61
9.15 Software Warranty..................... 62
9.16 Cancellation of License............... 64
9.17 Related Documentation................64
9.18 Additional Rights in Licensed Material.. 64
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9.19 Software Maintenance Service.............. 65
9.20 Notification of Discontinued Availability
of Software..... 65
ARTICLE X -- ENGINEERING, INSTALLATION,
MAINTENANCE AND OTHER
MISCELLANEOUS SERVICES... 66
10.1 General............................................. 66
10.2 Warranty of Services Other Than
Maintenance Services........................66
A. ENGINEERING SERVICES......................... 67
10.3 Ordering.............................................. 67
10.4 Standards for Engineering Services.......67
10.5 Standards for Central Office Record Services..67
10.6 Engineering Intellectual Property....................67
B. INSTALLATION SERVICES.................................. 67
10.7 Conditions of Installation and Other Services
Performed on Ordering Company's Site..... 67
10.8 Acceptance of Installation............................ 72
C. MAINTENANCE SERVICES............................. .73
10.9 General Service Description................... 73
10.10 Eligibility for Maintenance Service........ 77
10.11 Orders for Maintenance Service.......... 77
10.12 Prices.......................................... 77
10.13 Periods of Maintenance Service...... 77
10.14 Maintenance Service Exclusions....... 77
10.15 Ordering Company Responsibilities..... 79
10.16 Maintenance of Relocated Software..... 81
10.17 Software Product Update Services.......... 81
10.18 Maintenance Services Warranty............... 82
D. MISCELLANEOUS SERVICES .................... 83
10.19 Training................................................ 83
10.20 Installation/Cutover Assistance................ 83
ARTICLE XI -- OUTSIDE PLANT SERVICES............ 83
11.1 Purpose and Scope of This Article........... 83
11.2 Work; Supplier Materials; Permits; Railroads;
Security............................... 83
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11.3 Ordering Company Furnished Materials...... 84
11.4 Ordering Company Obligations.................. 85
11.5 Work Order; Changes................................ 86
11.6 Plant Protection; Underground Facilities.....86
11.7 Protection of Public and Public Property.....87
11.8 Local Conditions; Differing Site Conditions.87
11.9 Outside Plant Services Scheduling...............88
11.10 Inspection and Correction of Defects;
Acceptance...................................... 88
11.11 Supervision; Control of Work...............89
11.12 Warranty...............................................89
11.13 Safety; Emergency................................90
11.14 Engineer's Drawings and Specification...91
11.15 Reference Standards ........................ 91
11.16 Records................................................ 91
11.17 Unfavorable Construction Conditions... 92
11.18 Archaeological Sites; Environmental
Protection.........................................92
11.19 Reporting Defects............................... 93
11.20 Construction Delay.............................. 94
11.21 Notice of Labor Disputes..................... 95
11.22 Performance and Payment Bond........... 95
11.23 Application for Payment; Terms of Payment....96
11.24 Liens ................................................ 96
ARTICLE XII -- CONSULTING SERVICES........... 96
12.1 General................................................ 96
12.2 Statement of Work.............................. 96
12.3 Ownership of Information.................... 97
12.4 Equipment Supplier..............................97
12.5 Ordering Company's Responsibility...... 97
12.6 Warranty.............................................. 98
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<PAGE>
GENERAL PURCHASE AGREEMENT
THIS GENERAL PURCHASE AGREEMENT (this "General Agreement" or
"Agreement"), dated as of February 1, 1996, is by and between Lucent
Technologies Inc. and AT&T on behalf of itself and Ordering Companies.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned to them in Article I hereof.
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; and
WHEREAS, AT&T desires to purchase and license telecommunications
equipment, systems and services and Supplier is in the business of engineering,
furnishing and installing telecommunications systems and equipment, constructing
telecommunications networks, providing premises equipment, and providing
consulting and other services; and
WHEREAS, Lucent and AT&T wish to establish the fundamental terms and
conditions pursuant to which AT&T shall order, and Lucent shall provide, such
telecommunications equipment, systems and services.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
PART 1
COMMON TERMS AND CONDITIONS
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following definitions shall
apply:
1.1 ACCEPTANCE means Ordering Company's acknowledgment that
Products and Services provided or installed by Supplier have met the Acceptance
Test. It is agreed that both parties will respond to their obligations
regarding completion of Acceptance in a prompt and expeditious manner. Unless
Supplier receives written notification indicating otherwise from Ordering
Company, Acceptance will be deemed to have occurred thirty (30) days after
Supplier's notice of its completion, unless a longer Acceptance Test Period has
been agreed to. Acceptance of a particular release of Software in the ITN or in
the First Field Application shall constitute Acceptance of all copies of such
Software to be provided Ordering Company, regardless of when each such copy of
such Software is installed on its Designated Processor.
1
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1.2 ACCEPTANCE DATE means the date on which Supplier's Product or
Software successfully completes the applicable Acceptance Test, or, unless
Supplier receives written notice indicating otherwise from Ordering Company,
thirty (30) days after Supplier's notice of completion, whichever occurs sooner.
1.3 ACCEPTANCE TEST means the test upon Supplier's Product or
Software agreed upon by the parties, which may be performed by or on behalf of
Ordering Company during the Acceptance Test Period to determine whether the
Product or Software meets the applicable Specifications.
1.4 ACCEPTANCE TEST PERIOD means the period of time in days,
agreed upon by the parties and specified in the applicable Order or Supplemental
Agreement, during which the Acceptance Test shall be completed. In the absence
of such agreement, the Acceptance Test Period shall conclude thirty (30) days
from delivery of the Product or Licensed Materials to Ordering Company.
1.5 ACTION as used in Section 5A.1(a), AGREEMENT TO ARBITRATE,
means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or
investigation by or before any federal, state, local, foreign or international
Governmental Authority or any arbitration or mediation tribunal.
1.6 ACTIVE LICENSED SOFTWARE PRODUCT means an Application Software
Product that is actively embedded at Ordering Company sites and has been the
subject of some Product sales activity with any Ordering Company in the previous
three (3) years.
1.7 ADDITIONAL WORK means Work covered by a Change Order.
1.8 AFFILIATE of a party means a United States company or other
entity which is under common control with, controls, or is controlled by,
such party to this Agreement, as long as such control exists, where "control"
is defined as ownership greater than fifty percent (50%) of the equity or
beneficial interest of such entity or the right to elect or to appoint a
majority of the board of directors or other governing body of such entity.
1.9 AGREEMENT means this Agreement and any Work Orders or Change
Orders issued pursuant thereto.
1.10 AGREEMENT DOCUMENTS, as referred to in Article 11 means this
Agreement, any Special Conditions, Drawings, Specifications, Supplementary
Specifications which have been or will be mutually agreed upon.
1.11 APPLICATION FOR PAYMENT means a pro forma completed work
summary with supporting documentation from Supplier to Ordering Company.
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1.12 APPLICABLE DEADLINE has the meaning set forth in Section
5A.3(b), DEMAND FOR ARBITRATION.
1.13 APPLICATION SOFTWARE means Software that operates on a
generally available computer system and serves a function other than controlling
the fundamental operation of the computer system on which it is loaded (i.e.,
does not serve as a computer operating system). Application Software excludes
all Software that is utilized by the 5ESS(R) Switch.
1.14 AR means Assistance Request. Defect AR is an Ordering Company
Assistance Request due to a failure of the Product to perform to Specifications
and requires a design change to resolve. Service AR is an Ordering Company
Assistance Request due to a non-defect system problem or to answer a technical
question.
1.15 ARBITRATION ACT means the United States Arbitration Act,
9 U.S.C.Sections 1-14, as the same may be amended from time to time.
1.16 ARBITRATION DEMAND DATE has the meaning set forth in Section
5A.3(a), DEMAND FOR ARBITRATION.
1.17 ARBITRATION DEMAND NOTICE has the meaning set forth in Section
5A.3(a), DEMAND FOR ARBITRATION.
1.18 ARM means Assistance Request Management.
1.19 AT&T means AT&T Corp., a New York corporation.
1.20 AT&T EH&S PRACTICES as referenced in Article 11 means
environmental, health and safety practices that AT&T promulgates for use in its
own domestic operations and which it has provided to Supplier in the manner by
which notices are provided.
1.21 BENEFICIAL OCCUPANCY means the utilization by Ordering Company
of Work constructed by Supplier before Final Acceptance.
1.22 BILL OF MATERIALS means the list of major material items by
quantity to be ordered for a Work Order, which is taken from the Drawings after
the Work Order is engineered.
1.23 CALL RECEIPT means the process of ensuring that the Ordering
Company Assistance Request is referred to the appropriate Supplier technical
support group responsible for resolution. This task involves answering the
telephone (or electronic inquiry), gathering pertinent Ordering Company and
<PAGE>
technical data, determining the destination of the request for analysis to
ascertain if and how to bill Ordering Company for the Service being provided.
3
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<PAGE>
1.24 CHANGE ORDER as referred to in Article 11 means a written
Order by Ordering Company on its Change Order Form requesting a change to the
Work, as approved by Supplier, e.g., to approve variations in quantity or method
of Work.
1.25 COMPLETION DATE means the date by which Supplier and Ordering
Company agree in writing that the Work is to be completed.
1.26 COMPLETION SCHEDULE means the schedule for completion of the
Work contained in a Work Order or another writing signed by the parties.
1.27 CONSULTATION SUPPORT means technical assistance delivered by
telephone, electronic mail and/or telefax from Supplier's location via the Call
Receipt function.
1.28 CONSTRUCTION DELAY is defined in Section 11.21, NOTICE OF
LABOR DISPUTES, below.
1.29 CPR, as used in Article 5A, means the Center for Public
Resources.
1.30 CUSTOM SOFTWARE as referred to in Article 9 means the Source
Code, Object Code and Related Documentation developed by Supplier solely on
behalf of Ordering Company and in which Ordering Company has an ownership
interest (up to 100%) as specified in a Supplemental Agreement.
1.31 CUSTOMER CONNECTIVITY means the project in which Supplier,
pursuant to a Supplemental Agreement, is building a Network for AT&T in various
states of the United States to provide local telephone service.
1.32 DEMOBILIZATION as referred to in Article 11 means compensation
to Supplier for labor, equipment and load associated with ceasing an operation
due to Construction Delay and moving to another site.
1.33 DESIGNATED PROCESSOR means the Product for which licenses to
Use Licensed Materials are initially granted.
1.34 DIFFERING SITE CONDITIONS means (1) subsurface or latent
physical conditions at the Site differing materially from those indicated in the
Agreement Documents, or (2) unknown physical conditions at the Site, differing
materially from those ordinarily encountered and generally recognized as
inherent in Work of the character provided for in Article 11, or (3) conditions
differing materially from those indicated in the Agreement Documents and found
to be archaeologically, historically or culturally sensitive.
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1.35 DISCONTINUED AVAILABILITY (DA) means a Supplier-issued
Discontinued Availability announcement, which is written notice to Ordering
Company that Supplier will cease
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production of a specific Product or technology. This notice will also specify
the last date that Supplier will accept an equipment order (EO) from Ordering
Company and a timeline for how long Supplier will continue maintenance support
for the specific Product or technology.
1.36 DRAWINGS means the approved plans, profiles, working drawings,
and supplemental drawings, or exact reproductions thereof, which show the
location, character, dimensions, and details of the Work to be done, except for
shop drawings provided by Supplier.
1.37 EFFECTIVE DATE means January 1, 1996.
1.38 ENGINEER as referred to in Article 10 means a designation
reserved for a person or organization working for Ordering Company assigned
and/or identified to perform engineering services, including but not limited
to: development of project requirements; creation of product design; preparation
of drawings, Specifications and bidding requirements; and provision of Services
during the construction phase of the project.
1.39 ENHANCEMENTS as referred to in Article 9 means new releases of
Software, Software improvements and Software upgrades.
1.40 EXPORT means, without limitation, physical shipment;
transmittal by any means (including electronic); or oral, written, or visual
disclosure, either inside or outside the United States to a non-United States
national.
1.41 FIELD ORDER as referred to in Article 11 means a verbal
direction, confirmed by a Change Order, within the Scope of Work issued to
Supplier which interprets the Agreement Documents, excluding Article 11, or
authorizes minor variation in the Work from the requirements of the Agreement
Documents which Supplier agrees does not increase the unit prices but may change
the units that make up affected work.
1.42 FINAL ACCEPTANCE means a written Acceptance of the Work signed
by an authorized Ordering Company representative issued when all the Work is
acceptably completed and all items on the Punch List have been completed. Punch
List means the list of deficiencies to be corrected or completed as a result of
the final inspection of the Work.
1.43 FIRMWARE means a combination of (1) hardware and (2) Software
represented by a pattern of bits contained in such hardware.
1.44 FIRST FIELD APPLICATION shall mean the first installation of
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Software in AT&T's live network.
1.45 FIT means physical size or mounting arrangement (e.g.,
electrical or mechanical connections).
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1.46 FORCE MAJEURE means fires, strikes, riots, embargoes,
explosions, earthquakes, floods, wars, water, the elements, labor disputes,
shortages of or inability to secure materials and/or transportation facilities,
non-regulatory acts or omissions of government carriers, suppliers or other
third parties, or other causes beyond a party's control whether or not similar
to the foregoing.
1.47 FORM means physical shape.
1.48 FUNCTION means product features.
1.49 GOVERNMENTAL AUTHORITY as used in Article 5A shall mean any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.
1.50 HARDWARE DEPLOYMENT means the hardware fix, as the result of a
Product change notice, which is deployed pursuant to an Order or Supplemental
Agreement.
1.51 INFORMATION means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, Specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.52 INITIAL RESPONSE TIME means the time it takes for Ordering
Company to reach a Subject Matter Expert once Ordering Company contacts Supplier
Call Receipt group.
1.53 INSTALLATION COMPLETE DATE means the date on which a Product
or Software or System is installed by Supplier at the desired location and, for
Licensed Materials, is ready for Use by an Ordering Company.
1.54 INTELLECTUAL PROPERTY AGREEMENTS means the Patent License
Agreement, Patent Assignments, Patent Defensive Protection Agreements, Patent
Joint Ownership Agreement, Technology License Agreement, Technology Assignment
and Joint Ownership Agreement (in each case, as defined in the Separation and
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Distribution Agreement dated as of the date hereof by and among AT&T, NCR and
Supplier (the "Separation and Distribution Agreement")).
1.55 LICENSED MATERIALS means the Object Code and Related
Documentation wherein the parties may mutually agree to special terms and
conditions, such as field use
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restrictions, restrictions on use by third parties and the like as specified in
a Supplemental Agreement. In addition, Licensed Materials may include Source
Code but only if so specified in a Supplemental Agreement.
1.56 LUMP SUM PRICE means a price other than a Unit Price agreed
upon in writing by the parties for a specific item of Work prior to scheduling
of the item of Work.
1.57 MAJOR HOLIDAYS (or Company-designated day of observance)
New Years Day
President's Day (Massachusetts)
Patriot's Day (Massachusetts)
Memorial Day
Independence Day
Labor Day
Columbus Day (Massachusetts)
Thanksgiving Day
Day Following Thanksgiving
Christmas Eve (Massachusetts)
Christmas Day
1.58 MAKE READY COORDINATION as referred to in Article 10 means
additional assistance offered by Supplier for compensation at agreed upon rates.
1.59 MATURE SOFTWARE PRODUCT means an Application Software Product
that has not been the subject of any Product sales activity with any Ordering
Company within three (3) years.
1.60 MANAGEMENT NOTIFICATION means the internal Supplier process
that sets the minimum standards by which Supplier management will become aware
of a problem. The intent of escalating a problem is (a) to bring additional
resources together to resolve it, (b) to apprise management of the situation, or
(c) to acknowledge notification by contacting Ordering Company.
1.61 METHOD OF PROCEDURE (MOP) means a detailed, documented
methodology, as referenced in AT&T Practice 790-100-421AC, developed by the
OSWF (defined in 1.68), and its support departments, listing the Work to be
performed and the procedures to be followed for any construction, Software
Product Update, or maintenance activity near an AT&T plant.
1.62 MODIFICATIONS as referred to in Article 9 means Ordering
Company additions to, deletions from or mergers of Software with one or more
programs owned or licensed by Ordering Company that results in an updated or
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otherwise modified software.
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1.63 NCR means NCR Corporation (formerly named AT&T Global
Information Solutions Company), a Maryland corporation.
1.64 NEW SOFTWARE PRODUCT as referred to in Article 10 means an
Application Software Product initially licensed to Ordering Company after
execution of this Agreement.
1.65 Lucent means Lucent Technologies Inc., a Delaware corporation.
1.66 OBJECT CODE means the fully compiled or assembled series of
instructions, written in machine language, ready to be loaded into the computer,
that guides the operation of the computer.
1.67 ON-SITE ASSISTANCE means technical assistance provided by a
Supplier's engineer at Ordering Company's site at Ordering Company's request,
and as agreed to by Supplier.
1.68 ON-SITE WORK FORCE (OSWF) means local Ordering Company
personnel responsible for the operation, maintenance, and protection of
operating plant.
1.69 ORDER means any written or electronic request, other than a
Supplemental Agreement, that is presented to Supplier by an Ordering Company in
accordance with the terms of this Agreement to purchase Products or Services or
to license Licensed Materials from Supplier.
1.70 ORDERING COMPANY means any one of (a) AT&T; (b) an Affiliate
of AT&T; (c) a United States entity at least twenty-five percent (25%) of the
ownership interest of which is owned directly or indirectly by AT&T; or (d) a
non-United States entity at least twenty-five percent (25%) of the ownership
interest of which is owned directly or indirectly by AT&T and in which the other
party (or parties) in the non-United States entity is not a telecommunications
services provider(s). An Ordering Company must be designated in writing by
AT&T. Orders or Supplemental Agreements will be contractual relationships
between Ordering Company and Supplier and only Ordering Company and Supplier
shall have the respective rights and duties of buyer and seller thereunder.
1.71 ORDERING COMPANY'S INFORMATION means certain material and
technical and business information, owned or controlled by Ordering Company or
any of its Affiliates, relating to the operation of Ordering Company's business
operations. The term also means and includes any associated information
developed prior to the effective date of this Agreement by the AT&T business
units and other organizations which compose Ordering Company, regardless of
whether such information was originally disclosed to Supplier in written or
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other tangible form.
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1.72 ORDERING COMPANY NOTIFICATION BULLETINS mean the
written notices transmitted to Ordering Company that alert Ordering Company of
potential Product conditions or configurations which could have a negative
effect on Ordering Company operations.
1.73 ORDERING COMPANY REPRESENTATIVE means the person
representing Ordering Company responsible for overall coordination and
management of the project activities as designated in the Agreement. The
Ordering Company Representative is an employee of Ordering Company.
1.74 OTHERS means an entity other than Supplier that has
been contracted by Ordering Company to perform a portion of Work on a
project.
1.75 PERFORMANCE METRICS as referred to in Article 10 means
Supplier's performance objectives regarding the manner in which it Responds,
Restores, and Resolves Ordering Company's request for Ordering Company Technical
Support called in through Supplier's Call Receipt function. Ordering Company
requests that do not go through Supplier's Call Receipt function are excluded
from the Performance Metrics.
1.76 PRICE means the price for the Work to be performed by
Supplier as set forth in the Work Order, Change Order, Supplemental Agreement or
other document(s) signed by the parties.
1.77 PROBLEM MANAGEMENT means the procedures and actions
performed or required to be performed by Supplier upon written or oral request
of Ordering Company to investigate and manage the resolution of a reported
condition in a manner that provides Ordering Company with a single interface.
1.78 PROBLEM RESOLUTION means the analysis of the technical
data to determine, at minimum, a short term resolution. Depending upon the
analysis results, the response to Ordering Company may be in the form of
technical advice, a procedure performed by Supplier support personnel, or a
software product update. Technical questions or inquiries regarding the
operation or use of the Product are also handled under this task.
1.79 PRODUCT means systems, equipment and parts thereof, but
the term does not mean Software whether or not such Software is part of
Firmware.
1.80 PROPOSAL means the proposal or bid prepared by
Supplier, making reference to this Agreement.
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1.81 RELATED DOCUMENTATION as referred to in Article 9 and
in this Article 1 means materials useful in connection with Software, such as,
but not limited to, flow charts, logic diagrams, program descriptions, and
Specifications. No Source Code versions of Software are included in Related
Documentation.
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1.82 REMOBILIZATION as referred to in Article 11 means
compensation to Supplier for labor, equipment and load associated with returning
to an operation that was demobilized. See "Demobilization".
1.83 RESOLVE means that a permanent solution to the problem
has been provided. For service ARs, Resolution means that the question has been
answered to Ordering Company's satisfaction. For defect ARs, Resolution means
either that a final correction to the defect has been released to Ordering
Company or that Supplier has notified Ordering Company that the defect will not
be repaired.
1.84 RESOLVE TIME means elapsed time between the time
Ordering Company contacts Supplier through Supplier's Call Receipt function and
the time Ordering Company is supplied a permanent solution.
1.85 RESPOND means an engineer has contacted Ordering
Company regarding a particular Assistance Request.
1.86 RESTORE means that the Product or major feature of the
Product is temporarily operative, but a permanent resolution has not yet been
provided. Restore may mean that a software patch has been provided to
temporarily correct the problem, or a workaround has been implemented.
1.87 SCOPE OF WORK means the agreed upon scope of work set
forth in an executed Supplemental Agreement (e.g., for Customer Connectivity) or
Work Order. The Scope of Work may include: field and building surveys, route
planning, Make Ready Coordination, design engineering, material logistics, civil
construction, placing, splicing, Acceptance Testing, work print, as-built and
OSP records generation, and project management.
1.88 SERVICE means the services provided by Supplier with
respect to or independent from Supplier's Products and Software and the
operation of Ordering Company's business including, but not limited to, any type
of: (1) professional services including architecture planning or design,
consulting, program management, system integration and testing/verification; (2)
network engineering services including preparation of equipment Specifications,
preparation and updating of office records, and data creation/data management
services; (3) installation and equipment removal; (4) outside plant
engineering/construction services and cable mining; (5) maintenance, repair,
exchange/replacement, customer technical support, help desk, and diagnostic
services; (6) software development; (7) initial site/new start, migration,
trials, provisioning, retrofitting and update/upgrade services; (8) training in
any form; (9) logistics (transportation, warehousing staging, etc.); and (10)
such other services as Supplier may offer and Ordering Company may purchase from
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time to time.
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1.89 SERVICE PERFORMANCE REPORTS (SPR) means reports that
validate the agreed to Respond, Restore, and Resolve Ordering Company's request
for Ordering Company Technical Support.
1.90 SERVICE RESTORATION TIME means the elapsed time between
the time Ordering Company contacts Supplier through Supplier's Call Receipt
function and the time the system is restored to service.
1.91 SEVERITY LEVEL means the condition of the system when
Ordering Company makes an Assistance Request.
1.92 SEVERITY LEVEL ONE means the condition which exists
when the system is inoperative and Ordering Company's inability to use the
Product has a critical effect on Ordering Company's operations. The condition is
generally characterized by complete system failure and requires immediate
resolution or correction.
1.93 SEVERITY LEVEL TWO means the condition which exists
when the system is partially inoperative, but the system is still usable by
Ordering Company. The inoperative portion of the Product severely restricts
Ordering Company's operations but has a less critical effect than a Severity
Level One condition.
1.94 SEVERITY LEVEL THREE means the condition which exists
when the system is usable by Ordering Company, but with limited functions. The
condition is not critical to overall Ordering Company operations and does not
severely restrict such operations.
1.95 SEVERITY LEVEL FOUR means the condition which exists
when the system is usable and a means of circumventing the condition has been
found. This condition does not materially affect Ordering Company's operations.
1.96 SITE means all Work areas where any Work is required to
be performed as set forth in the Agreement Documents, excluding permanent
locations of Supplier and its suppliers and subcontractors.
1.97 SOFTWARE means a computer program consisting of a set
of logical instructions and tables of information which guide the functioning of
a central processing unit; such program may be contained in any medium
whatsoever, including hardware containing a pattern of bits representing such
program, but the term "Software" does not mean or include such medium.
1.98 SOFTWARE PRODUCT means the Software that Ordering
Company has been granted a license to use by Supplier.
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1.99 SOFTWARE PRODUCT DEFECT means an error condition that
causes the Software Product to fail to operate in compliance with Supplier's
documented Specifications available at time of Licensed Software Product sale.
1.100 SOFTWARE PRODUCT UPDATES means changes to the original
licensed Software Product and third party Software to correct defects or provide
accommodations not originally included in Supplier's documented Specifications
available at the time of the Software sale. Software Product Updates include
both corrections and accommodations requested by customers as well as
corrections and accommodations requested by other Ordering Companies. Software
Product Updates may be distributed through point issue releases on magnetic
media or Broadcast Warning Messages (BWM's), Software Updates (SU's), or other
on-line delivery mechanism.
1.101 SOURCE CODE means any version of Software incorporating
high-level or assembly language that generally is not directly executable by a
processor.
1.102 SPECIAL CONDITIONS means detailed provisions in the
Specifications referred to under Section 11.23, Application for Payment; Terms
of Payment, pursuant to which Supplier can petition AT&T for additional
compensation.
1.103 SPECIFICATIONS means the technical specifications for
particular Products, Software and Services of Supplier or its vendor furnished
hereunder.
1.104 SPECIFICATIONS OR STANDARDS as referred to in Article
11 means the Specifications for outside plant construction as agreed upon by the
parties for each project, Work Order, or Supplemental Agreement. (For Customer
Connectivity, the August 1992 Lightguide Cable Systems Outside Plant Standards
Handbook and the Specifications set forth in AT&T's standard construction
Specifications, each as amended and agreed by parties.) All projects, Work
Orders and Supplemental Agreements are subject in addition to the work practices
set forth in Section 11.18, ARCHAEOLOGICAL SITES; ENVIRONMENTAL PROTECTION.
1.105 START DATE means the date on which Supplier and AT&T
agree in a Work Order or in some other writing that the Work is due to begin.
1.106 SUBCONTRACTOR means a person or organization who has a
direct contract with Supplier.
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1.107 SUPPLEMENTAL AGREEMENT means a contemporaneous or
subsequent purchase agreement between an Ordering Company and Supplier which
incorporates all of the terms of this Agreement.
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1.108 SUPPLEMENTARY SPECIFICATIONS means mutually agreed upon
Specifications which, by modifying or supplementing the Specifications, describe
conditions unique to a particular project.
1.109 SUPPLIER means Lucent.
1.110 SUPPLIER'S INFORMATION means certain material and
technical or business information, owned or controlled by Supplier or any of its
Affiliates, relating to the operation of Products or Software, materials used in
the provision or manufacture of Products and Software, or relating to Supplier's
Services. The term also means and includes any part, component and associated
information developed prior to the effective date of this Agreement by the
business units and other organizations which compose Supplier, regardless of
whether such information was originally disclosed to AT&T or an Ordering Company
in written or other tangible form.
1.111 SUPPLIER'S MANUFACTURED PRODUCT means a Product
manufactured by Supplier or manufactured by an original equipment manufacturer
to Supplier's Specifications. Supplier's Manufactured Product includes Vendor
Items that are embedded in Products manufactured by Supplier.
1.112 SUPPORT SERVICES means Supplier's assistance at
Supplier's location analyzing the applicable Software or Hardware/Firmware
problem (as defined in the Order), remedying defects, and handling service calls
reported by Ordering Company through the Call Receipt function. Support Services
may be purchased by Ordering Company pursuant to the provisions set forth in
this Agreement.
1.113 SYSTEM means the integrated Products and Software as
described in associated Specifications.
1.114 UNIT ADJUSTING PRICE means a Price in the Work Order,
Change Order or Supplemental Agreement that compensates Supplier on a unit basis
for deviations from the defined scope of Work. The number of adjusting units
will subsequently be determined from the engineered Drawings or actual
occurrences as accepted by the Engineer.
1.115 UNIT PRICE means a Price in the Work Order or
Supplemental Agreement for a defined scope of Work on a unit basis. The number
of units will subsequently be determined from the engineered Drawings.
1.116 UNITED STATES means the fifty (50) states, District of
Columbia, Puerto Rico and the United States territories.
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1.117 USE with respect to Licensed Materials means loading
the Licensed Materials, or any portion thereof, into a processor for execution
of the instructions and tables contained in such Licensed Materials.
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1.118 VENDOR ITEM means a Product or partial assembly of
products furnished by Supplier, but not manufactured by Supplier but supplied
pursuant to its procurement specifications. An item ceases to be a Vendor Item
when it becomes embedded in a Supplier's Manufactured Product.
1.119 WARRANTY PERIOD means the period of time listed in the
respective Warranty clauses herein for Products, Licensed Materials or Services
which, unless otherwise stated, commences for Products and Licensed Materials on
the earlier of the date of shipment, or, if installed by Supplier, on the
Acceptance Date, and for Services, commences on the Acceptance Date of the
Service.
1.120 WORK is defined in Section 11.2, WORK;
SUPPLIER; MATERIALS; PERMITS; RAILROADS; SECURITY, below.
1.121 WORK ORDER means the specific Outside Plant Services
requested by Ordering Company pursuant to this Agreement. Work Order shall
contain the information set forth in Section 11.5, WORK ORDERS; CHANGES, below.
ARTICLE IA
NATURE OF AGREEMENT
1A.1 PURPOSE AND SCOPE OF THIS AGREEMENT. The purpose of
this Agreement is to permit Supplier to provide and Ordering Company to receive
Supplier's Products, Licensed Materials, and Services. This Agreement shall
govern all transactions pursuant to which Supplier provides Products, Licensed
Materials and Services to AT&T and Ordering Companies. AT&T and Supplier will
develop a template no later than June 30, 1996 for use when AT&T or Ordering
Company is ordering Products, Licensed Materials and Services from Supplier
pursuant to this Agreement for use outside the United States. This template
will be used as the starting point for Supplemental Agreements to address such
purchases and will address the additional country and customer-specific terms
and requirements with the particular transaction. This Agreement shall govern
Supplier's sale and licensing to Ordering Companies of Supplier's Products,
Licensed Materials and Services for Ordering Companies' internal business uses
only, and does not permit AT&T to resell or sublicense any Products, Licensed
Materials or Services provided hereunder as a distributor of same. However,
this Agreement, including any restrictions on use, resale and transfer is not
intended to prohibit Ordering Company from reselling or transferring Products
and Licensed Materials no longer needed for the operation of its business,
provided, that, in the case of Software, such transfers are made in accordance
with the provisions of Article 9. All terms and conditions governing resale or
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sublicensing of Supplier's Products, Licensed Materials and Services as a
distributor shall be addressed in a separate agreement.
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This Agreement is organized in the following manner: Part 1 sets forth the
common terms and conditions that apply to all sales and licenses executed
pursuant to this Agreement, unless otherwise stated in Part 2. Part 2 sets
forth the additional terms and conditions which govern Supplier's provision of
network infrastructure Products, Licensed Materials and Services, other than
such items currently provided by Supplier's Global Business Communications
Systems business unit. Part 3, to be negotiated and executed not later than
March 31, 1996, shall set forth the additional terms and conditions which
govern Supplier's provision of Products, Licensed Materials and Services
provided by Supplier's Global Business Communications System Unit.
1A.2 STATEMENT OF ASPIRATIONS. In an effort to ensure that
the parties remain fully focused upon their shared objectives and aspirations,
the parties agree that the following principles shall govern their work together
during the term of this Agreement:
(a) Both parties want Lucent to provide AT&T with
Products, Licensed Materials and Services that confer significant offer
differentiation, premium value and operating cost reduction consistent with
AT&T's brand equity, and shall work together so that Lucent may assist AT&T in
this manner;
(b) The parties recognize that Lucent's pricing of
Products, Licensed Materials and Services must balance two fundamental
requirements: AT&T's requirement for the lowest possible operating costs and
Lucent's requirement for adequate return on and recovery of investment;
(c) The parties shall at all times take care to conduct
themselves with the highest integrity, to respect all individuals, and to obtain
the maximum benefits of a shared end user customer focus, effective teamwork and
the parties' innovativeness; and
(d) The parties desire to maintain a relationship that is
warm, open and mutually profitable.
1A.3 VOLUME COMMITMENT. (a) AT&T commits that the
aggregate amount paid by Ordering Companies (including AT&T Wireless Services
Inc.) to Supplier during the calendar years 1996, 1997, and 1998 for Products,
Licensed Materials, and Services, pursuant to this Agreement, any Supplemental
Agreement, any other agreement or otherwise, between an Ordering Company and
Supplier for Supplier's provision of Products, Licensed Materials or Services
to an Ordering Company, will total at least three billion dollars
($3,000,000,000). If that commitment is not fulfilled by December 31, 1998,
Supplier shall, in January 1999, bill AT&T a carrying charge equal to the
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shortfall at December 31, 1998, multiplied by the Prime Rate (as defined in the
Separation and Distribution Agreement) plus two percent (2%). Thereafter,
Supplier shall, each month, bill AT&T a carrying charge equal to the shortfall,
if any, at the end of the preceding month, multiplied by 1/12 multiplied by the
Prime Rate plus two percent (2%). Such billing shall continue until the three
billion dollar ($3,000,000,000) commitment is fulfilled. AT&T will pay these
bills as set forth in Section 3.2, INVOICES AND TERMS OF PAYMENT. The remedy
in this Section 1A.3, VOLUME COMMITMENT, is
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Supplier's exclusive remedy for AT&T's failure to fulfill the three billion
dollar ($3,000,000,000) volume commitment.
(b) AT&T expects, but does not commit, that Products,
Licensed Materials and Services in the amount of one billion three hundred
million dollars ($1,300,000,000), out of the three billion dollar
($3,000,000,000) total volume commitment, will be ordered in 1996. Therefore,
the shortfall billing and payment arrangement set forth in subparagraph
(a) above does not apply to failure to meet this expectation by the end of 1996.
(c) Prior to the Closing Date (as defined in the
Separation and Distribution Agreement), AT&T shall deliver to Supplier as
advance payment for purchases of Products, Services, Software, or Licensed
Materials an amount equal to five hundred million dollars ($500,000,000).
Commencing on January 1, 1997, Supplier shall apply a portion of such amount as
a credit against any undisputed invoiced amounts due and payable to Supplier
from AT&T or, if AT&T shall so specify at any time, from any other Ordering
Company, on or after January 1, 1997, in full satisfaction of all obligations of
AT&T or any such Ordering Company then due in connection therewith. Supplier
shall continue to so apply such advance payment as a credit against such
undisputed invoices until fully applied.
1A.4 GOVERNING TERMS. (a) Current Order Performance: On
the Effective Date of this Agreement, Supplier shall be in the process of
performing several Ordering Company orders, some of which have not been the
subject of written Orders and purchase agreements. In addition, Supplier shall
be following many existing engineering, installation and maintenance practices
and procedures that have been developed mutually by Supplier and Ordering
Company but have not been completely documented. The parties intend that
Supplier shall continue to provide the same Products, Services and Licensed
Materials which Supplier is providing or has agreed to provide each Ordering
Company (hereinafter "Pending Orders") subject to the availability of third
party components and provided that Ordering Company shall retroactively
compensate Supplier for any Products, Licensed Materials and Services provided
by Supplier without compensation at the prices and rates set forth in any mutual
agreements entered into. Exhibit 1A-1 lists the Services, identified thus far,
intended for coverage under this clause and also the Services covered under
other Supplemental Agreements or commercial agreements. Services to be excluded
include, but are not limited to, real estate and motor vehicles. The parties
agree to use their best efforts to formalize the Services listed in Exhibit 1A-1
in a commercially reasonable manner (including pricing) that is consistent with
the terms and conditions contained herein no later than March 31, 1996. Such
retroactive compensation shall begin no earlier than the Effective Date and
shall be capped at twenty million dollars ($20,000,000) per month. Supplier
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shall not be liable for any injury to Ordering Company that results from
Supplier's employees and/or contractors failure to be aware of practices and
procedures that had not, at the time of Supplier's actions, been reduced to
writing. Supplier and Ordering Company recognize that the existing practices
and procedures will need to be reevaluated in light of the restructure of AT&T.
As part of this reevaluation, Supplier and
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Ordering Company may decide to continue existing practices and procedures or one
party may notify the other that it wishes to change or eliminate certain
practices or procedures.
The parties agree to use their best efforts to identify any other Products,
Licensed Materials and Services provided by Supplier to Ordering Company that
require commercialization and to formalize such undocumented arrangements in a
commercially reasonable manner that is consistent with the terms and conditions
contained herein no later than March 31, 1996. The parties acknowledge that
such formalization and modification of those arrangements may result in changes
in the terms and conditions pursuant to which such items are provided. All
agreements will be reduced to writing which will govern transactions between
Supplier and all Ordering Companies, unless otherwise agreed to. If the parties
are unable to negotiate a satisfactory resolution, the dispute resolution
provisions of Article 5A herein shall apply. Services not currently performed
by Supplier are not covered under this Section 1A.4, GOVERNING TERMS, and will
be covered under separate Supplemental Agreements.
With respect to Pending Orders, this Agreement is incorporated by reference,
however, in the event of conflict between the terms and conditions of this
Agreement and the terms and conditions of Pending Orders, the terms and
conditions of Pending Orders shall prevail over the terms and conditions of this
Agreement until such time that the Pending Orders are formalized, terminated or
expired.
(b) Future Procurements: All future Orders and
Supplemental Agreements pursuant to which Supplier provides Products, Licensed
Materials and Services to AT&T Company shall be deemed to incorporate and be
subject to the terms and conditions of this Agreement, regardless of whether any
such Order or Supplemental Agreement expressly incorporates this Agreement by
reference, unless such Order or Supplemental Agreement expressly provides that
it is not subject to this Agreement. To the extent that any exhibit to this
Agreement or any document other than a Supplemental Agreement conflicts with the
body of this Agreement, the body of this Agreement shall prevail over such
exhibit or other document. To the extent that a Supplemental Agreement
conflicts with this General Purchase Agreement, the Supplemental Agreement shall
prevail over the body of this Agreement. To the extent that the Supplemental
General Purchase Agreement, No. LC3757D, conflicts with either or both of this
Agreement and a Supplemental Agreement, the Supplemental General Purchase
Agreement shall prevail over those other agreements.
1A.5 TERM OF AGREEMENT. This Agreement shall become
effective on the Effective Date and shall continue in effect for a period of
five (5) years. The term of this Agreement shall thereafter be automatically
<PAGE>
extended for additional one (1) year periods unless either party provides the
other party one (1) year's prior written notice of its desire to permit this
Agreement to expire without further extension of its term, in which event this
Agreement shall expire on the day before this Agreement would otherwise be
automatically extended. The amendment or termination of this Agreement shall
not affect the obligations of an Ordering
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Company or Supplier under any then existing Order or Supplemental Agreement
issued under this Agreement.
1A.6 TRANSITION PERIOD. Although all terms of this
Agreement are effective on the Effective Date, the parties recognize that
complete implementation of certain terms depends upon the development and
deployment of necessary practices and systems. Those terms include, but are not
limited to:
- Section 2.1 - Orders
- Section 2.2 - Order Acceptance
- Section 2.6 - Order Cancellation and Holds
- Section 3.1 - Pricing
- Section 3.2 - Invoices and Terms of Payment
- Section 5.1 - Ordering Companies Remedies
- Section 5.2 - Supplier Performance
- Section 6.21 - Record Retention
- Section 8.16 - Planning Information for Orders for
Commercially Available Products
Both parties agree to use their reasonable best efforts to develop and deploy
those practices and systems underlying these and other terms as promptly as
possible, but not later than March 29, 1997. The inability of either party to
comply with any of these terms as a result of not having developed and deployed
such practices and systems prior to March 29, 1997, will not be construed a
breach of contract, provided, however, that if such Supplier's delay in
developing and deploying necessary practices and systems delays affording
Ordering Company the benefits of the Pricing Agreement, Supplier shall afford
those benefits to Ordering Company, as promptly as possible, retroactive to the
Effective Date.
1A.7 PURCHASES BY AT&T'S AFFILIATES. This Agreement shall
govern purchases from Supplier by AT&T, its Affiliates and Ordering Companies,
but shall not govern purchases by other entities.
1A.8 ADDITIONAL TECHNOLOGY RIGHTS. Supplemental Agreements
may provide, on a case-by-case basis, for Ordering Company's ownership (up to
and including 100% ownership) of specified intellectual property rights in
technology newly developed by Supplier solely on behalf of Ordering Company. In
the event technology is licensed by Supplier to Ordering Company, Supplier may
agree to grant Ordering Company (a) the right to make, have made, use, sell,
modify, offer for sale or import specified Products and provide specified
Services and (b) the title and intellectual property rights to certain
modifications and resulting derivative works made by Ordering Company.
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ARTICLE II
ORDERING AND DELIVERY
2.1 ORDERS. (a) All Orders, including electronic Orders,
shall contain the information necessary for Supplier to fill the Order. Such
information shall include, but not be limited to:
(i) Ordering Company's requested ship date or
requested complete date;
(ii) The date of the Order;
(iii) A reference to this Agreement, including its
contract number and any applicable firm price quote, Supplemental
Agreement, or other Supplier pricing information;
(iv) The Price of the item being purchased or
licensed or the means by which the Price is derived;
(v) A complete list of the Products, Licensed
Materials and Services requested, specifying, as applicable, quantity,
Supplier's model number, the type and periods of any maintenance or
consulting Service ordered (including Service Start Date, a description
of the Services to be provided and, if applicable, the items to be
maintained), Supplier's Specification number (by issue or generic
number), Telephone Equipment Order ("TEO") or other agreed upon
Specification or other Supplier identification;
(vi) The address or location to which Products or
Licensed Materials are to be delivered or the location where Services are
to be performed including a description, the serial number (if available)
and the location of any Designated Processor for which Licensed Materials
are being furnished; and
(vii) The address to which Supplier's invoice is to
be sent electronically.
(b) Unless otherwise agreed in writing, the planning
intervals for engineering, delivery and installation for commercially available
Products to be provided by Supplier shall be as set forth in Exhibit 2-1, which
will be updated quarterly by mutual agreement of the parties. These intervals
are for planning purposes only; Supplier's scheduled delivery and performance
<PAGE>
dates set forth in (i) an accepted Order for Products; or (ii) Licensed
Material, or an accepted Order or the appropriate Supplemental Agreement are
firm commitments and shall govern the parties' performance. Unless agreed
otherwise in writing, no provision, term or condition, or data on any Order or
contained in any document attached to or referenced in any Order, Supplemental
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Agreement, or any other subordinate document (such as a shipping release) shall
be binding, except data necessary for Supplier to fill the Order. Electronic
Orders shall be binding on Ordering Company notwithstanding the absence of a
signature. All schedules and requested dates are subject to Supplier's
concurrence.
(c) For construction Services, Ordering Company shall
place Orders at an agreed upon time period prior to the applicable construction
start date. In the event that Ordering Company is not ready to receive shipment
on the scheduled delivery date, Ordering Company shall reimburse Supplier for
any reasonable warehousing, handling, hoisting and idle time costs sustained
during the delay period.
2.2 ORDER ACCEPTANCE. All Orders are subject to
acceptance by Supplier. Supplier shall have twenty-one (21) business days in
1996 and thereafter ten (10) business days after the receipt of the Order in
which to notify Ordering Company of those aspects of Ordering Company's Order
which Supplier is unable to accept and to provide Ordering Company Supplier's
firm schedule Completion Date for the Order. Failure to provide such notice
within that period shall be deemed acceptance of Order. Ordering Company or
Supplier may modify the terms or content of any Order if such changes are
mutually agreed to and documented in writing.
2.3 CHANGES IN ORDERING COMPANY'S ORDERS. Should Ordering
Company wish to obtain information sufficient to permit it to assess whether to
submit an Order adding, deducting or deviating from a prior Order (hereinafter a
"Change Information Request"), it shall request such information from Supplier
in writing. As promptly as reasonably possible after its receipt of a Change
Information Request, Supplier shall submit a proposal to Ordering Company which
includes any increases or decreases in Supplier's Price or changes in the
delivery or work schedule for the existing and new Orders necessitated by the
change. Unless Supplier receives an Order to implement such change from
Ordering Company within twenty-one (21) calendar days of Ordering Company's
receipt of Supplier's proposal, Ordering Company shall be deemed not to have
authorized the change and Supplier shall remain obligated to perform all
previously ordered work in accordance with (a) the governing Order (for
Products) or (b) for Licensed Material, the governing Order or appropriate
Supplemental Agreement. Changes by Ordering Company to an accepted Order shall
be treated as a separate Order only if such change materially affects Supplier's
ability to meet its obligations under the original Order, in which case any
Price (or discount, if applicable), shipment date or Services Completion Date
provided by Supplier with respect to such original Order shall be subject to
change.
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2.4 CHANGES IN PRODUCTS BY SUPPLIER. Any change that
Supplier proposes to the Product furnished hereunder and the documentation
related thereto would be subject to the Change Notice Process attached hereto as
Exhibit 2-2.
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2.5 ORDER CANCELLATION AND HOLDS.
(a) CANCELLATION FOR CONVENIENCE.
(i) Ordering Company may, upon written notice to
Supplier, cancel an Order, provided that Ordering Company shall pay the
applicable fees, if any, set forth in Paragraphs (ii), (iii) and (iv)
below.
(ii) For those Products and Licensed Materials
canceled prior to shipment that are considered stock items, Ordering
Company agrees that it shall pay Supplier an Order cancellation fee
equal to fifteen percent (15%) of the Price or license fee for such
items.
(iii) For those Products and Licensed Materials
considered to be customized or non-stock items (1) not manufactured or
(2) manufactured but not yet accepted, Ordering Company shall pay a fee
based upon Supplier's incurred expenses (after adjustment for
recoveries and/or salvage value, if any), including, but not limited to
de-installation, transportation and associated general and
administrative expenses, plus a reasonable profit in the event that the
customized or non-stock items are not ultimately sold or licensed to
another party within ninety (90) days of cancellation, provided that
Supplier has made a reasonable attempt to sell or license such items.
(iv) If an Order for Services is canceled in whole
or in part after execution of such Order and prior to the scheduled
completion of such Services, Ordering Company agrees to pay Supplier
the fees due for Services provided (which fees, depending upon the
specific terms of the agreement, may be based on the applicable
periodic rates or equal to the percentage of the contracted project or
period that Supplier has completed multiplied by the total fee,
excluding expenses, for such project or period) and all expenses of any
type incurred for performing the Services prior to the date of
cancellation and any expenses Supplier may incur for terminating the
Services, including but not limited to:
(A) the cost of materials (less salvage
value, if any) which have been delivered to the work site prior to the
date of termination but which have not yet been incorporated into or
been consumed in performing the Services; plus
(B) the cost of undelivered materials
<PAGE>
( less salvage value, if any) planned for use in performance of this
Agreement for which irrevocable Work Orders have been placed by
Supplier prior to the effective date of cancellation; plus
(C) the cost of any other capital
expenditure that has been incurred in order to perform the terminated
project and that cannot be re-applied by Supplier to provide other
Services; plus
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(D) the cost to Supplier of terminating
and settling any subcontracts.
(v) For purposes of this subparagraph (a),
"salvage value" shall include the proceeds of the sale of the
material to another Ordering Company and the costs Supplier avoids as a
result of its reapplying materials to meet other needs of Ordering
Company, the needs of other customers or its own internal needs within
ninety (90) days of Order cancellation. Supplier shall make reasonable
efforts to maximize salvage value. Upon written request, Supplier will
substantiate such avoided costs.
(b) HOLDS. Ordering Company may issue "holds" on Orders
or suspend performance under this Agreement, in whole or in part, upon written
notice to Supplier and shall compensate Supplier for any incremental expense
(including, but not limited to, warehousing, loss, damage and inventory carrying
costs) incurred. A hold automatically converts to an Order cancellation after
thirty (30) days.
(c) CANCELLATION FOR CAUSE. In the event Supplier shall
be in material breach or default of any of the terms, conditions, or covenants
of any Order or Supplemental Agreement and if such breach or default shall
continue for a period of forty-five (45) days in 1996 and thereafter thirty
(30) days after Supplier's receipt of notice thereof by Ordering Company, then,
in addition to the remedies specified in Section 5.1, ORDERING COMPANIES'
REMEDIES, Ordering Company shall have the right to cancel such Order or
Supplemental Agreement, except to the extent that Products, Licensed Materials
or Services have previously been provided pursuant to such Order or Supplemental
Agreement.
(d) SURVIVAL. The obligations of this Section 2.5 shall
survive termination of this Agreement.
2.6 SHIPPING, PACKING AND DELIVERY. (a) Supplier shall,
at no additional charge, pack Products in accordance with its standard practices
for shipments to Ordering Company's locations. Unless instructed otherwise by
Ordering Company, Supplier shall (i) ship Orders as available, but not before
the customer requested ship date, (ii) ship to the destination designated in the
Order, (iii) mark all subordinate documents with the Order number, (iv) enclose
a packing memorandum with each shipment, and when more than one package is
shipped, identify the package containing the memorandum, and (v) mark Ordering
Company's Order number on all packages and shipping papers.
(b) Where, in order to meet Ordering Company's requests,
<PAGE>
Supplier packs Products in other than its normal manner, Ordering Company shall
pay Supplier's additional charges for such packing. Absent written agreement
otherwise, Supplier will deliver Products and Licensed Materials to Ordering
Company FOB (free on board) the manufacturing, warehouse or Software
distribution facility of Supplier or its vendor.
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(c) Unless otherwise directed by Ordering Company,
Supplier shall (i) ship equipment from its nearest facility or that of its
vendor capable of filling the Order, (ii) use the lowest available rate from
Ordering Company's pre-selected designated carrier (rail, truck or freight
forwarder), and (iii) prepay transportation charges at cost as a separate item
on Ordering Company's invoice when the cost of transportation is to be borne by
Ordering Company. Ordering Company shall promptly pay to Supplier any prepaid
transportation charges. Supplier will provide to Ordering Company a
transportation factor card to be used for estimating transportation rates.
Shipping and routing instructions may be furnished or altered by Ordering
Company in writing, subject to additional charges, if applicable.
(d) Supplier agrees not to deliver Products prior to five
(5) business days before the agreed upon delivery date without Ordering
Company's prior written authorization.
2.7 TITLE AND RISK OF LOSS. Title to and risk of loss to
Products and risk of loss of Licensed Materials shall pass to Ordering Company
upon delivery to Ordering Company. For purposes of this clause, "delivery"
shall mean the point at which Supplier or Supplier's supplier or agent turns
over possession of the Product or Licensed Materials to Ordering Company,
Ordering Company's employee, Ordering Company's pre-selected designated carrier,
Ordering Company's warehouse, or other Ordering Company's agent and not
necessarily the final destination shown on the Order. Ordering Company shall
notify Supplier promptly of any claim with respect to loss which occurs while
Supplier has the risk of loss and shall cooperate in every reasonable way to
facilitate the settlement of any claim.
ARTICLE III
PRICES AND PAYMENT
3.1 PRICES. (a) To the extent Ordering Company's Order is
subject to a firm price quotation made by Supplier, prices, fees, and charges
("Prices") shall be as set forth in Supplier's firm price quotation or as
specified in the governing Supplemental Agreement. In all other cases, Prices
shall be as set forth in the Product Information Catalog Extraction System
("PRICES") which provides toll free access to Supplier's complete Product
listing or in ELIB (electronic library information bulletin) or its successor
and will be provided in electronic media. For firm price quotations, Prices
shall be valid for thirty (30) days from the date of the quotation. Prices
shall be applied based upon the date Supplier receives Ordering Company's Order.
Both parties will work together in the first quarter of 1996 to develop a plan
for the migration to PRICES.
<PAGE>
(b) The database for pricing of all Standard Service Units
("SSU's") Products and Services is Service Unit Dictionary System ("SUDS").
(c) Where Supplier is not performing installation, all
expenses after shipment from Supplier's manufacturing or software distribution
facility shall be paid by Ordering Company. If Supplier pays any of such
expenses, they shall be borne by Ordering Company plus
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a fifteen percent (15%) administration fee. Supplier will not incur such
expenses unless it is requested to do so in writing by Ordering Company (which
request shall constitute Ordering Company's agreement to pay Supplier for such
expenses).
(d) Notwithstanding the foregoing, if Supplier is delayed
from completion of an Order due to any change requested by Ordering Company or
as a result of delay by Ordering Company in furnishing information or in
performing its obligations (including site preparation), Supplier's prices are
subject to change to the extent that Supplier incurs costs for such delay.
(e) Unless expressly stated in writing, Supplier's prices
are exclusive of charges for transportation and other related Services, and any
sales or other tax or duty which Supplier may be required to collect or pay upon
the ordered transaction. Supplier shall include these items as separate items in
its invoiced prices to Ordering Company. Ordering Company shall be responsible
for prepaid transportation paid by Supplier. Billable premium transportation
will be used only with Ordering Company's concurrence.
(f) Supplier may amend its pricing schedules once every
six (6) months by providing sixty (60) days' prior written notice. Unless the
parties agree otherwise in writing, Supplier's unaccepted firm price quotations
may be amended on ten (10) days' written notice. Such changes in Supplier's
pricing shall apply only to Orders received on or after the effective date of
such price changes.
(g) In addition to the applicable Price, reasonable
expenses for travel and living of Supplier's personnel while on travel
assignments outside the local area, approved by Ordering Company, shall be
reimbursable. Such approval may be written or oral and on an individual case
basis or for a category of such assignments. If oral approval is given, it
shall be followed with a written approval in ten (10) days. Supplier shall
submit invoices for reimbursable travel and living expenses promptly upon
completion of the travel events. Supplier shall list the travel and living
charges as separate items on each invoice. Supplier shall retain all records in
accordance with IRS standards of such charges for a period of not less than one
(1) calendar year after the expiration of the travel assignment. Upon
reasonable request in the event of a question, Supplier shall make such records
available for inspection by Ordering Company.
3.2 INVOICES AND TERMS OF PAYMENT.
(a) FOR CALENDAR YEAR 1996. Invoices and terms of payment
shall be mutually agreed to by both parties no later than March 1, 1996. The
<PAGE>
intent is that both parties will plan a movement toward the terms of Section
3.2(b), INVOICES AND TERMS OF PAYMENT, and away from the current practice,
NS/NSD Payment and Invoicing Policy dated January 30, 1995. The principles for
1996 which the parties will strive to meet will include (i) the provision of a
single bill per order on last shipment; (ii) such bill shall not be submitted
manually; (iii) billing upon shipment for Products, Licensed Materials
(including transportation charges and taxes, if applicable) and Engineering,
except engineering Services associated with
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outside plant construction; (iv) billing for Installation upon Installation
Complete Date; and (v) implementation on or before April 1, 1996.
(b) AFTER 1996.
(i) Products, Licensed Materials (including
transportation charges and taxes, if applicable), and Engineering Services,
except engineering Services associated with outside plant construction, shall
be billed by Supplier when last shipment on an Order is made, or as soon
thereafter as practical;
(ii) Installation shall be billed upon Acceptance;
(iii) Engineering Services associated with outside
plant construction shall be billed as performed or, at Supplier's discretion,
on a monthly basis;
(iv) Consulting, design, outside plant
construction, system integration and program management Services shall be
billed, as mutually agreed to by the parties (1) on a progress basis based on
the percentage of job completed up to eighty-five percent of the charge or, (2)
on a monthly basis. Final billing for such Services will be invoiced when such
Service is completed;
(v) Unless otherwise agreed to, Maintenance
Services shall be billed monthly, in advance. Supplier will work with Ordering
Company to minimize the number of bills Ordering Company receives each month
for such Services. If Ordering Company requests quarterly or annual invoicing,
such invoicing shall be rendered in advance of such Services;
(vi) Payment for generally available Licensed
Material is payable in full upon delivery to First Field Application; and
(vii) Software and/or other technology development
for small projects (i.e. less than or equal to fifteen million dollars
($15,000,000) and less than or equal to twelve (12) months) shall be billed as
follows: ten percent (10%) at commitment (i.e., signing of contract), forty
percent (40%) upon delivery of the Software to the Integrated Test Network (if
the Software will not be tested in the ITN, this forty percent (40%) payment
shall be due upon delivery to the First Field Application), and fifty percent
(50%) when Software is ready for deployment, or thirty (30) days after
Acceptance of the Software in the First Field Application, whichever occurs
sooner. Billing for Software and/or other technology development for projects
other than small projects as defined in the preceding sentence, shall be
<PAGE>
determined on a case by case basis. The parties will conform the Supplemental
Agreements to this Section 3.4(b)(vii) by March 31, 1996.
(c) Ordering Company shall pay such invoiced amounts, less
any items known then to be disputed items, within thirty (30) days of the date
of Supplier's invoice. Ordering Company shall notify Supplier of any disputed
invoice within eighteen (18) months from the date of the invoice. Such notice
of dispute shall not excuse Ordering Company from timely payment of the
undisputed portion(s) of any invoice containing a disputed portion.
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Supplier may apply any credit which remains outstanding in favor of Ordering
Company to the oldest undisputed invoice which remains in Ordering Company's
account, unless directed otherwise by Ordering Company.
(d) Unless otherwise agreed, payment of all amounts
contained in this Agreement shall be made in United States dollars and invoices
shall be rendered in the same currency. Unless otherwise agreed to by Supplier
and Ordering Company, payments shall be made by electronic transfer to the
account and address indicated by Supplier and shall reference the invoice(s) to
which they relate.
(e) AT&T guarantees payment in United States dollars of
the obligations of Ordering Companies that are not Affiliates of AT&T on any
Orders placed pursuant to this Agreement. Payment shall be made by AT&T within
thirty (30) days after receipt of invoice of a guaranteed payment. Such invoice
will only be issued to AT&T after Supplier has made reasonable efforts to obtain
payment from Ordering Company. Ordering Companies that are Affiliates of AT&T
shall bear sole responsibility for the performance of their obligations
hereunder.
3.3 TAXES. (a) Ordering Company shall bear all taxes,
levies, duties and other similar charges (and any related interest and
penalties), however designated, (herein referred to as "Tax") imposed as a
result of the existence or operation of this Agreement, Order or any
Supplemental Agreement, including but not limited to any tax which Ordering
Company is required to withhold, collect or deduct from payments to Supplier,
except (i) any tax imposed upon Supplier in a jurisdiction outside the United
States if such tax is allowable as a credit against the United States income
taxes of Supplier; and (ii) any net income tax imposed upon Supplier by the
United States or any governmental entity within the United States proper (the
fifty (50) states and the District of Columbia including, but not limited to
counties, municipalities and other localities). In order for the exception
contained in (i) to apply, Ordering Company must furnish Supplier with such
evidence as may be required by United States taxing authorities to establish
that such Tax has been paid, if any, so Supplier may claim the credit.
(b) If Ordering Company is required to bear a tax pursuant
to paragraph (a) above, Ordering Company shall pay to Supplier or the
appropriate government entity or taxing authority, such Tax and other charges
and any additional amounts as are necessary to ensure that the net amounts
received by Supplier after all such payments or withholdings equal the amounts
to which Supplier is otherwise entitled under this Agreement as if such Tax or
other charges did not exist.
<PAGE>
(c) If Ordering Company is exempt from any Tax, Ordering
Company shall provide Supplier with all required documentation necessary to
establish Ordering Company's exempt status. Ordering Company hereby agrees to
indemnify Supplier from any Tax, including penalties and interest, resulting
from Supplier's reliance on Ordering Company's claim of exempt status.
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(d) If Ordering Company disputes in good faith the
applicability of any Tax imposed as a result of the existence or operation of
this Agreement, Ordering Company, at its own expense and in its own name, may
contest the taxing jurisdiction of the disputed Tax. In the event the
applicable law requires that such contest must be taken in the name of Supplier
only, Supplier shall in good faith and with due diligence at Ordering Company's
sole expense contest the imposition of such Tax provided that (i) Supplier will
not be required to pursue such contest if the action will result in a lien
against Supplier for which Ordering Company has not adequately indemnified
Supplier or (ii) will result in a penalty being assessed against Supplier for
which Ordering Company has not adequately indemnified Supplier.
ARTICLE IV
INTELLECTUAL PROPERTY RIGHTS
4.1 USE OF INFORMATION. (a) All technical and business
Information disclosed by one party to the other subsequent to the execution of
this Agreement in whatever form recorded which is marked "proprietary" or
"confidential" or bears a legend or notice restricting its use, copying, or
dissemination or, if not in tangible form, is described as being proprietary or
confidential at the time of disclosure and is subsequently summarized in a
writing so marked and delivered to the receiving party within thirty (30) days
of disclosure to the receiving party shall remain the property of the furnishing
party. Similarly, all technical and business Information disclosed by one party
to the other party prior to the execution of this Agreement and described at the
time of disclosure by the furnishing party as being proprietary or confidential
or known by the party receiving disclosure of such Information to be proprietary
or confidential shall remain the property of the furnishing party (regardless of
whether it is ever recorded in tangible form).
(b) The furnishing party grants the receiving party the
right to use such Information only as follows: Such Information (i) shall not
be reproduced or copied, in whole or part, except for use as authorized in this
Agreement; and (ii) shall, together with any full or partial copies thereof, be
returned or destroyed when no longer needed. Supplier shall use Ordering
Company's Information only for the purpose of performing under this Agreement,
and Ordering Company shall use Supplier's Information only (i) to order
Products, Licensed Materials or Services; (ii) to evaluate Supplier's Products,
Licensed Materials or Services; or (iii) to install, operate and maintain the
particular Products or Licensed Materials for which such Information was
originally furnished. Unless the furnishing party consents in writing, such
Information, except for that part, if any, which was previously known to the
receiving party free of any confidential obligation, or which becomes generally
<PAGE>
known to the public through acts not attributable to the receiving party, or
which a receiving party receives from a third party without restriction, or
which is independently developed by the receiving party, shall be held in
confidence by the receiving party. The receiving party may disclose such
Information to other persons, upon the furnishing party's prior written
authorization, but solely to perform acts which this clause expressly authorizes
the receiving party to perform itself and further provided that
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such other person agrees in writing (a copy of which writing will be provided to
the furnishing party at its request) to the same conditions respecting use of
Information contained in this clause and to any other reasonable conditions
requested by the furnishing party. The contents of this Agreement are
confidential and shall not be disclosed by either party to third parties,
without the prior written agreement of both parties hereto, except to the extent
required by applicable law, a court or regulatory agency of competent
jurisdiction.
(c) Each party shall be liable to the other for damages
resulting from violation of this Section 4.1. Those damages shall be unlimited
as to nature and limited as to amount to thirty million dollars ($30,000,000)
per occurrence.
4.2 INFRINGEMENT AND MISAPPROPRIATION. (a) In the event
of any claim, action, proceeding or suit by a third party against Ordering
Company alleging an infringement of any patent, copyright, trademark or
misappropriation of a trade secret recognized in any jurisdiction where an
Ordering Company may lawfully use or operate Products or Licensed Materials
purchased hereunder, or if by reason of the use, in accordance with Supplier's
Specifications, in any such jurisdiction of any Products or Licensed Materials
furnished by Supplier to an Ordering Company under this Agreement, Supplier, at
its expense, shall defend Ordering Company, subject to the conditions and
exceptions stated in Paragraphs (b), (c), (d), and (e) below. Supplier shall
reimburse Ordering Company for all costs, expenses or attorneys' fees incurred
at Supplier's written request or authorization, and shall indemnify Ordering
Company against any liability assessed against Ordering Company by final
judgment on account of such infringement or violation arising out of such use.
In no event shall Supplier be liable for Ordering Company's consequential
damages.
(b) If Ordering Company's use is enjoined or in Supplier's
opinion is likely to be enjoined, Supplier shall, at its expense use its
reasonable best efforts, to either (i) replace the enjoined Product or Licensed
Materials furnished pursuant to this Agreement with a substitute free of any
infringement; (ii) modify it so that it will be free of the infringement; or
(iii) procure for Ordering Company a license or other right to use it. If none
of the foregoing options is achievable through reasonable best efforts, Supplier
shall remove the enjoined Product or Licensed Materials and refund or credit to
Ordering Company any amounts paid to Supplier therefor less a reasonable charge
for depreciation and any actual period of use by Ordering Company. In no event,
however, shall Supplier's liability under this Section 4.2(b) exceed the
amount(s) paid by Ordering Company to Supplier to purchase the Product or to
obtain the right to use the Licensed Materials which are alleged to violate the
<PAGE>
rights described in Paragraph (a) above.
(c) Ordering Company shall give Supplier prompt written
notice of all such claims, actions, proceedings or suits alleging infringement
or violation and Supplier shall have full and complete authority to assume the
sole defense thereof, including appeals, and to settle same. Ordering Company
shall, upon Supplier's request and at Supplier's expense, furnish all
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information and assistance available to Ordering Company and cooperate in every
reasonable way to facilitate the defense and/or settlement of any such claim,
action, proceeding or suit.
(d) No undertaking of Supplier under this clause shall
extend to any such alleged infringement or violation to the extent that it: (i)
solely arises from adherence to design modifications, Specifications, drawings,
or written instructions which Supplier is directed by Ordering Company to follow
but only if such alleged infringement or misappropriation does not reside in
material of Supplier's origin, design or selection; or (ii) arises from
adherence to instructions to apply Ordering Company's trademark, trade name or
other company identification; or (iii) resides in equipment or Software which is
furnished by Ordering Company to Supplier for use under this Agreement; or (iv)
arises from use of the Product or Licensed Materials provided by Supplier in
combination with any item not furnished directly by Supplier; or (v) is based
upon modification made by Ordering Company of any Product or Licensed Materials;
or (vi) arises from use of any Product or Licensed Material in a manner for
which it was not designed. In the foregoing cases numbered (i) through (vi),
Ordering Company shall defend and save Supplier harmless, subject to the same
terms and conditions and exceptions stated above, with respect to Supplier's
rights and obligations under this clause.
(e) The liability of Supplier, AT&T and Ordering Company
with respect to any and all claims, actions, proceedings or suits by third
parties alleging infringement of patents, trademarks or copyrights or violation
of trade secrets or proprietary rights because of, or in connection with, any
Products or Licensed Materials furnished pursuant to this Agreement shall be
limited to the specific undertakings contained in this Section 4.2.
4.3 NO PATENT LICENSES. Nothing contained herein shall be
construed as conferring by implication, estoppel or otherwise any license or
right under any patent, except that which is essential to the use of the
Products and/or Licensed Materials as provided by Supplier, and provided however
that this Section 4.3 shall not limit or modify any of the rights and
obligations of the Intellectual Property Agreements or the Supplemental General
Purchase Agreement, No. LC3757D, both executed as of this date as Ancillary
Agreements to the Separation and Distribution Agreement. Supplier shall retain
all ownership rights in all intellectual property used or embodied in Supplier's
Products, Licensed Materials and Service unless otherwise expressed herein, or
in a Supplemental Agreement.
4.4 TRADEMARKS. (a) Subject to the provisions of the
Brand License Agreement, executed as of this date as an Ancillary Agreement to
the Separation and Distribution Agreement, each party shall have the right to
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use Products and Licensed Materials which bear the other party's trademarks,
trade name, logos, trade devices, service marks, symbols, and codes, unless
otherwise directed by that party to remove such indicia.
(b) Except as provided in Section s 4.4 (a) above, each
party (including in the case of AT&T, each Ordering Company) shall not use in
advertising or otherwise, any of the other party's trade name, logo, trademark,
trade device, service mark, symbol, code or Specification, or any abbreviation,
contraction, or simulation thereof, without the prior written
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consent of such party. Neither party shall claim any ownership therein, and
any such usage shall inure to the benefit of the party which owns such trade
name, logo, trademark, trade device, service mark, symbol, code or
Specification.
4.5 PROPRIETARY NOTICE. Ordering Company shall reproduce
and include any Supplier copyright or proprietary notice on all authorized
copies of Licensed Materials. Ordering Company shall also mark all media
containing such copies with a warning that the Licensed Materials are subject to
restrictions contained in an agreement between Supplier and AT&T and that such
Licensed Material are the property of Supplier.
ARTICLE V
RISK MANAGEMENT
5.1 ORDERING COMPANIES' REMEDIES.
(a) An Ordering Company's exclusive remedies and the entire liability
of Supplier, Supplier's Affiliates and their employees and agents, and their
vendors for any claim, loss, damage or expense of Ordering Company or any other
entity arising out of this Agreement or any Supplemental Agreement, or the use
or performance of any Product, Licensed Materials, or Services, whether in an
action for or arising out of breach of contract, warranty, tort, including
negligence, or strict liability, shall be as follows:
(i) For infringement -- the remedy set forth above
in Section 4.2, INFRINGEMENT AND MISAPPROPRIATION;
(ii) For breach of Section 4.1, USE OF INFORMATION,
the remedy set forth above in Section 4.1 (c)
(iii) For the performance or nonperformance of
Products, Software, and Services or claims that they do not conform to a
warranty -- the remedy shall include those set forth in the applicable
"warranty" clause;
(iv) For third party claims against Ordering
Company for personal injury and property damage for which Supplier is held
liable -- the remedy afforded by the governing law;
(v) For tangible property damage to Ordering
Company caused by Supplier's negligence -- the amount of the direct damages; and
(vi) For Supplier's failure to deliver Products,
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Licensed Materials or Services on Supplier's scheduled delivery date, if
Supplier fails to deliver such Products, Licensed Materials or Services (aa) in
1996 within forty-five (45) days from receipt of written notice from Ordering
Company to Supplier of its failure to deliver such Products, Licensed
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Materials or Services on Supplier's scheduled delivery date and (ab) thereafter
thirty (30) days from receipt of such notice, the following remedies shall
apply:
(A) Ordering Company may cancel the Order
without incursion of cancellation fees; and,
(B) Ordering Company may request and Supplier
will reduce AT&T's volume purchase commitment by an amount equal to the value of
the Order. In addition, if a worldwide supply shortage exists, Ordering Company
may request and, upon such request, shall receive priority on allocation of such
delivered Products, Licensed Materials or Services in a shortage condition based
upon priority criteria agreed to between Supplier and its affected customers
established for the particular shortage condition.
(b) Notwithstanding any other provision of this Agreement
and except as provided in Section 5.1(a)(ii) above, ORDERING COMPANIES'
REMEDIES, Supplier, Supplier's Affiliates and their employees and agents, and
their vendors shall not be liable for any consequential damages in the nature of
lost profits, revenues or savings arising out of this Agreement, or the use or
performance of any Product, Licensed Materials, or Services, whether in an
action for or arising out of breach of contract, warranty, tort, including
negligence, or strict liability.
(c) Other than damages pursuant to Section 5.1(a)(ii)
above, ORDERING COMPANIES' REMEDIES, Supplier's total liability for incidental
and/or consequential damages and damages resulting from network outages which
must be reported by Ordering Company to the Federal Communications Commission in
accordance with its rules ("Network Outage(s)") shall not exceed ten million
dollars ($10,000,000) per occurrence with a total not to exceed of thirty
million dollars ($30,000,000) in any one year. This Section 5.1(c) shall
survive failure of an exclusive or limited remedy.
(d) Ordering Company shall give Supplier prompt written
notice of any claim. Any action or proceeding against Supplier must be brought
within thirty-six (36) months after the cause of action accrues.
(e) Supplier acknowledges that a Network Outage will cause
damage to AT&T in an amount impossible to ascertain. Supplier agrees to pay
AT&T, as liquidated damages and not as a penalty, the sum of one million dollars
($1,000,000) per occurrence in the event of a Network Outage caused solely by
Supplier in connection with network infrastructure equipment and one hundred
thousand dollars ($100,000) per occurrence in the event of a Network Outage
caused solely by Supplier in connection with GBCS Products, whether or not by
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breach of warranty and whether before, during or after any Warranty Period.
With respect to a Network Outage caused solely by Supplier in connection with
network infrastructure equipment, Supplier's total liability for damages for
Network Outages, including the liquidated damages described herein shall be one
million dollars ($1,000,000) per occurrence not to exceed the amount of three
million dollars ($3,000,000) for any calendar year, and Supplier's total
liability
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for damages for Network Outages for any three (3) year period of this Agreement,
including the liquidated damages described herein, shall be five million dollars
($5,000,000); provided that AT&T is meeting its obligations specified in Section
1A.3, VOLUME COMMITMENT, and the Pricing Agreement. With respect to Network
Outages caused solely by Supplier in connection with GBCS Products, Supplier's
total liability under this section shall be one hundred thousand dollars
($100,000) per occurrence not to exceed the amount of three hundred thousand
dollars ($300,000) for any calendar year ,and Supplier's total liability for
damages for Network Outages for any three (3) year period of this Agreement,
including the liquidated damages described herein, shall be five hundred
thousand dollars ($500,000); provided that AT&T is meeting its obligations
specified in Section 1A.3, VOLUME COMMITMENT, and the Pricing Agreement. If, at
any time during the term of this Agreement, AT&T fails to meet its obligations
specified in Section 1A.3, VOLUME COMMITMENT, and the Pricing Agreement, it
shall not be entitled to the remedy in this Section 5.1(e). Any damages paid by
Supplier pursuant to this Subparagraph shall be considered incidental and
consequential damages subject to the limitations on AT&T's right to recover same
that are set forth in Section 5.1(c), ORDERING COMPANIES' REMEDIES. At AT&T's
option, AT&T may take all or part of the payment as a credit against any invoice
due or to become due to Supplier. The remedies available to AT&T under Section
5.1, ORDERING COMPANIES' REMEDIES, and the foregoing liquidated damages shall
constitute AT&T's sole and exclusive remedy for Network Outages caused to any
extent by Supplier during the term of this Agreement.
5.2 SUPPLIER PERFORMANCE. AT&T and Supplier will jointly
develop requirements for an annual Supplier Merit Award by December 1st of each
year for the following year. For 1996, the requirements are listed in Exhibit
5-1. The award program will provide that if Supplier meets or exceeds either
award performance criteria for receipt of a Supplier Merit Award, AT&T shall:
(a) increase its minimum volume purchase
commitment for the following year (if the volume purchase commitment in Section
1A.3, VOLUME COMMITMENT, is in effect), by twenty million dollars ($20,000,000)
for achieving the on-time delivery criteria and ten million dollars
($10,000,000) for achieving the FCC reportable incidents criteria or
(b) if a volume purchase commitment is not in
effect, increase its purchase or license of Supplier's Products, Licensed
Materials and Services for the following year by twenty million dollars
($20,000,000) for achieving the on-time delivery criteria and ten million
dollars ($10,000,000) for achieving the FCC reportable incidents criteria. A
public relations program will be jointly developed and executed in support of
this award program.
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5.3 INSURANCE. Supplier shall maintain and cause
Supplier's subcontractors to maintain during the term of this Agreement: (a)
Workers' Compensation insurance as prescribed by the law of the state or nation
in which the work is performed, (b) employer's liability insurance with limits
of at least three hundred thousand dollars ($300,000) for each occurrence; (c)
comprehensive automobile liability insurance if the use of motor vehicles is
required, with
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limits of at least one million dollars ($1,000,000) combined single limit for
bodily injury and property damage for each occurrence; (d) Comprehensive General
Liability ("CGL") insurance, including Blanket Contractual Liability and Broad
Form Property damage, with limits of at least one million dollars ($1,000,000)
combined single limit for personal injury and property damage for each
occurrence; and (e) if the furnishing to Ordering Company (by sale or otherwise)
of Products or material is involved, CGL insurance endorsed to include products
liability and completed operations coverage in the amount of five million
dollars ($5,000,000) for each occurrence. If specifically requested by Ordering
Company, Supplier's subcontractors shall furnish, prior to the start of work,
certificates or adequate proof of the foregoing insurance, including copies of
the endorsements and insurance policies. Supplier's obligations to maintain
insurance may be satisfied by providing proof of self-insurance in a form
satisfactory to Company.
ARTICLE VA
ARBITRATION; DISPUTE RESOLUTION
5A.1 AGREEMENT TO ARBITRATE. The procedures for
discussion, negotiation and arbitration set forth in this Article 5A shall apply
to all disputes, controversies or claims (whether sounding in contract, tort or
otherwise) that may arise out of or related to, or arise under or in connection
with this Agreement or any Supplemental Agreement, or the transactions
contemplated hereby or thereby (including all actions taken in furtherance of
the transactions contemplated hereby or thereby on or prior to the date hereof),
or the commercial or economic relationship of the parties relating hereto,
between the parties. Each party agrees that the procedures set forth in this
Article 5A shall be the sole and exclusive remedy in connection with any
dispute, controversy or claim relating to any of the foregoing matters and
irrevocably waives any right to commence any Action in or before any
Governmental Authority except as expressly provided in Section 5A.7(b), CERTAIN
ADDITIONAL MATTERS, and 5A.8, LIMITED COURT ACTIONS, below and except to the
extent provided under the Arbitration Act in the case of judicial review of
arbitration results or awards. Each party on behalf of itself irrevocably
waives any right to any trial by jury with respect to any such claim,
controversy, or dispute.
5A.2 ESCALATION. (a) It is the intent of the parties to
use their respective reasonable best efforts to resolve expeditiously any
dispute, controversy or claim between or among them with respect to the matters
covered hereby that may arise from time to time on a mutually acceptable
negotiated basis. In furtherance of the foregoing, any party involved in a
dispute, controversy or claim may deliver a notice (an "Escalation Notice")
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demanding an in-person meeting involving representatives of the parties at a
senior level of management of the parties (or if the parties agree, of the
appropriate strategic business unit or division within such entity). A copy of
any such Escalation Notice shall be given to the General Counsel, or like
officer or official, of each party involved in the dispute, controversy or claim
(which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by the
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parties from time to time; provided, however, that the parties shall use their
reasonable best efforts to meet within thirty (30) days of the Escalation
Notice.
(b) The parties may, by mutual consent, retain a mediator to
aid the parties in their discussions and negotiations by informally providing
advice to the parties. Any opinion expressed by the mediator shall be strictly
advisory and shall not be binding on the parties, nor shall any opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the parties. Costs of the mediation shall be
borne equally by the parties involved in the matter, except that each party
shall be responsible for its own expenses. Mediation is not a prerequisite to a
demand for arbitration under Section 5A.3, DEMAND FOR ARBITRATION.
5A.3 DEMAND FOR ARBITRATION. (a) At any time after the
first to occur of (i) the date of the meeting actually held pursuant to the
applicable Escalation Notice or (ii) forty five (45) days after the delivery of
an Escalation Notice (as applicable, the "Arbitration Demand Date"), any party
involved in the dispute, controversy or claim (regardless of whether such party
delivered the Escalation Notice) may, unless the applicable deadline has
occurred, make a written demand (the "Arbitration Demand Notice") that the
dispute be resolved by binding arbitration, which Arbitration Demand Notice
shall be given in the manner set forth in Section 6.3, NOTICES. In the event
that any party shall deliver an Arbitration Demand Notice to another party, such
other party may itself deliver an Arbitration Demand Notice to such first party
with respect to any related dispute, controversy or claim with respect to which
the applicable deadline has not passed without the requirement of delivering an
Escalation Notice. No party may assert that the failure to resolve any matter
during any discussions or negotiation, the course of conduct during the
discussions or negotiations or the failure to agree on a mutually acceptable
time, agenda, location or procedures for the meeting, in each case, as
contemplated by Section 5A.2, ESCALATION, is prerequisite to a demand for
arbitration under this Section 5A.3.
(b) Any Arbitration Demand Notice may be given until one year
and forty-five (45) days after the later of the occurrence of the act or event
in the exercise of reasonable due diligence giving rise to the underlying claim
or the date on which such act or event was, or should have been, discovered by
the party asserting the claim (as applicable, and as it may in a particular case
be specifically extended by the parties in writing, the "Applicable Deadline").
Any discussions, negotiations or mediations between the parties pursuant to this
Agreement or otherwise will not toll the Applicable Deadline unless expressly
agreed in writing by the parties. Each of the parties agrees that if an
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Arbitration Demand Notice with respect to a dispute, controversy or claim is not
given prior to the expiration of the Applicable Deadline, as between or among
the parties, such dispute, controversy or claim will be barred. Subject to
Section 5A.7(d), CERTAIN ADDITIONAL MATTERS, and 5A.8, LIMITED COURT
ACTIONS,
upon delivery of an Arbitration Demand Notice pursuant to Section 5A.3(b),
DEMAND FOR ARBITRATION, prior to the Applicable Deadline, the dispute,
controversy or claim shall be decided by a sole arbitrator in accordance with
the rules set forth in this Article 5A.
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5A.4 ARBITRATORS. (a) Within fifteen (15) days after a
valid Arbitration Demand Notice is given, the parties involved in the dispute,
controversy or claim referenced therein shall attempt to select a sole
arbitrator satisfactory to all such parties.
(b) In the event that such parties are not able to jointly
select a sole arbitrator within such fifteen (15) day period, such parties shall
each appoint an arbitrator within thirty (30) days after delivery of the
Arbitration Demand Notice. If one party appoints an arbitrator within such time
period and the other party or parties fail to appoint an arbitrator within such
time period, the arbitrator appointed by the one party shall be the sole
arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above and, instead, two (2) or three (3)
arbitrators are selected pursuant to paragraph (b) above, the two or three
arbitrators will, within thirty (30) days after the appointment of the later of
them to be appointed, select an additional arbitrator who shall act as the sole
arbitrator of the dispute. After selection of such sole arbitrator, the initial
arbitrators shall have no further role with respect to the dispute. In the
event that the arbitrators so appointed do not, within thirty (30) days after
the appointment of the later of them to be appointed, agree on the selection of
the sole arbitrator, any party involved in such dispute may apply to CPR, New
York, New York, to select the sole arbitrator, which selection shall be made by
such organization within thirty (30) days after such application. Any
arbitrator selected pursuant to this paragraph (c) shall be disinterested with
respect to any of the parties and the matter and shall be reasonably competent
in the applicable subject matter.
(d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than ninety (90) days after the date of appointment of the
sole arbitrator pursuant to paragraph (a), (b) or (c) above, and which hearing
will be no longer than thirty (30) days (unless in the judgment of the
arbitrator the matter is unusually complex and sophisticated and thereby
requires a longer time, in which event such hearing shall be no longer than
ninety (90) days). The final decision of such arbitrator will be rendered in
writing to the parties not later than sixty (60) days after the last hearing
date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be New Jersey,
unless otherwise agreed by the parties.
5A.5 HEARINGS. Within the time period specified in Section
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5A.4(d), ARBITRATORS, the matter shall be presented to the arbitrator at a
hearing by means of written submissions of memoranda and verified witness
statements, filed simultaneously, and responses, if necessary in the judgment of
the arbitrator or both parties. If the arbitrator deems it to be essential to a
fair resolution of the dispute, live cross-examination or direct examination may
be permitted, but is not generally contemplated to be necessary. The arbitrator
shall actively manage the arbitration with a view to achieving a just, speedy
and cost-effective resolution of the dispute, claim or controversy. The
arbitrator may, in his discretion, set time and other limits on the presentation
of each party's case, its memoranda or other submissions, and refuse to receive
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any proffered evidence, which the arbitrator, in his discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the CPR Rules for Non-Administered Arbitration of Business
Disputes (except that the arbitration will not be conducted under the auspices
of the CPR and the fee schedule of the CPR will not apply). Except as expressly
set forth in Section 5A.8(b), LIMITED COURT ACTIONS, the decision of the
arbitrator will be final and binding on the parties, and judgment therein may be
had and will be enforceable in any court having jurisdiction over the parties.
Arbitration awards will bear interest at an annual rate of the Prime Rate Plus
two percent (2%) per annum. To the extent that the provisions of this Agreement
and the prevailing rules of the CPR conflict, the provisions of this Agreement
shall govern.
5A.6 DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party
involved in the applicable dispute may request limited document production from
the other party or parties of specific and expressly relevant documents, with
the reasonable expenses of the producing party incurred in such production paid
by the requesting party. Any such discovery (which rights to documents shall be
substantially less than document discovery rights prevailing under the Federal
Rules of Civil Procedure) shall be conducted expeditiously and shall not cause
the hearing provided for in Section 5A.5, HEARINGS, to be adjourned except upon
consent of all parties involved in the applicable dispute or upon an
extraordinary showing of cause demonstrating that such adjournment is necessary
to permit discovery essential to a party to the proceeding. Depositions,
interrogatories or other forms of discovery (other than the document production
set forth above) shall not occur except with the consent of the parties involved
in the applicable dispute. Disputes concerning the scope of document production
and enforcement of the document production requests will be determined by
written agreement of the parties involved in the applicable dispute or, failing
such agreement, will be referred to the arbitrator for resolution. All
discovery requests will be subject to the proprietary rights and rights of
privilege of the parties, and the arbitrator will adopt procedures to protect
such rights and to maintain the confidential treatment of the arbitration
proceedings (except as may be required by law). Subject to the foregoing, the
arbitrator shall have the power to issue subpoenas to compel the production of
documents relevant to the dispute, controversy or claim.
(b) Except where contrary to the provisions set forth in this
Agreement or any Supplemental Agreement, the rules of the CPR for commercial
arbitration will be applied to all matters of procedure, including discovery.
The arbitrator shall have full power and authority to determine issues of
arbitrability but shall otherwise be limited to interpreting or continuing the
applicable provisions of this Agreement and will have no authority or power to
<PAGE>
limit, expand, alter, amend, modify, revoke or suspend any condition or
provision of the Agreement; it being understood, however, the arbitrator will
have full authority to implement the provisions of this Agreement, and to
fashion appropriate remedies for breaches of this Agreement (including, other
than in the case of disputes, controversies or claims relating to, arising out
of or resulting from Patents (as such term is defined in the Patent License
Agreement), interim or permanent injunctive relief); provided that the
arbitrator shall not have (i) any authority in excess of the
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authority a court having jurisdiction over the parties and the controversy or
dispute would have absent these arbitration provisions or (ii) any right or
power to award punitive damages. It is the intention of the parties that in
rendering a decision, the arbitrator give effect to the applicable provisions of
this agreement and follow applicable law (it being understood and agreed that
this sentence shall not give rise to a right of judicial review of the
arbitrator's award).
(c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party
involved in the matter, except that each party will be responsible for its own
attorneys fees and other costs, expenses, including the costs of witnesses
selected by such party.
5A.7 CERTAIN ADDITIONAL MATTERS. (a) Any arbitration award
shall be a bare award limited to a holding for or against a party and shall be
without findings as to facts, issues or conclusions of law (including with
respect to any matters relating to the validity or infringement of Patents) and
shall be without a statement of the reasoning on which the award rests, but must
be in adequate form so that a judgment of a court may be entered thereupon.
Judgment upon any arbitration award hereunder may be entered in any court having
jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 5A.4(c), ARBITRATORS, any party may seek one or more
temporary restraining orders in a court of competent jurisdiction if necessary
in order to preserve and protect the status quo. Neither the request for, nor
grant or denial of, any such temporary restraining order shall be deemed a
waiver of the obligation to arbitrate as set forth herein and the arbitrator may
dissolve, continue or modify any such order. Any such temporary restraining
order shall remain in effect until the first to occur of the expiration of the
order in accordance with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and
shall cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Section 6.2 and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
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(d) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or
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as to which the replacement arbitrator elects to rely on the stenographic record
(if there is one) of such testimony shall be determined by the replacement
arbitrator.
5A.8 LIMITED COURT ACTIONS. (a) Notwithstanding anything
herein to the contrary, in the event that any party reasonably determines the
amount of controversy in any dispute, controversy or claim (or any series of
related disputes, controversies or claims) under this Agreement is, or is
reasonably likely to be, in excess of one hundred million dollars ($100,000,000)
and if such party desires to commence an Action in lieu of complying with the
arbitration provisions of this Article, such party shall so state in its
Arbitration Demand Notice. If the other parties to the arbitration do not agree
that the amount in controversy in such dispute, controversy or claim (or such
series of related disputes, controversies or claims) is, or is reasonably likely
to be, in excess of one hundred million dollars ($100,000,000), the arbitrator
selected pursuant to Section 5A.4, ARBITRATORS, hereof shall decide whether the
amount in controversies or claims) is, or is reasonably likely to be, in excess
of one hundred million dollars ($100,000,000). The arbitrator shall set a date
that is no later than ten (10) days after the date of his appointment for
submissions by the parties with respect to such issue. There shall not be any
discovery in connection with such issue. The arbitrator shall render his
decision on such issue within five (5) days of such date so set by the
arbitrator. In the event that the arbitrator determines that the amount in
controversy in such dispute, controversy or claim (or such series of related
disputes, controversies or claims) is, or is reasonably likely to be, in excess
of one hundred million dollars ($100,000,000), the provisions of Sections
5A.4(d), and (e), ARBITRATORS, 5A.5, HEARINGS, 5A.6, DISCOVERY AND CERTAIN
OTHER
MATTERS, 5A.7, CERTAIN ADDITIONAL MATTERS, and 5A.10, LAW GOVERNING
ARBITRATION
PROCEDURES, hereof shall not apply and on or before (but, except as expressly
set forth in Section 5A.8(b), not after) the tenth (10th) business day after the
date of such decision, any party to the arbitration may commence an Action with
respect to such dispute, controversy or claim (or such series of related
disputes, controversies or claims) in any court of competent jurisdiction. If
the arbitrator does not so determine, the provisions of this Article (including
with respect to time periods) shall apply as if no determinations were sought or
made pursuant to this Section 5A.8.
(b) In the event that an arbitration award in excess of one
hundred million dollars ($100,000,000) is issued in any arbitration proceeding
commenced hereunder, any party may, within sixty (60) days after the date of
such award, submit the dispute, controversy or claim (or series of related
disputes, controversies or claims) giving rise thereto a court of competent
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jurisdiction, regardless of whether such party or any other party sought to
commence an action in lieu of proceeding with arbitration in accordance with
Section 5A.8(a). In such event, the applicable court may, if it determines that
it would be advisable in connection with the matter, allow the parties to seek
additional discovery or to present additional evidence. Each party shall be
entitled to present arguments to the court with respect to whether any such
additional discovery or evidence shall be permitted and with respect to all
other matters relating to the applicable dispute, controversy or claim (or
series of related disputes, controversies or claims).
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5A.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Article 5A with respect to all
matters not subject to such dispute, controversy or claim.
5A.10 LAW GOVERNING ARBITRATION PROCEDURES. The
interpretation of the provisions of this Article 5A, only insofar as they relate
to the agreement to arbitrate and any procedures pursuant thereto shall be
governed by the Arbitration Act and other applicable federal law. In all other
respects, the interpretation of this Agreement shall be governed as set forth in
Section 6.19, GOVERNING LAW.
ARTICLE VI
MISCELLANEOUS
6.1 EXPORT CONTROL. The parties acknowledge that
Products, Licensed Materials and Information (including, but not limited to,
Services and training) provided under this Agreement are subject to U.S. export
laws and regulations, and any use or transfer of such Products and Information
must be authorized under those regulations. AT&T agrees that it will not use,
distribute, transfer, or transmit the Products, Licensed Materials or
Information (even if incorporated into other products) in violation of U.S.
export regulations. If requested by Supplier, AT&T shall sign written
assurances and other export-related documents as may be required for Supplier to
comply with U.S. export regulations. This Section does not grant AT&T any
contractual right to Export Supplier's Products and Licensed Materials. Such
right shall only be granted expressly in an applicable Supplemental Agreement.
6.2 PUBLICATION OF AGREEMENT. The parties shall treat the
provisions of this Agreement and any Supplemental Agreement or any Order
submitted hereunder as Information subject to the restrictions on use and
disclosure set forth in Section 4.1, USE OF INFORMATION, except as reasonably
necessary for performance hereunder (including enforcement of Supplier's
obligations under the Pricing Agreement and AT&T's obligations under Exhibit 1
thereto) and except to the extent disclosure may be required by applicable laws
or regulations, in which latter case, the party required to make such disclosure
shall promptly inform the other prior to such disclosure in sufficient time to
enable such other party to make known any objections it may have to such
disclosure. The party required to disclose information concerning this
Agreement, a Supplemental Agreement or Order to a third party in accordance with
the previous sentence shall take all reasonable steps to secure a protective
order or otherwise assure that the Agreement, Supplemental Agreement or Order
will be withheld from the public record.
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6.3 NOTICES. All notices under this Agreement shall be in
writing (except where otherwise stated) by confirmed, facsimile, electronic mail
or similar communication, or by certified or registered mail. Within ten (10)
days following the Effective Date, the parties will exchange the names and
addresses to whom the notices should be sent. A notice shall be deemed to have
been given, if by electronic mail, facsimile or similar communication, on the
date it is
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sent, and, if by certified or registered mail, on the date it is deposited
postage prepaid. Communications may be made orally between the parties when the
nature of the communication does not require written notice. In the event of a
change of address, written notice of such change shall be given promptly to the
other party.
6.4 ORDERING COMPANY'S RESPONSIBILITY. (a) Ordering
Company shall, at no charge to Supplier, provide Supplier with notice of site
conditions known to Ordering Company and such electrical and environmental
conditions, technical information, data, technical support or assistance as may
reasonably be required by Supplier to fulfill its obligations under this
Agreement, any Supplemental Agreement or Order. If Ordering Company fails to
provide the required conditions, technical information, data, support or
assistance, Supplier shall be discharged from its obligations to perform
hereunder for that Order. Where Services are to be performed by Supplier in
buildings owned or controlled by Ordering Company, Ordering Company shall be
responsible for ensuring that the premises where the work is to be performed by
Supplier are accessible to Supplier and ready and suitable for the Services to
be performed in accordance with Supplier's reasonable site-preparation
conditions communicated in advance to Ordering Company. Such conditions
include, but are not limited to, (a) site readiness and (b) access to adequate
storage space for tools and other small items necessary for the work, working
space, personal facilities, heat, light, ventilation, telephone, electrical
current, and outlets, all provided within a reasonable distance of the area
where the work is to be performed, if available.
(b) Supplier's representative shall have the right to
inspect the site prior to Service Start Date. If Ordering Company or its other
vendors or contractors fail to timely complete site readiness or if the work of
Ordering Company or its other vendors or contractors interferes with Supplier's
performance, the applicable Completion Date shall be extended as necessary to
compensate for such delay or interference and additional charges shall be
invoiced to recover the additional expenses incurred by Supplier as a result of
such failure or interference. Moreover, should Ordering Company fail to comply
with the reasonable site-preparation conditions after Supplier provides Ordering
Company notice, Supplier may perform such work or furnish such items and charge
Ordering Company for them in addition to the prices otherwise charged by
Supplier for such Services.
6.5 SUPPLIER'S RESPONSIBILITY. (a) Supplier shall become
acquainted with conditions governing the delivery, receipt and storage of
materials at the site of the work so that Supplier will not interfere with
Ordering Company's operations. For items other than those identified in Section
6.4, ORDERING COMPANY'S RESPONSIBILITY, above, storage space will not
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necessarily be provided adjacent to the site of the work. Therefore, Supplier
shall be expected to select, uncrate, remove and transport materials from the
storage areas provided. Except to the extent that Supplier's property located
on Ordering Company's property is damaged or misappropriated by employees,
contractors or representatives of Ordering Company, Ordering Company is not
responsible for the safekeeping of such property. When Supplier's property
located on Ordering Company's property is damaged or misappropriated by
employees, contractors, or representatives of Ordering Company, Ordering Company
shall be liable to Supplier for such damage or misappropriation. Supplier shall
not stop, delay or interfere with
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Ordering Company's work schedule without the prior approval of Ordering Company.
Supplier shall provide and maintain sufficient covering and take any other
precautions necessary to protect Ordering Company's stock, equipment and other
property from damage due to Supplier's performance of the work.
(b) Supplier recognizes that the continuity of Ordering
Company's telecommunications services is of paramount importance to Ordering
Company, and Supplier shall at all times exercise reasonable care to prevent
damage to Company's plant and shall not use any equipment or methods which
Ordering Company has informed Supplier, either in writing or through oral
directives at the work site, might endanger or interfere with its service.
6.6 EACH PARTY'S RESPONSIBILITY. Each party shall be
entirely responsible for all persons that it furnishes working in harmony with
all others when working on the other party's premises or those of Ordering
Company's customers. Services performed by either party or its other vendors or
contractors shall not interfere with the other party's performance of services.
6.7 ASSURANCE OF SUPPLY. (a) AT&T and Supplier will
jointly conduct regularly scheduled Life Cycle Management reviews for the
purpose of sharing information concerning current and future Product and support
requirements in order to permit both parties to make informed decisions
concerning such matters. AT&T's priority is to assure the ongoing growth and
service capabilities of the network are satisfied. In order to ensure the long
term viability of the network, AT&T will have the option to request sustained
manufacturing service for all Products and components that are used in the
network.
(b) Supplier must provide written notification to AT&T
eighteen (18) months in advance of Supplier's intended date of DA of any Product
used in Ordering Company's network, or to substitute or replace such Product if
Form, Fit or Function is affected. Supplier will provide nine (9) months
written notice with regard to GBCS Products not used in Order Company's network.
If Supplier's vendor terminates production of a Product and/or component of a
Product, Supplier will use reasonable efforts to provide the Products or
components or secure sources for such Products or components; provided however,
that Supplier reserves the right to provide a shorter notice in the event
suppliers of a Product or critical component terminates production or
maintenance of such items and no other sources for such items can be secured.
Within six (6) months of notification of DA, AT&T will provide written
notification to Supplier that it concurs with Supplier's decision or that it
intends to negotiate the terms, conditions and prices under which availability
shall be extended, provided that such Product and/or its components are
available to Supplier. Unless otherwise agreed to, the framework for that
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agreement is that Supplier will be entitled to recover its costs of providing
continued availability, plus a reasonable profit. Software DA is governed by
Section 9.20, NOTIFICATION OF DISCONTINUED AVAILABILITY OF SOFTWARE.
6.8 PUBLICITY. Each party shall submit to the other a
proposed copy of all advertising wherein the name, trademark, code,
Specification or service mark of the other party
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or its Affiliates is mentioned. Neither party shall publish or use such
advertising without the other's prior written approval, which consent shall not
be unreasonably withheld or delayed.
6.9 RIGHT OF ACCESS/PERMITS AND APPROVALS. Each party
shall have the right to enter the premises of the other party during normal
business hours with respect to the performance of this Agreement, subject to all
plant rules and regulations, security regulations and procedures and U.S.
Government clearance requirements if applicable. No charge shall be made for
such access. Reasonable prior notification shall be given when access is
required. Ordering Company shall have the responsibility for obtaining all
state, local and federal approvals and permits prior to the commencement of the
work. Any limitation of or delay in providing timely access may result in a
change of Supplier's schedule for performing its obligations hereunder and
additional charges to recover additional expenses incurred by Supplier as a
result of such limitations or delays.
6.10 FORCE MAJEURE. Neither party shall be held
responsible for any delay or failure in performance to the extent that such
delay or failure is caused by a Force Majeure; provided, however, that Ordering
Company shall not be relieved by reason of such cause of its obligation to make
payments to Supplier. If any Force Majeure condition occurs, the party delayed
or unable to perform shall give prompt notice to the other party, stating the
nature of the Force Majeure condition and any action being taken to avoid or
minimize its effect. The party affected by the other's delay or inability to
perform (hereinafter the "Affected Party") may elect to: (a) suspend the
applicable Supplemental Agreement or Order for the duration of the Force Majeure
condition and (i) only to the extent reasonably necessary to maintain the normal
operation of the Affected Party's business, buy, sell, obtain or furnish
elsewhere the Product, Licensed Material or Services to be bought, sold,
obtained or furnished thereunder (unless such sale or furnishing is prohibited
under this Agreement, a Supplemental Agreement or an Order, in which event an
Ordering Company experiencing a Force Majeure condition shall bear Supplier's
reasonable costs (including inventory costs) incurred awaiting cessation of the
Force Majeure condition) and, at the option of the Affected Party, deduct from
any commitment the quantity bought, sold, obtained or furnished or for which
commitments have been made elsewhere and (ii) once the Force Majeure condition
ceases, resume performance under the applicable Supplemental Agreement or Order
with an option in the Affected Party to extend the period of such Supplemental
Agreement or Order up to the length of time the Force Majeure condition endured
and/or (b) when the delay or nonperformance continues for a period of at least
thirty (30) days, terminate, at no charge and without any liability, the
applicable Supplemental Agreement or Order or the part of it relating to
Products or Licensed Material not already shipped, or Services not already
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performed. Unless written notice is given within forty-five (45) days after the
Affected Party is notified of the Force Majeure condition, option (a) shall be
deemed selected. Nothing contained herein or elsewhere shall impose any
obligation on either party to settle any labor difficulty.
6.11 INDEPENDENT CONTRACTOR. All work performed by
Supplier, AT&T or an Ordering Company under this Agreement shall be performed as
an independent contractor and not as an agent of the other, and no persons
furnished by the performing party shall be considered
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the employees or agents of the other. Each party is wholly responsible for
withholding and payment of all federal, state, and local income and other
payroll taxes with respect to its employees, including contributions from them
as required by law.
6.12 RELEASES VOID. Neither party shall
require releases or waivers of any personal rights from representatives or
employees of the other in connection with visits to its premises, nor shall such
parties plead such releases or waivers in any action or proceeding.
6.13 SURVIVAL OF OBLIGATIONS. The rights and obligations
of the parties which by their nature would continue beyond the termination,
cancellation, or expiration of this Agreement, including, but not limited to
COMPLIANCE WITH LAW, TRADEMARKS, INFRINGEMENT AND
MISAPPROPRIATION, INSURANCE,
RELEASES VOID, USE OF INFORMATION, CONTINUING PRODUCT SUPPORT -
PARTS AND
SERVICE, PRODUCT WARRANTY, SOFTWARE WARRANTY, WARRANTY FOR
SERVICES OTHER THAN
MAINTENANCE, MAINTENANCE SERVICE WARRANTY and WARRANTY, shall survive
such
termination, cancellation or expiration.
6.14 GOVERNMENT CONTRACT PROVISIONS. Ordering Company
shall identify in a request for proposed Supplemental Agreement if a Product,
Licensed Material or Service to be provided by Supplier is intended for use
under a government contract and if government contract flowdown provisions shall
apply to such procurement, with identification of such flowdown provisions. In
such a case, Supplier will advise AT&T if it will submit a proposal, bid or
accept an Order on such basis and, if so, it will address its acceptance or
compliance with the flowdown terms and conditions in its proposal, bid or
Supplemental Agreement. Orders placed in accordance with such proposal, bid or
Supplemental Agreement will be subject to the identified government contract
provisions as negotiated. If an Order or Supplemental Agreement fails to
specify the inclusion of government flowdown clauses or is issued by AT&T
without the prior identification of government contract use or flowdown clauses
as provided above, Supplier shall have the right to terminate such Order or
Supplemental Agreement and collect from Ordering Company charges for expenses
incurred until the effective date of such termination.
6.15 QUALITY SYSTEM AUDIT. (a) Supplier shall maintain a
compliant quality system that is subject to third party quality system audit
that shall include the following elements:
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(i) Management Responsibility
(ii) Quality System Principles
(iii) Quality in Marketing
(iv) Quality in Specification/Design
(v) Quality in Procurement
(vi) Quality in Production
(vii) Control of Production
(viii) Product Verification
(ix) Control of Measuring and Test Equipment
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(x) Non-conformity
(xi) Corrective Action
(xii) Handling and Post-production
(xiii) Quality Documentation and Records
(xiv) Use of Statistical Methods
(b) Such an audit shall assess the effectiveness and
documentation of the various elements that comprise a functioning quality
system. Supplier agrees that any deficiencies discovered in Supplier's quality
system as a result of the audit(s) shall be remedied by Supplier at Supplier's
expense.
6.16 ISO 9000. Supplier will undertake all reasonable
actions to become ISO 9000 registered. Certain vintage Products are exempt from
this Section. Such registration must be made by a third party registrar(s)
accredited in the following countries: United States or such other country as
may be designated in writing by AT&T or an Ordering Company.
6.17 UTILIZATION OF MINORITY AND WOMEN-OWNED BUSINESS
ENTERPRISES. It is AT&T's policy that minority and women-owned business
enterprises ("MWBE's) as defined in Exhibit 6-1 shall have the maximum
practicable opportunity to participate in the performance of contracts. Supplier
agrees to use its good faith efforts to utilize MWBE's to carry out this policy
to the fullest extent consistent with the efficient performance of its business
and this Agreement. In addition to these general conditions for MWBE support,
provided that Ordering Company will work with Supplier to seek out MWBE's and
works with Supplier in the development of opportunities for the use of MWBE's,
Supplier agrees to (a) work with Ordering Company to develop opportunities for
the utilization of MWBE's for first tier procurement of Supplier's Products,
Licensed Materials and Services by Ordering Company, (b) use its good faith
efforts to utilize MWBE's in support of this Agreement and strive to achieve the
portion of total expenditures for all Products, Licensed Materials and Services
purchased from Supplier equal to 5% of the value of Ordering Companies'
purchases of Products, Licensed Materials and Services from Supplier in 1996,
and strive to increase such percentage by 10% each of the following years of
this Agreement and (c) support Ordering Companies' state and regional goals for
MWBE and service-disabled veterans spending in California and other
states/regions as may be defined in the future. Supplier agrees to conduct a
program which will enable MWBE's to be considered fairly as subcontractors and
suppliers under this Agreement. Supplier shall submit to AT&T periodic reports
of work with known MWBE's in the form of Exhibit 6-1 in such manner and at such
time (not more than quarterly) as AT&T's representative may prescribe. Such
periodic reports shall state separately for MBE's and WBE's the subcontracted
work which is attributable to Ordering Companies. In instances where direct
<PAGE>
correlation cannot be determined, such MWBE payments may be established by
Supplier comparing Ordering Company's payments to Supplier, in that period, to
total payments to Supplier from all of its customers, in that period, and then
arriving at Ordering Company's apportionment of such MWBE payments. Nothing in
this clause shall affect or diminish Supplier's obligations as set forth in the
assignment and subcontracting provisions.
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6.18 ASSIGNABILITY. Except as provided in this clause,
neither party shall assign this Agreement or any right or interest under this
Agreement, nor delegate any work or obligation to be performed under this
Agreement (an "assignment") without the other party's prior written consent. Any
attempted assignment in contravention of this clause shall be void and
ineffective. Nothing shall preclude a party from employing a subcontractor in
carrying out its obligations under this Agreement; provided, however, that if
Supplier uses a subcontractor to perform a material service or obligation under
this Agreement, such use will be subject to AT&T's written consent. Supplier's
use of such subcontractor shall not release Supplier from its obligations under
this Agreement. Notwithstanding the foregoing, Supplier shall have the right to
assign this Agreement and to assign its rights under this Agreement, in whole or
in part, to any present or future Affiliate or to any entity which purchases
from Supplier the operating asset(s) utilized by Supplier to fulfill its
obligations hereunder, subject to AT&T's written consent, which consent shall
not be unreasonably withheld; provided, however, that in any such event Supplier
shall not be released from its obligations hereunder and shall indemnify, defend
and hold harmless each Ordering Company for all losses or damages arising in
connection therewith, including from any breach of this Agreement by such
assignee. The notice of assignment shall state the effective date thereof.
Following the effective date and to the extent of the assignment, Supplier shall
not be released from obligations. For purposes of this clause, the "Agreement"
includes this Agreement, each Supplemental Agreement, each Order and any other
subordinate agreement placed under this Agreement.
6.19 GOVERNING LAW. Except as set forth in Section
5A.10, LAW GOVERNING ARBITRATION PROCEDURES, this Agreement and, unless
expressly provided therein, each Supplemental Agreement, shall be governed by
and construed and interpreted in accordance with the laws of the State of New
Jersey, irrespective of the choice of laws principles of the State of New
Jersey, as to all matters, including matters of validity, construction, effect,
performance and remedies.
6.20 COMPLIANCE WITH LAW. Each party shall comply at its
own expense with applicable laws, ordinances, regulations, codes, rules,
guidelines, orders, permits and approvals of any governmental body, including,
but not limited to, those relating to the environment, health, and safety. Each
Party agrees to indemnify, defend (at the other party's request) and save
harmless the other party, its Affiliates, its and their customers and each of
their officers, directors and employees from and against any losses, damages,
claims, demands, suits, liabilities, fines, penalties and expenses (including
reasonable attorney's fees) that arise out of or result from (i) failure to do
so or (ii) activity, duty or status of such party that triggers any obligation
to investigate or remediate environmental contamination.
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6.21 RECORD RETENTION. Ordering Company agrees to keep
true and accurate records with regard to its use of Supplier's Licensed
Material. Supplier shall have the right to inspect such records at any
reasonable time, not more often than once each calendar year, upon reasonable
notice in writing to Ordering Company. Supplier shall bear the cost of such
auditing.
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6.22 NON-WAIVERS. The failure of either party at any time
to enforce any right or remedy available to it under this Agreement or otherwise
with respect to any breach or failure by the other party shall not be construed
to be a waiver of such right or remedy with respect to any other breach or
failure by the other party.
6.23 THIRD PARTY BENEFICIARIES. Except as otherwise
provided in Section 1A.7, PURCHASES BY AT&T'S AFFILIATES, of this Agreement or
as expressly provided in any Supplemental Agreement, the provisions of this
Agreement and each Supplemental Agreement are solely for the benefit of the
parties and are not intended to confer upon any person except the parties any
rights or remedies hereunder. There are no third party beneficiaries of this
Agreement or any Supplemental Agreement and neither this Agreement nor any
Supplemental Agreement shall provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement or any Supplemental Agreement.
6.24 SEVERABILITY. If any provision of this Agreement or
any Supplemental Agreement or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof or thereof, or the
application of such provision to persons or circumstances or in jurisdiction
other than those as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby or thereby, as the case may be, is not affected
in any manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
6.25 HEADINGS. The article, section and paragraph headings
contained in this Agreement and in the Supplemental Agreements are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement or any Supplemental Agreement.
6.26 COUNTERPARTS. This Agreement and each Supplemental
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
6.27 AMENDMENTS. No provisions of this Agreement or any
Supplemental Agreement shall be deemed waived, amended, supplemented or modified
by any party, unless such waiver, amendment, supplement or modification is in
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writing and signed by the authorized representative of the party against whom it
is sought to enforce such waiver, amendment, supplement or modification.
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6.28 INTERPRETATION. Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires. The terms "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement (or the applicable Supplemental Agreement)
as a whole (including all of the Schedules, Exhibits and Appendices hereto and
thereto) and not to any particular provision of this Agreement (or such
Supplemental Agreement). Article, Section, Exhibit, Schedule and Appendix
references are to the Articles, Sections, Exhibits, Schedules and Appendices to
this Agreement (or the applicable Supplemental Agreement) unless otherwise
specified. The word "including" and words of similar import when used in this
Agreement (or the applicable Supplemental Agreement) shall mean "including,
without limitation," unless the context otherwise requires or unless otherwise
specified. The word "or" shall not be exclusive.
6.29 ENTIRE AGREEMENT. The terms and conditions contained
in this General Purchase Agreement supersede all contemporaneous oral and all
prior oral or written quotations, communications, agreements and understandings
between the parties with respect to the subject matter hereof and constitute the
entire agreement between the parties with respect to such subject matter. The
preprinted terms and conditions on Ordering Company's purchase Orders and
Supplier's sales forms are deleted. The statements of Supplier's employees and
descriptions of Supplier's Products, Licensed Materials and Services do not
constitute warranties or other contractual obligations and shall not be relied
upon by any Ordering Company as such. Terms shall not be modified or amended
except by a writing signed by authorized representative of both parties.
ARTICLE VII
PURPOSE AND ORGANIZATION OF PART II
7.1 PURPOSE AND SCOPE OF PART II. Part II sets forth the
specific additional terms and conditions pursuant to which Supplier shall
provide, and Ordering Company shall purchase or license, Supplier's Products,
Licensed Materials and Services that relate to the operation of
telecommunications network infrastructure. The terms and conditions of Ordering
Company's purchase and licensing of Products, Licensed Materials and Services
provided by Supplier's Global Business Communications Systems business unit are
set forth in Part III. A non-exclusive list of the specific Products, Licensed
Materials and Services is set forth in the Product Information Catalog
Extraction System ("PRICES") database. Supplier may at any time, and without
consent of Ordering Company, revise or otherwise amend that database solely to
add to it additional items offered by Supplier under Part II. Supplier shall
remove items from that database only in accordance with Section 6.7, ASSURANCE
OF SUPPLY. Failure of Supplier to list a Product or Service in that database
<PAGE>
shall not preclude Supplier from providing such item pursuant to Part II.
7.2 ORGANIZATION OF PART II. Part II is organized as
follows:
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(a) Article 8 sets forth the additional terms and
conditions governing Supplier's provision of Products;
(b) Article 9 sets forth the additional terms and
conditions governing Supplier's licensing of Licensed Materials;
(c) Article 10 sets forth the additional terms and
conditions governing Supplier's provision of Engineering, Installation,
Maintenance, and other Miscellaneous Services;
(d) Article 11 sets forth the additional terms and
conditions governing Supplier's provision of Outside Plant Construction
Services; and
(e) Article 12 sets forth the additional terms and
conditions governing Supplier's provision of Consulting Services.
ARTICLE VIII
PURCHASE OF PRODUCTS
8.1 GENERAL. The provisions of this Article 8 shall be
applicable to the purchase of Products from Supplier. If Software is also to be
licensed for use on a purchased Product, or if a Product is also to be
engineered or installed by Supplier, the provisions of Articles 9 and 10 shall
also be applicable.
8.2 PRODUCT WARRANTY. (a) Supplier warrants to Ordering
Company only, that:
(i) As of the date title passes, Supplier will
have the right to sell, transfer, and assign such Products and the
title conveyed by Supplier shall be good and Products shall be
delivered free from any security interests or any other liens or
encumbrances;
(ii) Upon shipment or, if installed by Supplier
upon Acceptance, Supplier's Manufactured Products will be new (except
if manufactured discontinued, or with Ordering Company's approval),
free from defects in material, workmanship, and design (except to the
extent (A) designed, in whole or in part, by Ordering Company or
persons furnished by Ordering Company; or (B) such design defects are
caused by the presence in Supplier's Manufactured Product of substitute
components of Ordering Company's selection and not recommended by
Supplier), and will conform to Supplier's Specifications or any other
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agreed-upon Specifications referenced in the Order for such Products;
and
(iii) With respect to Vendor Items, Supplier, to the
extent permitted, does hereby assign to Ordering Company the warranties
given to Supplier by its vendor
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of such Vendor Items. Such assignment will be effective on the date of
shipment of such Vendor Items. With respect to Vendor Items
recommended by Supplier in its Specifications for which the Vendor's
warranty cannot be assigned to Ordering Company, or if assigned, less
than sixty (60) days remain of the Vendor's warranty at the time of
assignment, Supplier warrants for sixty (60) days from date of shipment
or if installed by Supplier from Acceptance that such Vendor's Items
will be free from defects in material and workmanship and will conform
to Supplier's Specifications or any other agreed-upon Specification
referenced in the Order for such Products.
(iv) Neither inspection, Acceptance, nor payment
shall affect or reduce the term of any warranty.
(b) The Warranty Period for a Product is set forth in
Exhibit 8-1. The Warranty Period for a Product or part thereof repaired under
this Warranty is the period indicated in Exhibit 8-1.
(c) If, under normal and proper use during the applicable
Warranty Period, a defect or nonconformity is identified in a Product furnished
by Supplier, Ordering Company shall notify Supplier in writing of such defect or
nonconformity promptly after Ordering Company discovers such defect or
nonconformity and follow Supplier's instructions regarding the return of
defective or nonconforming Product. With respect to a defect or nonconformity
of Products to Supplier's Specifications or any other agreed upon Specification
referenced in the Order for such Products, Supplier shall take the following
action promptly:
(i) Within the first sixty (60) days after (aa)
installation completion of a Product, if Supplier has installed the
Product or (ab) delivery, if Supplier is not installing the Product, if
Ordering Company notifies Supplier of a defect or nonconformity of
Products to the Specifications, that does not appear to be curable
through repair or replacement within a reasonable time period, Ordering
Company will be entitled, at its option, to a refund of the Product's
purchase price and installation charges and the associated Licensed
Materials charges. Should Ordering Company seek such a refund, it will
provide Supplier such cooperation as necessary to enable Supplier to
remove the Product from Ordering Company's premises, if necessary. In
the event of such refund, Ordering Company may also return for credit
any other Products intended for use with the defective Product that
cannot be applied to another use by Ordering Company and may cancel,
without liability for cancellation charges, any pending Orders for such
Product.
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(ii) After sixty (60) days from (aa) installation
completion of a Product, if Supplier has installed the Product or (ab)
delivery, if Supplier is not installing the Product, with respect to a
defect or nonconformity of Products to Supplier's Specifications,
Supplier shall take the following action promptly:
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(A) Supplier, at its option, shall
attempt first to repair or replace such Product without charge or, if
not feasible, provide a refund or credit based on the original purchase
price, installation charges paid by Ordering Company if installed by
Supplier, and the associated Licensed Materials charges. Ordering
Company must return Product to Supplier for repair and replacement,
except as noted in Sections 8.2 (c) (ii) (B) and (C). In the event of
such refund, Ordering Company may also return for credit any other
Products intended for use with the defective Product that cannot be
applied to another use by Ordering Company and may cancel, without
liability for cancellation charges, any pending Orders for such
Product.
(B) Supplier, in the case of any service
affecting defect, shall either (1) repair such defect in the field
using best reasonable efforts to avoid any service interruption; or (2)
immediately replace the defective Product, Licensed Material, or
Service with a working replacement, at Supplier's expense, for the time
that it takes the original Product, Licensed Material, or Service to be
repaired. At Ordering Company's option, Ordering Company may elect to
retain the replacement Product, Licensed Material, or Service if
substitution of the original after repair could cause a further service
interruption. Where Supplier has elected to repair or replace a
Product (other than Cable and Wire Products) which has not been
installed by Supplier and Supplier ascertains that the Product is not
readily returnable by Ordering Company, Supplier will repair or replace
the Product at Ordering Company's site. For the purposes of Sections
8.2 (c) (ii) (B) and (C) and Section 8.2 (d), Cable and Wire Products
shall mean fiber optics and associated products and copper cable and
associated products, including, but not limited to, interbay cable,
closures, arrays, and mounts.
(C) With respect to Cable and Wire
Products which Supplier has ascertained are not readily returnable for
repair, whether or not installed by Supplier, Supplier may elect to
repair the Cable and Wire Products at Ordering Company's site.
(d) If Supplier has elected to repair or replace a
defective Product, Ordering Company is responsible for removing and reinstalling
the Product and, in addition, for on-site repair or replacement of cable and
wire products, Ordering Company must make the Product accessible for repair or
replacement, and is responsible to restore the site.
(e) Products returned for repair or replacement will be
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accepted by Supplier only in accordance with its instructions and procedures for
such returns. The transportation expense associated with returning such Product
to Supplier shall be borne by Ordering Company. Supplier shall pay the cost of
transportation of the repaired or replacing Product to the destination
designated by Ordering Company. The same Product or part shall not be returned
by Supplier to Ordering Company with the notation no-trouble-found (NTF) on more
than two (2) occasions. On the third occasion that a Product or part has been
classified by Supplier as NTF, the Product or part shall be returned to Supplier
and shall become Supplier's property. Supplier shall ship a new, refurbished, or
reconditioned replacement to Ordering Company for the returned Product or part
at no charge for that Product under warranty. For out of warranty
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Product, Supplier shall ship a new, refurbished, or reconditioned replacement to
Ordering Company for the returned Product or part at Supplier's current
negotiated price for the production equipment element/component.
(f) The defective or nonconforming Products or parts which
are replaced shall become Supplier's property. Supplier may use either new,
remanufactured, reconditioned, refurbished, or functionally equivalent Products
or parts in the furnishing of repairs or replacements under this Agreement.
Unless otherwise agreed or unless unavailable, Supplier shall use new components
in the repair of Products.
(g) If a Product for which warranty Service is claimed is
not defective or is in conformance, Ordering Company shall pay Supplier's costs
of handling, inspecting, testing, and transporting, and, if applicable,
reasonable traveling and related expenses as referenced in Section 3.1 (g),
PRICES.
(h) Supplier makes no warranty with respect to defective
conditions or nonconformities resulting from the following: Ordering Company
modifications, misuse, neglect, accident or abuse, improper wiring, repairing,
splicing, alteration, installation, storage or maintenance other than by
Supplier, use in a manner not in accordance with Supplier's or vendor's
Specifications or operating instructions or failure of Ordering Company to apply
previously applicable Supplier modifications and corrections which were
available without extra charges and which Ordering Company had had reasonable
opportunity to apply. In addition, Supplier makes no warranty with respect to
Products which have had their serial numbers or month and year of manufacture
removed or altered and with respect to expendable items, including, without
limitation, fuses, light bulbs, motor brushes, and the like.
(i) THE FOREGOING PRODUCT WARRANTIES ARE EXCLUSIVE AND
ARE
IN LIEU OF ALL OTHER EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT
NOT LIMITED
TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, EXCEPT
FOR (a) TANGIBLE PROPERTY DAMAGE AND PERSONAL INJURY FOR WHICH
SUPPLIER IS HELD
LIABLE AND (b) THE REMEDY PROVIDED IN SECTION 5.1(e), ORDERING
COMPANIES'
REMEDIES, ORDERING COMPANY' S SOLE AND EXCLUSIVE REMEDY SHALL BE
SUPPLIER' S
OBLIGATION TO REPAIR, REPLACE, CREDIT, OR REFUND AS SET FORTH ABOVE IN
THIS
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WARRANTY.
8.3 CONTINUING PRODUCT SUPPORT - PARTS AND SERVICES.
(a) In addition to repairs provided for under Product
Warranty, Supplier offers repair services and repair parts in accordance with
Supplier's repair and repair parts practices and mutually agreed upon terms and
conditions then in effect for Supplier's Manufactured Products furnished
pursuant to this Agreement. Such repair Services and repair parts shall be
available while Supplier is manufacturing or stocking such Products or repair
parts, and in any event for ten (10) years from Supplier's last shipment of a
host system to Ordering Company for
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Supplier's 5ESS Switch System, and five (5) years or the duration of the period
of the host system, whichever is longer, for other 5ESS Switch Products sold to
Ordering Company as an addition to an existing 5ESS Switch System. The period
for all other Supplier's Manufactured Products is five (5) years after such
Product's discontinued availability effective date unless modified by
Supplemental Agreements. Supplier may use either new, remanufactured,
reconditioned, refurbished, or functionally equivalent Products or parts in the
furnishing of repairs or replacements under this Agreement.
(b) If after the agreed to support period Supplier is
unable to provide repair part(s) and/or repair service (s) and a functionally
equivalent replacement has not been designated, Supplier shall advise Ordering
Company, by written notice prior to such discontinuance to allow Ordering
Company to plan appropriately, and if Supplier is unable to identify another
source of supply for such repair part(s) and/or repair service(s), Supplier
shall provide Ordering Company, upon request, with nonexclusive licenses for
manufacturing drawings and Specifications of raw materials and components to the
extent Supplier can grant such licenses, so that Ordering Company will have
sufficient information to have manufactured, or obtain such Service or parts
from other sources. License terms for the foregoing manufacturing drawings,
Specifications, and related documentation, such as manufacturing shop
instructions, test programs and test instructions, including charges mutually
agreed to, will be in accordance with Supplier's licensing procedures then in
effect. In addition to the above licenses, if requested by Ordering Company,
Supplier shall provide, at mutually agreeable prices, all dedicated tools and
test beds necessary for Ordering Company to test such Products.
(c) With respect to Vendor Items, and subject to Section
1.118, VENDOR ITEMS, if during the agreed to support period, Supplier's vendor
terminates production of repair parts or repair services, Supplier will use
reasonable efforts to provide the repair parts or repair services or secure
sources for such parts or services. However, if no other sources or
functionally equivalent replacement can be secured, Supplier shall advise
Ordering Company, by written notice prior to such discontinuance to allow
Ordering Company to plan appropriately. Supplier shall provide Ordering Company,
upon request, a detailed list of all commercially available parts and components
purchased by Supplier disclosing the part number, name and location of supplier,
and prices of the purchased items.
(d) With respect to Vendor Items and subject to Section
1.120 if after the agreed to support period, Supplier is unable to provide
repair part(s) and/or repair service(s) and a functionally equivalent
replacement has not been designated, Supplier shall advise Ordering Company, by
written notice prior to such discontinuance to allow Ordering Company to plan
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appropriately, and if Supplier is unable to identify another source of supply
for such repair part(s) and/or repair service(s), Supplier shall provide
Ordering Company, upon request, a detailed list of all commercially available
parts and components purchased by Supplier disclosing the part number, name and
location of supplier, and prices of the purchased items.
8.4 TECHNICAL SUPPORT OF PRODUCTS. Supplier shall, in
addition to its obligations under Product Warranty, make available, at mutually
agreeable rates, ongoing
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technical support including, but not limited to the expertise to identify,
isolate, and resolve problems, that Supplier customarily provides to its
customers, including telephone assistance, field Service, and technical
consultation Service for Products provided under this Agreement for a period of
ten (10) years after Supplier's last shipment of a host system to Ordering
Company for Supplier's 5ESS Switch System, and five (5) years or the duration of
the period of the host system, whichever is longer, for other 5ESS Switch
Products sold to Ordering Company as an addition to an existing 5ESS Switch
System. The period for all other Supplier's Manufactured Products is five (5)
years after such Product's discontinued availability effective date unless
modified by Supplemental Agreements.
8.5 DOCUMENTATION. Supplier shall furnish to Ordering
Company at no additional charge and grant Ordering Company the right to use one
copy of the documentation for the Products provided hereunder for the purpose of
operating and maintaining such Products. Such documentation will be that
customarily provided by Supplier to its customers at no additional charge.
Supplier shall also furnish to Ordering Company the Application and Planning
Guide or a document similar to it. If Ordering Company wishes to perform its
own installation, Supplier, at an additional charge, if applicable, shall
furnish to Ordering Company and grant Ordering Company the right to use one copy
of the documentation for the Products provided hereunder for its evaluation and
installation purposes. The foregoing grant is subject to Section 4.1, USE OF
INFORMATION, and does not include the right to disclose the content of such
documents to persons other than employees of Ordering Company, its Affiliates,
representatives, or contractors who will be involved in the Work, provided,
however, that upon written agreement of Ordering Company to pay any applicable
licensing fee in accordance with ordinary commercial practices, persons with a
need to know in connection with installation of the specific Product shall be
allowed to use such documentation. Such documentation shall be provided prior
to, included with, or shortly after the shipment of the Products from Supplier
to Ordering Company. Additional copies of the documentation are available at
mutually agreeable prices.
8.6 SPECIFICATIONS. Upon request, Supplier shall provide
to Ordering Company, at no charge, and grant Ordering Company the right to use a
copy of Supplier's available commercial Specifications applicable to Products
orderable hereunder for the purpose of operating and maintaining Products.
Additional copies are available at mutually agreeable prices. Supplier shall
also furnish to Ordering Company the Application and Planning Guide or a
document similar to it. If Ordering Company wishes to perform its own
installation, Supplier, at an additional charge if applicable, shall furnish to
Ordering Company and grant Ordering Company the right to use one copy of the
documentation for the Products provided hereunder for its evaluation and
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installation purposes. The foregoing grant is subject to Section 4.1, USE OF
INFORMATION, and does not include the right to disclose the content of such
documents to persons other than employees of Ordering Company, its Affiliates,
representatives, or contractors who will be involved in the Work provided,
however, that upon written agreement of Ordering Company to pay any applicable
licensing fee in accordance with ordinary commercial practices,
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persons with a need to know in connection with installation of the specific
Product shall be allowed to use such documentation.
8.7 EQUIPMENT TESTING.
(a) Supplier is responsible for the performance of
standard factory production tests in the absence of any other testing mutually
agreed to by the parties. Such tests shall be performed in accordance with
Supplier's normal testing and quality control procedures in order to insure that
the equipment provided hereunder meets all applicable Specifications. At the
option of Ordering Company, Supplier shall furnish a copy of its high level test
and quality control process descriptions to Ordering Company prior to initiating
any such testing and Ordering Company, at its expense and with Supplier's
agreement, may request in advance to witness any of the testing by giving prior
notice to Supplier. Such request must be received with sufficient advance
notice that the observation would not delay the completion of a test. Supplier
also agrees to maintain detailed records of all such tests and to provide
Ordering Company, at no charge, and if requested, with written results of these
tests. Supplier reserves the right to make changes to its test and quality
control process descriptions without prior notification to Ordering Company.
(b) In the event that the equipment fails to meet the
applicable Specifications and test requirements, Supplier shall make the
necessary adjustments or repairs and repeat the applicable tests. If, in the
opinion of Supplier, the failure rates experienced during these tests become
unsatisfactory, all shipments of like equipment to Ordering Company shall be
suspended unless otherwise authorized by Ordering Company in writing.
(c) If Supplier is unable or unwilling to correct, at
Supplier's expense, any failure to meet the applicable Specification and test
requirements found during testing provided hereunder within thirty (30) days of
such discovery or such longer period as may be mutually agreed upon, Ordering
Company, at its option, shall be relieved of all responsibilities under this
Agreement with respect to such equipment or the portion thereof which was not
corrected.
8.8 ENVIRONMENTAL/RELIABILITY TESTING. Upon reasonable
request by Ordering Company and at a mutually agreeable charge, Supplier shall
perform environmental testing of the production equipment in accordance with
Ordering Company's Technical Reference-PUB 51001 entitled NETWORK
EQUIPMENT-BUILDING SYSTEM (NEBS) GENERAL EQUIPMENT REQUIREMENTS,
Sections 3, 4,
and 5 and Bellcore's Technical Reference-TR-NWT-000063 entitled NETWORK
EQUIPMENT-BUILDING SYSTEM (NEBS) GENERIC EQUIPMENT REQUIREMENTS.
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Supplier agrees
to report the test results to Ordering Company. If such test results already
exist, Supplier will furnish test results to Ordering Company at no additional
charge.
8.9 FAILURE MODE ANALYSIS OF FAILED COMPONENTS. Supplier
shall perform failure mode analysis on components of Products purchased by
Ordering Company with a persistent history of failure to determine the specific
cause of the component failure. The results
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of this analysis and planned corrective action shall be provided to Ordering
Company within fourteen (14) calendar days of the completion of the analysis.
8.10 FLOOR PLAN DATA SHEETS. Supplier shall, at Ordering
Company's request, at a mutually agreeable price, and within a reasonable
time frame after product design completion, deliver to Ordering Company a
completed Floor Plan Data (FPD) sheet, for equipment sold hereunder. Such FPD
sheets shall be prepared in accordance with the requirements of Technical
Reference 51005, dated December 1984, as amended from time to time.
8.11 MONTHLY ORDER AND SHIPMENT REPORTS. Supplier agrees
to render monthly Order and shipment reports at a mutually agreeable charge, if
applicable, on or before the fifteenth (15th) working day of the succeeding
month: (a) Monthly Order and shipment reports containing the information
required in a mutually agreeable format; (b) at the request of Ordering Company,
monthly summaries of actual shipping intervals achieved on material Ordered
under this Agreement; (c) at the request of Ordering Company, monthly repair
summaries on material including (i) number of units received for repair, (ii) a
breakdown of in-warranty repairs versus out-of-warranty repairs, (iii) summary
of all repairs for no trouble found, and (iv) number of units repaired within
same day, 24 hours, and one to seven days, and (d) at the request of Ordering
Company, monthly report identifying the number of units returned and repaired by
Supplier (RS&R Open Order Report).
8.12 RADIATION ASSISTANCE. If Product provided to Ordering
Company in compliance with applicable FCC rules are thought to provide
interference to others, Supplier shall provide to Ordering Company information
relating to methods of suppressing such interference at a mutually agreeable
price and Ordering Company shall pay the cost of suppressing such interference.
8.13 MARKING. All material furnished under this Agreement
shall be marked for identification purposes in accordance with mutually agreed
upon marking specifications set forth in any Supplemental Agreement or Order
referencing this Agreement and as follows: (a) with Supplier's model/serial
number; and (b) with month and year of manufacture. In addition, Supplier
agrees to add any other reasonable identification which might be requested by
Ordering Company such as, but not limited to, distinctive marks conforming to
Ordering Company's Serialization Plan. Charges, if any, for such additional
identification marking shall be as agreed upon by Supplier and Ordering Company.
This clause does not reduce or modify Supplier's obligations under Section 4.4,
TRADEMARKS, included in this Agreement.
8.14 PERIODIC PRODUCT QUALIFICATION REVIEWS. Supplier
shall conduct periodic product qualification ("PPQ") reviews to ensure that the
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Product continues to meet its design intent. The PPQ reviews are a Bellcore
requirement and results are reported to Bellcore. If requested, Supplier shall
provide to Ordering Company the results of such reviews.
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8.15 MAINTENANCE/POST WARRANTY. Supplier may offer various
programs which provide services beyond the warranty repairs above. At Ordering
Company's option, Ordering Company may purchase these Repair Service and Return
("R/SAR"), Spares Exchange Service ("SES"), and other offerings at prices, terms
and conditions to be mutually agreed upon.
8.16 PLANNING INFORMATION FOR ORDERS FOR COMMERCIALLY
AVAILABLE PRODUCTS. (a) This planning information addresses the process for all
Orders of Supplier's commercially available Products. It is not applicable to
custom Products or special arrangements on such things as inventory or
manufacturing (i.e., any custom or legacy products requiring unique procedures,
such as NGLN, DDM1000, FT-Series G and projects such as Customer Connectivity).
Special Product or unique arrangements will require a Supplemental Agreement to
document the agreements made specifically for that Product or project only.
(b) Supplier and Ordering Company shall identify Products
or technologies that will require special arrangements and for which
Supplemental Agreements must be negotiated.
(c) Ordering Company will provide to Supplier on a
monthly basis via the Customer Demand Planning (CDP) mechanized system, a
forecast of Product requirements consisting of funded, unfunded, and a
projection of unforecasted demand. This forecast is considered unconstrained
and will be provided for a rolling twelve (12) months as well as an aggregate
forecast for the subsequent year. It will represent forecasted demand by fiscal
month.
(d) A current listing of Products that are presently
forecasted by Network Services Division/Inventory Management ("NSD/IM") will be
mutually agreed upon and updated periodically as the scope of the forecasting
process changes. Forecasts furnished by Ordering Company will eventually
encompass all of the network Product requirements for Ordering Companies.
(e) Orders will be placed within Supplier's planning
interval documented in Exhibit 2-1, Planning Intervals, to the extent possible,
and will constitute a commitment to buy. Ordering Company will compare the
monthly forecast with the semi-annual planning forecast being provided in April
and September, and will reconcile the two accordingly. In the future, if the
frequency of these forecasts changes, a similar reconciliation will be performed
on all Product elements that are provided in the planning forecasts. Ordering
Company and Supplier will review Ordering Company's forecasting accuracy
quarterly with the goal of obtaining 80% forecasting accuracy. Ordering Company
will work with Supplier to provide Product level requirements on a monthly basis
especially for those forecasts within the six (6) month window as part of the
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rolling forecast.
(f) CUSTOMER DEMAND PLANNING (CDP). Should Ordering
Company request a programming change to the CDP system that would benefit
external users of the CDP system, Supplier shall make such modification at no
cost to Ordering Company. If Ordering Company has a request for a modification
to the CDP system that is specific to Ordering Company's needs,
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such modification to the system shall be made at a cost mutually agreed upon by
Ordering Company and Supplier. Supplier shall provide Ordering Company with CDP
system support via the 1-800-CDP-8845 Hotline at no cost to Ordering Company.
(g) METRICS. Ordering Company and Supplier agree to
monitor forecast accuracy on a monthly basis. Forecast accuracy measurements
shall be based upon a two month lead time for each forecasted item. CDP shall
be the vehicle for gathering data on forecast accuracy and shipping performance.
Ordering Company will monitor its forecasts and seek to achieve improvements in
accuracy as described in Exhibit 8-3. Supplier will monitor and seek to achieve
improvements on performance to customer requested completion date (CRCD), and
performance to published order intervals. This is an informal process and does
not imply penalty for non-performance. The 1996 metric goals are set forth in
Exhibit 8-3. Joint goals and metrics for future years will be mutually
negotiated for continuous improvement.
(h) FORECASTING PROCESS MONITORING. Forecasting Process
Performance Goals will be monitored on an ongoing basis by the Inventory
Management Process Management Team and the Forecasting Quality Improvement Team.
Additional meetings to review forecasting specifics may be scheduled as needed
by either Ordering Company or Supplier.
ARTICLE IX
SOFTWARE
9.1 GENERAL. (a) The provisions of this Article 9 apply
to the furnishing of Software by Supplier to Ordering Company pursuant to this
Agreement. Supplier's use of certain Licensed Materials may be restricted by
mutual agreement of the parties as specified in a Supplemental Agreement. The
ownership interests and rights of the parties in Custom Software, in addition to
the applicable rights set forth in this Article, shall be established on a
case-by-case basis in subsequent Supplemental Agreements.
(b) To the extent that any provision set forth in this
Article conflicts with any provision set forth elsewhere in this Agreement, this
Article shall control.
(c) Software in this Article means both Custom Software
and Licensed Materials.
9.2 LICENSE. (a) Unless otherwise specified in a
Supplemental Agreement, upon delivery of Licensed Materials, Supplier grants to
Ordering Company a personal, nontransferable, and nonexclusive license pursuant
to this Agreement to use Licensed Materials at a site(s) or, in the case of a
<PAGE>
Designated Processor, with either the Designated Processor or temporarily on any
comparable replacement if the Designated Processor becomes inoperative, until
the Designated Processor is restored to operational status. Ordering Company
shall use Licensed Materials only for its own internal business operations.
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(b) Ordering Company shall not sublicense such Licensed
Materials, nor modify, decompile, or disassemble Licensed Material furnished
solely as object code to generate corresponding Source Code, provided, however,
that Ordering Company shall be authorized to sublicense Software in connection
with its rights in Section 1A.1, PURPOSE AND SCOPE OF THIS AGREEMENT, to
dispose of Products and Licensed Materials.
9.3 SOFTWARE. On the delivery date, Supplier shall
furnish to Ordering Company, at the fee specified in the Order or Supplemental
Agreement, at least the following basic items: (a) Object Code stored in a
medium compatible with the equipment described in Supplier's Specifications or
the applicable Supplemental Agreement, and identified in the Order; (b) user
documentation which Supplier normally furnishes to customers with the Licensed
Materials at no additional charge, and any user documentation specified in the
applicable Supplemental Agreement; (c) if not previously provided, the required
machine configuration; and (d) Source Code if licensed or furnished by Supplier
as part of the Software ordered hereunder.
9.4 ACCESS TO SOURCE CODE.
(a) With respect to Software which has not been the
subject of a notice of discontinued availability pursuant to Section 9.20,
NOTIFICATION OF DISCONTINUED AVAILABILITY OF SOFTWARE, if Supplier is
declared
bankrupt or refuses to perform maintenance of the Software, or fails to provide
for the performance of maintenance of the Software to the extent that Ordering
Company is unable to use the Software for its intended purpose and perform
maintenance, then Supplier, or others acting on behalf of Supplier, shall
furnish to Ordering Company (under a suitable license agreement, if applicable),
Supplier's then existing Software Source Code, Software development programs,
and associated documentation for such standard version to the extent necessary
for Ordering Company to maintain and enhance for its own use the standard
version of that Software for which it has a perpetual, non-exclusive right to
use.
(b) If Ordering Company's use of the Software Source Code
provided pursuant to Section 9.4(a) involves use or copying of copyrighted
material or the practice of any invention covered by a patent, Supplier shall
not assert the copyright or patent against Ordering Company for use of the
Software Source Code as originally provided by Supplier.
9.5 RESTRICTIONS AND CONFIDENTIALITY. (a) Except for any
part of such Licensed Materials which is or becomes generally known to the
public through acts not attributable to Ordering Company, Ordering Company shall
<PAGE>
hold such Licensed Materials in confidence, and shall not, without Supplier's
prior written consent, disclose, provide, or otherwise make available, in whole
or in part, any Licensed Materials to anyone, except to its employees having a
need-to-know. Ordering Company shall not copy Licensed Materials embodied in
Firmware. Ordering Company shall not make any copies of any other Licensed
Materials except as necessary in connection with the rights granted hereunder.
Ordering Company shall comply fully with the proprietary notice requirements set
forth in Section 4.1,
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USE OF INFORMATION, and the record keeping obligation of Section 6.21, RECORD
RETENTION.
(b) Ordering Company shall take appropriate action, by
instruction, by agreement, or otherwise, with all persons permitted access to
the Licensed Materials so as to enable Ordering Company to satisfy its
obligations under this Agreement.
(c) When the Licensed Materials are no longer needed by
Ordering Company, or if Ordering Company's license is canceled or terminated,
Ordering Company shall return all copies of such Licensed Materials to Supplier
or follow written disposition instructions provided by Supplier.
(d) Custom Software and Related Documentation shall be
treated as proprietary information of a party or parties in accordance with
Section 4.1, USE OF INFORMATION.
9.6 INSTALLATION OF SOFTWARE. (a) Where Ordering Company
is responsible for installation of Software, Supplier's sole responsibility is
to deliver the Software to Ordering Company on or before the scheduled Delivery
Date specified in the Order or Supplemental Agreement. However, if Supplier is
expressly responsible for such installation, Supplier shall deliver the Software
to Ordering Company in sufficient time for it to be installed on or before the
scheduled Installation Complete Date specified in the Order or Supplemental
Agreement, and Supplier shall complete its installation and associated testing
on or before such date.
(b) Where Ordering Company has assumed responsibility for
the installation of newly licensed Software, Supplier will, at Ordering
Company's request and without charge provide for the first such installation a
reasonable level of technical assistance, which may include on-site assistance,
when Ordering Company encounters installation difficulties. For all subsequent
installations of such Software by Ordering Company, unless otherwise stipulated
under conditions of an Order or Supplement Agreement, Supplier reserves the
right to charge Ordering Company for any Ordering Company-requested assistance.
9.7 OPTIONAL SOFTWARE FEATURES. Licensed Materials
provided to Ordering Company under this Agreement may contain optional features
which are separately licensed and priced. Ordering Company agrees that such
optional features will not be activated without written authorization from
Supplier and Ordering Company's payment of the appropriate license fees. If, in
spite of Ordering Company's best effort to comply with this restriction, such
features are activated and used by Ordering Company, Ordering Company agrees to
so notify Supplier promptly and to pay Supplier the license fees for the
<PAGE>
activated features, as well as the reasonable cost of money for the period in
which such features were activated.
9.8 CENTRALIZED MAINTENANCE. (a) Ordering Company may
specify in an Order or Supplemental Agreement that, for centralized maintenance
purposes, all Software changes, including Enhancements, provided by Supplier
shall be provided only to Ordering
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Company's Centralized Support Organization. Supplier will, in that event, be
responsive to maintenance requests which Ordering Company's Centralized Support
Organization issues. This Organization will be responsible for Software
application, initial Acceptance testing and distribution of the Software to all
licensed installations.
(b) Subject to payment of all applicable fees, Supplier
grants Ordering Company the right to transmit the Software by means of data
links to each licensed installation.
(c) Supplier grants to Ordering Company, at a fee to be
negotiated in a Supplemental Agreement, a license to use a copy of the Software
for centralized maintenance purposes only. Supplier shall provide this
maintenance copy of the Software in response to an Order requesting same. The
maintenance copy provided to Ordering Company's Centralized Support Organization
will be used only to perform systems or application support functions for
Ordering Company's application programmers.
9.9 ENHANCEMENTS. Supplier shall offer to Ordering
Company during the term of an Order or Supplemental Agreement, at an agreed upon
charge, if any, all Software Enhancements and Related Documentation, generally
made available by Supplier. All Enhancements provided to Ordering Company shall
be considered Software subject to the provisions of an Order or Supplemental
Agreement.
9.10 INTELLECTUAL PROPERTY RIGHTS. (a) Title to the
Licensed Material and to Intellectual property rights herein shall remain in
Supplier or Supplier's licenser, as applicable. Ordering Company shall have the
right to make the number of copies of the Licensed Materials solely for use as
authorized in an Order or Supplemental Agreement, and archival copies as
appropriate. Ordering Company however, shall not reproduce copies of the
Licensed Materials for the purpose of supplying it to others except individuals
authorized herein.
(b) All Licensed Material (whether or not part of
Firmware) furnished by Supplier, and all copies thereof made by Ordering
Company, including translations, compilations, and partial copies thereof, are,
as between Ordering Company and Supplier, solely the property of Supplier.
(c) Title to Custom Software shall be specified in the
applicable Supplemental Agreement.
9.11 TRAINING AND TECHNICAL SERVICE. Supplier shall
provide: (a) assistance and advice, as may be specifically requested by
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Ordering Company necessary to assist in the testing and use of the Software
under the terms and conditions specified in the Order or Supplemental Agreement,
and (b) at no additional charge, any training as it normally provides without
charge to other customers.
9.12 MODIFICATIONS. In those instances where Source Code
is provided, Ordering Company may make Modifications to the Software as
permitted in a Supplemental
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Agreement. Ordering Company shall have all rights, title and interest to any
Modifications and resulting derivative works and the Intellectual Property
Rights in such Modifications or works. Moreover, unless otherwise agreed by the
parties, nothing shall limit Ordering Company's right to reproduce and use the
modified Software, provided, however, any portion or aspect of the modified
Software which is licensed from Supplier shall continue to be subject to all the
provisions of the license, and nothing contained herein grants to Ordering
Company any rights to use the Software other than as recited in the license.
9.13 REDESIGNATION OR TRANSFER OF DESIGNATED SITE OR
COMPUTER. (a) If Ordering Company's use of the Software is limited to a
designated site or a Designated Processor, the provisions of this clause shall
apply. A redesignation shall refer to the movement of Software to upgraded
equipment. A transfer shall refer to a temporary change of site of the
Software.
(b) Without an additional charge or fee or any requirement
for any additional license, except where feature or size sensitive units are a
factor, Ordering Company may:
(i) Redesignate the site or Designated Processor
at which the Software will be used and shall notify Supplier of the new
site or Designated Processor and the effective date of the
redesignation; and
(ii) Concurrently operate the Software at another
site or Designated Processor for a period not to exceed three (3)
months for the purpose of redesignating the assigned using site.
(c) The license granted for a designated site or
Designated Processor may be transferred with notice to Supplier (within a
reasonable time after such transfer) and at no additional charge or fee to
Ordering Company to a backup computer if the designated site or Designated
Processor is inoperative due to malfunction, due to performance of preventive or
remedial maintenance, due to engineering changes or due to changes in features
or model, until the designated site or Designated Processor is restored to
operative status and processing of the data already entered in the backup
computer has been completed. Supplier may charge Ordering Company for services
requested by Ordering Company in support of such relocation.
9.14 SOFTWARE ACCEPTANCE. (a) Upon installation completion
of the Software in the Integrated Test Network (ITN) or the First Field
Application, Ordering Company has the right to conduct an Acceptance Test.
Unless otherwise agreed by the parties, Ordering Company shall have an
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Acceptance Test Period of thirty (30) consecutive calendar days to conduct this
test. The Software shall be deemed accepted by Ordering Company unless Ordering
Company notifies Supplier in writing to the contrary within the Acceptance Test
Period described above. If the Software fails the Acceptance Test during the
Acceptance Test Period, Supplier shall use its reasonable efforts to correct
each error to minimize the Acceptance delay, and the Acceptance Date shall be
extended on a day-to-day basis until the Software, as modified, is accepted.
Acceptance of a particular release of Software in the ITN or in the First Field
Application shall
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constitute Acceptance of all copies of such Software to be provided Ordering
Company, regardless of when each such copy of such Software is installed on its
Designated Processor.
(b) If Ordering Company elects in the Order not to perform
Acceptance Tests for any Software, the Acceptance Date for such Software shall
be the Delivery Date if not installed by Supplier or the Installation Complete
Date if installed by Supplier, as applicable.
(c) For an Acceptance Test conducted by Ordering Company
on newly licensed Software, Supplier will, at Ordering Company's request and
without charge, provide a reasonable level of technical assistance to Ordering
Company when difficulties are encountered by Ordering Company.
(d) In the event that Software has not passed the
Acceptance Test within six (6) months after the Delivery Date, at Ordering
Company's option, (i) Ordering Company shall return all copies of the Software
to Supplier and Supplier shall reimburse Ordering Company for any fees (e.g.,
license, R&D, etc.) paid for such Software or (ii) if mutually agreed to by the
parties, Ordering Company may retain the Software at an equitable adjustment in
the fees as may be agreed to by the parties, in which case the Software shall be
deemed accepted.
9.15 SOFTWARE WARRANTY. (a) Supplier warrants to Ordering
Company all of the following:
(i) The Software will be free from significant
errors, will conform to and perform in accordance with the
Specifications. The media containing the Software will be free from
defects in material and workmanship. The Software will be compatible
with and may be used in conjunction with other Software and the
hardware as described in the Specifications.
(ii) Work will be performed in accordance with
industry standards.
(iii) There are no copy protection or similar
mechanisms within the Software which will, either now or in the future,
interfere with the rights granted to Ordering Company.
(iv) Supplier has the right to grant the licenses
as granted herein, and has not done anything to interfere with the
exercise of Ordering Company's rights.
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(v) At the time of delivery, to Supplier's
knowledge, the Software does not contain any malicious code, program,
or other internal component (e.g. computer virus, computer worm,
computer time bomb, or similar component), which could damage, destroy,
or alter Software, Firmware, or hardware or which could, in any manner,
reveal, damage, destroy, or alter any data or other information
accessed through or processed by the Software in any manner. Supplier
shall immediately advise Ordering
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Company, in writing, upon reasonable suspicion or actual knowledge that
the Software provided may result in the harm described above.
(b) All warranties shall survive inspection, Acceptance
and payment.
(c) If, under normal and proper use during the applicable
Warranty Period specified in Exhibit 8-1 Software proves to have a defect which
materially affects its performance in accordance with the applicable
Specifications and Ordering Company notifies Supplier in writing of such defect
promptly after Ordering Company discovers such defect and follows Supplier's
instructions, if any, regarding return of defective Software, Supplier shall,
attempt first to either correct or replace such Software without charge, or if
correction or replacement is not feasible, provide a refund or credit based on
the original license fee. In addition, should a defect in Software prevent in
whole or in part the use of any Product(s) that cannot be applied to another use
by Ordering Company, Ordering Company may, at its election, also return such
Product(s) for a full refund.
(d) Software returned for correction or replacement will
be accepted by Supplier only in accordance with its instructions and procedures
for such returns. The transportation expense associated with returning such
Software to Supplier shall be borne by Ordering Company. Supplier shall pay the
costs of transportation of the corrected or replacing Software to the
destination designated by Ordering Company.
(e) If Software for which warranty Service is claimed is
not defective or nonconforming, Ordering Company shall pay Supplier's costs of
handling, inspecting, testing, and transporting and, if applicable, traveling
and related expenses.
(f) Supplier makes no warranty with respect to defective
conditions or nonconformities resulting from the following: modifications,
misuse, neglect, or accident; events outside Supplier's control; installation,
use of Software or Software maintenance in a manner not in accordance with
Supplier's Specifications, operating instructions, or license-to-use; or failure
of Ordering Company to apply previously applicable Supplier modifications and
corrections. In addition, Supplier makes no warranty with respect to defects
related to Ordering Company's database errors. Moreover, no warranty is made
that Software will run uninterrupted or error free.
(g) If any Software is lost or damaged during the Warranty
Period or such other time as Supplier maintains the Software as a generally
available product offering, while in the possession of Ordering Company,
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Supplier will promptly replace the Software at the established charge for
providing the associated media unless such is provided by Ordering Company.
(h) If an Order specifies that Ordering Company's use of
the Software is limited to a designated site or a Designated Processor, the
provisions of this clause shall apply. If Ordering Company performs
installation and elects to perform applicable tests for any
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Software, the warranty for such Software shall commence on the Delivery Date.
If Supplier performs installation of any Software, the Warranty for such
Software shall commence upon installation completion.
(i) If Software is purchased with a license for multiple
sites (e.g., unlimited replication rights, or limited multiple replication
rights), the warranty for such Software shall commence upon Acceptance by
Ordering Company in the ITN or in the First Field Application, as appropriate.
(j) Supplier warrants that installation of any new
Software will not shorten or lessen the warranty of existing Software.
(k) THE FOREGOING SOFTWARE WARRANTIES ARE EXCLUSIVE AND
ARE IN LIEU OF ALL OTHER EXPRESS AND IMPLIED WARRANTIES, INCLUDING
BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
PARTICULAR PURPOSE.
EXCEPT FOR (a) TANGIBLE PROPERTY DAMAGE AND PERSONAL INJURY FOR
WHICH SUPPLIER
IS HELD LIABLE AND (b) THE REMEDY PROVIDED IN SECTION 5.1(e), ORDERING
COMPANIES' REMEDIES, ORDERING COMPANY'S SOLE AND EXCLUSIVE REMEDY
SHALL BE
SUPPLIER'S OBLIGATION TO CORRECT, REPLACE, CREDIT, OR REFUND AS SET
FORTH ABOVE
IN THIS WARRANTY.
9.16 CANCELLATION OF LICENSE. If Ordering Company fails to
comply with any of the material terms and conditions of this Agreement, Order or
Supplemental Agreement and such failure continues beyond ten (10) days after
receipt of written notice thereof by Ordering Company, the conditions of Article
5A, ARBITRATION; DISPUTE RESOLUTION shall apply. Supplier's cancellation of the
license at issue shall be tolled pending the outcome of the Dispute Resolution
process. Simultaneous with initial invocation of such process, Ordering Company
shall deposit and have held in escrow, until such dispute is resolved, an amount
equal to the current market price of the license in question.
9.17 RELATED DOCUMENTATION. Supplier shall furnish to
Ordering Company, at no additional charge and grant Ordering Company the right
to use one copy of the Related Documentation for Software furnished by Supplier
pursuant to this Agreement for the sole purpose of operating and maintaining
such Software. Such Related Documentation will be that customarily provided by
Supplier to its customers for such Software, consistent with the vintage,
options and feature of the system on which it operates. Such Related
Documentation shall be provided prior to, included with, or shortly after
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provision of Software by Supplier to Ordering Company. Additional copies of the
Related Documentation are available at prices set forth in Supplier's Price
List.
9.18 ADDITIONAL RIGHTS IN LICENSED MATERIAL. (a) The
additional rights granted by Supplier to Ordering Company herein apply to 4ESS
Switch, 5ESS Switch, 2NCP,
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SLC2000, FT2000, DDM, and DACS Product families. Both parties agree that these
same rights may be extended to other Products by mutual agreement and documented
within a Supplemental Agreement.
(b) Ordering Company may transfer its right to use Licensed Materials
furnished under this Agreement without the payment of an additional right-to-use
fee by transferee, except where feature or size sensitive units are a factor,
but only under the following conditions:
(i) Such Licensed Materials shall be used only within the
country in which it is currently deployed, however, Supplier will not
unreasonably withhold its consent to use outside such country provided the
proprietary information associated with the use of the Software can be
adequately protected;
(ii) Except as otherwise provided in the Agreement, the right to
use such Licensed Material may be transferred, only together with the
Product with which Ordering Company has a right to use such Licensed
Material, and such right to use the Licensed Material shall continue to be
limited to use with such Product;
(iii) Before any such Licensed Material shall be transferred,
Ordering Company shall notify Supplier of such transfer and the transferee
shall have agreed in writing (a copy of which will be provided to Supplier
at its request) to keep such Licensed Material in confidence and to
corresponding conditions respecting use of Licensed Materials as those
imposed on Ordering Company; and
(iv) Within the country in which the Licensed Material was
originally deployed, the transferee shall have the same right to Licensed
Material warranty or Licensed Material maintenance for such Software as the
transferor, provided the transferee continues to pay the fees, if any,
associated with such Software or Software maintenance.
9.19 SOFTWARE MAINTENANCE SERVICE. Unless otherwise agreed by Supplier
in writing, maintenance Service for Software shall only be available for (a) the
version/generic that is current at the time that such Service is ordered, (b)
the immediately preceding version/generic, and (c) a version/generic for which
the term of warranty is still in effect. Ordering Company will be notified in
writing six (6) months in advance of maintenance Service discontinuance for
version/generics prior to the preceding version/generic.
9.20 NOTIFICATION OF DISCONTINUED AVAILABILITY OF SOFTWARE.
Supplier
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shall notify Ordering Company at least one (1) year in advance of discontinued
availability of the last standard Software generic. For a minimum of two (2)
years after discontinued availability, Supplier will make available to Ordering
Company, Software Support Service or other mutually agreed upon arrangements
which afford Ordering Company reasonable continued use of the
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Software. If Supplier refuses to provide Software Support Service beyond the
minimum two (2) year period, Supplier shall grant to Ordering Company a license
to use the Software Source Code under terms and conditions to be negotiated at
that time.
ARTICLE X
ENGINEERING, INSTALLATION, MAINTENANCE
AND OTHER MISCELLANEOUS SERVICES
10.1 GENERAL. The provisions of this Article X shall be applicable to
the furnishing by Supplier of Services other than Services furnished pursuant to
any other Article of this Agreement. Such services include, but are not limited
to (a) Engineering Services such as preparation of equipment Specifications,
preparation and updating of office records, and preparation of a summary of
material not specifically itemized in the Order (b) Installation Services such
as installation, equipment removal, and cable mining (c) Maintenance Services,
and (d) other Miscellaneous Services.
10.2 WARRANTY FOR SERVICES OTHER THAN MAINTENANCE SERVICES. (a)
Supplier warrants to Ordering Company that Services will be performed in a
professional manner and in accordance with Supplier's Specifications or those
referenced in the Order and with accepted practices in the community in which
such Services are performed, using material free from defects except where such
material is provided by Ordering Company. If the Services prove to be not so
performed and if Ordering Company notifies Supplier, with respect to
Engineering, Installation, or other Miscellaneous Services, within a six (6)
month period commencing on the date of completion of the Service, as identified
in writing by Supplier, Supplier, at its option, either will correct the defect
or nonconforming Service for which Supplier is responsible or render a full or
prorated refund or credit based on the original charge for the Services. After
the corrective action, Ordering Company shall have the right to inspect and
accept the corrective work done.
(b) Where Supplier performs Engineering or Installation Services as
part of a combined engineering, furnishing, and installation Order, the six (6)
month period referenced above shall commence on the date of Ordering Company's
Acceptance of Installation Service.
(c) THE FOREGOING SERVICES WARRANTIES ARE EXCLUSIVE AND ARE IN
LIEU
OF ALL OTHER EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT
LIMITED TO,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
EXCEPT FOR
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(a) TANGIBLE PROPERTY DAMAGE AND PERSONAL INJURY FOR WHICH SUPPLIER
IS HELD
LIABLE AND (b) THE REMEDY PROVIDED IN SECTION 5.1(e), ORDERING
COMPANIES'
REMEDIES, ORDERING COMPANY'S SOLE AND EXCLUSIVE REMEDY SHALL BE
SUPPLIER'S
OBLIGATION TO MAKE CORRECTIONS OR GIVE A CREDIT OR REFUND AS SET
FORTH ABOVE IN
THIS WARRANTY.
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A. ENGINEERING SERVICES
10.3 ORDERING. Engineering Services may be ordered separately or in
combination with Installation Services.
10.4 STANDARDS FOR ENGINEERING SERVICES. Supplier agrees to perform
Engineering Services in accordance with the engineering Standards provided by
and/or approved by Ordering Company.
10.5 STANDARDS FOR CENTRAL OFFICE RECORD SERVICES. (a) Supplier agrees
to perform central office records services in accordance with central office
records standards provided and/or approved by Ordering Company.
(b) Ordering Company will provide Computer Aided Drafting (CAD)
specifications, CAD drafting tools, standard drawing files and other
conventions, in order that all completed CAD drawings will comply with Ordering
Company's standards. Title to CAD specifications, tools, drawing files, and
other data supplied to Supplier by Ordering Company shall remain in Ordering
Company at all times both before and after the Work is done.
(c) Supplier shall be responsible for loss or damage to CAD tools,
drawing files, models, blueprints, and other materials in Supplier's possession
under this Agreement belonging to Ordering Company, and shall, if requested,
furnish Ordering Company with acceptable certificates of insurance covering this
risk.
(d) All project and/or Order specific CAD drawings, specifications
and engineering calculations shall be forwarded to Ordering Company and become
Ordering Company's exclusive property prior to final payment by Ordering
Company on this Agreement or an Order, unless otherwise agreed in writing by
Ordering Company's representative.
10.6 ENGINEERING INTELLECTUAL PROPERTY. All engineering service
outputs and final products, including but not limited to equipment
Specifications, office records, and material summaries, shall be the sole
property of Ordering Company. All tools, reference material, and proprietary
information used by Engineering Services to create or produce these outputs or
documents shall remain the sole property of Supplier.
B. INSTALLATION SERVICES
10.7 CONDITIONS OF INSTALLATION AND OTHER SERVICES PERFORMED ON
ORDERING COMPANY'S SITE. (a) ITEMS PROVIDED BY ORDERING COMPANY.
Ordering
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Company will be responsible for furnishing the following items (as required by
the conditions of the particular installation or other on-site Service,
hereinafter collectively referred to as the "Service") at no charge to
Supplier and these items will not be included in Supplier's price for the
Services. Should Supplier incur expense, subject to Ordering Company's
preapproval, as a result of Ordering Company's failure to provide any of these
items, billing in addition to the contract price will be rendered to and paid by
Ordering Company. In addition, if Ordering Company's
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failure to provide any of these items results in delaying Supplier's
performance, the affected Completion Date may be extended.
(i) ACCESS TO BUILDING AND WORK SITE - Allow employees of
Supplier and its subcontractors controlled access to premises and
facilities at prearranged hours during the scheduled Service or at such
other times as are reasonably requested by Supplier. The parties shall
endeavor, to the extent practical, to agree on a building and work site
access schedule prior to the start of work. Ordering Company shall obtain
for Supplier's and its subcontractors' employees any necessary
identification and clearance credentials to enable Supplier and its
subcontractors to have access to the work site.
(ii) GENERAL BUILDING CONDITIONS - Take such action as may be
necessary to insure that the premises will be dry and free from dust and
Hazardous Materials, including but not limited to asbestos, and in such
condition as not to be injurious to Supplier's or its subcontractors'
employees or to the Products to be installed. Prior to commencement of the
Services and during the performance of the Services, Ordering Company
shall, if requested by Supplier, provide Supplier with sufficient data to
assist Supplier in evaluating the environmental conditions at the work site
(including the presence of Hazardous Materials). Ordering Company is
responsible for removing and disposing of the Hazardous Materials,
including but not limited to asbestos, prior to commencement of the
Services.
(iii) REPAIRS TO BUILDINGS - Prior to Service start date, to the
extent practical, make such alterations and repairs as are necessary for
proper installation of Products.
(iv) OPENINGS IN BUILDINGS - Prior to Service start date,
furnish suitable openings in buildings to allow Products to be placed in
position, and provide necessary openings and ducts for cable and conductors
in floors and walls as designated on engineering drawings furnished by
Supplier with input provided by Ordering Company. Supplier shall provide
such drawings to Ordering Company in sufficient time to meet project
service dates. Ordering Company shall fireproof (with steel covers) all
paths throughout the building.
(v) ELECTRICAL CURRENT, HEAT, LIGHT, AND WATER - Provide
electrical current for charging storage batteries and for any other
necessary purposes with suitable terminals where work is to be performed;
provide temperature control and general illumination (regular and
emergency) in rooms in which work is to be performed or Products stored,
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equivalent to that ordinarily furnished for similar purposes in a working
office; provide exit lights; provide water and other necessary utilities
for the proper execution of the Services. At new locations without existing
utilities Supplier may be requested in writing, prior to start date, to
provide utilities, subject to negotiations with Ordering Company.
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(vi) BUILDING EVACUATION - Prior to Services start date,
provide building evacuation plans in case of a fire or other emergency.
(vii) CEILING INSERTS - Provide ceiling inserts as required
using Supplier's standard spacing arrangement for ceiling support
equipment.
(viii) MATERIAL FURNISHED BY ORDERING COMPANY - New or used third
party material furnished by Ordering Company shall be in such condition
that it requires no repair and no adjustment or test effort in excess of
that normal for new equipment. Ordering Company assumes all responsibility
for the proper functioning of such material. Ordering Company shall also
provide the necessary third party Product information and, where possible
and permitted, access to special third party test equipment and tools, for
Supplier to properly install such material.
(ix) TOILET FACILITIES AND EYEWASH STATION - Provide proper and
easily accessible toilet facilities and supplies, such as towels and soap,
in buildings in which Services are in progress. Where temporary facilities
are required, Ordering Company will provide suitable, portable facilities
including supplies and custodial Services. Provide emergency eyewash
station in power room near battery stands.
(x) FLOOR SPACE AND STORAGE FACILITIES - Supplier will
identify to Ordering Company its need for space to store materials and
tools necessary for the work. If adequate space in the building is
available, Ordering Company will license Supplier to use such space
reasonably adjacent to the work site for storage of material and tools for
near-term use. If such space is not available, the parties will negotiate
other arrangements, such as trailers or off-site warehouses, to achieve the
maximum practical economies. To the extent feasible, Ordering Company will
permit Supplier's personnel to use luncheon facilities in the building and
will license Supplier to use administrative space solely for the purpose of
the Work.
(xi) EASEMENTS, PERMITS, AND RIGHTS-OF-WAY - Prior to Services
start date, provide all rights-of-way, easements, licenses to come upon
land to perform the Services, permits and authority for installation of
Products and other material; permits for opening sidewalks, streets,
alleys, and highways; and construction and building permits.
(xii) WATCH SERVICE - Provide normal security necessary to
prevent admission of unauthorized persons to building and other areas where
Installation Services are performed and to prevent unauthorized removal of
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the Products and other materials. Supplier will inform Ordering Company as
to which storage facilities at the work site Supplier will keep locked.
(xiii) USE OF AVAILABLE TESTING EQUIPMENT - Ordering Company
shall make available to Supplier the maintenance test facilities which are
imbedded in equipment to which the Product being installed will be
connected or added, and, if available, meters, test sets, and other
portable apparatus that is unique to the Product being installed.
Supplier's use of such test equipment shall not interfere with Ordering
Company's normal equipment maintenance functions.
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(xiv) ACCESS TO EXISTING PLANT - Ordering Company shall permit
Supplier reasonable use of such portions of the existing plant or equipment
as are necessary for the proper completion of such tests as require
coordination with existing facilities. Such use shall not interfere with
Ordering Company's normal maintenance of equipment.
(xv) GROUNDS - Ordering Company shall provide access to
suitable and isolated building ground as required for Supplier's standard
grounding of equipment. Where installation is outside or in a building
under construction, Ordering Company shall also furnish lightning
protection ground.
(xvi) REQUIREMENTS FOR ORDERING COMPANY DESIGNED CIRCUITS -
Ordering Company shall furnish information covering the proper test and
readjust requirements for apparatus and requirements for circuit
performance associated with circuits designed by Ordering Company or
standard circuits modified by Ordering Company's drawings.
(xvii) CLEARING EQUIPMENT FOR MODIFICATIONS - Ordering Company
shall remove, or transfer telecommunications traffic on trunks and sundry
working equipment, and make other arrangements required to permit Supplier
to modify existing equipment.
(xviii) BATTERY ROOM VENTILATION - Ordering Company shall provide
the required ventilation for battery rooms or areas.
(xix) HOUSE SERVICE PANEL - Ordering Company shall provide
electric power from Ordering Company's Service panel to Supplier's power
board and shall run all leads between said Service panel and power board.
(xx) THROUGH TESTS AND TRUNK TESTS - Ordering Company shall
make required through tests and trunk tests to other offices after Supplier
provides its notice of completion or notice of advanced turnover.
(b) ITEMS TO BE FURNISHED BY SUPPLIER. The following items will be
furnished by Supplier (if required by the conditions of the particular Service)
and the price thereof is included in Supplier's price for Services:
(i) PROTECTION OF EQUIPMENT AND BUILDINGS - Supplier shall
provide protection for Ordering Company's equipment, network integrity and
buildings during the
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performance of the Services and in accordance with Supplier's standard
practices. Supplier shall make every effort possible to prevent
interruptions to network integrity.
(ii) METHOD OF PROCEDURE - Supplier shall prepare detailed
(MOP), as defined by Ordering Company before starting work. Ordering
Company shall review the MOP and any requested changes shall be negotiated.
Ordering Company shall give Supplier written acceptance of the MOP prior to
start of the work.
(iii) POWER CONDUIT - Supplier shall install power conduit and
wire as specified in Ordering Company's specifications.
(iv) FRAME AND AISLE LIGHTING - Supplier shall install conduit,
wire, fixtures, and other necessary material for frame and aisle lighting
as specified in Ordering Company's specification.
(v) TEMPORARY DAILY CLOSING & FIREPROOFING - Supplier shall
provide temporary daily closing for all occupied buildings, and fireproof
all openings that Supplier makes in any occupied building in the course of
providing the Services.
(vi) RESTORATION - Where it is necessary in the performance of
the Services to open sidewalks, driveways, curbing, alleys, streets, or
other property, Supplier shall restore said property to at least its former
condition.
(vii) TOOLS AND EQUIPMENT - Unless otherwise specifically
provided in this Agreement, Supplier shall provide all labor, tools and
equipment (the "tools") for performance of this Agreement. Should
Supplier actually use any tools provided by Ordering Company, Supplier
acknowledges that Supplier accepts the tools "as is, where is". Supplier
shall not, however, be responsible for consequential damages in the nature
of lost revenues, profits, or savings arising from Supplier's non-negligent
use of a defective tool. Supplier acknowledges that Ordering Company has no
responsibility for the condition or state of repair of the tools and
Supplier shall have risk of loss and damage to such tools. Supplier agrees
not to remove the tools from the work site and to return the tools to
Ordering Company upon completion of use, or at such earlier time as
Ordering Company may request, in the same condition as when received by
Supplier, reasonable wear and tear excepted.
(viii) CLEAN UP - Supplier at all times, and at its expense,
shall keep the premise free from accumulation of waste materials or rubbish
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c aused by Supplier's operation. Upon completion of the Work, Supplier
shall, at its expense, as promptly as practical, remove from the premises
all of Supplier's implements, equipment, tools, machines, surplus, and
waste materials and debris. If Supplier fails to clean up as provided
herein, Ordering Company may do so and charge the cost thereof to Supplier
or deduct same from Ordering Company's payment to Supplier.
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(ix) SENSITIVE EQUIPMENT - Supplier will consider and treat all
Ordering Company equipment as sensitive equipment at the work site (e.g.,
equipment sensitive to static electricity or light).
(x) HAZARDOUS MATERIALS CLEANUP - At the conclusion of the
Services, Supplier shall be responsible for the cleanup, removal, and
proper disposal of all Hazardous Materials introduced by Supplier or its
subcontractors to Ordering Company's premises.
(xi) The following items may be furnished by Supplier if
requested by Ordering Company. Prices associated with these activities will
be subject to negotiations and no such activities will be furnished without
prior written consent of Ordering Company:
(A) READJUSTING APPARATUS - Supplier may provide
readjustment (in excess of that normally required on new apparatus) of
apparatus associated with relocated or rewired circuits.
(B) RERUNNING CROSS-CONNECTIONS - Supplier may rerun
permanent cross-connections in accordance with revised cross-connection
lists furnished by Ordering Company's cross-connection list.
(C) HANDLING, PACKING, TRANSPORTATION, AND DISPOSITION OF
REMOVED AND SURPLUS ORDERING COMPANY EQUIPMENT - Supplier may pack,
transport, and dispose of surplus and removed Ordering Company equipment as
agreed by the parties.
(D) PREMIUM TIME ALLOWANCES AND NIGHT SHIFT BONUSES -
Supplier may have its Services personnel work premium time and night shifts
to the extent that Supplier may deem such to be necessary to effect the
required coordination of installing and testing operations or other
Services because of Ordering Company's requirements.
(E) EMERGENCY LIGHTING SYSTEM - Supplier may provide new
emergency lighting system (other than the original ceiling mounted stumble
lighting) to satisfy illumination and safety needs of Products of certain
height.
10.8 ACCEPTANCE OF INSTALLATION. (a) At reasonable times during the
course of Supplier's installation, Ordering Company, at its request may, or upon
Supplier's request shall, inspect completed portions of such installation. Upon
Supplier's further request, and upon sufficient notice to Ordering Company,
Ordering Company shall observe Supplier's testing of the Product being installed
to determine that such testing and the test results are in accordance with
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Supplier's Acceptance standards or Acceptance procedures. The job shall be
considered complete and ready for Acceptance by Ordering Company when the
Product has been installed
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and tested by Supplier in accordance with its standard procedures, and Supplier
represents such Product to be in working order. Upon completion of the
installation, Supplier will submit to Ordering Company a written notice of
completion or, if Ordering Company has elected advance-turnover of subsystems, a
written notice of completion of advance-turnover.
(b) Ordering Company shall promptly make its final inspection of
substantial conformance with Supplier's specifications and do everything
necessary to expedite Acceptance of the job. Supplier will promptly correct any
defects for which it is responsible. The job will be considered as fully
accepted unless Supplier receives written notification to the contrary within
thirty (30) days after submitting the notice of completion.
(c) Acceptance shall be effective if executed in writing only by an
individual designated by Ordering Company in writing prior to installation start
date.
C. MAINTENANCE SERVICES
10.9 GENERAL SERVICE DESCRIPTION. Maintenance Services for Products
and Software include, but are not limited to, fixed-term Service and
time-and-material Service.
(a) Fixed-term Maintenance Service consists of procedures, as
determined by Supplier for particular Products and Software and for fixed
periods, to keep Products and Software operating materially in accordance with
their specifications. Such Service includes diagnostic Service using on-site or
remote techniques, as appropriate, to analyze a problem and prescribe remedial
action, and a mandatory escalation procedure to provide successively higher
levels of expertise. Fixed-term Maintenance Service will be rendered during the
Service hours selected by Ordering Company in accordance with the Level of
Service Specified in an Order from options offered by Supplier. At the time a
Maintenance Service agreement is established, Service Level Options will be
mutually agreed to by parties.
(b) Each Order shall be for a minimum of one (1) year and shall
commence on the date set forth in the Order. Supplier will provide written
notification to Ordering Company ninety (90) days prior to Order expiration, and
Ordering Company shall notify Supplier sixty (60) days prior to expiration date
of their intention to renew an Order for a period of time at prices to be
negotiated.
(c) Time-and-material Service includes, on a call-by-call basis and
on the basis of Supplier service personnel availability, technical assistance
<PAGE>
using on-site or remote techniques, as appropriate, to analyze a problem,
prescribe remedial action and, if ordered, make necessary repairs.
(i) TYPES OF SUPPORT SERVICES. The following Support Services may
be supplied to Ordering Company in accordance with the Maintenance Level of
Service ordered.
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(A) CALL RECEIPT AND ROUTING - Supplier will provide a
call receipt and routing function for use by Ordering Company. Ordering
Company may access twenty-four (24) hour a day, seven (7) day a week
telephone support for all Severity Level problems with the dial-in number
being specified in the Maintenance Service Agreement. Requests may be made
by electronic means as specified in the Maintenance Service Agreement, and
with the mutual acceptance of Ordering Company and Supplier. Supplier will
maintain an entitlement database to determine Ordering Company entitlements
(i.e., Service Level) and how the call should be routed. Supplier will work
problems outside the ARM coverage period only at Ordering Company's
expressed request and Ordering Company will be billed at Supplier's time
and material rates.
(B) ASSISTANCE REQUEST DATABASE ACCESS - Pursuant to a
fixed-term Maintenance Order and subject to availability, Ordering Company
will be given access to automated trouble reporting tools. Customized
trouble reporting features are fee-based.
(C) CONSULTATIVE SUPPORT - Remote telephone services
include delivering technical assistance and advice for service ARs reported
by Ordering Company.
(D) THIRD PARTY SOFTWARE SUPPORT - If a condition is
caused by the Third Party Software covered in the Order, Supplier shall be
responsible for diagnosing and resolving Third Party Software defects.
(E) DIAGNOSTIC SUPPORT - Supplier shall support Ordering
Company in analyzing Ordering Company problems, including isolation of
defects to one of the following areas:
(1) Problems arising as a result of Products or their
associated materials or documentation; and
(2) Other problems not directly related to Products,
such as Ordering Company operations problems, database problems, as well as
any other interfacing system problems.
(F) WORKING LOCATION - Supplier's working location is
remote from Product site. At Ordering Company's request, and as agreed to
by Supplier, Supplier will provide on-site assistance in resolving a
problem. Such assistance will be billed at a minimum of eight (8) hours a
day at the then current Supplier Time and Material (T&M) rate. Reasonable
travel and living expenses incurred by Supplier will also be billed.
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(G) SEVERITY LEVEL AND PRIORITIZATION - Supplier shall
perform Problem Resolution Management in accordance with the Severity Level
condition
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identified by Ordering Company. Severity Level Definitions are further
defined in Exhibit 10-1. The priority for problem resolution will be based
on the Severity Level of outstanding reported conditions. Severity Level
One (1) conditions will receive top priority support. In the event that
Ordering Company's notification of a Severity Level One causes Supplier to
redirect its efforts being expended on a lower Severity Level condition,
Supplier shall notify Ordering Company that there will be a delay in
correcting the lower Severity Level condition.
(H) PROBLEM MANAGEMENT - Supplier shall perform procedures
and actions upon written or oral request of Ordering Company to investigate
and develop the resolution of a reported condition in a manner that
provides Ordering Company a single interface. This service is performed
only for Products covered under the Maintenance Service Order.
(I) MANAGEMENT NOTIFICATION - Supplier will observe the
following escalation procedures:
(1) SEVERITY LEVEL ONE - In the event of a Severity
Level One condition that is still unrestored four (4) hours after the
condition is reported, Supplier will notify Supplier's supervisory
management or next level of expertise of the unrestored condition. If the
condition is still unrestored within eight (8) hours after the condition is
reported, the next higher level of Supplier supervisory management or level
of expertise will be notified of the unresolved condition. Once the highest
level of expertise is reached, no further escalation will occur.
(2) SEVERITY LEVEL TWO - In the event of a Severity
Level Two condition that is still unrestored twelve (12) hours after the
condition is reported, Supplier will notify Supplier's supervisory
management of the unrestored condition.
(J) SERVICE PERFORMANCE REPORTS (SPR) - Supplier will
provide quarterly reports of Supplier's performance against the objectives
stated in this Article 10.
(K) ORDERING COMPANY NOTIFICATION BULLETINS - Supplier will
provide Ordering Company Notification Bulletins to Ordering Company on an
as needed basis.
(L) ON-SITE ASSISTANCE - At Ordering Company's request and
as agreed to by Supplier, a Supplier's engineer may be dispatched to
Ordering Company's site for resolution of a problem. If the problem is not
caused by a Designated Processor covered by this Agreement, On-Site
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Assistance will be billed at minimum of eight (8) hours a day at the then
current Supplier time and material (T&M) rate.
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Reasonable travel and living expenses incurred by Supplier as referenced in
Section 3.1(g), PRICES, will also be billed.
(ii) PERFORMANCE METRICS & OBJECTIVES. (A) The Performance
Metrics described in this Section shall apply to Products and Licensed
Software covered under the Preferred and Standard Service Levels as
described in Section 10.2(c)(ii)(E) above. The problem must be reproducible
at either Supplier's location or on Ordering Company's system verifiable by
Supplier. The Severity Level of any problem shall be determined by Ordering
Company; however, if during resolution Supplier determines that the
Severity Level of the problem claimed by Ordering Company to be inaccurate,
the Severity Level may be changed by Supplier upon mutual agreement with
Ordering Company. Ordering Company requests which do not go through
Supplier's Call Receipt function will be excluded from the Performance
Metrics.
(B) Initial Response. During the term of a fixed-term
Maintenance Service Agreement, and upon expiration of any product warranty,
Supplier agrees to respond to Ordering Company's request for Support
Service called in through Supplier's Call Receipt function as described in
the table in Section 10.9 (c) (ii) (E), GENERAL SERVICE DESCRIPTION, within
sixty (60) minutes, twenty-four (24) hours a day, seven (7) days a week,
for all Severity Levels as reported in the assistance request database.
Response time will be validated through the use of the Service Performance
Report (SPR). Ordering Company requests which do not go through Supplier's
Call Receipt function will be excluded from the Performance Metrics.
(C) Service Restoration for Service Levels One and Two
shall be mutually agreed to by Ordering Company and Supplier, and
documented in the Maintenance Service Agreement. Restoral time will be
validated through the use of the Service Performance Report (SPR).
(D) Resolution of Defect and Service Severity Levels One
through Four shall be mutually agreed to by Ordering Company and Supplier,
and documented in the Maintenance Service Agreement. Resolution times will
be validated through the use of the Service Performance Report (SPR).
(E) The following table represents the Performance
Objectives for the Metrics listed in (B), (C), (D) above.
COMMITMENTS
METRIC OBJECTIVE PREFERRED STANDARD
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- --------------------------------------------------------------------------
Initial Response % 100% 95% 75%
- --------------------------------------------------------------------------
Restore Severity Level 1 AR 100% 95% 75%
- --------------------------------------------------------------------------
Restore Severity Level 2 AR 100% 95% 75%
- --------------------------------------------------------------------------
Resolve Service AR 100% 95% 75%
- --------------------------------------------------------------------------
Resolve Defect AR 100% 95% 75%
- --------------------------------------------------------------------------
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In addition, for 4ESS switch and 5ESS switch, the Switching Software Support
Plan (SSP), defines how the level of support changes with time upon the
introduction of new base releases. Exhibit 10-2 further explains the support
service that will be offered during each of the life cycle phases.
10.10 ELIGIBILITY FOR MAINTENANCE SERVICE. (a) Products and Software
furnished and installed by Supplier are eligible for Maintenance Service without
initial evaluation by Supplier provided the Service commences not later than the
end of the Warranty Period. Unless otherwise agreed by Supplier in writing,
Maintenance Service for Software shall only be available for the generic that is
current at the time that such Service is ordered and the immediately preceding
generic, as well as a generic where the term of warranty is still in effect.
(b) In all other situations, the Products and Software shall not be
eligible for Maintenance Service until Supplier, at its option, has made an
initial evaluation to determine whether modifications are required to make the
Product or Software eligible. If, in Supplier's judgment, modifications are
required for this purpose, Supplier will provide a written estimate based on
standard rates to Ordering Company for making such modifications. Upon Ordering
Company's written Acceptance, Ordering Company will be billed at Supplier's then
standard rate for such evaluation and any such modifications furnished by
Supplier. Software will not be eligible for Maintenance Service unless Supplier
determines that the Software is in good working order in accordance with its
Specifications and can be maintained in such condition.
10.11 ORDERS FOR MAINTENANCE SERVICES. Ordering Company shall place
Orders for Maintenance Services, indicating the Level of Service to be provided
for each Product upon commencement of the Order. The Level of Service chosen
shall remain in effect without change for the contract period covered by the
Order. All installations of each Product and each release of Software must be
served at the same Level of Service.
10.12 PRICES. Sixty (60) days prior to the expiration of any fixed-term
Service Order, Supplier will, at Ordering Company's request, submit a price for
the renewal of the Service. Charges for time-and-material Maintenance Service
shall be determined at Supplier's applicable time and material rates in effect
at the time an Order for such Service is accepted and will be based on the total
work-hours (which includes travel time) expended on the job, and actual travel
expense. Such charges shall be based on a minimum number of hours.
10.13 PERIODS OF MAINTENANCE SERVICE. Maintenance Service will be
provided in accordance with the Level of Service specified in an Order.
10.14 MAINTENANCE SERVICE EXCLUSIONS. (a) Unless expressly agreed by
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Supplier, Maintenance Services to be provided under this Article do not include:
(i) Performing preventive maintenance;
(ii) Making corrections to user-defined reports;
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(iii) Making Specification changes or performing Services
connected with relocation of the Product;
(iv) Service which is impractical for Supplier to render because
of changes not authorized by Supplier in the Designated Product processor,
hardware configuration, Supplier's Product or the Product environment in
which Supplier's Product operates;
(v) Modification or replacement of Product, repair of damage,
or increase in Service time caused by:
(A) Failure to continually provide a suitable operational
environment with all facilities prescribed by the applicable document
including, but not limited to, the failure to provide, or the failure of,
adequate electrical power, air conditioning, or humidity control;
(B) The use of the Product in a manner not in accordance
with its Specifications, operating instruction or license-to-use;
(C) Accident; disaster, which shall include, but not be
limited to, fire, flood, earthquake, water, wind and lightning;
transportation; neglect or misuse; pest damage; or power failures or surges
from sources external to the Product;
(D) Modifications, maintenance, or repair performed by a
party other than Supplier;
(E) The conversion from one Supplier Software release to
Supplier's subsequent Software Release, or the failure of Ordering Company
to apply previously applicable modifications and corrections offered by
Supplier;
(F) Attachment of unspecified or non-approved products to
the Product, including updates from manufacturers of third party Software
and Software not licensed by Supplier, or Designated Processors that have
not been certified by Supplier, or failure of a processor or other
equipment or software not maintained by Supplier, or failure of removable
or rotating storage media.
(vi) Problem Management, as follows:
(A) Database Problems - If the condition is mutually
determined to be the result of corruption of the Software Product data
base, and such corruption is not the direct result of the Product, the
<PAGE>
condition will be referred back to Ordering Company for resolution. At
Ordering Company's request, and at Supplier's option, Supplier may prepare
a proposal for billable corrective action to correct Ordering Company's
database. However, if corruption is the result of, or caused by another of
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Supplier's Products or Services, Supplier shall initiate Problem Management
regardless of whether such Software Product is covered under an Order.
(B) Hardware/Firmware Problems - When a condition has been
isolated to a problem in hardware or Firmware not covered under this
Agreement, the condition will be referred back to Ordering Company for
disposition under whatever arrangements Ordering Company may have for such
hardware or Firmware.
(C) Other/Interfacing Problems - If the condition is
determined mutually to be caused by systems other than the Products covered
under the existing Order, including, but not limited to, systems which
interface with the Product, the condition will be referred to Ordering
Company for corrective action unless such other system has been furnished
by Supplier, in which case, Supplier shall initiate Problem Management.
However, if a defect is identified with Software or Products covered by the
Order which is documented or advertised to interface or work with other
systems, hardware, Products or Software, Supplier shall conduct restoral
and correction procedures as required for a defect and not as Problem
Resolution Management.
(D) Additional Services - Additional services, including
but not limited to custom feature development, training, planning sessions,
and other value-added services, are not included in the fees paid under
this Agreement. Such services may be available through a Firm Price Quote
(FPQ).
(b) At the request of Ordering Company, Supplier, at its option, may
perform Maintenance Services in the excluded conditions listed above, at
Supplier's rates and terms in effect at the time of such request.
10.15 ORDERING COMPANY RESPONSIBILITIES. In addition to the
responsibilities specified in Section 6.4, ORDERING COMPANY'S RESPONSIBILITIES,
Ordering Company shall be responsible for:
(a) PROVIDING INFORMATION TO CALL RECEIPT. (i) Identification of the
condition and its isolation to a particular component of the system believed to
be Supplier's responsibility.
(ii) Collection of sufficient supporting documentation from the
Product or Software for inclusion in the AR database.
(iii) Determination that there are no outstanding conforming
Software Product Updates that correct the condition.
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(iv) The calling Ordering Company personnel shall provide the
following information, if applicable:
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(A) Caller's name, Location, and Company;
(B) Call-back Telephone Number;
(C) Remote Dial Access to Ordering Company System;
(D) System name and Location;
(E) Processor Location, Type, and Serial Number, if
available;
(F) Nature of the Question or Situation;
(G) The Calling Party's Alternate Contact;
(H) Description and History of Problem and Efforts to
Solve it by Ordering Company;
(I) Contract number or other proof of coverage as
requested by Supplier.
(b) PROVIDING PROBLEM DIAGNOSTIC MATERIALS. If Ordering Company
reports a condition, Ordering Company will be responsible for providing adequate
support material to enable the diagnosis of the condition. Such support
materials may include, but not be limited to, a description of the
circumstances, a dump of system logs or buffers, a listing of database contents,
and console printouts as required by Supplier.
(c) MAINTAINING THE PRODUCT OR SOFTWARE. (i) Make no modifications
other than those approved by Supplier. This includes updates from manufacturers
of third party Software or Designated Processors that have not been validated by
Supplier.
(ii) Install all Software Product Updates licensed by Ordering
Company under this Agreement within a reasonable time, unless Ordering
Company has previously notified Supplier of defects discovered in the
Software Product Update that make installation unfeasible.
(iii) Follow all Supplier's and relevant third party Software or
Designated Processor manufacturer's applicable installation, operation,
administration, and maintenance instructions.
(iv) Provide the proper environment and electrical and
telecommunications connections as specified by Supplier or the relevant
<PAGE>
Designated Processor manufacturer.
(v) Maintain a back-up procedure external to the Designated
Processors sufficient to reconstruct lost or altered files, data, or
programs.
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(vi) Install the appropriate Class A Change Notices in a timely
fashion as mutually agreed to by the parties.
(d) ASSISTING SUPPLIER PERSONNEL PROVIDING ON-SITE ASSISTANCE. (i)
Have an Ordering Company representative at the equipment location during
any on-site Supplier service activity. Ordering Company may be subject to
additional incurred time and material charges if Ordering Company fails to
have a representative at the equipment location at the agreed time.
(ii) Provide adequate communication facilities and work space
for Supplier.
(iii) Provide the maintenance test facilities which are embedded
in equipment to which the product being installed will be connected or
added, and maintenance documentation sufficient for maintenance of Products
and Software not covered by this Agreement that interface with the Products
and Software covered under this Agreement.
(iv) Ensure that work done at the site by Ordering Company does
not interfere with Supplier's performance of On-Site Assistance.
10.16 MAINTENANCE OF RELOCATED SOFTWARE. Software serviced under this
Agreement which is moved to another Designated Processor of Ordering Company
shall continue to be covered under this Agreement provided that Supplier has
received forty-five (45) days prior written notice of such relocation and, if
requested by Supplier, the parties have renegotiated the objective response time
(the time within which Supplier shall use reasonable efforts to respond to
Ordering Company maintenance requests) selected by Ordering Company in an Order.
If Ordering Company requests Supplier to relocate Software, Ordering Company
shall be charged for all such work performed by Supplier at the negotiated
rates.
10.17 SOFTWARE PRODUCT UPDATE SERVICES. Pursuant to a fixed-term
Software Maintenance Service Order, Supplier agrees to provide the Software
Product Update Services in accordance with the following terms and conditions:
(a) DEFECT REPORTING - Any defects found in the Software Product may
be reported by calling Supplier's Call Receipt function. A tracking report will
be entered into the AR tracking database and referred to Supplier's technical
support.
(b) SOFTWARE PRODUCT UPDATES - Supplier will correct defects in the
Software Product and third party Software in accordance with the support
<PAGE>
Services as described in Exhibit 8-1. Supplier will correct defects as follows:
(i) Supplier may periodically provide Software Product Updates to
the Software to correct defect conditions. If requested by Ordering
Company, Supplier shall provide documentation to enable Ordering Company to
train Ordering Company's
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personnel in the operation of the Software modified by such release.
Supplier shall make modifications to the documentation to clarify issues or
items not clear to Ordering Company, as required.
(ii) Fees paid in accordance with a Software Maintenance Service
Order cover only Product Updates made generally available during the term
covered by an Order. After expiration of the term covered by an Order,
Ordering Company is entitled to the next scheduled Product Update, which
may contain corrections for defects reported during the term of an Order.
(iii) Due to the nature of Software, Software Product Updates
require all previous Software Product Updates for the particular
generic/software release as prerequisites. It may not be possible to
install any Software Product Updates unless all previous Software Product
Updates have been installed. These previous Software Product Updates are
available for an additional fee.
(iv) If the condition is isolated to the related documentation
for the Product or Software, the fix will be given to Ordering Company as
part of the defect correction or Product Update procedure. Within two (2)
years, a permanent fix will be published in the following release of the
related documentation.
(c) NOTIFICATION OF CORRECTIONS - Supplier agrees to notify Ordering
Company of the availability of a resolution or work-around to a defect reported
by Ordering Company.
(d) ORDERING COMPANY CORRECTIVE MAINTENANCE RESPONSIBILITY -
Ordering
Company agrees to install the corrections or replacements provided under this
Agreement within a reasonable period of time. Ordering Company's failure to
install emergency fixes, work-arounds, patches or releases will cause the
Software Product to be considered non-standard until all such fixes are
installed, unless Ordering Company has previously notified Supplier of problems
with such emergency fixes, work-arounds, patches or releases.
10.18 MAINTENANCE SERVICES WARRANTY. Supplier warrants to Ordering
Company that Maintenance Services will be performed in a professional manner and
in accordance with Supplier's specifications or those referenced in an Order and
with accepted practices in the community in which such Services are performed,
using material free from defects except where such material is provided by
Ordering Company. If the Services prove to be not so performed and if Ordering
Company notifies Supplier, within the period of time equal to the repaired
Product warranty period (Exhibit 8-1), of the Product being repaired, or six (6)
<PAGE>
months, whichever is less, commencing on the date of Acceptance of the Service,
as identified in writing by Supplier, Supplier, at its option, either will
correct the defect or nonconforming Service for which Supplier is responsible or
render a full or prorated refund or credit based on the
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original charge for the Services. After the corrective action, Ordering Company
shall have the right to Acceptance of the corrective work done.
D. MISCELLANEOUS SERVICES
10.19 TRAINING. If requested by Ordering Company, Supplier will, at
mutually agreed to prices: (a) provide instructors and the necessary
instructional material of Supplier's standard format to train Ordering Company's
personnel in the installation, planning and practices, operation, maintenance,
and repair of material furnished under this Agreement with such classes to be
conducted at intervals and locations agreed upon by Supplier and Ordering
Company; or (b) license Ordering Company to reproduce Supplier's copyrighted
training modules or manuals, covering those areas of interest outlined in (a) of
this clause, sufficient in detail and format, to allow Ordering Company to
develop and conduct its own training program.
10.20 INSTALLATION/CUTOVER ASSISTANCE. In the event Supplier is not
installing the material, and if requested by Ordering Company, Supplier agrees
to make available at the installation site, at a negotiated price plus travel
and living expenses, a field engineer to render installation and cutover
assistance as required by Ordering Company.
ARTICLE XI
OUTSIDE PLANT SERVICES
11.1 PURPOSE AND SCOPE OF THIS ARTICLE. The purpose of this Article 11
is to set forth certain additional terms and conditions relating to the
provision of Outside Plant Services ("Services"). With respect to such Services,
to the extent that any provision set forth in this Article 11 conflicts with any
provision set forth elsewhere in this Agreement or in any project, Work Order or
Field Order, this Article 11 shall control. In the event of any conflict between
this Article 11 and the Specifications, this Article 11 shall control. This
Agreement shall not affect or modify any agreements between the parties
regarding Services currently in the course of performance at the time of
execution hereof; however, to the extent that there are ambiguities or subject
matters not addressed in such agreements, this General Purchase Agreement shall
apply.
11.2 WORK; SUPPLIER MATERIALS; PERMITS; RAILROADS; SECURITY.
(a) Supplier will provide, construct or install or arrange to have
provided, constructed or installed those Products and Services as specified in
the Work Order or Supplemental Agreement (such Products and Services hereinafter
<PAGE>
referred to as "Work"). Work shall not consist of the tasks and
responsibilities, including supply of materials or performance of services to be
provided or performed by Ordering Company, as set forth in Section 11.4,
ORDERING COMPANY OBLIGATIONS, below.
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(b) For materials to be furnished by Supplier, Supplier
shall assume full responsibility for furnishing materials of the quality and
quantity specified, and shall be responsible for the timely delivery of all
materials subject to the reasonable availability of such materials. Such
materials shall conform to the respective Specifications and shall be subject
to the warranty limitations set forth in Section 11.12, PRODUCT RELOCATION OR
MODIFICATION, below. Prior to purchasing a substitute product, Supplier shall
submit a formal written request to the Engineer for Acceptance. If requested
by Engineer, Supplier shall furnish manufacturer's shop drawings and
specifications.
(c) Supplier shall obtain all permits, licenses and
approvals at its own expense other than Ordering Company Permits (as defined in
Section 11.4, ORDERING COMPANY OBLIGATIONS, below) that are required for
Supplier's construction operations, including waste disposal. Supplier shall
comply with the requirements of all permits, licenses and approvals and shall,
at all times, keep a copy of the permits, licenses and approvals at the Site.
(d) If Sunday, holiday, or night Work is specifically
called for as a permit requirement, Supplier shall provide adequate personnel,
equipment, and supervision for the proper performance and control of the Work
in accordance with such requirement. For such Work, Supplier shall be entitled
to extra payment, unless such Work was specifically contemplated in the
applicable Work Order and included in the Price.
(e) Where Work is to be performed on railroad property,
Supplier shall cooperate with the railroad personnel in performance of the Work
and shall satisfy railroad requirements.
(f) Supplier shall be responsible for all security
affecting the performance of its Work.
11.3 ORDERING COMPANY FURNISHED MATERIALS. (a) All
material furnished by Ordering Company shall be delivered to Supplier at
storeyards or other locations to be mutually agreed upon; and, Supplier shall
have charge of, and be responsible for, all the material upon and after its
delivery to Supplier and shall return to Ordering Company all the material not
required for the completion of the Work, excluding waste.
(b) Supplier shall replace all Ordering Company furnished
materials which are lost or damaged while in the custody of Supplier.
Replacement materials shall be of a type and quality substantially equal to the
original materials, acceptable to the Engineer, and shall be obtained promptly
to prevent delay of the Work.
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(c) Supplier shall rehandle and reload, if required, all
Ordering Company furnished materials and equipment which have been rejected by
Supplier.
(d) Ordering Company shall reimburse Supplier for all its
material shipping and handling expenses associated with:
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(i) The return and/or replacement of defective
Ordering Company provided materials.
(ii) The return of excess materials resulting from
the termination of an Order or a decrease in the quantities of
materials required to complete a Work Order for reasons other than
breach of contract or material non-performance by Supplier.
(iii) The return of materials provided by Ordering
Company in excess of those requested by Supplier in the Bill of
Materials.
(e) Unless expressly stated to the contrary, the Price
does not include costs for any Ordering Company furnished material nor does it
include any Supplier charges for re-engineering, reinstallation, modification,
or repair Services to Ordering Company furnished material. New or used
material (if any) furnished by Ordering Company shall be in such condition that
it requires no repair and no adjustment or test effort in excess of that normal
for new material. Ordering Company assumes all responsibility for the proper
functioning of such material under normal conditions of use and/or when
properly installed. Ordering Company shall also provide the necessary
information for Supplier to properly install such material.
11.4 ORDERING COMPANY OBLIGATIONS. (a) On or before the
start date, at its own expense, Ordering Company will complete or provide, or
arrange for the completion or provision, of all of the following "Ordering
Company Obligations" set forth or referred to in this Section 11.4, ORDERING
COMPANY OBLIGATIONS. Ordering Company shall fulfill all obligations applicable
to Ordering Company-owned or -controlled buildings set forth in Section 10.7,
CONDITIONS OF INSTALLATION AND OTHER SERVICES PERFORMED ON
ORDERING COMPANY'S
SITE, above, including but not limited to provision of adequate Access to
Building and Site, General Building Conditions, Repairs to Buildings, Openings
in Buildings, Floor Space and Storage Facilities and Building Grounds. In
addition to Ordering Company's obligations in the Specifications, Ordering
Company shall comply with the following:
(i) CONSULTANTS FOR SPECIAL SITES - Except as
otherwise provided in Section 11.18, ARCHAEOLOGICAL SITES;
ENVIRONMENTAL PROTECTION, Ordering Company shall provide, or, at
Ordering Company's option, shall authorize Supplier to provide, any
consultants for special considerations, including, but not limited to,
biologists to evaluate endangered species impacts or archaeologists to
evaluate historically sensitive sites and qualified experts to
<PAGE>
evaluate environmentally hazardous conditions. In the event that
Supplier provides such consultants, Ordering Company shall reimburse
Supplier for such consultant costs on a Lump Sum Price basis; and
(ii) EASEMENTS, PERMITS, AND RIGHTS OF WAY -
Unless otherwise required by applicable ordinances, codes or statutes,
any necessary highway permits, construction permits, easements,
joint-use or right of way grants shall be obtained and paid for by
Ordering Company and Ordering Company shall file, or have filed, the
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necessary papers (collectively, the "Ordering Company Permits").
Ordering Company Permits and corresponding permit applications, if
necessary, are included in the Agreement Documents. If a permit is
unavailable at the time of issue of the Agreement Documents, the permit
application only will appear. Permits which are not available at the
time of issue of the Agreement Documents will be provided to Supplier
prior to the Start Date specified in each Work Order. When permits not
listed in the Agreement Documents are obtained by Ordering Company, a
copy will be provided to Supplier.
(iii) Railroad flagmen and/or inspectors required
to be on the Site as a condition of an easement permit or right of way
or other railroad requirement, will be provided by Ordering Company at
no cost to Supplier.
11.5 WORK ORDERS; CHANGES. (a) Ordering Company shall
submit Work Orders to Supplier utilizing Ordering Company's form. Each Work
Order and Field Order shall contain or refer to a document containing the
information necessary for Supplier to fulfill the Work Order, including, but
not limited to, the information called for by Section 2.1, ORDERS, above, a
reference to this Agreement, Special Conditions, a Start Date, Completion Date
and a Completion Schedule. If such work items have been mutually agreed upon
in a writing signed by the parties (e.g., a Supplemental Agreement or a
previously issued Work Order), then Supplier shall proceed to fulfill the Work
Order (i.e., the Work Order shall function as a notice by Ordering Company for
Supplier to proceed with the Work). If such items have not been agreed upon,
Supplier may reject the Work Order or propose changes to the Work Order. If
the parties are unable to agree, the Work Order shall be deemed abandoned.
(b) Each Work Order and Field Order shall be subject to
the terms and conditions of this Agreement which shall control over any
conflicting provisions in such Work Order.
(c) Changes by Ordering Company to an accepted Work Order
shall be treated as a separate Work Order unless the parties expressly agree
otherwise. In addition, subject to Section 11.18, ARCHAEOLOGICAL SITES;
ENVIRONMENTAL PROTECTION, Supplier may identify additional changes to the Work
which must be performed due to certain conditions, as set forth in Section
11.8, LOCAL CONDITIONS; DIFFERING SITE CONDITIONS below. If any such change
affects Supplier's ability to meet its obligations under the original Work
Order, any Price or Completion Date quoted by Supplier with respect to such
original Work Order is subject to change. All such changes must be approved in
writing by authorized representatives of both parties using Ordering Company's
Form.
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(d) Minor changes may be made by means of a Field Order.
11.6 PLANT PROTECTION; UNDERGROUND FACILITIES. (a)
Supplier shall adhere to the applicable MOP with respect to Ordering Company's
underground facilities.
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(b) Ordering Company has made minimal efforts to identify
existing utilities by field surveys and utility records research. Existing
underground and aerial utilities within the construction limits of the Work are
indicated on the Drawings only to the extent information on such utilities has
been made available to, or discovered by, the Engineer in the performance of
the design work. Except to the extent that the information contains a material
misrepresentation of fact, the Engineer and Ordering Company expressly disclaim
all responsibility for the accuracy and completeness of the information
indicated. Supplier shall conduct its operations on the basis that underground
and aerial utilities may exist which are not indicated on the Drawings.
(c) Supplier shall be responsible for locating and
identifying, except for Ordering Company's facilities or structures, all
existing utilities or structures within the construction limits of Work and
elsewhere where Supplier's construction operations may subject the utilities
or structures to damage. This shall be done prior to the performance of the
Work. All information relative to the above shall be recorded and incorporated
into the records in a manner reasonably acceptable by the Engineer.
(d) For Ordering Company facilities or structures,
Supplier shall adhere to the "One Call" procedure, as set forth in the
Specifications.
11.7 PROTECTION OF PUBLIC AND PUBLIC PROPERTY. Subject to
any more stringent requirements of Section 11.18, ARCHAEOLOGICAL SITES;
ENVIRONMENTAL PROTECTION, and Section 6.20, COMPLIANCE WITH LAW:
(a) Supplier shall in the performance of the Work exercise
reasonable measures to minimize inconvenience to the public and shall use its
reasonable efforts to preserve and protect all trees, shrubs, grass, or other
vegetation on or adjacent to the right of way or Site which do not
unreasonably interfere with the Work. Unless otherwise required by Ordering
Company's Representative, Supplier shall restore all such property which may
be disturbed in the execution of its Work to its former visible condition.
(b) In accordance with Supplier's standard procedures,
all pavement, surfacing, driveways, curbs, walks, buildings, utility poles, guy
wires, fences, and other surface structures affected by Supplier's Work,
together with all sod and shrubs in yards and parking areas, shall be
substantially restored to their original visible condition, whether within or
outside the easement. Supplier shall be responsible for (i) making reasonably
satisfactory and acceptable arrangements with the owner of, or the agency or
authority having jurisdiction over, the damaged property concerning its repair
or (ii) replacement, or payment of reasonable costs incurred in connection with
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such damage caused by Supplier or its Subcontractors.
11.8 LOCAL CONDITIONS; DIFFERING SITE CONDITIONS. (a)
Upon execution of a Work Order, Supplier admits to being reasonably informed as
to the nature and locations of the Work set forth therein; provided, however,
that in all cases, except as otherwise provided in Section 11.18,
ARCHAEOLOGICAL SITES; ENVIRONMENTAL PROTECTION, Differing
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Site Conditions shall be the basis for a Change Order and additional
compensation as set forth below in this Section 11.8.
(b) Delays, Additional Work, or extra costs may result
from Differing Site Conditions of which neither Ordering Company nor Supplier
should reasonably have had knowledge at the time of the effective date of the
earlier of the Supplemental Agreement, the Work Order and the Change Order. In
such case:
(i) Supplier shall, promptly and before Differing
Site Conditions are disturbed, notify the Engineer in writing by means
of the Ordering Company Change Order Form of such conditions;
(ii) After receiving notice from Supplier, the
Engineer shall promptly investigate the Differing Site Conditions,
and, if in his reasonable judgment, such conditions exist, the
Ordering Company Representative shall by means of a Change Order make
an equitable adjustment to the Price and the Completion Schedule, as
agreed by Supplier; and
(iii) No claim of Supplier for an equitable
adjustment because of Differing Site Conditions shall be allowed
unless written notice has been given as required.
11.9 OUTSIDE PLANT SERVICES SCHEDULING. Prior to the
pre-construction meeting, Supplier shall submit a detailed Outside Plant
Services Scheduling schedule as set forth in the Specifications. The Engineer,
Supplier and Ordering Company Representative shall hold weekly status meetings
at mutually agreed upon times and places. Additional coordination between the
parties will be held on an as needed basis as set forth in the Specifications.
11.10 INSPECTION AND CORRECTION OF DEFECTS; ACCEPTANCE.
(a) Ordering Company's Representative shall have free access to the Work
performed and materials furnished by Supplier under this Agreement for the
purpose of inspection thereof. Prior to the commencement of the Warranty
Period (as defined in Section 11.12, WARRANTY, below), Supplier shall upon
receipt of written request from Ordering Company's Representative, furnish
sufficient labor and facilities at Supplier's expense, to make an inspection
of Work already completed by uncovering and exposing the Work for inspection.
(b) If the inspection discloses that the Work reasonably
conforms to the applicable Specifications in all material respects, the cost to
Supplier of (i) uncovering and exposing the Work, and (ii) examining and
restoring of the Work shall be considered a Change Order and shall be paid for
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by Ordering Company. In addition, if completion of the Work has been delayed
thereby, Supplier shall be granted a suitable extension of time and/or delay
and disruption compensation, as mutually determined by Ordering Company and
Supplier.
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(c) If the inspection discloses that the Work does not
conform to the applicable Specifications in all material respects, Supplier
shall not have a basis for a Change Order and shall correct the Work at its own
expense. The Completion Date shall not be extended because of any delay caused
by such non-conforming Work.
(d) If Ordering Company notifies Supplier of a defect or
non-conformance during the progress of the Work or prior to Final Acceptance or
Beneficial Occupancy, Supplier will schedule the repair or replacement of such
Work within two (2) work days after receipt of written notice.
(e) Supplier may submit to Ordering Company a notice of
completion, placing Ordering Company on notice that the Work is complete and
ready for inspection. Ordering Company shall inspect the Work promptly and in
no event later than seven (7) business days after receipt of such notice. In
the event that Ordering Company does not inspect the Work within such time
period, Final Acceptance shall be deemed to have occurred with respect to such
Work. If the inspection results in a Punch List, Final Acceptance shall occur
when the Punch List is complete to Ordering Company's reasonable satisfaction.
Again, Supplier may submit a notice of completion regarding the Punch List and
the same procedure set forth above shall apply (i.e., Ordering Company shall
inspect the Work no later than seven (7) business days after receipt of such
notice and Final Acceptance shall be deemed if Ordering Company fails to
inspect within that time).
11.11 SUPERVISION; CONTROL OF WORK. (a) Supplier shall
keep on the Work site a competent Superintendent and any necessary assistants
and all of them shall be reasonably satisfactory to Ordering Company's
Representative.
(b) Supplier shall have full control and direction (i)
over the mode and manner of doing the Work, subject to Sections 6.20,
COMPLIANCE WITH LAWS, and 11.18, ARCHAEOLOGICAL SITES; ENVIRONMENTAL
PROTECTION, and MOPS and (ii) of its personnel employed on or about the Work.
11.12 WARRANTY.
(a) FOR PRODUCTS. The Warranty for Products is set
forth in Section 8.2, WARRANTY; the Warranty Period is set forth in
Exhibit 8-1, provided, however, that the Warranty Period begins on
the earlier of Final Acceptance of a completed Work Order or
Beneficial Occupancy.
(b) FOR SERVICES. The warranty shall begin on the
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earlier of Final Acceptance of a completed Work Order or Beneficial Occupancy
and shall extend for one (1) year (the "Warranty Period"). Supplier agrees to
perform Work in a professional manner; using competent and responsible
personnel trained as required by the most stringent of accepted industry
practice, Supplier practice, Section 6.20 COMPLIANCE WITH LAWS, and Applicable
EH&S Requirements (Section 11.18 (c)); and in accordance with the
Specifications or other
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agreed upon specifications and in accordance with accepted practices in the
community in which the Work is performed using material free from defects
except where such material is provided by Ordering Company. If Work provided
by Supplier proves not to have been so performed, and if Ordering Company
notifies Supplier in writing to that effect within the Warranty Period, then
Supplier shall, at its option, correct any defects or render a full pro-rated
refund or credit based on the original charges for the Work.
(c) If the refund or option is not chosen and if, during
the Warranty Period, Ordering Company notifies Supplier of a defect covered
under paragraphs (a) and (b) above, then Supplier shall commence to repair or
replace such Work within seven (7) days after receipt of written notice.
Notwithstanding the above, if the refund or credit option is not chosen and if
Ordering Company notifies Supplier that the defective or non-conforming Work is
of a critical nature for network protection or for safety reasons, Supplier
shall commence to repair or replace the Work within twenty-four (24) hours
after receipt of written notice.
(d) The warranties provided in this Section 11.12 do not
cover repair for damages, malfunctions or service failures caused by: (i)
actions of any personnel not employed, directly or indirectly, by Supplier;
(ii) Ordering Company's failure to follow Supplier's installation,
maintenance or operation instructions; or (iii) a condition of Force Majeure.
(e) THE WARRANTIES STATED IN THIS SECTION 11.12 ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER EXPRESSED OR IMPLIED
WARRANTIES,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A
PARTICULAR PURPOSE. EXCEPT FOR (a) TANGIBLE PROPERTY DAMAGE AND
PERSONAL
INJURY FOR WHICH SUPPLIER IS HELD LIABLE AND (b) THE REMEDY PROVIDED
IN SECTION
5.1(e), ORDERING COMPANIES' REMEDIES, ORDERING COMPANY'S SOLE AND
EXCLUSIVE
REMEDY SHALL BE SUPPLIER'S OBLIGATION TO REPAIR, REPLACE, MAKE
CORRECTIONS OR
REFUND AS SET FORTH ABOVE IN THIS WARRANTY.
(f) PRODUCT RELOCATION OR MODIFICATION. Ordering Company
shall advise Supplier promptly of any change in location or modification to any
Product covered by warranty service under this Agreement. If such change, in
Supplier's opinion, creates a safety hazard or is likely to cause a
malfunction, Supplier may at Ordering Company's expense, correct the
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condition. If the condition cannot be corrected to Supplier's reasonable
satisfaction, Supplier reserves the right to terminate without liability
warranty service under this Agreement for the products relocated and/or
modified.
11.13 SAFETY; EMERGENCY. (a) Supplier shall be responsible
for the safety of the Work it performs; provided, however, that Supplier shall
not be responsible for any unsafe circumstance caused by Ordering Company or
Others.
(b) Whenever, in the reasonable opinion of Ordering
Company or the Engineer, Supplier has not taken sufficient precautions for the
safety of the public or the
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protection of the Work or adjacent structures or property, and whenever, in the
reasonable opinion of Ordering Company or the Engineer, an emergency has arisen
and immediate action is considered necessary, then Ordering Company, with prior
notice to Supplier, may provide suitable protection by causing Work to be done
and material to be furnished and placed. To the extent that Supplier is
responsible for such emergency, the reasonable out-of-pocket cost of such Work
and material shall be borne by Supplier, and if the same is not paid on
presentation of the bills therefor, such costs may be deducted from amounts due
or to become due Supplier. The performance of such emergency Work shall not
relieve Supplier to the extent of its responsibility for damage which may
occur. Ordering Company shall make a good faith effort to contact and utilize
the services of Supplier to correct the emergency protection problem prior to
retaining the services of another contractor.
11.14 ENGINEER'S DRAWINGS AND SPECIFICATIONS. (a) Supplier
will be furnished a sufficient number of sets of Drawings including revisions
thereto and sufficient copies of the Specifications without charge. All
Drawings and Specifications shall be returned to the Engineer upon completion
of the Work. Supplier may retain sufficient copies to perform its Warranty
administration.
(b) The Drawings shall be signed by Ordering Company's
Representative and by Supplier.
(c) Supplier shall conduct a normal and customary check
of all dimensions, elevations, and quantities indicated on the Drawings and
lists furnished by the Engineer. If Suppliers discovers in the course of its
work, major discrepancies between the Drawings and the conditions at the site,
errors or omissions in the Drawings, and in the layout as given by stakes,
points, or instructions, Supplier shall notify the Engineer. Supplier will
not be allowed to take advantage of errors or omissions in the Drawings or
other Agreement Documents. Full instructions will be furnished by the Engineer
should such error or omission be discovered, and Supplier shall carry out such
instructions as if originally specified; provided, however, that in the event
that such instructions result in an increase in Supplier's costs or in a
Construction Delay (as defined in Section 11.20, CONSTRUCTION DELAY, below) in
the Completion Schedule, Supplier shall be entitled to reasonable compensation
and, if necessary, an extension in the Completion Schedule.
11.15 REFERENCE STANDARDS. Reference to the standards of
any technical society, organization, or association, or to codes of local or
state authorities, or AT&T EH&S Practices shall mean the latest standard, code,
Specification, or tentative standard adopted and published, unless specifically
stated otherwise. Since the Agreement will likely cover multiple years, except
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as otherwise required by Section 6.20, COMPLIANCE WITH LAW, Supplier will be
given sufficient time to assess and comply with new standards, and to request
additional time and/or compensation for compliance.
11.16 RECORDS. Supplier shall maintain complete records
including, but not limited to all labor and equipment hours, material
purchased, and Work subcontracted to other
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parties. The records shall be maintained in accordance with recognized
commercial accounting practices and in such manner that they may be readily
audited. The records, including all supporting documents, shall be available
at all reasonable times for audit by Ordering Company both during the contract
period and for one year following the date of final payment or until all
disputes, if any, between Supplier and Ordering Company have been finally
resolved, whichever is later. Supplier shall also maintain weekly sheets,
showing all labor and equipment employed and material received.
(a) Supplier shall maintain at the site where Work is
being performed or Supplier's local construction office a file of current
copies of all Drawings, Specifications, and other Agreement Documents and
supplementary data.
(b) Supplier shall create a timed and dated pictorial
record of the Site, including paths of ingress and egress, before and after
Work is performed for the purpose of precluding or settling claims.
11.17 UNFAVORABLE CONSTRUCTION CONDITIONS. (a) During
periods of unfavorable weather, wet or frozen grounds, or other unsuitable
construction conditions, Supplier shall confine its operations to Work which
will not be affected adversely thereby. No portion of the Work shall be
constructed under conditions which would adversely affect the quality or
efficiency thereof, unless special means or precautions are taken by Supplier
to perform the Work in a proper and satisfactory manner.
(b) If adverse weather conditions are encountered by
Supplier or its subcontractor(s) which are abnormal for the location and time
of year for which such claim is made, the construction schedule shall be
extended by an amount of time equal to the effect of such adverse weather. If
adverse weather is the basis of a claim by Supplier for additional time, such
claim shall be documented by Supplier and include data substantiating that
weather conditions were abnormal for the period of time in question and
Supplier could not have been reasonably anticipated such adverse weather and
that such weather conditions had an adverse effect on the construction
schedule.
11.18 ARCHAEOLOGICAL SITES; ENVIRONMENTAL PROTECTION. (a)
Known archaeological, historical or cultural sites along the route will be
indicated on the Drawings by the Engineer.
(b) If archaeological, historical or cultural artifacts
are encountered during construction anywhere along the route, construction at
that location shall stop and the Engineer shall be promptly notified. Supplier
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shall not harm or disturb such artifacts until instructed by Ordering Company
or Engineer as to how to proceed. If an extended delay is anticipated,
Supplier may elect to move to another location of Work. Notwithstanding
anything to the contrary herein, Demobilization and Remobilization or
construction delay due to unanticipated
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archaeological findings shall be a basis for extra payment. Ordering Company
shall be responsible for obtaining any necessary permits in order to continue
Work in the affected area.
(c) Ordering Company shall provide Supplier with AT&T
EH&S Practices, including updates. At the end of each calendar year, Ordering
Company shall provide Supplier a list of all AT&T EH&S Practices still in
effect. AT&T EH&S Practices shall be deemed applicable to the Work under a
Work Order only when provided to Supplier at or prior to the date of the Work
Order. Supplier shall at its own expense comply with the most stringent of:
applicable governmental laws, regulations, ordinances, rules, codes, orders,
guidances, permits, approvals; applicable easement or license conditions;
applicable Supplier EH&S practices; and applicable AT&T EH&S Practices
(collectively "Applicable EH&S Requirements").
(d) Supplier shall be deemed the generator of all waste
associated with the Work and shall dispose of that waste at its own expense as
set forth in Section 11.18(c), ARCHAELOGICAL SITES; ENVIRONMENTAL PROTECTION,
above. "Waste" shall include without limitation all hazardous and
non-hazardous substances and materials associated with the Work which are
intended to be discarded, scrapped, or recycled. It shall be presumed that all
substances and materials associated with the Work that are not incorporated
into the Work (including without limitation damaged components or tools,
leftovers, containers, garbage, scrap, residues or byproducts), except for
substances and materials that Supplier or Ordering Company intend to use in
their original form in connection with similar work, are waste.
(e) In the event conditions are discovered or created at
or near the site of the Work which may require (i) investigation or remediation
or (ii) unforeseen measures to protect the environment, health or safety
(collectively "Adverse EH&S Conditions"), the party discovering the condition
shall immediately notify the other party. The party in the best position to do
so (or, if the parties are equally situated, Supplier) will then immediately
take reasonable measures temporarily to contain or otherwise avoid exacerbation
of or exposure to the conditions. Unless Ordering Company affirmatively
notifies Supplier otherwise, Supplier shall also take such other actions as
Applicable EH&S Requirements prescribe.
(f) In the event Supplier's failure to comply with
Section 11.18(c), ARCHAELOGICAL SITES; ENVIRONMENTAL PROTECTION, above or
Supplier's negligence or willful misconduct was a not insignificant cause of
(i) the Adverse EH&S Conditions or (ii) exacerbation of the Adverse EH&S
Conditions, Supplier shall indemnify and hold harmless Ordering Company and be
responsible for all costs associated with curing the Adverse EH&S Conditions.
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In all other events Ordering Company shall indemnify and hold harmless Supplier
from and be responsible for all costs associated with curing the Adverse EH&S
Conditions.
11.19 REPORTING DEFECTS. (a) If any part of Supplier's
Work depends, for its proper execution or results, upon the Work of any Others,
excepting Subcontractors, Supplier shall inspect and promptly report to
Ordering Company's Representative any defects in the Work
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that render it unsuitable for the proper execution or results, and Supplier
shall not proceed with that phase of the Work until so authorized by Ordering
Company's Representative. Ordering Company may request and Supplier shall
provide such reports in writing.
(b) Supplier shall be made aware of the delivery status of
Ordering Company furnished materials and of the progress of construction Work
being performed under separate contracts, in each case as informed by Ordering
Company pursuant to (c) below.
(c) Ordering Company will furnish information to Supplier
which may be available to it regarding the status of Ordering Company furnished
materials or construction Work being performed under separate contracts.
11.20 CONSTRUCTION DELAY. (a) Supplier will complete all
Work on or before the Completion Date unless either Ordering Company agrees to
extend that Date or Supplier is entitled to an extension pursuant to this
Agreement.
(b) Ordering Company will perform all of its obligations,
including provision of labor and materials to be furnished by it in such a
manner so as not to delay the progress of the Work (such being a "Construction
Delay"), and in event of its failure to do so, thereby causing loss to Supplier
or as a result of one or more of the circumstances set forth in paragraph (c)
immediately below, Ordering Company agrees that it will compensate Supplier for
such loss and, if necessary, reschedule the Completion Date to a mutually
agreed upon date. Supplier agrees that if Supplier shall delay the progress of
the Work in breach of its obligations hereunder and such delay causes Ordering
Company to sustain a loss, then Supplier will reimburse Ordering Company for
such loss, subject to the limitation of Supplier's liability set forth in
Article 5 of this Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement, among the causes of "Construction Delay" for which Supplier shall be
compensated and the Completion Date shall be rescheduled pursuant to paragraph
(b) immediately above, are the following:
(i) Lack of Ordering Company Permits;
(ii) Lack of Ordering Company furnished material;
(iii) Work stoppage by landowner;
(iv) Work stoppage by permitting agency even
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though Supplier has met the requirements of the relevant permits;
(v) Railroad company denying access to the
right-of-way or rail due to railroad's operations which regulate the
Work conditions;
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(vi) Work stoppage by Ordering Company to implement new
requirements, including changes to the Completion Date or Completion
Schedule;
(vii) Waiting for the presence of the Ordering Company
Representative;
(viii) Defective or damaged Ordering Company furnished
material;
(ix) Special Service Precautions per the Specifications; and
(x) Waiting for Engineer's written approval to proceed due to
the interference of other contractors.
(d) Delay time is payable by Ordering Company for Construction
Delay for the reasons set forth above, when Supplier is prevented from or
delayed in working on any contracted item that is available to Supplier.
Construction Delay time will begin after Supplier has been denied access to the
Work or Ordering Company has delayed the Work for an accumulated time in excess
of one (1) hour during a given normal working day.
(e) The term "accumulated time" shall include discontinuous
amounts of time and shall be applied to an entire crew. For example, a
four-person crew that incurred a forty five (45) minute Construction Delay due
to a permit problem and then later in the same working day incurred an
additional Construction Delay for another reason, would begin Construction Delay
time for the crew after fifteen (15) minutes of the second delay. If a crew is
into Construction Delay time at the end of a Work day and is prevented from
working on any contracted item available the next Work day and the condition
that caused the Construction Delay still exists, then Construction Delay time
shall continue without the requirement that it be in excess of one hour for the
second day.
(f) If Supplier is forced to cease all or a portion of its
operations due to lack of right-of-way, by reason of injunction against Ordering
Company or other legal obstacles, or delay in Ordering Company-furnished
material deliveries, Ordering Company may request that Supplier move to another
site or to move off the project. At Ordering Company's request, Supplier shall
move from the portion of the project upon which he was previously engaged to
another point in the project designated by Ordering Company or to an Ordering
Company location completely off the project. Supplier shall at a later date
complete the Work left behind, when requested to do so by Ordering Company, and
such Work shall be done at prices specified in the Proposal plus Demobilization
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and Remobilization.
11.21 NOTICE OF LABOR DISPUTES. Whenever Supplier has knowledge
that any labor dispute is delaying or threatens to delay the timely performance
of the Work, Supplier shall promptly give notice thereof to Ordering Company.
Supplier shall confirm the notice in writing within three (3) Work days.
11.22 PERFORMANCE AND PAYMENT BOND. Ordering Company shall have
the right to require Supplier to furnish a bond for the full and faithful
performance of the Work and
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for the payment of all bills, debts and obligations related to the Work. The
bond shall be in such form, principal amount and with such sureties as may be
required by Ordering Company. Ordering Company shall reimburse Supplier for the
net premium on the bond upon receipt of the sureties' bills to Supplier.
Supplier agrees and represents that no amount for bond premium is included in
the contract price.
11.23 APPLICATION FOR PAYMENT; TERMS OF PAYMENT. (a) Supplier
shall render to Ordering Company Applications for Payment for an amount based
upon the quantities of Work in a Work Order which have been completed by
Supplier during the monthly invoicing period, unless billing is rendered sooner
pursuant to a written modification of this Section or for delay and disruption
compensation or Special Conditions accrued as provided for elsewhere in the
Agreement. Ordering Company shall promptly approve the Application for Payment
within ten (10) business days or notify Supplier of any disputed items in an
Application for Payment. If at the expiration of such ten business day period,
Supplier does not receive written approval or rejection from Ordering Company,
the Application for Payment shall be deemed approved.
(b) The method of measurement, basis of payment and conditions
under which payments for Special Conditions are made can be found in the
Specifications.
(c) For material furnished by Supplier, the same terms of payment
shall apply as the terms which apply for Services billed by Supplier. For
Material supplied by Ordering Company and ordered from Supplier pursuant to
another Article of this General Purchase Agreement (e.g., an Order for cable),
the terms of payment are set forth in such Article or elsewhere in this
Agreement.
11.24 LIENS. If as a result of any act or omission of Supplier,
any lien is filed by a Subcontractor against Ordering Company, Supplier shall
cause the same to be discharged of record within forty-five (45) days after
receipt of written notice thereof from Ordering Company.
ARTICLE XII
CONSULTING SERVICES
12.1 GENERAL. The provisions of this Article 12 shall be
applicable to the furnishing by Supplier to Ordering Company of Consulting
Services. Software development is not a Consulting Service governed by this
Article; it is governed by Article 9 of this Agreement.
12.2 STATEMENT OF WORK. (a) From time to time hereafter, Ordering
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Company may authorize Supplier to render to Ordering Company Consulting Services
and related work (hereinafter "Work") by submitting an Order to Supplier or by
entering into a Supplemental Agreement with Supplier. All Work conducted by
Supplier in response to such an Order or Supplemental Agreement shall be
considered Work under this Article, and the terms and conditions hereof shall
govern. Supplier shall render all the Services specified in the request within
the time allowed therein and shall meet all interim deadlines set by the
parties.
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(b) Supplier agrees that all information provided to Ordering
Company pursuant to this Agreement will be collected, compiled and provided to
Ordering Company in a lawful and ethical manner. Supplier shall not provide to
Ordering Company any information which has been provided to Supplier under the
terms of a written or oral non-disclosure confidentiality agreement. Such
Information includes, but is not limited to, proprietary, confidential, or trade
secret Information of a party that was obtained by Supplier during Supplier's
prior employment by such party. In the performance of this Agreement, Supplier
shall not at any time: (i) misrepresent itself or its status to any third party;
(ii) provide a false or deliberately misleading reason for inquiries or the
collection of Information; (iii) misstate the nature of its relationship with
Ordering Company; or (iv) use any element of fraud, dishonesty or criminal
conduct in connection with its performance under this Agreement and the
provisions of this Section 12.2.
12.3 OWNERSHIP OF INFORMATION. (a) Ordering Company acknowledges
that Supplier expressly reserves and retains sole ownership in its trademarks
and all intellectual property, including its copyrighted materials (report
formats, creative materials, etc.) and unique inventing and research systems and
methodologies as utilized in performing work. None of the above may be kept,
copied or utilized by Ordering Company in any manner.
(b) Except as expressly set forth herein, nothing contained
herein shall be construed as conferring to either party by implication, estoppel
or otherwise any license or right under any patent, trademark, service mark,
trade dress, indicia of origin, copyright, mask work protection right, or any
other intellectual property right which is owned, controlled by or licensed to
either party.
(c) The parties' respective ownership interests, up to and
including one hundred percent (100%), in and rights to use information used or
produced by Supplier to perform Consulting Services hereunder, other than those
specified above, shall be determined on a case by case basis in each Order or
Supplemental Agreement pursuant to which Ordering Company purchases Consulting
Services from Supplier.
12.4 EQUIPMENT SUPPLIER. Ordering Company warrants that no
current corporate policy, would give rise to Supplier or any of its Affiliated
Companies being disqualified, as a result of this Agreement or the work
performed under it, from bidding upon or being awarded a contract to supply
telecommunications or computer equipment, Software, or related Services to
Ordering Company.
12.5 ORDERING COMPANY'S RESPONSIBILITY. In addition to Ordering
<PAGE>
Company's responsibilities specified in Section 6.4, ORDERING COMPANY' S
RESPONSIBILITY, Ordering Company shall, at no charge to Supplier, provide
Supplier with financial, operational and technical information, data, technical
support, personnel or assistance as may reasonably be required by Supplier to
fulfill its obligations under this Article.
97
<PAGE>
<PAGE>
12.6 WARRANTY. Supplier warrants to Ordering Company that
Services will be performed in a professional manner and in accordance with
Ordering Company's specifications or those referenced in the Order and shall be
in accordance with such requirements or restrictions as may be lawfully imposed
by governmental authority. If the Services prove to be not so performed and if
Ordering Company notifies Supplier within a thirty (30) day period, commencing
on the date of completion of the Service, at Ordering Company's option, Supplier
either will correct the nonconforming Service for which Supplier is responsible
or render a full or prorated refund or credit based on the original charge for
the Services.
98
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this General Purchase
Agreement to be executed by their duly authorized representatives on the
date(s) indicated.
AT&T CORP. LUCENT TECHNOLOGIES INC.
By /s/ By /s/
--------------------------------- ---------------------------------
Name _______________________________ Name________________________________
Title ______________________________ Title ______________________________
Date _______________________________ Date _______________________________
99
<PAGE>
<PAGE> Exhibit (10) (iii)(A)19
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective August 9, 1993, by and between
the American Telephone and Telegraph Company, A New York
Corporation with its headquarters at 32 Avenue of the Americas,
New York, New York 10013 (hereinafter called the"Company"), and
Richard W. Miller (hereinafter called the "Employee").
WHEREAS the Employee has accepted employment with the
Company; and
WHEREAS the Company has assigned and appointed the
Employee to a Senior Management position as Executive Vice
President and Chief Financial Officer of the Company, and in
this capacity, Employee will be a member of the Operations
Committee and the Management Executive Committee and will
report directly to the Chairman of the Board and Chief
Executive Officer of the Company.
NOW, therefore, for and in consideration of the promises
and the mutual agreements hereinafter contained, the Company
and Employee do hereby agree as follows:
1. EMPLOYMENT. Subject to the provisions set forth
elsewhere in this Agreement, the Company hereby employs the
Employee and the Employee hereby accepts employment with the
Company as a Senior Manager for the term set forth in Section 2
of this Agreement. Employee represents and warrants that there
are no agreements or arrangements, whether written or oral, in
effect which would prevent him from rendering exclusive
services to the Company during the term hereof, and that he has
not made and will not make any commitment, agreement or
arrangement, or do any act in conflict with this Agreement.
Such employment shall be upon the terms and conditions
hereinafter contained.
2. TERM OF AGREEMENT. The term of employment hereunder
shall be at the will of each party to this Agreement and
subject to the terms and conditions thereof commencing on
August 9, 1993. Except as expressly set forth herein, the
Employee shall have no further rights or entitlements beyond
the terms of this Agreement, including but not limited to the
right of continued employment.
3. EMPLOYEE'S COMPENSATION AND BENEFITS. Except as
otherwise provided in this Agreement and as more fully set
forth hereinbelow, the Employee shall be treated in the same
manner as and be entitled to such benefits and other
perquisites and terms and conditions of employment as other
Senior Managers of the Company at a similar level and with
comparable responsibilities.
(a) BASE SALARY. The Company agrees to pay and
the Employee agrees to accept for services to be rendered
hereunder and during the term of this Agreement a base salary
of not less
<PAGE>
<PAGE>
than $540,000.00 per year, payable in installments on a monthly
or other periodic basis in accordance with the prevailing
payroll practices of the Company.
(b) PERQUISITES. During the term of this
Agreement, the Company shall (i) provide the Employee with
perquisites of employment as are commonly provided to an
Employee of the Company at a similar level and with comparable
responsibilities, and (ii) reimburse the Employee for
reasonable and necessary business expenses incurred in
connection with his employment, in accordance with employee
business expense practices applicable to employees of the
Company at a similar level and with comparable
responsibilities.
(c) BENEFITS. Subject to the terms and provisions
of this Agreement, the Employee shall be entitled to coverage
under or benefits in accordance with those employee and Senior
Management benefit plans and programs as are made available, or
which may subsequently become applicable, to other Senior
Managers of the Company at comparable levels. The Employee
shall be entitled to five (5) weeks of annual vacation
applicable to 1993 and subsequent years. The Employee shall
also be entitled to relocate under the terms of the AT&T
Management Relocation Plan.
(d) INCENTIVE PLANS. During the term of this
Agreement, the Employee will be eligible for consideration for
both long and short term awards pursuant to the terms of the
Company's 1987 Long Term Incentive Program and short-term
annual incentive arrangements, respectively, (the "Incentive
Plans") under the terms of such Incentive Plans as are in
effect from time to time. Short-term annual incentives for
AT&T Senior Managers currently take the form of AT&T
Performance Awards (APA), Merit Awards (MA), Unit Performance
Funding (UPF), and Superior Achievement Awards (SAA). Both the
UPF and SAA programs are newly instituted in 1993. Award
levels under the APA, UPF and SAA programs are predicated on
overall corporate performance and award levels under the MA
program are determined by individual and team contributions.
The Incentive Plans are designed to address the conditions of
an ever-changing marketplace. Accordingly, the Company cannot
guarantee the continuation of the current Incentive Plan
format. Moreover, except as detailed in the next two sentences
(for the APA/MA/UPF and SAA) and the following paragraph (for
Performance Shares and Stock Options), the Company cannot make
a definitive representation regarding the size, if any, of
individual Incentive Plan awards in any given year. Employee's
1993 Short Term incentives payable in 1994 will not be prorated
to reflect partial service in 1993. Moreover, the sum of all
annual cash incentives (i.e. APA/MA/UPF/SAA) paid to Employee
in 1994 for 1993 performance will not be less than $250,000.
<PAGE>
<PAGE>
The Company will award 7,397 Performance Shares to the
Employee as of the effective date of this Agreement under the
Company's 1987 Long Term Incentive Program covering the 1993-
1995 performance period. In addition and in accordance with
the terms of this award, the Employee shall receive quarterly
Dividend Equivalents with payment to begin November 1, 1993.
Distributions of Long Term Performance Shares will be in
accordance with the applicable 1987 Long Term Incentive Program
and award provisions. Also, as of the effective date of this
Agreement, 25,880 Stock Options will be granted to the Employee
under the Company's 1987 Long Term Incentive Program. In
addition to the above awards of Performance Shares and Stock
Options which represent the 1993 standard grants to a Senior
Manager at Employee's level, Employee will be granted: (1)
8,932 Performance Shares attributable to the 1991-1993
performance period and 8,932 Performance Shares attributable to
the 1992-94 performance period. Employee shall receive
quarterly Dividend Equivalents on these special Performance
Share Awards. (2) 50,000 Stock Options, one-third (1/3) of
which will vest on the first anniversary, one-third (1/3) on
the second and the final one-third (1/3) on the third
anniversary of such special grant.
(e) SUCCESSOR PLANS AND PROGRAMS. The
compensation, incentive and employee/Senior Management benefit
and perquisite plans, programs, and practices outlined in this
Agreement reflect their current provisions. The Company
reserves the right to modify, suspend, change or terminate any
such plans, programs or practices at any time. In the event
that after the date of this Agreement the Company establishes
any new, replacement or additional pension, retirement,
disability or annuity plans, programs or practices of incentive
compensation for Senior Managers of the Company at comparable
levels, the Employee shall also be eligible, at the Company's
discretion, for coverage under such pension, retirement,
disability and annuity plans, programs or incentive
compensation practices in accordance with the terms thereof.
<PAGE>
<PAGE>
4. SPECIAL PENSION ARRANGEMENT.
In the event the Employee's employment is
terminated, pursuant to any Employee or Company initiated
termination for any reason other than disability or "Cause,"
eight years or more after the effective date of this Agreement,
the Company agrees to provide an immediate special pension
benefit based on actual Company Net Credited Service and
calculated under the then-existing Company qualified and non-
qualified pension formulas (including the AT&T Mid-Career
Pension Plan formulas), but without reference to age and
service eligibility requirements. Non-qualified pension
benefits included in the calculation of this special benefit
pension would include the AT&T Non-Qualified Pension Plan and
the AT&T Mid-Career Pension Plan (but specifically would
exclude the Minimum Retirement Benefit and Surviving Spouse
Benefit payable under the AT&T Senior Management Long-Term
Disability and Survivor Protection Plan). The special pension
benefit amount which results from the application of the AT&T
Management Pension Plan formula shall be used as an offset in
the calculation of the benefit payable under the alternate
formula of the AT&T Non-Qualified Pension Plan. Special
pension benefit payments shall be paid to the Employee from
Company operating income. The total pension amount which
results from application of this Section 4 will be reduced by
all amounts actually received by Employee under any other AT&T
or subsidiary or affiliated company's qualified or non-
qualified pension, retirement, disability or annuity plan,
program or practice, except the AT&T Long-Term Savings Plan for
Management Employees and the AT&T Senior Management Incentive
Award Deferral Plan. Pension benefits payable under this
Section 4 will be afforded the same "ad hoc" inflation
adjustments as may be applicable to the AT&T Non-Qualified
Pension Plan from time to time. Moreover, Employee's Company-
paid Senior Management Basic Life Insurance Program ("SMBLIP")
benefit, equal to one times base salary, will be maintained
after such termination as if Employee was eligible for a
Service Pension under the AT&T Management Pension Plan. All
other terms and conditions of the SMBLIP will continue to
apply. Moreover, and following a termination under this
Section 4, Employee will be entitled to the following post-
termination ancillary entitlements, administered in a manner
consistent with the then-current (i.e., at Employee's
termination of employment and thereafter) treatment of Service
Pension eligible Senior Managers and in accordance with the
terms and conditions applicable to each Senior Management plan
or practice:
- COBRA entitlements (as mandated by Federal statutes)
- Continuation of outstanding Company Stock Options
and Performance Shares and continuation of Senior
Management Telephone Concession Service, may be
provided but only to the extent such benefits are
provided to Service Pension eligible Senior Managers
at the time Employee terminates employment with the
Company.
<PAGE>
<PAGE>
5. SPECIAL RELOCATION PROVISION. Employee will be
eligible for a special capital loss provision which provides a
capital loss benefit equal to the lesser of $200,000 or the
actual capital loss sustained by Employee. This amount will be
grossed-up for income tax purposes in accordance with the
provisions of the AT&T Management Relocation Plan (AT&TMRP).
Eligible improvements will be determined in accordance with
AT&TMRP provision but ignoring the 50% constraint. Any capital
loss benefits payable under the terms of the AT&TMRP are
offsets to this special capital loss provision.
6. POWERS AND DUTIES. The Employee shall devote his
full time, interests and abilities to the performance of duties
under this Agreement, it being understood in connection
therewith that he may, in his discretion and subject to not
interfering with his duties and responsibilities hereunder,
devote time to civic, public and professional activities and
may serve as a Director of other business corporations not
engaged in competition with the Company or any subsidiary or
affiliate of the Company; provided, however, that he shall not
accept directorships on more than three boards of other
business corporations; and provided, further, that for purposes
of the immediately preceding clause, directorships on the
boards of two or more companies with at least 50% common
ownership shall count as a single company.
7. OPERATION OF AGREEMENT. Notwithstanding any other
term or provision to the contrary, all rights, benefits and
entitlements available under and in accordance with the terms
of this Agreement, except for those provided in Sections 4 and
9, are contingent and dependent upon the Employee maintaining
and continuing employment as a Senior Manager of the Company.
8. RESTRICTIVE COVENANTS.
(a) COMPETITION. Notwithstanding any other
provisions of this Agreement, any and all payments (except
those made from Company-sponsored Tax Qualified Pension or
Welfare Plans), benefits or other entitlements to which the
Employee may be eligible in accordance with the terms hereof,
may be forfeited, whether or not in pay status, at the
discretion of the Company, if the Employee, at any time without
the consent of the Company is employed by, becomes associated
with, renders service to, or owns an interest in any business
that is competitive with the Company, any subsidiary or
affiliate of the Company, or any business in which the Company
or any such subsidiary or affiliate has a substantial interest
(other than as a shareholder with a non-substantial interest in
such business), all as determined by the Company.
(b) CONFIDENTIALITY. The Employee agrees that he
will not, at any time during his employment pursuant to this
Agreement or thereafter, disclose or use any trade secret,
proprietary or confidential information of the Company or any
<PAGE>
<PAGE>
subsidiary or affiliate of the Company, obtained during the
course of his employment, except as required in the course of
such employment or with the written permission of the Company
or, as applicable, any subsidiary or affiliate of the Company.
Further, the Employee agrees not to disclose or discuss the
terms and provisions of this Agreement with anyone except for
his legal and financial advisors and members of his immediate
family.
The Employee agrees that at the time of the
termination of his employment with the Company, whether at the
instance of the Employee or the Company, and regardless of the
reasons therefore, he will deliver to the Company, and not keep
or deliver to anyone else, any and all notes, files, memoranda,
papers and, in general, any and all physical matter containing
information, including any and all documents significant to the
conduct of the business of the Company or any subsidiary or
affiliate of the Company, except for any documents for which
the Company or any subsidiary or affiliate of the Company has
given written consent to removal at the time of the termination
of the Employee's employment.
(c) Violation by the Employee of any of the
provisions of this Section 8 may result, at the discretion of
the Company, in the cancellation of all rights and entitlements
of the Employee hereunder and shall give the Company any other
rights it may have under applicable law to restrict the use of
any information and/or documents and/or for the return of any
such information and/or documents.
9. TERMINATION PROVISIONS.
(a) If at any time during the period beginning from
the effective date of this Agreement and ending three years
thereafter, Employee is terminated by the Company for any
reason other than Cause or disability the Employee will be
entitled to:
(i) If Employee is terminated during the
first twenty-four months, Employee will
receive the higher of (1) $1,080,000 or
(2) 200% of Employee's annual base
salary rate in effect as of the date of
Employee's termination;
(ii) If Employee is terminated during the 12-
month period subsequent to Employees
initial 24 months of service, Employee
will receive an amount determined in
accordance with the following schedule:
THE GREATER OF:
PERCENT OF
TERMINATION ANNUAL
IN MONTH DOLLARS BASE SALARY
25 $1,020,600 189
26 961,200 178
27 907,200 168
28 858,600 159
29 810,000 150
30 761,400 141
31 718,200 133
32 680,400 126
33 642,600 119
34 604,800 112
35 572,400 106
36 540,000 100
<PAGE>
<PAGE>
(b) The Company may terminate the Employee for
Cause after written notice specifying the cause of such action
shall have been given to Employee by the Company. For purposes
of this Agreement, Cause shall mean:
(i) Employee's breach of any of the terms of
this Agreement;
(ii) Employee's conviction (including a plea
of guilty or nolo contendere) of a
felony or any crime of theft, dishonesty
or moral turpitude;
(iii) Gross omission or gross dereliction of
any statutory or common law duty of
loyalty to the Company.
(c) If the Employee terminates his employment with
the Company at any time for personal or other reasons or if
Employee dies or is terminated because of long-term disability
or is terminated by the Company for Cause, as specified in
Section 9(b) hereinabove, and except as provided in Section 4
of this Agreement, he will be treated in the same manner as any
other Senior Manager of the Company without reference to any
provision of this Agreement.
(d) Any payments made pursuant to this Section 9
are subject to: (1) the provisions, restrictions and
limitations of Section 8 above, (2) the AT&T Non-Competition
Guideline, (3) payable in twelve (12) equal monthly
installments commencing the month after the month of
termination and (4) subject to Employee signing a standard
Release and Agreement not to sue the Company. The form of such
Release and Agreement will be that then in use by the Company
in connection with terminated Senior Managers.
10. DISPUTE RESOLUTION. At the option of the Employee or
the Company, any dispute, controversy, or question arising
under, out of or relating to this Agreement or the breach
thereof, shall be referred for decision by arbitration in the
State of New Jersey by a neutral arbitrator selected by the
parties hereto. The proceeding shall be governed by the Rules
of the American Arbitration Association then in effect or such
rules last in effect (in the event such Association is no
longer in existence). If the parties are unable to agree upon
such a neutral arbitrator within thirty (30) days after each
party has given the other written notice of the desire to
submit the dispute, controversy or question for decision as
aforesaid, then either party may apply to the American
Arbitration Association for the appointment of a neutral
arbitrator, or, if such Association is not then in existence or
does not desire to act in the matter, either party may apply to
the Presiding Judge of the Superior Court of any county in New
Jersey for the appointment of a neutral arbitrator to hear the
parties and settle the dispute, controversy or question, and
such Judge is hereby authorized to make such appointment. In
the event that either party exercises the right to submit a
dispute arising hereunder to arbitration, the decision of the
neutral arbitrator shall be final, conclusive and binding on
all interested persons and no action at law or in equity shall
be instituted or, if instituted, further prosecuted by either
party other than to enforce the award of the neutral
arbitrator.
<PAGE>
<PAGE>
In the event that the Employee is successful in pursuing
any claim or dispute arising out of this Agreement, the Company
shall pay all of the Employee's attorneys' fees and costs,
including the compensation and expenses of any Arbitrator,
unless (1) the Arbitrator, or any court in which litigation is
filed, finds the Company to be without liability on material
issues raised or (2) the dispute or lawsuit is frivolous in
nature. In any other case, the Employee and the Company shall
each bear all their own costs and attorney fees, except that
the Company shall pay the costs of any Arbitrator appointed
hereunder.
11. ASSIGNMENT.
(a) EMPLOYEE. This Agreement is a personal
contract and the rights and interests of the Employee hereunder
may not be sold, transferred, assigned, pledged or hypothecated
by him.
(b) COMPANY. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and
assigns, including but not limited to any subsidiary or
affiliate of the Company to which the Employee may be employed
or assigned, by or with the consent of the Company. If the
Employee is assigned to or becomes employed by any subsidiary
or affiliate of the Company during the term of this Agreement,
such subsidiary or affiliate shall be considered to have been
assigned all rights of the Company and accepted all obligations
of the Company hereunder.
12. TAXES. It is understood that all payments and
benefits provided under this Agreement are subject to
withholding for applicable federal, state and local income (or
similar) taxes.
13. ENTIRE AGREEMENT ;AMENDMENTS. This Agreement
comprises 13 pages, 15 Sections and an Appendix which
represents the entire Agreement between Employee and the
Company in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties,
whether oral or written, by any officer, employee or
representative of any party hereto. No amendments or
modifications to this Agreement may be made except in writing
signed by the Company, through its authorized representative,
and the Employee.
14. SEVERABILITY. If any provisions of this Agreement
shall be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate or render unenforceable
this entire Agreement, but rather this entire Agreement shall
be construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and
obligations of the parties shall be construed and enforced
accordingly.
15. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with the laws of the State of New
Jersey, without reference to any applicable conflict of law
provisions.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and the Company has affixed its corporate seal as of
the day and year first above written.
Company:
By: ______________________
H. W. Burlingame
Date: ______________________
Witnessed:______________________
Date: ______________________
Employee:______________________
Richard W. Miller
Date: ______________________
Witnessed:______________________
Date: ______________________
<PAGE> 1
Exhibit (12)
AT&T CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
(Unaudited)
For the Year Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Earnings Before Income
Taxes $ 935 $7,518 $6,003 $5,638 $ 581
Less Interest Capitalized
During the Period 120 47 72 62 79
Less Undistributed
Earnings of Less Than
50% Owned Affiliates 94 46 (39) (27) 32
Add Fixed Charges 2,148 1,928 1,940 2,127 2,371
------ ------ ------ ------ ------
Total Earnings $2,869 $9,353 $7,910 $7,730 $2,841
====== ====== ====== ====== ======
Fixed Charges
Total Interest Expense
Including Capitalized
Interest $1,785 $1,561 $1,575 $1,737 $1,872
Interest Portion of
Rental Expenses 363 367 365 390 499
------ ------ ------ ------ ------
Total Fixed
Charges $2,148 $1,928 $1,940 $2,127 $2,371
====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges 1.3 4.9 4.1 3.6 1.2
====== ====== ====== ====== ======
<PAGE> 1 Exhibit 13
Our strategic restructuring will launch three new
customer-focused companies.
A Discussion and Analysis of Our Results of Operations and Financial Condition
Record revenues in 1995 reflected growth in long distance and wireless
communications services, increased sales of network telecommunications and
business telephone systems and growth in financial services and leasing.
Customer demand in the global information industry continues to rise, spurred by
worldwide economic growth, technological advances and the declining relative
cost of information technology.
Notwithstanding this revenue growth, after evaluating market conditions,
including economic, financial, governmental and technological factors, we
concluded that changes would be in the best interests of our stakeholders. On
September 20, 1995 we announced our plan to separate AT&T Corp. (AT&T) into
three independent, publicly held, global companies: communications services
(which will retain the AT&T name), communications systems and technologies
(which has been named Lucent Technologies Inc.) and transaction-intensive
computing (formerly AT&T Global Information Solutions, now NCR Corporation).
Our goal is to reduce the complexity of our operations making our businesses
more competitive and responsive to customers by eliminating some strategic and
internal conflicts. Separating into three independent companies will enhance
our ability to focus on strategic businesses that add value to customers, to
take advantage of new opportunities and to improve cost structures and operating
efficiencies. We are planning an initial public offering of approximately 15%
of Lucent Technologies Inc. (Lucent) common stock in the first half of 1996. We
expect to distribute to our shareowners, subject to certain conditions, all of
our remaining interest in Lucent and all of our interest in NCR Corporation
(NCR) by the end of 1996. Also announced as part of the restructuring was our
intent to pursue the sale of our remaining 86% interest in AT&T Capital
Corporation (AT&T Capital). Our goal is to complete all of these actions by the
end of 1996. However, our plan is subject to several conditions, including
receipt of a favorable tax ruling, other required approvals, and the absence of
events or developments that would cause the plan to have a material adverse
impact on AT&T or its shareowners. We expect transactions associated with this
plan to be tax-free to shareowners. Pages 17-19 of this report show summary
financial information for the three separate companies.
In the fourth quarter of 1995, we recorded restructuring and other charges
of approximately $6.2 billion before taxes primarily related
to our plans to separate into three companies as described above. The charges
reduced net income by approximately $4.2 billion, or $2.61 per share. As a
result, net income for the year was $139 million, or $.09 per share. Excluding
these charges, net income increased 16.6% in 1995 compared with 1994 to $5,492
million ($3.45 per share).
The charges cover plans to sell several businesses, including the AT&T
Microelectronics Interconnect business and AT&T Paradyne. We
also plan to close our 338 AT&T owned retail stores (the Phone Center Stores) by
May 1996, to realign our consumer products distribution
<PAGE>
<PAGE> 2
<TABLE>
<CAPTION>
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(UNAUDITED)
AT&T Corp. and Subsidiaries
Dollars in millions (except per share amounts)
1995* 1994 1993* 1992 1991* 1990 1989 1988* 1987 1986* 1985
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Total revenues $79,609 $75,094 $69,351 $66,647 $64,455 $63,228 $61,604 $62,067 $60,726 $61,975 $63,159
Research and
development expenses 3,718 3,110 3,111 2,924 3,114 2,935 3,098 2,988 2,810 2,599 2,527
Operating income (loss) 1,215 7,949 6,498 6,529 1,428 5,358 4,751 (2,500) 4,071 974 3,561
Income (loss) before extraordinary
item and cumulative effects
of accounting changes 139 4,710 3,702 3,442 171 3,475 2,820 (1,527) 2,374 609 1,856
Net income (loss) 139 4,710 (5,906) 3,442 171 3,666 2,820 (1,527) 2,374 434 1,856
Earnings (loss) per
common share before extraordinary
item and cumulative effects
of accounting changes 0.09 3.01 2.39 2.27 0.12 2.38 1.95 (1.06) 1.61 0.36 1.21
Earnings (loss) per
common share 0.09 3.01 (3.82) 2.27 0.12 2.51 1.95 (1.06) 1.61 0.24 1.21
Dividends declared per
common share 1.32 1.32 1.32 1.32 1.32 1.32 1.20 1.20 1.20 1.20 1.20
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS AND CAPITAL
Property, plant and
equipment - net $22,264 $21,279 $20,434 $20,209 $19,286 $18,906 $17,362 $16,793 $22,124 $22,247 $23,182
Total assets 88,884 79,262 69,393 66,104 62,071 57,036 45,228 41,945 45,583 44,305 44,824
Long-term debt including
capital leases 11,635 11,358 11,802 14,166 13,682 14,579 10,116 10,172 9,060 8,234 8,104
Common shareowners'
equity 17,274 17,921 13,374 20,313 17,973 17,928 15,727 13,694 16,913 15,849 16,945
Net capital expenditures 5,997 4,572 4,142 4,043 4,086 4,120 3,959 4,453 3,885 3,977 4,303
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA (Cont'd)
(UNAUDITED)
AT&T Corp. and Subsidiaries
Dollars in millions (except per share amounts)
1995* 1994 1993* 1992 1991* 1990 1989 1988* 1987 1986* 1985
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER INFORMATION
Operating income (loss)
as a percentage of
revenues 1.5% 10.6% 9.4% 9.8% 2.2% 8.5% 7.7% (4.0)% 6.7% 1.6% 5.6%
Net income (loss) as a
percentage of revenues 0.2% 6.3% (8.5)% 5.2% 0.3% 5.8% 4.6% (2.5)% 3.9% 0.7% 2.9%
Return on average common
equity 0.7% 29.5% (47.1)% 17.6% 0.9% 21.2% 19.1% (8.9)% 14.3% 2.0% 10.6%
Data at year-end:
Stock price per share $64.75 $50.25 $52.50 $51.00 $39.125 $30.125 $45.50 $28.75 $27.00 $25.00 $25.00
Book value per common
share $10.82 $11.42 $ 8.65 $13.31 $12.05 $12.33 $10.92 $ 9.57 $11.87 $11.04 $11.73
Debt ratio 62.0% 58.3% 64.4% 53.1% 54.8% 53.5% 45.0% 45.8% 38.4% 39.6% 39.9%
Debt ratio excluding
financial services 44.3% 34.1% 49.1% 40.8% 46.0% 47.6% 39.3% 42.2% 35.2% 37.6% 38.4%
Employees 299,300 304,500 317,700 319,000 322,300 333,400 343,000 367,400 366,200 379,900 400,400
------------------------------------------------------------------------------------------------------------------------------
<FN>
*1995 data reflect $7.8 billion of pretax business restructuring and other charges.
1993 data reflect a $9.6 billion net charge for three accounting changes.
1991 data reflect $4.5 billion of pretax business restructuring and other charges.
1988 data reflect a $6.7 billion pretax charge due to accelerated digitization of the long distance network.
1986 data reflect $3.2 billion of pretax charges for business restructuring, an accounting change and other items.
</FN>
/TABLE
<PAGE>
<PAGE> 4
channels and to consolidate and reorganize corporate and business unit
operations over the next two years. Accordingly, the fourth-quarter
charges included separation costs for nearly 40,000 employees, of
which about 24,000 were management and 16,000 were occupational. We
expect 70% of all separations to be completed by the end of 1996, with
the majority of the remainder being completed in 1997.
During the third quarter of 1995, we approved NCR's plans to
refocus its business. The goal is to return NCR to profitability.
Major aspects of the plan are to discontinue the manufacture of
personal computers and their sale through reseller channels, to reduce
the number of industry markets it serves and to consolidate facilities
globally. NCR expects to complete these actions during 1996. As a
result, in the third quarter of 1995, AT&T recorded charges of
approximately $1.6 billion before taxes, which reduced net income by
approximately $1.2 billion, or $0.74 per share.
The pretax total of the third and fourth quarter 1995 charges was
recorded as $670 million in costs of telecommunications services,
$1,676 million in costs of products and systems, $717 million in costs
of rentals and other services, $6 million in costs of financial
services and leasing, $4,359 million in selling, general and
administrative expenses and $417 million in research and development
expenses. If viewed by type of cost, the pretax charges reflect
$3,417 million for employee separations and other related costs,
$2,533 million for asset write-downs, $895 million for closing,
selling and consolidating facilities and $1,000 million for other
items. (See also Note 8 to the consolidated financial statements.)
In 1993 we provided $498 million before taxes for restructuring
activities. These charges covered actions at NCR to reduce its
workforce through early retirement and voluntary separation programs,
actions at our telecommunications services units to centralize support
services, actions to close plants that manufactured telecommunications
network systems and actions to restructure operations that serviced
the U.S. federal government. If viewed by type of cost, the charges
reflect $235 million for employee separations and other related
matters, $171 million for facility closings and $92 million for other
related items. These charges were recorded as $13 million in costs of
products and systems, $90 million in costs of other services, $373
million in selling, general and administrative expenses and $22
million in research and development expenses.
All parts of our business face substantial and intensifying
competition. Product pricing and technology are under continual
competitive pressure, and business and market conditions are changing
rapidly. Our business leaders must continuously reassess their
resource needs and redirect them as necessary to address market
conditions and to reduce costs. Such steps can include the expansion
of service offerings to provide larger bundles of services sought by
customers. They can also include closing and consolidating
facilities, disposing of assets, reducing the workforce or withdrawing
from markets. Actions to enhance efficiency through continuous
improvement are part of our commitment to quality.
The sections that follow describe our main revenue streams. Within
these sections we describe the main service and product lines of the
public companies that will emerge from our strategic restructuring.
<PAGE>
<PAGE>5
******************************************************************
A chart appears containing the following information:
AT&T versus S&P 500
Total shareowner return assuming
reinvestment of dividends
Your investment has outperformed the S&P 500 since the largest
divestiture in corporate history, which resulted from a consent
decree, in 1984. Only twelve years later we're preparing for the
second largest divestiture in corporate history; this time it's our
choice.
<TABLE>
<CAPTION>
<S>
@: AT&T
#: S&P 500
<C>
600
@
#
500
@
@ @
# # 400
#
@ #
@
300
#
#
@
@# 200
@# @#
@#
@
@# # 100
1/84 84 85 86 87 88 89 90 91 92 93 94 95 000
</TABLE>
Assumes $100 invested in AT&T common stock and in the S&P 500 index on
January 1, 1984 and all dividends reinvested.
******************************************************************
<PAGE> 6
Telecommunications Services
These revenues, which include traditional long distance, wireless
services and other communications services, grew 6.0% in 1995 and 4.3%
in 1994. The gains were mostly due to higher volumes, as the AT&T
network handled a record 61.6 billion calls in 1995. Billed minutes
for traditional, time-billed long distance services rose nearly 9.0%
in 1995, compared with an increase of more than 7.5% in 1994 and about
5.5% in 1993. In particular, we saw volume growth in calling card,
business inbound services and consumer international services.
Volume growth exceeds revenue growth because more customers are
taking advantage of our many calling plans and promotions. However,
the gap between revenues and volume growth narrowed in 1995 to 4%.
This narrowing reflected less movement among calling plans by both
business and residential customers and some targeted pricing actions.
The merger of AT&T and McCaw Cellular Communications, Inc. (McCaw)
in 1994 and the acquisition of personal communications services (PCS)
licenses in 1995 strengthened the competitive position of our
communications services business. These initiatives will create new
bundled offering opportunities, thereby enhancing our prospects for
growth in revenues and earnings. The purchase of the minority owners'
stake in LIN Broadcasting Corporation (LIN) in October 1995 gave us
increased control of important cellular markets. AT&T now has the
right to provide cellular services or PCS in 23 of the nation's top 25
markets. AT&T Wireless Services, formerly McCaw, is the leading U.S.
provider of wireless communications services.
Total revenues from wireless services, which include cellular and
messaging services, grew 28.3% to $2,926 million in 1995, from $2,280
million in 1994 and $1,760 million in 1993, mainly due to additional
cellular service subscribers. Having met government conditions, in
1995 we were allowed to begin to jointly market long distance and
cellular services. Thus far we've had a favorable response to this
promotion. Cellular customers, reported on the same basis as
consolidated wireless services revenues, increased to 3.9 million at
year-end 1995, from 2.8 million in 1994 and 1.9 million in 1993.
Cellular customers served by companies in which AT&T has or shares a
controlling interest increased to 5.5 million at year-end 1995, from
4.0 million in 1994 and 3.0 million in 1993. Average revenue per
subscriber declined in 1995 reflecting pricing pressures experienced
by all cellular service providers, as well as lower average usage per
subscriber attributed to growth in subscribers for emergency and other
personal use.
We also furthered our strategy of providing a broad package of
telecommunications services by launching AT&T branded on-line
services, such as the AT&T Learning Network, the AT&T Business
Network, AT&T Easy World Wide Web Service and Personal Online
Services. These services provide dial-up and dedicated internet
access, navigational tools and information directories, hosting and
transaction services, and content.
In February 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") became law. The Telecommunications Act
preempts state and local requirements which prohibit or have the
effect of prohibiting an entity from providing telecommunications
<PAGE>
<PAGE> 7
services. In addition, the Telecommunications Act requires incumbent
local exchange carriers (LECs) including the Regional Bell Operating
Companies (RBOCs), to implement a checklist of conditions that are
designed to foster local exchange competition. Although the
Telecommunications Act permits interexchange carriers and others to
begin providing local exchange service at any time, negotiations with
LECs over access and interconnection agreements and the adoption of
implementing rules and regulations will be necessary before effective
local exchange competition commences.
The Telecommunications Act permits immediate RBOC provision of
interexchange services outside of their home service areas and certain
incidental interexchange services in their home service areas, such as
those provided in conjunction with commercial mobile and cellular
services. In addition, an RBOC is permitted to provide interexchange
services originating in any state in its region upon receiving FCC
approval, which is subject to a number of conditions, including that
the RBOC has implemented the Telecommunications Act checklist of
conditions throughout such state and, generally has entered into an
interconnection agreement with a facilities-based competitor upon
request. Once approved to provide interexchange services in a single
in-region state, an RBOC is also permitted to begin manufacturing
telecommunications equipment.
AT&T believes that the Telecommunications Act's provisions for the
opening of local exchange markets to competitive entry are significant
and that the restrictions placed on RBOC entry into in-region
interexchange services should promote service competition in the
RBOC's monopoly markets before RBOC provision of in-region
interexhange services. Nonetheless, there is no assurance that, in
the administration of the Telecommunications Act, the rules and
regulations to be adopted will result in meaningful facilities-based
competition prior to RBOC provision of in-region interexchange
service.
To the extent that such implementing rules and regulations do not
contain adequate provision for facilities-based local exchange
competition, there is a substantial risk that AT&T and other
interexchange service providers would be at a disadvantage to the
RBOCs in the provision of local exchange services. In addition,
regardless of provisions for facilities-based local exchange
competition, the simultaneous entrance of seven RBOC competitors for
interexchange services is likely to adversely affect AT&T's
long-distance revenues and could adversely affect earnings. There is
still a significant amount of uncertainty as to the extent, timing and
impact on AT&T of the RBOCs entrance into interexchange services.
Similarly, the impact of AT&T's entrance into local services cannot
reasonably be predicted. Notwithstanding the strong local entry
provisions contained in the Telecommunications Act, various factors,
including start-up costs associated with entering new markets, local
conditions and obstacles and the final form of implementing rules and
regulations, could adversely affect future revenues and earnings.
Nevertheless, the legislation, plus other public policy and
technological changes, will likely open new markets for AT&T in
different areas of communications services. AT&T's competitive
<PAGE>
<PAGE> 8
strategy includes using its networking capabilities, respected brand
name and other resources to take advantage of these new opportunities
as they arise.
Costs of telecommunications services include $670 million of
restructuring and other charges in 1995. Excluding these charges, the
gross margin percentage on telecommunications services rose to 44.9%
in 1995 from 42.4% in 1994 and 39.9% in 1993. This upward trend is
mainly the result of lower per-minute access costs - costs for
reaching customers through local networks. The Federal Communications
Commission (FCC) approved changes to the price-setting methodology for
access costs, effective August 1995. These changes included a
reduction in the maximum prices (price caps) local telephone companies
can charge for connections. These price caps will be adjusted
annually for inflation and changes in productivity. Additionally, the
local telephone companies are required to use higher productivity
factors in the future, which should lead to lower charges.
*********************************************************************
The Pace of Change in the Global Information Industry
We must anticipate and react quickly to continuous and rapid changes
in our markets. Technological developments create new markets,
shorten product life cycles and hasten the convergence of different
areas of the global information industry. The rapid growth, enormous
size and global scope of this industry attract new entrants and
encourage existing competitors to broaden their offerings. Alliances,
joint ventures, mergers and acquisitions between market participants
and regulatory and legislative decisions that affect these markets,
further alter the competitive landscape.
Current and potential competitors in telecommunications services
include local telephone companies, other long distance carriers, cable
companies, internet service providers, wireless service providers and
other companies that offer network services. Other entrants from
adjacent segments of the communications and information services
industries, include providers of business information systems, systems
integrators and companies outside the U.S. seeking to expand their
markets. Some of these companies already have a strong market
presence, brand recognition and existing direct customer
relationships. All of these conditions contribute to substantial and
intensifying competition.
Public policy changes including the Telecommunications Act are
likely to bring not only increased competitive pressures, but may also
open new markets to AT&T. Our strategy is to use our strong
networking capabilities, a well-known and respected brand name and
other strengths to capitalize on opportunities that arise.
*********************************************************************
<PAGE>9
********************************************************************
A pie chart appears containing the following information:
1995 SOURCES OF REVENUES
As percentage of total revenue
The markets for our products and systems are growing fastest outside
the U.S. as many countries expand and modernize their
telecommunications infrastructure. Global competition in
telecommunications services is developing now and will likely
accelerate.
11% International Revenues
From operations located in other countries
15% International Revenues
From U.S. operations (international telecommunications
services and exports)
74% U.S. Revenues
*******************************************************************
Products and Systems
Products and systems sales climbed 5.9% in 1995 and 18.1% in 1994,
reflecting continued growth in sales both inside and outside of the
United States.<PAGE>
<PAGE> 10
Products and Systems
Dollars in millions 1995 1994 1993
Revenues
Telecommunications network
products and systems $10,665 $ 9,785 $ 8,345
Communications products
and systems 4,899 4,494 3,692
Microelectronics products and
other* 2,798 2,674 2,418
Computer products and systems 4,050 4,208 3,470
Products and systems $22,412 $21,161 $17,925
Gross margin percentage 28.4% 37.3% 38.8%
*Other product revenues are mainly from computing media that customers
use with automated teller machines and retail scanning equipment, and
business forms.
Most of the revenues from telecommunications network products and
systems, communications products and systems, and microelectronics
products are from units that will be a part of Lucent.
Revenues from telecommunications network products and systems rose
9.0% in 1995 and 17.3% in 1994. In both years we had higher sales
both inside and outside of the United States. The growth outside of
the U.S. was due primarily to increased sales to service providers.
In the U.S. sales increased to independent telephone companies, cable
companies and competitive access providers. About $243 million of the
1994 increase in revenues came from consolidating AG Communications
Systems Corporation when we raised our ownership to 80%. Sales of
switching and transmission equipment to the local telephone companies
declined in 1995. We believe that was due to delays in spending by
those customers and recent legislative initiatives which caused
reluctance to purchase from a potential competitor.
Sales outside of the U.S. of telecommunications network products and
systems rose $730 million or 27.2% in 1995, led by strong sales in
Saudi Arabia and China. Most systems and equipment for
telecommunications networks are sold under contracts that produce
revenues for several years. In 1994 we were awarded a $4 billion
contract to build a fully digital communications network in Saudi
Arabia. This contract will launch AT&T's GSM (global systems for
mobile communications) offerings and is expected to be completed by
the beginning of the next decade.
Revenues from sales of business communications products and systems
rose 9.0% in 1995 and 21.7% in 1994. Sales of business communications
equipment grew both inside and outside of the U.S. the last two years.
In 1995 U.S. growth was largely due to increased sales of private
branch exchanges (PBXs), including Definity# products and
voice-processing systems. Sales of business communications products
outside of the U.S. increased $89 million or 26.5% in 1995, led by
increases in the United Kingdom, Canada and France. In 1994 we also
had higher sales of Definity PBX products, partly reflecting upgrades
to accommodate changes in the North American Numbering Plan and sales
of
___________
# Registered Trademark
<PAGE>
<PAGE> 11
Conversant# voice-processing products. Growth in sales outside the
U.S. in 1994 reflected acquisitions in Europe and Latin America as
well as higher demand.
Revenues from sales of consumer communications products declined in
1995 mainly because of competitive pricing pressures and an increasing
proportion of lower-margin products. The decline was due to lower
sales of corded telephones and telephone answering machines which was
partially offset by higher sales of cordless and cellular phones. In
1994 revenues rose again primarily because of strong consumer sales of
cellular and cordless phones. In 1995 we introduced three pagers, the
first in a line that will include alphanumeric models in early 1996
and two-way pagers designed for eventual use with PCS. In January
1996 we announced our intention to close the 338 AT&T Phone Center
Stores most of which will be closed by May 1996.
AT&T Submarine Systems, Inc. (Submarine Systems) supplies and
constructs submarine cable systems and is a part of the communications
services units. Revenues from these systems fall within the
communications products and systems category. This unit had revenues
of almost $900 million in 1995 which reflected growth of more than 14%
over 1994. Revenues in 1994 increased almost 12% compared with 1993.
Revenues from sales of microelectronics components (including
integrated circuits, digital signal processors and power systems) and
other products grew 4.6% in 1995 and 10.6% in 1994. The growth
occurred despite the sale of the NCR microelectronics unit in early
1995, which had 1994 revenues of $383 million. Most of the revenue
increase in microelectronic components reflected increased sales of
integrated circuits, both inside and outside of the United States.
NCR is responsible for the majority of our sales of computer
products and systems. Revenues from these sales declined 3.7% in 1995
after rising 21.3% in 1994. The decline in revenues was primarily due
to lower sales of personal computers and large systems. Price
competition for personal computers was severe. Most personal computers
from different manufacturers use the same or comparable
microprocessors and software, leading customers to focus increasingly
on price. This is one of the reasons that NCR is discontinuing the
manufacture of personal computers. In 1994 we changed the end of the
fiscal year from November to December for NCR operations outside of
the United States. This was done to report essentially all of our
operations on a calendar year. This change added $223 million in
revenues ($113 million of product sales) and a marginal loss in 1994.
Cost of products and systems included $1,676 million in provisions
for business restructuring and other charges in 1995 and $13 million
in 1993. Apart from these provisions, the rise in cost of products
and systems is mainly associated with the higher sales volumes.
Excluding the charges, the gross margin percentage on products was
35.9% in 1995, compared with 37.3% in 1994 and 38.9% in 1993. The
rising proportion of lower-margin products in the sales mix led to the
margin decline in both years.
Rentals and Other Services
Revenues from rentals and other services for computer products and
systems come primarily from NCR. The services are mainly professional
________
#Registered Trademark
<PAGE>
<PAGE>12
services - such as designing solutions and systems for customers - and
maintenance contracts.
Rentals and Other Services
Dollars in millions 1995 1994 1993
Revenues
Computer products and systems $2,841 $2,818 $2,641
Communications products and
systems services 1,755 1,680 1,457
Communications products and
systems rentals 795 955 1,174
Other* 798 763 871
Rentals and other services $6,189 $6,216 $6,143
Gross margin percentage 33.8% 47.1% 46.0%
*Other revenues are mainly from telemarketing services, information
technology services, facility rentals and licenses and royalties.
Revenues from maintenance contracts for communications products grew
as a result of increases in related sales. Rental revenues - from
renting telephone sets or answering machines to consumers and PBX
equipment to businesses - continued to decline and are expected to
continue to decline in future years.
"Other" revenues are mainly from the activities of units that will
remain with AT&T after our reorganization. An example is
telemarketing services provided by AT&T American Transtech.
Provisions for business restructuring and other charges added $717
million to cost of rentals and other services in 1995 and $90 million
in 1993. Excluding these changes, the gross margin percentage was
45.4% in 1995, compared with 47.1% in 1994 and 47.4% in 1993. This
decline was due mainly to the shifting mix of revenues, particularly
the declining proportion of high-margin rentals.
Financial Services and Leasing
These revenues come mainly from AT&T Universal Card Services
(Universal Card) and AT&T Capital. As previously announced, AT&T
intends to pursue the sale of AT&T Capital. Both revenues and
earnings for these two companies continued to grow over the past two
years because of their continued earning asset growth.
Financial Services and Leasing
Dollars in millions 1995 1994 1993
Revenues
AT&T Capital $1,577 $1,384 $1,360
Universal Card 2,250 1,782 1,228
Eliminations, adjustments
and other* (96) (49) (84)
Financial services and leasing $3,731 $3,117 $2,504
Gross margin percentage 29.1% 31.0% 31.7%
Universal Card Information:
Total book and managed finance
receivables $14,118 $12,380 $9,154
Accounts in millions 17.6 15.1 11.7
*Other revenues are mainly from lease finance assets that AT&T
retained when AT&T Capital was reorganized in 1993 as well as
elimination of lease revenues from AT&T affiliates.
<PAGE>13
The gross margin percentage for these services declined in 1995 due
to competitive pricing pressures and to higher credit losses and fraud
at Universal Card. In 1994 rising interest rates narrowed margins.
Both Universal Card and AT&T Capital set reserves for losses based on
experience, current delinquencies and the outlook for the economy.
The continuing growth of Universal Card is illustrated by its
receivables and number of customer accounts. Universal Card's "book"
and managed receivables, which include the $3.5 billion securitized in
1995, were $14.1 billion at December 31, 1995, up 14.0% from year-end
1994. Universal Card will retain the servicing and customer
relationships of the credit card accounts that were securitized.
Universal Card did not securitize receivables before 1995.
The intent to pursue the sale of AT&T Capital does not affect AT&T
Capital's role as a provider of AT&T's customer financing pursuant to
an operating agreement between AT&T and AT&T Capital. We expect that
at the completion of the restructuring, AT&T Capital will retain its
current operating agreements regarding its leasing arrangements with
AT&T, Lucent and NCR. The sale of AT&T Capital also will not affect
AT&T's unconditional guarantee of all of the AT&T Capital outstanding
debt at the end of March 1993. The guaranteed debt amounted to $417
million at the end of 1995. AT&T Capital's debt issued subsequent to
March 1993 relies on its own credit.
Operating Expenses
Selling, general and administrative expenses included $4,359 million
of restructuring and other charges in 1995, $246 million of
merger-related expenses in 1994 and $373 million of restructuring and
other charges in 1993. Excluding these charges, such expenses were
26.1% of total revenues in 1995, compared with 25.8% in 1994 and 25.5%
in 1993. Part of the 1995 increase was related to our response to
competitive conditions and to our increased global presence, resulting
in increased spending on sales and sales support efforts. We focused
advertising expenditures on retaining and winning back residential
customers of traditional long distance services and acquiring new
cellular subscribers.
In 1994 expenses of $246 million related to the merger of AT&T and
McCaw reduced net income by $187 million, or $0.12 per share. We
accounted for the merger with McCaw as a pooling of interests.
Therefore, we restated AT&T's financial statements to include McCaw's
results in all periods before the merger.
Research and development expenditures are mainly for work on
wireless systems technology, advanced communications services devices,
and projects aimed at international growth. These expenses included
$417 million of restructuring and other charges in 1995 and $22
million of such charges in 1993. Excluding those charges, research
and development expenses were 4.1% of total revenues in 1995 and 4.1%
in 1994 compared with 4.5% in 1993.
As required by changes in accounting standards, we adopted new
methods of accounting for retiree benefits, postemployment benefits
and income taxes in 1993. We recorded cumulative effects of
accounting changes to reflect our financial statements at the position
they would have been in if we had always used the new methods. As a
<PAGE>
<PAGE>14
result, we took a $9.6 billion after-tax charge which caused a
reported net loss in 1993. The accounting changes did not affect cash
flows.
Similar to other manufacturers, we use, dispose of and remove
substances regulated under environmental protection laws. We have
been named a potentially responsible party (PRP) at a number of
Superfund sites. At most of these sites, our share of the costs is
limited and other PRPs are expected to contribute to the cleanup
costs. We regularly review potential cleanup costs and costs of
compliance with environmental laws and regulations. We provide
reserves for these potential costs and routinely review their
adequacy. In addition, we forecast our expenses and capital
expenditures for existing and planned compliance programs as part of
our regular corporate planning process. We believe that cleanup costs
and costs related to environmental proceedings and ongoing compliance
with present laws will not have a material effect on our future
expenditures, annual consolidated financial statements or competitive
position beyond that provided for at year-end.
In October 1995 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation." This standard establishes
a fair value method for accounting for stock-based compensation plans
either through recognition or disclosure. Upon adoption, which is
required in 1996, we intend to disclose rather than record these
computations. Adopting this standard will not affect our reported
earnings, financial condition or cash flows.
In March 1995 the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
of." Although the standard does not require adoption until fiscal
year 1996, we implemented it effective October 1, 1995. Under this
standard, we consider whether we can recover our costs for impaired
assets whenever events or changes in circumstances call that recovery
into question. The adoption of this standard did not materially
affect our reported earnings, financial condition or cash
flows because this was essentially the same method we used in the past
to measure and record asset impairments. Our 1995 restructuring and
other charges included recognition of asset impairments.
Other Income Statement Items
The majority of other income-net is from transactions, such as sales
of assets, that are individually immaterial. In 1995 it reflects
gains from selling the NCR microelectronics unit and several other
properties. We also sold properties and recognized gains in 1994 but
these were partially offset by losses on the shutdown of a subsidiary,
EO Inc., and the uninsured portion of a lost satellite. In 1993 we
had a $217 million gain from exchanging our remaining 77% interest in
UNIX System Laboratories, Inc. for stock in Novell, Inc. We
subsequently recognized declines in the value of the Novell stock.
Also included in other income are earnings and losses from
investments, increases in value of corporate-owned life insurance
policies on officers, and minority owners' interests in the earnings
<PAGE>
<PAGE>15
or losses of subsidiaries. Before we redeemed the preferred stock of
a subsidiary in mid-1994, we recorded the dividends on those shares as
a charge against other income-net.
Interest expense increased slightly in 1995 compared with 1994
despite higher levels of average debt. This was due to lower average
rates on long-term debt in 1995. The decline in interest expense in
1994 was mainly due to refinancing long-term debt at more favorable
rates.
The effective income tax rate is the provision for income taxes as a
percentage of income before taxes and cumulative effects of accounting
changes. The effective tax rate of 85.1% for 1995 was impacted by the
restructuring and other charges recognized. Excluding business
restructuring and other charges, such as merger-related expenses from
all three years, our effective tax rate was 37.5% in 1995, compared
with 37.9% and 38.3% in 1994 and 1993, respectively. The decline in
1994 compared with 1993 was mainly due to credits for foreign tax
payments and the deferred tax effects of redeeming preferred stock.
The effective tax rate in 1995 remained at essentially the same level
as 1994 primarily due to lower state tax rates.
Cash Flows
Operating cash flow increased in both 1995 and 1994, mainly because of
higher income before restructuring and other charges. About $160
million of the 1995 pretax charges for business restructuring and
other related items required cash payments during the year. Another
$4.4 billion of the pretax charges will also require future cash
payments primarily in 1996 and 1997.
Most of our capital expenditures support telecommunications network
services, providing for growth in calling volumes, the introduction of
new technology and enhanced reliability.
Another large part of our investing activities is purchasing
finance assets. Our investments in finance assets, which include
credit card receivables, leases and equipment for rentals, fuel the
growth in revenues and earnings from AT&T Capital and Universal Card.
The $1.68 billion purchase of PCS licenses in 1995 is intended to
permit us to offer broadband PCS in 21 major trading areas.
Additionally, in 1995 we completed the $3.3 billion acquisition of the
minority owners' stake in LIN, a subsidiary of AT&T Wireless Services.
We will continue to make substantial investments in our
communications services business. Notable plans include the buildout
of PCS sites, preparing to provide local services in the U.S. and
funding a variety of projects and joint ventures to offer
telecommunications services in other countries.
We intend to conclude an agreement for 49% of a joint venture with
Grupo Alfa to offer services in Mexico when that country opens to
competition in 1997. We will supply our share of the investment up to
$1 billion over the next four to six years. We also have a 40% stake
in UniWorld, a joint venture with Unisource, that began operations in
January 1996, providing services to multinational business customers
in Europe. The venture was formed initially with about $200 million
in assets, but may expand, partly because of possible entry into other
markets.
Investing activities at Lucent focus on manufacturing and research
<PAGE>
<PAGE>16
and development. In 1995, we agreed to purchase part of the public
network assets of N.V. Philips' Communications Systems division for
approximately $260 million. This acquisition would give us products
and an employee base to improve our access to cellular equipment
markets in Europe, South America and Southeast Asia.
Competition in communications and computing is global and
increasingly involves multinational firms and partners from different
nations. We believe commitments of resources to expand globally are
necessary for future growth. Although we reported operating losses
for the past three years in our units outside of the U.S., we continue
to believe that these operations and markets provide excellent
opportunities for future revenues and earnings.
For all three years, operating cash flows covered capital
expenditures and dividend payments. Operating cash also helped fund
other investing activities such as our purchases of PCS licenses and
the remaining 48% of LIN in 1995. We expect operating cash will
continue covering capital expenditures and dividends in 1996.
The ratio of total debt to total capital (debt plus equity)
increased to 62.0% at December 31, 1995, compared with 58.3% at
December 31, 1994, mainly because of lower equity caused by the 1995
charges and the increase in debt associated with acquiring PCS
licenses and the remaining interest in LIN. Most of our debt supports
financial services and leasing operations. Excluding financial
services and leasing operations and the impact of the restructuring
and other charges taken in 1995, our debt ratio would have been 44.3%
at December 31, 1995, compared with 34.1% at December 31, 1994.
AT&T has raised all necessary external financing through issuances
of commercial paper and long-term debt, as well as asset-backed
securities and equity. Additionally, we have unused available lines
of credit totaling approximately $12.4 billion at December 31, 1995.
We expect to be able to arrange any future needed financing using
these same sources, with the timing of issue, principal amount
and form depending on our needs and the prevailing market and economic
conditions. Under a Master Trust, $3.5 billion of notes backed by
Universal Card receivables were issued in 1995.
In 1995 our debt issuances were primarily to support our financial
services and leasing businesses. Much of the financing activity in
1993 and 1994 was refinancing, generally to get lower rates, but
sometimes to change maturities. In each of the past three years, we
issued new shares of common stock in our shareowner and employee
purchase plans. The dilution in earnings per share from new issuances
for these plans was not material.
Our asset and liability management strategy for our financial
services business is to match the average maturities of our borrowings
with the average cash flows of our portfolio assets and to match
floating-rate assets with floating-rate debt and fixed-rate assets
with fixed-rate debt. Cash flow projections are based on assumptions
about customer prepayments, refinancings and charge-offs that are
derived from our past experience as well as current customer
preferences, competitive market conditions, portfolio growth rates and
our portfolio mix. We issue commercial paper and long-term notes and
use interest rate swaps to achieve a matched portfolio position in our
finance assets.
<PAGE>
<PAGE>17
Foreign currency contracts and options are used to limit risks due
to changing currency exchange rates. We do not speculate on interest
rates or foreign currency rates. Instead, we seek to reduce the
possible effects of fluctuations in these rates. This leads to more
stable earnings in periods when these rates are changing.
The notional amounts of derivative contracts do not represent
direct credit exposure or future cash requirements. Credit exposure
is determined by the market value of derivative contracts that are in
a gain position as well as the ability of the counterparties to
perform its payment obligation under the agreements. We control
credit risk of our derivative contracts through credit approvals,
exposure limits and other monitoring procedures. There were no past
due amounts related to our derivative contracts at December 31, 1995,
nor have there been any charge-offs during the three years ended
December 31, 1995.
We sell equity interests in AT&T subsidiaries only when
opportunities or circumstances warrant. We have no current plans to
sell material interests in subsidiaries beyond those announced and
described previously.
Financial Condition, Including Liquidity
Our cash account includes funds to finance the day-to-day business and
funds for pending transactions.
We turned over our inventory 3.1 times in 1995, compared with 3.2
times in 1994. This slight decline reflects higher levels of shipped
but not invoiced inventory due to terms and conditions of large
network contracts. Accounts receivable turned over an average of 5.7
times in 1995, compared with 6.0 times in 1994. The decrease in 1995
relates to lower turnover levels in our computer business, where
revenues have been declining at a greater rate than the related
receivables, as well as the impacts of some billing takebacks from the
local telephone service carriers for our long distance service
business.
The fair value of our pension plan assets is greater than our
projected pension obligations. We record pension income when our
expected return on plan assets plus amortization of the transition
asset (created by our 1986 adoption of the current standard for
pension accounting) is greater than the interest cost on our projected
benefit obligation plus service cost for the year. Consequently, we
continued to have pension income that added to our prepaid pension
costs in 1995.
Higher payroll and benefit related liabilities and other
liabilities are associated with the restructuring and other charges
recorded in 1995.
Other aspects of our financial condition that relate closely to our
investing and financing activity - such as finance receivables,
plant, licensing costs and debt - have been discussed in the section
on cash flows.
Strategic Restructuring
As announced in September 1995 and discussed elsewhere in this report,
AT&T intends to implement a strategic restructuring to separate AT&T
into three independent, publicly held, global companies. Our
<PAGE>
<PAGE>18
plans are subject to several conditions, including receipt of a
favorable tax ruling, other required approvals, and the absence of
events or developments that would have a material adverse impact on
AT&T or its shareowners.
We plan an initial public offering of approximately a 15% interest
in Lucent in the first half of 1996. By the end of 1996, AT&T
intends, subject to certain conditions, to distribute its remaining
interest in Lucent and its interest in NCR to AT&T's shareowners.
The following financial information for Lucent and NCR reflects
those entities as if they had been operating as stand-alone companies
in the periods presented. For example, sales to other entities of
AT&T are included in revenues. Therefore, the sum of the entities'
amounts do not equal consolidated AT&T's results of operations or
financial condition.
The "As Adjusted" column for 1995, excludes the restructuring and
other charges recorded in 1995 as discussed previously.
********************************************************************
A pie chart appears containing the following information:
1995 REVENUES FOR THE FOUR COMPANIES
Shown in percentages of the $82.8 billion total before eliminations
Revenues and profits from transactions between companies are removed
(eliminated) from the income statement while they are a part of AT&T.
Once the companies are separate, these revenues and profits will
remain in their income statements.
62% AT&T Corp.
6.2% Growth* 1993-1995
26% Lucent
9.9% Growth* 1993-1995
10% NCR
6.0% Growth* 1993-1995
2% AT&T Capital
7.7% Growth* 1993-1995
*Compounded Annual Growth Rate
********************************************************************<PAGE>
<PAGE>19
Lucent Technologies Inc.
Lucent includes our businesses that develop, manufacture and service
systems and software for telecommunications applications within the
global telecommunications networking industry. These integrated
systems enable network operators and business enterprises to connect,
route, manage and store information between and within locations.
They range in size from large global public telephone networks to
small-business communications systems and support functions ranging
from simple voice-only applications to complex multifunctional service
offerings. Additionally, substantially all of Bell Laboratories is a
part of this company.
The following table provides summary financial information for
Lucent. It reflects the results of operations of the businesses
transferred to Lucent from AT&T. As a result, the financial
information has been derived from the financial statements of AT&T
using the historical results of operations and historical basis of
assets and liabilities of such businesses. Additionally, it includes
certain assets, liabilities and expenses that were not historically
recorded at the level of, but are primarily associated with, this
business. We believe the assumptions underlying the financial
information to be reasonable. However, the financial information may
not necessarily reflect the results of operations or financial
position of Lucent in the future, or what the results of operations or
financial position would have been had Lucent been a separate,
stand-alone entity during the periods presented.
<PAGE>
<PAGE> 20
Lucent Technologies Inc. 1995
Dollars in millions 1995 As Adjusted* 1994 1993
External revenues $19,294 $19,294 $17,628 $15,767
Internal revenues 2,119 2,119 2,137 1,967
Total revenues $21,413 $21,413 $19,765 $17,734
Gross margin $ 8,468 $ 9,360 $ 8,428 $ 7,646
Operating expenses 9,468 7,559 7,457 6,977
Operating income $(1,000) $ 1,801 $ 971 $ 669
Income before
income taxes $(1,116) $ 1,685 $ 854 $ 666
Total assets $19,722 - $17,340 $17,109
*As adjusted excludes the restructuring and other charges recorded in
1995.
The "internal revenues" in this table represent sales to other
units of AT&T and its affiliates. They do not include any revenues
from sales between operating units of Lucent, which will continue to
be eliminated in consolidation. Most internal revenues are for
network equipment sold to AT&T for the construction and maintenance of
the AT&T Worldwide Intelligent Network, which will remain at AT&T.
As part of AT&T's strategic restructuring, Lucent underwent a
comprehensive review of its operations. Approximately 23,000 of the
total positions to be eliminated come from Lucent. Lucent intends to
focus its investments on its core technologies, primarily through
expanded and targeted research and development efforts. Consequently,
Lucent will exit tangential product lines and markets, including AT&T
Paradyne which manufactures certain data communications equipment and
AT&T Microelectronics Interconnect products business which
manufactures backplanes and printed circuit boards. Lucent's
reorganization efforts also include plans to close all of its 338
Phone Center Stores, most of which will be closed by May 1996. As a
result, Lucent recorded restructuring and other charges in 1995 of
$2,801 million ($1,847 million after taxes). The pretax charges
included $1,509 million for employee separations and other related
items, $627 million for asset write-downs, $202 million for closing,
selling and consolidating facilities and $463 million for other items.
NCR Corporation
We plan to make NCR a stand-alone business focused on transaction-
intensive computing. The new strategy centers around more profitable
products such as massively parallel computer processors, automated
teller machines and retail scanning equipment. This direction also
enhances the company's primary strategy which is to help businesses
use new technology to collect and use information to enhance customer
service. Although NCR is ceasing the manufacture of personal
computers, it will continue to offer personal computers manufactured
by others as part of its total solutions approach.
The following table provides summary financial information for NCR.
It reflects the results of operations of the businesses to be
transferred to NCR from AT&T. As a result, the financial information
has been derived from the financial statements of AT&T using the
historical results of operations and historical basis of assets and
liabilities of such businesses. Additionally, it includes certain
<PAGE>
<PAGE>21
assets, liabilities and expenses that were not historically recorded
at the level of, but are primarily associated with, this business. We
believe the assumptions underlying the financial information to be
reasonable. However, the financial information may not necessarily
reflect the results of operations or financial position of NCR in the
future, or what the results of operations or financial position would
have been had NCR been a separate, stand-alone entity during the
periods presented.
NCR Corporation 1995
Dollars in millions 1995 As Adjusted* 1994 1993
External revenues $ 7,531 $ 7,531 $ 7,939 $ 6,879
Internal revenues 631 631 522 386
Total revenues $ 8,162 $ 8,162 $ 8,461 $ 7,265
Gross margin $ 973 $ 1,904 $ 2,671 $ 2,524
Operating expenses 3,344 2,624 2,773 2,805
Operating income $(2,371) $ (720) $ (102) $ (281)
Income (loss) before
income taxes $(2,354) $ (703) $ 3 $ (264)
Total assets $ 5,181 - $ 6,006 $ 5,207
*As adjusted excludes the restructuring and other charges recorded in
1995.
The "internal revenues" in this table primarily represent sales of
computer products to other units of AT&T and its affiliates.
NCR, as a result of continuing operating losses, has taken decisive
action in 1995 to create a smaller, more focused business,
concentrating on the three industries in which it has a leading
position - retailing, financial and communications.
This resulted in restructuring and other charges in the third
quarter of 1995, of approximately $1.6 billion before taxes ($1.2
billion after taxes). The pretax charges reflect $698 million for
employee separations and other related costs, $564 million for asset
write-downs, $196 million for closing, selling and consolidating
facilities and $191 million for other items.
Ongoing AT&T
The ongoing business of AT&T will include communications services,
wireless services, AT&T Solutions consulting services and our
Universal Card business. Building on the skills from Bell
Labortories, we will also create an AT&T Laboratories unit that will
continue research and development for the ongoing AT&T.
The following table provides summary financial information for the
operations of AT&T that will remain with AT&T.
<PAGE>22
AT&T without Lucent, NCR and AT&T Capital
1995
Dollars in millions 1995 As Adjusted* 1994 1993
Total revenues $51,374 $51,374 $48,315 $45,556
Gross margin $21,305 $22,395 $20,052 $17,973
Operating expenses 15,927 13,877 12,421 11,259
Operating income $ 5,378 $ 8,518 $ 7,631 $ 6,714
Income before income
taxes $ 5,168 $ 8,308 $ 7,289 $ 6,398
Total assets $55,603 - $49,167 $42,724
*As adjusted excludes the restructuring and other charges recorded in
1995.
The main differences between the information above and the
consolidated AT&T results are the exclusion of Lucent, NCR and AT&T's
interest in AT&T Capital.
The businesses that are part of the ongoing AT&T recorded
restructuring and other charges of $3,140 million ($2,104 after
taxes)in 1995 related to AT&T's plans to separate into three
companies. The pretax charges cover consolidating and reorganizing
numerous corporate and business unit operations during the next two
years including force reductions of 17,000 positions as well as the
write-down in value of some unnecessary network facilities, of
nonstrategic wireless assets and some investments. The pretax charges
cover $956 million for employee separations and other related items,
$1,342 million for asset write-downs, $497 million for closing,
selling and consolidating facilities and $345 million for other items.
In connection with the plan to separate into three companies, AT&T,
Lucent and NCR have entered into various agreements. These agreements
generally provide for the separation and distribution of the operating
assets and liabilities, and pension plan assets and liabilities, as
well as tax sharing and allocation. Additionally, various interim
services agreements provide for certain data processing services,
telecommunications services and certain support services on specified
terms.
*********************************************************************
In accordance with SEC rules and regulations, as uncertainties
surrounding our plan to separate are cleared, we will provide more
financial information. If you are interested in directly receiving
this information as it is made public, it will be available by calling
AT&T Shareowner Services toll-free at 1 800 348-8288.
*********************************************************************
<PAGE>
<PAGE>23
REPORT OF MANAGEMENT
Management is responsible for the preparation, integrity and
objectivity of the financial statements and all other financial
information included in this report. Management is also
responsible for maintaining a system of internal controls as a
fundamental requirement for the operational and financial
integrity of results.
The financial statements which reflect the consolidated
accounts of AT&T and subsidiaries and other financial
information shown, were prepared in conformity with generally
accepted accounting principles. Estimates included in the
financial statements were based on judgments of qualified
personnel.
To maintain its system of internal controls, management
carefully selects key personnel and establishes the
organizational structure to provide an appropriate division of
responsibility. We believe it is essential to conduct business
affairs in accordance with the highest ethical standards as set
forth in the AT&T Code of Conduct. These guidelines and other
informational programs are designed and used to ensure that
policies, standards and managerial authorities are understood
throughout the organization. Our internal auditors monitor
compliance with the system of internal controls by means of an
annual plan of internal audits. On an ongoing basis, the system
of internal controls is reviewed, evaluated and revised as
necessary in light of the results of constant management
oversight, internal and independent audits, changes in AT&T's
business and other conditions.
Management believes that the system of internal controls,
taken as a whole, provides reasonable assurance that (1)
financial records are adequate and can be relied upon to permit
the preparation of financial statements in conformity with
generally accepted accounting principles, and (2) access to
assets occurs only in accordance with management's
authorizations.
The Audit Committee of the Board of Directors, which is
composed of directors who are not employees, meets periodically
with management, the internal auditors and the independent
auditors to review the manner in which these groups of
individuals are performing their responsibilities and to carry
out the Audit Committee's oversight role with respect to
auditing, internal controls and financial reporting matters.
Periodically, both the internal auditors and the independent
auditors meet privately with the Audit Committee. These auditors
also have access to the Audit Committee and its individual
members at any time.
<PAGE>
<PAGE>24
The financial statements in this annual report have been
audited by Coopers & Lybrand L.L.P., Independent Auditors. Their
audits were conducted in accordance with generally accepted
auditing standards and include consideration of the internal
control structure and selective tests of transactions. Their
report follows.
Richard W. Miller Robert E. Allen
Executive Vice President, Chairman of the Board,
Chief Financial Officer Chief Executive Officer
REPORT OF INDEPENDENT AUDITORS
To the Shareowners of AT&T Corp.:
We have audited the consolidated balance sheets of AT&T Corp.
and subsidiaries (AT&T) at December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareowners'
equity and cash flows for the years ended December 31, 1995, 1994 and
1993. These financial statements are the responsibility of AT&T's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of AT&T at December 31, 1995 and 1994, and the
consolidated results of their operations, changes in their
shareowners' equity and their cash flows for the years ended December
31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the financial statements, in 1993
AT&T changed its methods of accounting for postretirement
benefits, postemployment benefits and income taxes.
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York
January 25, 1996<PAGE>
<PAGE>25
CONSOLIDATED STATEMENTS OF INCOME AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions (Except per share amounts) 1995 1994 1993
SALES AND REVENUES
Telecommunications services $47,277 $44,600 $42,779
Products and systems 22,412 21,161 17,925
Rentals and other services 6,189 6,216 6,143
Financial services and leasing 3,731 3,117 2,504
TOTAL REVENUES 79,609 75,094 69,351
COSTS
Telecommunications services
Access and other interconnection costs 17,618 17,797 17,772
Other costs 9,123 7,873 7,937
Total telecommunications services 26,741 25,670 25,709
Products and systems 16,045 13,273 10,966
Rentals and other services 4,098 3,287 3,319
Financial services and leasing 2,646 2,152 1,711
TOTAL COSTS 49,530 44,382 41,705
GROSS MARGIN 30,079 30,712 27,646
OPERATING EXPENSES
Selling, general and administrative expenses 25,146 19,653 18,037
Research and development expenses 3,718 3,110 3,111
TOTAL OPERATING EXPENSES 28,864 22,763 21,148
OPERATING INCOME 1,215 7,949 6,498
Other income - net 458 293 546
Loss on sale of stock by subsidiary - - 9
Interest expense 738 724 1,032
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES 935 7,518 6,003
Provision for income taxes 796 2,808 2,301
Income before cumulative
effects of accounting changes 139 4,710 3,702
Cumulative effects on prior years
of changes in accounting for:
Postretirement benefits (net of income
tax benefit of $4,294) - - (7,023)
Postemployment benefits (net of income
tax benefit of $681) - - (1,128)
Income taxes - - (1,457)
Cumulative effects of accounting changes - - (9,608)
NET INCOME (LOSS) $ 139 $ 4,710 $(5,906)
Weighted average common
shares outstanding (millions) 1,592 1,564 1,547
PER COMMON SHARE:
Income before cumulative effects
of accounting changes $ 0.09 $ 3.01 $ 2.39
Cumulative effects of accounting changes - - (6.21)
NET INCOME (LOSS) $ 0.09 $ 3.01 $ (3.82)
The notes on pages 38 through 50 are an integral part of the consolidated
financial statements.<PAGE>
<PAGE>26
CONSOLIDATED BALANCE SHEETS AT&T CORP. AND SUBSIDIARIES
At December 31
Dollars in millions 1995 1994
ASSETS
Cash and temporary cash investments $ 908 $ 1,208
Receivables, less allowances of $1,583 and $1,251
Accounts receivable 15,493 13,671
Finance receivables 13,782 14,952
Inventories 4,074 3,633
Deferred income taxes 4,460 3,030
Other current assets 792 1,117
TOTAL CURRENT ASSETS 39,509 37,611
Property, plant and equipment - net 22,264 21,279
Licensing costs, net of accumulated
amortization of $743 and $613 8,056 4,251
Investments 3,885 2,708
Long-term finance receivables 5,389 4,513
Net investment in operating leases of
finance subsidiaries 888 756
Prepaid pension costs 4,664 4,151
Other assets 4,229 3,993
TOTAL ASSETS $88,884 $79,262
LIABILITIES
Accounts payable $ 7,071 $ 6,011
Payroll and benefit-related liabilities 6,256 4,105
Postretirement and postemployment
benefit liabilities 405 1,029
Debt maturing within one year 16,589 13,666
Dividends payable 527 518
Other current liabilities 8,524 5,601
TOTAL CURRENT LIABILITIES 39,372 30,930
Long-term debt including capital leases 11,635 11,358
Long-term postretirement and postemployment
benefit liabilities 8,908 8,754
Other long-term liabilities 5,170 4,285
Deferred income taxes 5,199 3,913
Unamortized investment tax credits 199 232
Other deferred credits 400 776
TOTAL LIABILITIES 70,883 60,248
MINORITY INTERESTS 727 1,093
COMMON SHAREOWNERS' EQUITY
Common shares par value $1 per share 1,596 1,569
Authorized shares: 2,000,000,000
Outstanding shares: 1,596,005,351 at December 31, 1995;
1,569,006,000 at December 31, 1994
Additional paid-in capital 16,614 15,825
Guaranteed ESOP obligation (254) (305)
Foreign currency translation adjustments 5 145
Retained earnings (deficit) (687) 687
TOTAL COMMON SHAREOWNERS' EQUITY 17,274 17,921
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $88,884 $79,262
The notes on pages 38 through 50 are an integral part of the consolidated
financial statements.<PAGE>
<PAGE>27
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions 1995 1994 1993
Common shares
Balance at beginning of year $ 1,569 $ 1,547 $ 1,526
Shares issued:
Under employee plans 13 11 6
Under shareowner plans 13 8 8
Other 1 3 7
Balance at end of year 1,596 1,569 1,547
Additional paid-in capital
Balance at beginning of year 15,825 14,324 13,485
Shares issued:
Under employee plans 602 538 183
Under shareowner plans 687 424 450
Other 31 133 208
Shares repurchased (4) (2) (4)
Preferred stock redemption - 408 -
Dividends declared (527) - -
Other changes - - 2
Balance at end of year 16,614 15,825 14,324
Guaranteed ESOP obligation
Balance at beginning of year (305) (355) (407)
Amortization 51 50 52
Balance at end of year (254) (305) (355)
Foreign currency translation adjustments
Balance at beginning of year 145 (32) 65
Translation adjustments (140) 177 (97)
Balance at end of year 5 145 (32)
Retained earnings (deficit)
Balance at beginning of year 687 (2,110) 5,644
Net income 139 4,710 (5,906)
Dividends paid (1,570) (1,940) (1,780)
Other changes 57 27 (68)
Balance at end of year (687) 687 (2,110)
Total Shareowners' Equity $17,274 $17,921 $13,374
In March 1990 we issued 13.4 million new shares of common stock in
connection with the establishment of an ESOP feature for the nonmanagement
savings plan. The shares are being allocated to plan participants over ten
years commencing in July 1990 as contributions are made to the plan.
We have 100 million authorized shares of preferred stock at $1 par value. No
preferred stock is currently issued or outstanding.
The notes on pages 38 through 50 are an integral part of the consolidated
financial statements.
<PAGE>
<PAGE>28
CONSOLIDATED STATEMENTS OF CASH FLOWS AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions 1995 1994 1993
OPERATING ACTIVITIES
Net income (loss) $ 139 $ 4,710 $(5,906)
Adjustments to reconcile net income(loss) to
net cash provided by operating activities:
Restructuring and other charges 7,685 - 498
Cumulative effects of accounting changes - - 9,608
Depreciation and amortization 4,845 4,633 4,702
Provision for uncollectibles 2,378 1,929 1,665
Increase in accounts receivable (3,386) (2,673) (2,211)
Increase in inventories (1,206) (394) (594)
Increase (decrease) in accounts payable 1,043 1,125 (295)
Net decrease (increase) in other operating
assets and liabilities 366 (793) (1,579)
Other adjustments for noncash items - net (2,174) 509 1,505
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,690 9,046 7,393
INVESTING ACTIVITIES
Capital expenditures, net of proceeds from
sale or disposal of property, plant and
equipment of $414, $354 and $198 (5,997) (4,572) (4,142)
Increase in finance assets,
net of lease-related repayments of
$3,960, $3,760 and $3,703 (3,785) (5,315) (4,222)
Cash proceeds from securitizations of
finance receivables 3,747 303 586
Additions to licensing costs (1,978) (293) (89)
Net increase in investments (228) (165) (453)
(Acquisitions)dispositions,net of cash acquired (3,355) 144 (228)
Other investing activities - net (357) 53 (86)
NET CASH USED IN INVESTING ACTIVITIES (11,953) (9,845) (8,634)
FINANCING ACTIVITIES
Proceeds from long-term debt issuances 5,504 6,134 4,386
Retirements of long-term debt (4,519) (5,637) (5,879)
Issuance of common shares 1,214 973 1,053
Dividends paid (2,088) (1,870) (1,774)
Increase in short-term borrowings - net 1,760 1,746 2,586
Other financing activities - net 87 (32) 25
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,958 1,314 397
Effect of exchange rate changes on cash 5 22 3
Net increase (decrease) in cash and
temporary cash investments (300) 537 (841)
Cash and temporary cash investments at
beginning of year 1,208 671 1,512
Cash and temporary cash investments at
end of year $ 908 $ 1,208 $ 671
The notes on pages 38 through 50 are an integral part of the consolidated
financial statements.<PAGE>
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AT&T CORP. AND SUBSIDIARIES (AT&T)
(Dollars in Millions, except per share amounts)
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include all majority-owned
subsidiaries. Investments in which we exercise significant influence
but which we do not control (generally a 20% - 50% ownership interest)
are accounted for under the equity method of accounting. Generally,
investments in which we have a less than 20% ownership interest are
accounted for under the cost method of accounting. The fiscal year of
most AT&T operations ends December 31.
CURRENCY TRANSLATION
For operations outside of the U.S. that prepare financial statements
in currencies other than the U.S. dollar, we translate income
statement amounts at average exchange rates for the year, and we
translate assets and liabilities at year-end exchange rates. We
present these translation adjustments as a separate component of
shareowners' equity.
REVENUE RECOGNITION
REVENUE FROM BASIS OF RECOGNITION
Telecommunications Services Minutes of traffic processed
and contracted fees
Products and Systems Percentage-of-completion method
for most long-term contracts;
upon performance of
contractual obligations for
others
Rentals and Other Services Proportionately over contract
periods or as services are
performed
Financial Services and Leasing Over the life of the finance
receivables using the
interest method, or straight-
line over life of operating
leases
SOFTWARE PRODUCTION COSTS
Until technological feasibility is established, we expense the costs
of developing computer software that we plan to sell, lease or
otherwise market, as incurred. After that time, we capitalize the
remaining software production costs and amortize them to costs over
the estimated period of sales and revenues.
ADVERTISING COSTS
We expense costs of advertising as incurred. Advertising expense was
$2,265, $2,219 and $1,665 in 1995, 1994 and 1993, respectively.
INVESTMENT TAX CREDITS
We amortize investment tax credits as a reduction to the provision for
income taxes over the useful lives of the property that produced the
credits.
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<PAGE>30
EARNINGS PER SHARE
We use the weighted average number of shares of common stock and
common stock equivalents outstanding during each period to compute
earnings per common share. Common stock equivalents are stock
options that we assume to be exercised for the purposes of this
computation.
TEMPORARY CASH INVESTMENTS
We consider all highly liquid investments with original maturities of
generally three months or less to be temporary cash investments.
INVENTORIES
We state inventories at the lower of cost or market (i.e., net
realizable value or replacement cost). Cost includes material, labor
and manufacturing overhead. We determine cost principally on a
first-in, first-out (FIFO) basis.
PROPERTY, PLANT AND EQUIPMENT
We state property, plant and equipment at cost and determine
depreciation using either the group or unit method. The unit method
is used primarily for laboratory equipment, large computer systems,
and certain international earth stations and submarine cables. When
we sell assets that were depreciated using the unit method, we include
the gains or losses in operating results. The group method is used
for most other depreciable assets. When we sell or retire plant that
was depreciated using the group method, we deduct the original cost
from the plant account and from accumulated depreciation.
We use accelerated depreciation methods for factory facilities and
digital equipment used in the telecommunications network, except
switching equipment placed in service before 1989 and certain high
technology computer processing equipment. All other plant and
equipment is depreciated on a straight-line basis.
LICENSING COSTS
Licensing costs are costs incurred to develop or acquire cellular,
personal communications services (PCS) and messaging licenses.
Generally, amortization begins with the commencement of service to
customers and is computed using the straight-line method over a period
of 40 years.
GOODWILL
Goodwill is the excess of the purchase price over the fair value of
net assets acquired in business combinations treated as purchases. We
amortize goodwill on a straight-line basis over the periods benefited,
principally in the range of 10 to 40 years. Goodwill is reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the
asset, a loss is recognized.
DERIVATIVE FINANCIAL INSTRUMENTS
We use various financial instruments, including derivative financial
instruments, for purposes other than trading. We do not use
derivative financial instruments for speculative purposes.
Derivatives, used as part of our risk management strategy, must be
designated at inception as a hedge and measured for effectiveness both
at inception and on an ongoing basis. Gains and losses that do not
qualify as hedges are recognized in other income or expense.
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<PAGE>31
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
period reported. Actual results could differ from those estimates.
Estimates are used when accounting for long-term contracts,
allowance for doubtful accounts, inventory obsolescence, product
warranty reserves, depreciation and amortization, employee benefit
plans, taxes, restructuring reserves and contingencies.
RECLASSIFICATIONS
We reclassified certain amounts for previous years to conform with
the 1995 presentation.
2. RESTRUCTURING OF AT&T
On September 20, 1995, we announced a plan to separate AT&T into three
independent, publicly held, global companies that will each focus on
serving certain core businesses: communications services (AT&T),
communications systems and technology (Lucent Technologies Inc.) and
transaction-intensive computing (NCR Corporation). We are planning an
initial public offering of approximately 15% of Lucent Technologies
Inc. (Lucent) common stock in the first half of 1996 with our
remaining interest in Lucent and NCR Corporation (NCR) being spun off
to AT&T shareowners by the end of 1996. The plan also includes our
intention to pursue the sale of our remaining interest in AT&T Capital
Corporation (AT&T Capital) in 1996. Our plan is subject to several
conditions, including receipt of a favorable tax ruling and other
approvals, and the absence of events or developments that would have a
material adverse impact on AT&T or its shareowners. In connection
with the plan AT&T, Lucent and NCR have entered into various
agreements. These agreements generally provide for the separation and
distribution of the operating assets and liabilities and pension plan
assets and liabilities, as well as tax sharing and allocation.
Additionally, various interim service agreements provide for certain
data processing services, telecommunication services and certain
support services on specified terms.
3.CHANGES IN ACCOUNTING PRINCIPLES
IMPAIRMENT OF LONG-LIVED ASSETS
Effective October 1, 1995, we adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." This
standard requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The adoption of this
standard did not materially affect our reported earnings, financial
condition or cash flows because this was essentially the same method
we used in the past to measure and record asset impairments. Our 1995
restructuring and other charges included recognition of asset
impairments.
POSTRETIREMENT BENEFITS
We adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," effective January 1, 1993. This
standard requires us to accrue estimated future retiree benefits
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<PAGE>32
during the years employees are working and accumulating these
benefits. Previously, we expensed health care benefits as claims were
incurred and life insurance benefits as plans were funded.
In 1993, we recorded a one-time pretax charge for the unfunded
portions of these liabilities of $11,317 ($7,023, or $4.54 per share,
after taxes). Apart from these cumulative effects on prior years of
the accounting change, this change in accounting had no material
effect on net income and it does not affect cash flows.
POSTEMPLOYMENT BENEFITS
We also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1993. Analogous to
SFAS No. 106, this standard requires us to accrue for estimated future
postemployment benefits, including separation payments, during
the years employees are working and accumulating these benefits and
for disability payments when the disabilities occur. Before this
change in accounting, we recognized costs for separations when they
were approved and disability benefits when they were paid.
We recorded a one-time pretax charge for the unprovided portion of
these liabilities of $1,809 ($1,128, or $0.73 per share, after taxes).
This change does not affect cash flows.
INCOME TAXES
We also adopted SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1993. Among other provisions, this standard
requires us to compute deferred tax amounts using the enacted
corporate income tax rates for the years in which the taxes will be
paid or refunds received.
The adoption of this standard reduced net income by $1,457 ($0.94
per share). Apart from these cumulative effects on prior years of the
accounting change, this new accounting method had no material effect
on net income in 1993. Unless Congress changes tax rates, we do not
expect this change to affect net income materially in future periods.
This change does not affect cash flows.
STOCK-BASED COMPENSATION
In 1996 we will adopt SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard establishes a fair value method for
accounting for stock-based compensation plans either through
recognition or disclosure. We intend to adopt this standard by
disclosing the pro forma net income and earnings per share amounts
assuming the fair value method was adopted on January 1, 1995. The
adoption of this standard will not impact our results of operations,
financial position or cash flows.
4.MERGER WITH MCCAW CELLULAR COMMUNICATIONS, INC. (McCaw)
On September 19, 1994, AT&T merged with McCaw, now AT&T Wireless
Services. As a result, 197.5 million shares of McCaw common stock
were converted into shares of AT&T common stock. In addition, AT&T
assumed 11.3 million McCaw stock options which were converted into
AT&T stock options at the same exchange ratio. The merger was
accounted for as a pooling of interests, and the consolidated
financial statements were restated for all periods prior to the merger
to include the accounts and operations of McCaw. Merger related
expenses of $246 incurred in 1994 ($187 net of taxes) were reported as
selling, general and administrative expenses.
<PAGE>
<PAGE>33
5.PURCHASE OF REMAINING 48% OF LIN BROADCASTING
On October 3, 1995, we acquired the remaining 48% of LIN Broadcasting
Corporation (LIN), now a wholly-owned subsidiary of AT&T Wireless
Services, for a total purchase price of approximately $3.3 billion.
The acquisition was accounted for using the purchase method.
Accordingly, we allocated the purchase price to assets acquired and
liabilities assumed based on their fair values. The allocations were
$2.0 billion to licensing costs, $.9 billion to investments, $1.1
billion to goodwill and $.7 billion to deferred taxes. The goodwill
and the licensing costs are being amortized on a straight-line basis
over 35 years. The initial 52% interest of LIN was acquired by McCaw
on March 1, 1990. Accordingly, the results of operations, assets and
liabilities of LIN have been included in the consolidated financial
statements since March 1, 1990.
6.PREFERRED STOCK REDEMPTION
On June 24, 1994, LCH Communications (LCH), a subsidiary of LIN
Broadcasting Corporation, redeemed all $1.3 billion of its
outstanding redeemable preferred stock held by Comcast Cellular
Communications, Inc. in exchange for all of the capital stock of one
of LCH's subsidiaries.
As a result of the redemption, we eliminated the net assets and
recorded a gain on the sale of assets of $12 and a tax benefit of $74.
The $784 difference between the book value of the preferred stock and
the fair value of the assets exchanged was recorded as $408 of
additional paid-in capital and $376 of minority interests.
7.SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
1995 1994 1993
INCLUDED IN COSTS
Amortization of software production costs $ 365 $ 370 $ 359
Amortization of licensing costs 133 115 108
COST OF FINANCIAL SERVICES AND LEASING
Interest expense $1,049 $ 725 $ 506
Depreciation, provision for losses
and other 1,597 1,427 1,205
Total $2,646 $2,152 $1,711
INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Amortization of goodwill $ 128 $ 97 $ 89
OTHER INCOME - NET
Interest income $ 101 $ 72 $ 141
Royalties and dividends 74 30 59
Minority interests in earnings
of subsidiaries (73) (64) (9)
Miscellaneous - net 356 255 355
Total other income-net $ 458 $ 293 $ 546
In June 1993 we sold our remaining 77% interest in UNIX System
Laboratories, Inc. to Novell, Inc. (Novell) in exchange for
approximately 3% of Novell's common stock. Our gain on the sale was
$217. Between 1995 and 1994 we subsequently recognized a cumulative
decline of $107 in the value of the stock of Novell.
<PAGE>
<PAGE>34
1995 1994 1993
DEDUCTED FROM INTEREST EXPENSE
Capitalized interest $121 $47 $72
SUPPLEMENTARY BALANCE SHEET INFORMATION
AT DECEMBER 31 1995 1994
INVENTORIES
Completed goods $ 2,293 $ 2,022
Work in process and raw materials 1,781 1,611
Total inventories $ 4,074 $ 3,633
PROPERTY, PLANT AND EQUIPMENT
Land and improvements $ 772 $ 761
Buildings and improvements 9,562 9,240
Machinery, electronic and other equipment 38,729 34,797
Total property, plant and equipment 49,063 44,798
Accumulated depreciation (26,799) (23,519)
Property, plant and equipment - net $22,264 $21,279
INVESTMENTS
Accounted for by the equity method $ 3,329 $ 2,314
Stated at cost or fair value 556 394
Total investments $ 3,885 $ 2,708
OTHER ASSETS
Unamortized software production costs $ 489 $ 483
Unamortized goodwill 1,735 1,007
Deferred charges 378 746
Other 1,627 1,757
Total other assets $ 4,229 $ 3,993
SUPPLEMENTARY CASH FLOW INFORMATION
1995 1994 1993
Interest payments net of
amounts capitalized $ 1,691 $ 1,445 $ 1,728
Income tax payments 1,893 2,047 1,733
The following table displays the noncash items excluded from the
consolidated statements of cash flows:
Machinery and equipment acquired under
capital lease obligations $ 41 $ 13 $ 15
EXCHANGE OF STOCK
Net assets $ - $ 2 $ (43)
Investments - - 260
Licenses 32 134 96
Total $ 32 $ 136 $ 313
ACQUISITION/DISPOSITION ACTIVITIES
Net receivables $ (46) $ 24 $ (19)
Inventories 72 (10) (1)
Property, plant and equipment (106) 3 (132)
Licensing costs (1,960) (79) 5
Accounts payable 1 (8) 7
Short-term and long-term debt (450) 47 3
Other operating assets and liabilities-net (866) 167 (91)
Net noncash items consolidated (3,355) 144 (228)
Net cash (used for) received from
acquisitions/dispositions $(3,355) $ 144 $ (228)
<PAGE>35
8.BUSINESS RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1995, we recorded a pretax charge of $6,248
to cover restructuring costs of $5,336 and asset impairments and other
charges of $912. Our fourth quarter charges include plans to
restructure our consumer products business to implement major process
improvements in how it designs, manufactures and distributes those
products; consolidating and reorganizing numerous corporate and
business unit operations during the next two years; and selling the
AT&T Microelectronics Interconnect business and AT&T Paradyne.
Accordingly, the fourth quarter restructure charge of $5,336 included
the separation costs for nearly 40,000 employees, of which about
24,000 were management and 16,000 were occupational. As of December
31, 1995, approximately 7,400 management employees have accepted a
voluntary severance package and will leave in early 1996. We expect
70% of all separations to be completed by the end of 1996 with the
majority of the remaining separations being completed during 1997.
The force reductions include about 10,000 corporate-wide staff jobs in
functions such as information systems, human resources, financial
operations, legal and public relations. The remaining separations will
occur within the operating units of the ongoing AT&T and Lucent. The
restructuring charge also included costs associated with early
termination of building leases and asset write-downs as part of our
plan to sell certain businesses and to restructure our operations.
In the third quarter of 1995, we approved the restructuring plans
of NCR and recorded a pretax charge totaling $1,597 to cover
restructuring costs of $1,547 and other charges of $50. NCR's plans
include discontinuing the manufacture of personal computers,
consolidating facilities globally, reducing industry markets served,
as well as separating about 7,200 employees, including 3,200 in
foreign locations. We expect to complete all NCR's restructuring
plans by the end of 1996. As of December 31, 1995, about 4,900
employees have left NCR and the remainder will leave in 1996.
In 1993 we recorded a $498 pretax provision for business
restructuring. Of the total provision, $227 was related to costs at
NCR and $215 was for restructuring customer support functions for
telecommunications services. The remainder of the provision consisted
of $23 related to closing plants and $33 related to operations that
service the U.S. federal government. The total 1993 provision of $498
was recorded as $13 in costs of products and systems, $90 in costs of
other services, $373 in selling, general and administrative expenses
and $22 in research and development expenses.
The following table displays a rollforward of the liabilities for
business restructuring from December 31, 1993 to December 31, 1995:
<PAGE>
<PAGE>36
Dec. 31, Dec.31,
1993 1994
1994
______________________________________
Type of Cost Balance Additions Other Payments Balance
Employee
separations $ 356 $ 5 $ (52) $(265) $ 44
Facility closings 788 21 4 (172) 641
Other 296 8 (67) (28) 209
Total $1,440 $34 $(115) $(465) $894
___________________________________________________________________________
Dec.31, Dec.31,
1994 1995 1995
________________________________
Type of Cost Balance Additions Other Payments Balance
Employee
separatons $ 44 $2,712 $(22) $(165) $2,569
Facility closings 641 895 (51) (277) 1,258
Other 209 837 (10) (86) 950
Total $894 $4,444 $(83) $(478) $4,777
___________________________________________________________________________
Other represents reversals of business restructuring reserves no
longer required.
The December 31, 1993 business restructuring balance included
reserves primarily for real estate, NCR and reengineering operator
services. As of December 31, 1995, $469 of the $1,440 December 31,
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<PAGE>37
1993 balance remained. This balance is related to excess space at some
locations and is expected to be fully utilized over the remaining
terms of the leases.
We believe that the liabilities for business restructuring of
$4,777 at December 31, 1995 are adequate to complete our plans.
In 1995 in addition to recording restructuring liabilities of
$4,444, asset impairments of $1,734 (which were credited directly to
the related asset balances) and $705 of benefit plan losses were
included in the total restructure costs of $6,883. Benefit plan losses
relate to our pension and other employee benefit plans and primarily
represent losses in the current year for actuarial changes that
otherwise might have been amortized over future periods.
The fourth quarter charge also included $799 for writing down
certain impaired assets, including the write-down in the value of some
unnecessary network facilities, the write-down of nonstrategic
wireless assets and the reduction in value of some investments. There
were no assets to be disposed of or sold included in these
write-downs. The third and fourth quarter charges also included $163
of other items, none of which individually exceed 1% of the total
charge.
The pretax total of the third and fourth quarter charges of $7,845
for 1995 was recorded as $670 in costs of telecommunications services,
$1,676 in costs of products and systems, $717 in costs of rentals and
others services, $6 in costs of financial services and leasing, $4,359
in selling, general and administrative expenses and $417 in research
and development expenses. If viewed by type of cost, the combined
charges reflect $3,417 for employee separations and other related
items; $2,533 for asset write-downs; $895 for closing, selling and
consolidating facilities; and $1,000 for other items. The total
combined charges reduced net income by $5,353 or $3.36 per share. Of
the total combined charges, we have made cash payments of $160 as of
December 31, 1995 and approximately $4.4 billion will result in
payment of cash in the future. Approximately, $3.3 billion related to
noncash items.
9.INCOME TAXES
The following table shows the principal reasons for the difference
between the effective tax rate and the United States federal statutory
income tax rate:
1995 1994 1993
U.S. federal statutory income tax rate 35% 35% 35%
Federal income tax at statutory rate $327 $2,631 $2,101
Amortization of investment tax credits (36) (33) (92)
State and local income taxes, net of
federal income tax effect 120 296 287
Amortization of intangibles 94 20 24
Foreign rate differential 106 36 45
Taxes on repatriated and accumulated
foreign income, net of tax credits 194 (71) (20)
Research credits (58) (66) (47)
Effect of tax rate change on
deferred tax assets - - (23)
Other differences-net 49 (5) 26
Provision for income taxes $796 $2,808 $2,301
Effective income tax rate 85.1% 37.4% 38.3%
The 1995 effective tax rate is high primarily due to the foreign tax
effects associated with the restructuring and other charges.
<PAGE>
<PAGE>38
The U.S. and foreign components of income before income taxes and
the provision for income taxes are presented in this table:
INCOME BEFORE INCOME TAXES 1995 1994 1993
United States $ 1,799 $6,841 $5,705
Foreign (864) 677 298
Total $ 935 $7,518 $6,003
PROVISION FOR INCOME TAXES
CURRENT
Federal $ 1,606 $1,618 $ 925
State and local 390 300 206
Foreign 212 225 169
$ 2,208 $2,143 $1,300
DEFERRED
Federal $(1,023) $ 488 $ 910
State and local (205) 155 212
Foreign (148) 60 (41)
$(1,376) $ 703 $1,081
Deferred investment tax credits-net* (36) (38) (80)
Provision for income taxes $ 796 $2,808 $2,301
*Net of amortization of $36 in 1995, $33 in 1994 and $92 in 1993.
Deferred tax liabilities are taxes we expect to pay in future
periods. Similarly, deferred tax assets are recorded for expected
reductions in taxes payable in future periods. Deferred taxes arise
because of differences in the book and tax bases of certain assets and
liabilities. Deferred tax liabilities and assets consist of the
following:
1995 1994
LONG-TERM DEFERRED INCOME TAX LIABILITIES:
Property, plant and equipment $ 6,981 $ 5,872
Investments 792 343
Other 1,568 1,370
Total long-term deferred tax liabilities $ 9,341 $ 7,585
LONG-TERM DEFERRED INCOME TAX ASSETS:
Business restructuring $ 853 $ 479
Net operating loss/credit carryforwards 410 175
Employee pensions and other benefits-net 2,353 2,618
Reserves and allowances 329 141
Valuation allowance (293) (178)
Other 490 437
Total long-term deferred income tax assets $ 4,142 $ 3,672
Net long-term deferred income tax liabilities $ 5,199 $ 3,913
CURRENT DEFERRED INCOME TAX LIABILITIES:
Total current deferred income tax liabilities $ 210 $ 110
CURRENT DEFERRED INCOME TAX ASSETS:
Business restructuring $ 763 $ 99
Net operating loss/credit carryforwards 61 99
Employee pensions and other benefits 1,546 1,166
Reserves and allowances 1,472 1,126
Valuation allowance (61) -
Other 889 650
Total current deferred income tax assets $ 4,670 $ 3,140
Net current deferred income tax assets $ 4,460 $ 3,030
<PAGE>
<PAGE>39
At December 31, 1995 we had net operating loss carryforwards (tax
affected) for federal and state income tax purposes of $115 and $98,
respectively, expiring through 2010. We also had foreign net
operating loss carryforwards (tax affected) of $192, of which $145 has
no expiration date, with the balance expiring by 2002. Federal and
foreign tax credit carryforwards amounting to $65 also exist. The
majority of these credits are not subject to expiration. We recorded
a valuation allowance to reflect the estimated amount of deferred tax
assets which, more likely than not, will not be realized.
10.LEASES
AS LESSOR
We provide financing on sales of our products and those of other
companies, primarily through AT&T Capital, and lease our products to
customers under sales-type leases. This table displays our net
investment in direct financing and sales-type leases that are
primarily included in finance receivables:
At December 31 1995 1994
Minimum lease payments receivable $6,699 $5,414
Estimated unguaranteed residual values 731 593
Unearned income (1,189) (1,006)
Allowance for credit losses (166) (127)
Net investment $6,075 $4,874
This table shows the scheduled maturities for our $6,699
minimum lease payments receivable on these leases at December 31,
1995:
1996 1997 1998 1999 2000 Later Years
$2,574 $1,868 $1,164 $637 $254 $202
We lease airplanes, energy-producing facilities and transportation
equipment under leveraged leases having original terms ranging from 10
to 30 years, expiring in various years from 1996 through 2026.
Leveraged leases are included in finance receivables on the balance
sheet. This table shows our net investment in leveraged leases:
At December 31 1995 1994
Rentals receivable (net of principal
and interest on nonrecourse notes) $ 885 $ 967
Estimated unguaranteed
residual values 787 781
Unearned income (396) (472)
Allowance for credit losses (34) (30)
Investment in leveraged leases 1,242 1,246
Deferred taxes (1,189) (1,066)
Net investment $ 53 $ 180
We lease assets to others through operating leases, the majority of
which are cancelable. Assets under operating leases, other than those
owned by our finance subsidiaries, are included in property, plant and
equipment. This table shows our net investment in operating leases:
At December 31 1995 1994
Machinery, electronic and other equipment $1,902 $1,391
Buildings and land 800 738
Less: Accumulated depreciation (1,142) (817)
Net investment $1,560 $1,312
<PAGE>40
This table shows the $1,030 of future minimum rentals receivable under
noncancelable operating leases at December 31, 1995:
1996 1997 1998 1999 2000 Later Years
$384 $224 $127 $60 $35 $200
AS LESSEE
We lease land, buildings and equipment through contracts that expire
in various years through 2026. Our rental expense under operating
leases was $1,088 in 1995, $1,098 in 1994 and $1,095 in 1993. The
table below shows our future minimum lease payments due under
noncancelable leases at December 31, 1995. Such payments total $2,796
for operating leases. The total of minimum rentals to be received in
the future under noncancelable subleases related to operating leases
as of December 31, 1995 was $586.
1996 1997 1998 1999 2000 Later Years
$546 $461 $360 $293 $238 $898
11.DEBT OBLIGATIONS
DEBT MATURING WITHIN ONE YEAR
The following table displays the details of debt maturing within one
year:
Amount 1995 1994 1993
Commercial paper $12,829 $10,777 $ 8,761
Long-term debentures and notes 3,236 2,535 2,019
Long-term lease obligations 36 30 52
Other 488 324 231
Total debt maturing within one year $16,589 $13,666 $11,063
Weighted Average Interest Rate (a)
Commercial paper 6.0% 4.7% 3.3%
Long-term debt 7.1% 9.7% 10.0%
Average Short-Term Debt Outstanding
During the Year
Amounts $10,016 $ 8,400 $ 8,010
Weighted average interest rate (a) 6.1% 4.6% 3.7%
Maximum amount of short-term debt at any
month end during the year $13,489 $11,357 $ 9,959
(a) Computed by dividing the average face amount of debt into the
aggregate related interest expense.
A consortium of lenders provides revolving credit facilities of $9.5
billion to AT&T and $2.0 billion to AT&T Capital. These credit
facilities were unused at December 31, 1995. Both AT&T and AT&T
Capital also maintain lines of credit with different consortiums of
primarily foreign banks totaling approximately $340 and $1,035,
respectively. At December 31, 1995, $304 and $638, respectively, of
these foreign lines of credit were unused. The credit facilities, as
described above, are intended for general corporate purposes, which
include support for AT&T's and AT&T Capital's commercial paper.
<PAGE>
<PAGE>41
LONG-TERM OBLIGATIONS
This table shows the outstanding long-term debt obligations at
December 31:
Interest Rates (b) Maturities 1995 1994
DEBENTURES
4 3/8% to 4 3/4% 1996-1999 $ 750 $ 750
5 1/8% to 7 1/8% 2000-2001 500 500
8 1/8% to 9% 1996-2031 1,999 1,700
NOTES
4 1/4% to 7 3/4% 1995-2025 8,091 6,291
7 4/5% to 8 19/20% 1995-2025 1,397 348
9% to 13% 1995-2020 178 373
Variable rate 1995-2054 1,249 3,187
14,164 13,149
Long-term lease obligations 166 105
Other 1,140 1,062
Less: Unamortized discount-net 75 69
Total long-term obligations 15,395 14,247
Less: Amounts maturing within one year 3,760 2,889
Net long-term obligations $11,635 $11,358
(b)Note that the actual interest paid on our debt obligations may have
differed from the stated amount due to our entering into interest rate
swap contracts to manage our exposure to interest rate risk and our
strategy to reduce finance costs.
This table shows the maturities, at December 31, 1995, of the
$15,395 in total long-term obligations:
1996 1997 1998 1999 2000 Later Years
$3,760 $2,071 $1,709 $1,527 $779 $5,549
12.EMPLOYEE BENEFIT PLANS
PENSION PLANS
We sponsor noncontributory defined benefit plans covering the
majority of our employees. Benefits for management employees are
principally based on career-average pay. Benefits for occupational
employees are not directly related to pay.
Pension contributions are principally determined using the
aggregate cost method and are primarily made to trust funds held for
the sole benefit of plan participants. We compute pension cost using
the projected unit credit method and assumed a long-term rate of
return on plan assets of 9.0% in 1995, 1994 and 1993.
<PAGE>
<PAGE>42
Pension cost includes the following components:
1995 1994 1993
Service cost-benefits earned during
the period $ 570 $ 669 $ 536
Interest cost on projected benefit
obligation 2,551 2,400 2,294
Amortization of unrecognized prior
service costs 280 230 251
Credit for expected return on plan
assets* (3,318) (3,260) (3,110)
Amortization of transition asset (500) (501) (500)
Charges for special pension options 213 - 74
Net pension credit $ (204) $ (462) $ (455)
*The actual return on plan assets was $9,484 in 1995, $582 in 1994 and
$5,068 in 1993.
The net pension credit of $204 in 1995 was reduced by a one-time
charge of $213 for early retirement options and curtailments.
This table shows the funded status of the defined benefit plans:
At December 31 1995 1994
Actuarial present value of accumulated
benefit obligation, including vested benefits
of $32,726 and $26,338, respectively $36,052 $28,801
Plan assets at fair value $47,634 $40,131
Less: Actuarial present value of projected
benefit obligation 37,989 30,125
Excess of assets over projected benefit obligation 9,645 10,006
Unrecognized prior service costs 2,297 2,319
Unrecognized transition asset (2,961) (3,460)
Unrecognized net gain (4,528) (4,928)
Net minimum liability of nonqualified plans (166) (103)
Prepaid pension costs $ 4,287 $ 3,834
We used these rates and assumptions to calculate the projected
benefit obligation:
At December 31 1995 1994
Weighted-average discount rate 7.0% 8.7%
Rate of increase in future
compensation levels 5.0% 5.0%
The prepaid pension costs shown above are net of pension
liabilities for plans where accumulated plan benefits exceed assets.
Such liabilities are included in other liabilities in the
consolidated balance sheets.
We are amortizing over approximately 15.9 years the unrecognized
transition asset related to our 1986 adoption of SFAS No. 87,
"Employers' Accounting for Pensions." We amortize prior service
costs primarily on a straight-line basis over the average remaining
service period of active employees. Our plan assets consist
primarily of listed stocks (including $259 and $216
of AT&T common stock at December 31, 1995 and 1994, respectively),
corporate and governmental debt, real estate investments, and cash
and cash equivalents.
<PAGE>
<PAGE>43
SAVINGS PLANS
We sponsor savings plans for the majority of our employees. The
plans allow employees to contribute a portion of their pretax and/or
after-tax income in accordance with specified guidelines. We match a
percentage of the employee contributions up to certain limits. Our
contributions amounted to $408 in 1995, $357 in 1994 and $351 in 1993.
13.POSTRETIREMENT BENEFITS
Our benefit plans for retirees include health care benefits, life
insurance coverage and telephone concessions. This table shows the
components of the net postretirement benefit cost:
1995 1994
Service cost - benefits earned during the period $ 98 $ 108
Interest cost on accumulated postretirement
benefit obligation 888 852
Expected return on plan assets * (298) (243)
Amortization of unrecognized prior service costs 67 14
Amortization of net loss (gain) (14) 1
Charge for special options 11 -
Net postretirement benefit cost $ 752 $ 732
* The actual return on plan assets was $962 in 1995 and ($30) in 1994.
We had approximately 146,700 retirees in 1995, 144,900 in 1994 and
142,200 in 1993.
Our plan assets consist primarily of listed stocks, corporate and
governmental debt, cash and cash equivalents, and life insurance
contracts. The following table shows the funded status of our
postretirement benefit plans reconciled with the amounts recognized in
the consolidated balance sheets:
At December 31 1995 1994
Accumulated postretirement benefit obligation:
Retirees $ 8,250 $ 7,476
Fully eligible active plan participants 1,453 822
Other active plan participants 2,869 1,751
Accumulated postretirement benefit obligation 12,572 10,049
Plan assets at fair value 4,704 3,291
Unfunded postretirement obligation 7,868 6,758
Less:
Unrecognized prior service costs 771 (46)
Unrecognized net (gain)loss (292) (1,012)
Accrued postretirement benefit obligation $ 7,389 $ 7,816
We made these assumptions in valuing our postretirement benefit
obligation at December 31:
1995 1994
Weighted-average discount rate 7.0 % 8.8%
Expected long-term rate of return
on plan assets 9.0 % 9.0%
Assumed rate of increase in the per
capita cost of covered health care benefits 6.1 % 8.6%
We assumed that the growth in the per capita cost of covered health
care benefits (the health care cost trend rate) would gradually
decline after 1995 to 4.9% by the year 2005 and then remain level.
This assumption greatly affects the amounts reported. To illustrate,
increasing the assumed trend rate by 1% in each year would raise our
<PAGE>
<PAGE>44
accumulated postretirement benefit obligation at December 31, 1995 by
$646 and our 1995 postretirement benefit costs by $53.
14.STOCK OPTIONS
In our Long-Term Incentive Program, we grant stock options, stock
appreciation rights (SARs), either in tandem with stock options or
free-standing, and other awards. On January 1 of each year, 0.6% of
the outstanding shares of our common stock become available for
grant. The exercise price of any stock option is equal to or greater
than the stock price when the option is granted. When granted in
tandem, exercise of an option or SAR cancels the other to the extent
of such exercise. Before our mergers with McCaw, NCR and Teradata,
and our purchase of LIN, stock options were granted under the separate
stock option plans of those companies. No new options can be granted
under those plans.
Option transactions are shown below:
Number of Shares 1995 1994 1993
Balance at January 1 40,284,801 38,011,478 36,777,098
Options granted 13,276,698 5,803,142 7,261,355
Options assumed in purchase
of LIN 3,381,869 - -
Options and SARs exercised (8,181,161) (2,498,132) (5,766,132)
Average price $29.39 $25.04 $23.93
Options forfeited (1,073,142) (1,031,687) (260,843)
At December 31:
Options outstanding 47,689,065 40,284,801 38,011,478
Average price $43.21 $36.61 $33.52
Options exercisable 28,775,262 28,010,381 24,063,837
Shares available for grant 17,524,180 22,014,728 25,264,307
During 1995, 154,887 SARs were exercised and no SARs were granted.
At December 31, 1995, 685,897 SARs remained unexercised and all of
these were exercisable.
15.SEGMENT INFORMATION
INDUSTRY SEGMENTS
Our operations in the global information movement and management
industry involve providing wireline and wireless telecommunications
services, business information processing systems, and other systems,
products and services that combine communications and computers. Our
operations in the financial services and leasing industry involve
direct financing and finance leasing programs for our products and
the products of other companies, leasing products to customers under
operating leases and being in the general-purpose credit card
business. Miscellaneous other activities, including the distribution
of computer equipment through retail outlets, in the aggregate,
represent less than 10% of revenues, operating income and
identifiable assets and are included in the information movement and
management segment. Revenues between industry segments are not
material.
1995 1994 1993
REVENUES
Information movement and management $75,878 $71,977 $66,847
Financial services and leasing 3,731 3,117 2,504
$79,609 $75,094 $69,351
<PAGE>45
1995 1994 1993
OPERATING INCOME (LOSS)
Information movement and management $ 1,519 $ 8,107 $ 6,769
Financial services and leasing 486 394 339
Corporate and nonoperating (1,070) (983) (1,105)
Income before income taxes $ 935 $ 7,518 $ 6,003
ASSETS
Information movement and management $66,155 $56,551 $51,971
Financial services and leasing 21,368 21,462 17,033
Corporate assets 1,839 1,714 1,104
Eliminations (478) (465) (715)
$88,884 $79,262 $69,393
DEPRECIATION AND AMORTIZATION
Information movement and management $ 4,405 $ 4,193 $ 4,271
Financial services and leasing 440 440 431
CAPITAL EXPENDITURES
Information movement and management $ 5,853 $ 4,244 $ 3,839
Financial services and leasing 144 328 303
TOTAL LIABILITIES
Financial services and leasing $19,072 $19,463 $15,329
GEOGRAPHIC SEGMENTS
Transfers between geographic areas are on terms and conditions
comparable with sales to external customers. The methods followed in
developing the geographic area data require the use of estimation
techniques and do not take into account the extent to which product
development, manufacturing and marketing depend upon each other.
Thus the information may not be indicative of results if the
geographic areas were independent organizations.
1995 1994 1993
REVENUES - EXTERNAL CUSTOMERS
United States $70,896 $67,769 $63,775
Other geographic areas 8,713 7,325 5,576
$79,609 $75,094 $69,351
TRANSFERS BETWEEN GEOGRAPHIC AREAS
(ELIMINATED IN CONSOLIDATION)
United States $ 1,378 $ 1,679 $ 1,374
Other geographic areas 1,221 1,291 1,125
$ 2,599 $ 2,970 $ 2,499
OPERATING INCOME (LOSS)
United States $ 3,792 $ 8,651 $ 7,355
Other geographic areas (1,787) (150) (247)
Corporate and nonoperating (1,070) (983) (1,105)
Income before income taxes $ 935 $ 7,518 $ 6,003
ASSETS
United States $76,624 $69,718 $63,194
Other geographic areas 12,085 9,361 6,901
Corporate assets 1,839 1,714 1,104
Eliminations (1,664) (1,531) (1,806)
$88,884 $79,262 $69,393
Data on other geographic areas pertain to operations that are
located outside of the U.S. Our revenues from all international
activities, including those in the table, international
<PAGE>46
telecommunications services and exports, provided 26.2% of
consolidated revenues in 1995, 25.2% in 1994, and 24.4% in 1993.
Corporate assets are principally cash and temporary cash
investments.
CONCENTRATIONS
As of December 31, 1995, we are not aware of any significant
concentration of business transacted with a particular customer,
supplier or lender that could, if suddenly eliminated, severely impact
our operations. We also do not have a concentration of available
sources of supply materials, labor, services, or licenses or other
rights that could, if suddenly eliminated, severely impact our
operations.
16.CONTINGENCIES
In the normal course of business we are subject to proceedings,
lawsuits and other claims, including proceedings under
laws and regulations related to environmental and other matters.
Such matters are subject to many uncertainties, and outcomes are not
predictable with assurance. Consequently, we are unable to ascertain
the ultimate aggregate amount of monetary liability or financial
impact with respect to these matters at December 31, 1995.
These matters could affect the operating results of any one quarter
when resolved in future periods. However, we believe that after final
disposition, any monetary liability or financial impact to us beyond
that provided for at year-end would not be material to our annual
consolidated financial statements.
AT&T and Lucent have entered into an agreement pursuant to which
AT&T and affiliates will purchase from Lucent products and services
totaling at least $3,000 cumulatively for the calendar years 1996,
1997 and 1998.
17.FINANCIAL INSTRUMENTS
In the normal course of business we use various financial
instruments, including derivative financial instruments, for
purposes other than trading. We do not use derivative financial
instruments for speculative purposes. These instruments include
commitments to extend credit, letters of credit, guarantees of debt,
interest rate swap agreements and foreign currency exchange contracts.
Interest rate swap agreements and foreign currency exchange contracts
are used to mitigate interest rate and foreign currency exposures.
Collateral is generally not required for these types of instruments.
By their nature all such instruments involve risk, including the
credit risk of nonperformance by counterparties, and our maximum
potential loss may exceed the amount recognized in our balance sheet.
However, at December 31, 1995 and 1994, in management's opinion there
was no significant risk of loss in the event of nonperformance of the
counterparties to these financial instruments. We control our
exposure to credit risk through credit approvals, credit limits and
monitoring procedures and we believe that our reserves for losses are
adequate. We do not have any significant exposure to any individual
customer or counterparty, nor do we have any major concentration of
credit risk related to any financial instruments.
COMMITMENTS TO EXTEND CREDIT
We participate in the general-purpose credit card business through
AT&T Universal Card Services Corp., a wholly-owned subsidiary. We
purchase essentially all cardholder receivables under an agreement
<PAGE>
<PAGE>47
with the Universal Bank, a subsidiary of Synovus Financial
Corporation, which issues the cards. The unused portion of available
credit was approximately $72,179 at December 31, 1995 and $75,445 at
December 31, 1994. This represents the receivables we would need to
purchase if all Universal Card accounts were used up to their full
credit limits. The potential risk of loss associated with, and the
estimated fair value of, the unused credit lines is not considered to
be significant.
LETTERS OF CREDIT
Letters of credit are purchased guarantees that ensure our
performance or payment to third parties in accordance with specified
terms and conditions.
GUARANTEES OF DEBT
From time to time, we guarantee the financing for product purchases
by customers outside the U.S., and the debt of certain unconsolidated
joint ventures.
INTEREST RATE SWAP AGREEMENTS
We enter into interest rate swaps to manage our exposure to
changes in interest rates and to lower our overall costs of financing.
We enter into swap agreements to manage the fixed/floating mix of our
debt portfolio in order to reduce aggregate risk to interest rate
movements. Interest rate swaps also allow us to raise funds at
floating rates and effectively swap them into fixed rates that are
lower than those available to us if fixed-rate borrowings were made
directly. These agreements involve the exchange of floating-rate for
fixed-rate payments or fixed-rate for floating-rate payments without
the exchange of the underlying principal amount. Fixed interest rate
payments are at rates ranging from 4.68% to 11.59%. Floating-rate
payments are based on rates tied to prime, LIBOR or U.S. Treasury
bills. Interest rate differentials paid or received under these swap
contracts are recognized over the life of the contracts as adjustments
to the effective yield of the underlying debt. If we terminate a swap
agreement, the gain or loss is recorded as an adjustment to the basis
of the underlying asset or liability and amortized over the remaining
life.
The following table indicates the types of swaps in use at December
31, 1995 and 1994 and their weighted average interest rates. Average
variable rates are those in effect at the reporting date and may
change significantly over the lives of the contracts.
1995 1994
Fixed to variable swaps-notional amount $1,657 $ 746
Average receive rate 6.46% 6.82%
Average pay rate 5.63% 5.91%
Variable to fixed swaps-notional amount $2,896 $3,677
Average pay rate 6.23% 5.56%
Average receive rate 5.83% 6.11%
The weighted average remaining terms of the swap contracts are
5 years for both 1995 and 1994.
FOREIGN EXCHANGE
We enter into foreign currency exchange contracts, including forward,
option and swap contracts, to manage our exposure to changes in
currency exchange rates, principally Canadian dollars, Deutsche
<PAGE>
<PAGE>48
marks, pounds sterling and Japanese yen. Some of the contracts
involve the exchange of two foreign currencies, according to the local
needs of foreign subsidiaries. The use of these derivative financial
instruments allows us to reduce our exposure to the risk that the
eventual dollar net cash inflows and outflows, resulting from the sale
of products to foreign customers and purchases from foreign suppliers,
will be adversely affected by changes in exchange rates. Our foreign
exchange contracts are designated for firmly committed or forecasted
purchases and sales. These transactions are generally expected to
occur in less than one year. For firmly committed sales and
purchases, gains and losses are deferred in other current assets and
liabilities. These deferred gains and losses are recognized as
adjustments to the underlying hedged transactions when the future
sales and purchases are recognized, or immediately if the commitment
is cancelled. Gains or losses on foreign exchange contracts that are
designated for forecasted transactions are recognized in other income
as the exchange rates change. Amounts deferred relating to firm
commitments at December 31, 1995 and 1994, were unrealized gains of $9
and $4, respectively, and unrealized losses of $7 and $10,
respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS INCLUDING DERIVATIVE FINANCIAL
INSTRUMENTS
The tables below show the valuation methods and the carrying or
notional amounts and estimated fair values of material financial
instruments. The notional amounts represent agreed upon amounts on
which calculations of dollars to be exchanged are based. They do not
represent amounts exchanged by the parties and, therefore, are not a
measure of our exposure. Our exposure is limited to the fair value of
the contracts with a positive fair value plus interest receivable, if
any, at the reporting date.
Financial instrument Valuation method
Universal Card finance receivables Carrying amounts. These accrue
interest at a prime-based
rate.
Other finance receivables excluding Future cash flows discounted
leases at market rates.
Debt excluding capital leases Market quotes or based on rates
available to us for debt with
similar terms and maturities.
Letters of credit Fees paid to obtain the
obligations.
Guarantees of debt Costs to terminate agreements.
Interest rate swap agreements Gains or losses to
terminate agreements.
Interest rate cap agreements Costs to obtain agreements.
Foreign exchange contracts Market quotes.
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
ON BALANCE SHEET INSTRUMENTS
Assets:
Finance receivables
other than leases $12,064 $12,108 $13,553 $13,528
Liabilities:
Debt excluding capital leases 28,058 28,717 24,919 24,449
<PAGE>
<PAGE>49
1995 1994
Contract/ Contract/
Notional Notional
Amount Amount
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $4,553 $ 4,423
Interest rate cap agreements - 1,333
Foreign exchange:
Forward contracts 3,260 3,068
Swap contracts 756 340
Option contracts 22 -
Letters of credit 919 834
Guarantees of debt 731 518
1995
Carrying Fair
Amount Value
Asset Liab. Asset Liab.
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $12 $ 8 $65 $99
Foreign exchange:
Forward contracts 44 46 29 48
Swap contracts 1 10 7 66
Letters of credit - - 2 -
1994
Carrying Fair
Amount Value
Asset Liab. Asset Liab.
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $ 9 $ 2 $142 $27
Interest rate cap agreements 2 - 2 -
Foreign exchange:
Forward contracts 37 39 44 61
Swap contracts - 5 16 6
Letters of credit - - 2 -
SECURITIZATION OF RECEIVABLES
For the years ended December 31, 1995, 1994 and 1993, we securitized
portions of our short-term and long-term finance receivable portfolios
amounting to $3,575, $259 and $562, with proceeds received of $3,579,
$288 and $649, respectively. We continue to service these accounts
for the purchasers. At December 31, 1995 and 1994, $4,059 and $853,
respectively, of receivables previously securitized remained
outstanding. Our maximum exposure under limited recourse provisions,
in the unlikely event that all such receivables became uncollectible,
amounted to $255 at December 31, 1995 and $353 at December 31, 1994.
We have recorded a liability for the amount that we expect to
reimburse to the purchasers.
18.AT&T CREDIT HOLDINGS, INC.
In connection with a March 31, 1993 legal restructuring of AT&T
Capital Holdings, Inc. (formerly AT&T Capital Corporation), we issued
a direct, full and unconditional guarantee of all the outstanding
public debt of AT&T Credit Holdings, Inc. (formerly AT&T Credit
Corporation). At December 31, 1995, $417 of the guaranteed debt
remained outstanding.
<PAGE>
<PAGE>50
AT&T Credit Holdings, Inc. holds the majority of AT&T's investment
in AT&T Capital and the lease finance assets of the former AT&T
Credit Corporation. The table below shows summarized consolidated
financial information for AT&T Credit Holdings, Inc. The summarized
financial information includes transactions with AT&T that are
eliminated in consolidation.
1995 1994 1993
Total revenue $ 1,762 $1,437 $1,432
Interest expense 422 302 284
Selling, general and administrative expense 444 387 329
Income before cumulative effect of
change in accounting 119 92 70
Cumulative effect on prior years of change in
accounting for income taxes (SFAS No. 109) - - 22
Net income $ 119 $ 92 $ 48
Finance receivables $ 9,111 $7,726
Net investment in operating lease assets 1,118 903
Total assets 11,061 9,468
Total debt 7,028 5,682
Total liabilities 9,750 8,299
Minority interest 299 270
Total shareowners' equity $ 1,012 $ 899
19.SALE OF STOCK BY SUBSIDIARY
In August 1993, AT&T Capital sold 5,750,000 shares of common stock in
an initial public offering and approximately 850,000 shares of common
stock in a management offering. The shares sold represented
approximately 14% of the shares outstanding, decreasing our ownership
to 86%. The share were sold at $21.50 per share, yielding net proceeds
of $115 excluding $18 of recourse loans attributable to the management
offering. Because of these loans, we recorded a $9 loss on the sale
in 1993.
The plan announced on September 20, 1995 includes our intent to
sell our remaining 86% interest in AT&T Capital either to another
company or through a public offering. While the sale requires changes
to certain existing agreements between AT&T and AT&T Capital, we
expect the sale to be completed by the end of 1996. The recourse
loans attributable to the management offering will become due and
payable upon disposition of our remaining interest.
20.QUARTERLY INFORMATION (UNAUDITED)
1995 First Second Third Fourth
Total revenues $18,262 $19,512 $19,704 $22,131
Gross margin 7,545 8,144 7,361 7,029
Net income (loss) 1,198 1,355 262 (2,676)
Per common share:
Net income (loss) .76 .85 .16 (1.67)
Dividends declared .33 .33 .33 .33
Stock price*:
High 53 1/4 53 3/4 66 3/8 68 1/2
Low 47 5/8 47 7/8 51 3/8 60 1/4
Quarter-end close 51 3/4 53 65 3/4 64 3/4
<PAGE>
<PAGE>51
1994 First Second Third Fourth
Total revenues $17,097 $18,238 $18,649 $21,110
Gross margin 6,952 7,390 7,747 8,623
Net income 1,074 1,248 1,050 1,338
Per common share:
Net income .69 .80 .67 .85
Dividends declared .33 .33 .33 .33
Stock price*:
High 57 1/8 57 1/8 55 7/8 55 1/4
Low 50 5/8 49 1/2 52 1/2 47 1/4
Quarter-end close 51 1/4 53 3/8 54 50 1/4
* Stock prices obtained from the Composite Tape.
In the fourth quarter of 1995, we recorded $6,248 of charges which
reduced net income by $4,181 or $2.61 per share.
In the third quarter of 1995, we recorded $1,597 of charges at NCR
which reduced net income by $1,172 or $0.74 per share.
In the third quarter of 1994, we recorded $227 of costs
($169 net of taxes or 11 cents per share) related to the McCaw merger
primarily consisting of legal and investment banking fees and bonus
pool funding.
<PAGE>
<PAGE>52
BOARD OF DIRECTORS
ROBERT E. ALLEN, 60
Chairman of the Board and Chief Executive Officer of AT&T since 1988. Director
since 1984. 6,8
KENNETH T. DERR, 59
Chairman and Chief Executive Officer of Chevron Corporation, an international
oil company. Elected to Board in 1995.
M. KATHRYN EICKHOFF, 56
President of Eickhoff Economics Inc., a business consulting firm.
Elected to board in 1987. 1,5
WALTER Y. ELISHA, 63
Chairman and Chief Executive Officer of Spring Industries, Inc., a textile
manufacturing firm. Director since 1987. 2,4,7
PHILIP M. HAWLEY, 70
Retired Chairman and Chief Executive Officer of Broadway Stores, Inc.
(formerly Carter Hawley Hale Stores, Inc.), department stores.
Director since 1982. 2,3,4
CARLA A. HILLS,* 61
Chairman and Chief Executive Officer of Hills & Company international
consulting firm and former U.S. Trade Representative. Elected to
Board in 1993. 1,2,5
BELTON K. JOHNSON, 66
Former owner of Chaparrosa Ranch. Chairman of Belton K. Johnson Interests.
Director since 1974. 3,5,6,8
RALPH S. LARSEN, 57
Chairman and Chief Executive Officer of Johnson & Johnson, a
diversified health care company. Elected to Board in 1995.
DREW LEWIS,* 64
Chairman and Chief Executive Officer of Union Pacific Corporation, a rail
transportation, natural resources and trucking company.
Elected to Board in 1989. 1,2,5
ALEX J. MANDL, 52
President and Chief Operating Officer of the new AT&T. Served as
Chief Financial Officer of AT&T and Group Head of AT&T Communications
Services since joining the company in 1991. Elected to Board in 1996.
DONALD F. McHENRY, 59
President of IRC Group, international relations consultants; educator and former
U.S. Ambassador to the United Nations. Director since 1986. 3,7
VICTOR A. PELSON, 58
Chairman of AT&T Global Operations Team and Executive Vice President of AT&T.
Elected to Board in 1993. 5
<PAGE>53
DONALD S. PERKINS,* 68
Retired Chairman, Jewel Companies, Inc. Director since 1979. 2,3,6,7,8
HENRY B. SCHACHT,+ 61
Chairman of the Executive Committee and former Chief Executive Officer
of Cummins Engine Company, Inc., manufacturer of diesel engines. Elected
to Board in 1981. 1,5
MICHAEL I. SOVERN, 64
President Emeritus and Chancellor Kent Professor of Law at Columbia University.
Director since 1984. 1,4
FRANKLIN A. THOMAS,* 61
President of the Ford Foundation. Elected to Board in 1988. 1,2,5
JOSEPH D. WILLIAMS, 69
Retired Chairman and Chief Executive Officer of Warner-Lambert
Company, a pharmaceutical, health care and consumer products company.
Director since 1984. 4,6,7
THOMAS H. WYMAN, 66
Chairman of S.G. Warburg & Co. Inc., investment bankers. Director since 1981.
2,4,7
Our thanks and best wishes to Philip Hawley and Vic Pelson, who will
retire March 1996.
*Expected to join the Board of Lucent Technologies.
+Will resign to become Chairman and CEO of Lucent Technologies
coincident with the company's Initial Public Offering.
1. Audit Committee
2. Committee on Directors
3. Committee on Employee Benefits
4. Compensation Committee
5. Corporate Public Policy Committee
6. Executive Committee
7. Finance Committee
8. Proxy Committee
1995 MANAGEMENT EXECUTIVE COMMITTEE
The Management Executive Committee of the integrated AT&T was dissolved as
1995 ended and new leadership teams were formed. Our thanks and best wishes
to those officers who went on to other assignments in the new operating units
(indicated on page 52), as well as to John Mayo, who retired in February 1995
as President of AT&T Bell Laboratories; Vic Pelson, who will retire in
March; and Dick Bodman, who will retire in April to become Managing General
Partner of a new AT&T venture capital fund.
<PAGE>54
NEW LEADERSHIP TEAMS
______________________________________________________________________________
AT&T
ROBERT E. ALLEN*
Chairman and Chief Executive Officer. 1,2
ALEX J. MANDL*
President and Chief Operating Officer. 1,2
_____
HARRY BENNETT
Vice President and General Manager and Acting Head- Local Services
HAROLD W. BURLINGAME*
Executive Vice President - Human Resources. 2
PIER CARLO FALOTTI
President - AT&T International and AT&T Europe. 2
STEVEN W. HOOPER
President and Chief Executive Officer - AT&T Wireless Services
DAVID K. HUNT
President and Chief Executive Officer - AT&T Universal Card Services
FRANK IANNA
Vice President and General Manager - Network and Computing Services Division
MARILYN LAURIE*
Executive Vice President - Public Relations and Employee Information. 2
GAIL J. McGOVERN
Executive Vice President - Business Markets Division. 2
VICTOR E. MILLAR
President and Chief Executive Officer - AT&T Solutions
RICHARD W. MILLER*
Senior Executive Vice President and Chief Financial Officer. 1,2
JOSEPH P. NACCHIO
Executive Vice President - Consumer and Small Business Division. 2
JOSEPH C. PETRILLO
Executive Vice President - Strategy and New Offer Development. 2
RON J. PONDER
Executive Vice President - Operations and Service Management and
Chief Information Officer. 2
<PAGE>55
JOHN D. ZEGLIS *
General Counsel and Senior Executive Vice President - Policy Development and
Operations Support. 1,2
Other officers:
S. LAWRENCE PRENDERGAST
Vice President and Treasurer
MAUREEN B. TART
Vice President and Controller
MARILYN J. WASSER
Vice President - Law and Secretary
1. Chairman's Office
2. Executive Policy Council
______________________________________________________________________________
LUCENT TECHNOLOGIES
HENRY B. SCHACHT
Chairman-designate and Chief Executive Officer
RICHARD A. McGINN*
President and Chief Operating Officer and Director-designate
_____
CURTIS R. ARTIS
Senior Vice President - Human Resources
JAMES K. BREWINGTON
President - Network Systems Product Realization
GERALD J. BUTTERS
President - Network Systems North American Region
JOSEPH S. COLSON, JR.
President - Network Systems AT&T Customer Business Unit
CURTIS J. CRAWFORD
President - Microelectronics
CARLETON S. FIORINA
Executive Vice President - Corporate Operations
KATHLEEN M. FITZGERALD
Senior Vice President - Public Relations and Investor Relations
WILLIAM B. MARX JR.*
Senior Executive Vice President
ARUN N. NETRAVALI
Vice President - Research, Bell Laboratories
WILLIAM T. O'SHEA*
President - Network Systems International Regions and Professional Services
<PAGE>56
DONALD K. PETERSON
Executive Vice President and Chief Financial Officer
RICHARD J. RAWSON
Senior Vice President and General Counsel
PATRICIA F. RUSSO
President - Business Communications Systems
DANIEL C. STANZIONE*
President - Bell Laboratories and President - Network Systems
______________________________________________________________________________
NCR
LARS NYBERG*
Chief Executive Officer
_____
RAYMOND G. CARLIN
Senior Vice President - The Americas Region
ROBERT R. CARPENTER
Senior Vice President - Worldwide Services
ROBERT A. DAVIS
Senior Vice President - Quality and Reengineering
WILLIAM J. EISENMAN
Senior Vice President - Computer Systems Group
DANIEL J. ENNEKING
Senior Vice President - Systemedia Group
RICHARD H. EVANS
Senior Vice President - Global Human Resources
ANTHONY E. FANO
Senior Vice President - Retail Systems Group
RONALD L. FOWINKLE
Senior Vice President and Chief Information Officer
JOHN L. GIERING
Senior Vice President and Chief Financial Officer
<PAGE>57
JONATHAN S. HOAK
Senior Vice President and General Counsel
PER-OLOF LOOF
Senior Vice President - Financial Systems Group
DENNIS A. ROBERTSON
Senior Vice President and Chief Technical Officer
JOSE LUIS SOLLA
Senior Vice President - Europe, Middle East/Africa Region
HIDEAKI TAKAHASHI
Senior Vice President - Asia/Pacific Region
MICHAEL P. TARPEY
Senior Vice President - Public Relations
*Former member AT&T Management Executive Committee
<PAGE>
<PAGE>58
INVESTOR INFORMATION
CORPORATE HEADQUARTERS
AT&T
32 Avenue of the Americas
New York, NY 10013-2412
Internet users can access information on AT&T and its
products and services at: http://www.att.com/.
ANNUAL MEETING
The 111th Annual Shareowners Meeting will convene at 9:30 a.m.
Wednesday, April 17, 1996, at the James L. Knight International
Center in the Convention Center in Miami, Florida.
SHAREOWNER SERVICES
Questions about stock-related matters should be directed to
AT&T's shareowner services and transfer agent, First Chicago
Trust Co. Of NY:
AT&T
c/o First Chicago Trust Co. of NY
P.O. Box 2575
Jersey City, NJ 07303-2575
800-348-8288
Shareholders with e-mail addresses can send inquiries
electronically. First Chicago Trust's Internet address is
[email protected]. AT&T Mail Service subscribers should
address inquiries to !fctc.
Persons outside the U.S. may call collect to 201-324-0293.
Persons using a telecommunications device for the deaf (TDD)
or a teletypewriter (TTY) may call: 800 822-2794.
The First Chicago Trust address to which banks and brokers
may deliver certificates for transfer is 14 Wall Street in
New York City.
To hear information or ask questions about AT&T's
restructuring, call our special toll-free number:
800 756-8500.
DIVIDEND REINVESTMENT
The Dividend Reinvestment and Stock Purchase Plan provides
owners of common stock a convenient way to purchase additional
shares. You may write or call First Chicago Trust for a
prospectus and enrollment form.
<PAGE>59
STOCK DATA
AT&T (ticker symbol "T") is listed on the New York Stock
Exchange, as well as on the Boston, Midwest, Pacific and
Philadelphia exchanges in the U.S., and on stock exchanges
in Brussels, London, Paris, Geneva and Tokyo.
Shareowners of record as of December 29, 1995: 2,190,940.
PUBLICATIONS
AT&T's annual report to the Securities and Exchange
Commission, Form 10-K, is available without charge by
writing or calling First Chicago Trust Co.
The following publications are available by writing or
calling the sources indicated:
AT&T Capital Corporation
Annual Report and/or Form 10-K:
Corporate Communications
44 Whippany Road
Morristown, NJ 07962-1983
800 235-4288 or 201 397-3000
AT&T Foundation Report
Room 3100
1301 Avenue of the Americas
New York, NJ 10019-1035
AT&T and the Environment
Department AR
131 Morristown Road
Room B1220
Basking Ridge, NJ 07920-1650
<PAGE>
Exhibit (21)
List of Subsidiaries of AT&T Corp.
As of 1/31/96
Jurisdiction of
Incorporation
Alascom, Inc. .................................................Alaska
Actuarial Sciences Associates, Inc. ...........................Delaware
American Transtech, Inc. ......................................Delaware
AT&T Capital Corporation ......................................Delaware
AT&T Communications, Inc. .....................................Delaware
AT&T Communications of California, Inc. .......................California
AT&T Communications of Delaware, Inc. .........................Delaware
AT&T Communications of Hawaii, Inc. ...........................Hawaii
AT&T Communications of Illinois, Inc. .........................Illinois
AT&T Communications of Indiana, Inc. ..........................Indiana
AT&T Communications of Maryland, Inc. .........................Maryland
AT&T Communications of Michigan, Inc. .........................Michigan
AT&T Communications of the Midwest, Inc. ......................Iowa
AT&T Communications of the Mountain States, Inc. ..............Colorado
AT&T Communications of Nevada, Inc. ...........................Nevada
AT&T Communications of New England, Inc. ......................New York
AT&T Communications of New Hampshire, Inc. ....................New Hampshire
AT&T Communications of New Jersey, Inc. .......................New Jersey
AT&T Communications of New York, Inc. .........................New York
AT&T Communications of Ohio, Inc. .............................Ohio
AT&T Communications of the Pacific Northwest, Inc. ............Washington
AT&T Communications of Pennsylvania, Inc. .....................Pennsylvania
AT&T Communications of the South Central States, Inc. .........Delaware
AT&T Communications of the Southern States, Inc. ..............New York
AT&T Communications of the Southwest, Inc. ....................Delaware
AT&T Communications of Virginia, Inc. .........................Virginia
AT&T Communications of Washington, D.C. Inc. ..................New York
AT&T Communications of West Virginia, Inc. ....................West Virginia
AT&T Communications of Wisconsin, Inc. ........................Wisconsin
AT&T Credit Corporation .......................................Delaware
AT&T Istel....... .............................................United Kingdom
AT&T Microelectronica de Espana S.A. ..........................Spain
AT&T Nassau Metals Corporation ................................New York
AT&T Network Systems International B.V. .......................Netherlands
AT&T Paradyne Corporation .....................................Delaware
AT&T of Puerto Rico, Inc. .....................................New York
AT&T Universal Card Services Corporation ......................Delaware
AT&T Wireless Services, Inc. ..................................Delaware
LIN Broadcasting Corporation ..................................Delaware
LIN Television Corporation ....................................Delaware
Lucent Technologies Inc. ......................................Delaware
Lucent Technologies International Inc. ........................Delaware
NCR Corporation................................................Delaware
<PAGE> 1
Exhibit (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
registration statements of AT&T Corp. ("AT&T" or the "Company")
on Form S-3 for the Shareowner Dividend Reinvestment and Stock
Purchase Plan (Registration No.333-00573), Form S-8 for the AT&T
1984 Stock Option Plan (Registration No.2-90983), Form S-8 for
the AT&T Long Term Savings and Security Plan (Registration No.
33-34265), Form S-8 for the AT&T Long Term Savings Plan for
Management Employees (Registration Nos. 33-34264, 33-29256 and
33-21937), Form S-8 for the AT&T Retirement Savings and Profit
Sharing Plan (Registration No. 33-39708), Form S-8 for Shares
Issuable Under the Stock Option Plan of the AT&T 1987 Long Term
Incentive Program (Registration Nos. 33-56643, 33-49465 and
33-20276, Form S-8 for the AT&T Global Information Solutions
Company Savings Plan (Registration No. 33-53765), Form S-8 for
the 1994 Employee Stock Purchase Plan for AT&T Global Information
Solutions Company (Registration No. 33-54281), Form S-8 for the
AT&T Capital Corporation Retirement and Savings Plan
(Registration No. 33-50821), Form S-8 for the AT&T of Puerto
Rico, Inc. Long Term Savings Plan for Management Employees
(Registration No. 33-50819), Form S-8 for the AT&T of Puerto
Rico, Inc. Long Term Savings and Security Plan (Registration No.
33-50817), Form S-8 for the AGCS Savings Plan (Registration No.
33-50827), Form S-8 for the AGCS Hourly Savings Plan
(Registration No. 33-50829, Form S-8 for the 1995 AT&T Employee
Stock Purchase Plan (Registration No. 33-54797), Form S-8 for the
AT&T Shares for Growth Program (Registration No. 33-49089), Form
S-3 for the AT&T $2,600,000,000 Notes and Warrants to Purchase
Notes (Registration No. 33-49589), Form S-3 for the AT&T
$3,000,000,000 Notes and Warrants to Purchase Notes (Registration
No. 33-59495), Form S-4 for the AT&T 5,000,000 Common Shares
(Registration No. 33-57745), and in Post-Effective Amendment Nos.
1, 2 and 3 on Form S-8 to Form S-4 Registration Statement
(Registration No. 33-42150) for the NCR Corporation 1989 Stock
Compensation Plan (Registration No. 33-42150-01), the NCR
Corporation 1984 Stock Option Plan (Registration No. 33-42150-02)
and the NCR Corporation 1976 Stock Option Plan (Registration No.
33-42150-03), respectively, and the Post-Effective Amendment Nos.
1, 2, 3, 4 and 5 on Form S-8 to Form S-4 Registration Statement
(Registration No. 33-52119) for the McCaw Cellular
Communications, Inc. 1983 Non-Qualified Stock Option Plan
(Registration No. 33-52119-01), the McCaw Cellular
Communications, Inc. 1987 Stock Option Plan (Registration No.
33-52119-02), the McCaw Cellular Communications, Inc. Equity
Purchase Plan (Registration No. 33-52119-03), the McCaw Cellular
Communications, Inc. 1992 Stock Option Plan for Non-Employee
Directors (Registration No. 33-52119-04) and the McCaw Cellular
Communications, Inc. Employee Stock Purchase Plan (Registration
No.
33-52119-05), respectively, and Post-Effective Amendment No. 1 on
Form S-8 to Form S-4 Registration Statement (Registration No.
33-45302) for the Teradata Corporation 1987 Incentive and Other
Stock Option Plan (Registration No. 33-45302-01), Form S-8 for
the AT&T Amended and Restated 1969 Stock Option Plan for LIN
Broadcasting Corp. (Registration No. 33-63195) of our reports,
which include explanatory paragraphs regarding the change in 1993
in methods of accounting for postretirement benefits,
postemployment benefits and income taxes, dated January 25, 1996,
on our audits of the consolidated financial statements and
consolidated financial statement schedule of the Company and its
subsidiaries at December 31, 1995 and 1994, and for the years
ended December 31, 1995, 1994 and 1993, which reports are
included or incorporated by reference in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
February 27, 1996
<PAGE>1 EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is both a director and an officer
of the Company, as indicated below his signature:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorney for him and in his name, place and stead,
and in his capacity as both a director and an officer of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorneys may or shall
lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 19th day of February 1996.
R. E. Allen
Chairman of the Board and Director
<PAGE>
<PAGE>2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is an officer of the Company, as
indicated below his signature:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints M. B. TART and S. L. PRENDERGAST, and each of them, as
attorneys for him and in his name, place and stead, and in his
capacity as an officer of the Company, to execute and file such
annual report, and thereafter to execute and file any amendments
or amendments thereto, hereby giving and granting to said
attorneys, and each of them, full power and authority to do and
perform each and every act and thing whatsoever requisite and
necessary to be done in and about the premises, as fully, to all
intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 14th day of February, 1996.
R. W. Miller
Senior Executive Vice President
and Chief Financial Officer
<PAGE>
<PAGE>3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is an officer of the Company, as
indicated below her signature:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER and S. L. PRENDERGAST, and each of them, as
attorneys for her and in her name, place and stead, and in her
capacity as an officer of the Company, to execute and file such
annual report, and thereafter to execute and file any amendments
or amendments thereto, hereby giving and granting to said
attorneys, and each of them, full power and authority to do and
perform each and every act and thing whatsoever requisite and
necessary to be done in and about the premises, as fully, to all
intents and purposes, as she might or could do if personally
present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 19th day of February, 1996.
M. B. Tart
Vice President and Controller
<PAGE>
<PAGE>4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 22nd day of February, 1996.
Philip M.Hawley
Director
<PAGE>
<PAGE>5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 14th day of February, 1996.
Carla A. Hills
Director
<PAGE>
<PAGE>6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 19th day of February, 1996.
Belton K. Johnson
Director
<PAGE>
<PAGE>7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 14th day of February, 1996.
Ralph S. Larsen
Director
<PAGE>
<PAGE>8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 19th day of February, 1996.
Alex J. Mandl
Director
<PAGE>
<PAGE>9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 22nd day of February, 1996.
Donald F. McHenry
Director
<PAGE>
<PAGE>10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 19th day of February, 1996.
Victor A. Pelson
Director
<PAGE>
<PAGE>11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 14th day of February, 1996.
Donald S. Perkins
Director
<PAGE>
<PAGE>12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 22nd day of February, 1996.
Michael I. Sovern
Director
<PAGE>
<PAGE>13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 13th day of February, 1996.
Franklin A. Thomas
Director
<PAGE>
<PAGE>14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 14th day of February, 1996.
Thomas H. Wyman
Director
<PAGE>
<PAGE>15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 23rd day of February, 1996.
M. Kathryn Eickhoff
Director
<PAGE>
<PAGE>16
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 23rd day of February, 1996.
Drew Lewis
Director
<PAGE>
<PAGE>17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter
referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company:
NOW, THEREFORE, the undersigned hereby constitutes and
appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each
of them, as attorneys for him or her and in his or her name,
place and stead, and in his or her capacity as a director of the
Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he or she
might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 27th day of February, 1996.
Kenneth T. Derr
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains restated summary financial information extracted from the
audited balance sheet of AT&T at December 31, 1994 and the audited consolidated
statement of income for the twelve-month period ended December 31, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,208
<SECURITIES> 294
<RECEIVABLES> 13,671
<ALLOWANCES> 1,251
<INVENTORY> 3,633
<CURRENT-ASSETS> 37,611
<PP&E> 44,798
<DEPRECIATION> 23,519
<TOTAL-ASSETS> 79,262
<CURRENT-LIABILITIES> 30,930
<BONDS> 11,358
0
0
<COMMON> 1,569
<OTHER-SE> 16,352
<TOTAL-LIABILITY-AND-EQUITY> 79,262
<SALES> 21,161
<TOTAL-REVENUES> 75,094
<CGS> 13,273
<TOTAL-COSTS> 44,382
<OTHER-EXPENSES> 22,763
<LOSS-PROVISION> 1,929
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> 7,518
<INCOME-TAX> 2,808
<INCOME-CONTINUING> 4,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,710
<EPS-PRIMARY> $3.01
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
balance sheet of AT&T at December 31, 1995 and the audited consolidated
statement of income for the twelve-month period ended December 31, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 908
<SECURITIES> 593
<RECEIVABLES> 15,493
<ALLOWANCES> 1,583
<INVENTORY> 4,074
<CURRENT-ASSETS> 39,509
<PP&E> 49,063
<DEPRECIATION> 26,799
<TOTAL-ASSETS> 88,884
<CURRENT-LIABILITIES> 39,372
<BONDS> 11,635
0
0
<COMMON> 1,596
<OTHER-SE> 15,678
<TOTAL-LIABILITY-AND-EQUITY> 88,884
<SALES> 22,412
<TOTAL-REVENUES> 79,609
<CGS> 16,045
<TOTAL-COSTS> 49,530
<OTHER-EXPENSES> 28,864
<LOSS-PROVISION> 2,378
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> 935
<INCOME-TAX> 796
<INCOME-CONTINUING> 139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139
<EPS-PRIMARY> $0.09
<EPS-DILUTED> 0
</TABLE>
