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, 1996
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 February 28, 1997, the aggregate market value of the voting stock held by
non-affiliates was $64,782,019,250.
At February 28, 1997, 1,624,837,277 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, 1996 (Part II)
(2) Portions of the registrant's definitive proxy statement dated April 1, 1997,
issued in connection with the annual meeting of shareholders (Part III)
<PAGE>
SCHEDULE A
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange on which
Title of each class registered
Common Shares # New York, Boston, Chicago,
(Par Value $1 Per Share) ## Philadelphia and Pacific Stock
# Exchanges
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 #
<PAGE>
TABLE OF CONTENTS
PART I
Item
Description Page
1. Business............................................................... 1
2. Properties............................................................. 10
3. Legal Proceedings...................................................... 10
4. Submission of Matters to a Vote of Security-Holders.................... 11
PART II
Description
5. Market for Registrant's Common Equity and Related Stockholder
Matters.............................................................. 13
6. Selected Financial Data................................................ 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 13
8. Financial Statements and Supplementary Data............................ 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................. 13
PART III
Description
10. Directors and Executive Officers of the Registrant..................... 13
11. Executive Compensation................................................. 13
12. Security Ownership of Certain Beneficial Owners and Management ........ 13
13. Certain Relationships and Related Transactions......................... 13
PART IV
Description
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....... 14
See page 12 for "Executive Officers of the Registrant."
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
AT&T Corp. ("AT&T" or the "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). Internet users can access information about AT&T and its services
at http://www.att.com/.
AT&T is currently a major participant in two industries:
telecommunications and financial services. AT&T is among the world's
communications leaders, providing voice, data and video telecommunications
services to large and small businesses, consumers and government entities. AT&T
and its subsidiaries furnish regional, domestic, international and local
communication transmission services. AT&T's wholly owned subsidiaries, including
AT&T Wireless Services, Inc., provide cellular telephone and other wireless
services. AT&T also provides billing, directory, and calling card services to
support its communications business as well as offering a general purpose credit
card through its wholly owned subsidiary, AT&T Universal Card Services Corp.
("AT&T Universal Card Services").
On September 20, 1995, AT&T announced a plan to separate (the
"Separation") into three publicly held stand-alone global companies focused on
serving certain core businesses: communication and information services and
general purpose credit card (to be carried on by the new AT&T, which includes
AT&T Universal Card Services), communications systems and technology (to be
carried on by Lucent Technologies Inc. ("Lucent")), and transaction-intensive
computing (to be carried on by NCR Corporation ("NCR", formerly AT&T Global
Information Solutions Company)).
AT&T completed the Separation in 1996. AT&T distributed to its
shareowners all of the shares AT&T owned of Lucent on September 30, 1996 and all
of the shares of NCR on December 31, 1996. These distributions were tax free to
shareowners, except to the extent cash was received for fractional shares. The
Lucent distribution had been preceded by the initial public offering of 17.6% of
Lucent shares. In addition, on October 1, 1996, AT&T completed the sale of its
majority interest in AT&T Capital Corporation, in which AT&T received $1.8
billion in cash, recognizing a $162 million after-tax gain.
COMMUNICATION AND INFORMATION SERVICES
AT&T's communication and information services business addresses the
needs of consumers, large and small businesses, the Federal government and state
and local governments for voice, data and video telecommunications services.
Business units within this group provide regular and custom long distance
communications services, data transmission services, 500 services, toll-free or
800 and 888 services, 900 services, private line services, software defined
network services ("SDN"), integrated services digital network ("ISDN")
technology based services, and electronic mail, electronic data interchanges and
enhanced facsimile services.
AT&T also provides special long distance services, including AT&T
Calling Card services, special calling plans and the Company's domestic and
international operator services. AT&T provides communications services
<PAGE>
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).
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 has also begun providing a variety of new services, including
online services, internet access and local telecommunications services. Online
and internet access services include AT&T WorldNet* Service, a service providing
dedicated and dial-up access to the internet, AT&T Easy World Wide Web* Service,
an internet web site creation and hosting service, custom web site hosting
services, and AT&T SecureBuy* Service, an Internet transaction service that
simplifies buying and selling on the Internet.
Following passage of the Telecommunications Act of 1996 (the
"Telecommunications Act"), AT&T has applied for permission to provide local
service in all 50 states. At December 31, 1996, AT&T had received authority to
provide service in 42 states and anticipates that it will receive the remaining
approvals as the other states take the actions contemplated by the
Telecommunications Act. In the fourth quarter of 1996, AT&T began providing
local telephone service to residential customers on a controlled basis in
Sacramento, California. In addition, in February 1997 AT&T began offering local
telephone service to business customers throughout California as well as
offering in 45 states AT&T Digital Link, which enables business customers to
place local calls over high capacity lines connected directly to AT&T's existing
switches.
AT&T Solutions, Inc., 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 is one of the world's largest wireless service providers. In the United
States, AT&T holds licenses to operate systems providing broadband wireless
services covering markets with a population of over 200 million nationwide and
messaging and air-to-ground services throughout the country. The
- ------------
* Service Mark
<PAGE>
services provided by AT&T currently include cellular, messaging and
air-to-ground communications.
In addition, AT&T has purchased (primarily in auctions conducted by the
Federal Communications Commission ("FCC")) wireless broadband PCS (or "personal
communication services") licenses covering markets with a population of over 70
million. AT&T is required by the FCC to provide adequate broadband PCS 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 has created service clusters in major metropolitan areas and
linked its and other service providers systems into a network which permits its
wireless cellular subscribers to both place and receive calls anywhere they
travel in areas served by the network, even if the local wireless telephone
service is not provided by AT&T. AT&T is now integrating other communications
technologies, such as PCS, into the network. AT&T will continue to explore the
use of emerging technologies to expand the reach of the network and to provide
additional services (especially data and internet services).
AT&T also offers one-way messaging systems such as paging services. As
of December 31, 1996, the Company had over 1.1 million messaging service
subscribers. The majority of these subscribers are in locations where AT&T holds
cellular or PCS licenses.
AT&T's wireless services are conducted primarily through subsidiaries
of AT&T Wireless Services, Inc. (formerly 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
(which held cellular and broadcast television properties), which in turn owned
100% of LIN Television Corporation. In December 1994, LIN Broadcasting
Corporation distributed to its shareholders all of the stock of LIN Television
Corporation, so that upon the distribution AT&T became the direct owner (through
its wholly owned subsidiaries) of 52% of LIN Television Corporation. In
September 1995, AT&T acquired the remaining 48% publicly-held interest in LIN
Broadcasting Corporation at an aggregate price of approximately $3.3 billion.
AT&T has established a number of international alliances to increase
the reach and scope of AT&T's network over time and has invested in certain
countries in order to increase the range of services AT&T offers in those
countries. For example, AT&T founded the WorldPartners alliance in 1993 to
provide multinational customers with seamless telecommunications and related
services. As of the end of 1996, WorldPartners included 30 members who provide
services to multinational customers in North America, Europe and Asia. In
addition, in 1996 AT&T began offering business and consumer services in the
United Kingdom and in early 1997 AT&T's joint venture in Mexico, Alestra, began
offering long distance service. AT&T also has an interest in several wireless
communications companies outside of the United States, including cellular
operators licensed to serve Hong Kong, Columbia and parts of India.
<PAGE>
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 managed receivables in excess of $13.5 billion
in 1996, $14.1 billion in 1995, $12.3 billion in 1994, $9.1 billion in 1993, and
$6.6 billion in 1992. 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. Based
on the number of cardholder accounts, the AT&T Universal Card program is one of
the largest bankcard/credit card programs in the United States.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Telecommunications Act of 1996
In February 1996, the Telecommunications Act became law. The
Telecommunications Act, among other things, was designed to foster local
exchange competition by establishing a regulatory framework to govern new
competitive entry in local and long distance telecommunications services and
requiring incumbent local exchange carriers ("LECs"), including the Regional
Bell Operating Companies ("RBOCs"), to implement a checklist of conditions that
would support 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) telephone number portability for customers changing carriers, (iv)
dialing parity for customers and (v) access to rights of way.
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 must review such request within 90 days, but cannot
approve such a request unless (i) approval is consistent with the public
interest, convenience and necessity; (ii) the FCC has consulted with the
Department of Justice ("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 unaffiliated competing providers of telephone 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.
In August 1996, the FCC adopted rules and regulations (the "Implementing Rules")
to implement the local competition provisions of the Telecommunications Act,
including with respect to the terms and conditions of interconnection with LEC
networks and the standards governing the purchase of unbundled network elements
and wholesale services from LECs. The Implementing
<PAGE>
Rules rely on each state to develop the specific rates and procedures in such
state within the framework prescribed by the FCC for developing such rates and
procedures.
For example, the Implementing Rules identify a minimum set of
technically feasible points of interconnection that an incumbent LEC must
provide; identify a minimum set of network elements that must be made available
by an incumbent LEC on an unbundled basis, without restriction; and require
incumbent LECs to provide nondiscriminatory access to operations support systems
for ordering, provisioning, maintenance and repair.
In addition, the Implementing Rules establish a methodology that states
must use for determining the wholesale rates that LECs must provide to resellers
of their services and which is based on retail rates less marketing, billing,
collection and other avoided or avoidable costs. In addition, the Implementing
Rules establish a default discount in the range of 17-25% that states may use
pending implementation of this methodology.
Finally, the Implementing Rules require states to set prices for
interconnection and unbundled network elements pursuant to a forward looking
economic cost pricing methodology which is based on the Total Element Long-Run
Incremental Cost ("TELRIC") of providing a particular network element plus a
reasonable share of forward-looking joint and common costs. If states are unable
to conduct a cost study to determine such rates within the statutory time frame
for arbitrating interconnection disputes, the Implementing Rules establish
default ranges or ceilings for unbundled network elements.
Although the FCC deferred interstate access charge reform to another proceeding,
the Implementing Rules only permit incumbent LECs to recover from interexchange
carriers using unbundled network elements for local service certain portions of
the current interstate access charges. Such interexchange carriers will not be
required to pay these charges as of the earliest of July 1, 1997 or the
occurrence of certain other events, such as RBOC receipt of authority to provide
in-region long distance service.
In October 1996, the United States Court of Appeals for the 8th Circuit
ordered a stay of the effectiveness of those provisions of the Implementing
Rules addressed to the pricing of unbundled network elements and wholesale
services ("Pricing Rules"), among others, until such court resolves the
challenges to the Implementing Rules by local telephone companies and telephone
regulators in several states. The court heard argument on the challenges in
January 1997.
AT&T believes that the stay of the Pricing Rules may inhibit the
establishment of appropriate permanent rates for the provision of network
elements and wholesale services. Absent full effectiveness of the Implementing
Rules, each state will determine the applicable rates and procedures independent
of the framework of the Pricing Rules. Since the stay was issued, many states
have used the Pricing Rules as guidelines in establishing interim rates that
will apply pending the determination of permanent rates in subsequent state
proceedings. Nevertheless, in the absence of the Pricing Rules, there can be no
assurance that the prices and other conditions established in each state will
provide for effective local service entry and competition or provide AT&T with
new market opportunities.
AT&T has applied for permission to provide local service in all 50
states. At December 31, 1996, AT&T had received authority to provide service in
42 states and anticipates that it will receive the remaining approvals as the
other states take the actions contemplated by the Telecommunications Act. While
the Telecommunications Act makes clear that no state can prohibit AT&T or any
<PAGE>
other entity from providing local services, AT&T cannot be certain as to when it
will receive certification in each state and the conditions that might attach to
each such certification. Most of the RBOCs have indicated their intention to
petition the FCC during 1997 for permission to provide interexchange services in
one or more states within their home market.
As a result of the legislative and regulatory developments discussed
above, there can be no assurance that all of the necessary preconditions for the
development of effective local competition will be achieved in a timely or even
manner and that long distance carriers will be in a position to compete
effectively against RBOCs in local service at the time RBOCs receive permission
to enter the long distance market. Because it is widely anticipated that
substantial numbers of long distance customers will seek to purchase local,
interexchange and other services from a single carrier as part of a combined or
full service package, any competitive disadvantage, inability to profitably
provide local service at competitive rates or delays or limitations in providing
local service or combined service packages could adversely affect AT&T's future
revenues and earnings.
Modification of Final Judgment of 1982
Prior to 1996, AT&T and the RBOCs were subject to the provisions of the
Modification of Final Judgment of 1982 (the "MFJ") since its implementation. The
Telecommunications Act effectively superseded future
operation of the MFJ.
Consequently, on April 11, 1996, Judge Harold Greene issued an order terminating
the MFJ.
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. From
July 1989 to October 1995, the FCC regulated AT&T under a system known as "price
caps" whereby 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 lacked 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 became subject to the same regulations as
its long distance competitors for such services. Thus, AT&T was no longer
subject to price cap regulation for these services, was able to file tariffs
that are presumed lawful on one day's notice, and was free of other regulations
and reporting requirements that apply only to dominant carriers.
In addition, in further recognition of competitive developments, on
October 31, 1996, the FCC issued an order, to be effective in late 1997,
prohibiting AT&T and other non-dominant carriers from filing tariffs for their
domestic interstate services. Accordingly, carriers will be required to use
contracts and other commercial arrangements to establish the terms of service
with customers. In February 1997, the United States Court of Appeals for the
District of Columbia ordered a stay of the effectiveness of the FCC'c order.
Argument is expected to be heard later this year.
AT&T remains subject to the statutory requirements of Title II of the
Communications Act. AT&T 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
<PAGE>
regard to the potential impact of declaring AT&T to be non-dominant, including a
three-year rate assurance for low income and low usage residential users and a
three-year limit on, and 5 days advance notice for, rate increases on 800
directory assistance and analog private line services.
AT&T's international private line services have been classified as
non-dominant for several years. AT&T's switched international services have
become subject to increased competition, similar to its domestic services and on
May 9, 1996, the FCC adopted an order reclassifying AT&T as a non-dominant
carrier for such services. AT&T has made certain voluntary commitments that
address issues raised in that proceeding, including commitments: (i) to maintain
its annual average revenue per minute for international residential calls at or
below the 1995 level through May 9, 1999, and in the event of a significant
change that substantially raises AT&T's costs, to provide the FCC five business
days notice prior to implementing rate increases that would raise the annual
average revenue per minute for such calls above the 1995 level; and (ii) to
maintain certain discount calling plans providing at least a 15% discount off
basic pricing schedules until May 9, 1999. AT&T also made voluntary commitments
relating to its operation of international cable facilities, its negotiation of
settlement agreements with foreign carriers and its relationship with foreign
partners.
In addition to the matters described above with respect to the
Telecommunications Act, state public service commissions or similar authorities
having regulatory power over intrastate rates, lines and services and other
matters regulate AT&T's local and intrastate communications services. The system
of regulation used in many states is rate-of-return regulation. In recent years,
many states have adopted different systems of regulation, such as: complete
removal of rate-of-return regulation, pricing flexibility rules, price caps, and
incentive regulation.
COMPETITION
AT&T currently faces significant competition in the communication and
information services industry and expects that the level of competition will
continue to increase. As competitive, regulatory 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 markets. These may include
entrants from other segments of the communication and information services
industry 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 Telecommunications Act has already begun to intensify the
competitive environment. Anticipating changes in the industry, non-RBOC LECs,
which are not required to implement the Telecommunications Act's competitive
checklist prior to offering long distance in their home markets, have begun
integrating their local service offerings with long distance offerings in
advance of AT&T being able to offer combined local and long distance service in
these areas. If such non-RBOC LECs continue to offer combined services without
offering reasonable terms of interconnection and service elements at competitive
rates, AT&T's revenues and earnings in these service regions will be adversely
affected.
Similarly, to the extent that the RBOCs obtain in-region interLATA
authority before the Telecommunications Act's checklist of conditions have been
<PAGE>
fully or satisfactorily implemented and adequate facilities-based local exchange
competition exists, there is a substantial risk that AT&T and other
interexchange service providers would be at a disadvantage to the RBOCs in
providing both local service and combined service packages. Furthermore, the
previously announced merger of British Telecommunications PLC and MCI
Communications Corp. will create a large, well-capitalized competitor for AT&T's
offerings, domestically as well as internationally, with substantial financial,
technical, marketing and other resources and a large worldwide installed base of
customers.
Furthermore, in February 1997, a General Agreement on Trade in Services
(the "GATS") was reached under the World Trade Organization. The GATS, which
will become effective January 1, 1998, is designed to open each country's
domestic telecommunications markets to foreign competitors. The GATS, and future
trade agreements, may accelerate the entrance into the U.S. market of foreign
telecommunications providers, certain of whom are likely to possess dominant
home market positions in which there is not effective competition. The GATS may
also permit AT&T's entrance into other markets as only a small number of
countries refused to eliminate their foreign ownership restrictions.
In addition to the matters referred to above, various other factors,
including market acceptance, start-up and ongoing costs associated with the
provision of new services and local conditions and obstacles, could adversely
affect the timing and success of AT&T's entrance into the local exchange
services market and AT&T's ability to offer combined service packages that
include local service. In addition, the simultaneous entrance of numerous new
competitors for interexchange and combined service packages is likely to
adversely affect AT&T's long distance revenues and could adversely affect
earnings.
AT&T's other industry segment, 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).
FORWARD LOOKING STATEMENTS
Except for the historical statements and discussions contained herein,
statements contained in this Report on Form 10-K constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Any Form 10-K, Annual Report
to Shareowners, Form 10-Q or Form 8-K of AT&T may include forward looking
statements. In addition, other written or oral statements which constitute
forward looking statements have been made and may in the future be made by or on
behalf of AT&T, including statements concerning future operating performance,
AT&T's share of new and existing markets, AT&T's short- and long-term revenue
and earnings growth rates, and general industry growth rates and AT&T's
performance relative thereto. These forward looking statements rely on a number
of assumptions concerning future events, including the adoption and
implementation of balanced and effective rules and regulations by the FCC and
the state public regulatory agencies, and AT&T's ability to achieve a
significant market penetration in new markets. These forward looking statements
are subject to a number of uncertainties and other factors, many of which are
<PAGE>
outside AT&T's control, that could cause actual results to differ materially
from such statements. These factors include, but are not limited to:
- - the efficacy of the Implementing Rules and other rules and regulations to be
adopted by the FCC to implement the provisions of the Telecommunications Act;
- - the outcome of negotiations with LECs and state regulatory arbitrations and
approvals with respect to interconnection agreements; the timing of receipt of
and the conditions that attach to, certification to provide local service in
each state; and the ability to purchase unbundled network elements or
wholesale services from LECs at a price sufficient to permit the profitable
offering of local exchange service at competitive rates;
- - success and market acceptance for new offerings, including local service;
start-up costs associated with entering new markets, including advertising and
promotional efforts; successful deployment of new systems and applications to
support new offerings; and local conditions and obstacles;
- - competitive pressures, including pricing pressures, technological developments
and the ability to offer combined service packages that include local service;
the extent and pace at which different competitive environments develop for
each segment of the telecommunications industry; the extent at and duration
for which competitors from each segment of the telecommunications industry are
able to offer combined or full service packages prior to AT&T being able to;
and the degree to which AT&T experiences material competitive impacts to its
traditional service offerings prior to achieving adequate local service entry;
- - the availability, terms and deployment of capital; and the ability to achieve
cost savings; and
- - general economic conditions, government and regulatory policies, and business
conditions in the communications industry.
Readers are cautioned not to put undue reliance on such forward looking
statements. For a more detailed description of these and additional
uncertainties and other factors that could cause actual results to differ
materially from such forward looking statements, see "Results of Operations",
"Financial Condition", "Regulatory and Legislative Developments", and
"Competition" included in or incorporated by reference into this Form 10-K. As
described elsewhere in this Form 10-K, these uncertainties and factors could
adversely affect the timing and success of AT&T's entrance into the local
exchange services market and AT&T's ability to offer combined service packages
that include local service, thereby adversely affecting AT&T's future revenues
and earnings. AT&T disclaims any intention or obligation to update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.
SEGMENT, OPERATING REVENUE AND RESEARCH AND DEVELOPMENT EXPENSE
INFORMATION
For information about the Company's industry segments, see Note 12 to
the Consolidated Financial Statements. For information about the Company's
research and development expense, see Note 4 to the Consolidated Financial
Statements. For information about the consolidated operating revenues
contributed by the Company's major classes of products and services, see the
revenue tables and descriptions on pages 21 through 23 and Consolidated
<PAGE>
Statements of Income on page 30 of the Company's annual report to security
holders for the year ended December 31, 1996. All such information is
incorporated herein by reference pursuant to General Instruction G(2).
EMPLOYEE RELATIONS
At December 31, 1996 AT&T employed approximately 130,000 persons in its
operations, approximately 124,000 of whom are located domestically. About 41% of
the domestically located employees of AT&T are represented by unions. Of those
so represented, about 96% are represented by the Communications Workers of
America ("CWA"), which is affiliated with the AFL-CIO; about 4% by the
International Brotherhood of Electrical Workers ("IBEW"), which is also
affiliated with the AFL-CIO. In addition, there is a very small remainder of
domestic employees represented by other unions. Labor agreements with most of
these unions extend through May 1998.
ITEM 2. PROPERTIES.
The properties of AT&T consist primarily of plant and equipment used to
provide long distance telecommunications services 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 also operates a number of sales offices, customer care
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. 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.
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, 1996. While these matters could affect operating results of any one quarter
when resolved in future periods, it is management's opinion that after final
<PAGE>
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 position or results of operations.
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 asserted, among
other things, monopolization or attempted monopolization claims concerning
communications transmission equipment, related software and caller
identification services. AT&T filed counterclaims against Bell Atlantic and
Lucent filed counterclaims against DSC Communications. In the first quarter of
1997, Bell Atlantic, DSC Communications, AT&T and Lucent independently reached
separate settlements with plaintiffs pursuant to confidential agreements, which
resolved the claims among the parties. The settlements will have no material
impact on AT&T's financial position or results of operations.
AT&T is also a named party in a number of environmental actions, none
of which are material to the consolidated financial statements or business of
the Company. In addition, pursuant to the Separation and Distribution Agreement
by and among AT&T, Lucent, and NCR, dated as of February 1, 1996 and amended and
restated as of March 29, 1996, Lucent has assumed liability, subject to the
liability sharing provisions of that agreement, for a number of actions in which
AT&T remains a named party. AT&T is working to be released as a party to these
actions, although there can be no assurance that it will be successful in this
regard.
There are three environmental proceedings which are required to be reported
pursuant to Instruction 5.C. of Item 103 of Regulation S-K, all of which are
proceedings for which Lucent has assumed liability, as described above. 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 $4.2 million
in 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 Comprehensive Environmental Response, Compensation and
Liability Act ("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. Finally, 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.
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>
Executive Officers of the Registrant
(as of March 28, 1997)
Became AT&T Executive
Name Age Officer On
- ---------------- --- ---------------------
Robert E. Allen* . . .62 Chairman of the Board and Chief
Executive Officer . . . . . . . 9-86
Harry S. Bennett . . .52 Vice President & General Manager,
AT&T Local Services Division . 3-97
Harold W. Burlingame .56 Executive Vice President, Human .
Resources . . . . . . . . . . . 9-86
Steven W. Hooper . . .44 President & Chief Executive
Officer - AT&T Wireless
Services . . . . . . . . . . . 3-97
Frank Ianna . . . . .47 Vice President & General Manager,
Network & Computing Services &
AT&T Chief Quality Officer . . 3-97
Marilyn Laurie . . . .57 Executive Vice President, Brand
Strategy & Marketing 2-87
Communications . . . . . . . .
Gail J. McGovern . . .44 Executive Vice President,
Consumer Markets Division . . . 1-96
Victor E. Millar . . .61 President & Chief Executive
Officer, AT&T Solutions . . . . 3-97
Richard W. Miller . .56 Senior Executive Vice President
and Chief Financial Officer . . 8-93
David C. Nagel . . . .52 President, AT&T Labs . . . . . . 3-97
John Petrillo . . . .47 Executive Vice President,
Strategy & New Service
Innovation and International . 1-96
Ron J. Ponder . . . .53 Executive Vice President,
Operations & Service
Management . . . . . . . . . . 1-96
Richard J. Srednicki .49 President & Chief Executive
Officer, AT&T Universal Card
Services . . . . . . . . . . . 3-97
John R. Walter** . . .50 President and Chief Operating
Officer . . . . . . . . . . . . 11-96
Jeffrey Weitzen . . .40 Executive Vice President,
Business Markets Division . . . 1-97
Paul J. Wondrasch . .53 Senior Vice President,
International . . . . . . . . . 3-97
John D. Zeglis . . . .49 General Counsel and Senior
Executive Vice President,
Policy Development & Operations
Support . . . . . . . . . . . . 9-86
- -----------
*Chairman 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.
Hooper, Millar, Miller, Nagel, Ponder, Srednicki and Walter. Prior to joining
AT&T in September 1994, at the time of the merger of McCaw Cellular
Communications, Inc. with AT&T, Mr. Hooper was Chief Financial Officer of McCaw
(AT&T Wireless Services, Inc.), from 1993, and held various other positions with
McCaw prior to that time. Prior to joining AT&T in February 1995, Mr. Millar was
with Unisys Corporation, an information services company, serving as President
from 1992. Prior to joining AT&T in August 1993, Mr. Miller was with Wang
<PAGE>
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. On February 3, 1997, AT&T announced that Mr. Miller was
resigning his position with AT&T. Prior to joining AT&T in April 1996, Mr. Nagel
was with Apple Computer, a computer company, serving as Senior Vice President
from 1995 and General Manager from 1988 through 1995. Prior to joining AT&T in
June 1993, Mr. Ponder was Executive Vice President and Chief Information Officer
for Sprint Corporation, a telecommunications company, from 1991 to 1993. Prior
to joining AT&T in January 1997, Mr. Srednicki was Business Manager of Citibank-
Germany and Country Corporate Officer, Citibank Bankcards from 1990. Prior to
joining AT&T in November 1996, Mr. Walter was Chairman and Chief Executive
Officer of R.R. Donnelley & Sons Company, a financial printer, from 1989 to
1996.
Officers are not elected for a fixed term of office but hold office until
their successors have been elected or such officers resign or retire.
PART II
Items 5. through 8.
The information required by these items is included in pages 20 through 44
and on the outside back cover of the Company's annual report to security holders
for the year ended December 31, 1996. Such information is incorporated herein by
reference, pursuant to General Instruction G(2). The referenced information from
the Company's annual report to security holders has been filed as Exhibit 13 to
this document.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There have been no changes in independent accountants and no disagreements
with independent accountants 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.
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 April 1, 1997, the last paragraph on
page 5, the carryover paragraph and first full paragraph on page 6, the second
full paragraph on page 7 through the final footnote on page 12 and the fourth
paragraph on page 37 through page 57. Such information is incorporated herein by
reference, pursuant to General Instruction G(3).
<PAGE>
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 Accountants................................. *
Statements:
Consolidated Statements of Income........................... *
Consolidated Balance Sheets................................. *
Consolidated Statements of Changes in
Shareowners' Equity....................................... *
Consolidated Statements of Cash Flows....................... *
Notes to Consolidated Financial Statements.................. *
(2) Financial Statement Schedules:
Report of Independent Accountants.......................... 18
Schedules:
II -- Valuation and Qualifying Accounts.................... 19
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 3-9.
(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).
- ------------
*Incorporated herein by reference to the appropriate portions of the Company's
annual report to security holders for the year ended December 31, 1996. (See
Part II.)
<PAGE>
(3)b By-Laws of the registrant, as amended January 15, 1997.
(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 Form of Separation and Distribution Agreement by and
among AT&T Corp., Lucent Technologies Inc. and NCR
Corporation, dated as of February 1, 1996 and amended
and restated as of March 29, 1996.
(10)(i)2 Form of Distribution Agreement, dated as of November 20,
1996, by and between AT&T Corp. and NCR Corporation.
(10)(i)3 Tax Sharing Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of
February 1, 1996 and amended and restated as of
March 29, 1996.
(10)(i)4 Employee Benefits Agreement by and between AT&T Corp.
and Lucent Technologies Inc., dated as of February 1,
1996 and amended and restated as of March 29, 1996.
(10)(i)5 Form of Employee Benefits Agreement, dated as of
November 20, 1996, between AT&T Corp. and NCR
Corporation.
(10)(ii)(B)1 General Purchase Agreement between AT&T Corp. and
Lucent Technologies Inc., dated February 1, 1996 and
amended and restated as of March 29, 1996.
(10)(ii)(B)2 Form of Volume Purchase Agreement, dated as of
November 20, 1996, by and between AT&T Corp. and NCR
Corporation.
(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).
<PAGE>
(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, as amended and restated
effective January 1, 1995.
(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 The AT&T Directors Individual Life Insurance Program
dated January 1, 1987, revised December 1, 1995.
(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 AT&T Excess Benefit and Compensation Plan, as amended
and restated effective October 1, 1996.
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, as amended and restated
January 1, 1995.
(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan,
as amended December 20, 1995.
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January
1, 1988 (Exhibit (10)(iii)(A)4 to Form SE, dated March
25, 1988, File No. 1-1105) including AT&T Mid-Career
Pension Plan, as amended and restated October 1, 1996.
(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 Corp. Senior Management Basic Life Insurance
Program, as amended May 17, 1995.
(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 Form of Employment Agreement between AT&T Corp. and
John R. Walter dated October 23, 1996.
<PAGE>
(10)(iii)(A)19 Employment Agreement between American Telephone and
Telegraph Company and Richard W. Miller dated August 9,
1993 (Exhibit 10(iii)(A)19 to Form 10-K for 1995, File
No. 1-1105).
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Specified portions (pages 20 through 44 and the outside
back cover) of the Company's Annual Report to security
holders for the year ended December 31, 1996.
(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:
During the fourth quarter 1996, Forms 8-K dated October 10, 1996 and
October 28, 1996 were filed pursuant to Item 5 (Other Events).
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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 29
of the 1996 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 14 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.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
January 22, 1997
<PAGE>
<TABLE>
Schedule II--Sheet 1
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
- -------------------------------------------------------------------------------------------------------
Balance at
Charged to Balance
Beginning Costs
and at End
Description of Period
Expenses Deductions(a) of Period
- -------------------------------------------------------------------------------------------------------
Year 1996
<S> <C>
<C> <C> <C>
Allowances for doubtful accounts (b) ..... $1,287
$2,443 $2,342 $1,388
Reserves related to business
restructuring, including force
and facility consolidation (c) ..........$2,098 $
- -- $ 710 $1,388
Deferred tax asset valuation allowance ... $ 129 $
39 $ 2 $ 166
Year 1995
Allowances for doubtful accounts (b) ..... $1,023
$2,272 $2,008 $1,287
Reserves related to business
restructuring, including force
and facility consolidation (c) ......... $ 699
$1,718 $ 319 $2,098
Deferred tax asset valuation allowance ... $ 36 $
109 $ 16 $ 129
<FN>
The Notes on Sheet 2 are an integral part of this Schedule.
</FN>
</TABLE>
<PAGE>
<TABLE>
Schedule II--Sheet 2
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
- -------------------------------------------------------------------------------------------------------
Balance at
Charged to Balance
Beginning Costs
and at End
Description of Period
Expenses Deductions(a) of Period
- -------------------------------------------------------------------------------------------------------
Year 1994
<S> <C>
<C> <C> <C>
Allowances for doubtful accounts (b) ..... $ 889
$1,697 $1,563 $1,023
Reserves related to business
restructuring, including force
and facility consolidation (c) ......... $ 952 $
22 $ 275 $ 699
Deferred tax asset valuation allowance ... $ 43 $
3 $ 10 $ 36
<FN>
- ------------
(a) Amounts written off as uncollectible, net of recoveries.
(b) Includes allowances for doubtful accounts on long-term
receivables of $52,
$35 and $32 in 1996, 1995 and 1994, respectively
(included in Finance
receivables in the Consolidated Balance Sheets).
(c) Included primarily in Other current liabilities and in
Other long-term
liabilities and deferred credits in the Consolidated Balance
Sheets.
</FN>
</TABLE>
<PAGE>
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.
/s/ M. J. Wasser
------------------------------------
By: M. J. Wasser
Vice President - Law and
Secretary
March 28, 1997
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 Officers: #
#
Robert E. Allen Chairman #
of the Board and #
Chief Executive #
Officer #
#
John R. Walter President, Chief #
Operating Officer #
and Director #
#
Principal Financial Officer: #
#
Richard W. Miller Senior Executive #
Vice President and#
Chief Financial #
Officer #
#
Principal Accounting Officer: #
#
Maureen B. Tart Vice President ## By M. J.
Wasser
and Controller #
(attorney-in-fact)*
#
Directors: #
# March 28, 1997
Kenneth T. Derr #
M. Kathryn Eickhoff #
Walter Y. Elisha #
Ralph S. Larsen #
Donald F. McHenry #
Michael I. Sovern #
Joseph D. Williams #
Thomas H. Wyman #
<PAGE>
Exhibit Index
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
January 15, 1997.
(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 Form of Separation and Distribution
Agreement by and
among AT&T Corp., Lucent Technologies
Inc. and NCR
Corporation, dated as of February 1, 1996
and amended and
restated as of March 29, 1996.
(10)(i)2 Form of Distribution Agreement, dated as
of November 20,
1996, by and between AT&T Corp. and NCR
Corporation.
(10)(i)3 Tax Sharing Agreement by and among AT&T
Corp., Lucent
Technologies Inc. and NCR Corporation,
dated as of
February 1, 1996 and amended and restated
as of March 29,
1996.
(10)(i)4 Employee Benefits Agreement by and between
AT&T Corp. and
Lucent Technologies Inc., dated as of
February 1, 1996
and amended and restated as of March 29,
1996.
(10)(i)5 Form of Employee Benefits Agreement, dated
as of November
20, 1996, between AT&T Corp. and NCR
Corporation.
(10)(ii)(B)1 General Purchase Agreement by and between
AT&T Corp. and
Lucent Technologies Inc., dated
February 1, 1996 and
amended and restated as of March 29, 1996.
(10)(ii)(B)2 Form of Volume Purchase Agreement, dated
as of November
20, 1996, by and between AT&T Corp. and NCR
Corporation.
(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, as amended
and restated
effective January 1, 1995.
(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 The AT&T Directors Individual Life
Insurance Program
dated January 1, 1987, revised December 1,
1995.
(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 AT&T Excess Benefit and Compensation Plan,
as amended and
restated effective October 1, 1996.
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, as
amended and restated
January 1, 1995.
(10)(iii)(A)11 AT&T Senior Management Incentive Award
Deferral Plan, as
amended December 20, 1995.
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised
effective January 1,
1988 (Exhibit (10)(iii)(A)4 to Form SE,
dated March 25,
1988, File No. 1-1105) including AT&T
Mid-Career Pension
Plan, as amended and restated October 1,
1996.
(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 Corp. Senior Management Basic
Life Insurance
Program, as amended May 17, 1995.
(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 Form of Employment Agreement between AT&T
Corp. and John
R. Walter dated October 23, 1996.
(10)(iii)(A)19 Employment Agreement between American
Telephone and
Telegraph Company and Richard W. Miller
dated August 9,
1993 (Exhibit 10(iii)(A)19 to Form 10-K
for 1995, File
No. 1-1105).
(12) Computation of Ratio of Earnings to Fixed
Charges.
(13) Specified portions (pages 20 through 44
and the outside
back cover) of the Company's Annual
Report to security
holders for the year ended December 31,
1996.
(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.
BY-LAWS
as amended by
BOARD OF DIRECTORS, January 15, 1997
Article I
Meeting of Shareholders
Section 1. The annual meeting of the shareholders shall be held in May
each year on such day, at such time and at such place as shall be designated in
the notice of the meeting.
A notice of the annual meeting as approved by the Board of Directors shall
be mailed not less than ten nor more than fifty days before the meeting,
directed to each shareholder entitled to vote at said meeting at his address as
it appears on the record of shareholders unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be directed to him at such other address.
Section 2. The Board of Directors may fix, in advance, a date not more
than fifty nor less than ten days before the date of any meeting of the
shareholders as the record date for determination of shareholders entitled to
notice of or to vote at such meeting, and only shareholders of record on such
date shall be entitled to notice of or to vote at such meeting.
Section 3. Special meetings of the shareholders may be called at any time
by either the Chairman of the Board or the Board of Directors, and shall be
called upon a request to the Chairman of the Board or Secretary, signed by
shareholders representing at least one-third of the shares. Any such request
shall specify the time and the purpose or purposes of the proposed meeting. The
meeting shall be held at such place within or without the State of New York as
may be designated in the notice of the meeting.
A notice of not less than ten nor more than fifty days shall be given by
mail for each special meeting, in the manner provided for notice of the annual
meeting. Such notice shall state the purpose or purposes for which the meeting
is called and the time when and the place where it is to be held and shall
indicate that the notice is being issued by or at the direction of the person or
persons calling the meeting.
Section 4. Failure to receive notice of any meeting shall not invalidate
the meeting.
Section 5. Notice of shareholders business at annual meetings of
shareholders shall be governed by the provisions of this By-Law.
(1) The proposal of business to be considered by the
shareholders may be
made at an annual meeting of shareholders (a)
pursuant to the
company's notice of meeting pursuant to Section 1 of
this Article I
of these By-Laws, by or at the direction of the Board
of Directors or
(c) by any shareholder of the company who was a
shareholder of record
at the time of giving notice provided for in this
By-Law, who is
entitled to vote at the meeting and who complies
with the notice
procedures set forth in this By-Law.
<PAGE>
(2) For business to be properly brought before an annual
meeting by a
shareholder pursuant to clause (c) of paragraph (1)
of this By-Law,
the shareholder must have given timely notice thereof
in writing to
the Secretary of the company and such business must
otherwise be a
proper matter for shareholder action. To be timely, a
shareholder's
notice shall be delivered to the Secretary at the
principal executive
offices of the company not later than the close of
business on the
90th calendar day nor earlier than the close of
business on the 120th
calendar day prior to the first anniversary of the
preceding year's
annual meeting; provided, however, that in the event
that the date of
the annual meeting is more than 30 calendar days
before or more than
60 calendar days after such anniversary date,
notice by the
shareholder to be timely must be so delivered not
earlier than the
close of business on the 120th calendar day prior
to such annual
meeting but not later than the close of business on
the later of the
90th calendar day prior to such annual meeting or the
10th calendar
day following the calendar day on which public
announcement of the
date of such meeting is first made by the Company. In
no event shall
the public announcement of an adjournment of an
annual meeting
commence a new time period for the giving of a
shareholder's notice
as described above. Such shareholder's notice shall
set forth (a) as
to any description of the business desired to be
brought before the
meeting, the reasons for conducting such business at
the meeting and
any material interest in such business of such
shareholder and
beneficial owner, if any, on whose behalf the
proposal is made; and
(b) as to the shareholder giving the notice and the
beneficial owner,
if any, on whose behalf the nomination or proposal
is made (i) the
name and address of such shareholder, as they appear on
the Company's
books, and of such beneficial owner and (ii) the class
and number of
shares of the Company which are owned beneficially
and of record by
such shareholder and such beneficial owner.
ARTICLE II.
The Conduct of Shareholders' Meetings
At all meetings of the shareholders, the holders of forty per centum of
the shares entitled to vote thereat shall constitute a quorum, except as
otherwise required by law; but the shareholders present may adjourn the meeting
to another time or place despite the absence of a quorum. Every shareholder
entitled to vote shall be entitled to one vote for each share standing in his
name on the record of shareholders; and every shareholder entitled to vote may
vote in person or by proxy.
All elections by shareholders shall be by ballot.
<PAGE>
ARTICLE III.
Inspectors
The Board of Directors, in advance of any shareholders' meeting, shall
appoint three Inspectors to act at the meeting or any adjournment thereof. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat.
ARTICLE IV.
The Board of Directors
Section 1. The business of the company shall be managed under the
direction of its Board of Directors, who shall be elected by the shareholders at
the annual meeting.
Section 2. The number of Directors shall be not less than ten nor more
than twenty-five, the exact number of Directors within such minimum and maximum
limits to be fixed and determined by the vote of a majority of the entire Board.
In case of any increase in the number of Directors, the additional Directors may
be elected by a majority of the Directors then in office.
Section 3. Any vacancy in the Board may be filled by a majority vote of
the remaining Directors, though less than a quorum.
ARTICLE V.
Meetings of Directors
Section 1. Regular meetings shall be held at such times and places as the
Board may determine.
Section 2. Special meetings of the Directors may be called at any time by
the Chairman of the Board, or by two members of the Executive Committee, and
shall be called by the Chairman of the Board, or by the Secretary, forthwith
upon request in writing signed by two Directors and specifying the object of the
meeting. At least three days' notice of a special meeting shall be given in the
manner provided for herein.
Section 3. Any notice of a meeting of Directors required to be given may
be given to each Director by mail or telegraph, addressed to him at his
residence or usual place of business, or in person or by telephone, stating the
time and place of the proposed meeting.
Section 4. One-third of the entire Board shall constitute a quorum.
Section 5. Meetings of the Directors may be held within or without the
State of New York.
Section 6. Any one or more members of the Board may participate in a
meeting of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Any action required or permitted to be taken by the Board may be taken
without a meeting if all members of the Board consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board shall be filed with the minutes of the
proceedings of the Board.
<PAGE>
ARTICLE VI.
Executive Committee and Other Committees
The Board of Directors, by resolution adopted by a majority of the entire
Board, may designate from their number an Executive Committee and other
committees, and may determine the quorum thereof. Any such committee shall
consist of three or more members and shall serve at the pleasure of the Board.
The Chairman of the Board, one or more Vice Chairmen of the Board and the
President, if any, shall be members of the Executive Committee. The Executive
Committee shall, except as otherwise provided by law or by resolution of the
Board, have all the authority of the Board of Directors during the intervals
between the meetings of the Board. The Executive Committee shall keep a record
of its proceedings, which shall from time to time be reported to the Board of
Directors. The Chairman of the Board shall preside at the meetings of the
Executive Committee.
Committees other than the Executive Committee shall, except as otherwise
provided by law, have such authority as shall be provided by resolution of the
Board.
The Board may designate from time to time one or more Directors as
alternate members of the Executive Committee or of any other committee, who may
replace any absent member or members at any meeting of the
committee.
Any one or more members of the Executive Committee or any other committee
established by the Board pursuant to this Article VI may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
Any action required or permitted to be taken by the Executive Committee or
any other committee established by the Board pursuant to this Article VI may be
taken without a meeting if all members of the committee consent in writing to
the adoption of a resolution authorizing the action. The resolution and written
consents thereto shall be filed with the minutes of the proceedings of the
committee.
ARTICLE VII.
Officers of the Company
Section l. The officers of the Company shall be elected by the Board of
Directors, and may consist of a Chairman of the Board, one or more Vice Chairmen
of the Board, a President, such number of Executive Vice Presidents and Senior
Vice Presidents as the Board of Directors shall from time to time determine, a
Secretary, a Treasurer and a Controller. The officers shall hold office until
their successors have been elected.
Section 2. The Board of Directors may appoint one or more Assistant
Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers, and such other officers and agents as the Board may consider
necessary.
<PAGE>
ARTICLE VIII.
Duties of the Chairman of the Board,
President, Vice Chairmen of the Board,
Executive Vice Presidents and Senior Vice Presidents
Section 1. The Chairman of the Board shall be the chief executive officer
of the company and shall have such authority and perform such duties as usually
appertain to the chief executive office in business corporations. He shall
preside at the meetings of the Board of Directors and he, or such officer as he
may designate from time to time, shall preside at meetings of the shareholders.
Section 2. The President, Vice Chairmen of the Board, Executive Vice
Presidents and Senior Vice Presidents shall perform such duties as the Board of
Directors or Chairman of the Board may from time to time determine.
Section 3. In case of absence or inability of the Chairman of the Board,
the President shall possess all the authority of the Chairman of the Board.
ARTICLE IX.
Duties of the Treasurer and Assistant Treasurers
Section 1. The Treasurer shall receive all the funds of the company, and
shall disburse them under the direction of the Board of Directors. All
disbursement instruments shall be signed by such person or persons and in such
manner as the Board may from time to time provide.
Section 2. The Treasurer shall keep full and regular books, showing all
his receipts and disbursements, which books shall be open at all times to the
inspection of the Chairman of the Board or of any member of the Board of
Directors; and he shall make such reports and perform such other duties as the
Chairman of the Board or Board of Directors may require.
Section 3. The Treasurer shall deposit all moneys received by him, in the
corporate name of the company, with such depositories as shall be approved from
time to time by the Board of Directors or by the Chairman of the Board, the
President, a Vice Chairman of the Board or the Treasurer.
Section 4. Assistant Treasurers shall have such of the authority and
perform such of the duties of the Treasurer as may be provided in these by-laws
or assigned to them by the Board of Directors or the Chairman of the Board or by
the Treasurer upon the approval of the Chairman of the Board, the President or a
Vice Chairman of the Board. During the Treasurer's absence or inability, his
authority and duties shall be possessed by such Assistant Treasurer or Assistant
Treasurers as the Board of Directors, the Chairman of the Board, the President
or a Vice Chairman of the Board may designate.
Section 5. The Board of Directors may require the Treasurer and Assistant
Treasurers to give such security for the faithful performance of their duties as
the Board shall from time to time determine.
<PAGE>
ARTICLE X.
Duties of the Secretary and Assistant Secretaries
Section 1. The Secretary shall send notice to the shareholders of all
annual and special meetings, and to the Directors of meetings of the Board where
notice is required to be given; and he shall perform such other duties as may be
required of him by the Chairman of the Board or Board of Directors, and such as
usually appertain to the office of Secretary.
Section 2. The Secretary or in his absence an Assistant Secretary shall
keep an accurate record of the proceedings of the Board of Directors and of the
Executive Committee, and of all meetings of shareholders, and shall have the
custody of the seal of the company and affix it to all instruments requiring the
seal.
Section 3. Assistant Secretaries shall have such of the authority and
perform such of the duties of the Secretary as may be provided in these by-laws
or assigned to them by the Board of Directors or the Chairman of the Board or by
the Secretary upon the approval of the Chairman of the Board, the President or a
Vice Chairman of the Board. During the Secretary's absence or inability, his
authority and duties shall be possessed by such Assistant Secretary or Assistant
Secretaries as the Board of Directors, the Chairman of the Board, the President
or a Vice Chairman of the Board may designate.
ARTICLE XI.
Duties of the Controller
The Controller shall be the principal accounting officer of the company
and shall perform such duties as may be required of him by the Chairman of the
Board or Board of Directors.
ARTICLE XII.
Transfer of Shares
Section 1. Certificates for shares shall be issued by the Treasurer.
Shares shall be transferable only on the record of shareholders of the company
by the holder thereof in person or by attorney, upon surrender of the
outstanding certificate therefor. This requirement shall be embodied in each
certificate.
Section 2. In case of the loss of a certificate, a new certificate may be
issued upon such terms as the Board of Directors may prescribe.
<PAGE>
ARTICLE XIII.
Indemnification of Directors and Officers
The company is authorized, by (i) a resolution of shareholders, (ii) a
resolution of Directors, or (iii) an agreement providing for such
indemnification, to the fullest extent permitted by applicable law, to provide
indemnification and to advance expenses to its Directors and officers in respect
of claims, actions, suits or proceedings based upon, arising from, relating to
or by reason of the fact that any such Director or officer serves or served in
such capacity with the corporation or at the request of the company in any
capacity with any other enterprise.
ARTICLE XIV.
Seal
The common seal of the company shall be in the following form.
<PAGE>
ARTICLE XV.
Amendments
These by-laws may be amended by the shareholders at any meeting; or by the
Board of Directors at any meeting by a majority vote of the full Board, or at
two successive meetings by a majority vote of a quorum present. The notice of a
special meeting of the Board at which such action is to be taken shall set forth
the substance of the proposed amendment.
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
AT&T CORP.,
LUCENT TECHNOLOGIES INC.
AND
NCR CORPORATION
DATED AS OF FEBRUARY 1, 1996 AND
AMENDED AND RESTATED AS OF
MARCH 29, 1996
<PAGE>
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of
February 1, 1996, as amended and restated as of March 29, 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:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall
have the following meanings:
<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 and related
agreements regarding powers of attorney, 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. Sections 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 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>
(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;
(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>
(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, as amended, 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 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>
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 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>
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, as amended, 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.
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>
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;
(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>
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 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, 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
<PAGE>
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, formerly known as NS-MPG Inc.
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 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;
(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
<PAGE>
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 a Lucent Contract, except to the extent
expressly set forth herein.
1.70. LUCENT GROUP means Lucent, each Subsidiary of Lucent and
each other 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.
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
<PAGE>
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 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;
(d) surety bonds (excluding surety for workers'
compensation
self-insurance);
<PAGE>
(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
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).
1.88. PATENT ASSIGNMENTS means the six Patent Assignments,
effective as of March 29, 1996, executed and delivered by AT&T to Lucent, NCR to
AT&T, AT&T to NCR, Lucent to NCR, and Lucent to AT&T.
1.89. PATENT DEFENSIVE PROTECTION AGREEMENTS means the two
Defensive Protection Agreements, effective as of March 29, 1996, by and between
AT&T and Lucent, and by and between Lucent and NCR, respectively.
1.90. PATENT JOINT OWNERSHIP AGREEMENT means
the Patent Joint
Ownership Agreement, effective as of March 29, 1996, by and
between AT&T and
Lucent.
1.91. PATENT LICENSE AGREEMENT means the
Patent License
Agreement, effective as of March 29, 1996, by and among AT&T,
Lucent and NCR.
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.
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 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.
<PAGE>
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.
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.
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.
<PAGE>
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, as amended, 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, effective as
of March 29, 1996, by and between AT&T and Lucent, and by and among AT&T, Lucent
and NCR, respectively.
1.113. TECHNOLOGY LICENSE AGREEMENT means
the Technology
License Agreement, effective as of March 29, 1996, by and among
AT&T, Lucent and
NCR.
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.
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.
<PAGE>
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 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.
(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):
<PAGE>
(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);
(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 a Lucent Asset. No
Asset shall be
deemed to be a 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 a Lucent Asset 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;
<PAGE>
(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 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
(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, in each case
<PAGE>
other than any third party costs and expenses incurred by
any member of
the AT&T Group;
(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 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 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
<PAGE>
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); (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 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 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)
<PAGE>
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 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
sub-sublessor,
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), 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
<PAGE>
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) Effective as of March 29, 1996, the parties shall execute and
deliver each of the following Ancillary Agreements to which it is a party:
(i) the Patent Assignments and related
agreements regarding
powers of attorney;
(ii) the Patent License Agreement;
(iii) the Patent Joint Ownership Agreement;
(iv) the Patent Defensive Protection Agreements;
(v) the Technology Assignment and Joint
Ownership Agreements;
and
(vi) the Technology License Agreement.
(a) 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).
Notwithstanding
anything in this Agreement or in any Ancillary Agreement to the
contrary, no
party shall be entitled to receive or retain any Asset unless such
party shall
have paid any consideration contemplated to be paid in connection
therewith
pursuant to the Non-U.S. Plan.
(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
<PAGE>
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 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 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.
<PAGE>
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, AT&T shall pay all third
party costs and expenses incurred by any member of the AT&T Group 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.
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 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).
<PAGE>
(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
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 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
<PAGE>
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 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 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
<PAGE>
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.
(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 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).
<PAGE>
(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;
(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
(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
<PAGE>
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
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.
ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
3.1. TRANSACTIONS PRIOR TO THE IPO. (a) Subject
to the
conditions specified in Section 3.3, 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.
<PAGE>
(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.
(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 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.
<PAGE>
(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.
(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.
(j) A pricing committee of AT&T officers
designated by the
Board of Directors of AT&T shall have determined that
the terms of the
IPO are acceptable to AT&T.
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 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.
<PAGE>
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.
(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.
(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
<PAGE>
(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, in lieu of any fractional share, 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
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.
ARTICLE V
MUTUAL RELEASES; 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
<PAGE>
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 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;
(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
<PAGE>
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 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
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;
<PAGE>
(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
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 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
<PAGE>
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 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 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
<PAGE>
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 (including any
Third Party Claim set forth on Schedule 6.6) 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 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 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
<PAGE>
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 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 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 either the Indemnified Party or 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.
<PAGE>
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 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 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.
<PAGE>
(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
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 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
<PAGE>
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.
(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.
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
<PAGE>
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 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 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.
<PAGE>
(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 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. The parties agree that the matters
specified on Schedule 6.1(f)(iv) shall be deemed Exclusive Lucent Contingent
Liabilities to the extent reflected thereon.
(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:
(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
<PAGE>
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. Section 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%.
(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:
(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%.
<PAGE>
(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 (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, 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
<PAGE>
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 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 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
<PAGE>
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 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 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
<PAGE>
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 in-house 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 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) With respect to the Actions set forth on
Schedule 6.6, and
with respect to any other matters not set forth on Schedules
6.1(e), 6.1(f),
6.1(g) or 6.1(n) (regardless of whether such matters are currently pending but
not set forth on such Schedules or are asserted or filed hereafter), AT&T,
Lucent and NCR will form the Contingent Claim Committee for the purpose of
resolving whether:
(i) any claim or right is a Contingent Gain;
(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
as described in Section
<PAGE>
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 Action set forth on
Schedule 6.6 or any other 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 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, prior to the Closing
Date, the parties will continue to review Schedule 6.6 to determine whether any
matter set forth therein will be reassigned to one of Schedules
6.1(e), 6.1(f),
6.1(g) or 6.1(n).
6.7. CERTAIN CASE ALLOCATION MATTERS. (a) 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 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 (including pursuant to Article V hereof) 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).
(b) The parties agree that if any Action not set forth on
Schedule 6.1(e), 6.1(f), 6.1(g) or 6.1(n) involves separate and distinct claims
that, if not joined in a single Action, would constitute separate Exclusive
Contingent Liabilities of two or more parties, they will use their reasonable
best efforts to segregate such separate and distinct claims so that the
Liabilities associated with each such claim (including all costs and expenses
(including allocated costs of in-house counsel and other personnel)) shall be
treated as Exclusive Contingent Liabilities of the appropriate party and so that
each party shall have the rights
<PAGE>
and obligations with respect to each such claim (including pursuant to Article V
hereof) as would have been applicable had such claims been commenced as separate
Actions. Notwithstanding the foregoing provisions, this Section 6.7(b) shall not
apply to any separate and distinct claim that is de minimis or frivolous in
nature.
(c) The parties agree that notwithstanding anything in this
Agreement to the contrary, all Liabilities arising out of, resulting from or
relating to the Action commenced by Bell Atlantic Corporation and DSC
Communications Corporation against AT&T and Lucent in the United States District
Court for the Eastern District of Texas on February 14, 1996, (i) to the extent
relating to Caller ID services, shall be Exclusive AT&T Contingent Liabilities
and (ii) to the extent relating to telecommunications equipment, systems or
software, shall be Exclusive Lucent Contingent Liabilities; provided however
that each of the parties shall bear its own costs and expenses (including
allocated costs of in-house counsel and other personnel) of defending any such
claims, including any such costs and expenses of any related document
productions.
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 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
<PAGE>
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 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 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
<PAGE>
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 Lucent 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 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 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
<PAGE>
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).
(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
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
<PAGE>
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.
(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
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
<PAGE>
Group other than any Liabilities that are fully discharged and satisfied by
Lucent simultaneously with such prepayment or early termination.
(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 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
<PAGE>
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%.
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
attorney-client 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 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.
<PAGE>
(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 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 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
<PAGE>
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 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 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
<PAGE>
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 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 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
<PAGE>
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 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
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. In the event that any party delivers an Arbitration Demand
Notice with respect to any dispute, controversy or
<PAGE>
claim that is the subject of any then pending arbitration proceeding or of a
previously delivered Arbitration Demand Notice, all such disputes, controversies
and claims shall be resolved in the arbitration proceeding for which an
Arbitration Demand Notice was first delivered unless the arbitrator in his or
her sole discretion determines that it is impracticable or otherwise inadvisable
to do so.
(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
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 (who need not be disinterested as to the parties or the
matter) 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.
(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
<PAGE>
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 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 fee schedule of 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 parties' rights to claim any applicable privilege. The arbitrator
will adopt procedures to protect the proprietary rights of the parties 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 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
<PAGE>
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).
(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 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)
<PAGE>
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 or by notice given to the other
parties within 20 days after receipt of an Arbitration Demand Notice with
respect thereto. 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 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).
(c) No party shall raise as a defense the statute of
limitations if the applicable Arbitration Demand Notice was delivered on or
prior to the Applicable Deadline and, if applicable, if the matter is submitted
to a court of competent jurisdiction within the 60-day period specified in
Section 9.8(b).
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
<PAGE>
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 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.
(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 NCR Group, on the other hand, to
provide any notification or disclosure required under any state
<PAGE>
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.
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.
<PAGE>
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 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.
(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
<PAGE>
applicable federal law pursuant to Section 9.10), irrespective of the choice of
laws principles of the State of New 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 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. No party shall be required to deliver any
notice under this Agreement or under any Ancillary Agreement to any other party
with respect to any matter in which such other party has no right, remedy or
claim.
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:
<PAGE>
If to AT&T, to: AT&T Corp.
131 Morristown Road
Basking Ridge, NJ 07920
Attn: Vice President-Law and
Corporate Secretary
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.
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.
<PAGE>
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 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 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
<PAGE>
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 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. Unless expressly stated to the contrary
in this Agreement or in any Ancillary Agreement, all references to "the date
hereof," "the date of this Agreement," "hereby" and "hereupon" and words of
similar import shall all be references to February 1, 1996, regardless of any
amendment or restatement hereof.
<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:
FORM OF
DISTRIBUTION AGREEMENT
BY AND BETWEEN
AT&T CORP.
AND
NCR CORPORATION
DATED AS OF ________, 1996
<PAGE>
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT, dated as of ___________, 1996, is
by and between AT&T 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, AT&T, NCR and Lucent
have executed and delivered the Separation and Distribution Agreement providing
for, among other things, the initial public offering of shares of Lucent Common
Stock (which was consummated on April 10, 1996) and for the pro rata
distribution by AT&T of all of its shares of Lucent Common Stock to the
shareholders of AT&T;
WHEREAS, AT&T, NCR and Lucent have also executed and delivered
the Ancillary Agreements (as such term is defined in the Separation and
Distribution Agreement) governing certain additional matters relating to the
Lucent Distribution;
WHEREAS, the Board of Directors of AT&T has also determined
that AT&T will distribute to its shareholders all of the capital stock of NCR
held directly or indirectly by AT&T, subject to the terms and conditions set
forth herein;
WHEREAS, the NCR Distribution is intended to
qualify as a
tax-free spin-off under Section 355 of the Code;
WHEREAS, it is appropriate and desirable to set forth certain
agreements that will govern certain matters relating to the NCR Distribution and
the relationship of AT&T and NCR and their respective Subsidiaries following the
NCR Distribution.
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. ACTION has the meaning set forth in the
Separation and
Distribution Agreement.
1.2. ADJUSTMENT has the meaning set forth in the
Tax Sharing
Agreement.
1.3. AFFILIATE has the meaning set forth in the
Separation and
Distribution Agreement.
<PAGE>
1.4. AGENT means the distribution agent to be appointed by
AT&T to distribute, or make book entry credits for, the shares of NCR Common
Stock held by AT&T pursuant to the NCR Distribution.
1.5. AGREEMENT means this Distribution
Agreement, including all of the Schedules hereto.
1.6. ANCILLARY AGREEMENTS has the meaning set
forth in the
Separation and Distribution Agreement.
1.7. APPLICABLE DEADLINE has the meaning set
forth in the
Separation and Distribution Agreement.
1.8. ARBITRATION ACT has the meaning set forth
in the
Separation and Distribution Agreement.
1.9. ARBITRATION DEMAND NOTICE has the meaning
set forth in
the Separation and Distribution Agreement.
1.10. ASSETS has the meaning set forth in the
Separation and
Distribution Agreement.
1.11. AT&T means AT&T Corp., a New York
corporation.
1.12. AT&T COMMON STOCK means the Common Stock,
$1.00 par
value per share, of AT&T.
1.13. AT&T GROUP has the meaning set forth in
the Separation
and Distribution Agreement.
1.14. AT&T INDEMNITEES has the meaning set forth
in Section
4.2 hereof.
1.15. AT&T SERVICES BUSINESS has the meaning set
forth in the
Separation and Distribution Agreement.
1.16. AT&T SERVICES GROUP means each member of
the AT&T Group
other than any member of the NCR Group.
1.17. AT&T VOLUME PURCHASE AGREEMENT means the
Volume Purchase
Agreement, dated as of the date hereof, as amended, by and between
AT&T and NCR.
1.18. CLOSING DATE has the meaning set forth in
the Separation
and Distribution Agreement.
1.19. CODE means the Internal Revenue Code of
1986, as
amended.
<PAGE>
1.20. COMMISSION means the Securities and
Exchange Commission.
1.21. CONSENTS means any consents, waivers or
approvals from,
or notification requirements to, any third parties.
1.22. DETERMINATION REQUEST has the meaning set
forth in the
Separation and Distribution Agreement.
1.23. EXCHANGE ACT means the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
1.24. GOVERNMENTAL APPROVALS has the meaning set
forth in the
Separation and Distribution Agreement.
1.25. GOVERNMENTAL AUTHORITY has the meaning set
forth in the
Separation and Distribution Agreement.
1.26. GROUP means any of the AT&T Services
Group, the Lucent
Group or the NCR Group, as the context requires.
1.27. INDEMNIFYING PARTY has the meaning set
forth in Section
4.4(a) hereof.
1.28. INDEMNITEE has the meaning set forth in
Section 4.4(a)
hereof.
1.29. INDEMNITY PAYMENT has the meaning set
forth in Section
4.4(a) hereof.
1.30. INSURANCE PROCEEDS has the meaning set
forth in the
Separation and Distribution Agreement.
1.31. IPO has the meaning set forth in the
Separation and
Distribution Agreement.
1.32. LIABILITIES has the meaning set forth in
the Separation
and Distribution Agreement.
1.33. LUCENT means Lucent Technologies Inc., a
Delaware
corporation.
1.34. LUCENT COMMON STOCK means the Common
Stock, $.01 par value per share, of Lucent.
1.35. LUCENT 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 as set forth in Article IV of the
Separation and Distribution Agreement.
<PAGE>
1.36. LUCENT GROUP has the meaning set forth in
the Separation
and Distribution Agreement.
1.37. LUCENT INDEMNITEES has the meaning set
forth in the
Separation and Distribution Agreement.
1.38. NCR means NCR Corporation, a Maryland
corporation.
1.39. NCR ANCILLARY AGREEMENTS means the AT&T
Volume Purchase
Agreement, the NCR Employee Benefits Agreement, the Procedures
Agreement and the
agreements related or supplemental to this Agreement or to any of
the foregoing.
1.40. 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 or in the Separation and Distribution Agreement, 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, by any Person
that at any time was an Affiliate of NCR prior to the acquisition of NCR by
AT&T, or by any Person that at any time was controlled by NCR; (c) the
terminated, divested or discontinued businesses and operations listed or
described on Schedule 1.75 to the Separation and Distribution Agreement; and (d)
any business or operation conducted by NCR or any Affiliate of NCR at any time
on or after the NCR Distribution Date.
1.41. NCR COMMON STOCK means the Common Stock,
par value $.01
per share, of NCR.
1.42. NCR COVERED LIABILITIES has the meaning
set forth in the
Separation and Distribution Agreement.
1.43. 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 Common Stock owned by AT&T on the NCR Distribution Date as set forth in
Article II of this Agreement.
1.44. NCR DISTRIBUTION DATE means the date determined pursuant
to Section 2.3 of this Agreement on which the NCR Distribution occurs.
1.45. NCR EMPLOYEE BENEFITS AGREEMENT means
the Employee
Benefits Agreement, dated as of the date hereof, as amended, by
and between AT&T
and NCR.
1.46. NCR FORM 10 means the Registration Statement on Form 10
to be filed by NCR with the Commission in connection with the NCR Distribution.
1.47. NCR GROUP has the meaning set forth in the
Separation
and Distribution Agreement.
<PAGE>
1.48. NCR INDEMNITEES has the meaning set forth
in Section
4.3(a) hereof.
1.49. NCR INFORMATION STATEMENT means the Information
Statement constituting a part of the NCR Form 10, which will be mailed to AT&T
shareholders in connection with the NCR Distribution.
1.50. NCR INSURANCE POLICIES means the insurance policies
written by insurance carriers unaffiliated with AT&T pursuant to which NCR or
one or more of its Subsidiaries (or their respective officers or directors) will
be insured parties after the NCR Distribution Date.
1.51. NCR RECORD DATE means the time at which the transfer
agent for the AT&T Common Stock closes its transfer records for AT&T Common
Stock 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 the special
dividend of shares of NCR Common Stock in the NCR Distribution.
1.52. NYSE means The New York Stock Exchange,
Inc.
1.53. PERSON has the meaning set forth in the
Separation and
Distribution Agreement.
1.54. PREFERRED SHARE PURCHASE RIGHTS mean the Rights to be
issued pursuant to a Rights Agreement substantially in the form of the Rights
Agreement attached as an Exhibit to the NCR Form 10.
1.55. PROCEDURES AGREEMENT means the Procedures
Agreement,
dated as of the date hereof, as amended, by and between AT&T and
NCR.
1.56. RESTRUCTURING ADJUSTMENT has the meaning
set forth in
the Tax Sharing Agreement.
1.57. SECURITIES ACT means the Securities
Act of 1933, as
amended, together with the rules and regulations promulgated
thereunder.
1.58. SECURITY INTEREST has the meaning set
forth in the
Separation and Distribution Agreement.
1.59. SEPARATION has the meaning set forth in
the Separation
and Distribution Agreement.
1.60. SEPARATION AND DISTRIBUTION AGREEMENT means the
Separation and Distribution Agreement, dated as of February 1, 1996, as amended
and restated as of March 29, 1996, by and among AT&T, Lucent and NCR, including
the Schedules thereto.
<PAGE>
1.61. SHARED CONTINGENT LIABILITY has the
meaning set forth in
the Separation and Distribution Agreement.
1.62. SUBSIDIARY has the meaning set forth in
the Separation
and Distribution Agreement.
1.63. TAX SHARING AGREEMENT has the meaning set
forth in the
Separation and Distribution Agreement.
1.64. TAXES has the meaning set forth in the Tax
Sharing
Agreement.
1.65. THIRD PARTY CLAIM has the meaning set
forth in Section
4.5(a) hereof.
1.66. TRANSACTION AGREEMENTS means,
collectively, this
Agreement, the NCR Ancillary Agreements, the Separation
and Distribution
Agreement and the Ancillary Agreements.
ARTICLE II
THE DISTRIBUTION
2.1. THE DISTRIBUTION. (a) Subject to Section 2.3 hereof, on
or prior to the NCR Distribution Date, AT&T will deliver to the Agent for the
benefit of holders of record of AT&T Common Stock on the NCR Record Date, a
single stock certificate representing all of the outstanding shares of NCR
Common Stock then beneficially owned by AT&T or any of its wholly owned
Subsidiaries, and shall cause the transfer agent for the shares of AT&T Common
Stock to instruct the Agent on the NCR Distribution Date either to distribute,
or make book-entry credits for, the appropriate number of such shares of NCR
Common Stock to each such holder of AT&T Common Stock or designated transferee
or transferees of such holder.
(b) Subject to Section 2.4, each holder of AT&T Common Stock
on the NCR Record Date (or such holder's designated transferee or transferees)
will be entitled to receive in the NCR Distribution a number of shares of NCR
Common Stock equal to the number of shares of AT&T Common Stock held by such
holder on the NCR Record Date multiplied by a fraction, the numerator of which
is the number of shares of NCR Common Stock beneficially owned by AT&T or any of
its wholly owned Subsidiaries on the NCR Record Date and the denominator of
which is the number of shares of AT&T Common Stock outstanding on the NCR Record
Date.
(c) Each of NCR 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 NCR Distribution on the terms contemplated hereby.
2.2. ACTIONS PRIOR TO THE NCR DISTRIBUTION. (a)
AT&T and NCR
shall prepare and mail, prior to the NCR Distribution Date, to the
holders of
AT&T Common
<PAGE>
Stock, the NCR Information Statement, which shall set forth appropriate
disclosure concerning NCR, the NCR Distribution and such other matters as AT&T
and NCR may determine. AT&T and NCR shall prepare, and NCR shall file with the
Commission, the NCR Form 10, which shall include or incorporate by reference the
NCR Information Statement. NCR shall use its reasonable best efforts to cause
the NCR Form 10 to be declared effective under the Exchange Act as soon as
practicable following the filing thereof.
(b) AT&T and NCR 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 NCR Distribution.
(c) NCR shall prepare and file, and shall use its reasonable
best efforts to have approved, an application for the listing of the NCR Common
Stock (and related Preferred Share Purchase Rights) to be distributed in the NCR
Distribution on the NYSE or another mutually agreeable stock exchange or
quotations system.
2.3. CONDITIONS TO THE NCR DISTRIBUTION. The
AT&T Board shall
have the sole discretion to determine the NCR Record
Date and the NCR
Distribution Date, and all appropriate procedures in connection with the NCR
Distribution, provided that the NCR Distribution shall not occur prior to such
time as each of the following conditions shall have been satisfied or shall have
been waived by the AT&T Board in its sole discretion:
(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 NCR Distribution
will qualify as a
tax-free distribution for federal income tax purposes
under Section 355
of the Code, 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 NCR 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 NCR
Distribution shall
be in effect and no other event shall have occurred or
failed to occur
that prevents the consummation of the NCR Distribution;
(d) the NCR Form 10 shall have been declared
effective by the
Commission;
(e) AT&T shall have received a favorable
response from the
Staff of the Commission to a request for a no-action
letter concerning,
among other matters, whether the NCR
Distribution and related
transactions may be effected without registration of
the NCR Common
Stock (and related Preferred Share Purchase
Rights) under the
Securities Act;
<PAGE>
(f) the NCR Common Stock (and related Preferred
Share Purchase
Rights) shall have been accepted for listing by the
NYSE or another
mutually agreeable stock exchange or quotations system;
and
(g) the AT&T Board shall have formally approved
the
Distribution;
provided that the satisfaction of such conditions shall not create any
obligation on the part of AT&T, NCR or any other Person to effect or to seek to
effect the NCR Distribution or in any way limit AT&T's right to terminate this
Agreement as set forth in Section 7.1 or alter the consequences of any such
termination from those specified in Section 7.2.
2.4. FRACTIONAL SHARES. No certificates representing
fractional shares of NCR Common Stock will be distributed to holders of AT&T
Common Stock in the NCR Distribution. Holders that receive certificates in the
NCR Distribution and holders that receive less than one whole share of NCR
Common Stock in the NCR Distribution will receive cash in lieu of such
fractional shares as contemplated hereby. As soon as practicable after the NCR
Distribution Date, AT&T shall direct the Agent to determine the number of
fractional shares of NCR Common Stock allocable to each holder of record or
beneficial owner of AT&T Common Stock as of the Record Date that will receive
cash in lieu of such fractional shares, to aggregate all such fractional shares
and sell the whole shares obtained by aggregating such fractional shares either
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, in lieu of any fractional share, 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 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.
ARTICLE III
CERTAIN AGREEMENTS RELATING TO THE NCR DISTRIBUTION
3.1. NCR ANCILLARY AGREEMENTS. Effective as of
the date
hereof, each of AT&T and NCR are executing and delivering each of
the NCR
Ancillary Agreements.
3.2. THE NCR BOARD. NCR and AT&T shall take all actions which
may be required to elect or otherwise appoint as directors of NCR, on or prior
to the NCR Distribution Date, the persons named in the NCR Form 10 to constitute
the Board of Directors of NCR on the NCR Distribution Date.
3.3. NCR CHARTER, BYLAWS AND RIGHTS. Prior to the NCR
Distribution Date, (a) AT&T shall cause Articles of Amendment and Restatement of
NCR, substantially in the form filed with the NCR Form 10, to be filed for
record with the Maryland State Department of Assessments and Taxation and to be
in effect on the NCR Distribution Date,
<PAGE>
and (b) the Board of Directors of NCR shall amend the Bylaws of NCR so that the
NCR Bylaws are substantially in the form filed with the NCR Form 10. Prior to
the NCR Record Date, the Board of Directors of NCR shall declare a dividend of
the Preferred Share Purchase Rights so that each share of NCR Common Stock
issued and outstanding on the NCR Distribution Date shall initially have one
Preferred Share Purchase Right attached thereto.
3.4. TERMINATION OF INTERCOMPANY AGREEMENTS. (a) Except as set
forth in Section 3.4(b) or Section 2.4(b) of the Separation and Distribution
Agreement or Schedule 2.4(b)(ii) thereto, in furtherance of the releases and
other provisions of Section 4.1 hereof, NCR and each member of the NCR Group, on
the one hand, and AT&T and the respective members of the AT&T Services Group, on
the other hand, hereby terminate any and all agreements, arrangements,
commitments or understandings, whether or not in writing, between or among NCR
and/or any member of the NCR Group, on the one hand, and AT&T and/or any member
of the AT&T Services Group, on the other hand, effective as of the NCR
Distribution Date. 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 NCR Distribution
Date. 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 3.4(a) shall not apply to any of
the following agreements, arrangements, commitments or understandings (or to any
of the provisions thereof): (i) the Transaction Agreements (and each other
agreement or instrument expressly contemplated by any Transaction 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 3.4(b)(ii); (iii) any agreements,
arrangements, commitments or understandings to which any Person other than the
parties hereto and their respective Affiliates is a party; (iv) except as set
forth in Schedule 3.4(b)(iv), any intercompany accounts payable or accounts
receivable accrued as of the NCR Distribution 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, any member of the Lucent
Group, or any other non-wholly owned Subsidiary of AT&T or NCR, as the case may
be, is a party (it being understood that directors' qualifying 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 any of the Transaction
Agreements expressly contemplates will survive the NCR Distribution Date.
3.5. DISCLAIMER OF REPRESENTATIONS AND
WARRANTIES. Each of
AT&T (on behalf of itself and each member of the AT&T Services
Group) and NCR
(on behalf of itself and each member of the NCR Group) understands and agrees
that, except as expressly set forth in any Transaction Agreement, no party to
any Transaction Agreement or any other agreement or document contemplated by any
Transaction Agreement either has or is
<PAGE>
representing or warranting in any way as to the Assets, businesses or
Liabilities retained, 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 in any Transaction Agreement, all
such Assets were, or are being, transferred, or are being retained, 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.
3.6. NON-U.S. PLAN. On or prior to the NCR
Distribution Date,
NCR and AT&T shall use their reasonable best efforts to
consummate, or to cause
to be consummated, the transactions set forth on Schedule 3.6
hereto.
3.7. LETTERS OF CREDIT AND RELATED MATTERS. In
the event that
at any time, whether prior to or after the NCR
Distribution Date, AT&T
identifies any letters of credit, interest rate or foreign exchange contracts or
other financial or other contracts that relate primarily to the NCR Business but
for which any member of the AT&T Services Group has contingent, secondary,
joint, several or other Liability of any nature whatsoever, NCR will at its
expense take such actions and enter into such agreements and arrangements as
AT&T may request to effect the release or substitution of the member of the AT&T
Services Group.
ARTICLE IV
MUTUAL RELEASES; INDEMNIFICATION
4.1. RELEASE OF PRE-CLOSING CLAIMS. (a) Except as provided in
Section 4.1(c), effective as of the NCR Distribution Date, NCR does hereby, for
itself and each other member of the NCR Group, their respective Affiliates
(other than any member of the AT&T Services Group or the Lucent Group),
successors and assigns, and all Persons who at any time prior to the NCR
Distribution Date have been shareholders, directors, officers, agents or
employees of any member of the NCR Group (in each case, in their respective
capacities as such), remise, release and forever discharge AT&T, the members of
the AT&T Services Group, their respective Affiliates (other than any member of
the NCR Group or the Lucent Group), successors and assigns, and all Persons who
at any time prior to the NCR Distribution Date have been shareholders,
directors, officers, agents or employees of any member of the AT&T Services
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
<PAGE>
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 NCR Distribution Date, including in connection
with the actions or decisions taken or omitted to be taken in connection with,
and the other activities relating to, the structuring or implementation of any
of the Separation, the IPO, the Lucent Distribution or the NCR Distribution.
(b) Except as provided in Section 4.1(c), effective as of the
NCR Distribution Date, AT&T does hereby, for itself and each other member of the
AT&T Services Group, their respective Affiliates (other than AT&T Capital
Corporation or any of its Subsidiaries, any member of the NCR Group or the
Lucent Group), successors and assigns, and all Persons who at any time prior to
the NCR Distribution Date have been shareholders, directors, officers, agents or
employees of any member of the AT&T Services Group other than AT&T Capital
Corporation or any of its Subsidiaries (in each case, in their respective
capacities as such), remise, release and forever discharge NCR, the respective
members of the NCR Group, their respective Affiliates (other than any member of
the AT&T Services Group or the Lucent Group), successors and assigns, and all
Persons who at any time prior to the NCR Distribution Date have been
shareholders, directors, officers, agents or employees of any member of 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 NCR Distribution
Date, including in connection with the transactions and all other activities to
implement any of the Separation, the IPO, the Lucent Distribution or the NCR
Distribution.
(c) Nothing contained in Section 4.1(a) or (b) shall impair
any right of any Person to enforce the Transaction Agreements, or any
agreements, arrangements, commitments or understandings that are specified in
the Separation and Distribution Agreement, in Section 3.4(b) or the Schedules
hereto or thereto not to terminate as of the Closing Date or the NCR
Distribution Date, as the case may be, in each case in accordance with its
terms. Nothing contained in Section 4.1(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 or the NCR
Group that is
specified in the Separation and Distribution
Agreement, in Section
3.4(b) or the applicable Schedules hereto or
thereto as not to
terminate as of the Closing Date or as of the NCR
Distribution Date, as
the case may be, or any other Liability so
specified as not to
terminate as of the Closing Date or NCR Distribution Date;
(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, any Transaction Agreement;
<PAGE>
(iii) 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 IV and by the
Separation and
Distribution Agreement, and, if applicable, by
the appropriate
provisions of the Ancillary Agreements or NCR Ancillary
Agreements; or
(iv) any Liability the release of which would
result in the
release of any Person other than a Person released
pursuant to this
Section 4.1; provided that the parties agree not to
bring suit or
permit any of their Subsidiaries to bring suit against
any such Person
with respect to any Liability to the extent that such
Person would be
released with respect to such Liability by this Section
4.1 but for the
provisions of this clause (iv).
(d) NCR shall not make, and shall not permit any member of the
NCR 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, any member of the AT&T Services Group, or any other Person
released pursuant to Section 4.1(a), with respect to any Liabilities released
pursuant to Section 4.1(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 NCR or any member of the NCR Group, or any other Person
released pursuant to Section 4.1(b), with respect to any Liabilities released
pursuant to Section 4.1(b).
(e) It is the intent of each of AT&T and NCR by virtue of the
provisions of this Section 4.1 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
NCR Distribution Date, between or among NCR or any member of the NCR Group, on
the one hand, and AT&T or any member of the AT&T Services 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 NCR Distribution
Date), except as expressly set forth in Section 4.1(c). At any time, at 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.
4.2. INDEMNIFICATION BY NCR. NCR 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"), from and against any and all Liabilities of the AT&T Indemnitees
relating to, arising out of or resulting from any of the following items
(without duplication), in each case whether arising before, on or after the NCR
Distribution Date:
(a) the failure of NCR or any other member of
the NCR Group or
any other Person to pay, perform or otherwise promptly
discharge any
Liabilities of any mem-
<PAGE>
ber of the NCR Group in accordance with their respective
terms, whether
prior to or after the NCR Distribution Date or the date
hereof;
(b) the NCR Business (including any claim by any
creditor of
AT&T UK Holdings Ltd. to the extent relating to the NCR
Business
conducted by such entity), any Liability of any member of
the NCR Group
or any NCR Covered Liability;
(c) any Asset (including contracts, agreements,
real property
and leasehold interests) of any member of the NCR
Group at any time
(other than Assets transferred to any member of the AT&T
Services Group
prior to the NCR Distribution Date), and any
contract, agreement,
letter of credit or other commitment or obligation
listed on Schedule
4.2 hereof;
(d) the operation of the NCR Business, as
conducted at any
time prior to, on or after the NCR Distribution 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));
(e) any guarantee, indemnity,
representation, warranty or
other Liability of or made by any member of the AT&T
Services Group in
respect of any Liability or alleged Liability of any
member of the NCR
Group;
(f) any breach by NCR or any member of the NCR
Group of this
Agreement, the Separation and Distribution Agreement,
any Ancillary
Agreement or any of the NCR Ancillary Agreements;
(g) any Liabilities relating to, arising out
of or resulting
from the NCR Business (including any NCR Covered
Liabilities) for which
AT&T has agreed to indemnify and hold harmless the
Lucent Indemnitees
pursuant to Section 5.3(a) of the Separation
and Distribution
Agreement;
(h) actions taken by any member of the AT&T
Group on behalf of
any member of the NCR Group pursuant to the Separation
and Distribution
Agreement or any Ancillary Agreement;
(i) 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
the NCR Information Statement or NCR Form 10; and
(j) any Liability relating to, arising out
of or resulting
from any actual or threatened Action or other claim
alleging that any
Liability was improperly allocated to the NCR Group or
that any Asset
was improperly withheld from the NCR Group, in each
case pursuant to
any of the Transaction Agreements.
<PAGE>
Nothing in this Agreement shall be deemed to amend or modify Section 5.3(c) of
the Separation and Distribution Agreement and the provisions of the Separation
and Distribution Agreement shall govern matters covered thereby.
4.3. INDEMNIFICATION BY AT&T. (a) AT&T shall indemnify, defend
and hold harmless 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 NCR Indemnitees relating to, arising
out of or resulting from any of the following items (without duplication), in
each case whether arising before, on or after the NCR Distribution Date:
(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
Liabilities of the AT&T Services Group whether prior
to or after the
NCR Distribution Date or the date hereof;
(ii) the AT&T Services Business (including any
claim by any
creditor of AT&T UK Holdings Ltd. to the extent relating
to the AT&T
Services Business conducted by such entity) or any
Liability of the
AT&T Services Group; and
(iii) any breach by AT&T or any member of the
AT&T Services
Group of this Agreement, the Separation and Distribution
Agreement, any
Ancillary Agreement or any of the NCR Ancillary
Agreements;
provided however that this Section 4.3 shall not apply to any
Liability relating
to the NCR Business.
4.4. 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 IV will be net of
Insurance Proceeds 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. 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, 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
recovery had been received, realized or recovered before the Indemnity Payment
was made.
(b) 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"
<PAGE>
(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.
4.5. 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 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 Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 4.2 or 4.3, or any other Section of this
Agreement or any NCR Ancillary Agreement, such Indemnitee shall give such
Indemnifying Party 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
to give notice as provided in this Section 4.5(a) shall not relieve the related
Indemnifying Party of its obligations under this Article IV, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.
(b) If the Indemnitee 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 in accordance
with the Separation and Distribution Agreement at any time following any notice
given by the Indemnitee to an Indemnifying Party pursuant to Section 4.5(a).
AT&T may make such a Determination Request at any time. Unless each of AT&T, NCR
and Lucent has acknowledged that the applicable Third Party Claim (including any
Third Party Claim set forth on Schedule 6.6 to the Separation and Distribution
Agreement) is not a Shared Contingent Liability or unless a determination to
such effect has been made in accordance with the Separation and Distribution
Agreement, 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) of the Separation and Distribution
Agreement.
(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 Section 6.4 of
the Separation and Distribution Agreement. 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.
<PAGE>
(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 4.5(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 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 4.5(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 4.5 and Section 4.6 shall not
apply to Taxes (which are covered by the Tax Sharing Agreement).
4.6. 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 the Indemnitee to the related Indemnifying
Party. Such
Indemnifying Party shall have a period
<PAGE>
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 any
Transaction Agreement.
(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 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 either the Indemnified Party or 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 of the Separation and
Distribution Agreement 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.
4.7. REMEDIES CUMULATIVE. The remedies provided in this
Article IV shall be cumulative and, subject to the provisions of Article IX of
the Separation and Distribution Agreement, shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
4.8. SURVIVAL OF INDEMNITIES. The rights and
obligations of
each of AT&T and NCR and their respective Indemnitees under this
Article IV
shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
4.9. RELATIONSHIP TO SEPARATION AND DISTRIBUTION
AGREEMENT
DISPUTE RESOLUTION PROCEDURES. (a) Each of NCR and AT&T agrees
that the
procedures for discussion, negotiation and arbitration set forth
in Article IX
of the Separation and Distribution Agreement (which are hereby
incorporated
herein by reference) shall apply to all dis-
<PAGE>
putes, 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, except as otherwise expressly provided therein, any NCR Ancillary
Agreement (as if each of this Agreement and each of the NCR Ancillary Agreements
were an 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 and the NCR Group.
(b) Each party agrees on behalf of itself and each member of
its respective Group that the procedures set forth in such 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 of the Separation and Distribution
Agreement 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 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 Section 9.1 of the Separation and Distribution
Agreement.
(c) Without limiting the foregoing, 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.
(d) Subject to Sections 9.7(d) and 9.8 of the Separation and
Distribution Agreement, upon delivery of an Arbitration Demand Notice pursuant
to Section 9.3(a) of the Separation and Distribution Agreement 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 Article IX of the
Separation and Distribution Agreement.
(e) The interpretation of the provisions of this Section 4.9
and Article IX of the Separation and Distribution Agreement (to the extent
incorporated herein by reference), 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 8.2.
ARTICLE V
INTERIM OPERATIONS AND CERTAIN OTHER MATTERS
5.1. CERTAIN TAX MATTERS. Notwithstanding any
other provision
of this Agreement, the Tax Sharing Agreement or any other
Transaction Agreement,
in the case of any Adjustment comprising a Restructuring
Adjustment that relates
to the NCR Distribution
<PAGE>
and arises as a result of the acquisition of all or a portion of the NCR capital
stock of any class or series and/or of its assets by any means whatsoever by any
Person other than an Affiliate of NCR following such NCR Distribution, NCR shall
indemnify, defend and hold harmless AT&T from and against any and all
Liabilities of AT&T relating to, arising out of or resulting from such
Adjustment.
5.2. AGREEMENT FOR EXCHANGE OF INFORMATION;
ARCHIVES. Each of
AT&T and NCR agrees that the provisions of Article VIII of the
Separation and
Distribution Agreement shall continue to apply after the NCR
Distribution Date;
provided however, that as between the members of NCR Group, on the one hand, and
the AT&T Services Group, on the other hand, the reference to "the third
anniversary of the date hereof" in Section 8.2 of the Separation and
Distribution Agreement shall be deemed to be the third anniversary of the date
of this Agreement. Without limiting the foregoing, (a) NCR 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 (b) NCR shall provide,
or cause to be provided, to AT&T in such form as 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.
ARTICLE VI
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
6.1. 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 NCR
Distribution 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 NCR Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the
NCR Distribution 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
NCR Ancillary Agreements, in order to effectuate the provisions and purposes of
this Agreement and the NCR Ancillary Agreements 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
<PAGE>
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) Each of AT&T and NCR, at the request of the other, shall
use its 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 of any nature
whatsoever that constitute Liabilities of the NCR Group or Liabilities that
relate to the NCR Group, or to obtain in writing the unconditional release of
all parties to such arrangements other than any member of the NCR Group, so
that, in any such case, NCR and its Subsidiaries will be solely responsible for
such Liabilities; provided, however, that neither AT&T nor NCR shall be
obligated to pay any consideration therefor to any third party from whom such
consents, approvals, substitutions, amendments and releases are requested.
(d) If AT&T 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 shall continue to be
bound by such agreements, leases, licenses and other obligations and, unless not
permitted by law or the terms thereof, NCR shall, as agent or subcontractor for
AT&T or such other Person, as the case may be, pay, perform and discharge fully
all the obligations or other Liabilities of AT&T or such other Person, as the
case may be, thereunder from and after the date hereof. NCR shall indemnify each
AT&T Indemnitee, and hold each of them harmless against any Liabilities arising
in connection therewith.
(e) On or prior to the Closing Date, AT&T and NCR shall take
all actions as may be necessary to approve the stock-based employee benefit
plans of NCR in order to satisfy the requirements of Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code.
(f) The parties hereto agree to take any reasonable actions
necessary in order for the NCR Distribution to qualify as a tax-free
distribution pursuant to Section 355 of the Code.
6.2. QUALIFICATION AS TAX-FREE DISTRIBUTION. (a) After the NCR
Distribution Date, none of AT&T or NCR shall take, or permit any member of its
respective Group to take, any action which could reasonably be expected to
prevent the NCR 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 other Transaction Agreement which is intended by the
parties to be tax-free from failing so to qualify.
(b) After the NCR Distribution Date, NCR shall not, nor cause
or permit, any member of the NCR Group to take any action or enter into any
transaction which could reasonably be expected to materially adversely impact
the reasonably expected tax consequences to AT&T which are known to NCR of any
transaction contemplated by this Agreement or any Transaction Agreement;
provided, however, nothing in this section shall prohibit NCR from taking any
action, or entering into any transaction (or permitting or causing any member of
the NCR Group so to act or enter) in the ordinary course of business or in the
ordinary course of business dealing, or in connection with the settlement of any
audit issue or in connection with the filing of any tax return. After the NCR
Distribution Date, AT&T shall not, nor cause or permit, any member of the AT&T
Group to take any action or enter into any transaction which could reasonably be
expected to materially adversely impact the expected tax consequences to NCR
which are known to AT&T of any transaction contemplated by this Agreement or any
Transaction Agreement; provided, however, nothing in this section shall prohibit
AT&T from taking any action, or entering into any transaction (or permitting or
causing any member of the AT&T Group so to act or enter), in the ordinary course
of business or in the ordinary course of business dealing, or in connection with
the settlement of any audit issue or in connection with the filing of any tax
return.
ARTICLE VII
TERMINATION
<PAGE>
7.1. TERMINATION. This Agreement may be
terminated at any time
prior to the NCR Distribution Date by AT&T.
7.2. EFFECT OF TERMINATION. In the event of any
termination of
this Agreement, no party to this Agreement (or any of its
directors or officers)
shall have any Liability or further obligation to any other party.
ARTICLE VIII
MISCELLANEOUS
8.1. COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER. (a) This
Agreement and each NCR Ancillary 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.
(b) This Agreement, the Separation and Distribution Agreement,
the Ancillary Agreements and the NCR 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.
(c) AT&T represents on behalf of itself and each other member
of the AT&T Services 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 NCR Ancillary Agreements to
which it is a
party and to consummate the transactions
contemplated hereby and
thereby; and
(ii) this Agreement and each NCR 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) Notwithstanding any provision of this Agreement or any NCR
Ancillary Agreement, AT&T shall not be required to take or omit to take any act
that would violate its fiduciary duties to any minority stockholders of Lucent,
AT&T Capital Corporation or any other non-wholly owned Subsidiary of AT&T (it
being understood that directors' qualifying shares or similar interests will be
disregarded for purposes of determining whether a Subsidiary is wholly owned).
<PAGE>
8.2. GOVERNING LAW. This Agreement and, unless expressly
provided therein, each NCR 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 4.9 hereof
and Section 9.10 of the Separation and Distribution Agreement), irrespective of
the choice of laws principles of the State of New York, as to all matters,
including matters of validity, construction, effect, enforceability, performance
and remedies.
8.3. ASSIGNABILITY. (a) Except as set forth in any NCR
Ancillary Agreement, this Agreement and each NCR 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 NCR Ancillary Agreement
without the express prior written consent of the other parties hereto or
thereto.
8.4. THIRD PARTY BENEFICIARIES. Except for the
indemnification
rights under this Agreement of any AT&T Indemnitee or NCR
Indemnitee in their
respective capacities as such, (a) the provisions of this
Agreement and each NCR
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 NCR Ancillary Agreement and neither this Agreement nor any NCR 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 NCR Ancillary Agreement.
8.5. NOTICES. All notices or other communications under this
Agreement or any NCR 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
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.
Dayton, Ohio 45479
Attn.: General Counsel
<PAGE>
Any party may, by notice to the other party, change the address to which such
notices are to be given.
8.6. SEVERABILITY. If any provision of this Agreement or any
NCR 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.
8.7. FORCE MAJEURE. No party shall be deemed in default of
this Agreement or any NCR Ancillary Agreement to the extent that any delay or
failure in the performance of its obligations under this Agreement or any NCR
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.
8.8. PUBLICITY. Prior to the NCR Distribution Date, each of
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 Lucent
Distribution, the NCR Distribution or any of the other transactions contemplated
hereby and prior to making any filings with any Governmental Authority with
respect thereto.
8.9. EXPENSES. Except as expressly set forth in this Agreement
or in any NCR Ancillary Agreement, whether or not the NCR Distribution is
consummated, all third party fees, costs and expenses paid or incurred prior to
the NCR Distribution Date in connection with the NCR Distribution will be paid
by AT&T; provided however that NCR shall consult with AT&T prior to incurring
any such third party obligations.
8.10. HEADINGS. The article, section and
paragraph headings
contained in this Agreement and in the NCR Ancillary Agreements
are for
reference purposes only and shall not affect in any way the
meaning or
interpretation of this Agreement or any NCR Ancillary Agreement.
8.11. SURVIVAL OF COVENANTS. Except as expressly
set forth in
any NCR Ancillary Agreement, the covenants, representations and
warranties
contained in this Agreement and each NCR Ancillary Agreement, and
liability for
the breach of any obligations
<PAGE>
contained herein, shall survive the NCR Distribution and shall remain in full
force and effect following the consummation of the NCR Distribution.
8.12. WAIVERS OF DEFAULT. Waiver by any party of any default
by the other party of any provision of this Agreement or any NCR Ancillary
Agreement shall not be deemed a waiver by the waiving party of any subsequent or
other default, nor shall it prejudice the rights of the other party.
8.13. AMENDMENTS. No provisions of this Agreement or any NCR
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.
8.14. 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 NCR 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 NCR
Ancillary Agreement). Article, Section, Exhibit, Schedule and Appendix
references are to the Articles, Sections, Exhibits, Schedules and Appendices to
this Agreement (or the applicable NCR Ancillary Agreement) unless otherwise
specified. The word "including" and words of similar import when used in this
Agreement (or the applicable NCR 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 to the
Separation and Distribution Agreement.
TNESS WHEREOF, the parties have caused this Distribution Agreement to be
executed by their duly authorized representatives.
AT&T CORP.
By:
Name:
Title:
NCR CORPORATION
By:
Name:
Title:
TAX SHARING AGREEMENT
BY AND AMONG
AT&T CORP.,
LUCENT TECHNOLOGIES INC.
AND
NCR CORPORATION
DATED AS OF
FEBRUARY 1, 1996
AND AMENDED AND RESTATED AS OF MARCH 29, 1996
<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
<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
<PAGE>
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.
<PAGE>
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,
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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);
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
(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
<PAGE>
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
<PAGE>
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,
<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.
<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.
<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:
<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.
<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:
EMPLOYEE BENEFITS AGREEMENT
BETWEEN
AT&T CORP.
AND
LUCENT TECHNOLOGIES INC.
DATED AS OF
FEBRUARY 1, 1996
AND
AMENDED AND RESTATED AS OF
MARCH 29, 1996
<PAGE>
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of February 1, 1996, and
amended and restated as of March 29, 1996, is by and between
AT&T and Lucent.
Capitalized terms used herein (other than the formal names of AT&T Plans (as
defined below) and related trusts of AT&T) and not otherwise defined shall have
the respective meanings assigned to them in Article I hereof or as assigned to
them in the Separation and Distribution Agreement (as defined below).
WHEREAS, the Board of Directors of AT&T has determined that it is in
the best interests of AT&T and its shareholders to separate AT&T's existing
businesses into three independent businesses;
WHEREAS, in furtherance of the foregoing, AT&T, Lucent and NCR have
entered into a Separation and Distribution Agreement, dated as of the date
hereof (the "Separation and Distribution Agreement") and certain other
agreements that will govern certain matters relating to the Separation, the IPO,
the Distribution and the relationship of AT&T, Lucent and NCR and their
respective Subsidiaries following the IPO and the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, AT&T
and Lucent have agreed to enter into this agreement allocating assets,
liabilities and responsibilities with respect to certain employee compensation
and benefit plans and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 414(l)(1) AMOUNT is defined in Section 3.2(b)(i)(A).
1.2 1992 COLLECTIVE BARGAINING AGREEMENT is defined in
Section 5.18.
1.3 AGREEMENT means this Employee Benefits Agreement,
including all the
Schedules and Exhibits hereto.
1.4 AGGREGATE LUCENT STOCK VALUE means the Lucent Stock Value
multiplied by the number of shares of Lucent Common Stock issued and outstanding
as of Immediately after the Distribution Date.
1.5 ASA is defined in Section 8.11.
1.6 ASA AGREEMENT means the agreement with ASA
described in Section
8.11.
1.7 ASO CONTRACT is defined in Section 5.7(a)(i).
1.8 ASSIGNED SPLIT DOLLAR POLICIES is defined in Section
6.9.
<PAGE>
1.9 ATTIMCO means the AT&T Investment Management
Corporation, a
Delaware corporation.
1.10 AT&T DEFERRED SEVERANCE ACCOUNT means an account established on
the financial books and records of AT&T or an AT&T Entity to reflect a liability
to pay a deferred severance benefit to an AT&T Executive.
1.11 AT&T ENTITY means any Person that is, at the relevant time, an
Affiliate of AT&T, except that, for periods beginning on and after the
Participation Commencement Date, the term "AT&T Entity" shall not include Lucent
or a Lucent Entity.
1.12 AT&T EXECUTIVE means an employee or former employee of AT&T, an
AT&T Entity, Lucent or a Lucent Entity, who immediately before the Close of the
Distribution Date is eligible to participate in or receive a benefit under any
AT&T Executive Benefit Plan.
1.13 AT&T GROUP PENSION TRUST is defined in Section 3.1.
1.14 AT&T LEAVE OF ABSENCE PROGRAMS means the Local Leave, Disability
Leave, Educational Leave of Absence, Accompanying AT&T Employed Spouse-Foreign
Assignment Leave, Personal Leave, Union Business Leave, Anticipated Disability
Leave, Care of Newborn/Newly Adopted Child Leave, Family Care Leave, Military
Leave, Transition Leave, Special Leave, Enhanced Leave, and ELOA Plus Leave
Programs offered from time to time under the personnel policies and practices of
AT&T.
1.15 AT&T LTD PLANS means the AT&T Long-Term Disability Plan for
Management Employees and the AT&T Long Term Disability Plan for Occupational
Employees.
1.16 AT&T MANAGEMENT SAVINGS GROUP TRUST means the group
trust under
IRS Rev. Rul. 81-100 established in connection with the AT&T
LTSPME and the AT&T
RSPSP pursuant to a group trust agreement between AT&T and
Fidelity Management
Trust Company.
1.17 AT&T MPP means the AT&T Management Pension Plan. Unless the
context indicates otherwise, AT&T MPP includes disability pensions payable from
the AT&T LTD VEBA and death benefits payable under the AT&T Special Accidental
Death Insurance Policy.
1.18 AT&T OCCUPATIONAL SAVINGS GROUP TRUST means the
group trust under
IRS Rev. Rul. 81-100 established in connection with the AT&T LTSSP
pursuant to a
group trust agreement between AT&T and Bankers Trust Company.
1.19 AT&T PP means the AT&T Pension Plan. Unless the context indicates
otherwise, AT&T PP includes disability pensions payable from the AT&T LTD VEBA
and death benefits payable under the AT&T Special Accidental Death Insurance
Policy.
1.20 AT&T SADBP means the AT&T Sickness and Accident
Disability Benefit
Plan.
1.21 AT&T SPECIAL EXECUTIVE DEFERRAL ACCOUNT means an account
established on the financial books and records of any member of the AT&T Group
to reflect a liability to
<PAGE>
pay a special pension enhancement, hiring bonus or benefit to an
AT&T Executive
pursuant to an Individual Agreement.
1.22 AT&T STOCK VALUE means the average of the daily high and low
per-share prices of the AT&T Common Stock as listed on the NYSE during each of
the five trading days immediately preceding the ex-dividend date for the
Distribution.
1.23 AT&T TRANSFERRED EMPLOYEE means an individual who (a) on the
Participation Commencement Date, is either actively employed by or on leave of
absence from Lucent or a Lucent Entity (including for purposes of this
definition any division or business unit of AT&T on the Participation
Commencement Date that is part of the Lucent Business), if such individual is
part of a work group or organization that, at any time before the Close of the
Distribution Date, moves to the employ of AT&T or an AT&T Entity and that, after
such move, performs substantially the same functions as before such move; (b) on
the Participation Commencement Date, is either actively employed by or on leave
of absence from a Subsidiary of AT&T that becomes a Lucent Entity before the
Close of the Distribution Date, if such individual, at any time before the Close
of the Distribution Date, moves to the employ of AT&T or an AT&T Entity that
does not become a Lucent Entity before the Close of the Distribution Date; or
(c) on the Participation Commencement Date, is either actively employed by or on
leave of absence from Lucent or a Lucent Entity in a common support function, is
at any time before the Close of the Distribution Date designated by AT&T for
transfer to AT&T or an AT&T Entity and, at any time after the Participation
Commencement Date and before the Close of the Distribution Date, moves to the
employ of AT&T or an AT&T Entity. In addition, AT&T and Lucent may designate, by
mutual agreement, any other individual or group of individuals as AT&T
Transferred Employees.
1.24 AT&T WCP means the AT&T Workers' Compensation Program, comprised
of the various arrangements established by AT&T or an AT&T Entity to comply with
the workers' compensation requirements of the states in which AT&T and its
Affiliates conduct business.
1.25 AUDITING PARTY is defined in Section 8.7(b)(i).
1.26 AWARD means an award under a Long Term Incentive
Plan or a Short
Term Incentive Plan.
1.27 BDEC is defined in Section 5.16(a).
1.28 BDS is defined in Section 5.16(a).
1.29 CECRA, when immediately preceded by "AT&T," means the AT&T
Child/Elder Care Reimbursement Account Plan. When immediately preceded by
"Lucent," CECRA means the child/elder care reimbursement account plan to be
established by Lucent pursuant to Section 2.3.
1.30 CHANGE is defined in Section 5.8(b)(i).
1.31 CLOSE OF THE DISTRIBUTION DATE means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the Distribution Date.
<PAGE>
1.32 COBRA means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code Section
4980B and ERISA
Sections 601 through 608.
1.33 CODE means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
1.34 COLLECTIVE BARGAINING AGREEMENT means the National AT&T/CWA/IBEW
Memorandum of Understanding, including all Attachments, National Items and
letters included as a part thereof, executed by AT&T and the CWA and IBEW as of
May 28, 1995, and such local collective bargaining agreements into which the
National AT&T/CWA/IBEW Memorandum of Understanding has been incorporated.
1.35 CORPORATE-OWNED LIFE INSURANCE means the life insurance policies
owned by AT&T insuring the lives of certain AT&T Executives and certain other
highly compensated employees of AT&T or an AT&T Entity that were purchased by
AT&T between the years 1985 and 1992.
1.36 COVERED AT&T AWARDS means any AT&T Options or non-vested AT&T
performance shares, stock units, restricted stock or restricted stock units held
as of the Close of the Distribution Date by Transferred Individuals who as of
the Distribution Date are either active employees of or on a leave of absence
from Lucent or a Lucent Entity.
1.37 CWA means the Communication Workers of America,
AFL-CIO.
1.38 DEFERRAL PLAN, when immediately preceded by "AT&T," means the AT&T
Senior Management Incentive Award Deferral Plan. When immediately preceded by
"Lucent," Deferral Plan means the senior management incentive award deferral
plan to be established by Lucent pursuant to Section 2.3.
1.39 DOL means the United States Department of Labor.
1.40 ERISA means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific provision of ERISA also includes any
proposed, temporary, or final regulation in force under that provision.
1.41 ESOP, when immediately preceded by "AT&T," means the AT&T Employee
Stock Ownership Plan. When immediately preceded by "Lucent," ESOP means the
employee stock ownership plan to be established by Lucent pursuant to Section
2.3.
1.42 ESOP TRUST, when immediately preceded by "AT&T," means the trust
established by AT&T forming part of the AT&T ESOP. When immediately preceded by
"Lucent," ESOP Trust has the meaning set forth in Section 4.3(a).
1.43 EXECUTIVE BENEFIT PLANS, when immediately preceded by "AT&T,"
means the executive benefit and nonqualified plans, programs, and arrangements
established, maintained, agreed upon, or assumed by AT&T or an AT&T Entity for
the benefit of employees and former employees of AT&T or an AT&T Entity before
the Close of the Distribution Date, including the plans listed in Schedule 1,
but excluding the Senior Management Ground Transportation Program. When
immediately preceded by "Lucent," Executive
<PAGE>
Benefit Plans means the executive benefit plans and programs to be established
by Lucent pursuant to Section 2.3 that correspond to the respective AT&T
Executive Benefit Plans.
1.44 EXISTING ACQUISITION LOAN is defined in Section
4.2(c)(ii).
1.45 FMLA means the Family and Medical Leave Act of
1993, as amended.
1.46 FOREIGN PLAN means a Plan maintained by AT&T, an AT&T Entity,
Lucent, or a Lucent Entity for the benefit of employees outside the U.S.
1.47 FUNDING POLICY AMOUNT is defined in Section
3.2(b)(i)(A).
1.48 GROSS VALUE OF THE ASSUMED STOCK AWARDS means the sum of (a) the
Lucent Stock Value multiplied by the number of shares of Lucent Common Stock
that Immediately after the Distribution Date would be issuable in respect of
then outstanding Covered AT&T Awards, assuming all then outstanding Covered AT&T
Awards were converted into replacement Awards as of such time in accordance with
the terms of Section 6.4(a), plus (b) the aggregate amount paid to AT&T by
Lucent on or after the Closing Date and prior to the Close of the Distribution
Date pursuant to Section 8.2(f)(i) and (iii), plus (c) the aggregate of the
exercise prices paid to AT&T on or after the Closing Date and prior to the Close
of the Distribution Date in respect of the exercise of all AT&T Options that
constitute Covered AT&T Awards and for which payments are made by Lucent to AT&T
pursuant to Section 8.2(f)(i) as a result of such exercise.
1.49 GROUP INSURANCE POLICIES is defined in Section
5.7(b)(i).
1.50 GROUP LIFE PROGRAM, when immediately preceded by "AT&T," means the
AT&T Dependent Accidental Loss Insurance Plan, the AT&T Dependent Group Life
Insurance Plan, the AT&T Group Life Insurance Plan, the AT&T Supplementary
Accidental Loss Insurance Plan and the AT&T Supplementary Life Insurance Plan.
When immediately preceded by "Lucent," Group Life Program means the life
insurance plans and programs to be established by Lucent pursuant to Section 2.3
that correspond to the respective AT&T Group Life Programs.
1.51 HCFA means the Health Care Financing Administration.
1.52 HCRA PLAN, when immediately preceded by "AT&T," means the AT&T
Health Care Reimbursement Account Plan. When immediately preceded by "Lucent,"
HCRA Plan means the Health Care Reimbursement Account Plan to be established by
Lucent pursuant to Section 2.3.
1.53 HEALTH AND WELFARE PLANS, when immediately preceded by "AT&T,"
means the health and welfare plans listed on Schedule II established and
maintained by AT&T for the benefit of employees and retirees of AT&T and certain
AT&T Entities, and such other welfare plans or programs as may apply to such
employees and retirees as of the Distribution Date. When immediately preceded by
"Lucent," Health and Welfare Plans means the health and welfare plans to be
established by Lucent pursuant to Section 2.3 that correspond to the respective
AT&T Health and Welfare Plans.
1.54 HEALTH PLANS, when immediately preceded by "AT&T," means the AT&T
Dental Expense Plan for Active Employees, the AT&T Dental Expense Plan for
Retired Employees, the AT&T Medical Plans, the AT&T HCRA
Plan and the AT&T
Vision Care
<PAGE>
Plan. When immediately preceded by "Lucent," Health Plans means the health plans
to be established by Lucent pursuant to Section 2.3 that correspond to the
respective AT&T Health Plans.
1.55 HEALTH PLANS BENEFIT TRUST, when immediately preceded by "AT&T,"
means the American Telephone and Telegraph Company Health Plans
Benefit Trust.
When immediately preceded by "Lucent," Health Plans Benefit Trust means the
trust to be established by Lucent pursuant to Section 5.1 that corresponds to
the AT&T Health Plans Benefit Trust.
1.56 HEALTH TRUSTS, when immediately preceded by "AT&T," means the AT&T
Health Plans Benefit Trust, the AT&T Management VEBA, and the AT&T Union VEBA.
When immediately preceded by "Lucent," Health Trusts means the trusts to be
established by Lucent pursuant to Section 5.1 that correspond to the respective
AT&T Health Trusts.
1.57 HMO means a health maintenance organization that provides benefits
under the AT&T Medical Plans or the Lucent Medical Plans.
1.58 HMO AGREEMENTS is defined in Section 5.7(c)(i).
1.59 HPSS is defined in Section 5.21(c)(v).
1.60 HWLI COMMITTEE means the Health, Welfare and Life Insurance
Committee established pursuant to Section 5.9.
1.61 IBEW means the International Brotherhood of
Electrical Workers.
1.62 IMMEDIATELY AFTER THE DISTRIBUTION DATE means 12:00 A.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the day after the Distribution Date.
1.63 INITIAL ALLOCATION AMOUNT is defined in Section
3.2(b)(i)(A).
1.64 INDIVIDUAL AGREEMENT means an individual contract or agreement
(whether written or unwritten) entered into between AT&T, an AT&T Entity, Lucent
or a Lucent Entity and an AT&T Executive that establishes the right of such
individual to special executive compensation or benefits, including a
supplemental pension benefit, hiring bonus, loan, guaranteed payment, special
allowance, tax equalization or disability benefit, or share units granted (and
payable in the form of cash or otherwise) under individual phantom share
agreements, or that provides benefits similar to those identified in Schedule I.
1.65 IRS means the Internal Revenue Service.
1.66 LEGALLY PERMISSIBLE is defined in Section
5.15(a)(iv).
1.67 LEGALLY PERMITTED is defined in Section B.4 of
Exhibit B.
1.68 LESOP, when immediately preceded by "AT&T," means the portion of
the AT&T LTSSP that is a leveraged employee stock ownership plan. When
immediately preceded by "Lucent," LESOP means the portion of the Lucent LTSSP
that is a leveraged employee stock ownership plan.
<PAGE>
1.69 LESOP TRUST, when immediately preceded by "AT&T," means the trust
established by AT&T under Article 20 of the AT&T LTSSP. When immediately
preceded by "Lucent," LESOP Trust has the meaning set forth in Section
4.2(c)(i).
1.70 LONG TERM INCENTIVE PLAN, when immediately preceded by "AT&T,"
means any of the AT&T 1984 Stock Option Plan, the AT&T 1987 Long Term Incentive
Program, and such other stock-based incentive plans assumed by AT&T by reason of
merger, acquisition, or otherwise, including incentive plans of NCR, Teradata
Corporation, AT&T Wireless Services, Inc. (formerly McCaw Cellular
Communications, Inc.), and Lin Broadcasting Corporation. When immediately
preceded by "Lucent," Long Term Incentive Plan means the long term incentive
plan to be established by Lucent pursuant to Section 2.3.
1.71 LTD VEBA, when immediately preceded by "AT&T," means the American
Telephone & Telegraph Company Long-Term Disability Plans Benefit Trust. When
immediately preceded by "Lucent," LTD VEBA means the welfare benefit fund to be
established by Lucent pursuant to Section 5.1 that corresponds to the AT&T LTD
VEBA.
1.72 LTSPME, when immediately preceded by "AT&T," means the AT&T Long
Term Savings Plan for Management Employees. When immediately preceded by
"Lucent," LTSPME means the management savings plan to be established by Lucent
pursuant to Section 2.3 that corresponds to the AT&T LTSPME.
1.73 LTSSP, when immediately preceded by "AT&T," means
the AT&T Long
Term Savings and Security Plan. When immediately preceded by
"Lucent," LTSSP
means the occupational savings plan to be established by Lucent pursuant to
Section 2.3 that corresponds to the AT&T LTSSP.
1.74 LUCENT ACQUISITION LOAN is defined in Section
4.2(c)(ii).
1.75 LUCENT ADMINISTRATIVE EMPLOYEES is defined in
Section 8.1(c).
1.76 LUCENT ENTITY means any Person that is, at the relevant time, a
Subsidiary of Lucent or is otherwise controlled, directly or indirectly, by
Lucent.
1.77 LUCENT INDIVIDUAL means any individual who (a) on the
Participation Commencement Date, is either actively employed by or on leave of
absence from Lucent or a Lucent Entity (including for purposes of this
definition any division or business unit of AT&T or an AT&T Entity on the
Participation Commencement Date that is part of the Lucent Business), other than
any AT&T Transferred Employee; (b) on the Participation Commencement Date, is
either actively employed by or on leave of absence from AT&T or an AT&T Entity
as part of a work group or organization that, at any time after the
Participation Commencement Date and before the Close of the Distribution Date,
moves to the employ of Lucent or a Lucent Entity from the employ of AT&T or an
AT&T Entity and that, after such move, performs substantially the same functions
as before such move; (c) on the Participation Commencement Date, is either
actively employed by or on leave of absence from AT&T or an AT&T Entity in a
common support function, is at any time before the Close of the Distribution
Date designated by AT&T for transfer to Lucent or a Lucent Entity and, at any
time after the Participation Commencement Date and before the Close of the
Distribution Date, moves to the employ of Lucent or a Lucent Entity from the
employ of AT&T or an AT&T Entity; (d) on the Participation Commencement Date, is
either actively employed by or on leave of absence from a Subsidiary of AT&T
that becomes a Lucent Entity before the Close of the Distribution Date, other
than any AT&T
<PAGE>
Transferred Employee; (e) at any time after the Participation Commencement Date
and before the Close of the Distribution Date both (i) is declared to be surplus
by AT&T or an AT&T Entity and (ii) applies for, obtains and accepts employment
with Lucent or a Lucent Entity; or (f) is a Lucent Administrative Employee. In
addition, AT&T and Lucent may designate, by mutual agreement, any other
individual or group of individuals as Lucent Individuals.
1.78 LUCENT STOCK VALUE means the average of the daily high and low
per-share prices of the Lucent Common Stock as listed on the NYSE during each of
the five trading days immediately preceding the ex-dividend date for the
Distribution.
1.79 LUCENT WCP CLAIMS is defined in Section 5.15(a)(i).
1.80 MANAGEMENT EMPLOYEE means any individual who is an "Employee" as
defined under the terms of the AT&T MPP or the Pension Plan to be established by
Lucent pursuant to Section 2.3 that corresponds to the AT&T MPP.
1.81 MANAGEMENT TRANSITION PERIOD means the period beginning
Immediately after the Distribution Date and ending on the earlier of December
31, 1997 and the end of the third calendar month that ends after the
Distribution Date.
1.82 MANAGEMENT VEBA, when immediately preceded by "AT&T," means The
American Telephone and Telegraph Company Management and Nonrepresented Employees
Postretirement Health Benefits Trust. When immediately preceded by "Lucent,"
Management VEBA means the welfare benefit fund to be established by Lucent
pursuant to Section 5.1 that corresponds to the AT&T Management VEBA.
1.83 MATERIAL FEATURE means any feature of a Plan that could reasonably
be expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required to be made by participants (or their dependents
or beneficiaries) to such Plan.
1.84 MEDICAL PLANS, when immediately preceded by "AT&T," means the AT&T
Medical Expense Plan for Management Employees, the AT&T Medical Expense Plan for
Occupational Employees and the AT&T Medical Expense Plan for
Retired Employees.
When immediately preceded by "Lucent," Medical Plans means the medical plans to
be established by Lucent pursuant to Section 2.3 that correspond to the
respective AT&T Medical Plans.
1.85 MPA means the Mandatory Portability Agreement
established as of
January 1, 1985 among AT&T, American Information Technologies
Corporation, Bell
Atlantic Corporation, Bell Communications Research, Inc.,
BellSouth Corporation,
Cincinnati Bell Telephone Company, NYNEX Corporation, Pacific Telesis Group,
Inc., The Southern New England Telephone Company, Southwestern Bell Corporation
and US WEST, Inc. that provides, in accordance with Section 559 of the Tax
Reform Act of 1984, for the mutual recognition of service credit and the
transfer of benefit obligations for specified employees who terminate employment
with one "Interchange Company" as defined under such agreement and subsequently
commence employment with another such Interchange Company.
<PAGE>
1.86 NON-EMPLOYEE DIRECTOR, when immediately preceded by "AT&T," means
a member of AT&T's Board of Directors who is not an employee of AT&T, an AT&T
Entity, Lucent, or a Lucent Entity. When immediately preceded by "Lucent,"
Non-Employee Director means a member of Lucent's Board of Directors who is not
an employee of AT&T, an AT&T Entity, Lucent or a Lucent Entity.
1.87 NON-EMPLOYEE DIRECTOR PLANS, when immediately preceded by "AT&T,"
means the AT&T Deferred Compensation Plan for Non-Employee Directors, the AT&T
Directors' Individual Life Insurance Program and the AT&T Pension Plan for
Non-Employee Directors. When immediately preceded by "Lucent," Non-Employee
Director Plans means the plans and programs to be established by Lucent pursuant
to Section 2.3 that correspond to the AT&T Non-Employee Director Plans.
1.88 NON-PARTIES is defined in Section 8.7(b)(ii).
1.89 OCCUPATIONAL EMPLOYEE means any individual who is an "Employee" as
defined under the terms of the AT&T PP or the Pension Plan to be established by
Lucent pursuant to Section 2.3 that corresponds to the AT&T PP.
1.90 OCCUPATIONAL TRANSITION PERIOD means the period beginning
Immediately after the Distribution Date and ending on May 30, 1998, the
scheduled expiration date of the Collective Bargaining Agreement as in effect on
the date hereof.
1.91 OPTION, when immediately preceded by "AT&T," means an option to
purchase AT&T Common Stock. When immediately preceded by "Lucent," Option means
an option to purchase Lucent Common Stock, in each case pursuant to a Long Term
Incentive Plan.
1.92 OUTSOURCE is defined in Sections 5.10(b) and
5.15(a)(iii) for
purposes of such respective sections.
1.93 PARTICIPATING COMPANY means (a) AT&T, (b) any Person that AT&T has
approved for participation in, and which is participating in, a Plan sponsored
by AT&T, and (c) any Person (other than an individual) which, by the terms of
such a Plan, participates in such Plan or any employees of which, by the terms
of such Plan, participate in or are covered by such Plan.
1.94 PARTICIPATION COMMENCEMENT DATE means February 1,
1996.
1.95 PBGC means the Pension Benefit Guaranty Corporation.
1.96 PENSION PLANS, when immediately preceded by "AT&T," means the AT&T
MPP and the AT&T PP. When immediately preceded by "Lucent," Pension Plans means
the respective management and occupational pension plans to be established by
Lucent pursuant to Section 2.3 that correspond to the AT&T Pension Plans.
1.97 PLAN, when immediately preceded by "AT&T" or "Lucent," means any
plan, policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy or other agreement or funding vehicle providing benefits to
employees, former employees or Non-Employee Directors of AT&T or an AT&T Entity,
or Lucent or a Lucent Entity, as applicable.
<PAGE>
1.98 QDRO means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under any of the AT&T Pension Plans,
the AT&T Savings Plans, or the AT&T ESOP.
1.99 QMCSO means a medical child support order which qualifies under
ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under an
AT&T Health Plan.
1.100 RABBI TRUST, when immediately preceded by "AT&T," means the
American Telephone and Telegraph Company Benefits Protection Trust. When
immediately preceded by "Lucent," Rabbi Trust means the grantor trust to be
established by Lucent pursuant to Section 6.8(a) that corresponds to the AT&T
Rabbi Trust.
1.101 RABBI TRUST DETERMINATION DATE is defined in
Section 6.8(b)(i).
1.102 RATIO means the amount obtained by dividing the
AT&T Stock Value
by the Lucent Stock Value.
1.103 RFA means Retirement Funding Account.
1.104 RSPSP, when immediately preceded by "AT&T," means the AT&T
Retirement Savings and Profit Sharing Plan. When immediately preceded by
"Lucent," RSPSP means the savings plan to be established by Lucent pursuant to
Section 2.3 that corresponds to the AT&T RSPSP.
1.105 SAVINGS PLANS, when immediately preceded by "AT&T," means the
AT&T LTSPME, the AT&T LTSSP and the AT&T RSPSP. When immediately preceded by
"Lucent," Savings Plans means the Lucent LTSPME, the Lucent LTSSP and the Lucent
RSPSP.
1.106 SEPARATION AND DISTRIBUTION AGREEMENT is defined in the third
paragraph of the preamble of this Agreement.
1.107 SHORT TERM INCENTIVE PLAN, when immediately preceded by "AT&T,"
means the AT&T Short Term Incentive Plan. When immediately preceded by "Lucent,"
Short Term Incentive Plan means the AT&T Short Term Incentive Plan to be
established by Lucent pursuant to Section 2.3.
1.108 SPLIT DOLLAR LIFE INSURANCE means the life insurance policies
purchased by AT&T on behalf of certain AT&T Executives and AT&T Non-Employee
Directors under (a) the AT&T Senior Management Individual Life Insurance
Program, (b) the AT&T Senior Management Basic Life Insurance Program and (c) the
AT&T Directors' Individual Life Insurance Program, with respect to which such
AT&T Executives or AT&T Non-Employee Directors (or their assignees or
delegates), respectively, have executed collateral assignments for the benefit
of AT&T.
1.109 SPREAD is defined in Section 8.2(f).
1.110 STOCK PURCHASE PLAN, when immediately preceded by
"AT&T," means
the AT&T 1996 Employee Stock Purchase Plan. When immediately
preceded by
"Lucent,"
<PAGE>
Stock Purchase Plan means the employee stock purchase plan to be established by
Lucent pursuant to Section 2.3.
1.111 TRANSFERRED INDIVIDUAL means any individual who, as of the Close
of the Distribution Date: (a) is either then actively employed by, or then on a
leave of absence from, Lucent or a Lucent Entity; or (b) is neither then
actively employed by, nor then on a leave of absence from, Lucent or a Lucent
Entity, but who (i) was a Lucent Individual, or (ii) whose most recent active
employment with AT&T or a past or present Affiliate of AT&T was with an entity
or a corporate division having a "Company Code," "Managed Entity Code" or "Legal
Entity Code" set forth in Schedule V, to the extent such information is
available, and who has not had an intervening period of employment covered by an
interchange agreement under which assets and liabilities with respect to the
individual were or are to be transferred from an AT&T Pension Plan, or (iii)
otherwise is identified pursuant to a methodology approved by the Lucent Senior
Vice President-Human Resources and the AT&T Senior Vice President-Benefits and
Compensation, which methodology shall be consistent with the intent of the
parties that former employees of AT&T or a past or present Affiliate of AT&T
will be aligned with the entity for which they most recently worked and based
upon the business of such entity. Transferred Individuals shall also include the
Lucent Administrative Employees and the individuals designated as such pursuant
to Section 9.2. An alternate payee under a QDRO, alternate recipient under a
QMCSO, beneficiary or covered dependent, in each case, of an employee or former
employee described in either of the preceding two sentences shall also be a
Transferred Individual with respect to that employee's or former employee's
benefit under the applicable Plans. Such an alternate payee, alternate
recipient, beneficiary, or covered dependent shall not otherwise be considered a
Transferred Individual with respect to his or her own benefits under any
applicable Plans unless he or she is a Transferred Individual by virtue of
either of the first two sentences of this definition. In addition, AT&T and
Lucent may designate, by mutual agreement, any other individuals, or group of
individuals, as Transferred Individuals. An individual may be a Transferred
Individual pursuant to this definition regardless of whether such individual is
or was a Lucent Individual and regardless of whether such individual is, as of
the Distribution Date, alive, actively employed, on a temporary leave of absence
from active employment, on layoff, terminated from employment, retired or on any
other type of employment or post-employment status relative to an AT&T Plan, and
regardless of whether, as of the Close of the Distribution Date, such individual
is then receiving any benefits from an AT&T Plan. Notwithstanding the foregoing,
if the Distribution does not occur on or before December 31, 1997, references in
this definition to the Close of the Distribution Date shall be deemed to refer
to the close of business on the earlier of the date AT&T publicly announces that
the Distribution will not occur and December 31, 1997.
1.112 TRANSITION INDIVIDUAL means any individual who:
(a) is a Transferred Individual who during the applicable
Transition Period becomes an employee of AT&T or an AT&T Entity without an
intervening period of employment covered by an interchange agreement under which
assets and liabilities with respect to the individual were or are to be
transferred from an AT&T Pension Plan; or
(b) is an employee or former employee of AT&T or an AT&T
Entity as of the Distribution Date (but is not a Transferred Individual) who
during the applicable Transition Period becomes an employee of Lucent or a
Lucent Entity without an intervening period of employment covered by an
interchange agreement under which assets and liabilities with respect to the
individual were or are to be transferred from an AT&T Pension Plan; or
<PAGE>
(c) is an individual described in clause (a) or (b) of this
definition whose employer changes during the applicable Transition Period either
(i) from AT&T or an AT&T Entity to Lucent or a Lucent Entity, or (ii) from
Lucent or a Lucent Entity to AT&T or an AT&T Entity without an intervening
period of employment covered by an interchange agreement under which assets and
liabilities with respect to the individual were or are to be transferred from an
AT&T Pension Plan.
For these purposes, the applicable Transition Period is determined by the
positions (Management Employee or Occupational Employee) from which and into
which the individual is hired as more fully set forth in Sections 2.5(b) and
2.5(c). An alternate payee under a QDRO, alternate recipient under a QMCSO,
beneficiary or covered dependent, in each case, of an individual described in
clause (a), (b), or (c) of this definition shall also be a Transition Individual
with respect to that individual's benefit under the applicable Plans. Such an
alternate payee, alternate recipient, beneficiary, and covered dependent shall
not otherwise be considered a Transition Individual with respect to his or her
own benefits under any applicable Plans unless he or she is a Transition
Individual by virtue of clause (a), (b), or (c) of this definition.
1.113 TRANSITION PERIOD means the Management Transition
Period or the
Occupational Transition Period, as applicable.
1.114 TRUST-OWNED LIFE INSURANCE (VEBA) means the group life insurance
policies purchased from The Prudential Insurance Company of America by the
trustee of the AT&T Management VEBA.
1.115 UNFUNDED COST SHARING AGREEMENTS means the 1983 Force Adjustment
Cost Reimbursement and Indemnification Agreement established as of January 1,
1984 among AT&T, American Information Technologies Corporation, Bell Atlantic
Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group,
Inc., Southwestern Bell Corporation, and US WEST, Inc., which provides for
reimbursement by AT&T and certain AT&T Entities to the other parties of certain
expenses for medical and dental benefits and certain post-retirement pension
increases for employees designated for reassignment from the other parties to
AT&T on or about January 1, 1984, and the Unfunded Post-Retirement Benefits Cost
Sharing Agreement established as of January 1, 1984 among AT&T, Advanced Mobile
Phone Service, Inc., American Information Technologies Corporation, Bell
Atlantic Corporation, BellSouth Corporation, Central Services Organization,
NYNEX Corporation, Pacific Telesis Group, Inc., Southwestern Bell Corporation,
and US WEST, Inc., which provides for the allocation of expenses relating to
post-retirement medical, dental, specified disability and future contingent
pension increases with respect to Bell System employees who retired before
January 1, 1984 or who otherwise left the service of a Bell System Company
before that date with eligibility to continue any such benefits on or after
January 1, 1984.
1.116 UNION VEBA, when immediately preceded by "AT&T," means the
American Telephone and Telegraph Company Represented Employees Post-Retirement
Health Benefits Trust. When immediately preceded by "Lucent," Union VEBA means
the welfare benefit fund to be established by Lucent pursuant to Section 5.1
that corresponds to the AT&T Union VEBA.
1.117 U.S. means the 50 United States and the District of
Columbia.
1.118 VALUE is defined in Section 8.2(f).
<PAGE>
1.119 VEBA, when immediately preceded by "AT&T," means any voluntary
employees' beneficiary association trust sponsored by AT&T. When immediately
preceded by "Lucent," VEBA means any voluntary employees' beneficiary
association trust sponsored by Lucent.
1.120 VEBA PLANS is defined in Section 5.3.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF LIABILITIES.
(a) LUCENT LIABILITIES. Lucent hereby assumes and agrees to
pay, perform, fulfill and discharge, in accordance with their respective terms,
all of the following (regardless of when or where such Liabilities arose or
arise or were or are incurred): (i) all Liabilities to or relating to Lucent
Individuals and Transferred Individuals, and their respective dependents and
beneficiaries, in each case relating to, arising out of or resulting from
employment by AT&T or an AT&T Entity before becoming Lucent Individuals or
Transferred Individuals, respectively (including Liabilities under AT&T Plans
and Lucent Plans); (ii) all other Liabilities to or relating to Lucent
Individuals, Transferred Individuals and other employees or former employees of
Lucent or a Lucent Entity, and their dependents and beneficiaries, to the extent
relating to, arising out of or resulting from future, present or former
employment with Lucent or a Lucent Entity (including Liabilities under AT&T
Plans and Lucent Plans); (iii) all Liabilities relating to, arising out of or
resulting from any other actual or alleged employment relationship with Lucent
or a Lucent Entity; (iv) all Liabilities relating to, arising out of or
resulting from the imposition of withdrawal liability under Subtitle E of Title
IV of ERISA as a result of a complete or partial withdrawal of AT&T Network
Construction Services, Inc. from a "multiemployer plan" within the meaning of
ERISA Section 4021, except to the extent that such withdrawal liability is
imposed solely as a result of the Separation, the IPO, or the Distribution; and
(v) all other Liabilities relating to, arising out of or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by
Lucent, a Lucent Entity, or a Lucent Plan pursuant to this Agreement.
Notwithstanding the foregoing, Lucent shall not, by virtue of any provision of
this Agreement or the Separation and Distribution Agreement, be deemed to have
assumed any Excluded Liability or to have agreed to alter or amend any provision
of Article VI of the Separation and Distribution Agreement.
(b) EXCLUDED LIABILITIES. All Liabilities to or relating to
AT&T Transferred Employees and their respective dependents and beneficiaries
relating to, arising out of or resulting from employment by Lucent or a Lucent
Entity before becoming AT&T Transferred Employees or employment by AT&T or an
AT&T Entity (including Liabilities under AT&T Plans) shall be "Excluded
Liabilities" within the meaning of the Separation and Distribution Agreement.
2.2 LUCENT PARTICIPATION IN AT&T PLANS.
(a) PARTICIPATION IN AT&T PENSION, SAVINGS, HEALTH AND WELFARE
AND EXECUTIVE BENEFIT PLANS. Effective as of the Participation Commencement Date
and subject to the terms and conditions of this Agreement, Lucent shall become a
Participating Company in the AT&T Plans in effect as of the Participation
Commencement Date. Each Lucent Entity that is, as of the date of this Agreement,
a Participating Company in any of
<PAGE>
the AT&T Plans shall continue as such. Effective as of any date on or after the
Participation Commencement Date and before the Distribution Date, a Lucent
Entity not described in the preceding sentence may, at its request and with the
consent of AT&T (which shall not be unreasonably withheld), become a
Participating Company in any or all of the AT&T Plans. Without Lucent consent,
neither Lucent nor any Lucent Entity shall become a Participating Company in an
AT&T Plan established after the Participation Commencement Date.
(b) PARTICIPATION IN AT&T STOCK PURCHASE PLAN. If the AT&T
Stock Purchase Plan is approved by the shareholders of AT&T at the 1996 annual
meeting, then (i) effective as of July 1, 1996, Lucent shall become a
Participating Company in the AT&T Stock Purchase Plan; and (ii) effective as of
July 1, 1996, any Lucent Entity may (at the discretion of AT&T in accordance
with the terms of the AT&T Stock Purchase Plan) become a Participating Company
in the AT&T Stock Purchase Plan.
(c) AT&T'S GENERAL OBLIGATIONS AS PLAN SPONSOR. AT&T shall
continue through the Close of the Distribution Date to administer, or cause to
be administered, in accordance with their terms and applicable law, the AT&T
Plans, and shall have the sole discretion and authority to interpret the AT&T
Plans as set forth therein. Before the Close of the Distribution Date, AT&T
shall not, without first consulting with Lucent (on behalf of itself and each
Lucent Entity which is a Participating Company), amend any Material Feature of
any AT&T Plan in which Lucent or a Lucent Entity is a Participating Company,
except to the extent such amendment would not affect any benefits of Lucent
Individuals or Transferred Individuals under such Plan or as may be necessary or
appropriate to comply with any collective bargaining agreement or applicable
law.
(d) LUCENT'S GENERAL OBLIGATIONS AS
PARTICIPATING COMPANY.
Lucent shall perform with respect to its participation in the
AT&T Plans, and
shall cause each other Lucent Entity that is a Participating
Company in any AT&T
Plan to perform, the duties of a Participating Company as set forth in such
Plans or any procedures adopted pursuant thereto, including: (i) assisting in
the administration of claims, to the extent requested by the claims
administrator of the applicable AT&T Plan; (ii) cooperating fully with AT&T Plan
auditors, benefit personnel and benefit vendors; (iii) preserving the
confidentiality of all financial arrangements AT&T has or may have with any
vendors, claims administrators, trustees or any other entity or individual with
whom AT&T has entered into an agreement relating to the AT&T Plans; and (iv)
preserving the confidentiality of participant health information (including
health information in relation to FMLA leaves).
(e) TERMINATION OF PARTICIPATING COMPANY STATUS. Effective as
of the Close of the Distribution Date, Lucent and each Lucent Entity shall cease
to be a Participating Company in the AT&T Plans, except that Lucent and each
Lucent Entity shall cease to be a Participating Company in the AT&T Rabbi Trust
as of the Rabbi Trust Determination Date.
2.3 ESTABLISHMENT OF LUCENT PLANS. Effective Immediately after the
Distribution Date, Lucent shall adopt, or cause to be adopted, the Lucent
Pension Plans, the Lucent Savings Plans, the Lucent ESOP, the Lucent Stock
Purchase Plan (if the AT&T Stock Purchase Plan is then in existence), the Lucent
Health and Welfare Plans, and the Lucent Executive Benefit Plans for the benefit
of the Transferred Individuals and other current, future, and former employees
of Lucent and the Lucent Entities. Except for the Lucent Long Term Incentive
Plan and the Lucent Stock Purchase Plan, the foregoing Lucent Plans as in effect
Immediately after the Distribution Date shall be substantially identical in all
<PAGE>
Material Features to the corresponding AT&T Plans as in effect as of the Close
of the Distribution Date. The Lucent Long Term Incentive Plan and the Lucent
Stock Purchase Plan shall be adopted by Lucent and approved by AT&T as sole
shareholder of Lucent, before the Closing Date, to become effective Immediately
after the Distribution Date. Effective as of the Closing Date, Lucent shall
adopt, or cause to be adopted, the Lucent Non-Employee Director Plans, for the
benefit of Lucent Non-Employee Directors who were, immediately before the
Closing Date, AT&T Non-Employee Directors. The Lucent Non-Employee Director
Plans shall be substantially identical in all Material Features to the
corresponding AT&T Non-Employee Director Plans as in effect on the Closing Date,
except that they need not provide for the accrual of additional benefits after
the Closing Date. In addition, before the Closing Date, Lucent may adopt, and in
that event AT&T shall approve as sole shareholder of Lucent, a plan or other
arrangement for the payment of compensation of the Lucent Non-Employee Directors
in Lucent Common Stock, under which the number of shares permitted to be issued
before the Close of the Distribution Date shall not exceed 10,000 in the
aggregate.
2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS
IN LUCENT PLANS
AND LUCENT NON-EMPLOYEE DIRECTORS IN LUCENT NON-EMPLOYEE DIRECTOR
PLANS.
(a) LUCENT PLANS. The Lucent Plans shall be, with respect to
Transferred Individuals, in all respects the successors in interest to, and
shall not provide benefits that duplicate benefits provided by, the
corresponding AT&T Plans. AT&T and Lucent shall agree on methods and procedures,
including amending the respective Plan documents, to prevent Transferred
Individuals from receiving duplicative benefits from the AT&T Plans and the
Lucent Plans. Lucent shall not permit any Lucent Plan to commence benefit
payments to any Transferred Individual until it receives notice from AT&T
regarding the date on which payments under the corresponding AT&T Plan shall
cease. With respect to Transferred Individuals, each Lucent Plan shall provide
that all service, all compensation and all other benefit-affecting
determinations that, as of the Close of the Distribution Date, were recognized
under the corresponding AT&T Plan shall, as of Immediately after the
Distribution Date, receive full recognition, credit, and validity and be taken
into account under such Lucent Plan to the same extent as if such items occurred
under such Lucent Plan, except to the extent that duplication of benefits would
result. The provisions of this Agreement for the transfer of assets from certain
trusts relating to AT&T Plans (including Foreign Plans) to the corresponding
trusts relating to Lucent Plans (including Foreign Plans) are based upon the
understanding of the parties that each such Lucent Plan will assume all
Liabilities of the corresponding AT&T Plan to or relating to Transferred
Individuals, as provided for herein. If any such Liabilities are not effectively
assumed by the appropriate Lucent Plan, then the amount of assets transferred to
the trust relating to such Lucent Plan from the trust relating to the
corresponding AT&T Plan shall be recomputed, ab initio, as set forth below but
taking into account the retention of such Liabilities by such AT&T Plan, and
assets shall be transferred by the trust relating to such Lucent Plan to the
trust relating to such AT&T Plan so as to place each such trust in the position
it would have been in, had the initial asset transfer been made in accordance
with such recomputed amount of assets.
(b) LUCENT NON-EMPLOYEE DIRECTOR PLANS. The Lucent
Non-Employee Director Plans shall be, with respect to the Lucent Non-Employee
Directors who participated in the corresponding AT&T Non-Employee Director
Plans, in all respects the successors in interest to, and shall not provide
benefits that duplicate benefits provided by such AT&T Plans.
<PAGE>
2.5 TRANSITION INDIVIDUALS. Portability of benefits
(without
duplication thereof) for Transition Individuals shall be set forth
in the
separate agreements provided for below.
(a) MANDATORY PORTABILITY AGREEMENT. Effective as of the
Participation Commencement Date, AT&T shall designate Lucent as, and Lucent
shall become, an Interchange Company under the MPA, with all the applicable
rights and obligations of such an Interchange Company. Each Lucent Entity that
is an Interchange Company as of the date of this Agreement shall continue as
such. Effective as of any date on or after the Participation Commencement Date,
any other Lucent Entity that becomes a Participating Company in the AT&T Pension
Plans pursuant to Section 2.2 may, at its request and with the consent of AT&T
(which shall not be unreasonably withheld), become an Interchange Company.
Effective Immediately after the Distribution Date, the Lucent Pension Plans
shall be "Interchange Company Pension Plans" under, and subject to the terms of,
the MPA. AT&T shall use its reasonable best efforts to seek an amendment of the
MPA to allow Lucent to become a "Tier II Signatory Company" under the MPA with
the same rights and obligations as have been granted to AirTouch International,
Inc. as a Tier II Signatory Company. Lucent shall take any and all action,
including any action reasonably requested by AT&T, to become a Tier II Signatory
Company under the MPA. During the applicable Transition Periods, neither AT&T
nor Lucent shall permit any Transition Individual covered by the Interchange
Agreements described above to waive portability under the MPA with respect to
movement as a Transition Individual.
(b) MANAGEMENT INTERCHANGE AGREEMENT. On or before the Closing
Date, AT&T and Lucent shall enter into an Interchange Agreement providing for
(among other things) the portability of benefits and mutual recognition of
service during the Management Transition Period with respect to Transition
Individuals who terminate employment with AT&T or an AT&T Entity and who become
Management Employees (or employees covered by an alternate benefit program) of
Lucent or a Lucent Entity and Transition Individuals who terminate employment
with Lucent or a Lucent Entity and who become Management Employees (or employees
covered by an alternate benefit program) of AT&T or an AT&T Entity after the
Distribution Date, as more fully described in Section 2.5(d).
(c) OCCUPATIONAL INTERCHANGE AGREEMENT. On or before the
Closing Date, AT&T and Lucent shall enter into an Interchange Agreement
providing for the portability of benefits and mutual recognition of service
during the Occupational Transition Period with respect to Transition Individuals
who cease employment with AT&T or an AT&T Entity and who become Occupational
Employees of Lucent or a Lucent Entity and Transition Individuals who cease
employment with Lucent or a Lucent Entity and who become Occupational Employees
of AT&T or an AT&T Entity after the Distribution Date, as more fully described
in Section 2.5(d).
(d) TERMS OF THE MANAGEMENT AND
OCCUPATIONAL INTERCHANGE
AGREEMENTS. The Interchange Agreements described in Sections 2.5(b) and 2.5(c)
shall provide in a mutually agreeable manner for the following with respect to
Transition Individuals: (i) prohibition of the commencement of benefits under
any transferor AT&T or Lucent Pension Plan, and suspension of any benefits
already commenced, with respect to any individual for whom the liability for
benefits is transferred either from the AT&T Pension Plans to the Lucent Pension
Plans or from the Lucent Pension Plans to the AT&T Pension Plans; (ii) transfer
of service credit between the AT&T Plans and the Lucent Plans, where
appropriate; (iii) transfer of assets and liabilities between the AT&T Pension
Plans and the Lucent Pension Plans in the same manner and in accordance with the
same methods and assumptions as prescribed by the MPA, regardless of whether
such employees are covered by the
<PAGE>
MPA (but in no event shall a Transition Individual be entitled to obtain
overlapping benefits under both the MPA and the Interchange Agreement); (iv)
transfer of accounts between the AT&T Savings Plans and the Lucent Savings
Plans; (v) transfer of accounts between the AT&T ESOP and the Lucent ESOP; (vi)
transfer of accounts between the AT&T Stock Purchase Plan and the Lucent Stock
Purchase Plan; (vii) mutual maintenance and recognition by the AT&T Health and
Welfare Plans and the Lucent Health and Welfare Plans of the coverage elections
and all amounts applied to deductibles and out-of-pocket maximums met under the
other company's Health and Welfare Plans for plan years in the applicable
Transition Period; (viii) mutual maintenance and recognition by the AT&T Health
and Welfare Plans and the Lucent Health and Welfare Plans of all lifetime
maximum benefits reached under the other company's Health and Welfare Plans;
(ix) transfer of service credit, assets, and liabilities between the AT&T
Executive Benefit Plans and the Lucent Executive Benefit Plans and the related
trusts, insurance policies and other funding vehicles; (x) allocation and
transfer of RFA assets and liabilities between the applicable AT&T Health and
Welfare Plans and the applicable Lucent Health and Welfare Plans and the related
trusts, insurance policies and other funding vehicles; and (xi) assumption of
Individual Agreements. Each of the service crediting provisions described above
shall be subject to any applicable "service bridging" or "break in service"
rules under the AT&T Plans and the Lucent Plans.
(e) RESTRICTION ON PLAN AMENDMENTS. During the Management
Transition Period, neither AT&T nor Lucent shall adopt any amendment, or allow
any amendment to be adopted, to any of their respective Pension Plans, Savings
Plans or ESOPs that would violate Code Section 411(d)(6) or that would create an
optional form of benefit subject to Code Section 411(d)(6).
ARTICLE III
DEFINED BENEFIT PLANS
3.1 ESTABLISHMENT OF MIRROR PENSION TRUSTS. Before the Close of the
Distribution Date, AT&T shall cause the trust presently established under the
AT&T Pension Plans to be amended and restated as a group trust under IRS Rev.
Rul. 81-100 (the "AT&T Group Pension Trust") in a form reasonably satisfactory
to Lucent. AT&T shall establish, or cause to be established, a new master
pension trust under the AT&T Pension Plans, which shall be substantially
identical in all Material Features to the trust established under the AT&T
Pension Plans as in effect before such amendment and restatement and which shall
be a participating trust in the AT&T Group Pension Trust. Effective Immediately
after the Distribution Date, Lucent shall establish, or cause to be established,
a master pension trust qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a)(1), and forming part of the Lucent
Pension Plans, which shall be a participating trust in the AT&T Group Pension
Trust, subject to ratification of such participation by the Board of Directors
of Lucent or its authorized delegate after the Close of the Distribution Date
(and Lucent shall seek such ratification within 60 days after the Close of the
Distribution Date).
3.2 ASSUMPTION OF PENSION PLAN LIABILITIES AND ALLOCATION
OF INTERESTS
IN THE AT&T MASTER PENSION TRUST.
(a) ASSUMPTION OF LIABILITIES BY LUCENT PENSION PLAN.
Immediately after the Distribution Date, all Liabilities to or relating to
Transferred Individuals under the AT&T MPP or AT&T PP, as applicable, shall
cease to be Liabilities of the AT&T MPP or AT&T PP, as applicable, and shall be
assumed by the corresponding Lucent Pension Plan.
<PAGE>
(b) ASSET ALLOCATIONS AND TRANSFERS.
(i) CALCULATION OF ASSET ALLOCATION.
(A) As soon as practicable after the
Close of the
Distribution Date, AT&T shall cause to be calculated, for the AT&T MPP and the
corresponding Lucent Pension Plan, as of Immediately after the Distribution
Date, (1) the "Funding Policy Amount," which shall be consistent with the
minimum amount necessary to satisfy AT&T's pension funding policy as set forth
in Schedule VI, as applied to the AT&T MPP and the corresponding Lucent Pension
Plan; (2) the "414(l)(1) Amount," which shall equal the minimum amount necessary
to fully fund benefits under the AT&T MPP and the corresponding Lucent Pension
Plan on a "termination basis" (as that term is defined in Treas. Reg. Section
1.414(l)-1(b)(5)); and (3) the "Initial Allocation Amount," which shall equal
the Funding Policy Amount for that particular Pension Plan, plus one-half times
the difference (positive or negative) between (x) the amount of assets as of the
Close of the Distribution Date of the AT&T MPP and (y) the sum of the Funding
Policy Amounts for the AT&T MPP and the corresponding Lucent Pension Plan. The
assumptions used in determining the 414(l)(1) Amount for each Pension Plan shall
be those used in the determination of the minimum required contribution under
ERISA for the Plan year beginning January 1, 1996, except that the discount
rates shall be the rates issued by the PBGC for valuing annuities in terminating
single-employer pension plans during the month containing the Close of the
Distribution Date.
(B) If the aggregate amount of the
assets of the AT&T
MPP as of the Close of the Distribution Date is not less than the sum of the
414(l)(1) Amounts for the AT&T MPP and the corresponding Lucent Pension Plan,
then such assets shall be allocated between the AT&T MPP and the corresponding
Lucent Pension Plan in accordance with the following: (1) if the Initial
Allocation Amount is greater than or equal to the 414(l)(1) Amount for the AT&T
MPP, and the Initial Allocation Amount is greater than or equal to the 414(l)(1)
Amount for the corresponding Lucent Pension Plan, then the amounts of assets
allocated to the AT&T MPP and the corresponding Lucent Pension Plan shall equal
their respective Initial Allocation Amounts; (2) if the Initial Allocation
Amount is greater than or equal to the 414(l)(1) Amount for the AT&T MPP, but
the Initial Allocation Amount is less than the 414(l)(1) Amount for the
corresponding Lucent Pension Plan, then the amount of assets allocated to the
Lucent Pension Plan shall equal the 414(l)(1) Amount for that Pension Plan, and
the amount of assets allocated to the AT&T MPP shall equal the excess of (x) the
total amount of assets, as of the Close of the Distribution Date, of the AT&T
MPP over (y) the 414(l)(1) Amount for the corresponding Lucent Pension Plan; and
(3) if the Initial Allocation Amount is less than the 414(l)(1) Amount for the
AT&T MPP, but the Initial Allocation Amount is greater than or equal to the
414(l)(1) Amount for the corresponding Lucent Pension Plan, then the amount of
assets allocated to the AT&T MPP shall equal the 414(l)(1) Amount for the AT&T
MPP, and the amount of assets allocated to the corresponding Lucent Pension Plan
shall equal the excess of (x) the total amount of assets, as of the Close of the
Distribution Date, of the AT&T MPP over (y) the 414(l)(1) Amount for the AT&T
MPP.
(C) If the aggregate amount of the
assets of the AT&T
MPP as of the Close of the Distribution Date is less than the sum of the
414(l)(1) Amounts for the AT&T MPP and the corresponding Lucent Pension Plan,
then such assets shall be allocated between the AT&T MPP and the corresponding
Lucent Pension Plan as follows: (i) AT&T
<PAGE>
and Lucent shall obtain a quote from a mutually agreeable insurance company for
the provision of immediate and deferred annuities payable under the AT&T MPP and
the corresponding Lucent Pension Plan for all accrued benefits under the AT&T
MPP as of the Close of the Distribution Date; (ii) if the amount of assets as of
the Close of the Distribution Date is not less than the amount of such quote,
the amount of assets allocated to the AT&T MPP and the corresponding Lucent
Pension Plan shall equal the portion of the quote allocable to each plan plus
one-half of the excess, if any, over such quote; and (iii) if the amount of
assets as of the Close of the Distribution Date is less than the amount of such
quote, the amount of assets allocated to the AT&T MPP and the corresponding
Lucent Pension Plan shall be determined on a plan termination basis in
accordance with ERISA Section 4044 using the same assumptions as those used in
computing the 414(l)(1) Amounts.
(ii) CALCULATION OF THE AT&T PP'S ASSET
ALLOCATION. The asset
allocation of the AT&T PP and the corresponding Lucent Pension
Plan shall be
determined by applying Section 3.2(b)(i) but substituting "AT&T
PP" for "AT&T
MPP" wherever it appears in that section.
(iii) SEGREGATION OF LUCENT PENSION PLANS' INTERESTS WITHIN
THE AT&T GROUP PENSION TRUST. The actual segregation of the interests of the
Lucent Pension Plans in the AT&T Group Pension Trust into separate trust
accounts shall occur as soon as practicable after the calculation of such
interests pursuant to Section 3.2(b)(i) and (ii), but in no event before AT&T
determines that the calculation and the data on which it is based are acceptably
complete, accurate and consistent. In addition, the interests so calculated
shall be adjusted as of the date of the actual segregation by AT&T to the extent
necessary or appropriate to reasonably and appropriately reflect additional
pension contributions, interest, investment gains and losses, and benefit
payments and data corrections, enhancements, and computational refinements from
Immediately after the Distribution Date through the date of the actual
segregation of such interests. If the master pension trust established by Lucent
pursuant to the last sentence of Section 3.1 is for any reason not then a
participating trust in the AT&T Group Pension Trust, such master pension trust
shall be entitled to receive its allocable share of the assets of the AT&T Group
Pension Trust as determined pursuant to the foregoing provisions of this Section
3.2(b) in redemption of the interests therein of the Lucent Pension Plans as
promptly as prudently practicable. Such allocable share shall consist of
Lucent's allocable share of each class of assets in the AT&T Group Pension
Trust, unless AT&T and Lucent agree otherwise.
ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 LTSPMEs AND RSPSPs.
(a) MANAGEMENT SAVINGS PLAN TRUSTS. Effective Immediately after the
Distribution Date, Lucent shall establish, or cause to be established, separate
trusts qualified under Code Section 401(a), exempt from taxation under Code
Section 501(a)(1), and forming part of the Lucent LTSPME and Lucent RSPSP, which
shall be participating trusts in the AT&T Management Savings Group Trust.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS.
Effective
Immediately after the Distribution Date: (i) the Lucent LTSPME and
the Lucent
RSPSP shall assume and be solely responsible for all Liabilities
to or relating
to Transferred Individuals under the AT&T LTSPME and the AT&T
RSPSP,
respectively; and (ii) AT&T shall cause
<PAGE>
the accounts of the Transferred Individuals under the AT&T LTSPME and the AT&T
RSPSP which are held by their related trusts as of the Close of the Distribution
Date to be transferred to the Lucent LTSPME and the Lucent RSPSP, respectively,
and their related trusts, and Lucent shall cause such transferred accounts to be
accepted by such plans and trusts. Effective no later than Immediately after the
Distribution Date, Lucent shall use its reasonable best efforts to enter into
such agreements satisfactory to Lucent to accomplish such assumptions and
transfers, the maintenance of the necessary participant records, the appointment
of Fidelity Institutional Trust Company as initial trustee under the Lucent
LTSPME and the Lucent RSPSP, and the engagement of Fidelity Records Management
Company as initial recordkeeper under such plans.
4.2 LTSSPS AND LESOPS.
(a) OCCUPATIONAL SAVINGS PLAN TRUSTS. Effective Immediately
after the Distribution Date, Lucent shall establish, or cause to be established,
a separate trust, qualified in accordance with Code Section 401(a), exempt from
taxation under Code Section 501(a)(1), and forming part of the Lucent LTSSP,
which shall be a participating trust in the AT&T Occupational Savings Group
Trust.
(b) ASSUMPTION OF LTSSP LIABILITIES. Effective Immediately
after the Distribution Date: (i) the Lucent LTSSP shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
the AT&T LTSSP, other than Liabilities referred to in Section 4.2(c); and (ii)
AT&T shall cause the accounts of the Transferred Individuals under the AT&T
LTSSP which are held by its related trust as of the Close of the Distribution
Date to be transferred to the Lucent LTSSP and its related trust, and Lucent
shall cause such transferred accounts to be accepted by such plans and trusts.
Effective no later than Immediately after the Distribution Date, Lucent shall
use its reasonable best efforts to enter into agreements satisfactory to Lucent
to accomplish such assumption and transfer, the maintenance of the necessary
participant records, the appointment of the then-current trustee under the AT&T
LTSSP as initial trustee under the Lucent LTSSP, and the engagement of the
then-current recordkeeper of the AT&T LTSSP as initial recordkeeper under such
plans.
(c) LEVERAGED STOCK OWNERSHIP PLAN.
(i) Effective Immediately after the
Distribution
Date, Lucent shall establish, or cause to be established, a separate trust (the
"Lucent LESOP Trust"), qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a), and forming part of the Lucent LTSSP.
(ii) Before the Distribution Date, AT&T
and Lucent
shall use their reasonable best efforts to renegotiate the note agreement
between Bankers Trust Company, as trustee of the AT&T LESOP, and various lenders
dated March 9, 1990 (the "Existing Acquisition Loan") so that it is restructured
into two note agreements for two loans, the principal amount of one being
attributable to the accounts to be transferred to the Lucent LESOP Trust
pursuant to Section 4.2(c)(iii) (the "Lucent Acquisition Loan") and the
principal amount of the other being attributable to the accounts remaining in
the AT&T LESOP (the "AT&T Acquisition Loan"). The principal amount of the Lucent
Acquisition Loan shall be determined by multiplying the principal amount of the
Existing Acquisition Loan as of the Distribution Date by the fraction described
in Section 4.2(c)(iii). AT&T and Lucent shall use their reasonable best efforts
to cause the terms of the AT&T Acquisition Loan and the Lucent Acquisition Loan
to be as favorable to Lucent and AT&T, respectively, as the
<PAGE>
terms of the Existing Acquisition Loan, and, to the extent permitted by
applicable law, including Code Section 133, the terms of the Lucent Acquisition
Loan to be no less favorable to Lucent and the Lucent LESOP Trust than the terms
of the AT&T Acquisition Loan are to AT&T and the AT&T LESOP Trust.
(iii) Effective Immediately after the
Distribution
Date: (A) the Lucent LTSSP shall assume and be solely responsible for all
Liabilities to or relating to Transferred Individuals under the AT&T LTSSP that
relate to, arise out of or result from the AT&T LESOP; (B) AT&T shall cause the
accounts of the Transferred Individuals under the AT&T LTSSP which are held by
the AT&T LESOP Trust as of the Close of the Distribution Date to be transferred
to the Lucent LTSSP and the Lucent LESOP Trust; (C) if the Existing Acquisition
Loan has been restructured into, and subject to the terms of, the AT&T
Acquisition Loan and the Lucent Acquisition Loan, AT&T shall cause the trustee
of the AT&T LESOP Trust to transfer to the Lucent LESOP Trust a portion of the
assets held in the "Suspense Account" (as defined in Article 20 of the AT&T
LTSSP) attributable to the Transferred Individuals, determined by multiplying
the number of shares of AT&T Common Stock and the fair market value of any other
assets held in such suspense account as of the Close of the Distribution Date by
a fraction, the numerator of which is the amount deemed to be employer matching
contributions attributable to Lucent Individuals and other employees of Lucent
and the Lucent Entities for the latest calendar month that ends on or before the
Distribution Date, and the denominator of which is the total amount deemed to be
employer matching contributions for all participants in the AT&T LTSSP for such
calendar month; and (D) Lucent shall cause all accounts transferred pursuant to
clauses (B) and (C) to be accepted by such plan and trust. Effective no later
than Immediately after the Distribution Date, Lucent shall use its reasonable
best efforts to enter into agreements acceptable to Lucent to accomplish such
assumption and transfers, the maintenance of the necessary participant and
suspense account records, the appointment of Bankers Trust Company as initial
trustee of the Lucent LESOP Trust, and the engagement of the then-current
recordkeeper of the AT&T LESOP as initial recordkeeper of the Lucent LESOP.
(iv) The parties intend that, as the
result of the
above-described transactions, after the Close of the Distribution Date, each of
them will be the sponsor of an "employee stock ownership plan" as defined in
Code Section 4975(e)(7), and that the AT&T Acquisition Loan and Lucent
Acquisition Loan will be exempt from the prohibited transaction rules of the
Code and ERISA pursuant to Code Section 4975(d)(3).
(v) The parties acknowledge that, as a
result of the
transfer of assets described in Section 4.2(c)(iii) and the Distribution, both
the AT&T LESOP and the Lucent LESOP will, after the Close of the Distribution
Date, hold shares of both AT&T Common Stock and Lucent Common Stock. The parties
further acknowledge that applicable law generally prohibits such plans from
holding securities that are not "qualifying employer securities" within the
meaning of Code Section 409 for more than a reasonable time after the
Distribution Date unless the IRS grants an extension of time.
Accordingly, AT&T
and Lucent shall each request the IRS to grant an extension of such holding
period as their financial advisors shall deem prudent to allow the AT&T LESOP to
dispose of the shares of Lucent Common Stock received by it as a result of the
Distribution and to allow the Lucent LESOP to dispose of the shares of AT&T
Common Stock it holds as a result of the transfer of accounts pursuant to
Section 4.2(c)(iii), and, in each case, to reinvest in qualifying employer
securities, in a manner consistent with the best interests of the LESOP
participants. In furtherance of such dispositions and reinvestments, AT&T and
Lucent shall take all actions necessary or appropriate to permit the exchange of
shares of Lucent Common Stock held by the AT&T LESOP Trust for shares of AT&T
Common Stock held by the Lucent
<PAGE>
LESOP Trust, including the engagement of a fiduciary not affiliated with either
AT&T or Lucent to advise the parties regarding the time and manner (including
the exchange ratio) of such exchange. If the restructuring of the Existing
Acquisition Loan results in any prepayment or "make whole" penalty, or if the
interest rate payable pursuant to the Lucent Acquisition Loan exceeds the
interest rate payable pursuant to the AT&T Acquisition Loan or vice versa, then
Lucent and AT&T and their respective LESOPs shall bear the cost of such
penalties and the excess interest expense so incurred in proportion to the
relative initial principal amounts of the Lucent Acquisition Loan and the AT&T
Acquisition Loan, taking into account any tax benefits realized or tax
detriments suffered in connection therewith.
(vi) Notwithstanding the foregoing, if
it is
determined by AT&T or Lucent before the Distribution Date that the restructuring
of the Existing Acquisition Loan is not practicable on commercially reasonable
terms and conditions, then, unless AT&T and Lucent agree otherwise, AT&T shall
terminate the AT&T LESOP and its related trust before the Distribution Date, and
shall direct the trustee of the AT&T LESOP trust to sell sufficient shares of
AT&T Common Stock held under the AT&T LESOP trust to repay the Existing
Acquisition Loan. Any remaining "Financed Shares" (as defined in the AT&T LESOP)
that are released after repayment of the loan and not the subject of any
subsequent refinancing shall be used by the Participating Companies to make
matching contributions with respect to periods before the Close of the
Distribution Date to the AT&T LTSSP in accordance with their obligations under
the AT&T LTSSP.
4.3 ESOPS.
(a) ESOP TRUST. Effective Immediately after the Distribution
Date, Lucent shall establish, or cause to be established, a separate trust (the
"Lucent ESOP Trust"), qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a), and forming part of the Lucent ESOP.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF
ASSETS.
(i) Effective Immediately after the
Distribution
Date, the Lucent ESOP shall assume and be solely responsible for all Liabilities
to or relating to Transferred Individuals under the AT&T ESOP, and AT&T shall
cause the accounts of the Transferred Individuals under the AT&T ESOP as of the
Close of the Distribution Date to be transferred to the Lucent ESOP and the
Lucent ESOP Trust, and Lucent shall cause such plan and trust to accept such
assets. Effective no later than Immediately after the Distribution Date, Lucent
shall use its reasonable best efforts to enter into agreements acceptable to
Lucent to accomplish such assumptions and transfers, the maintenance of the
necessary participant records, the appointment of Midlantic Bank as initial
trustee of the Lucent ESOP Trust and the engagement of American Transtech Inc.
as initial recordkeeper of the Lucent ESOP.
(ii) The parties acknowledge that, as a
result of the
transfer of assets described in Section 4.3(b)(i) and the Distribution, both the
AT&T ESOP and the Lucent ESOP will, after the Distribution Date, hold shares of
both AT&T Common Stock and Lucent Common Stock and that, in order to continue to
qualify as employee stock ownership plans, each such plan will be required to
dispose of securities that are not qualifying employer securities and reinvest
in qualifying employer securities. The parties further acknowledge that
applicable law generally prohibits such plans from holding securities that are
not "qualifying employer securities" within the meaning of Code Section 409 for
more than a reasonable time after the Distribution Date unless the IRS grants an
extension of time. Accordingly, AT&T and Lucent shall each request the IRS to
grant an extension of such
<PAGE>
holding period as their financial advisors shall deem prudent to allow the AT&T
ESOP to dispose of the shares of Lucent Common Stock received by it as a result
of the Distribution and to allow the Lucent ESOP to dispose of the shares of
AT&T Common Stock it holds as a result of the transfer of accounts pursuant to
Section 4.3(b)(i), and, in each case, to reinvest in qualifying employer
securities, in a manner consistent with the best interests of the ESOP
participants. In furtherance of such dispositions and reinvestments, AT&T and
Lucent shall take all actions necessary or appropriate to permit the exchange of
shares of Lucent Common Stock held by the AT&T ESOP Trust for shares of AT&T
Common Stock held by the Lucent ESOP Trust, including the engagement of a
fiduciary not affiliated with either AT&T or Lucent to advise the parties
regarding the time and manner (including the exchange ratio) of such exchange.
ARTICLE V
HEALTH AND WELFARE PLANS
5.1 ESTABLISHMENT OF MIRROR HEALTH AND WELFARE PLAN TRUSTS. On or
before the Distribution Date, Lucent shall establish, or cause to be
established: (a) the Lucent Health Plans Benefit Trust, for the purpose of
funding claims, other than for post-retirement benefits, under the Lucent Health
Plans; (b) the Lucent Management VEBA, for the purpose of funding claims for
post-retirement benefits of employees not covered by any collective bargaining
agreement under the Lucent Health Plans; (c) the Lucent Union VEBA, for the
purpose of funding claims for post-retirement benefits under the Lucent Health
Plans of employees covered by a collective bargaining agreement; and (d) the
Lucent LTD VEBA, for the purpose of funding long-term disability and disability
pension benefits under the Lucent Health and Welfare Plans. Such trusts shall
meet the requirements of Code Sections 419, 419A, 501(a), and 501(c)(9). Lucent
shall use its reasonable best efforts to enter into agreements satisfactory to
Lucent for the appointment as initial trustee under each such trust of the
trustee of the corresponding AT&T trust.
5.2 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) Immediately after the Distribution Date, all Liabilities
to or relating to Transferred Individuals under the AT&T Health and Welfare
Plans shall cease to be Liabilities of the AT&T Health and Welfare Plans and
shall be assumed by the corresponding Lucent Health and Welfare Plans.
(b) Notwithstanding Section 5.2(a), all treatments which have
been pre-certified for or are being provided to a Transferred Individual as of
the Close of the Distribution Date shall be provided without interruption under
the appropriate AT&T Health and Welfare Plan until such treatment is concluded
or discontinued pursuant to applicable plan rules and limitations, but Lucent
shall continue to be responsible for all Liabilities relating to, arising out of
or resulting from such on-going treatments as of the Close of the Distribution
Date.
(c) Lucent shall assume, effective Immediately after the
Distribution Date, all Liabilities relating to, arising out of or resulting from
special commitments made by AT&T before the Close of the Distribution Date to
provide benefits to or with respect to Transferred Individuals for custodial
care or other services not covered by any AT&T Health and Welfare Plans (but
only if such special commitments were made with the prior written consent of the
Lucent Senior Vice President, Human Resources or his delegate, to
<PAGE>
Exhibit 5.2
April 1, 1996
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, N.J. 07974
Dear Sirs:
With reference to the registration statement on Form S-1 (No.
333-00703; the "Registration Statement") filed by Lucent Technologies Inc. (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, relating to 127,650,000 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), we are of the opinion
that:
1. the Company is a duly organized and validly
existing
corporation under the laws of the State of
Delaware;
2. the issuance of the Common Stock has been duly
authorized by
appropriate corporate action; and
3. when the Common Stock has been issued, paid for
and delivered
pursuant to a sale in the manner described in
the Registration
Statement, such Common Stock will be validly
issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission in connection with the filing of the Registration
Statement. We also consent to the making of the statement with respect to us in
the related prospectus under the heading "Legal Opinions".
Very truly yours,
/s/ Wachtell, Lipton,
Rosen & Katz
<PAGE>
the extent such commitments are made after the Participation Commencement Date).
Before the Close of the Distribution Date, AT&T shall transfer to Lucent copies
of all documentation, and a complete written description, of the terms of all
such special commitments to Transferred Individuals.
5.3 VEBA ASSET TRANSFERS. This Section 5.3 shall govern the transfer of
assets from the AT&T Health Trusts (other than the AT&T Health Plans Benefit
Trust) to the corresponding Lucent Health Trusts and from the AT&T LTD VEBA to
the Lucent LTD VEBA, except to the extent that Section 5.5 is applicable. As
soon as practicable after the Close of the Distribution Date, AT&T shall
determine the aggregate present value, as of the Close of the Distribution Date,
of the future benefit obligations of each AT&T Plan funded by a VEBA ("VEBA
Plans"), with respect to Transferred Individuals who are eligible to receive
benefits under the applicable VEBA Plan as of the Close of the Distribution Date
(and, in the case of any post-retirement health benefits, who have terminated
employment as of the Close of the Distribution Date). As soon as practicable
after such determination is made, there shall be transferred from each AT&T VEBA
to the corresponding Lucent VEBA an amount of assets having a fair market value
on the date of transfer equal to the amount determined by dividing such
aggregate present value of future benefit obligations for the applicable VEBA
Plans of Lucent by the aggregate of all such present values of all the
applicable VEBA Plans of AT&T and all the applicable VEBA Plans of Lucent,
multiplied by the fair market value of the assets of the AT&T VEBA on the date
of transfer, adjusted to take into account the extent to which AT&T and/or
Lucent has opted to forego reimbursement from the applicable VEBA of any benefit
obligation that was paid by AT&T or Lucent, as applicable, on or after the
Participation Commencement Date and before the Close of the Distribution Date.
5.4 TRANSFER OF RETIREMENT FUNDING ACCOUNT ASSETS. This Section 5.4
shall apply to AT&T Health and Welfare Plans with group term life insurance
policies that have RFAs maintained for the purpose of accumulating, through
employer contributions in advance of employee retirements, a fund to be used to
pay all or a portion of the costs for continuing life insurance protection for
employees after their retirement. As soon as practicable after the Close of the
Distribution Date, there shall be transferred to the corresponding RFA of Lucent
an amount of assets (determined by AT&T subject to audit by Coopers & Lybrand)
having a fair market value as of the Close of the Distribution Date equal to the
product of (a) the present value, as of the Close of the Distribution Date, of
the future benefit obligation with respect to Transferred Individuals to be
discharged from the RFA, divided by the present value of the future benefit
obligations with respect to all individuals whose benefits are to be discharged
from the RFA assets as of the Close of the Distribution Date times (b) the fair
market value of all RFA assets as of the Close of the Distribution Date. AT&T
and Lucent shall adopt, and shall use their reasonable best efforts to cause
their insurers to adopt, procedures to implement such asset transfers in a
reasonable and expeditious manner that is consistent with the underlying group
life insurance contracts and applicable legal requirements. Nothing in this
Agreement shall be interpreted to provide that any assets so transferred have
reverted to AT&T or Lucent.
5.5 VEBAs FUNDED WITH TRUST-OWNED LIFE INSURANCE. This Section 5.5
shall govern transfers of assets of AT&T VEBAs that are funded, in whole or in
part, with trust-owned life insurance policies.
(a) GENERAL PROVISIONS. As soon as practicable
after the Close
of the Distribution Date, AT&T shall cause each such AT&T VEBA to
transfer to
the corresponding Lucent VEBA such assets as are attributable to
Transferred
Individuals who are eligible to
<PAGE>
receive post-retirement health benefits under the AT&T Health Plans with respect
to such AT&T VEBA; provided, that AT&T shall not be required to cause such
transfer to occur before AT&T has obtained appropriate rulings from regulatory
agencies indicating that the transfers do not contravene any statute,
regulation, or technical pronouncement.
(b) AT&T MANAGEMENT VEBA: TRUST-OWNED LIFE INSURANCE (VEBA).
To accomplish the transfers required by Section 5.5(a), all or a portion of the
Trust-Owned Life Insurance (VEBA) policies and any residual assets in the AT&T
Management VEBA shall be allocated between the trustee of the AT&T Management
VEBA, and the trustee of the Lucent Management VEBA, in accordance with the
following procedures.
(i) AT&T shall determine the extent to
which the
assets of the AT&T Management VEBA are sufficient to satisfy all Liabilities to
or relating to Transferred Individuals who have terminated employment and are
eligible to receive post-retirement health benefits under the AT&T Health Plans
with respect to the AT&T Management VEBA as of the Close of the Distribution
Date.
(ii) AT&T shall instruct the trustee of
the AT&T
Management VEBA to transfer one of the Trust-Owned Life Insurance (VEBA)
policies to the Lucent Management VEBA. AT&T shall determine which policy shall
be transferred based on the present values of relative post-retirement health
liabilities (benefit obligations) retained by AT&T and assumed by Lucent
pursuant to this Agreement, without regard to which entity employs the insured
individuals, provided, that before such transfer, AT&T shall instruct the
trustee of the AT&T Management VEBA to adjust and/or allocate the cash values
under the Trust-Owned Life Insurance (VEBA) policies such that the policy to be
transferred to the Lucent Management VEBA shall have a proportionate cash value
consistent with the proportion of post-retirement health liabilities (benefit
obligations) to be assumed by Lucent. Upon such assignment, the trustee of the
Lucent Management VEBA shall assume and be solely responsible for all
Liabilities relating to, arising out of or resulting from such policy, including
the payment of any premiums and any loan repayments required, and shall be
entitled to all benefits, under the policy.
(c) OTHER ASSET TRANSFERS. To accomplish
the transfers
required by Section 5.5(a), a portion of the assets of the AT&T
Management VEBA
(other than Trust-Owned Life Insurance (VEBA) policies) shall be transferred to
the Lucent Management VEBA to the extent necessary so that immediately after
such transfer and the transfer pursuant to Section 5.5(b), the ratio of the
assets of each such VEBA trust to the liabilities payable therefrom as described
in Section 5.5(b)(i), is equal.
(d) ADMINISTRATION. Lucent and AT&T shall share all
information necessary to determine when and whether any individuals insured by
the Trust-Owned Life Insurance (VEBA) policies owned by the trustees of the AT&T
Management VEBA and Lucent Management VEBA, respectively, are deceased, and as
otherwise necessary to administer their respective Management VEBAs.
5.6 CONTRIBUTIONS TO, INVESTMENTS OF AND DISTRIBUTIONS FROM VEBAS.
Before the Close of the Distribution Date, AT&T shall have sole authority to
direct the trustee of the AT&T Health Trusts and AT&T LTD VEBA as to the timing
and manner of any contributions to the AT&T Health Trusts and AT&T LTD VEBA, the
investment of any trust assets, and the distributions and/or transfers of trust
assets to AT&T, Lucent, any Participating Company in the trusts, any paying
agent, any successor trustee, or any other Person.
<PAGE>
5.7 VENDOR CONTRACTS.
(a) THIRD-PARTY ASO CONTRACTS.
(i) AT&T shall use its reasonable best
efforts to
amend each administrative services only contract with a third-party
administrator that relates to any of the AT&T Health and Welfare Plans (an "ASO
Contract") in existence as of the date of this Agreement to permit Lucent to
participate in the terms and conditions of such ASO Contract from Immediately
after the Distribution Date until the expiration of the financial fee guarantees
in effect under such ASO Contract as of the Close of the Distribution Date. AT&T
shall use its reasonable best efforts to cause all ASO Contracts into which AT&T
enters after the date of this Agreement but before the Close of the Distribution
Date (including contracts with a subrogation vendor, a COBRA administration
vendor and a Disability 2000 vendor) to allow Lucent to participate in the terms
and conditions thereof effective Immediately after the Distribution Date on the
same basis as AT&T.
(ii) AT&T shall have the right to
determine, and
shall promptly notify Lucent of, the manner in which Lucent's participation in
the terms and conditions of ASO Contracts as set forth above shall be
effectuated. The permissible ways in which Lucent's participation may be
effectuated include automatically making Lucent a party to the ASO Contracts or
obligating the third party to enter into a separate ASO Contract with Lucent
providing for the same terms and conditions as are contained in the ASO
Contracts to which AT&T is a party. Such terms and conditions shall include the
financial and termination provisions, performance standards, methodology,
auditing policies, quality measures, reporting requirements and target claims.
Lucent hereby authorizes AT&T to act on its behalf to extend to Lucent the terms
and conditions of the ASO Contracts. Lucent shall fully cooperate with AT&T in
such efforts, and Lucent shall not perform any act, including discussing any
alternative arrangements with any third party, that would prejudice AT&T's
efforts.
(iii) If AT&T determines that it will
not be
successful in negotiating contract language that will permit compliance with
Sections 5.7(a)(i) and 5.7(a)(ii), AT&T shall so notify Lucent promptly, but in
no event later than July 20,1996, and after such notification, Lucent shall be
released from the restriction contained in the last sentence of Section
5.7(a)(ii). In such case, AT&T shall offer a contingency plan for the
administration of the portion of the Lucent Health and Welfare Plans affected by
the unavailability of such ASO Contract, including, if possible, an offer by the
third-party administrator under the relevant ASO Contract of its services under
a separate contract with Lucent, with terms and conditions as similar as
practicable to those of the ASO Contract with AT&T. Lucent shall, effective
Immediately after the Distribution Date, either adopt its own contingency plan
or the contingency plan established by AT&T for such arrangement.
(b) GROUP INSURANCE POLICIES.
(i) This Section 5.7(b) applies to
group insurance
policies not subject to allocation or transfer pursuant to the foregoing
provisions of this Article V ("Group Insurance Policies").
(ii) AT&T shall use its reasonable best
efforts to
amend each Group Insurance Policy in existence as of the date of this Agreement
for the provision or administration of benefits under the AT&T Health and
Welfare Plans to permit Lucent to
<PAGE>
participate in the terms and conditions of such policy from Immediately after
the Distribution Date until the expiration of the financial fee and rate
guarantees in effect under such Group Insurance Policy as of the Close of the
Distribution Date. AT&T shall use its reasonable best efforts to cause all Group
Insurance Policies into which AT&T enters or which AT&T renews after the date of
this Agreement but before the Close of the Distribution Date to allow Lucent to
participate in the terms and conditions thereof effective Immediately after the
Distribution Date on the same basis as AT&T.
(iii) Lucent's participation in the
terms and
conditions of each such Group Insurance Policy shall be effectuated by
obligating the insurance company that issued such insurance policy to AT&T to
issue one or more separate policies to Lucent. Such terms and conditions shall
include the financial and termination provisions, performance standards and
target claims. Lucent hereby authorizes AT&T to act on its behalf to extend to
Lucent the terms and conditions of such Group Insurance Policies. Lucent shall
fully cooperate with AT&T in such efforts, and Lucent shall not perform any act,
including discussing any alternative arrangements with third parties, that would
prejudice AT&T's efforts.
(iv) If AT&T determines that it will
not be
successful in negotiating policy provisions that will permit compliance with
Sections 5.7(b)(ii) and 5.7(b)(iii), AT&T shall so notify Lucent promptly, but
in no event later than July 20, 1996, and after such notification, Lucent shall
be released from the restriction contained in the last sentence of Section
5.7(b)(iii). In such case, AT&T shall use its reasonable best efforts to either
continue to cover Lucent under its Group Insurance Policies or procure a
separate policy for Lucent until Lucent has procured such separate insurance
policy or made other arrangements for replacement coverage, and Lucent shall
bear all costs incurred by AT&T to continue such coverage.
(c) HMO AGREEMENTS.
(i) Before the Distribution Date, AT&T
shall use its
reasonable best efforts to amend all letter agreements with HMOs that provide
medical services under the AT&T Medical Plans for 1996 ("HMO Agreements") in
existence as of the date of this Agreement to permit Lucent to participate in
the terms and conditions of such HMO Agreements, in each case, from Immediately
after the Distribution Date until December 31, 1996. AT&T shall use its
reasonable best efforts to cause all HMO Agreements into which AT&T enters after
the date of this Agreement but before the Close of the Distribution Date to
allow Lucent to participate in the terms and conditions of such HMO Agreements
from Immediately after the Distribution Date until December 31, 1996 on the same
basis as AT&T.
(ii) AT&T shall have the right to
determine, and
shall promptly notify Lucent of, the manner in which Lucent's participation in
the terms and conditions of all HMO Agreements as set forth above shall be
effectuated. The permissible ways in which Lucent's participation may be
effectuated include automatically making Lucent a party to the HMO Agreements or
obligating the HMOs to enter into letter agreements with Lucent which are
identical to the HMO Agreements. Such terms and conditions shall include the
financial and termination provisions of the HMO Agreements. Lucent hereby
authorizes AT&T to act on its behalf to extend to Lucent the terms and
conditions of the HMO Agreements. Lucent shall fully cooperate with AT&T in such
efforts, and Lucent shall not perform any act, including discussing any
alternative arrangements with any third-party, that would prejudice AT&T's
efforts.
<PAGE>
(iii) If AT&T determines that it will
not be
successful in negotiating arrangements that will permit compliance with Sections
5.7(c)(i) and 5.7(c)(ii), AT&T shall so notify Lucent promptly, but no event
later than July 20, 1996, and after such notification, Lucent shall be released
from the restriction contained in the last sentence of Section 5.7(c)(ii). In
such case, Lucent shall enter into letter agreements with one or more HMOs to
provide benefits under the Lucent Medical Plans, at least through December 31,
1996, in the geographic area serviced by the HMOs covered by AT&T's notice. AT&T
shall, if requested by Lucent and permitted by the HMOs, arrange for the
continued provision under its HMO Agreements of medical services to Lucent
Medical Plan participants from Immediately after the Distribution Date through
December 31, 1996, and Lucent shall bear all costs incurred by AT&T to continue
such services.
(iv) Notwithstanding anything in this
Article V to
the contrary, Lucent shall have the sole discretion to determine which HMOs to
offer to the participants in the Lucent Medical Plans for 1997 and subsequent
years, and all HMO Agreements in which Lucent participates pursuant to this
Section 5.7(c) shall provide Lucent with the right to discontinue its
participation effective January 1, 1997.
(d) EFFECT OF CHANGE IN RATES. AT&T and Lucent shall use their
reasonable best efforts to cause each of the insurance companies, HMOs,
point-of-service vendors and third-party administrators providing services and
benefits under the AT&T Health and Welfare Plans and the Lucent Health and
Welfare Plans to maintain the premium and/or administrative rates based on the
aggregate number of participants in both the AT&T Health and Welfare Plans and
the Lucent Health and Welfare Plans through the expiration of the financial fee
or rate guarantees in effect as of the Close of the Distribution Date under the
respective ASO Contracts, Group Insurance Policies, and HMO Agreements. To the
extent they are not successful in such efforts, AT&T and Lucent shall each bear
the revised premium or administrative rates attributable to the individuals
covered by their respective Health and Welfare Plans.
5.8 PROCEDURES FOR AMENDMENTS TO PLANS, PLAN DESIGNS,
ADMINISTRATIVE
PRACTICES, AND VENDOR CONTRACTS.
(a) AMENDMENTS TO PLAN DOCUMENTS. From Immediately after the
Distribution Date through December 31, 1998, no amendment to any AT&T Health and
Welfare Plan or Lucent Health and Welfare Plan shall be effective unless the
party intending to amend its Health and Welfare Plan has: (i) given the other
party written notice of the intention to amend, accompanied by a copy of the
proposed amendment, at least 30 days in advance of the earlier of (A) the
proposed amendment effective date, or (B) the proposed amendment adoption date;
(ii) agreed to bear all of the costs of implementing the amendment incurred by
third-party administrators, insurance companies and other vendors and passed
through to one or both of the parties; and (iii) certified to the other party,
and provided to the other party the written concurrence of all third-party
administrators, insurance companies and other vendors providing services in
connection with such Plan, that (after taking into account the effect of clause
(ii)) the proposed amendment to the Health and Welfare Plan will have no
material adverse impact (financial, administrative or otherwise) on the
corresponding Health and Welfare Plan sponsored by the other party.
<PAGE>
(b) CHANGES IN VENDOR CONTRACTS, GROUP INSURANCE
POLICIES,
PLAN DESIGN, AND ADMINISTRATION PRACTICES AND PROCEDURES.
(i) From Immediately after the
Distribution Date
through the earlier of the expiration of the financial fee or rate guarantees in
effect as of the Close of the Distribution Date under the applicable ASO
Contract, Group Insurance Policy or HMO Agreement, and
December 31, 1998,
neither AT&T nor Lucent shall materially modify, or take other action which
would have a material effect on, any of the following (each such modification, a
"Change") without complying with Section 5.8(b)(ii): (A) the termination date,
administration, or operation of (1) an ASO contract between AT&T or Lucent and a
third-party administrator, (2) a Group Insurance Policy issued to AT&T or
Lucent, or (3) an HMO Agreement with AT&T or Lucent, in each case, the material
terms and conditions of which contracts and policies are extended to Lucent or
to which Lucent becomes a party pursuant to Section 5.7; (B) the design of
either an AT&T Health and Welfare Plan or a Lucent Health and Welfare Plan; or
(C) the financing, operation, administration or delivery of benefits under
either an AT&T Health and Welfare Plan or a Lucent Health and Welfare Plan.
(ii) Neither AT&T nor Lucent shall make
any Change
unless the party intending to make the Change has: (A) given the other party
written notice of the intention to make the Change, accompanied by a written
description of the Change, at least 180 days in advance of the proposed
effective date of the Change; (B) agreed to bear all of the costs of
implementing the Change which are incurred by all third-party administrators,
insurance companies, HMOs and other vendors and passed through to one or both of
the parties; and (C) certified to the other party, and provided to the other
party the written concurrence of each third-party administrator, insurance
company, HMO or other vendor associated with or performing services in
connection with the Health and Welfare Plan affected by the Change, that (after
taking into account the effect of clause (B)) the proposed Change will have no
material adverse impact (financial, administrative or otherwise) on the
corresponding Health and Welfare Plan sponsored by the other party.
(iii) SUBMISSION TO HEALTH, WELFARE AND
LIFE
INSURANCE COMMITTEE. If AT&T or Lucent desires to make a Change that requires
compliance with, but cannot satisfy all of the conditions of, Section
5.8(b)(ii), the party desiring to make the Change may submit a written request
for approval of the Change, accompanied by a written description of the Change,
to the HWLI Committee. If such a request is made, the desired Change may be
implemented only after the Change is approved in writing by the HWLI Committee.
(c) EMPLOYEE CONTRIBUTIONS. Notwithstanding the provisions of
Sections 5.8(a) and 5.8(b), as of the first January 1 after the Distribution
Date, AT&T and Lucent shall each have the independent right, in its sole
discretion and without compliance with Sections 5.8(a) and 5.8(b), to increase
or decrease the amount of employee contributions under their respective Health
and Welfare Plans.
5.9 HEALTH, WELFARE AND LIFE INSURANCE COMMITTEE. From the date of this
Agreement through December 31, 1998, the management of the ASO Contracts, Group
Insurance Policies, and HMO Agreements and other vendor contracts that are
subject to Section 5.8 and the administration of the AT&T Health and Welfare
Plans and the Lucent Health and Welfare Plans associated therewith shall be
conducted under the supervision of the HWLI Committee. The HWLI Committee shall
be comprised of an equal number of representatives from AT&T and Lucent at the
District Manager or equivalent level, and shall provide
<PAGE>
strategic oversight and direction of the cohesive administration of the AT&T
Health and Welfare Plans and the Lucent Health and Welfare Plans. Issues that
cannot be resolved by the HWLI Committee shall be decided, at the request of
either party, by the Executive Oversight Committee comprised of the Lucent
Senior Vice President-Human Resources and the AT&T Senior Vice
President-Benefits and Compensation.
5.10 AT&T SICKNESS AND ACCIDENT DISABILITY, LONG TERM
DISABILITY AND
PENSION DISABILITY BENEFITS.
(a) ADMINISTRATION OF AT&T SADBP CLAIMS. AT&T shall administer
claims incurred under the AT&T SADBP by Transferred Individuals, Lucent
Individuals and other employees and former employees of Lucent and the Lucent
Entities on or after the Participation Commencement Date but before the Close of
the Distribution Date, to the extent such claims are not administered by Lucent
pursuant to the terms of the AT&T SADBP as in effect on the date of this
Agreement. Any determination made or settlements entered into by AT&T with
respect to such claims shall be final and binding. If claims incurred before the
Close of the Distribution Date under the AT&T SADBP by Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities were administered by Lucent before the Close of the Distribution
Date, such claims shall continue to be administered by Lucent after the Close of
the Distribution Date, unless outsourced pursuant to Section 5.10(b). AT&T shall
transfer to Lucent, effective Immediately after the Distribution Date,
responsibility for administering all claims incurred by Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities before the Close of the Distribution Date that are administered
by AT&T as of the Close of the Distribution Date. Lucent shall administer such
claims in the same manner, and using the same methods and procedures, as AT&T
used in administering such claims. Lucent shall have sole discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims.
(b) OUTSOURCING OF CLAIMS. AT&T, pursuant to its Disability
2000 project or otherwise, shall have the right to engage a third-party
administrator or insurance company to administer ("outsource") claims incurred
under the AT&T SADBP that are being administered by AT&T pursuant to Section
5.10(a), claims incurred under the AT&T LTD Plans, and claims incurred under the
pension disability provisions of the AT&T Pension Plans, including claims
incurred by Transferred Individuals, Lucent Individuals and other employees and
former employees of Lucent and the Lucent Entities before the Close of the
Distribution Date. AT&T may determine the manner and extent of such outsourcing,
including the selection of one or more third-party administrators or insurance
companies and the ability to transfer the liability for such claims to one or
more independent insurance companies. AT&T shall promptly notify Lucent of its
intent to outsource such claims, and the material terms and condition of the
outsourcing, before the effective date thereof. Lucent shall have the right to
notify AT&T, within a reasonable period of time after Lucent receives AT&T's
notice of intent to outsource, of Lucent's desire to participate in the proposed
outsourcing. If Lucent gives such notice, all claims incurred by Transferred
Individuals, Lucent Individuals and other employees and former employees of
Lucent and the Lucent Entities before the Close of the Distribution Date that
are administered by Lucent pursuant to Section 5.10(a) shall be included in the
proposed outsourcing. In the event Lucent elects to participate in such
outsourcing, Lucent shall be bound by the terms and conditions thereof
(including all consequences of any transfer of liability) and to any
determinations and settlements entered into by the third-party administrator
pursuant thereto.
<PAGE>
5.11 POST-RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS.
(a) As soon as practicable after the Distribution Date, AT&T
shall provide Lucent with a list of all Transferred Individuals who are, to the
best knowledge of AT&T, eligible to receive retiree medical or dental coverage
under the AT&T Health Plans as of the Distribution Date and/or post-retirement
life insurance coverage under the AT&T Group Life Program, and the type of
retiree medical or dental coverage and the level of life insurance coverage for
which they are eligible, as applicable.
(b) Effective Immediately after the Distribution Date, Lucent
shall (i) assume and continue through December 31, 1998 the company-sponsored
retiree care accounts provided under the AT&T Medical Expense Plan for Retired
Employees pursuant to collective bargaining agreements for all Transferred
Individuals under the Lucent Medical Expense Plan for Retired Employees and (ii)
honor and maintain all other-covered-charges buy-up lifetime maximum elections
made by Transferred Individuals under the AT&T Medical Expense Plan for Retired
Employees.
5.12 GROUP LIFE PROGRAMS. Effective as of the Close of the Distribution
Date, AT&T shall cause the insurance carrier that provides basic active life
insurance coverage, supplemental life insurance coverage, dependent life
insurance coverage, accidental life insurance coverage and the portion of the
post-retirement life insurance benefit which exceeds $50,000 per participant
under the AT&T Group Life Program to: (a) perform an experience rating; (b)
allocate the applicable premium stabilization reserves between AT&T and Lucent
on an actuarial basis; (c) allocate pending claim reserves based on actual
claims data; and (d) allocate unreported claim reserves based on expected claims
by coverage.
5.13 COBRA AND DIRECT PAY. Through the Close of the Distribution Date,
AT&T shall be responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the AT&T Health and Welfare
Plans with respect to Transferred Individuals, Lucent Individuals and other
employees and former employees of Lucent and the Lucent Entities and
beneficiaries and dependents thereof and Lucent and the Lucent Entities shall be
responsible for filing all necessary employee change notices with respect to
their respective employees in accordance with applicable AT&T policies and
procedures. Effective Immediately after the Distribution Date, Lucent shall
solely be responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the Lucent Health and Welfare
plans, and, with respect to Transferred Individuals, the AT&T Health and Welfare
Plans.
5.14 LEAVE OF ABSENCE PROGRAMS AND FMLA.
(a) Through the Close of the Distribution Date, AT&T shall be
responsible for administering compliance with the AT&T Leave of Absence Programs
and FMLA with respect to Lucent Individuals and all other employees of Lucent
and the Lucent Entities. Lucent and the Lucent Entities shall be responsible for
determining whether their respective employees are eligible for leave under the
AT&T Leave of Absence Programs and FMLA in accordance with such programs and
FMLA, respectively.
(b) Effective Immediately after the Distribution Date: (i)
Lucent shall adopt, and shall cause each Lucent Entity to adopt, leave of
absence programs which are substantially identical in all Material Features to
the AT&T Leave of Absence Programs as in effect on the Distribution Date; (ii)
Lucent shall honor, and shall cause each Lucent Entity to honor, all terms and
conditions of leaves of absence which have been granted to any
<PAGE>
Transferred Individual under an AT&T Leave of Absence Program or FMLA before the
Close of the Distribution Date by AT&T, Lucent, or a Lucent Entity, including
such leaves that are to commence after the Distribution Date; (iii) Lucent and
each Lucent Entity shall be solely responsible for administering leaves of
absence and compliance with FMLA with respect to their employees; and (iv)
Lucent and each Lucent Entity shall recognize all periods of service of
Transferred Individuals with AT&T or an AT&T Entity, as applicable, to the
extent such service is recognized by AT&T for the purpose of eligibility for
leave entitlement under the AT&T Leave of Absence Programs and FMLA; provided,
that no duplication of benefits shall be required by the foregoing.
(c) As soon as administratively possible after the Close of
the Distribution Date, AT&T shall provide to Lucent copies of all records
pertaining to the AT&T Leave of Absence Programs and FMLA with respect to all
Transferred Individuals to the extent such records have not been provided
previously to Lucent or a Lucent Entity.
5.15 AT&T WORKERS' COMPENSATION PROGRAM.
(a) ADMINISTRATION OF CLAIMS.
(i) Through the Close of the
Distribution Date or
such earlier date as may be agreed by AT&T and Lucent, (A) AT&T shall continue
to be responsible for the administration of all claims that (1) are, or have
been, incurred under the AT&T WCP before the Close of the Distribution Date by
Transferred Individuals, Lucent Individuals and other employees and former
employees of Lucent and the Lucent Entities through the Close of the
Distribution Date ("Lucent WCP Claims") and (2) have been historically
administered by AT&T or its insurance company, and (B) Lucent shall continue to
be responsible for the administration of all Lucent WCP Claims that have been
historically administered by the Lucent Business.
(ii) Effective immediately after the
Distribution
Date or such earlier date as may be agreed by AT&T and Lucent, (A) Lucent shall,
to the extent Legally Permissible (as defined below), be responsible for the
administration of all Lucent WCP Claims, whether those claims were previously
administered by AT&T or Lucent, and (B) AT&T shall be responsible for the
administration of all Lucent WCP Claims not administered by Lucent pursuant to
clause (A), whether previously administered by AT&T or Lucent and whether under
the self-insured or insured portion of the AT&T WCP. Any determination made, or
settlement entered into, by either party or its insurance company with respect
to Lucent WCP Claims for which it is administratively responsible shall be final
and binding upon the other party.
(iii) Each party shall fully cooperate
with the other
with respect to the administration and reporting of Lucent WCP Claims, the
payment of Lucent WCP Claims determined to be payable, and the transfer of the
administration of any Lucent WCP Claims to the other party as determined under
Section 5.15(a)(ii). Either party shall have the right to "outsource" (i.e.,
transfer the administration of claims to a third party administrator or cause
claims to be paid through insurance) any and all Lucent WCP Claims for which it
is administratively responsible.
(iv) For purposes of this Section
5.15(a), "Legally
Permissible" shall be determined on a state-by-state basis, and
shall mean that
administration of Lucent
<PAGE>
WCP Claims by Lucent both (A) is permissible under the applicable state's
workers' compensation laws (taking into account all relevant facts, including
that Lucent may have a self-insurance certificate in that state) and (B) would
not have a material adverse effect on AT&T's self-insurance certificate within
that state. If it is determined that, in a particular state, it is Legally
Permissible for Lucent to administer Lucent WCP Claims, then Lucent shall be
responsible for the administration of all Lucent WCP Claims incurred in that
state, whether previously administered by AT&T, Lucent, or an insurance company.
If it is determined that, in a particular state, it is not Legally Permissible
for Lucent to administer Lucent WCP Claims, then AT&T shall be responsible for
the administration of all Lucent WCP Claims incurred in that state, whether
previously administered by AT&T, Lucent, or an insurance company.
(b) SELF-INSURANCE STATUS.
(i) AT&T shall amend its certificates of
self-insurance with respect to workers' compensation and any applicable group
insurance policies to include Lucent until the Close of the Distribution Date,
and Lucent shall fully cooperate with AT&T in obtaining such amendments. All
costs incurred by AT&T in amending such certificates or group insurance
policies, including filing fees, adjustments of security and excess loss
policies and amendment of safety programs, shall be shared equally by AT&T and
Lucent. AT&T shall use its reasonable best efforts to obtain self-insurance
status for workers' compensation for Lucent effective Immediately after the
Distribution Date in each jurisdiction in which Lucent conducts business and in
which AT&T is self-insured, if AT&T determines that such status is beneficial to
Lucent. Lucent hereby authorizes AT&T to take all actions necessary and
appropriate on its behalf in order to obtain such self-insurance status.
(ii) AT&T shall also arrange a
contingent insured or
other arrangement for payment of workers' compensation claims, into which Lucent
shall enter if and to the extent that AT&T fails to obtain self-insured status
for Lucent as provided in Section 5.15(b)(i), unless Lucent obtains another such
arrangement that is effective Immediately after the Distribution Date, in which
event Lucent shall reimburse AT&T for any expenses incurred by AT&T in procuring
such contingent arrangement.
(c) INSURANCE POLICY.
(i) In the event the workers'
compensation insurance
policy that AT&T maintains under the AT&T WCP expires before the Distribution
Date, AT&T shall use its reasonable best efforts to renew such policy and to
cause the issuing insurance company to issue a separate policy to Lucent. If
AT&T is not able to cause such insurance company to issue such separate
insurance policy, Lucent shall use its reasonable best efforts to procure a
separate policy from another insurance company or to obtain self-insurance
status, and AT&T shall use its reasonable best efforts to continue to cover
Lucent under its renewed policy until the earlier of (A) the date on which
Lucent's application for such self-insurance status is approved or (B) the date
on which a separate insurance policy is procured. Lucent shall compensate AT&T
for all costs incurred by AT&T to continue such coverage. Any claims incurred by
Transferred Individuals after the Close of the Distribution Date that will be
covered under and during any such continuation of coverage shall be treated as
being incurred before the Close of the Distribution Date for purposes of
determining the party responsible for the administration of benefits.
<PAGE>
(ii) AT&T shall use its best effort to
maintain the
premium rates for all workers' compensation insurance policies for both AT&T and
Lucent in effect for periods through the Close of the Distribution Date to be
based on the aggregate number of employees covered under the workers'
compensation insurance policies of both AT&T and Lucent. Any premiums due under
the separate workers' compensation insurance issued to Lucent shall be payable
by Lucent.
5.16 AMERICAN TRANSTECH INC. AND BENEFIT DIRECTIONS
ENROLLMENT CENTER.
AT&T shall cause American Transtech Inc. to enter into an
agreement with Lucent
for the provision of data and enrollment services and customer
service for
enrollment and eligibility matters through the 1996 fall open
enrollment period
using the Benefit Directions Enrollment Center (the "BDEC") and
the Benefit
Direction System (the "BDS") database. Such services shall be
provided by
American Transtech Inc. to Lucent on terms and conditions and at
prices
comparable to those on which American Transtech Inc. provides
similar services
to AT&T.
5.17 AT&T EMPLOYEE ASSISTANCE PROGRAM. Effective Immediately after the
Distribution Date, Lucent shall either (a) provide a centralized Lucent Employee
Assistance Program staff to provide case management services for chemical
dependency/substance abuse treatments to Transferred Individuals or (b) contract
with the mental health network vendor used by AT&T to provide such services. As
of the Close of the Distribution Date, the AT&T Employee Assistance Program
shall cease to have any responsibility to provide case management services for
any Transferred Individuals' chemical dependency/substance abuse treatments.
5.18 AT&T WORK AND FAMILY PROGRAM. Before the Close of the Distribution
Date, AT&T and Lucent shall use their reasonable best efforts to agree on the
manner in which the Work and Family Program, including the Family Care
Development Fund, will be jointly funded, operated and administered. Until an
agreement is reached, AT&T will have sole responsibility for determining the
1996 grant payments to be made under the occupational and management Family Care
Development Fund. After an agreement is reached, but no later than the Close of
the Distribution Date, Lucent will have sole discretion to determine whether and
at what rate to make payments for the Lucent Fund for Management Employees. In
addition, Lucent will have sole discretion for administering the Lucent Family
Development Fund Program, provided that it funds its proportionate share of the
grants required by the National AT&T/CWA/IBEW Memorandum of Understanding
executed by AT&T and the CWA and IBEW as of May 31, 1992 (the "1992 Collective
Bargaining Agreement") and the Collective Bargaining Agreement. The share will
be determined in accordance with a methodology agreed upon by AT&T and Lucent,
and if they fail to agree upon a methodology, Lucent's allocable share shall be
that portion of the total of such grants that bears the same relationship to
such total grants as the number of Lucent Individuals who are occupational
employees bears to total number of occupational employees of AT&T, the AT&T
Entities, Lucent and the Lucent Entities as of the Participation Commencement
Date. Until all of the foregoing obligations under the 1992 Collective
Bargaining Agreement and the Collective Bargaining Agreement have been
satisfied, Lucent will provide AT&T with quarterly reports of occupational
grants funded. Before the Close of the Distribution Date, AT&T shall use its
reasonable best efforts to cause its agreement with its Work and Family vendors
to permit Lucent to participate in the terms and conditions of such agreements
until the expiration of the agreements. These efforts shall substantially
conform to the guidelines set forth in Section 5.7(a) as if such agreements were
ASO Contracts.
<PAGE>
5.19 WORLD WIDE WEB. Before the Close of the Distribution Date, AT&T and
Lucent shall jointly continue to explore (including by participation in a
testing program) the feasibility of offering participants in their Plans on-line
computer access to the point-of-service provider directories, fee schedules,
enrollment and other benefit communication materials through the AT&T customized
Internet World Wide Web developed by AT&T Bell Laboratories and a third-party
vendor. Lucent shall have the right to offer Lucent Plan participants these
on-line computer services after the Distribution Date, provided that Lucent
exercises this right by giving written notice of its intent to do so to AT&T on
or before the Distribution Date. If the portion of AT&T Bell Laboratories
responsible for developing and maintaining the AT&T customized Internet World
Wide Web is transferred to Lucent pursuant to the Separation and Distribution
Agreement, AT&T shall have the right to use, and Lucent agrees to maintain, this
service pursuant to a contract entered into between AT&T and Lucent as soon as
practicable after the Close of the Distribution Date. If the portion of AT&T
Bell Laboratories responsible for developing and maintaining the AT&T customized
Internet World Wide Web remains with AT&T pursuant to the Separation and
Distribution Agreement, Lucent shall have the right to use, and AT&T agrees to
maintain, this service pursuant to a contract entered into between AT&T and
Lucent as soon as practicable after the Close of the Distribution Date.
5.20 UNEMPLOYMENT INSURANCE TAX MANAGEMENT PROGRAM.
(a) AT&T shall cause Lucent to be covered under the AT&T
Unemployment Insurance Tax Management Program from the Participation
Commencement Date through the Close of the Distribution Date. Lucent shall
reimburse AT&T for its allocable share of fees paid by AT&T to its unemployment
insurance tax management vendor for services rendered during such period. Lucent
shall cooperate with the unemployment insurance tax management vendor by
providing information in its possession that is necessary for administration of
the AT&T Unemployment Insurance Tax Management Program.
(b) Before the Distribution Date, AT&T shall use its
reasonable best efforts to cause its agreement with its unemployment insurance
tax management vendor and any successor thereto to permit Lucent to participate
in the terms and conditions of such agreements from Immediately after the
Distribution Date through June 30, 1997. These efforts shall substantially
conform to the guidelines set forth in Section 5.7(a) as if such agreements were
ASO Contracts. AT&T shall use its reasonable best efforts to cause such
agreements to provide that Lucent's participation shall include administration
of all unemployment compensation claims of Transferred Individuals, Lucent
Individuals and other employees and former employees of Lucent and the Lucent
Entities, regardless of whether such claims were filed before, on, or after the
Distribution Date.
5.21 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND
MAXIMUM
BENEFITS.
(i) Lucent shall cause the Lucent
Health and Welfare
Plans to recognize and maintain all coverage and contribution elections made by
Transferred Individuals under the AT&T Health and Welfare Plans and apply such
elections under the Lucent Health and Welfare Plans for the remainder of the
period or periods for which such elections are by their terms applicable. The
transfer or other movement of employment from AT&T to Lucent at any time before
the Close of the Distribution Date shall neither constitute nor be treated as a
"status change" under the AT&T Health and Welfare Plans or the Lucent Health and
Welfare Plans.
<PAGE>
(ii) Lucent shall cause the Lucent
Health and Welfare
Plans to recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to which such expenses have been incurred by Transferred Individuals
under the AT&T Health and Welfare Plans for the remainder of the year in which
the Distribution occurs, and (B) all benefits paid to Transferred Individuals
under the AT&T Health and Welfare Plans for purposes of determining when such
persons have reached their lifetime maximum benefits under the Lucent Health and
Welfare Plans.
(iii) Lucent shall recognize and
maintain through
December 31, 1998 all eligible populations covered by the AT&T Health and
Welfare Plans (as defined in the applicable AT&T Health and Welfare Plan
documents), including Class I and Class II dependents, term and temporary
employees, alternate benefit plan employees, and all categories of part-time
employees (which are fully and non-fully eligible for company contributions).
(iv) Lucent shall (A) provide coverage
to Transferred
Individuals under the Lucent Group Life Program without the need to undergo a
physical examination or otherwise provide evidence of insurability, and (B)
recognize and maintain all irrevocable assignments and accelerated benefit
option elections made by Transferred Individuals under the AT&T Group Life
Program.
(b) ADMINISTRATION.
(i) COORDINATION OF BENEFITS FOR
SPOUSES AND
DEPENDENTS. Effective as of the first January 1 that occurs on or after the
Distribution Date, Lucent shall cause the Lucent Health and Welfare Plans to
permit eligible Transferred Individuals to cover their lawful spouses as
dependents if such lawful spouses are active or retired AT&T employees. As of
the first January 1 that occurs on or after the Distribution Date, AT&T shall
cause the AT&T Health and Welfare Plans to permit eligible AT&T and AT&T Entity
employees to cover their lawful spouses as dependents if such lawful spouses are
active or retired Lucent employees. All benefits provided under either the
Lucent Health and Welfare Plans or the AT&T Health and Welfare Plans to a lawful
spouse dependent of the other company's plans shall be coordinated pursuant to
the terms and conditions of the applicable Health and Welfare Plans. Effective
as of January 1, 1997, eligible dependents of AT&T and Lucent lawful spouse
employees or lawful spouse retirees may be covered under both the Lucent Health
and Welfare Plans and the AT&T Health and Welfare Plans, and the benefits
provided under both plans shall be coordinated pursuant to the applicable terms
and conditions of the respective Health and Welfare Plans in effect as of such
date and thereafter as amended from time to time.
(ii) HCFA DATA MATCH. Immediately after
the
Distribution Date, Lucent shall assume all Liabilities relating to, arising out
of or resulting from claims verified by AT&T or Lucent under the HCFA data match
reports that relate to Transferred Individuals. Lucent and AT&T shall share all
information necessary to verify HCFA data match reports regarding Transferred
Individuals. Lucent shall not change any employee identification numbers
assigned by AT&T without notifying AT&T of the change and the new Employee
Identification Number. To the extent that AT&T enters into any settlement
negotiations between its health plan carriers or claims administrators and HCFA
before the end of the Occupational Transition Period, Lucent shall have the
right to participate in such negotiations.
<PAGE>
(c) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) AT&T HCRA PLAN. To the extent any
Transferred
Individual contributed to an account under the AT&T HCRA Plan during the
calendar year that includes the Distribution Date, effective as of the Close of
the Distribution Date, AT&T shall transfer to the Lucent HCRA Plan the account
balances of Transferred Individuals for such calendar year under the AT&T HCRA
Plan, regardless of whether the account balance is positive or negative.
(ii) AT&T CHILD/ELDER CARE
REIMBURSEMENT ACCOUNT
PLAN. To the extent any Transferred Individual contributed to the AT&T CECRA
Plan during the calendar year that includes the Distribution Date, AT&T shall
transfer the account balances of Transferred Individuals for such calendar year
in the AT&T CECRA Plan to the Lucent CECRA Plan.
(iii) POST-RETIREMENT MEDICAL PLAN.
Pursuant to Code
SectionSection 401(h) and 420, Lucent shall comply with all cost maintenance
period requirements and benefit maintenance period requirements that are
applicable to post-retirement health benefits under the Lucent Health Plans for
any pension asset transfers pursuant to Code Section 420 by or on behalf of AT&T
for qualified current retiree health liabilities (as defined under Code Section
420). With respect to any pension asset transfers pursuant to Code Section 420,
Lucent shall obtain AT&T's prior written approval before amending any Lucent
Health Plan with respect to the provision of post-retirement health benefits
during the cost maintenance or benefit maintenance periods to which the AT&T
Health Plans are subject pursuant to Code Section 420. No pension asset transfer
pursuant to Code Section 420 shall be made after the date hereof and before the
Close of the Distribution Date unless Lucent and AT&T so agree.
(iv) HEALTH AND WELFARE PLANS
SUBROGATION RECOVERY.
After the Close of the Distribution Date, AT&T shall pay to Lucent or the Lucent
Health Trusts (as appropriate) any amounts AT&T recovers from time to time
through subrogation or otherwise for claims incurred by or reimbursed to any
Transferred Individual. If Lucent recovers any amounts through subrogation or
otherwise for claims incurred by or reimbursed to employees and former employees
of AT&T or an AT&T Entity and their respective beneficiaries and dependents
(other than Transferred Individuals), Lucent shall pay such amounts to AT&T or
the AT&T Health Trusts (as appropriate).
(v) EXCHANGE OF HISTORICAL DATA. Both
AT&T and Lucent
shall have access to claims data configured on the Medical Information Data
Analysis System database (or archived, if applicable) and to eligibility data
configured on the eligibility database (or archived, if applicable) and to
disability, medical and demographic data configured on the Health Planning
Support System ("HPSS") database (or archived, if applicable) for all historical
periods beginning January 1, 1989, up to and including eligibility, incurred
claims and HPSS data for the calendar year that includes the Distribution Date,
for all vendors administering the AT&T Medical Plans and Lucent Medical Plans.
AT&T and Lucent shall cooperate in the collection of claims, eligibility and
HPSS data during the period from the first January 1 that occurs after the
Distribution Date through December 31, 1998, and share all such data. Both AT&T
and Lucent shall have the right to access and use eligibility, incurred claims,
and HPSS data for periods through December 31, 1998 for such purposes as each
determines.
5.22 APPLICATION OF ARTICLE V TO LUCENT ENTITIES. Any
reference in this
Article V to "Lucent" shall include a reference to a Lucent Entity
when and to
the extent Lucent has
<PAGE>
caused the Lucent Entity to (a) become a party to a vendor contract, group
insurance contract, or HMO letter agreement associated with a Lucent Health and
Welfare Plan, (b) become a self-insured entity for the purposes of one or more
Lucent Health and Welfare Plans, (c) assume all or a portion of the liabilities
or administrative responsibilities for benefits which arose before the Close of
the Distribution Date under an AT&T Health and Welfare Plan and which were
expressly assumed by Lucent pursuant to the terms of this Agreement, or (d) take
any other action, extend any coverage, assume any other liability or fulfill any
other responsibility that Lucent would otherwise be required to take under the
terms of this Article V, unless it is clear from the context that the particular
reference is not intended to include a Lucent Entity. In all such instances in
which a reference in this Article V to "Lucent" includes a reference to a Lucent
Entity, Lucent shall be responsible to AT&T for ensuring that the Lucent Entity
complies with the applicable terms of this Agreement and the Transferred
Individuals allocated to such Lucent Entity shall have the same rights and
entitlements to benefits under the applicable Lucent Health and Welfare Plans
that the Transferred Individual would have had if he or she had instead been
allocated to Lucent.
ARTICLE VI
EXECUTIVE BENEFITS AND NON-EMPLOYEE DIRECTOR BENEFITS
6.1 ASSUMPTION OF OBLIGATIONS. Effective Immediately after the
Distribution Date, Lucent and the Lucent Entities shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
all AT&T Executive Benefit Plans, other than any Liabilities to or relating to
executives or former executives of NCR pursuant to separate agreements with such
executives entered into in connection with AT&T's acquisition of NCR.
6.2 CONSENTS AND NOTIFICATIONS. AT&T and Lucent shall use their
reasonable best efforts to obtain, or cause to be obtained, to the extent
necessary, the written consent of each Transferred Individual who is a party to
an Individual Agreement and/or a participant in any AT&T Executive Benefit Plan,
and of each Lucent Non-Employee Director who is a participant in any AT&T
Non-Employee Director Plan, to the treatment of such Individual Agreement,
Executive Benefit Plan and/or AT&T Non-Employee Director Plan, as applicable, in
accordance with this Article VI, including the assumption by Lucent and the
Lucent Entities, of sole responsibility for, and the release of AT&T and the
AT&T Entities from, all Liabilities thereunder; provided, that no failure to
seek or to obtain any such consent shall have any effect upon the obligations of
Lucent and the Lucent Entities with respect to such Liabilities.
6.3 AT&T SHORT TERM INCENTIVE PLAN. Lucent shall be
responsible for
determining, with respect to all Awards that would otherwise be
payable under
the AT&T Short Term Incentive Plan to Transferred
Individuals for the 1996
performance year, (a) the extent to which established performance criteria (as
interpreted by Lucent, in its sole discretion, after taking into account the
effects of the IPO and the Distribution) have been met and (b) the payment level
for each Transferred Individual.
6.4 AT&T LONG TERM INCENTIVE PLANS. AT&T and Lucent shall use their
reasonable best efforts to take all actions necessary or appropriate so that
each outstanding Award granted under any AT&T Long Term Incentive Plan held by
any Transferred Individual shall be replaced as set forth in this Section 6.4
with an Award under the Lucent Long Term Incentive Plan.
<PAGE>
(a) TRANSFERRED INDIVIDUALS WHO ARE ACTIVE
EMPLOYEES OF
LUCENT.
(i) STOCK OPTIONS. Lucent shall cause
each Award
consisting of an AT&T Option that is outstanding as of the Close of the
Distribution Date (or, in the case of a Lucent Administrative Employee, such
later date as he or she becomes a Transferred Individual) and is held by a
Transferred Individual who, as of the Distribution Date (or, in the case of a
Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual), is an active employee of or on leave of absence from
Lucent or a Lucent Entity to be replaced, effective Immediately after the
Distribution Date, with a Lucent Option. Such Lucent Option shall provide for
the purchase of a number of shares of Lucent Common Stock equal to the number of
shares of AT&T Common Stock subject to such AT&T Option as of the Close of the
Distribution Date, multiplied by the Ratio, and then rounded down to the nearest
whole share. Lucent shall pay to the holder of such replacement Award, at the
time of such replacement, cash in lieu of any fractional share equal to the
product of (A) the fraction represented by such fractional share times (B) (1)
the excess of the Lucent Stock Value over (2) the per-share exercise price of
such AT&T Option as of the Close of the Distribution Date divided by the Ratio.
The per-share exercise price of such Lucent Option shall equal the per-share
exercise price of such AT&T Option as of the Close of the Distribution Date
divided by the Ratio. Each such Lucent Option shall otherwise have the same
terms and conditions as were applicable to the corresponding AT&T Option as of
the Close of the Distribution Date, except that references to AT&T and its
Affiliates shall be amended to refer to Lucent and its Affiliates.
(ii) PERFORMANCE SHARES AND STOCK
UNITS. Lucent shall
cause each Award consisting of AT&T performance shares or AT&T stock units that
is outstanding as of the Close of the Distribution Date (or, in the case of a
Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual) and is held by a Transferred Individual who, as of the
Distribution Date (or, in the case of a Lucent Administrative Employee, such
later date as he or she becomes a Transferred Individual), is an active employee
of or on leave of absence from Lucent or a Lucent Entity to be replaced,
effective Immediately after the Distribution Date, with a new performance share
award or a new stock unit award, as the case may be, consisting of a number of
Lucent performance shares or Lucent stock units, as the case may be, equal to
the number of AT&T performance shares or AT&T stock units, as the case may be,
constituting such Award immediately before the Distribution Date, multiplied by
the Ratio, and then rounded down to the nearest whole share. Lucent shall pay to
the holder of such replacement Award, at the time of such replacement, cash in
lieu of any fractional share based on the Lucent Stock Value. Each such
replacement Award shall otherwise have the same terms and conditions as were
applicable to the corresponding AT&T Award as of the Close of the Distribution
Date, except that references to AT&T and its Affiliates shall be amended to
refer to Lucent and its Affiliates and dividend equivalent payments, if any,
shall be payable after the Close of the Distribution Date with reference to
dividends on Lucent Common Stock.
(iii) RESTRICTED STOCK AND RESTRICTED
STOCK UNITS.
Lucent shall cause each Award that consists of non-vested restricted shares of
AT&T Common Stock or restricted stock units relating to shares of AT&T Common
Stock that is outstanding as of the Close of the Distribution Date (or, in the
case of a Lucent Administrative Employee, such later date as he or she becomes a
Transferred Individual) and is held by a Transferred Individual who, as of the
Close of the Distribution Date (or, in the case of a Lucent Administrative
Employee, such later date as he or she becomes a Transferred Individual), is an
active employee of or on leave of absence from Lucent or a Lucent Entity to be
replaced, effective Immediately after the Distribution Date, with a new Award
consisting of a number
<PAGE>
of non-vested restricted shares of Lucent Common Stock and/or restricted stock
units relating to shares of Lucent Common Stock equal to the number of
non-vested restricted shares or restricted stock units of AT&T Common Stock
constituting such Award as of the Close of the Distribution Date multiplied by
the Ratio, and then rounded down to the nearest whole share. Lucent shall pay to
the holder of such replacement Award, at the time of such replacement, cash in
lieu of any fractional share based on the Lucent Stock Value. Each such
replacement Award shall otherwise have the same terms and conditions as were
applicable to the corresponding AT&T Award as of the Close of the Distribution
Date, except that references to AT&T and its Affiliates shall be amended to
refer to Lucent and its Affiliates and dividend equivalent payments, if any,
shall be payable after the Distribution Date with reference to dividends on
Lucent Common Stock.
(iv) SPECIAL PAYMENT. On the thirtieth
day following
the Distribution Date, AT&T shall pay to Lucent an amount in cash equal to the
excess, if any, of (a) the Gross Value of the Assumed Stock Awards over (b)
seven percent (7%) of the Aggregate Lucent Stock Value.
(b) TRANSFERRED INDIVIDUALS WHO ARE NOT ACTIVE EMPLOYEES OF
LUCENT. Each outstanding Award that is held by a Transferred Individual who, as
of the Close of the Distribution Date (or, in the case of a Lucent
Administrative Employee, such later date as he or she becomes a Transferred
Individual), is not an active employee of or on leave of absence from Lucent or
a Lucent Entity shall remain outstanding Immediately after the Distribution Date
in accordance with its terms as applicable as of the Close of the Distribution
Date, subject to such adjustments as may be applicable to outstanding Awards
held by individuals who remain active employees of or on leave of absence from
AT&T or an AT&T Entity after the Distribution Date.
6.5 AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN. Each
Transferred Individual who has a deferred AT&T share unit account under the AT&T
Deferral Plan shall be permitted an irrevocable election to have the share units
in such account converted to their cash value and transferred to the cash
account under the AT&T Deferral Plan, which election shall be made in accordance
with procedures established by AT&T, in its sole discretion, before and
effective as of the Close of the Distribution Date. Immediately after the
Distribution Date, the balance of any Transferred Individual in either an AT&T
share unit account or a cash account under the AT&T Deferral Plan as of the
Close of the Distribution Date shall be transferred to a Lucent share unit
account or cash account, respectively, under the Lucent Deferral Plan, with a
number of Lucent share units equal to the number of AT&T share units under the
AT&T Deferral Plan as of the Close of the Distribution Date multiplied by the
Ratio.
6.6 NON-EMPLOYEE DIRECTOR BENEFITS.
(a) NON-EMPLOYEE DIRECTOR PLANS. As of the Closing Date,
Lucent shall assume and be solely responsible for all Liabilities under the AT&T
Non-Employee Director Plans to or relating to Lucent Non-Employee Directors.
(b) DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
Each Lucent Non-Employee Director who has a deferred AT&T share unit account
under the AT&T Deferred Compensation Plan for Non-Employee Directors shall be
permitted an irrevocable election to have the share units in such account
converted to their cash value and
<PAGE>
transferred to the cash account under the AT&T Deferred Compensation Plan for
Non-Employee Directors, which election shall be made in accordance with
procedures established by AT&T, in its sole discretion, before and effective as
of the Closing Date. As of the Closing Date, the balance of any Lucent
Non-Employee Director in either an AT&T share unit account or a cash account
under the AT&T Deferred Compensation Plan for Non-Employee Directors shall be
transferred to a Lucent share unit account or cash account, respectively, under
the Lucent Deferred Compensation Plan for Non-Employee Directors, with a number
of Lucent share units equal to the number of AT&T share units under the AT&T
Deferred Compensation Plan for Non-Employee Directors as of the Closing Date
multiplied by the amount obtained by dividing (A) the average of the daily high
and low per-share prices of the AT&T Common Stock as listed on the NYSE during
each of the five trading days Immediately after the Closing Date, by (B) the
average of the daily high and low per-share prices of the Lucent Common Stock as
listed on the NYSE during each of the five trading days Immediately after the
Closing Date.
6.7 NON-COMPETITION GUIDELINES.
(a) AT&T NON-COMPETITION GUIDELINE. Effective as of the Close
of the Distribution Date, AT&T shall cause the AT&T Non-Competition Guideline to
be amended to provide that until the end of the eighteenth calendar month that
ends after the Close of the Distribution Date, employment by Lucent or a Lucent
Entity shall not be a violation of the guideline.
(b) LUCENT NON-COMPETITION GUIDELINE. Effective Immediately
after the Distribution Date, Lucent shall adopt a non-competition guideline,
applicable to employees of Lucent and the Lucent Entities who are similarly
situated to those employees of AT&T and the AT&T Entities who are subject to the
AT&T Non-Competition Guideline, which guideline shall expressly provide that
until the end of the eighteenth calendar month that ends after the Close of the
Distribution Date, employment by AT&T shall not constitute a violation of the
guideline.
(c) CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision
of the Separation and Distribution Agreement shall be deemed to release any
individual for any violation of the AT&T Non-Competition Guideline or any
agreement or policy pertaining to confidential or proprietary information of
AT&T or any of its Affiliates, or otherwise relieve any individual of his or her
obligations under such Guideline or any such agreement or policy.
6.8 RABBI TRUST AND CORPORATE-OWNED LIFE INSURANCE.
(a) ESTABLISHMENT OF MIRROR RABBI TRUST. Effective no later
than Immediately after the Distribution Date, Lucent shall establish, or cause
to be established, the Lucent Rabbi Trust as a grantor trust subject to Code
SectionSection 671 et seq., which shall be substantially identical in all
Material Features to the AT&T Rabbi Trust, other than the definitions of the
terms "potential change in control" and "change in control." Lucent shall
appoint as trustee under the Lucent Rabbi Trust the then-current trustee of the
AT&T Rabbi Trust.
(b) FUNDING OF LUCENT RABBI TRUST.
(i) As of the earlier of the Close of
the
Distribution Date and the date when assets are first transferred or contributed
to the Lucent Rabbi Trust (the "Rabbi
<PAGE>
Trust Determination Date"), AT&T shall determine the amount of the liabilities
under the AT&T Executive Benefits Plans (other than the AT&T Senior Management
Incentive Award Deferral Plan) that are payable from the AT&T
Rabbi Trust. AT&T
shall then cause the trustee of the AT&T Rabbi Trust to transfer to the trustee
of the Lucent Rabbi Trust (A) the most recently purchased trust-owned life
insurance policy held by the AT&T Rabbi Trust if more than one such policy is
then so held (regardless of which entity employs the insured individuals), and
(B) if AT&T, in its sole discretion, so determines, all cash then held in the
AT&T Rabbi Trust that is not invested in trust-owned life insurance. If AT&T
determines (or projects) that immediately after such transfer the ratio of the
value of the assets in the Lucent Rabbi Trust to the liabilities under the
Lucent Executive Benefit Plans (other than the Lucent Senior Management
Incentive Award Deferral Plan) that are payable from the Lucent Rabbi Trust will
be less than the ratio of the value of the assets in the AT&T Rabbi Trust
(before the allocation of assets to the Lucent Rabbi Trust) to the liabilities
under the AT&T Executive Benefit Plans (other than the AT&T Senior Management
Incentive Award Deferral Plan) (before the allocation of liabilities to the
Lucent Rabbi Trust), then Lucent shall make an additional contribution to the
Lucent Rabbi Trust from its general assets in cash, simultaneously with the
transfer of assets from the AT&T Rabbi Trust to the Lucent Rabbi Trust, in an
amount such that, immediately following the transfer of assets from the AT&T
Rabbi Trust to the Lucent Rabbi Trust, the ratio of the value of the assets in
the Lucent Rabbi Trust to the liabilities under the Lucent Executive Benefit
Plans (other than the Lucent Senior Management Incentive Award Deferral Plan)
will immediately thereafter be equal to the ratio of assets to liabilities under
the AT&T Rabbi Trust (other than liabilities associated with the AT&T Senior
Management Incentive Award Deferral Plan) immediately before the allocation of
assets and liabilities to the Lucent Rabbi Trust. For purposes of this Section
6.8(b)(i), liabilities shall be determined based upon the "Full Funding Amount"
as defined in Section 2.5 of the AT&T Rabbi Trust.
(ii) As of the Rabbi Trust
Determination Date, Lucent
and AT&T shall identify the Transferred Individuals and other individuals
insured by trust-owned life insurance polices held by the trustee of the AT&T
Rabbi Trust and (after any transfers described in Section 6.8(b)(i)) the trustee
of the Lucent Rabbi Trust, and shall share (and shall cause the trustees of
their respective Rabbi Trusts to share) such information as may be necessary for
each to determine when and whether such individuals are deceased.
(c) CORPORATE-OWNED LIFE INSURANCE. Lucent and AT&T shall take
all actions, including creating any trust arrangements necessary to replicate
the manner in which AT&T has heretofore held such policies, and executing or
accepting delivery of any assignments reasonably requested by either party or
any insurance company insuring one or more lives under the Corporate-Owned Life
Insurance, as may be necessary or appropriate in order to assign those policies
insuring Transferred Individuals to Lucent, effective Immediately after the
Distribution Date. If a Corporate-Owned Life Insurance Policy is so assigned to
Lucent, Lucent shall assume and be solely responsible for all Liabilities, and
shall be entitled to all benefits, thereunder, effective as of the earlier of
(i) the Close of the Distribution Date and (ii) the date of such assignment.
AT&T and Lucent shall continue, liquidate and/or administer such Corporate-Owned
Life Insurance Policies on terms and conditions agreed to by AT&T and Lucent.
Lucent and AT&T shall share all information that may be necessary to identify
the individuals insured by the Corporate-Owned Life Insurance policies owned by
AT&T and Lucent and to determine when and whether such individuals are deceased.
6.9 AT&T SPLIT DOLLAR LIFE INSURANCE. AT&T and Lucent
shall take all
actions necessary or appropriate to assign to Lucent, AT&T's
rights and
interests in the Split Dollar
<PAGE>
Life Insurance policies under the Senior Management Individual Life Insurance
Program and the Senior Management Basic Life Insurance Program issued by
Metropolitan Life Insurance Company, Hartford Life Insurance Company, and
Confederation Life Insurance Company (or their successors in interest, including
Pacific Mutual Life Insurance Company), and any additional split dollar life
insurance program that may be implemented by AT&T before the Close of the
Distribution Date, with respect to Transferred Individuals, effective
Immediately after the Distribution Date, and under the AT&T Non-Employee
Director Plans with respect to AT&T Non-Employee Directors who become Lucent
Non-Employee Directors, effective as of the Closing Date (such policies, the
"Assigned Split Dollar Policies"). Such actions shall include Lucent's
acceptance of any collateral assignments, policy endorsements or such other
documentation executed by or on behalf of Transferred Individuals and Lucent
Non-Employee Directors, or any trustee of any trust to which such individual's
policy rights or incidents of ownership under the Assigned Split Dollar Policies
have been assigned, and Lucent's entering into such agreements as may be
necessary to fulfill any obligations of AT&T to any insurance company or
insurance agent or broker under the Assigned Split Dollar Policies. From and
after the date of the assignment of any Assigned Split Dollar Policy to Lucent,
Lucent shall assume and be solely responsible for all Liabilities, and shall be
entitled to all benefits, of AT&T under such policy and under the Senior
Management Life Insurance Program, the Senior Management Basic Life Insurance
Program, the AT&T Non-Employee Director Plans and any additional split dollar
life insurance program that may be implemented by AT&T before the Close of the
Distribution Date, as the case may be, with respect to such policies, and any
related agreements entered into by Transferred Individuals or Lucent
Non-Employee Directors.
ARTICLE VII
MISCELLANEOUS BENEFITS
7.1 TRANSFER OF STOCK PURCHASE PLAN RECORDKEEPING
ACCOUNTS. If the AT&T
Stock Purchase Plan is in effect as of the Close of the
Distribution Date, AT&T
shall cause the recordkeeping accounts under the AT&T Stock Purchase Plan of all
Transferred Individuals to be transferred, as of the Close of the Distribution
Date or as soon as practicable thereafter, to, and Lucent shall cause the
accounts to be accepted by, the recordkeeper for the Lucent Stock Purchase Plan.
Lucent shall use its reasonable best efforts to enter into agreements
satisfactory to Lucent with the recordkeeper of the AT&T Stock Purchase Plan to
ensure the transfer and maintenance of the participant records. Through the end
of the Occupational Transition Period, Lucent shall use a recordkeeper and an
enrollment vendor under the Lucent Stock Purchase Plan compatible with the
recordkeeper and enrollment vendor under the AT&T Stock Purchase Plan.
7.2 CONCESSION TELEPHONE SERVICE. Effective Immediately after the
Distribution Date through June 30, 1998, Lucent shall continue to provide a
concession telephone service program for Transferred Individuals who are then
retired or who retire on or before June 30, 1998, which shall be substantially
identical in all Material Features to the corresponding AT&T concession
telephone service program (provided, that Lucent shall only reimburse or pay for
long-distance services provided by AT&T to such Transferred Individuals).
7.3 SERVICE ANNIVERSARY AND RETIREMENT AWARD PROGRAM.
(a) Before the Close of the Distribution Date, AT&T shall use
its reasonable best efforts to amend the service anniversary merchandise vendor
contract in existence as of
<PAGE>
the date of this Agreement and related to the AT&T Service Anniversary and
Retirement Award Program to permit Lucent and the Lucent Entities to participate
in the terms and conditions of such contract effective Immediately after the
Distribution Date. These efforts shall substantially conform with the guidelines
set forth in Section 5.7(a) as if the service anniversary merchandise vendor
contract were an ASO Contract.
(b) Lucent and the Lucent Entities may provide to their
employees service anniversary merchandise bearing the name and/or logo of AT&T
ordered by AT&T before the date of this Agreement and delivered under the Lucent
Service Anniversary and Retirement Award Program to Transferred Individuals,
Lucent Individuals and other employees and former employees of Lucent and the
Lucent Entities whose service anniversary occurs on or before December 31, 1996,
subject to the terms and conditions of any separate agreement between AT&T and
Lucent regarding the use of the corporate names, logos, service marks and other
intellectual property of AT&T and an AT&T Entity. No service anniversary
merchandise bearing the corporate name and/or logo of AT&T shall be delivered to
any Transferred Individuals, Lucent Individuals or other employees and former
employees of Lucent and the Lucent Entities with respect to a service
anniversary on or after January 1, 1997, without the express written consent of
AT&T.
7.4 SHARES FOR GROWTH PROGRAM. Effective Immediately after the
Distribution Date, Lucent shall assume and be solely responsible for all
Liabilities relating to, arising out of or resulting from awards to Transferred
Individuals under the Shares for Growth Program provided for in the Collective
Bargaining Agreement. Awards to Transferred Individuals payable after the Close
of the Distribution Date shall be made in shares of Lucent Common Stock rather
than shares of AT&T Common Stock, and in determining the number of shares of
Lucent Common Stock Transferred Individuals will receive for such awards, the
August 1995 reference price for a share of Lucent Common Stock shall be
calculated by dividing the August 1995 reference price for a share of AT&T
Common Stock as set forth in the Collective Bargaining Agreement by the Ratio.
7.5 THEODORE N. VAIL AWARD TRUST ASSETS. Lucent shall have the option
to continue to offer the Theodore N. Vail Memorial Fund Awards program to its
employees after the Close of the Distribution Date, provided that it exercises
this option by giving written notice of its intent to AT&T before the Close of
the Distribution Date. If Lucent elects to offer the Theodore N. Vail Awards
program, and it is determined by AT&T to be legally permissible to transfer
assets from the AT&T Theodore N. Vail Awards trust to a trust established by
Lucent for purposes of the Lucent Theodore N. Vail Awards program, AT&T shall
transfer from the AT&T Theodore N. Vail Awards trust to such trust established
by Lucent assets determined by AT&T to have a fair market value that bears the
same relationship to the fair market value of the total assets in such AT&T
trust as the number of Transferred Individuals bears to the total number of
employees and former employees of AT&T, the AT&T Entities, Lucent and the Lucent
Entities as of the Close of the Distribution Date. AT&T shall have the sole
discretion to determine whether such assets will be transferred to the Lucent
trust in the form of AT&T Stock or cash or a combination thereof.
7.6 1996 MANAGEMENT INCENTIVE COMPENSATION PAYMENTS. Effective
Immediately after the Distribution Date, Lucent shall be responsible for
determining, with respect to company performance awards, unit performance
awards, and merit awards that would otherwise be payable under AT&T's management
compensation program to Transferred Individuals for the 1996 performance year,
(a) the extent to which established performance criteria (as interpreted by
Lucent, in its sole discretion, after taking into account the effects
<PAGE>
of the IPO and the Distribution) have been met and (b) the payment
level for
each Transferred Individual.
ARTICLE VIII
GENERAL AND ADMINISTRATIVE
8.1 PAYMENT OF 1996 ADMINISTRATIVE COSTS AND EXPENSES.
(a) SHARED COSTS. The estimated budget for 1996 for AT&T's
Benefits and Compensation organization is set forth on Schedule VII. AT&T and
Lucent shall each be responsible for their allocable share of such budgeted
costs as set forth on Schedule VII. Lucent shall pay to AT&T one-twelfth of its
allocable share of such budgeted costs each month during 1996. AT&T shall
provide, as soon as practicable after the date of this Agreement, such
information as may reasonably be requested by Lucent concerning the
determination of such budgeted costs.
(b) ADDITIONAL UNANTICIPATED EXPENSES. If there are additional
expenses not anticipated in the 1996 budget for AT&T's Benefits and Compensation
organization, then Lucent shall pay to AT&T one-half of such unanticipated
expenses, but only to the extent that the additional expenses are (i) reasonable
and necessary and (ii) incurred as a direct result of, and solely for the
purpose of, the normal administration (as currently projected for 1996) of the
AT&T Plans and the Lucent Plans during 1996. If any unanticipated expenses are
incurred at the request of Lucent or a Lucent Entity, they shall be the sole
responsibility of Lucent. Any other unanticipated expenses shall be the sole
responsibility of AT&T.
(c) ADMINISTRATIVE PERSONNEL. A schedule of the individuals
employed in AT&T's Benefits and Compensation organization who have been
designated to become employees of Lucent or a Lucent Entity (the "Lucent
Administrative Employees") has been agreed to by Lucent and AT&T. The Lucent
Administrative Employees shall remain on AT&T's payroll until December 31, 1996
unless AT&T and Lucent agree to a different date. If AT&T and Lucent elect that
the Lucent Administrative Employees be placed on the Lucent payroll before
January 1, 1997, then Lucent's direct cost with respect to the Lucent
Administrative Employees (including salary and loading for benefit related
charges) for each month after they leave AT&T's payroll shall be subtracted from
the monthly amount payable by Lucent in accordance with Section 8.1(a). Such
individuals shall become Transferred Individuals when they are placed on the
payroll of Lucent or a Lucent Entity if such date is after the Close of the
Distribution Date. Regardless of whether the Lucent Administrative Employees are
on the payroll of AT&T or Lucent or a Lucent Entity, they shall be subject to
the supervision of AT&T's Senior Vice President, Benefits and Compensation, or
his delegates, through December 31, 1996.
(d) POST-DISTRIBUTION ADMINISTRATION IN
1996. From the
Distribution Date through December 31, 1996, AT&T's Senior Vice President,
Benefits and Compensation, and his staff (including the Lucent Administrative
Employees) shall have full authority and responsibility to administer the Lucent
Plans to the same extent as if AT&T's Senior Vice President, Benefits and
Compensation, and his staff were employees of Lucent or a Lucent Entity.
Notwithstanding the foregoing, Lucent shall retain all fiduciary responsibility
for the administration of the Lucent Plans and, subject to the need to conform
the administration of the AT&T Plans and the Lucent Plans during 1996, Lucent
shall have the right to
<PAGE>
direct AT&T's Senior Vice President, Benefits and
Compensation, in the manner in which it intends the
Lucent Plans to be
administered.
8.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED
MATTERS.
(a) ACTUARIAL AND ACCOUNTING METHODOLOGIES AND ASSUMPTIONS.
For purposes of this Agreement, unless specifically indicated otherwise: (i) all
actuarial methodologies and assumptions used for a particular Plan shall (except
to the extent otherwise determined by AT&T and Lucent to be reasonable or
necessary) be substantially the same as those used in the actuarial valuation of
that Plan used to determine minimum funding requirements under ERISA Section 302
and Code Section 412 for 1996, or, if such Plan is not subject to such minimum
funding requirements, used to determine AT&T's deductible contributions under
Code Section 419A or, if such Plan is not subject to Code Section 419A, the
assumptions used to prepare AT&T's audited financial statements for 1996, as the
case may be; and (ii) the value of plan assets shall be the value established
for purposes of audited financial statements of the relevant plan or trust for
the period ending on the date as of which the valuation is to be made. Lucent
Liabilities relating to, arising out of or resulting from the status of Lucent
and the Lucent Entities as Participating Companies in AT&T Plans, as provided
for in Section 2.2 and all accruals relating thereto shall be determined by AT&T
using actuarial assumptions and methodologies (including with respect to
demographics, medical trends and other relevant factors) determined by AT&T in a
manner consistent with AT&T's practice as in effect on the Participation
Commencement Date and in conformance with the generally accepted actuarial
principles promulgated by the American Academy of Actuaries, the Code, ERISA,
and/or generally accepted accounting principles, as applicable, in each case as
interpreted by AT&T consistent with past practice. Except as otherwise
contemplated by this Agreement or as required by law, all determinations as to
the amount or valuation of any assets of or relating to any AT&T Plan (whether
or not such assets are being transferred to a Lucent Plan) shall be made
pursuant to procedures to be established by the parties before the Closing Date.
(b) PAYMENT OF LIABILITIES; DETERMINATION OF EMPLOYEE STATUS.
Lucent shall pay directly, or reimburse AT&T promptly for, all Liabilities
assumed by it pursuant to this Agreement, including all compensation payable to
Lucent Individuals and Transferred Individuals for services rendered while in
the employ of AT&T or an AT&T Entity before becoming a Lucent Individual or
Transferred Individual, respectively (to the extent not charged for pursuant to
Section 8.1 or another Ancillary Agreement). To the extent the amount of such
Liabilities is not yet determinable because the status of individuals as Lucent
Individuals or Transferred Individuals is not yet determined, except as
otherwise specified herein or in another Ancillary Agreement with respect to
particular Liabilities, Lucent shall make such payments or reimbursements based
upon AT&T's reasonable estimates of the amounts thereof, and when such status is
determined, Lucent shall make additional reimbursements or payments, or AT&T
shall reimburse Lucent, to the extent necessary to reflect the actual amount of
such Liabilities. In determining the number of individuals in any particular
group of employees described in this Agreement (such as "Transferred Individuals
and Lucent Individuals"), no individual shall be counted twice (even if, for
example, he or she is both a Lucent Individual and a Transferred Individual).
Determinations of what entity employs or employed a particular individual shall
be made by reference to the applicable legal entity and/or other appropriate
accounting code, to the extent possible.
(c) CONTRIBUTIONS TO TRUSTS. Lucent shall pay
its share of any
contributions made to any trust maintained in connection with an
AT&T Plan with
respect to any
<PAGE>
period while Lucent or a Lucent Entity is a Participating Company in that AT&T
Plan; provided, however, that Lucent shall not be required to contribute to the
AT&T Rabbi Trust after the date of this Agreement. Lucent's share of any
contributions to the AT&T Health Benefits Trust shall be determined based on
AT&T's reasonable estimate of the claims under the AT&T Plans funded through
such trust that are paid to or for the benefit of Lucent Individuals and other
employees and former employees of Lucent and the Lucent Entities, Transferred
Individuals and beneficiaries and dependents thereof, until a cash benefit
payment procedure for daily check presentments separately to Lucent and the
Lucent Entities for such claims is implemented, after which Lucent's share of
such contributions shall be determined based upon such procedure. Lucent's share
of any contributions to any other such trust shall be determined by AT&T by
computing separate contribution amounts for AT&T and Lucent, as if Lucent and
the Lucent Entities were not Affiliates of AT&T and the AT&T Entities, but
followed the same funding policy and used the same funding assumptions as AT&T
and the AT&T Entities with respect to such trust; provided, that if the sum of
the amounts so determined is less than or exceeds the total contribution to be
made to such trust in accordance with such funding policy as applied to AT&T,
the AT&T Entities, Lucent and the Lucent Entities as a group, then Lucent's
share of such contribution shall be determined by increasing or reducing both
such amounts, as applicable, proportionately so as to eliminate such difference.
(d) PARTICIPANT CONTRIBUTIONS; SETTLEMENTS, REFUNDS, AND
SIMILAR PAYMENTS. Until such time as a cash benefit payment procedure is
implemented pursuant to which the participant contributions made under any AT&T
Health and Welfare Plan made by Lucent Individuals, Transferred Individuals and
other employees and former employees of Lucent and the Lucent Entities and
beneficiaries and dependents thereof can be specifically identified as such, for
purposes of determining the Lucent Liabilities associated with such Plan, such
individuals shall be deemed to have made such contributions in an amount that
bears the same relationship to the total contributions by all participants to
such Plan as the number of such individuals who are participants in such Plan
bears to the total number of participants in such Plan. If AT&T or an AT&T
Entity receives any amount that represents an offset to or reduction of any
Liability relating to, arising out of or resulting from any AT&T Plan (including
any amount received in settlement of a dispute regarding the amount of benefits
payable under such Plan and any refund of premiums paid to an insurer of
benefits under such Plan) with respect to a period before the Close of the
Distribution Date, then except to the extent Section 5.21(c)(iv) is applicable,
AT&T shall pay to Lucent a portion of such amount that bears the same
relationship to the total of such amount as the number of Lucent Individuals,
Transferred Individuals and other employees and former employees of Lucent and
the Lucent Entities who were participants in such Plan during the period to
which such amount relates bears to the total number of participants in such
Plan.
(e) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST. To the
extent not charged for pursuant to Section 8.1 or another Ancillary Agreement or
the ASA Agreement and to the extent not chargeable to a trust established in
connection with an AT&T Plan, Lucent shall be responsible, through either direct
payment from its own cash or reimbursement of AT&T from its own cash, for the
following expenses in the administration of the AT&T Plans while Lucent or a
Lucent Entity is a Participating Company in such Plans (and except as expressly
provided below, Lucent's allocable share of the following administrative
expenses shall be that portion of the total such expenses that bears the same
relationship to such total expenses as the number of Lucent Individuals,
Transferred Individuals and other employees and former employees of Lucent and
the Lucent Entities who are participants in the applicable Plan bears to total
number of participants in
<PAGE>
such Plan): (i) the costs incurred in the administration of the AT&T Pension
Plans and other Plans providing benefits to retired individuals, including the
cost of managing any trust assets and performing actuarial calculations (which
shall be shared equally between Lucent and AT&T); (ii) the recordkeeping costs
(including expenses in development and operation of the daily valuation
recordkeeping system for the AT&T LTSSP) and other costs incurred in the
administration of the AT&T Savings Plans (including expenses in employee
communications materials for the AT&T Savings Plans and consultant and other
out-of-pocket fees and expenses generally related to the design or
administration of the AT&T Savings Plans); (iii) the fees paid to benefit
delivery vendors under AT&T Health and Welfare Plans; (iv) COBRA administrative
costs (of which Lucent's allocable share shall be that portion of the total such
costs that bears the same relationship to such total costs as the number of
Lucent Individuals, Transferred Individuals and other employees and former
employees of Lucent and the Lucent Entities and beneficiaries and dependents
thereof who are participants in the applicable Plan bears to total number of
participants in such Plan); (v) the cost of administrative services for the
Family Care Development Fund and other Work and Family programs; (vi) the costs
incurred in the administration of the AT&T Executive Benefits Plans, including
payments made to insurance agents and brokers (such as the agents and brokers
who administer corporate-owned life insurance and trust-owned life insurance
programs), and payments made to vendors (such as the vendor(s) who administer
the AT&T Senior Management Financial Counseling Program); (vii) the expenses
incurred in establishing the AT&T Stock Purchase Plan and its recordkeeping
system; (viii) the consultant and other out-of-pocket fees and expenses
(including accounting, actuarial, consulting, and legal fees, and photocopying,
printing, and similar expenses) generally related to the design or
administration of the AT&T Plans (which shall be shared equally between Lucent
and AT&T); (ix) the payments for administration of the AT&T Rabbi Trust and for
actuarial and legal work in connection with the AT&T Rabbi Trust (which shall be
shared equally between Lucent and AT&T); and (x) the payments for the management
of the assets of the AT&T Rabbi Trust (which shall be prorated between Lucent
and AT&T based on relative value of Lucent's and AT&T's share of the liabilities
funded by AT&T Rabbi Trust assets with respect to AT&T and Lucent Executives as
reflected in the IPO Registration Statement).
(f) STOCK AWARD CHARGEBACKS. Lucent shall pay AT&T the
following amounts: (i) with respect to each AT&T Option that is exercised by a
Lucent Individual or another employee of Lucent or a Lucent Entity at any time
after the Closing Date, the Spread on such Option; (ii) with respect to each
purchase of AT&T Common Stock pursuant to the AT&T Stock Purchase Plan by a
Lucent Individual or another employee of Lucent or a Lucent Entity at any time
after the Closing Date, the Spread with respect to such purchase; (iii) with
respect to the vesting or delivery at any time after the Closing Date of shares
of AT&T Common Stock pursuant to an Award (other than an AT&T Option) held by a
Lucent Individual or another employee of Lucent or a Lucent Entity, the Value of
such AT&T Common Stock on the date of such vesting or delivery. AT&T shall bill
Lucent for such amounts from time to time (but only after the exercise,
purchase, vesting or delivery that gives rise to the obligation to make any such
payment), and Lucent shall pay such amounts promptly after receipt of such
bills. The "Spread" on an Option or with respect to a purchase pursuant to the
AT&T Stock Purchase Plan means the excess, if any, of the Value of the purchased
shares on the date of exercise of such Option or the date of such purchase, as
applicable, over the price paid for such shares. The "Value" of a share of AT&T
Common Stock on a given date means the average of the high and the low per-share
prices of the AT&T Common Stock as listed on the NYSE on such date, or if there
is no trading on the NYSE on such date, on the most recent previous date on
which such trading takes place.
<PAGE>
8.3 1984 AT&T UNFUNDED DIVESTITURE REIMBURSEMENT AGREEMENTS. In order
to permit AT&T to continue to honor any obligations it may have for on-going
reimbursement costs payable periodically to the seven Regional Bell Holding
Companies and Bell Communications Research, Inc. in accordance with the
provisions of the Unfunded Cost Sharing Agreements, Lucent shall provide, on an
annual basis and in accordance with the schedule provided to Lucent by AT&T, at
no cost to AT&T, any information in its possession required to enable AT&T to
determine, validate, and reconcile the AT&T offset amounts specified in the
Unfunded Cost Sharing Agreements. Lucent shall also provide AT&T with
information in its possession to the extent requested by a party to an Unfunded
Cost Sharing Agreement pursuant to its rights thereunder to audit information
provided by Lucent to AT&T. If Lucent or any Lucent Entity grants an "ad hoc
pension increase" as defined in either of the Unfunded Cost Sharing Agreements,
as a result of which AT&T or any AT&T Entity is required to pay pursuant to
either or both of the Unfunded Cost Sharing Agreements any amounts in excess of
the amounts it would have been required to pay absent such ad hoc pension
increase, then Lucent shall reimburse AT&T for the amount of such excess, as and
when it is paid by AT&T or such AT&T Entity. The parties agree that any such ad
hoc increase made by Lucent or any Lucent Entity to the extent not in excess of
a prior ad hoc increase by AT&T or any AT&T Entity made after the date hereof
will not give rise to any reimbursement obligation pursuant to the foregoing
sentence, but an ad hoc increase made by Lucent or any Lucent Entity prior to
any ad hoc increase made by AT&T or any AT&T Entity will give rise to such
reimbursement obligation (with no reduction in such reimbursement obligation due
to the subsequent ad hoc increase by AT&T or any AT&T Entity). Except as
specifically provided in the preceding two sentences, the foregoing shall not be
deemed to give rise to any liability of Lucent under the Unfunded Cost Sharing
Agreements.
8.4 SHARING OF PARTICIPANT INFORMATION. AT&T and Lucent shall share,
AT&T shall cause each applicable AT&T Entity to share, and Lucent shall cause
each applicable Lucent Entity to share, with each other and their respective
agents and vendors (without obtaining releases) all participant information
necessary for the efficient and accurate administration of each of the AT&T
Plans and the Lucent Plans during the respective Transition Periods applicable
to such Plans, and with respect to each of the AT&T Health and Welfare Plans and
Lucent Health and Welfare Plans, any additional periods during which such Plan
is subject to the restrictions of Section 5.8. AT&T and Lucent and their
respective authorized agents shall, subject to applicable laws on
confidentiality, be given reasonable and timely access to, and may make copies
of, all information relating to the subjects of this Agreement in the custody of
the other party, to the extent necessary for such administration. Until the
Close of the Distribution Date, all participant information shall be provided in
the manner and medium applicable to Participating Companies in the AT&T Plans
generally, and thereafter until December 31, 1998, all participant information
shall be provided in a manner and medium that is compatible with the data
processing systems of AT&T as in effect of the Close of the Distribution Date,
unless otherwise agreed to by AT&T and Lucent.
8.5 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS. While
Lucent is a Participating Company in the AT&T Plans, Lucent shall take, and
shall cause each other applicable Lucent Entity to take, all actions necessary
or appropriate to facilitate the distribution of all AT&T Plan-related
communications and materials to employees, participants and beneficiaries,
including summary plan descriptions and related summaries of material
modification, summary annual reports, investment information, prospectuses,
notices and enrollment material for the Lucent Plans. Lucent shall pay AT&T the
cost relating to the copies of all such documents provided to Lucent, except to
the extent such costs are charged pursuant to Section 8.1 or pursuant to an
Ancillary Agreement or the ASA Agreement. Lucent shall assist, and Lucent shall
cause each other applicable Lucent Entity to assist, AT&T in complying with all
reporting and disclosure requirements of ERISA, including the preparation of
Form 5500 annual reports for the AT&T Plans, where applicable.
<PAGE>
8.6 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement or the Separation and Distribution Agreement shall
be construed to create any right, or accelerate entitlement, to any compensation
or benefit whatsoever on the part of any Lucent Individual, Transferred
Individual or other future, present or former employee of AT&T, an AT&T Entity,
Lucent, or a Lucent Entity under any AT&T Plan or Lucent Plan or otherwise.
Without limiting the generality of the foregoing: (i) neither the Distribution
nor the termination of the Participating Company status of Lucent or a Lucent
Entity shall cause any employee to be deemed to have incurred a termination of
employment which entitles such individual to the commencement of benefits under
any of the AT&T Plans, any of the Lucent Plans, or any of the Individual
Agreements; and (ii) except as expressly provided in this Agreement, nothing in
this Agreement shall preclude Lucent, at any time after the Close of the
Distribution Date, from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Lucent Plan, any benefit
under any Plan or any trust, insurance policy or funding vehicle related to any
Lucent Plan.
8.7 PLAN AUDITS.
(a) AUDIT RIGHTS WITH RESPECT TO THE ALLOCATION OR TRANSFER OF
PLAN ASSETS. The allocation of Pension Plan assets and liabilities pursuant to
Section 3.2, the transfer of assets from AT&T VEBAs pursuant to Sections 5.3 and
5.5, the transfer of RFA assets pursuant to Section 5.4 and the transfer of
assets from the AT&T Rabbi Trust pursuant to Section 6.8 shall be audited on
behalf of both AT&T and Lucent by the consulting firm of Milliman & Robertson.
The scope of such audit shall be limited to the accuracy of the data and the
accuracy of the computation and adherence to the methodology specified in this
Agreement and except as set forth in the last sentence of this Section 8.7(a),
such audit shall not be binding on the parties. Milliman & Robertson shall
provide its report to both AT&T and Lucent. No other audit shall be conducted
with respect to the transfer or allocation of Plan assets. The costs of such
audit shall be shared equally by AT&T and Lucent, or, at each company's
discretion and to the extent allocable thereto, by their respective Pension
Plans. To the extent such audit recommends a change to the value of assets
allocated to a Lucent Plan of less than 0.25%, the original determination shall
be binding on the parties and shall not be subject to the dispute resolution
process provided under the Separation and Distribution Agreement. To the extent
such audit recommends such a change of 0.25% or more, any unresolved dispute
between the parties as to whether and how to make any change in response to such
recommendation shall be subject to the dispute resolution process provided under
the Separation and Distribution Agreement.
(b) AUDIT RIGHTS WITH RESPECT TO INFORMATION
PROVIDED.
(i) Each of AT&T and Lucent, and their
duly
authorized representatives, shall have the right to conduct audits with respect
to all information provided to it by the other party. The party conducting the
audit (the "Auditing Party") shall have the sole discretion to determine the
procedures and guidelines for conducting audits and the selection of audit
representatives under this Section 8.7(b); provided, that audits with respect to
the allocation or transfer of Plan assets and liabilities shall be subject only
to Section 8.7(a). The Auditing Party shall have the right to make copies of any
records at its expense, subject to the confidentiality provisions set forth in
the Separation and Distribution Agreement, which are incorporated by reference
herein. The party being audited shall provide the Auditing Party's
representatives with reasonable access during normal business hours to its
operations, computer systems and paper and electronic files, and
-50-
<PAGE>
provide workspace to its representatives. After any audit is completed, the
party being audited shall have the right to review a draft of the audit findings
and to comment on those findings in writing within five business days after
receiving such draft.
(ii) The Auditing Party's audit rights
under this
Section 8.7(b) shall include the right to audit, or participate in an audit
facilitated by the party being audited, of any Subsidiaries and Affiliates of
the party being audited and of any benefit providers and third parties with whom
the party being audited has a relationship, or agents of such party, to the
extent any such persons are affected by or addressed in this Agreement
(collectively, the "Non-parties"). The party being audited shall, upon written
request from the Auditing Party, provide an individual (at the Auditing Party's
expense) to supervise any audit of a Non-party. The Auditing Party shall be
responsible for supplying, at the Auditing Party's expense, additional personnel
sufficient to complete the audit in a reasonably timely manner. The
responsibility of the party being audited shall be limited to providing, at the
Auditing Party's expense, a single individual at each audited site for purposes
of facilitating the audit.
(c) AUDITS REGARDING VENDOR CONTRACTS. From Immediately after
the Distribution Date through December 31, 1998, AT&T and Lucent and their duly
authorized representatives shall have the right to conduct joint audits with
respect to any vendor contracts that relate to both the AT&T Health and Welfare
Plans and the Lucent Health and Welfare Plans. The scope of such audits shall
encompass the review of all correspondence, account records, claim forms,
canceled drafts (unless retained by the bank), provider bills, medical records
submitted with claims, billing corrections, vendor's internal corrections of
previous errors and any other documents or instruments relating to the services
performed by the vendor under the applicable vendor contracts. AT&T and Lucent
shall agree on the performance standards, audit methodology, auditing policy and
quality measures and reporting requirements relating to the audits described in
this Section 8.7 and the manner in which costs incurred in connection with such
audits will be shared.
8.8 BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Transferred Individuals for AT&T Plans shall be transferred to and be in full
force and effect under the corresponding Lucent Plans until such beneficiary
designations are replaced or revoked by the Transferred Individual who made the
beneficiary designation.
8.9 REQUESTS FOR IRS RULINGS AND DOL OPINIONS.
(a) COOPERATION. Lucent shall cooperate fully with AT&T on any
issue relating to the transactions contemplated by this Agreement for which AT&T
elects to seek a determination letter or private letter ruling from the IRS or
an advisory opinion from the DOL. AT&T shall cooperate fully with Lucent with
respect to any request for a determination letter or private letter ruling from
the IRS or advisory opinion from the DOL with respect to any of the Lucent Plans
relating to the transactions contemplated by this Agreement.
(b) APPLICATIONS. AT&T and Lucent shall make such applications
to regulatory agencies, including the IRS and DOL, as may be necessary to ensure
that any transfers of assets from the AT&T Health Trusts to the Lucent Health
Trusts and from the AT&T LTD VEBA to the Lucent LTD VEBA will neither (i) result
in any adverse tax, legal or fiduciary consequences to AT&T and Lucent, the AT&T
Health Trusts and the AT&T LTD VEBA, the Lucent Health Trusts and the Lucent LTD
VEBA, any participant therein or beneficiaries thereof, or any of AT&T Health
Trusts and the AT&T LTD
<PAGE>
VEBA, any successor welfare benefit funds established by or on behalf of Lucent,
or the trustees of such trusts, nor (ii) contravene any statute, regulation or
technical pronouncement issued by any regulatory agency. Before the Close of the
Distribution Date, Lucent shall prepare all forms required to obtain favorable
tax-exempt determination letters from the IRS for the Lucent Health Trusts and
the Lucent LTD VEBA, and, if applicable, the Lucent Union VEBA.
Lucent and AT&T
agree to cooperate with each other to fulfill any filing and/or regulatory
reporting obligations with respect to such transfers.
(c) LIFE INSURANCE. To the extent the transfer or allocation
of all or a portion of any life insurance policies results in any adverse tax or
legal consequences, including (i) any finding that such transfer results in the
creation of a modified endowment contract within the meaning of Code Section
7702A, a transfer for value within the meaning of Code Section 101(a), or a lack
of insurable interest for either AT&T or Lucent (or their respective trusts, if
any), or (ii) multiple claims for insurance proceeds, AT&T and Lucent shall take
such steps as may be necessary to contest any such finding and, to the extent of
any final determination that such adverse tax or legal consequences will result,
AT&T and Lucent shall make such further adjustments so as to place both parties
in the proportionate financial position that they each would have been in
relative to the other but for such adverse tax or legal consequences.
8.10 FIDUCIARY MATTERS.
(a) FIDUCIARY STATUS. AT&T and Lucent each acknowledges that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and no party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good faith determination that
to do so would violate such a fiduciary duty or standard.
(b) INDEPENDENT FIDUCIARY. Lucent shall retain a fiduciary
independent of AT&T to review and approve the types and value of the assets to
be transferred to the Lucent Plans from the AT&T Plans as described in Articles
III and IV of this Agreement to the extent that such Plans are subject to Part 4
of Title I of ERISA. The foregoing shall not prevent Lucent from engaging any
fiduciaries for any other purposes.
8.11 AGREEMENT WITH ACTUARIAL SCIENCES ASSOCIATES, INC. Lucent shall
enter into an agreement with Actuarial Sciences Associates, Inc. ("ASA"), in a
form substantially similar to Exhibit A. Within 60 days after the Distribution
Date, such agreement shall be presented for ratification by Lucent's Board of
Directors or its authorized delegate.
8.12 COLLECTIVE BARGAINING. To the extent any provision of this
Agreement is contrary to the provisions of the Collective Bargaining Agreement
or any other collective bargaining agreement to which AT&T or any Affiliate of
AT&T is a party, the terms of such collective bargaining agreement shall
prevail. Should any provisions of this Agreement be deemed to relate to a topic
determined by an appropriate authority to be a mandatory subject of collective
bargaining, AT&T or Lucent may be obligated to bargain with the union
representing affected employees concerning those subjects. Neither party will
agree to a modification of the Collective Bargaining Agreement without the
consent of the other. In the event a force surplus affecting members of a
bargaining unit in both AT&T or any AT&T Entity (on the one hand) and Lucent or
any Lucent Entity (on the other hand) directly results, due to the provisions of
the Collective Bargaining Agreement, in an
<PAGE>
employee involuntarily leaving the payroll of the party not declaring the
surplus, then the party declaring the surplus shall bear the cost of any
severance payable to such employee.
8.13 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, AT&T and Lucent shall use their reasonable best
efforts to implement the applicable provisions of this Agreement to the full
extent practicable. If any provision of this Agreement cannot be implemented due
to the failure of such third party to consent, AT&T and Lucent shall negotiate
in good faith to implement the provision in a mutually satisfactory manner. The
phrase "reasonable best efforts" as used herein shall not be construed to
require the incurrence of any non-routine or unreasonable expense or liability
or the waiver of any right.
8.14 POST-DISTRIBUTION BENEFIT
DELIVERY/ADMINISTRATION. Lucent shall
continue to use the P2000 benefit administration system and a compatible pension
payment system, to administer the Lucent Pension Plans through the end of the
Management Transition Period.
8.15 QUIET PERIODS. Lucent shall take such action as is necessary to
ensure that participants in the Lucent LTSSP, the Lucent LTSPME, and the Lucent
RSPSP are notified that a quiet period will occur beginning on or about October
1, 1996, during which changes in investment direction with respect to
participants' accounts generally will not be permitted.
ARTICLE IX
MISCELLANEOUS
9.1 FOREIGN PLANS. As soon as practicable after the date of this
Agreement, AT&T and Lucent shall enter into an agreement regarding the treatment
of Foreign Plans consistent with the principles set forth in Exhibit B hereto.
9.2 RESOURCE LINK EMPLOYEES. The following individuals who are
employees of AT&T or an AT&T Entity as of the Close of the Distribution Date
shall become employees of Lucent or a Lucent Entity Immediately after the
Distribution Date, and shall be Transferred Individuals: (a) a maximum of 208
such individuals who, as of the Close of the Distribution Date, are on Resource
Link assignments to Lucent or a Lucent Entity as of that time, or whose most
recent Resource Link assignment before the Close of the Distribution Date was
with Lucent or a Lucent Entity; (b) a maximum of 48 additional individuals who
are, as of the Close of the Distribution Date, on Resource Link assignment to
common support functions or whose most recent Resource Link assignment before
the Close of the Distribution Date was to common support functions; and (c) term
employees who are, as of the Close of the Distribution Date, on Resource Link
assignments with Lucent or a Lucent Entity.
9.3 EFFECT IF DISTRIBUTION DOES NOT OCCUR. If the Distribution does not
occur, then all actions and events that are, under this Agreement, to be taken
or occur effective as of the Close of the Distribution Date, Immediately after
the Distribution Date, or otherwise in connection with the Distribution, shall
not be taken or occur except to the extent specifically agreed by Lucent and
AT&T.
<PAGE>
9.4 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
9.5 AFFILIATES. Each of AT&T and Lucent shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth in this Agreement to be performed by an AT&T Entity or a
Lucent Entity, respectively.
9.6 INCORPORATION OF SEPARATION AND DISTRIBUTION AGREEMENT PROVISIONS.
The following provisions of the Separation and Distribution Agreement are hereby
incorporated herein by reference, and unless otherwise expressly specified
herein, such provisions shall apply as if fully set forth herein (references in
this Section 9.6 to an "Article" or "Section" shall mean Articles or Sections of
the Separation and Distribution Agreement, and, except as expressly set forth
below, references in the material incorporated herein by reference shall be
references to the Separation and Distribution Agreement): Article V (relating to
Mutual Releases and Indemnification); Article VIII (relating to Exchange of
Information and Confidentiality); Article IX (relating to Arbitration and
Dispute Resolution); Article X (relating to Further Assurances and Additional
Covenants); Article XI (relating to Termination); and Article XII (relating to
Miscellaneous) other than Section 12.2 (relating to Governing Law).
9.7 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of New York, irrespective of the choice of
laws principles of the State of New York, as to all matters, including matters
of validity, construction, effect, performance and remedies.
IN WITNESS WHEREOF, the parties have caused this Employee
Benefits Agreement to be duly executed as of the day and year first above
written.
AT&T CORP.
By: /s/
- ------------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC.
By: /s/
- ------------------------------
Name:
Title:
FORM OF
EMPLOYEE BENEFITS AGREEMENT
BETWEEN
AT&T CORP.
AND
NCR CORPORATION
DATED AS OF
NOVEMBER 20, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
................................................ 1
1.1 Agreement
...................................................... 1
1.2 Assigned Split Dollar Policies
................................. 1
1.3 AT&T Controlled Person
......................................... 2
1.4 AT&T Executive Benefit Plans
................................... 2
1.5 AT&T Individual
................................................ 2
1.6 AT&T Individual Agreement
...................................... 2
1.7 AT&T Plan
...................................................... 2
1.8 AT&T Short Term Incentive Plans
................................ 2
1.9 AT&T Stock Value
............................................... 2
1.10 ATTIMCO
........................................................ 3
1.11 Award
.......................................................... 3
1.12 Close of the NCR Distribution Date
............................. 3
1.13 Code
........................................................... 3
1.14 Distribution Agreement
......................................... 3
1.15 ERISA
.......................................................... 3
1.16 First Transfer
................................................. 3
1.17 Immediately after the NCR Distribution
Date..................... 3
1.18 Individual Agreement
........................................... 3
1.19 Long Term Incentive Plan
....................................... 3
1.20 LTIT
........................................................... 3
1.21 LTIT Agreement
................................................. 3
1.22 LTIT Redemption
................................................ 4
1.23 Lucent EBA
..................................................... 4
1.24 MPT
............................................................ 4
1.25 MPT Agreement
.................................................. 4
1.26 MPT Withdrawal
................................................. 4
1.27 NCR Allocable Share
............................................ 4
1.28 NCR Controlled Person
.......................................... 4
1.29 NCR Employee
................................................... 4
1.30 NCR Executive Benefit Plans
.................................... 4
1.31 NCR Individual
................................................. 4
1.32 NCR Individual Agreement
....................................... 5
1.33 NCR Pension Plans
.............................................. 5
1.34 NCR Plan
....................................................... 5
1.35 NCR Savings Plan
............................................... 5
1.36 NCR SERPs
...................................................... 5
1.37 NCR Short Term Incentive Plans
................................. 5
1.38 NCR Stock Value
................................................ 5
1.39 Option
......................................................... 5
1.40 Plan
........................................................... 5
1.41 Prior MPT
...................................................... 5
1.42 QDRO
........................................................... 5
1.43 QMCSO
.......................................................... 6
<PAGE>
1.44 Ratio
...................................................... 6
1.45 Second Transfer
............................................ 6
1.46 Segregated Assets
.......................................... 6
1.47 Separation and Distribution Agreement
...................... 6
1.48 Split Dollar Life Insurance
................................ 6
1.49 Spread
..................................................... 6
1.50 Supplemental Pension Plan for Transfers
.................... 6
1.51 U.S.
....................................................... 6
1.52 Value
...................................................... 6
ARTICLE II GENERAL PRINCIPLES
......................................... 6
2.1 Allocation of Liabilities
.................................. 6
2.2 Transferred Executives
..................................... 7
ARTICLE III QUALIFIED PLANS
............................................ 7
3.1 NCR Pension Plans
.......................................... 7
3.2 NCR Savings Plan
........................................... 10
ARTICLE IV EXECUTIVE BENEFITS
......................................... 10
4.1 General
.................................................... 10
4.2 Nonqualified Plans
......................................... 10
4.3 AT&T Long Term Incentive Plans
............................. 11
4.4 AT&T Split Dollar Life Insurance
........................... 13
4.5 Individual Agreements
...................................... 13
ARTICLE V MISCELLANEOUS BENEFITS
..................................... 14
5.1 Employee Stock Purchase Plan
............................... 14
5.2 Short Term Incentive Plans
................................. 14
ARTICLE VI FOREIGN PLANS; INTERCHANGE
................................. 14
6.1 Foreign Plans
.............................................. 14
6.2 Interchange Agreement
...................................... 14
ARTICLE VII MISCELLANEOUS
.............................................. 14
7.1 Sharing of Participant Information
......................... 14
7.2 No Change of Control; No Rights Created; No
.................
Restrictions
.............................................. 14
7.3 Effect If NCR Distribution Does Not Occur
.................. 15
7.4 Relationship of Parties
.................................... 15
7.5 Affiliates
................................................. 15
7.6 Incorporation of Distribution Agreement
Provisions
............................................... 15
<PAGE>
7.7 Incorporation of Separation and Distribution
Agreement Provisions
...................................... 15
7.8 Governing Law
.............................................. 15
7.9 Tax Deductions
............................................. 16
7.10 Agreements with Third Parties
.............................. 16
7.11 NCR to Honor Agreements
.................................... 17
Signatures
............................................................. 18
Schedule I AT&T Executive Benefit Plans
Schedule II Individual Agreements
Schedule III NCR Executive Benefit Plans
Schedule IV Individuals to be Transferred to NCR
Schedule V Assets Referred to in Section 3.1(b)
Schedule VI Selection of Assets to be
Transferred to
Trustee(s) of NCR Pension Plans
Schedule VII AT&T Awards Not to Be Replaced with
NCR Awards
Schedule VIII AT&T Liabilities Under Individual
Agreements
Schedule IX Reimbursement of NCR
Schedule X Reimbursement of AT&T
Schedule XI Agreements Establishing Phantom
Share Accounts
Exhibit A Form of Receipt and Release for
First Transfer
Exhibit B Form of Receipt and Release for
Second
Transfer
Exhibit C Form of Foreign Employee Benefits
Agreement
Exhibit D Form of Interchange Agreement
<PAGE>
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of November 20, 1996, is by
and between AT&T and NCR. Capitalized terms used herein (other than the formal
names of AT&T Plans and NCR Plans (as defined below) and related trusts) and not
otherwise defined shall have the respective meanings assigned to them in Article
I hereof or as assigned to them in the Distribution Agreement (as defined
below).
WHEREAS, the Board of Directors of AT&T has determined that it is in
the best interests of AT&T and its shareholders to separate AT&T's existing
businesses into three independent businesses;
WHEREAS, in furtherance of the foregoing, AT&T, NCR and Lucent have
executed and delivered the Separation and Distribution Agreement providing for,
among other things, the initial public offering of shares of Lucent Common Stock
(which was consummated on April 10, 1996) and for the pro rata distribution by
AT&T of all of its shares of Lucent Common Stock to the shareholders of AT&T
(which was consummated on September 30, 1996);
WHEREAS, AT&T, NCR and Lucent have also executed and delivered the
Ancillary Agreements (as such term is defined in the Separation and Distribution
Agreement) governing certain additional matters relating to the Lucent
Distribution;
WHEREAS, the Board of Directors of AT&T has also determined that AT&T
will distribute to its shareholders all of the capital stock of NCR held
directly or indirectly by AT&T, subject to the terms and conditions set forth in
the Distribution Agreement;
WHEREAS, in furtherance of the foregoing, AT&T and NCR have entered
into a Distribution Agreement, dated as of November 20, 1996 (the "Distribution
Agreement"), and certain other agreements that will govern certain matters
relating to the NCR Distribution and the relationship of AT&T and NCR and their
respective Subsidiaries following the NCR Distribution; and
WHEREAS, AT&T and NCR wish to enter into this agreement allocating
assets, liabilities and responsibilities with respect to certain employee
compensation and benefit plans and programs between them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 AGREEMENT means this Employee Benefits Agreement,
including all the
Schedules and Exhibits hereto.
1.2 ASSIGNED SPLIT DOLLAR POLICIES is defined in Section
4.4.
<PAGE>
1.3 AT&T CONTROLLED PERSON as of a specified time means any Person that
is, at such time, a Subsidiary of AT&T or is otherwise controlled, directly or
indirectly, by AT&T, other than NCR or any Person that is, at such time, an NCR
Controlled Person.
1.4 AT&T EXECUTIVE BENEFIT PLANS means the executive benefit and
nonqualified plans, programs, and arrangements established, maintained, agreed
upon, or assumed, in each case before the Close of the NCR Distribution Date, by
AT&T or a Person that is, Immediately after the NCR Distribution Date, an AT&T
Controlled Person, for the benefit of AT&T Individuals and/or NCR Individuals
who participated therein, including the plans listed in Schedule I.
1.5 AT&T INDIVIDUAL means any individual who is not an NCR Individual
and is, as of the Close of the NCR Distribution Date: (a) actively employed by,
or on a leave of absence from, either AT&T or a Person that is, as of the Close
of the NCR Distribution Date, an AT&T Controlled Person; or (b) neither actively
employed by, nor on a leave of absence from, AT&T or a Person that is, as of the
Close of the NCR Distribution Date, an AT&T Controlled Person, but whose most
recent active employment with AT&T or a past or present Affiliate of AT&T
(including NCR and its Affiliates) was with either AT&T or a Person that was, at
the time such active employment ended, an AT&T Controlled Person; provided, that
an individual who is a Transferred Individual as defined in the Lucent EBA shall
not be considered an AT&T Individual under this sentence. An alternate payee
under a QDRO or alternate recipient under a QMCSO with respect to, or a
beneficiary or covered dependent of, an employee or former employee described in
the preceding sentence shall also be an AT&T Individual with respect to that
employee's or former employee's benefit under the applicable Plans. Such an
alternate payee, alternate recipient, beneficiary, or covered dependent shall
not otherwise be considered an AT&T Individual with respect to his or her own
benefits under any applicable Plans unless he or she is an AT&T Individual by
virtue of the first sentence of this definition. In addition, AT&T and NCR may
designate, by mutual agreement, any other individuals, or group of individuals,
as AT&T Individuals. An individual may be an AT&T Individual pursuant to this
definition regardless of whether such individual is, as of the NCR Distribution
Date, alive, actively employed, on a temporary leave of absence from active
employment, on layoff, terminated from employment, retired or on any other type
of employment or post-employment status relative to any Plan, and regardless of
whether, as of the Close of the NCR Distribution Date, such individual is then
receiving any benefits from any AT&T Plan or NCR Plan.
1.6 AT&T INDIVIDUAL AGREEMENT means an Individual
Agreement with an AT&T Individual.
1.7 AT&T PLAN means any Plan that is, Immediately after the NCR
Distribution Date, sponsored by AT&T or a Person that is then an AT&T Controlled
Person or, if such Plan is no longer in existence Immediately after the NCR
Distribution Date, was, at the time it ceased to exist, sponsored by AT&T or a
Person that is, Immediately after the NCR Distribution Date, an AT&T Controlled
Person or a direct or indirect predecessor to such a Person.
1.8 AT&T SHORT TERM INCENTIVE PLANS means the AT&T Short Term Incentive
Plan and the AT&T Management Incentive Compensation Program.
1.9 AT&T STOCK VALUE means the average of the daily high and low
per-share prices of the AT&T Common Stock as traded regular way on the NYSE
during each of the five trading days immediately preceding the NCR Distribution
Date.
<PAGE>
1.10 ATTIMCO means AT&T Investment Management
Corporation, a Delaware
corporation.
1.11 AWARD means an award under a Long Term Incentive
Plan or a Short
Term Incentive Plan.
1.12 CLOSE OF THE NCR DISTRIBUTION DATE means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in effect), on
the NCR Distribution
Date.
1.13 CODE means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.
1.14 DISTRIBUTION AGREEMENT is defined in the sixth
paragraph of the preamble of this Agreement.
1.15 ERISA means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific provision of ERISA also includes any
proposed, temporary, or final regulation in force under that provision.
1.16 FIRST TRANSFER is defined in Section 3.1(c)(iii).
1.17 IMMEDIATELY AFTER THE NCR DISTRIBUTION DATE means 12:00 A.M.,
Eastern Standard Time or Eastern Daylight Time (whichever shall then be in
effect), on the day after the NCR Distribution Date.
1.18 INDIVIDUAL AGREEMENT means an individual contract or agreement
(including the agreements listed on Schedule II) entered into before the Close
of the NCR Distribution Date between AT&T, or any of its past or present
Affiliates (including NCR and its past or present Affiliates) and an NCR
Individual or an AT&T Individual that establishes the right of such individual
to special executive compensation or benefits, including a supplemental pension
benefit, hiring bonus, loan, guaranteed payment, special allowance, tax
equalization or disability benefit, or share units granted (and payable in the
form of cash or otherwise) under an individual phantom share agreement, or that
provides benefits similar to those identified in Schedule I.
1.19 LONG TERM INCENTIVE PLAN, when immediately preceded by "AT&T,"
means any of the AT&T 1984 Stock Option Plan, the AT&T 1987 Long Term Incentive
Program, and such other stock-based incentive plans assumed by AT&T by reason of
merger, acquisition, or otherwise, including incentive plans of NCR, Teradata
Corporation, AT&T Wireless Services, Inc. (formerly McCaw Cellular
Communications, Inc.), and LIN Broadcasting Corporation, and when immediately
preceded by "NCR," means the long term incentive plan to be established by NCR
pursuant to Section 4.3(a).
1.20 LTIT means the Long-Term Investment Trust
established pursuant to
the LTIT Agreement.
1.21 LTIT AGREEMENT means the Agreement of Trust Establishing the
Long-Term Investment Trust and Constituting the Amendment and Restatement of the
AT&T Master Pension Trust Agreement and Conversion Thereof, effective as of
October 1, 1996, as amended from time to time.
<PAGE>
1.22 LTIT REDEMPTION is defined in Section 3.1(c)(ii).
1.23 LUCENT EBA means the Employee Benefits Agreement between AT&T and
Lucent dated as of February 1, 1996 and amended and restated as of March 29,
1996.
1.24 MPT means the AT&T Master Pension Trust established pursuant to
the MPT Agreement.
1.25 MPT AGREEMENT means the AT&T Master Pension Trust Agreement dated
as of October 1, 1996 between AT&T, Citibank, N.A., and certain other banks,
trust companies or individuals identified therein, as amended from
time to time.
1.26 MPT WITHDRAWAL is defined in Section 3.1(c)(iii).
1.27 NCR ALLOCABLE SHARE is defined in Section 3.1(c)(ii).
1.28 NCR CONTROLLED PERSON as of a specified time means any Person that
is, at such time, a Subsidiary of NCR or is otherwise controlled, directly or
indirectly, by NCR.
1.29 NCR EMPLOYEE means an NCR Individual who is described in clause
(a) of the definition of NCR Individual, or, to the extent relevant, an
alternate payee under a QDRO or alternate recipient under a QMCSO with respect
to, or a beneficiary or covered dependent of, such an NCR Individual.
1.30 NCR EXECUTIVE BENEFIT PLANS means the executive benefit and
nonqualified plans, programs, and arrangements established, maintained, agreed
upon, or assumed, before the Close of the NCR Distribution Date, by NCR or any
Person that is, Immediately after the NCR Distribution Date, an NCR Controlled
Person, for the benefit of AT&T Individuals and/or NCR Individuals who
participated therein, including the plans listed in Schedule III.
1.31 NCR INDIVIDUAL means any individual who, as of the Close of the
NCR Distribution Date: (a) is actively employed by, or on a leave of absence
from, NCR or a Person that is, as of the Close of the NCR Distribution Date, an
NCR Controlled Person; or (b) is neither actively employed by, nor on a leave of
absence from, NCR or a Person that is, as of the Close of the NCR Distribution
Date, an NCR Controlled Person, but whose most recent active employment with
AT&T or a past or present Affiliate of AT&T (including NCR and its Affiliates)
was with either NCR or a Person that was, at the time such active employment
ended, or is, as of the Close of the Distribution Date, an NCR Controlled
Person. An alternate payee under a QDRO or alternate recipient under a QMCSO
with respect to, or a beneficiary or covered dependent of, an employee or former
employee described in the preceding sentence shall also be an NCR Individual
with respect to that employee's or former employee's benefit under the
applicable Plans. Such an alternate payee, alternate recipient, beneficiary, or
covered dependent shall not otherwise be considered an NCR Individual with
respect to his or her own benefits under any applicable Plans unless he or she
is an NCR Individual by virtue of the first sentence of this definition. In
addition, AT&T and NCR may designate, by mutual agreement, any other
individuals, or group of individuals, as NCR Individuals. An individual may be
an NCR Individual pursuant to this definition regardless of whether such
individual is, as of the NCR Distribution Date, alive, actively employed, on a
temporary leave of absence from active employment, on layoff, terminated from
employment, retired or on any other type of employment or post-employment status
relative to any Plan, and regardless of whether, as of the Close of
<PAGE>
the NCR Distribution Date, such individual is then receiving any benefits from
any AT&T Plan or NCR Plan.
1.32 NCR INDIVIDUAL AGREEMENT means an Individual Agreement with an NCR
Individual.
1.33 NCR PENSION PLANS means The NCR Pension Plan, The Retirement Plan
for Employees of NCR Corporation at Dayton, Ohio Represented by the Independent
Union of NCR Corporation Guards, and all predecessors to either of such Plans,
including Plans that have been merged into either of such Plans.
1.34 NCR PLAN means any Plan that is, Immediately after the
Distribution Date, sponsored by NCR or a Person that is then an NCR Controlled
Person or, if such Plan is no longer in existence Immediately after the NCR
Distribution Date, was, at the time it ceased to exist, sponsored by NCR or a
Person that is, Immediately after the NCR Distribution Date, an NCR Controlled
Person or a direct or indirect predecessor to such a Person.
1.35 NCR SAVINGS PLAN means the NCR Savings Plan.
1.36 NCR SERPS means all NCR Plans that are or were "employee pension
benefit plans" within the meaning of Section 3(2) of ERISA that are not
qualified under Section 401(a) of the Code, including the NCR Corporation
Nonqualified Excess Plan, the NCR Corporation Executive Retirement, Death and
Disability Plan, the NCR Mid-Career Hire Supplemental Pension Plan, the
Supplemental Plan for Transfers Between AT&T and NCR, and the Retirement Plan
for Officers of NCR.
1.37 NCR SHORT TERM INCENTIVE PLANS means the NCR Management Incentive
Plan and the NCR Customer Delight Performance Award Program.
1.38 NCR STOCK VALUE means the average of the daily high and low
per-share prices of the NCR Common Stock as traded on the NYSE, on a when-issued
basis, during each of the five trading days immediately preceding the NCR
Distribution Date.
1.39 OPTION, when immediately preceded by "AT&T," means an option to
purchase AT&T Common Stock and when immediately preceded by "NCR," Option means
an option to purchase NCR Common Stock, in each case pursuant to a Long Term
Incentive Plan.
1.40 PLAN means any plan, policy, program, payroll practice, on-going
arrangement, contract, trust, insurance policy or other agreement or funding
vehicle providing benefits to employees or former employees of AT&T and its past
or present Affiliates (including NCR and its Affiliates).
1.41 PRIOR MPT means the AT&T Master Pension Trust which was the
predecessor to, and was converted into, the LTIT.
1.42 QDRO means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under any AT&T Plan or NCR Plan.
<PAGE>
1.43 QMCSO means a medical child support order which qualifies under
ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under an
AT&T Plan or NCR Plan.
1.44 RATIO means the amount obtained by dividing the
AT&T Stock Value by the NCR Stock Value.
1.45 SECOND TRANSFER is defined in Section 3.1(c)(iii).
1.46 SEGREGATED ASSETS is defined in Section 3.1(c)(iii).
1.47 SEPARATION AND DISTRIBUTION AGREEMENT is defined in the third
paragraph of the preamble of this Agreement.
1.48 SPLIT DOLLAR LIFE INSURANCE means the life insurance policies
purchased by AT&T on behalf of certain individuals under the AT&T Senior
Management Individual Life Insurance Program and the AT&T Senior Management
Basic Life Insurance Program, with respect to which such individuals (or their
assignees or delegates) have executed collateral assignments for the benefit of
AT&T.
1.49 SPREAD is defined in Section 4.3(b)(iv).
1.50 SUPPLEMENTAL PENSION PLAN FOR TRANSFERS means the NCR Supplemental
Pension Plan for Transfers between AT&T and NCR.
1.51 U.S. means the 50 United States and the District of
Columbia.
1.52 VALUE is defined in Section 4.3(b)(iv).
ARTICLE II
GENERAL PRINCIPLES
2.1 ALLOCATION OF LIABILITIES. (a) NCR hereby assumes or retains, as
applicable, and agrees to pay, perform, fulfill and discharge, in accordance
with their respective terms, and to indemnify the AT&T Indemnitees from and
against, pursuant to Section 4.2 of the Distribution Agreement, all of the
following (regardless of when or where such Liabilities arose or arise or were
or are incurred), except to the extent otherwise specified in Section 2.1(b)
below and in the agreement entered into pursuant to Section 6.1 with respect to
Foreign Plans: (i) all Liabilities to or relating to NCR Individuals relating
to, arising out of or resulting from employment by AT&T or any Person that was,
at the time of such employment, an AT&T Controlled Person, which employment
occurred before the Close of the NCR Distribution Date; (ii) all Liabilities to
or relating to NCR Individuals and other employees or former employees of NCR or
any Person that was, at the time of such employment, an NCR Controlled Person,
and their dependents and beneficiaries, relating to, arising out of or resulting
from employment with NCR or an NCR Controlled Person before, at or after the
Close of the NCR Distribution Date (including Liabilities under NCR Plans);
(iii) all Liabilities relating to, arising out of or resulting from any other
actual or alleged employment relationship with NCR or any Person that was, at
the time of such actual or alleged employment, an NCR Controlled Person; (iv)
all other Liabilities relating to, arising out of or resulting from obligations,
liabilities and responsibilities expressly
<PAGE>
assumed or retained by NCR, or an NCR Plan pursuant to this Agreement; and (v)
all Liabilities relating to, arising out of or resulting from NCR Plans.
(b) AT&T hereby assumes or retains, as applicable, and agrees to
pay, perform, fulfill and discharge, in accordance with their respective terms,
and to indemnify the NCR Indemnitees from and against, pursuant to Section 4.3
of the Distribution Agreement, all of the following (regardless of when or where
such Liabilities arose or arise or were or are incurred) except to the extent
otherwise specified in the agreement entered into pursuant to Section 6.1 with
respect to Foreign Plans: (i) all Liabilities to or relating to AT&T Individuals
relating to, arising out of or resulting from employment by AT&T, any Person
that was, at the time of such employment, an AT&T Controlled Person, NCR or any
Person that was, at the time of such employment, an NCR Controlled Person, which
employment occurred before the Close of the NCR Distribution Date, other than
Liabilities relating to, arising out of or resulting from NCR Plans; (ii) all
Liabilities relating to, arising out of or resulting from written AT&T Plans in
accordance with their terms, to the extent neither of NCR nor any NCR Plan is
expressly made responsible for such Liabilities pursuant to this Agreement; and
(iii) any other Liabilities relating to, arising out of or resulting from
obligations, liabilities and responsibilities expressly assumed or retained by
AT&T or an AT&T Plan pursuant to this Agreement.
2.2 TRANSFERRED EXECUTIVES. The individuals listed on Schedule IV shall
become employees of, and shall be transferred to the payroll of, NCR or a Person
that is, at the time of such transfer, an NCR Controlled Person, as soon as
practicable after the date hereof, but in any event no later than the Close of
the NCR Distribution Date, and shall therefore be considered "NCR Individuals"
as of the Close of the NCR Distribution Date.
ARTICLE III
QUALIFIED PLANS
3.1 NCR PENSION PLANS.
(a) NAMED FIDUCIARY FOR NCR PENSION PLANS. NCR hereby represents
and warrants to AT&T that (i) the NCR Pension Plans as defined herein
constitute, as of the date hereof, all of the defined benefit pension plans
sponsored by NCR and the Persons that are, as of the date hereof, NCR Controlled
Persons, all other such plans having been merged into the NCR Pension Plan on or
before November 15, 1996, (ii) each NCR Pension Plan has been amended to provide
that NCR is the named fiduciary of such NCR Pension Plan, and that AT&T is not
the named fiduciary of such NCR Pension Plan, in each case for purposes of
negotiating the terms and conditions of this Section 3.1 and entering into this
Agreement, and (iii) that it has delivered to AT&T true, correct and complete
copies of such amendments and the resolutions of its Board of Directors
authorizing such amendments and providing for the delegation of the authority to
act in such fiduciary capacity by NCR to individual employees of NCR. As soon as
practicable after the Close of the NCR Distribution Date, and in any event
before the Second Transfer, NCR shall seek to have its Board of Directors ratify
such amendments and resolutions.
(b) PRE-DISTRIBUTION ACTIONS BY NCR. NCR shall
take all actions
necessary or appropriate so that before the Close of the NCR
Distribution Date:
(i) one or more individuals or entities are appointed in place of AT&T as named
fiduciary under the NCR Pension Plans; (ii) appropriate trustees, custodians,
investment managers and other fiduciaries with respect to the NCR Pension Plans
have been appointed, so as to permit the LTIT
<PAGE>
Redemption and the MPT Withdrawal to occur promptly in accordance with this
Section 3.1; (iii) NCR shall have entered into an Investment Advisory Agreement
with ATTIMCO providing for the management of the assets of the NCR Pension Plans
by ATTIMCO during the period from Immediately after the NCR Distribution Date
until the completion of the LTIT Redemption and the MPT Withdrawal in accordance
with this Section 3.1; and (iv) NCR shall have taken all such actions with
respect to the assets identified on Schedule V hereto as ATTIMCO shall
reasonably require.
(c) TRANSFER OF ASSETS OF NCR PENSION PLANS FROM LTIT
AND MPT.
(i) LTIT REDEMPTION AND MPT WITHDRAWAL. AT&T shall take all
actions necessary or appropriate to accomplish the LTIT Redemption, and AT&T and
NCR shall take all steps necessary or appropriate to accomplish the MPT
Withdrawal, in each case in accordance with this Section 3.1(c) as promptly as
practicable after the later of (A) the Close of the NCR Distribution Date and
(B) the completion of the ratification referred to in the last sentence of
Section 3.1(a) and all actions required to be taken pursuant to Section 3.1(b).
(ii) VALUATION OF LTIT ASSETS; LTIT REDEMPTION. Under the terms
of the LTIT Agreement, the Total Asset Value and Net Asset Value (as those terms
are defined in the LTIT Agreement) of the assets of the LTIT will be determined
by ATTIMCO, in its capacity as named fiduciary of the LTIT, as of December 31,
1996. As part of such determination process, ATTIMCO shall also determine the
portion of such Net Asset Value that represents the share allocable to the NCR
Pension Plans in the LTIT through their interests in the MPT (the "NCR Allocable
Share") in accordance with the terms of the LTIT Agreement. Such determinations
shall be audited by Coopers & Lybrand in accordance with the normal valuation
procedures for the LTIT. AT&T, in its capacity as Authorized Fiduciary (within
the meaning of the LTIT Agreement) for the MPT, shall then direct ATTIMCO, in
its capacity as named fiduciary of the LTIT, to redeem, pursuant to Section 7.2
of the LTIT Agreement, a portion of the MPT's allocable share of the assets of
the LTIT having a value, as of December 31, 1996, at least equal to the NCR
Allocable Share (the "LTIT Redemption"). Such assets shall consist of a mix of
assets satisfying the requirements of Schedule VI hereto (as such Schedule may
be amended hereafter by written agreement between AT&T and NCR). AT&T and NCR
acknowledge that the LTIT Redemption may be subject, in whole or in part, to the
consent of Lucent, in its capacity as Authorized Fiduciary (within the meaning
of the LTIT) of certain plans participating in the LTIT, and agree to use
reasonable best efforts to obtain any such required consent, but failure to
obtain such consent shall not be considered a violation hereof.
(iii) WITHDRAWAL FROM MPT. AT&T (in its capacity as named
fiduciary of the MPT) shall cause the assets received by the MPT pursuant to the
LTIT Redemption to be segregated upon such receipt in anticipation of the MPT
Withdrawal. Such assets, together with the proceeds of any sale of such assets,
any other assets in which such proceeds may be reinvested, and any dividends,
interest, distributions and other income realized from such assets, proceeds and
other assets, in each case during the period from their receipt by the MPT until
they are transferred to the trustee(s) of the NCR Pension Plans as hereinafter
provided, are referred to collectively as the "Segregated Assets." AT&T and NCR
shall then direct the withdrawal of the NCR Pension Plans from the MPT pursuant
to Section 5(c) of MPT Agreement (the "MPT Withdrawal") in exchange for all or a
portion of the Segregated Assets, as set forth below. The transfer of Segregated
Assets from the trustee of the MPT to the trustee(s) of the NCR Pension Plans
pursuant to the MPT Withdrawal shall occur in two steps. The first step (the
"First Transfer") shall be a
<PAGE>
transfer of a portion of the Segregated Assets selected by ATTIMCO (in its
capacity as a fiduciary of the MPT) that it determines to have a value, as of
December 31, 1996, equal to approximately 90 percent of the NCR Allocable Share.
The second step (the "Second Transfer") shall be a transfer of additional
Segregated Assets selected by ATTIMCO (in its capacity as a fiduciary of the
MPT), such that the Segregated Assets transferred to the trustee(s) of the NCR
Pension Plans in the First Transfer and the Second Transfer (I) have a value, as
of December 31, 1996, equal to the NCR Allocable Share, and (II) constitute a
mix of assets satisfying the requirements of Schedule VI hereto. No adjustment
shall be made to the assets so transferred as a result of any diminishment in
the value of the Segregated Assets after December 31, 1996.
(iv) ACCEPTANCE OF ASSET TRANSFER. The completion of the First
Transfer and the Second Transfer shall be subject in each case to the receipt by
ATTIMCO, from NCR and each of the recipient trustee(s) of the NCR Pension Plans,
of a Receipt and Release substantially in the forms attached hereto as Exhibits
A and B, respectively (with such modifications as may be agreed to by ATTIMCO).
NCR hereby agrees to give Receipts and Releases substantially in such forms
unless it determines in good faith that either (I) AT&T or ATTIMCO has failed to
comply with the requirements of this Section 3.1(c) or (II) it is required by
ERISA to withhold such Receipts and Releases.
(d) RELEASE AND ASSUMPTION OF LIABILITIES.
(i) RELEASES. Effective Immediately after the NCR Distribution
Date, NCR does hereby, for itself and each other member of the NCR Group, their
respective Affiliates (other than any member of the AT&T Services Group (as
defined in the Separation and Distribution Agreement) or the Lucent Group),
successors and assigns, and all Persons who at any time prior to the NCR
Distribution Date have been shareholders, directors, officers, agents or
employees of any member of the NCR Group (in each case, in their respective
capacities as such), remise, release and forever discharge AT&T, the members of
the AT&T Services Group, their respective Affiliates (other than any member of
the NCR Group), successors and assigns, and all Persons who at any time prior to
the NCR Distribution Date have been shareholders, directors, officers, agents or
employees of any member of the AT&T Services 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
relating to or arising out of the participation by any of the NCR Pension Plans
in the MPT or the Prior MPT or the participation by the MPT in the LTIT;
provided that the foregoing shall not release AT&T from the obligation to carry
out the First Transfer and the Second Transfer in accordance with Section 3.1(c)
above.
(ii) ASSUMPTION OF LIABILITIES. Without limiting the generality
of Section 2.1 above, NCR hereby assumes or retains, as applicable, and agrees
to pay, perform, fulfill and discharge, in accordance with their respective
terms: (A) all Liabilities relating to, arising out of or resulting from the
administration, or investment of the assets of, any of the NCR Pension Plans;
(B) all other Liabilities relating to, arising out of or resulting from any of
the NCR Pension Plans; and (C) NCR's allocable share of any amounts which AT&T
or any Affiliate of AT&T pays to any fiduciary of the MPT, the Prior MPT or the
LTIT pursuant to any obligation to indemnify such fiduciary with respect to
actions or omissions occurring while assets of any of the NCR Pension Plans were
held in the MPT, the Prior MPT or the LTIT, as applicable; such allocable share
to equal a percentage of such amounts paid by AT&T or such Affiliate equal to
the average percentage of the total value of the assets of the MPT, the Prior
MPT or the LTIT, as applicable,
<PAGE>
during the period of time when such actions or omissions occurred, that was
allocable to the NCR Pension Plans.
3.2 NCR SAVINGS PLAN. (a) REPLACEMENT FIDUCIARIES. NCR
shall take all
steps necessary and appropriate, including the amendment of the
plan document
and related trust agreement, so that effective no later than
Immediately after
the NCR Distribution Date, one or more individuals or entities
appointed by NCR
shall (i) replace AT&T in all of its capacities under the NCR
Savings Plan,
including as named fiduciary with respect to investment,
reinvestment and
administration of assets and with respect to the power to remove
and replace
trustees and investment managers, and (ii) replace or be
reappointed as the
trustee, investment managers, custodians and other fiduciaries
with respect to
the NCR Savings Plan.
(b) RELEASE. Effective Immediately after the NCR Distribution Date,
NCR does hereby, for itself and each other member of the NCR Group, their
respective Affiliates (other than any member of the AT&T Services Group (as
defined in the Separation and Distribution Agreement)), successors and assigns,
and all Persons who at any time prior to the NCR Distribution Date have been
shareholders, directors, officers, agents or employees of any member of the NCR
Group (in each case, in their respective capacities as such), remise, release
and forever discharge AT&T, the members of the AT&T Services Group, their
respective Affiliates (other than any member of the NCR Group), successors and
assigns, and all Persons who at any time prior to the NCR Distribution Date have
been shareholders, directors, officers, agents or employees of any member of the
AT&T Services 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 relating to or arising out of the NCR Savings
Plan.
ARTICLE IV
EXECUTIVE BENEFITS
4.1 GENERAL. Effective Immediately after the NCR Distribution Date,
except as otherwise specified in this Article IV and in Section 5.2 hereof: (a)
NCR shall be solely responsible for all Liabilities to or with respect to NCR
Individuals under all AT&T Executive Benefit Plans; (b) AT&T shall be solely
responsible for all Liabilities to or with respect to AT&T Individuals under all
NCR Executive Benefit Plans; (c) no NCR Individuals shall continue to
participate in or to accrue benefits under any AT&T Executive Benefit Plans; and
(d) no AT&T Individuals shall continue to participate in or to accrue benefits
under any NCR Executive Benefit Plans.
4.2 NONQUALIFIED PLANS.
(a) NCR SERPS. NCR shall cause the Supplemental
Pension Plan for
Transfers to be amended, effective Immediately after the NCR Distribution Date,
to provide that no individual will be eligible to participate therein as a
result of or with respect to transfers of employment from AT&T or a Person that
is, at the time of such transfer, an AT&T Controlled Person to NCR or a Person
that is, at the time of such transfer, an NCR Controlled Person, or vice versa,
occurring after the Close of the NCR Distribution Date. NCR shall remain solely
responsible for all Liabilities to or relating to NCR Individuals under the
Supplemental Pension Plan for Transfers, and for all Liabilities for benefits
accrued by AT&T Individuals through the Close of the Distribution Date under the
NCR SERPs.
<PAGE>
(b) AT&T SERPS. AT&T shall remain solely responsible for all
Liabilities for benefits accrued by NCR Individuals through the close of the
Distribution Date under the AT&T Mid-Career Pension Plan and the AT&T
Non-Qualified Pension Plan.
4.3 AT&T LONG TERM INCENTIVE PLANS.
(a) GENERAL. NCR shall use its reasonable best efforts to take all
actions necessary or appropriate (including obtaining consents of affected
individuals) so that each outstanding Award granted under any AT&T Long Term
Incentive Plan held by any NCR Employee shall be replaced to the extent required
by this Section 4.3 with an Award based on NCR Common Stock. Effective
Immediately after the NCR Distribution Date, (i) NCR shall establish a Long Term
Incentive Plan providing for awards to employees of NCR and its Affiliates based
upon NCR Common Stock, (ii) NCR shall be solely responsible for all Liabilities
under the AT&T Long Term Incentive Plan to NCR Employees, and (iii) AT&T shall
remain solely responsible for all Liabilities under the AT&T Long Term Incentive
Plan to NCR Individuals who are not NCR Employees.
(b) NCR EMPLOYEES.
(i) STOCK OPTIONS. NCR shall cause each Award consisting of an
AT&T Option that is outstanding and held by an NCR Employee as the Close of the
NCR Distribution Date to be replaced, effective Immediately after the NCR
Distribution Date, with an NCR Option. Such NCR Option shall provide for the
purchase of a number of shares of NCR Common Stock equal to the number of shares
of AT&T Common Stock subject to such AT&T Option as of the Close of the NCR
Distribution Date, multiplied by the Ratio, and then rounded down to the nearest
whole share. NCR shall pay to the holder of such replacement Award, at the time
of such replacement, cash in lieu of any fractional share equal to the product
of (A) the fraction represented by such fractional share times (B)(1) the excess
of the NCR Stock Value over (2) the per-share exercise price of such AT&T Option
as the Close of the NCR Distribution Date divided by the Ratio. The per-share
exercise price of such NCR Option shall equal the per-share exercise price of
such AT&T Option as of the Close of the NCR Distribution Date divided by the
Ratio. Each such NCR Option shall otherwise have the same terms and conditions
as were applicable to the corresponding AT&T Option as of the Close of the NCR
Distribution Date, except that references to AT&T and its Affiliates shall be
amended to refer to NCR and its Affiliates.
(ii) PERFORMANCE SHARES AND STOCK UNITS. NCR shall cause each
Award consisting of AT&T performance shares or AT&T stock units that is
outstanding and held by an NCR Employee as of the Close of the NCR Distribution
Date to be replaced, effective Immediately after the NCR Distribution Date, with
a new performance share award or a new stock unit award, as the case may be,
consisting of a number of NCR performance shares or NCR stock units, as the case
may be, equal to the number of AT&T performance shares or AT&T stock units, as
the case may be, constituting such Award as of the Close of the NCR Distribution
Date, multiplied by the Ratio, and then rounded down to the nearest whole share.
NCR shall pay to the holder of such replacement Award, at the time of such
replacement, cash in lieu of any fractional share based on the NCR Stock Value.
Each such replacement Award shall otherwise have the same terms and conditions
as were applicable to the corresponding AT&T Award as of the Close of the NCR
Distribution Date, except that references to AT&T and its Affiliates shall be
amended to refer to NCR and its Affiliates and dividend equivalent payments, if
any, with respect to dividends, the record date for which is after the Close of
the NCR Distribution Date shall be paid with reference to dividends, if any, on
NCR Common Stock.
<PAGE>
(iii) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. NCR shall
cause each Award that consists of non-vested restricted shares of AT&T Common
Stock or restricted stock units relating to shares of AT&T Common Stock that is
outstanding and held by an NCR Employee as of the Close of the NCR Distribution
Date, other than the Awards described in Schedule VII, to be replaced, effective
Immediately after the NCR Distribution Date, with either a replacement Award
described below or such other form of compensation not based on NCR Common Stock
as NCR shall determine. Any such replacement Award shall be a new Award
consisting of a number of non-vested restricted shares of NCR Common Stock
and/or restricted stock units relating to shares of NCR Common Stock equal to
the number of non-vested restricted shares or restricted stock units of AT&T
Common Stock constituting such Award as of the Close of the NCR Distribution
Date multiplied by the Ratio, and then rounded down to the nearest whole share.
NCR shall pay to the holder of any such replacement Award, at the time of such
replacement, cash in lieu of any fractional share based on the NCR Stock Value.
Each such replacement Award shall otherwise have the same terms and conditions
as were applicable to the corresponding AT&T Award as of the Close of the NCR
Distribution Date, except that references to AT&T and its Affiliates shall be
amended to refer to NCR and its Affiliates and dividend equivalent payments, if
any, with respect to dividends, the record date for which is after the NCR
Distribution Date shall be paid with reference to dividends, if any, on NCR
Common Stock.
(iv) CHARGEBACK. If, at any time after the Close of the NCR
Distribution Date, AT&T is required to deliver shares of AT&T Common Stock, or
shares of AT&T Common Stock vest, pursuant to an Award that NCR fails to replace
pursuant to this Section 4.3 or an Award listed on Schedule VII, NCR shall pay
AT&T the following amounts: (A) with respect to each such Award that is an AT&T
Option, the Spread on such Option; (B) with respect to the vesting or delivery
of shares of AT&T Common Stock pursuant to such an Award (other than an AT&T
Option), the Value of such AT&T Common Stock on the date of such vesting or
delivery and (C) with respect to each such Award, the amount of any withholding
taxes with respect thereto which are not paid or reimbursed to AT&T by the
holder of such Award. In addition, NCR shall pay AT&T the amount of any payments
made by AT&T with respect to fractional shares under any Award that NCR fails to
replace pursuant to this Section 4.3 or an Award listed on Schedule VII. AT&T
shall bill NCR for such amounts from time to time (but only after the exercise,
purchase, vesting, delivery or payment that gives rise to the obligation to make
any such payment), and NCR shall pay such amounts promptly after receipt of such
bills. The "Spread" on an Option means the excess, if any, of the Value of the
purchased shares on the date of exercise of such Option over the price paid for
such shares. The "Value" of a share of AT&T Common Stock on a given date means
the average of the high and the low per-share prices of the AT&T Common Stock as
listed on the NYSE on such date, or if there is no trading on the NYSE on such
date, on the most recent previous date on which such trading takes place.
(c) NCR INDIVIDUALS WHO ARE NOT NCR EMPLOYEES. Each Award that is
outstanding and held by an NCR Individual other than an NCR Employee as of the
Close of the NCR Distribution Date shall remain outstanding Immediately after
the NCR Distribution Date in accordance with its terms as applicable as of the
Close of the NCR Distribution Date, subject to such adjustments as may be
applicable to outstanding Awards held by AT&T Individuals.
<PAGE>
4.4 AT&T SPLIT DOLLAR LIFE INSURANCE. AT&T and NCR shall take all
actions necessary or appropriate to assign to NCR, effective Immediately after
the NCR Distribution Date, AT&T's rights and interests in the Split Dollar Life
Insurance policies under the Senior Management Individual Life Insurance Program
and the Senior Management Basic Life Insurance Program issued by Metropolitan
Life Insurance Company, Hartford Life Insurance Company, and Confederation Life
Insurance Company (or their successors in interest, including Pacific Mutual
Life Insurance Company), and any additional split dollar life insurance program
that may be implemented by AT&T before the Close of the NCR Distribution Date,
with respect to NCR Individuals (such policies, the "Assigned Split Dollar
Policies"). Such actions shall include NCR's acceptance of any collateral
assignments, policy endorsements or such other documentation executed by or on
behalf of NCR Individuals, or any trustee of any trust to which such
individual's policy rights or incidents of ownership under the Assigned Split
Dollar Policies have been assigned, and NCR's entering into such agreements as
may be necessary to fulfill any obligations of AT&T to any insurance company or
insurance agent or broker under the Assigned Split Dollar Policies. From and
after the date of the assignment of any Assigned Split Dollar Policy to NCR, NCR
shall assume and be solely responsible for all Liabilities, and shall be
entitled to all benefits, of AT&T under such policy and under the Senior
Management Life Insurance Program, the Senior Management Basic Life Insurance
Program and any additional split dollar life insurance program that may be
implemented by AT&T before the Close of the NCR Distribution Date, as the case
may be, with respect to such policies, and any related agreements entered into
by NCR Individuals.
4.5 INDIVIDUAL AGREEMENTS.
(a) GENERAL. Except as specifically provided in the next two
sentences, NCR shall assume or retain, as the case may be, and be solely
responsible for all Liabilities relating to, arising out of or resulting from
NCR Individual Agreements, and AT&T shall assume or retain, as the case may be,
and be solely responsible for all Liabilities relating to, arising out of or
resulting from AT&T Individual Agreements. AT&T shall retain the Liabilities
under NCR Individual Agreements specified on Schedule VIII and shall reimburse
NCR for the amounts described on Schedule IX when and as such amounts are paid
by NCR. NCR shall reimburse AT&T for the amounts described on Schedule X as set
forth thereon. For purposes of this Section 4.5, Liabilities relating to,
arising out of or resulting from NCR Plans or AT&T Plans without reference to
any Individual Agreement shall not be considered to relate to, arise out of or
result from any Individual Agreement, even if such Liabilities or Plans are
described in such Individual Agreements.
(b) PHANTOM SHARE ACCOUNTS. The phantom AT&T Shares credited to
each of the phantom share accounts established pursuant to the agreements listed
on Schedule XI shall be converted, effective Immediately after the NCR
Distribution Date, to a number of phantom NCR Shares equal to the number of such
phantom AT&T Shares reflected in such account as of the Close of the NCR
Distribution Date multiplied by the Ratio. If AT&T declares any dividend (other
than the dividend that effects the NCR Distribution), the record date for which
is before the NCR Distribution Date and the payment date for which is after the
NCR Distribution Date, each such phantom share account shall be credited with
such dividend in accordance with the terms of the relevant agreement listed on
Schedule XI, except that such dividend shall be converted into NCR Common Stock
rather than AT&T Common Stock. After the Close of the NCR Distribution Date, the
dividends credited to such phantom share accounts shall be determined by
reference to dividends on NCR Common Stock rather than AT&T Common Stock.
<PAGE>
ARTICLE V
MISCELLANEOUS BENEFITS
5.1 EMPLOYEE STOCK PURCHASE PLAN. NCR shall cause the 1994 Employee
Stock Purchase Plan for NCR, and any options that are then outstanding under
such Plan, to be terminated no later than the record date for the NCR
Distribution.
5.2 SHORT TERM INCENTIVE PLANS. AT&T shall be solely responsible for
all Liabilities to NCR Individuals under the AT&T Short Term Incentive Plans for
the 1996 performance year and (if the NCR Distribution Date occurs after
December 31, 1996) subsequent performance years, to the extent they participated
therein. NCR shall be solely responsible for all Liabilities to AT&T Individuals
under the NCR Short Term Incentive Plans for the 1996 performance year and (if
the NCR Distribution Date occurs after December 31, 1996) subsequent performance
years, to the extent they participated therein.
ARTICLE VI
FOREIGN PLANS; INTERCHANGE
6.1 FOREIGN PLANS. AT&T and NCR shall use reasonable best efforts so
that as soon as practicable after the date of this Agreement, AT&T, Lucent and
NCR shall enter into an agreement regarding the treatment of employee benefit
plans maintained for the benefit of employees outside the U.S. substantially in
the form set forth in Exhibit C hereto.
6.2 INTERCHANGE AGREEMENT. AT&T and NCR shall use
reasonable best
efforts so that as soon as practicable after the date of this
Agreement, AT&T,
Lucent and NCR shall enter into an agreement regarding the treatment, for
purposes of their respective Plans, of individuals whose employment is
transferred between them, which agreement shall be substantially in the form set
forth in Exhibit D hereto.
ARTICLE VII
MISCELLANEOUS
7.1 SHARING OF PARTICIPANT INFORMATION. AT&T and NCR shall share, and
shall cause their respective Affiliates to share, with each other and their
respective agents and vendors (without obtaining releases) all participant, plan
design and other information necessary for the efficient and accurate
administration of, compliance with laws and regulations applicable to, and
response to inquiries by governmental authorities regarding, the AT&T Plans and
the NCR Plans after the Close of the NCR Distribution Date. AT&T and NCR and
their respective authorized agents shall, subject to applicable laws on
confidentiality, be given reasonable and timely access to, and may make copies
of, all information relating to the subjects of this Agreement in the custody of
the other party, to the extent necessary for such administration. All
participant information shall be provided in a manner and medium that is
compatible with the data processing systems of AT&T as in effect as of the Close
of the NCR Distribution Date, unless otherwise agreed to by AT&T and NCR.
7.2 NO CHANGE OF CONTROL; NO RIGHTS CREATED; NO
RESTRICTIONS. The NCR
Distribution shall not be considered to result in a "change of
control" of NCR
or any Person that is, as of the Close of the NCR Distribution
Date, an NCR
Controlled Person, or any
<PAGE>
similar event for purposes of any NCR Plan or NCR Individual Agreement, and NCR
shall take all steps necessary or appropriate, including amending any NCR Plan
or NCR Individual Agreement or obtaining any necessary approvals or consents, to
ensure the foregoing result. No provision of this Agreement or of the
Distribution Agreement shall be construed to create any right to any
compensation or benefit whatsoever on the part of any NCR Individual, AT&T
Individual or other future, present or former employee of AT&T, any of its
Affiliates, NCR or any of its Affiliates under any AT&T Plan or NCR Plan or
otherwise. Nothing in this Agreement shall preclude AT&T or NCR, at any time
after the Close of the NCR Distribution Date, from amending, merging, modifying,
terminating, eliminating, reducing, or otherwise altering in any respect any
AT&T Plan or NCR Plan, as applicable, any benefit under any Plan or any trust,
insurance policy or funding vehicle related to any AT&T Plan or NCR Plan, as
applicable.
7.3 EFFECT IF NCR DISTRIBUTION DOES NOT OCCUR. If the
NCR Distribution
does not occur, then all actions and events that are, under this
Agreement, to
be taken or occur effective as of the Close of the NCR
Distribution Date,
Immediately after the NCR Distribution Date, or otherwise in connection with the
NCR Distribution, shall not be taken or occur except to the extent specifically
agreed by NCR and AT&T.
7.4 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
7.5 AFFILIATES. Each of AT&T and NCR shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth in this Agreement to be performed by a Person that is, at the time of
such performance, an AT&T Controlled Person or an NCR Controlled Person,
respectively.
7.6 INCORPORATION OF DISTRIBUTION AGREEMENT PROVISIONS. The following
provisions of the Distribution Agreement are hereby incorporated herein by
reference, and unless otherwise expressly specified herein, such provisions
shall apply as if fully set forth herein (references in this Section 7.6 to an
"Article" or "Section" shall mean Articles or Sections of the Distribution
Agreement, and, except as expressly set forth below, references in the material
incorporated herein by reference shall be references to the Distribution
Agreement): Article IV (relating to Mutual Releases and Indemnification);
Section 5.2 (relating to Exchange of Information and Archives); Article VI
(relating to Further Assurances and Additional Covenants); Article VII (relating
to Termination); and Article VIII (relating to Miscellaneous) other than Section
8.2 (relating to Governing Law).
7.7 INCORPORATION OF SEPARATION AND DISTRIBUTION AGREEMENT PROVISIONS.
Article IX of the Separation and Distribution Agreement (relating to Arbitration
and Dispute Resolution) is hereby incorporated herein by reference, and unless
otherwise expressly specified herein, such provision shall apply as if fully set
forth herein (references in the material incorporated herein by reference shall
be references to the Separation and Distribution Agreement).
7.8 GOVERNING LAW. To the extent not preempted by
applicable federal
law, this Agreement shall be governed by, construed and
interpreted in
accordance with the laws of the State of New York, irrespective of
the choice of
laws principles of the State of New
<PAGE>
York, as to all matters, including matters of validity, construction, effect,
performance and remedies.
7.9 TAX DEDUCTIONS. It is the intention of AT&T and NCR that the party
that actually bears the cost (whether directly or indirectly) of making a
payment with respect to, or (except as provided below) whose stock is used to
satisfy, a Liability governed by this Agreement shall be entitled to any and all
tax benefits associated therewith, including the benefit of taking a deduction
with respect to such payment or satisfaction for income tax purposes, and shall
be obligated to satisfy all tax withholding obligations with respect thereto,
and AT&T and NCR agree to take no action inconsistent with such intention.
Notwithstanding the foregoing, AT&T and NCR recognize that it is possible that
the Internal Revenue Service or another taxing authority will take a different
position. Therefore, AT&T and NCR agree that: (a) if either of them is notified
by the Internal Revenue Service or another taxing authority that it is taking or
proposes to take a different position, the party receiving such notice shall so
notify the other; (b) if, when and to the extent that AT&T or a Person that is
then an AT&T Controlled Person receives a tax benefit as a result of a payment
made by NCR or a Person that is then an NCR Controlled Person with respect to,
or the use of NCR Common Stock to satisfy, a Liability governed by this
Agreement, AT&T shall pay to NCR, or shall cause such AT&T Controlled Person to
pay to NCR, an amount equal to the net tax benefit realized by AT&T or such AT&T
Controlled Person, as and when realized; and (c) if and to the extent that NCR
or a Person that is then an NCR Controlled Person receives a tax benefit as a
result of a payment made by AT&T or a Person that is then an AT&T Controlled
Person with respect to, or (except as provided below) the use of AT&T stock to
satisfy, a Liability governed by this Agreement, NCR shall pay to AT&T, or shall
cause such NCR Controlled Person to pay to AT&T, an amount equal to the net tax
benefit realized by NCR or such NCR Controlled Person, as and when realized. For
purposes of this Section 7.9, NCR shall be entitled to any and all tax benefits
with respect to Awards as to which NCR makes a payment to AT&T required by
Section 4.3(b)(iv) hereof, and AT&T shall not be entitled to any such tax
benefits, notwithstanding the fact that its stock is used to satisfy, or it pays
cash to satisfy, the Liabilities with respect to such Awards; provided, that
AT&T shall be obligated in the first instance to satisfy all tax withholding
obligations with respect thereto, subject to reimbursement by NCR pursuant to
Section 4.3(b)(iv) hereof. The net tax benefit to either party resulting from
payment or satisfaction of a Liability shall be deemed to equal the excess of
(i) the taxes that would have been paid by such party if such party had not paid
or satisfied such Liability over (ii) the taxes that are actually paid by such
party.
7.10 AGREEMENTS WITH THIRD PARTIES. The provisions of this Agreement
regarding the allocation of Liabilities are intended only to provide for such
allocation as between AT&T and NCR, and shall have no effect on any agreements
with respect thereto among AT&T, any of its Affiliates and/or one or more third
parties, or among NCR and any of its Affiliates and/or one or more third
parties, including the Lucent EBA. To the extent that (i) any Liability assumed
or retained by NCR hereunder, (ii) any other Liability accrued under any NCR
Plan not specifically assumed by AT&T hereunder, or (iii) any other
employee-related Liability primarily related to, arising out of or resulting
from the operation of the NCR Business (as conducted at any time prior to, on or
after the NCR Distribution Date) not specifically assumed by AT&T hereunder, is
subject to the sharing arrangement for Contingent Liabilities under Section
6.3(b)(ii) of the Separation and Distribution Agreement, NCR shall be solely
responsible for AT&T's share thereof (as determined pursuant to said Section
6.3(b)(ii)), but no provision of this Agreement shall be deemed to relieve or
release Lucent from responsibility for its share thereof (as determined pursuant
to said Section 6.3(b)(ii)).
<PAGE>
7.11 NCR TO HONOR AGREEMENTS. NCR shall honor, and shall cause Persons
who are, at any time hereafter, NCR Controlled Persons to honor, all obligations
to their respective employees and former employees, except to the extent such
obligations are expressly assumed by AT&T pursuant to this Agreement. To the
extent the obligations referred to in the preceding sentence are obligations
pursuant to agreements referred to in Schedule 6.12 to the Agreement and Plan of
Merger, dated May 6, 1991, as amended as of July 17, 1991, among AT&T,
Subsidiary Corporation and NCR, the individuals who are entitled to third-party
beneficiary rights with respect thereto under said Schedule 6.12 shall be
entitled to third-party beneficiary rights with respect to the preceding
sentence.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Employee
Benefits Agreement to be duly executed as of the day and year first above
written.
AT&T CORP.
By:_______________________________
Name:
Title:
NCR CORPORATION
By:_______________________________
Name:
Title:
GENERAL PURCHASE AGREEMENT
BETWEEN
AT&T CORP.
AND
LUCENT TECHNOLOGIES INC.
<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 Technologies Inc. and AT&T wish
to establish
the fundamental terms and conditions pursuant to which AT&T shall
order, and
Lucent Technologies Inc. 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.
<PAGE>
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 proforma completed work
summary with supporting documentation from Supplier to Ordering Company.
<PAGE>
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
technical data, determining the destination of the request for analysis to
ascertain if and how to bill Ordering Company for the Service being provided.
<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.
1.35 DISCONTINUED AVAILABILITY (DA) means a Supplier issued
Discontinued Availability announcement, which is written notice to Ordering
Company that Supplier will cease
<PAGE>
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); 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 Software in AT&T's live network.
1.45 FIT means physical size or mounting
arrangement (e.g.,
electrical or mechanical connections).
<PAGE>
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
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
<PAGE>
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 LUCENT TECHNOLOGIES means Lucent
Technologies Inc., a
Delaware Corporation.
1.57 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.
1.58 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
1.59 MAKE READY COORDINATION as referred to in Article 10
means additional assistance offered by Supplier for compensation at agreed upon
rates.
1.60 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.
1.61 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.
1.62 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.
<PAGE>
1.63 MODIFICATIONS as referred to in Article 9 means Ordering
Company additions to, deletions from or merges of Software with one or more
programs owned or licensed by Ordering Company that results in an updated or
otherwise modified software.
1.64 NCR means NCR Corporation (formerly named AT&T Global
Information Solutions Company), a Maryland corporation.
1.65 NEW SOFTWARE PRODUCT as referred to in Article 10 means
an Application Software Product initially licensed to Ordering Company after
execution of this Agreement.
1.66 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
other tangible form.
<PAGE>
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 affect 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.
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
<PAGE>
diagrams, program descriptions, and Specifications. No Source Code
versions of
Software are included in Related Documentation.
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
time to time.
<PAGE>
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.
<PAGE>
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.
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.
<PAGE>
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 Technologies Inc.
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.
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.
<PAGE>
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
sublicensing of Supplier's Products, Licensed Materials and Services as a
distributor shall be addressed in a separate agreement.
<PAGE>
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 Business Communications Systems business unit,
previously known as "GBCS," ("BCS"). Part 3 sets forth the additional terms and
conditions which govern Supplier's provision of Products, Licensed Materials and
Services provided by BCS.
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 Technologies Inc.
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
Technologies Inc.
may assist AT&T in this manner;
(b) The parties recognize that Supplier's pricing of Products,
Licensed Materials and Services must balance two fundamental requirements:
AT&T's requirement for the lowest possible operating costs and Supplier'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 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
<PAGE>
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) 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. 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
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,
<PAGE>
Supplier and 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 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 Company or Supplier under any then existing Order or
Supplemental Agreement issued under this Agreement.
<PAGE>
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.
<PAGE>
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 dates set
forth in (i) an accepted Order for Products; or (ii) for 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
<PAGE>
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.
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.
<PAGE>
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 (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
<PAGE>
(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,
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.
<PAGE>
(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.
(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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
timely payment of the undisputed portion(s) of any invoice containing a disputed
portion. 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.
(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.
<PAGE>
(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 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
<PAGE>
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
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 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.
<PAGE>
(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 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 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,
<PAGE>
trade device, service mark, symbol, code or Specification.
<PAGE>
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,
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 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:
<PAGE>
(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 BCS Products, whether or not by
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 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
<PAGE>
Pricing Agreement. With respect to Network Outages caused solely by Supplier in
connection with BCS 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.
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 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
<PAGE>
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.
<PAGE>
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") 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 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. In the event that any party delivers an
Arbitration Demand Notice with respect to any dispute, controversy or claim that
is the subject of any then pending arbitration proceeding or of a previously
delivered Arbitration Demand Notice, all such disputes, controversies and claims
shall be resolved in the arbitration proceeding for which an Arbitration Demand
Notice was first delivered unless the
<PAGE>
arbitrator in his or her sole discretion determines that it is
impracticable or
otherwise inadvisable to do so.
(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
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.
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 (who need not be disinterested as to the parties or
the matter) 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
<PAGE>
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
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
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 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
<PAGE>
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
parties' rights to claim any applicable privilege. 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
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 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
<PAGE>
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.
(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 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 or by notice given to the other parties within twenty
(20) days after receipt of an Arbitration Demand Notice with respect thereto. 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
<PAGE>
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
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).
(c) No party shall raise as a defense the statute of
limitations if the applicable Arbitration Demand Notice was delivered on or
prior to the Applicable Deadline and, if applicable, the matter is submitted to
a court of competent jurisdiction within the sixty (60) day period specified in
Section 5A.8(b).
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
<PAGE>
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.
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 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.
<PAGE>
(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
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 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
<PAGE>
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 BCS 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
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 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
<PAGE>
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 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 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
<PAGE>
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:
(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
(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
<PAGE>
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
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.
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.
<PAGE>
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 matter,
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.
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.
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
<PAGE>
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
writing and signed by the authorized representative of the party against whom it
is sought to enforce such waiver, amendment, supplement or modification.
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.
<PAGE>
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
shall not preclude Supplier from providing such item pursuant to Part II.
7.2 ORGANIZATION OF PART II. Part II is
organized as follows:
(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.
<PAGE>
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
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 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:
<PAGE>
(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.
(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:
(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.
<PAGE>
(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
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 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.
<PAGE>
(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
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 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
<PAGE>
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 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 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
<PAGE>
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
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.
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
<PAGE>
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. 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 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
timeframe 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.
<PAGE>
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
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.
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.
<PAGE>
(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
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, 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.
<PAGE>
(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 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.
(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.
<PAGE>
(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 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, 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
<PAGE>
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 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 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.
<PAGE>
(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 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 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
<PAGE>
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
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 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.
<PAGE>
(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.
(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 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
<PAGE>
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 data base 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,
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 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
<PAGE>
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 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, 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
<PAGE>
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 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
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
<PAGE>
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
(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.
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
<PAGE>
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
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 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.
<PAGE>
(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, 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.
(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
<PAGE>
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 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.
(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.
<PAGE>
(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 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
<PAGE>
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 caused 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.
(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.
<PAGE>
(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 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 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
<PAGE>
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 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.
(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.
<PAGE>
(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, data base
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.
(G) SEVERITY LEVEL AND
PRIORITIZATION - Supplier
shall perform Problem Resolution Management in
accordance with the
Severity Level condition 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.
<PAGE>
(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 Assistance will be billed at
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 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 10.9(c)(ii)(E) below. 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
<PAGE>
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
COMMITMENTS
METRIC OBJECTIVE
PREFERRED STANDARD
- -------------------------------------------------------------------------------------------------
<S> <C>
<C> <C>
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%
- -------------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
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 Supplier, Maintenance Services to be provided under this
Article do
not include:
(i) Performing preventive
maintenance;
(ii) Making corrections to
user-defined reports;
(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;
and
(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;
<PAGE>
(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 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 data base. However, if
corruption is the
result of, or caused by another of 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.
<PAGE>
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.
(iv) The calling Ordering Company
personnel shall
provide the following information, if applicable:
(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 data base
contents, and console printouts as required by Supplier.
<PAGE>
(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 Designated Processor manufacturer.
(v) Maintain a back-up procedure
external to the
Designated Processors sufficient to reconstruct lost or
altered files,
data, or programs.
(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
<PAGE>
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
Services as described in Exhibit 10-1. 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
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.
<PAGE>
(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) months, whichever is less, commencing on the date of Acceptance of
the Service, as identified in writing by Supplier, Supplier, at it's 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 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
<PAGE>
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 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.
(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.
<PAGE>
(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.
(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:
(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
<PAGE>
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 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 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.
<PAGE>
(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.
(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.
(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
<PAGE>
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
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 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
<PAGE>
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
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.
(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.
<PAGE>
(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 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 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
<PAGE>
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 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 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
<PAGE>
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
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 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
<PAGE>
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 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 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
<PAGE>
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. 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 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.
<PAGE>
(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 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;
(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.
<PAGE>
(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
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 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.
<PAGE>
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 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.
(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.
<PAGE>
(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 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.
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.
ARTICLE XIII
PURPOSE AND ORGANIZATION OF PART III
13.1 PURPOSE AND SCOPE OF PART III. Part III sets forth the
specific additional terms and conditions pursuant to which the Business
Communications Systems unit of Supplier ("BCS") shall provide, and Ordering
Companies shall purchase or license, BCS Products, Licensed Materials (including
Software) and Services. The terms and conditions that shall govern BCS sales to
Ordering Companies shall be Part I and Part III of this Agreement, any
applicable Supplemental Agreement, the Pricing Agreement (LC3775D) or any other
governing agreement covering pricing, except that Sections 1.3 and 1.4 of the
Pricing Agreement shall govern in any event. With respect to BCS Products used
in conjunction with AT&T's Network, additional provisions may be negotiated on a
case-by-case basis and set forth in Supplemental Agreements or Orders.
13.2 ORGANIZATION OF PART III. Part III is
organized as
follows:
<PAGE>
(a) Article 14 sets forth the additional terms
and conditions
governing BCS's provision of Products;
(b) Article 15 sets forth the additional terms
and conditions
governing BCS's licensing of Licensed Materials; and
(c) Article 16 sets forth the additional terms and conditions
governing BCS's provision of Maintenance, Installation and other Miscellaneous
Services.
13.3 ORDERS
(a) The term "Order" shall be defined as any Ordering Company
request to purchase Products, to receive a license to use Licensed Material or
to obtain Services. Such requests will be done on a BCS order form (e.g.,
Product Agreement, Service Agreement, Purchase/Service Agreement, Equipment
Supplement, Maintenance Supplement, or Change Order Form), Ordering Company's
Purchase Order Form or other mutually agreeable order form.
(b) Subject to Section 2.2, subsequent Orders for
modifications, additions or changes will become an integral part of this
Agreement when accepted by BCS.
(c) The Customer Contract Return Date is the date BCS must
receive from Ordering Company an executed Order. If this date is not met, BCS
may reschedule the Delivery Date and/or In-Service Date and BCS may, subject to
Ordering Company's consent, change the prices specified on the Order or
confirmation of such Order.
(d) When applicable for an Order, BCS and Ordering Company
will agree upon all dates and activities required to meet the scheduled Delivery
Date for Customer-installed Products, or the scheduled In-Service Date for
BCS-installed Products, and complete the Project Milestone and Responsibilities
document (a sample of which has been provided as Exhibit 13-1 of this Agreement,
which document shall be incorporated by reference into such Order under this
Agreement). The installation responsibilities of each party with respect to an
Order under this Agreement are described in Exhibit 13-2 of this Agreement,
which is incorporated into this Agreement.
(e) Subject to Section 2.2, Orders for modifications or
additions to the Products acquired hereunder placed after the Delivery Date or
In-Service Date (as applicable for said Product) will be governed by the terms
and conditions of this Agreement when the Order is accepted by BCS.
13.4 PRICE AND DISCOUNTS. Prices and discounts
for BCS's
Products, Licensed Materials and Services shall be as shown in the
AT&T-BCS
Pricing Agreement.
<PAGE>
13.5 BILLING AND PAYMENT
(a) This section overrides any inconsistent provisions in Part
1 and covers how BCS will invoice Ordering Company.
(b) For Products that BCS installs, BCS will bill Ordering
Company for the Product and installation charges on the In-Service Date, except
as provided in Section 14.4(b).
(c) For Ordering Company-installed Products,
BCS will invoice
Ordering Company upon delivery.
(d) BCS will invoice recurring charges in
advance.
(e) Payment of invoices is due within thirty (30) days of the
invoice date. Restrictive endorsements or other statements on checks will not
apply.
(f) If Ordering Company does not generally pay in a timely
fashion, the parties agree to review the billing and payment processes to
improve such processes.
13.6 HAZARDOUS MATERIAL. Ordering Company is responsible for
removal of any hazardous material (e.g., asbestos) or correction of any
hazardous condition that affects BCS's performance of Services. Services will be
delayed until Ordering Company removes or corrects any such hazardous condition
with no penalty to BCS.
13.7 IDENTIFICATION CREDENTIALS. Ordering Company may, at its
discretion, require BCS's employees and subcontractors to exhibit identification
credentials, which Ordering Company may issue, in order to gain access to
Ordering Company's premises for the performance of the work. If for any reason,
any of BCS's employees or subcontractors are no longer performing work, BCS
shall immediately inform Ordering Company's Representative in the speediest
manner possible. Notification shall be followed by the prompt delivery to
Ordering Company's Representative of the identification credentials involved or
a written statement of the reasons why the identification credentials cannot be
returned. Subject to Section 5.1 of this Agreement, BCS shall be liable for any
damage or loss sustained by Ordering Company if the identification credentials
are not returned to Ordering Company.
ARTICLE XIV
PURCHASE OF PRODUCTS
14.1 GENERAL. The provisions of this Article 14 shall be
applicable to the purchase of Products from BCS. 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 BCS, the provisions of Articles 15 and 16 shall also
be applicable.
<PAGE>
14.2 CHANGE CONTROL DATE. The Change Control Date ("CCD") for
Orders, is a date shown on the Order or confirmation of the Order, and is the
last date BCS will be required to accept changes to the Products ordered for
delivery on the Delivery Date for Customer-installed Products or for
installation on the In-Service Date for BCS-installed Products. The CCD is the
date BCS accepts the Order or is deemed to have accepted it pursuant to Section
2.2, unless a different date is shown on the Order or confirmation of the Order.
Changes to the original Order received by BCS prior to the CCD must be approved
in writing by authorized representatives of both parties. Changes to an Order
received and accepted by BCS after the CCD will be treated as separate Orders
and may be delivered after the Delivery Date for Customer-installed Products or
may be installed after the In-Service Date for BCS-installed Products. The CCD
for Orders for modifications or additions addressed in this Section will be the
date BCS accepts the Order or is deemed to have accepted it pursuant to Section
2.2.
14.3 ORDERING COMPANY-INSTALLED PRODUCTS.
(a) The "Delivery Date" is the date BCS
delivers the Products
to the Ordering Company's facility as specified in an Order or
confirmation of
Order.
(b) BCS will make reasonable accommodations if Ordering
Company requests a delay in the originally scheduled Delivery Date if Ordering
Company gives BCS written notice prior to the CCD. If Ordering Company gives
notice of a request for a delay in the originally scheduled delivery date after
the CCD, requests more than one delay in the Delivery Date prior to the CCD, or
causes a delay in the Delivery Date as a result of Ordering Company's failure to
meet obligations under this Agreement, BCS may cancel the Order and bill
Ordering Company for cancellation charges as set forth in Part 1 of this GPA;
provided however, that BCS shall give Ordering Company fifteen (15) days written
notice of its intention to cancel the Order and to bill cancellation charges
pursuant to this Section and shall not cancel the Order if Ordering Company
accepts delivery prior to the expiration of such period. In addition, BCS's
notice shall include a reasonable estimate of the anticipated cancellation
charges. Notwithstanding the foregoing provisions of this Section 14.3(b),
Ordering Company may delay delivery one time for up to thirty (30) days,
provided Ordering Company has given BCS seven (7) business days' notice prior to
the scheduled ship date.
(c) Shipping charges may be adjusted if Ordering
Company
changes the location for delivery.
14.4 BCS-INSTALLED PRODUCTS.
(a) This Section 14.4 overrides any inconsistent
terms in Part
1 of this Agreement. For all BCS Products, if BCS installs such
Products, BCS
will notify Ordering Company that the Product is installed in good
working order
and complies with BCS's standard specifications and any other
specifications
agreed to by the parties (the "In-Service Date"). For
<PAGE>
BCS's DEFINITYPBX and Multimedia Messaging and Response ("MM&R") Products, such
notice will be in writing and Ordering Company shall have ten (10) days
following the In-Service Date (the "Acceptance Period") to test the DEFINITY
and/or MM&R Product and to determine whether Ordering Company agrees with BCS
that such Product complies with the applicable specifications and warranties for
that Product. If Ordering Company does not notify BCS in writing during such
Acceptance Period of any non-conformities to the applicable product
specifications and warranties, the Product will be deemed accepted as of the
In-Service Date.
During the Acceptance Period, Ordering Company may conduct
appropriate tests and then shall either: (a) accept the Product -- by providing
written notice to BCS of that fact, in which case the Product will be deemed
accepted as of the In-Service Date; or (b) if non-conformities to the
specifications or warranties exist, so advise BCS in writing, specifying such
non-conformities. BCS shall promptly correct such non-conformities and notify
Ordering Company that they were corrected. The Product will be deemed accepted
by Ordering Company upon correction of the non-conformities specified in
Ordering Company's notice.
If BCS is unable to correct all of the significant
non-conformities described in Ordering Company's notice within thirty (30) days
of receipt of Ordering Company's notice, Ordering Company shall either: (a)
accept the Product, in which case BCS will be required to continue to correct
any outstanding non-conformity; or (b) Ordering Company may reject the Product
without any liability and BCS will refund all amounts paid to BCS for the
returned Product plus transportation charges from BCS' plant and return; or (c)
have the Product replaced by BCS as promptly as possible by giving Ordering
Company priority over other customers at no additional charge. If Ordering
Company elects to reject the Product, it must do so in writing and within a
reasonable time frame.
(b) BCS will make reasonable accommodations if Ordering
Company requests a delay in the originally scheduled In-Service Date if Ordering
Company gives BCS written notice prior to the CCD. If Ordering Company gives
notice of a request for delay in the originally scheduled In-Service Date after
the CCD, requests more than one delay in the In-Service Date prior to the CCD,
or causes a delay in the In-Service Date as a result of Ordering Company's
failure to meet its obligations (e.g., its obligations under Section 13.6) under
this Agreement, Ordering Company and BCS will mutually agree to either: (i)
deliver the Products and commence billing as of the originally scheduled
In-Service Date, in which case installation will be rescheduled at a mutually
agreeable time and additional installation charges may apply; or (ii) cancel the
Order and bill Ordering Company for cancellation charges as set forth in Part 1
of this GPA. Notwithstanding the foregoing provisions of this Section 14.4(b),
Ordering Company may delay delivery one time for up to thirty (30) days,
provided Ordering Company has given BCS seven (7) business days' notice prior to
the scheduled ship date.
(c) For BCS-installed Products, BCS will perform a site survey
to identify Ordering Company's specific installation requirements. If the site
survey cannot be performed prior to the execution of an Order, it will be
scheduled and conducted as soon as Ordering
<PAGE>
Company's facilities are available. Upon completion of the site survey, BCS will
identify and communicate to Ordering Company any additional charges that may
apply. If there were additional charges identified during the site survey,
Ordering Company may cancel the Order without incurring cancellation charges if
Ordering Company notifies BCS in writing within ten (10) days of Ordering
Company's receipt of the notice from BCS of the additional charges.
(d) Installation and shipping charges may be
adjusted if
Ordering Company changes the installation location.
14.5 PRODUCT WARRANTY.
(a) BCS warrants that as of the date title passes, BCS will
have the right to sell, transfer and assign Products and the title conveyed
shall be good and Products shall be delivered free from any security interests
or any other liens or encumbrances.
(b) For purposes of Sections 14.5(b) through 14.5(g) only, the
term "Product" also includes the Product's associated Software. During the
warranty period, BCS warrants to Ordering Company that the Products furnished
shall conform to and perform in accordance with BCS's standard specifications or
documentation and any other mutually agreed specifications. In addition, BCS
warrants to Ordering Company that the Products shall be merchantable and free
from defects in design (except to the extent (i) designed by Ordering Company or
(ii) design defects are caused by the presence in BCS's Product of substitute
components of Ordering Company's selection not recommended by BCS), material and
workmanship. BCS also warrants that the Products will be new, remanufactured, or
refurbished, and that installation and other services will be performed in a
first-class workmanlike manner.
(c) The warranty period shall be specified on an Order or
confirmation of the Order and shall begin on the Delivery Date for Ordering
Company-installed Products or on the In-Service Date for
BCS-installed Products.
However, for DEFINITY and/or MM&R Products, if in the course of acceptance tests
significant problems occur such that acceptance is delayed for more than ten
(10) days following Ordering Company's notice concerning such significant
problems, the warranty period shall commence upon acceptance. The warranty
period shall be one year if none is specified on the Order or confirmation of
the Order.
(d) (i) Replacement material shall be warranted as set forth
above in Section 14.5(b). Repaired material shall be warranted as set forth
above in Section 14.5(b) for the remainder of the original warranty period.
(ii) When BCS performs services under a
time-and-materials Order, replacement and repaired material, as well as
associated services, will be warranted for ninety (90) days from the date the
work is completed.
<PAGE>
(e) If a Product (including any associated Installation
Services) does not meet the above warranties during the warranty period,
Ordering Company shall promptly notify BCS. BCS shall take the following action
promptly:
(i) Within the first sixty (60) days of the
warranty period, if
Ordering Company notifies BCS of a defect or
non-conformity 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 upon return of the Product. Should Ordering
Company seek such a
refund, it will provide BCS such cooperation as necessary
to enable BCS
to remove the Product from Ordering Company's premises,
if necessary.
Transportation costs and risk of loss or damage in
transit shall be
borne by BCS. In the event of such a refund, Ordering
Company may also
return for credit any other BCS 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 Products.
(ii) After sixty (60) days, BCS, at its option, shall
attempt first to
repair or replace such Product without charge or, if
not feasible,
refund the original purchase price and installation
charges. In the
event of such refund, Ordering Company shall
provide BCS such
cooperation as necessary to enable BCS to remove the
Product from
Ordering Company's premises, if necessary.
Transportation costs and
risk of loss or damage in transit shall be borne by BCS.
In addition,
in the event of such refund, Ordering Company may
also return for
credit any other BCS 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.
(f) All warranties shall continue in full force and effect
notwithstanding transfer of title (except for title to their associated
Software) to the Products by Ordering Company, so long as Ordering Company or
its Affiliates shall remain the user of the Product. All warranties shall also
survive inspection, acceptance and payment.
(g) THE FOREGOING PRODUCT WARRANTIES ARE
EXCLUSIVE AND ARE IN
LIEU OF ALL OTHER EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT
NOT LIMITED TO
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR (1)
TANGIBLE PROPERTY
DAMAGE AND PERSONAL INJURY FOR WHICH BCS IS HELD LIABLE AND
(2) THE REMEDY
PROVIDED IN SECTION 5.1(E), ORDERING COMPANY'S SOLE AND
EXCLUSIVE REMEDY SHALL
BE BCS'S OBLIGATION TO REPAIR, REPLACE, CREDIT, OR REFUND AS SET
FORTH ABOVE IN
THIS WARRANTY.
<PAGE>
(h) Certain additional warranties with respect
to Software are
set forth in Section 15.8.
14.6 WARRANTY/POST-WARRANTY SERVICE EXCLUSIONS.
(a) EXCEPT AS STATED IN SECTION 14.5, BCS,
ITS SUBSIDIARIES
AND THEIR AFFILIATES, SUBCONTRACTORS AND SUPPLIERS, MAKE NO
WARRANTIES, EXPRESS
OR IMPLIED, AND SPECIFICALLY DISCLAIM ANY WARRANTY OF FITNESS
FOR A PARTICULAR
PURPOSE.
(b) The warranty provided in Section 14.5 and post-warranty
service do not cover repair for damages or malfunctions caused by: (1) actions
of non-BCS personnel or the attachment to the Products of non-BCS furnished
equipment or Software; (2) Ordering Company's failure to follow BCS's
installation, operation or maintenance instructions, including Ordering
Company's failure to permit BCS timely remote access to Ordering Company's
Products; (3) failure of products not serviced by BCS; (4) abuse, misuse or
negligent acts of non-BCS personnel; or (5) Force Majeure conditions following
delivery. In addition, BCS is not obligated to provide warranty or post-warranty
service if Ordering Company modifies the Software. If Ordering Company requests,
BCS will perform repair or other services not covered by this Agreement to
Ordering Company's BCS Products at the mutually agreed to rates for such
service.
(c) Additional charges may apply if BCS incurs additional
costs in providing warranty or post-warranty services as a result of a
modification of Products. Unless otherwise agreed, BCS shall not be responsible
to provide warranty or post-warranty Maintenance Services, if Ordering Company
has moved a Product without notifying BCS.
(d) BCS DOES NOT WARRANT UNINTERRUPTED OR
ERROR-FREE OPERATION
OF THE PRODUCTS AND BCS DOES NOT WARRANT THAT THE PRODUCTS WILL
PREVENT, AND BCS
WILL NOT BE RESPONSIBLE FOR, UNAUTHORIZED USE (OR CHARGES
FOR SUCH USE) OF
COMMON CARRIER TELECOMMUNICATION SERVICES OR FACILITIES
ACCESSED THROUGH OR
CONNECTED TO PRODUCTS. ORDERING COMPANY MAY PURCHASE BCS'S TOLL
FRAUD PROTECTION
PRODUCTS OR OFFERINGS (E.G., DEFINITY TOLL FRAUD INDEMNITY OFFER) IF IT CHOOSES
TO DO SO, PROVIDED BCS CONTINUES SUCH OFFERING.
14.7 DOCUMENTATION. BCS shall furnish to Ordering Company at
no additional charge and grant Ordering Company the right to use one copy of the
documentation for each unit of the Products provided hereunder. Such
documentation will be that customarily provided by BCS to its customers, for
that Product, at no additional charge. BCS shall also furnish to Ordering
Company the standard application and/or planning guide or a similar document, to
the extent BCS provides such a document for the Product. Such documentation
shall be provided
<PAGE>
prior to or included with the shipment of the Products from
BCS to Ordering
Company. Additional copies of the documentation are
available at mutually
agreeable prices.
14.8 SPECIFICATIONS. Upon request, BCS shall provide to
Ordering Company, at no charge, and grant Ordering Company the right to use and
reproduce a copy of BCS's available commercial Specifications applicable to
Products ordered hereunder. In addition, a copy of BCS's Specifications shall be
provided with each unit. Additional copies are available at mutually agreeable
prices.
14.9 REGISTRATION AND RADIATION STANDARDS. When a Product
furnished under this Part III is subject to Part 68, Part 15 or any other part
of the Federal Communications Commission's Rules and Regulations, as they may be
amended from time to time, (hereinafter "FCC Rules"), BCS warrants that such
Product complies with the registration, certification, type-acceptance and/or
verification standards of FCC Rules including, but not limited to, all labeling,
customer instruction requirements, and the suppression of radiation to specified
levels. BCS shall also establish periodic ongoing compliance re-testing and
follow a Quality Control program, to assure that Product shipped complies with
the applicable FCC Rules. BCS agrees to indemnify and save Ordering Company
harmless from any liability, claims, or demands (including costs, expenses and
reasonable attorney's fees on account thereof) that may be made because of BCS's
noncompliance with the applicable FCC Rules. BCS agrees to defend Ordering
Company, at Ordering Company's request, against such liability, claim or demand.
In addition, should Product which is subject to Part 15 of the FCC Rules, during
use generate harmful interference to radio communications, BCS shall provide to
Ordering Company information relating to methods of suppressing such
interference and pay the cost of suppressing such interference or, at the option
of Ordering Company, accept return of the Product and refund to Ordering Company
the price paid for the Product less a reasonable amount for depreciation, if
applicable. Nothing in this Section 14.9 shall be deemed to diminish or
otherwise limit BCS's obligations under any other Section of this Agreement.
14.10 MARKING. All BCS Product furnished under this Agreement
shall be marked for identification purposes in accordance with mutually agreed
upon marking specifications. Such specifications shall be set forth in a
Supplemental Agreement or Order. All such Product shall also be marked with
BCS's model/serial number. This Section 14.10 does not reduce or modify BCS's
obligations under Section 4.4, TRADEMARKS, of this Agreement.
<PAGE>
ARTICLE XV
SOFTWARE
15.1 GENERAL.
(a) The provisions of this Article 15 apply to the furnishing
of Software by BCS to Ordering Company pursuant to this 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.
15.2 SOFTWARE LICENSE.
(a) BCS grants Ordering Company a personal, non-transferable
(except to the extent allowed in Section 15.2(d) below) and non-exclusive right
to use, in object code form, all Licensed Materials and related documentation
furnished under this Agreement. Title to and ownership of all Licensed Materials
shall remain with BCS or its suppliers. This grant shall be limited to use with
the equipment for which the Licensed Materials was obtained or, on a temporary
basis, on back-up equipment when the original equipment is inoperable. Use of
Licensed Materials on multiple processors is prohibited unless otherwise agreed
to in writing by BCS. Ordering Company will not reverse assemble, reverse
compile, disassemble or decompile the Licensed Materials to derive a source code
equivalent of the Licensed Materials. Ordering Company will take appropriate
action to instruct Ordering Company's employees and users of all Licensed
Materials of Ordering Company's obligations under this Section.
(b) Ordering Company may make a reasonable number of copies of
Licensed Materials, solely for the purpose of back-up or archival use. Any such
copy must contain the same copyright and other notices and markings that the
original Licensed Materials contains. Use of Licensed Materials on any equipment
other than that for which it was obtained or removal of Licensed Materials from
the United States or other country in which the Licensed Materials was
originally deployed (without written consent of BCS, which will not be
unreasonably withheld), or reverse assembly, reverse compilation, disassembly or
decompilation of the Licensed Materials to derive a source code equivalent shall
immediately and automatically terminate the license with respect to the
particular unit of the Licensed Materials. If Ordering Company commits any other
material breach of the Licensed Materials license, the conditions of Article 5A,
ARBITRATION; DISPUTE RESOLUTION shall apply. BCS's cancellation of the license
at issue shall be tolled pending the outcome of the Dispute Resolution process.
Simultaneous with initial invocation of
<PAGE>
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.
(c) BCS may provide Ordering Company with Software that bears
the logo or copyright of another company. If BCS provides such Software with a
"shrinkwrap" or other license from the other company, those terms apply rather
than the license terms in this Agreement. If Ordering Company requests, BCS will
give Ordering Company a copy of such other license terms before Ordering Company
orders the Software.
(d) If the equipment purchased hereunder is sold or assigned
to another party, BCS requires that the new owner or assignee execute a new
Licensed Materials license and pay the then current Licensed Materials license
fee, if any. Upon written request, BCS will grant the new owner or assignee of
the equipment the right to use any related Licensed Materials, provided the new
owner or assignee agrees, in writing, to BCS's terms and conditions and pays
BCS's then current Licensed Materials license fee. BCS shall seek to enforce its
rights in the first instance against the new owner or assignee. If the new owner
or assignee of the equipment refuses to execute a new Licensed Materials license
agreement or pay the applicable Licensed Materials license fee, or if the
equipment is no longer to be used by Ordering Company, Ordering Company shall
either return the Licensed Materials, together with any copies, or destroy the
Licensed Materials and all copies, and provide BCS with prompt written notice of
such destruction. Notwithstanding the preceding provisions of this Section
15.2(d), Ordering Company may transfer the Licensed Materials to another
Ordering Company in connection with a transfer of the associated equipment, and
BCS will not charge the new Ordering Company a Licensed Materials license fee
therefor.
15.3 SOFTWARE. On the delivery date, BCS 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, as described in BCS's Specifications, the
applicable Supplemental
Agreement or the Order;
(b) User documentation which BCS normally furnishes to
customers with the Licensed Materials at no additional charge, and any user
documentation specified in the applicable Supplemental Agreement; and
(c) If appropriate and if not previously
provided, the
required machine configuration.
15.4 INSTALLATION OF SOFTWARE. Where Ordering Company is
responsible for installation of Software, BCS'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 BCS is
responsible for such installation, BCS shall deliver the Software to Ordering
Company in sufficient time for it to be installed on or before the scheduled In-
<PAGE>
Service Date specified in the Order or Supplemental Agreement, and BCS shall
complete its installation and associated testing on or before such date.
15.5 CENTRALIZED MAINTENANCE. Ordering Company
may specify in
an Order that, for centralized maintenance purposes, all
Software changes,
including Enhancements, provided by BCS shall be provided only to the Ordering
Company's Centralized Support Organization. BCS will, in that event, be
responsive to maintenance requests which the 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. BCS grants Ordering Company the right to transmit the
Software by means of data links from Ordering Company's Centralized Support
Organization to each licensed installation. BCS grants to Ordering Company, at
no additional fee, a license to use a copy of the Software for centralized
maintenance purposes only. BCS shall provide this maintenance copy of the
Software in response to an Order requesting same. The maintenance copy provided
to the Ordering Company's Centralized Support Organization will be used only to
perform systems or application support functions for the Ordering Company's
application programmers, except as provided hereinafter. If the maintenance copy
of the Software provided pursuant to this Section 15.5 or a copy thereof is
later incorporated by the Ordering Company's Centralized Support Organization
into a Ordering Company system or application support Software, Ordering Company
shall notify BCS and shall pay BCS the current applicable rate paid by Ordering
Company for use of the Software.
15.6 ENHANCEMENTS. BCS shall promptly furnish to Ordering
Company during the duration of the Order, at an agreed upon charge, if any, all
Software Enhancements and telephone technical assistance made available by BCS
to commercial customers and shall promptly provide to Ordering Company any
revisions to the basic Software items defined in Section 15.3 to reflect the
Enhancements. All Enhancements shall be considered Software subject to the
provisions of the Order. Ordering Company may incorporate the Enhancements into
the Software or continue using previous versions of the Software, at Ordering
Company's option. Ordering Company may, at any time and at its discretion,
discontinue maintenance of the Software. BCS shall not charge Ordering Company
for Quality Protection Plan Change Notices (QPPCNs) during the warranty period
or during any contracted-for post-warranty maintenance period. If the QPPCN is
required for warranty or post-warranty service, and Ordering Company elects not
to obtain the QPPCN, continuation of warranty or post-warranty service may be
subject to additional charges.
15.7 TRAINING AND TECHNICAL SERVICE. BCS shall
provide such
assistance, advice and training at no additional charge, as it
normally provides
without charge to other customers.
15.8 SOFTWARE WARRANTY. BCS warrants to Ordering
Company all
of the following:
<PAGE>
(a) The Software will be free from significant errors, will
conform to and perform in accordance with the Specifications and will function
properly. The Media conveying 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 as described in the Specifications. If an Order
states that the Software is to be used in conjunction with certain BCS
equipment, the Software shall be compatible with that equipment. The foregoing
warranties extend to the future performance of the Software and shall continue
for one year except as otherwise specified in a Supplemental Agreement or Order.
(b) Software-related Work will be performed in a
first-class,
workmanlike manner.
(c) With respect to BCS-developed Software, there are no copy
protection or similar mechanisms within the Software which will, either now or
in the future, interfere with the grants made in this Agreement or an Order .
With respect to non-BCS developed Software, BCS will use reasonable efforts to
insure that there are no copy protection or similar mechanisms within the
Software which will, either now or in the future, interfere with the grants made
in this Agreement or an Order.
(d) Ordering Company shall have quiet enjoyment
of the
Software.
(e) As to Software for which BCS does not solely own all
intellectual property rights, BCS has full right, power and authority to license
the Software to Ordering Company as provided in this Agreement or an Order.
(f) If the Software, or any portion thereof, is or becomes
unusable, totally, or in any respect during the applicable warranty period, or
if the work fails to meet the warranties, BCS will reperform work, correct
errors, defects and nonconformities and restore the Software to conforming
condition free of significant errors at no cost to Ordering Company. Corrected
Software shall be warranted as set forth in this clause.
(g) 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. BCS shall immediately advise Ordering Company, in
writing, upon reasonable suspicion or actual knowledge that the Software
provided under this Agreement or an Order may result in the harm described
above.
(h) All warranties shall survive inspection,
acceptance and
payment.
15.9 RELATED DOCUMENTATION. BCS shall furnish to
Ordering
Company, at no additional charge, and grant Ordering Company the
right to use
one copy of the related
<PAGE>
documentation for each unit of the Software furnished by BCS pursuant to this
Agreement for the sole purpose of operating and maintaining such Software. Such
related documentation will be that customarily provided by BCS 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 or included with provision of Software by BCS to Ordering Company. Additional
copies of the related documentation are available at prices set forth in BCS's
Price List.
15.10 NOTIFICATION OF DISCONTINUED AVAILABILITY OF SOFTWARE.
BCS 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, BCS will make available to
Ordering Company, Software support service which affords Ordering Company
reasonable continued use of the Software.
15.11 RISK OF LOSS. If any Software fixed in Media is lost,
damaged or made invalid during shipment, BCS will promptly replace the Software
and Media therefor at no additional charge to Ordering Company. If any Software
is lost or damaged while in the possession of Ordering Company, BCS will
promptly replace the Software at mutually agreed charges.
15.12 ACCESS TO SOURCE CODE
(a) If Supplier is declared bankrupt, and as a result of such
bankruptcy, BCS is unable to maintain Software so that Ordering Company is
unable to use the Software, then BCS shall furnish to Ordering Company (under a
suitable license agreement, if applicable) BCS's then existing Software Source
Code and associated documentation for the affected Product(s) for such standard
version only to the extent to allow Ordering Company to use solely for its
internal purposes such Software for which Ordering Company has a perpetual,
non-exclusive right to use.
(b) If Ordering Company's use of the Software Source Code
provided pursuant to Section 15.12(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 within the scope of the
rights granted in Section 15.12(a).
(c) The parties may negotiate additional rights for Ordering
Company to access particular Software Source Code on a case-by-case basis, as
set forth in a Supplemental Agreement or Order.
<PAGE>
ARTICLE XVI
MAINTENANCE, INSTALLATION
AND OTHER MISCELLANEOUS SERVICES
16.1 GENERAL. The provisions of this Article 16 shall be
applicable to the furnishing by BCS of Services other than Services furnished
pursuant to any other Article of this Agreement. Such services include, but are
not limited to Maintenance Services and other Miscellaneous Services.
16.2 POST-WARRANTY MAINTENANCE PERIOD. If Ordering Company
orders post-warranty service, it will commence on the expiration of the
applicable warranty period and will be provided for an initial term as specified
on the relevant Supplemental Agreement or Order. BCS shall provide Ordering
Company with written notice of pending expiration of applicable Maintenance
period, ninety (90) days prior to expiration.
16.3 MAINTENANCE SERVICES TERMINATION. BCS shall provide all
Maintenance Services required by this Agreement upon the provisions set forth in
this Agreement and in Orders placed by Ordering Company pursuant to this
Article. At any time, Ordering Company may terminate individual Orders for
Maintenance Services, provided Ordering Company gives at least sixty (60) days
prior written notice to BCS. If the charges for a terminated Order were paid
annually in advance, BCS shall promptly refund to Ordering Company the unused
prorate portion of the charges. Ordering Company and BCS agree to separately
address in Orders or Supplemental Agreements the appropriate notice provisions
and/or early termination charges for multi-year maintenance service periods.
16.4 POST-WARRANTY SERVICE.
(a). Post-warranty service includes preventive maintenance as
deemed appropriate by BCS and remedial maintenance, including replacement parts
required for Products used under normal operating conditions. BCS shall maintain
such Maintenance records, including records with respect to On-site Response
Time and Time to Repair, as it keeps in its normal course of business. Upon
request of Ordering Company, BCS shall provide a copy of such records to
Ordering Company.
(b) If Ordering Company subsequently obtains additional
Products similar to the Products covered under any Order issued pursuant to this
Part III of the GPA, or requests certification or connection of equipment
similar to the Products covered under any Order issued pursuant to this Part III
of the GPA, and co-locate those Products or equipment (the "Added Products")
with the existing ones, upon warranty expiration the Added Products will also be
covered for post-warranty service under this Part III of the GPA and Ordering
Company agrees to pay any applicable post-warranty service charges. Such charges
will be at the then current
<PAGE>
monthly rate and coverage will be the same as and coterminous
with the coverage
for the existing Products.
16.5 WARRANTY AND POST-WARRANTY COVERAGE AND
SUPPORT.
(a) PURCHASED OR REPLACEMENT PARTS MAY BE NEW, REMANUFACTURED
OR REFURBISHED and will be functionally equivalent to a new Product. Any removed
parts and/or Products will become the property of BCS.
(b) Warranty and post-warranty service coverage will be in
accordance with the option(s) Ordering Company has selected as identified on the
Order or confirmation of the Order. BCS's standard warranty and post-warranty
coverage will apply if none is specified. BCS's warranty and post-warranty
service coverage options, and Ordering Company's responsibilities, are described
in Exhibit 16-1 to this Part III of the GPA.
(c) Under BCS's warranty and post-warranty service, BCS is
responsible for damage to the Products (excluding loss or corruption of data
records) from power surges as long as Ordering Company has installed BCS
provided or approved electrical protection to the Products and the electrical
protection complies with the National Electrical Code and any applicable
federal, state and local laws.
(d) Warranty and post-warranty service
exclusions are set
forth in Section 14.6(b) above.
16.6 CONTENTS OF MAINTENANCE ORDER. A
Maintenance Order shall contain the following:
(a) The incorporation by reference of this
Agreement;
(b) A complete list of Equipment to be maintained specifying
quantity and type, description of Maintenance Services, duration of Order,
monthly or annual maintenance charges for each item of Equipment, total monthly
maintenance charges payable by Ordering Company and invoice address;
(c) The location at which the Equipment is to be
maintained,
including floor, street, city and state; and
(d) Any other special terms agreed upon by both
parties.
16.7 AUDIT. With the exception of any fixed basic monthly or
annual maintenance charge set forth in this Agreement or an Order, BCS shall
maintain complete, clear and accurate records of: (a) all hours of direct labor
employees engaged in work for which
<PAGE>
payment under this Agreement is to be computed on the basis of actual hours
worked, at a fixed rate per hour or other unit of time specified in this
Agreement; and (b) billable costs payable by Ordering Company under this
Agreement including a physical inventory, if applicable. These records shall be
maintained in accordance with generally accepted accounting principles so they
may be readily audited and shall be held until costs have been finally
determined under this Agreement and payment or final adjustment of payment, as
the case may be, has been made. BCS shall permit Ordering Company or Ordering
Company's representative to examine and audit these records and all supporting
records at all reasonable times. Audits shall be made not later than one
calendar year after the expiration or termination of an Order, and the
correctness of BCS's billing hereunder shall be determined from the results of
that audit. In making arrangements with a vendor for the furnishing of labor,
material or other items for which Ordering Company will be charged separately
from the fixed basic monthly maintenance charges as set forth in this Agreement
or the applicable Supplemental Agreement or Order, BCS shall require its vendor
to keep separate records, and make separate invoices, covering only what is so
supplied, so that no part of the records or invoices shall apply to jobs not
covered by this Agreement. In making payments to a vendor for labor, material or
other items for which Ordering Company will be charged separately from the fixed
basic monthly maintenance charges as set forth in this Agreement or the
applicable Supplemental Agreement or Order, BCS shall show its vendor's invoice
number and date on BCS 's payment advice, and no part of that payment shall
apply to other jobs not covered by this Agreement.
16.8 BREAKAGE, DISAPPEARANCE AND CONDITION. BCS shall take
whatever precautions BCS deems necessary or desirable (which do not violate
Ordering Company's plant rules or cause inconvenience or delay to Ordering
Company) regarding tools, equipment, and materials, whether or not owned by BCS,
which BCS causes to be brought to Ordering Company's premises. Ordering Company
shall have no responsibility for their care, safekeeping or operating condition.
Ordering Company shall not bear any cost or expense associated with their
breakage or disappearance unless resulting from Ordering Company's negligence.
16.9 CONTINGENCY. If BCS fails to perform
the Maintenance
Services, Ordering Company may arrange for the performance of
the Maintenance
Services by another party.
16.10 ELIGIBILITY FOR MAINTENANCE SERVICES. Equipment shall
automatically be eligible for Maintenance Services provided it shall have been
under Maintenance Service or warranty by BCS on the date of commencement of
Maintenance Services. Any other Equipment shall be inspected by BCS at mutually
agreed to charges to determine whether it is in good working order and can be
maintained in that condition. BCS shall notify Ordering Company in writing about
the eligibility of the Equipment. If the Equipment is not eligible, but can be
made eligible, Ordering Company may, at its expense, make or have made those
changes required to upgrade the Equipment to eligibility status.
<PAGE>
16.11 MAINTENANCE FACILITIES. Ordering Company shall provide
BCS with adequate storage space for spare parts and adequate working space,
including heat, light, ventilation, electric current and outlets for use by
BCS's maintenance personnel. These facilities shall be within a reasonable
distance of the Products to be serviced and shall be provided at no charge to
BCS. Ordering Company shall not be responsible for any damage to BCS's equipment
or materials stored on Ordering Company's premises unless the damage results
from Ordering Company's negligence.
16.12 PRECAUTIONS. BCS shall take care in all operations to
safeguard people as well as property and will strive to minimize interference
with or curtailment of Ordering Company or customer operations at the work site.
16.13 TECHNICAL INFORMATION, SOFTWARE AND PROGRAMMING AIDS.
BCS shall furnish to Ordering Company on the agreed-upon delivery date without
additional charge any technical information, programs, routines, subroutines,
documentation, or related material it has or may develop or modify, necessary
for the general use or maintenance of Products under post-warranty maintenance
service, which are normally so furnished to maintenance customers.
16.14 TITLE. Except as maybe set forth in an applicable
Supplemental Agreement or Order, title to replacement and repair parts and
components shall vest in Ordering Company upon installation on equipment owned
by Ordering Company. Any parts replaced shall become the property of BCS. Title
to enhancements and modifications and to intellectual property rights therein
shall remain in BCS.
16.15 TRAINING AND TECHNICAL SERVICE. BCS shall
provide,
without additional charge to Ordering Company, the training and
assistance as it
normally provides without charge to maintenance customers.
16.16 MAINTENANCE SERVICES WARRANTY. BCS warrants to Ordering
Company that the Maintenance Services shall be performed with promptness and
diligence, in a first-class, workmanlike manner in accordance with applicable
specifications and using material free from defects, and that the Product shall
function in good operating condition during the duration of the Maintenance
Order. All warranties shall survive inspection, acceptance and payment.
Maintenance Services (including replacement parts) not meeting the above
warranties will be corrected by BCS at no cost to Ordering Company or if BCS is
unable to do so within a reasonable period of time, then Ordering Company may
terminate the applicable maintenance Order with respect to that Product without
liability for cancellation charges. Whenever equipment, repair parts or
components under warranty are shipped for repair or replacement purposes, BCS
shall bear all costs, including but not limited to, costs of packing, rigging,
transportation and insurance. BCS shall also bear all risk of loss or damage
from the time the equipment, repair parts or components are removed from
Ordering Company's site until the equipment, repair parts or components are
returned to that site and installed by BCS.
<PAGE>
16.17 TECHNICAL SUPPORT OF PRODUCTS. With respect to the
DEFINITY Product Line, BCS shall, in addition to its obligations under Product
Warranty, make available, at mutually agreeable rates, ongoing technical support
including, but not limited to the expertise to identify, isolate, and resolve
problems, that BCS customarily provides, including telephone assistance, field
Service, and technical consultation Service for DEFINITY Products provided under
this Agreement for a period of the longer of (A) ten (10) years after
installation of the particular DEFINITY Product; or (B) five (5) years after
last shipment of such type of Product to Ordering Company. The period for BCS's
Multi-media Messaging and Response Product Line is five (5) years after such
Product's discontinued availability effective date unless modified by
Supplemental Agreements.
16.18 REPORTS. At Ordering Company's request, and subject to
mutually agreed charges, BCS will provide periodic or other reports in a
mutually agreeable format concerning such matters as billings for Products and
Services, time to repair and time for Order completion.
16.19 WARRANTY FOR SERVICES OTHER THAN MAINTENANCE SERVICES.
BCS warrants to Ordering Company that Services will be performed in a
professional manner and in accordance with BCS'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 BCS, with respect to other
Miscellaneous Services (e.g., Move, Change and Rearrangements), within a
mutually agreed to period commencing on the date of acceptance of the Service,
BCS, at its option, either will correct the defect or nonconforming Service for
which BCS 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.
16.20 CONDITIONS OF INSTALLATION AND OTHER
SERVICES PERFORMED
ON ORDERING COMPANY'S SITE.
(a) ITEMS PROVIDED BY ORDERING COMPANY. Ordering
Company will
be responsible for furnishing the following items as required:
(i) 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 BCS with
input provided by
Ordering Company. BCS 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.
(ii) BUILDING EVACUATION - Prior to
Services start date,
provide building evacuation plans in case of a
fire or other
emergency.
<PAGE>
(iii) CEILING INSERTS - Provide ceiling
inserts as required
using BCS's standard spacing arrangement for
ceiling support
equipment.
(iv) 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 BCS to
properly install such
material.
(v) PERMITS - Prior to Services start date,
Ordering Company
shall provide all licenses, permits, easements,
right of ways
and authority for installation of Products and
other material;
and construction and building permits.
(vi) USE OF AVAILABLE TESTING EQUIPMENT -
Ordering Company
shall make available to BCS 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. BCS's use
of such test
equipment shall not interfere with the
Ordering Company's
normal equipment maintenance functions.
(vii) GROUNDS - Ordering Company shall
provide access to
suitable and isolated building ground as
required for BCS's
standard grounding of equipment. Where
installation is outside
or in a building under construction, Ordering
Company shall
also furnish lightning protection ground.
(viii) 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 BCS to modify existing
equipment.
(ix) BATTERY ROOM VENTILATION - Ordering Company
shall provide
the required ventilation for battery rooms or
areas.
(xvii) HOUSE SERVICE PANEL - Ordering Company
shall provide
electric power from the Ordering Company's
Service panel to
BCS's power board and shall run all leads
between said Service
panel and power board.
<PAGE>
(b) ITEMS TO BE FURNISHED BY BCS. The following
items will be
furnished by BCS (if required by the conditions of the particular
Service) and
the price thereof is included in BCS's price for Services:
(i) PROTECTION OF EQUIPMENT AND BUILDINGS -
BCS shall follow
its standard practices in providing
protection for Ordering
Company's equipment and buildings during the
performance of
the Services.
(ii) WIRE CONDUIT - BCS shall install
wire conduit as
specified in the Ordering Company's
specifications.
(iii) WIRE FRAMING - BCS shall install wire
conduit, fixtures,
and other necessary material for wire framing
distribution as
specified in Ordering Company's specification.
(iv) TEMPORARY DAILY CLOSING AND
FIREPROOFING - BCS shall
provide temporary daily closing for all
occupied buildings,
and fireproof all openings that BCS makes in
any occupied
building in the course of providing the Services.
(v) TOOLS AND EQUIPMENT - Unless
otherwise specifically
provided in this Agreement, BCS shall provide
all labor, tools
and equipment (the "tools") for performance of
this Agreement.
Should BCS actually use any tools
provided by Ordering
Company, BCS acknowledges that BCS accepts the
tools "as is,
where is". BCS acknowledges that Ordering
Company has no
responsibility for the condition or state of
repair of the
tools and BCS shall have risk of loss and
damage to such
tools. BCS 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 BCS,
reasonable wear
and tear excepted.
(vi) CLEAN UP - BCS at all times, and at its
expense, shall
keep the premise free from accumulation of
waste materials or
rubbish caused by BCS's operation. Upon
completion of the
work, BCS shall, at its expense, as promptly
as practical,
remove from the premises all of BCS's
implements, equipment,
tools, machines and surplus. In addition, BCS
shall clean up
its waste materials and debris and
dispose of same in
containers to be provided by Ordering Company.
If BCS fails to
clean up as provided herein, Ordering Company
may do so and
charge the cost thereof to BCS or deduct
same from the
Ordering Company's payment to BCS, provided
Ordering Company
has given prior notice to BCS and BCS has not
commenced to
cure within twenty-four (24) hours.
(vii) HAZARDOUS MATERIALS CLEANUP - At the
conclusion of the
Services, BCS shall be responsible for the
cleanup, removal,
and proper disposal of all
<PAGE>
Hazardous Materials introduced by BCS or its
sub-contractors
to Ordering Company's premises.
(viii) Subject to an additional charge, the
following items
may be furnished by BCS if mutually agreed to:
(1) RERUNNING CROSS-CONNECTIONS - BCS may
rerun permanent
cross-connections in accordance with revised
cross-connection
lists furnished by the
Ordering Company's cross-connection list.
(2) HANDLING, PACKING,
TRANSPORTATION, AND
DISPOSITION OF REMOVED AND SURPLUS
ORDERING COMPANY
EQUIPMENT - BCS may pack, transport,
and dispose of
surplus and removed Ordering Company
equipment as
agreed by the parties.
(3) PREMIUM TIME ALLOWANCES AND NIGHT
SHIFT BONUSES -
BCS may have its Services personnel
work premium time
and night shifts to the extent that BCS
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.
16.21 TRAINING. If requested by Ordering Company, BCS will, at
mutually agreed prices: (a) provide instructors and the necessary instructional
material of BCS'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 BCS and Ordering Company; or, (b) if
agreed to by BCS, license Ordering Company to reproduce BCS's copyrighted
training modules or manuals, covering those areas of interest outlined above in
this Section 16.21, sufficient in detail and format, to allow Ordering Company
to develop and conduct its own training program.
16.22 INSTALLATION/CUTOVER ASSISTANCE. In the event BCS is not
installing the material, and if requested by Ordering Company, BCS 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 XVII
EXHIBITS
17.1 LIST OF EXHIBITS. The following exhibits
are incorporated
by reference and are part of this Part III of this Agreement:
<PAGE>
Exhibit 13-1 - Sample Project Milestones and
Responsibilities
Exhibit 13-2 - Implementation Roles and Responsibilities
for an Order
Exhibit 16-1 - Basic Service Description of Warranty Or
Post Warranty
Service Coverage Offerings and Support
Options For
Equipment And Licensed Material
Exhibit 16-2 - Dedicated Technician Service
<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/
------------------------------
- ---------------------------
ame Name
-----------------------------
- --------------------------
Title Title
----------------------------
- -------------------------
Date Date
-----------------------------
- --------------------------
Form of
VOLUME PURCHASE AGREEMENT
THIS Volume Purchase Agreement ("Agreement") dated as of November 20,
1996 is between AT&T Corp., a New York corporation ("AT&T"), and NCR
Corporation, a Maryland corporation ("NCR").
WHEREAS, the Board of Directors of AT&T has determined that it is in the
best interests of AT&T and its shareholders to separate AT&T's existing
businesses into three independent businesses;
WHEREAS, in furtherance of the foregoing, AT&T and NCR will, on or
before January 1, 1997, execute and deliver a Distribution Agreement, by and
between AT&T and NCR (the "Distribution Agreement").
WHEREAS, this Agreement is one of the NCE Ancillary Agreements (as such
term is defined in the Distribution Agreement) contemplated by the Distribution
Agreement; and
WHEREAS, in anticipation of NCR's spin-off, AT&T and NCR desire to
memorialize and formalize the volume, prices, and other terms and conditions
under which AT&T will buy products and services from NCR in 1997 and thereafter.
NOW THEREFORE, AT&T and NCR agree as follows:
1. TERM OF AGREEMENT. (a) Except as otherwise expressly provided herein or in a
subsequent agreement between the parties, the terms and conditions of this
Agreement and the General Agreement between the parties of even date herewith
shall govern all of AT&T's purchases of products and services from NCR fro the
five-year period beginning as of January 1, 1997 and ending December 31, 2001,
unless this Agreement is terminated sooner as permitted by Section 1(b).
(b) Upon at least 90 days' prior written notice, either party may
terminate this Agreement for its convenience, without requirement of cause,
provided that the effective date of such termination is after expiration of the
Purchasing Period described in Section 2.
<PAGE>
2. COMMITMENT
(a) Under the terms and conditions of this Agreement, during the period
beginning January 1, 1997 and ending December 31, 1999 ("Purchasing Period")
AT&T contractually commits to purchase not less than $350 million of products
and services from NCR or any present or future subsidiaries or affiliates of NCR
(collectively "NCR Entities") ("Commitment"), unless the Commitment is reduced
or terminated as provided in Section 7. AT&T may satisfy this Commitment by
purchasing the entire Commitment amount of products or services in any of the
three years or cumulatively over the three years. If AT&T fails to satisfy the
Commitment, the adjustment described in Section 9 shall apply. Subject to the
clause in Article VI of the General Agreement entitled SCOPE OF AGREEMENT, any
purchases of Eligible Products, as hereinafter defined, by any present or future
subsidiary or other affiliate of AT&T (collectively, the "AT&T Entities") during
the Purchasing Period shall be included in the calculation of whether the
Commitment has been satisfied.
(b) Upon written notice to NCR, AT&T may, at its option, extend the
Purchasing Period until December 31, 2000 and/or December 31, 2001, subject to
Sections 9(a) and 9(b).
3. PRODUCTS AND SERVICES. The NCR products and services which the AT&T Entities
may purchase in satisfaction of the Commitment ("Eligible Products") include all
present and future products and services of any NCR Entity except products that
are exclusive to the Personal Computer, Retail, and/or Financial product lines.
Eligible Products include, but are not limited to, the following: Professional
Services; Customer Support Services (including without limitation Large Systems
Support and Software Support; repair and replacement parts and technical
support; and all products and services purchased in support of AT&T's
self-maintenance activities, including any parts purchased in the fourth quarter
of 1996 in contemplation of NCR's spin-off, systems infrastructure and customer
engineer education); Servers; Massively Parallel Processors; Software; and
Networking Products. The AT&T Entities may purchase Eligible Products for their
own internal use or (pursuant to the terms of a separate written agreement) for
resale worldwide (but with the applicable AT&T Entity additionally responsible
for any customs, duties, or local country taxes incurred by NCR by providing
products and services outside the United States), provided that the applicable
AT&T products or services to a customer ("Solutions Sale"), and provided further
that if the AT&T Entity receives written notice that NCR has
<PAGE>
entered into an exclusive distribution agreement with a third party in a given
foreign country, that AT&T Entity will not be authorized hereunder to resell NCR
products and services in that foreign country without obtaining NCR's prior
written consent, which consent will not be unreasonably withheld or delayed if
the resale can be accomplished without violation of such exclusive distribution
agreement. Subsidiaries acquired by Supplier after the effective date of this
Agreement shall have their products and services added to this Agreement at
mutually agreeable discount rates.
4. INDIRECT PURCHASES. Subject to the clause in Article VI of the General
Agreement entitled SCOPE OF AGREEMENT, if the AT&T Entities purchase Eligible
Products from any of NCR's authorized Value Added Resellers ("VARs") or
Independent Software Vendors ("ISVs") or from a third party NCR exclusive
distributor in a given foreign country, NCR will credit towards AT&T's
Commitment hereunder, the price paid by the AT&T Entities to the VAR, ISV or
third party foreign distributor for components produced by NCR.
5. PRICES. Unless the parties otherwise mutually agree, and
except as
required by Section 6, NCR prices to the AT&T Entities for the
Purchasing
Period shall be determined as follows:
(a) For all NCR products and services for which NCR has published a
Manufacturer's Suggested References Price ("MSRP"), the price to the AT&T
Entities shall be the MSRP reduced by a Discount calculated in accordance with
Section 5(b). NCR has furnished AT&T with a list of MSRPs for all such products
and services and thereafter shall provide AT&T not less than 30 days' prior
written notice of any changes to the MSRP list. For United States Customer
Support Services, any increase in the MSRP for Customer Support Services (or any
component thereof) shall not exceed the percentage increase in the Consumer
Price Index - All Urban Wage Earners and Clerical Workers, as issued by the
Bureau of Labor Statistics of the United States Department of Labor ("CPI")
relative to the CPI that was in effect on the later of January 1, 1996 or the
date the previous list price became effective.
(b) For each category of NCR product or service, the Discount shall be a
percentage equal to the effective discount off MSRP that was available as of
January 1, 1996 under the lowest NCR prices regularly offered to any AT&T
business unit. The formula for calculating the Discount, using MSRP and
discounted price in effect as of January 1, 1996 is as follows:
<PAGE>
(1/1/96 MSRP - 1/1/96 discounted price) x 100 =
Discount (%)
---------------------------------------
1/1/96 MSRP
Based on this formula, NCR and AT&T will establish the percentage amount of the
Discount for each product or service category by mutual written agreement.
(c) For all NCR products and services for which NCR has not published an
MSRP, NCR and AT&T shall negotiate prices in good faith. Such prices shall yield
margins to NCR not greater than the margins realized on comparable products and
services priced in accordance with Section 5(a).
(d) In order for NCR to comply with all applicable laws and regulations,
NCR's prices for products and services which the AT&T Entities purchase
indirectly through VARs and ISVs will be NCR's standard prices in effect with
such VARs and ISVs, and NCR's prices for products which the AT&T Entities
purchase for Solution Sales in which title to the NCR product passes to an AT&T
customer will be NCR's standard resale prices or such prices as the parties may
separately negotiate ("Indirect and Resale Prices").
(e) In the event that NCR redefines its pricing strategy in a manner
that would make the current model pricing obsolete, the AT&T Entities shall have
the option to move to this new pricing paradigm in its entirety through the
remaining term of this Agreement. Should a new pricing paradigm occur, only new
products/service transactions would be impacted through this change.
(f) NCR may, from time to time, offer AT&T to substitute upgraded or
later-developed items of equipment, components or parts for the products
purchased herein. In such event, NCR will allow a trade-in credit for the
equipment being traded-in toward the purchase of the upgraded or later-developed
equipment. the trade-in credit shall be in accordance with mutually agreed upon
allowances in effect at the time of such trade-in.
6. MOST FAVORED CUSTOMER STATUS.
(a) For the Purchasing Period, NCR agrees that all prices, except for
Indirect and Resale Prices and non-United States services prices, charged to the
AT&T Entities under this Agreement shall be as favorable as any prices offered
or charged by NCR during the preceding 12-month period to any other NCR customer
making a comparable purchasing commitment, in each case taking into account the
value of terms and conditions of sale. With respect to non-United States
services pricing, prices charged to the AT&T Entities in any given country
<PAGE>
shall be as favorable as any prices offered or charged by NCR during the
preceding 12-month period to any other NCR customer making a comparable
purchasing commitment for comparable services in that country, in each case
taking into account the value of terms and conditions of sale. For purposes of
this Section 6, the purchasing commitment made to NCR by Lucent Technologies
Inc., and the terms and conditions of sale applicable thereto, shall be deemed
comparable to those of the AT&T Entities under this Agreement and the General
Agreement. If NCR charges a more favorable price (other than an Indirect or
Resale Price) to any such NCR customer, NCR shall immediately reduce the AT&T
Entities price as necessary to comply with this Section 6; provided, however,
that AT&T's and the AT&T's Entities' sole remedy for NCR's unintentional breach
of this requirement shall be to recover from NCR the difference between what the
applicable AT&T Entity was actually charged and what should have been charged
had NCR complied with its obligations hereunder. Notwithstanding the foregoing,
NCR may offer or charge more favorable prices to other NCR customers without
lowering the prices to the AT&T Entities under this Agreement, provided any such
more favorable prices are offered or charged for the limited purpose of
initiating a new customer relationship, reestablishing a customer relationship
that has been discontinued for no less than six (6) months or expanding an
existing customer relationship by selling products or services of a type not
previously sold to that customer during the previous 12 months and provided
further that such more favorable prices are not offered or charged for more than
6 months.
(b) At AT&T's request, but not more frequently than once each calendar
year, NCR's compliance with its obligations under this Section 6 shall be
subject to an audit of reasonable scope by an independent auditing firm selected
by AT&T and reasonably satisfactory to NCR. AT&T will bear the auditing firms's
charges. The audit will be conducted in a manner that will minimize NCR's
inconvenience and expense in providing information necessary to perform the
audit. Prior to the auditor submitting findings to AT&T, NCR will be afforded a
reasonable opportunity to review and comment on any preliminary finding by the
auditor that NCR has failed to fulfill its obligation under this Section 6.
Prior to the commencement of each audit, the auditor will execute a
non-disclosure agreement reasonably acceptable to NCR which will require the
auditor to hold all information received from NCR in confidence, except such
information contained in the auditor's final report (which shall be disclosed to
AT&T only upon AT&T's entry into a non-disclosure agreement acceptable to NCR.)
Should the auditor determine that NCR has not fulfilled its obligations under
this Section 6, NCR will issue AT&T a credit (without interest) in the
<PAGE>
amount determined to be the difference between what AT&T paid and the price that
AT&T would have paid had NCR complied with its obligations hereunder. Such
credit may be reduced by the amount of any underbillings which may be disclosed
by the audit and substantiated with evidence reasonably satisfactory to AT&T.
7. ADJUSTMENTS TO COMMITMENT. The parties recognize that future events may make
it impractical or inequitable for the AT&T Entities to purchase NCR products and
services in the amounts contemplated by the Commitment. Accordingly, the
Commitment shall be reduced in amount, or terminated and extinguished in its
entirety, under the circumstances described in this Section 7.
(a) If an AT&T Competitor (as hereinafter defined) enters into a
relationship with NCR that would potentially enable the AT&T Competitor to
obtain AT&T (including its subsidiaries) proprietary or confidential
information, NCR will take all necessary steps to assure that the AT&T
Competitor does not have access to such information through NCR without AT&T's
express prior written consent. In addition, if at any time an AT&T Competitor
owns or controls shares representing a controlling interest in NCR, AT&T may, at
its option, terminate the Commitment at any time by giving written notice to
NCR. Upon any such termination, the Commitment shall be extinguished, AT&T's
obligation thereunder shall be deemed entirely fulfilled, and the Purchasing
Period shall terminate. For purposes of this Agreement, an AT&T Competitor is
any company, person, or other entity which, either directly or through an
affiliate, offers (or has announced future availability of) any product or
service that AT&T reasonably determines to be substantially competitive with a
product or service offered or announced by AT&T (including its subsidiaries);
provided, that a third party will not be deemed an AT&T Competitor unless AT&T
(including its subsidiaries) and such third party each have aggregate actual or
forecasted annual revenues from substantially competitive products and services
exceeding $250 MILLION for at least one year of the Purchasing Period.
(b) If AT&T or a controlled United States subsidiary purchases any
information technology product or service from a third party ("Alternative IT
Supplier") because the available Eligible Products do not meet its needs (as
defined in this Section 7(b)), the amount of the Commitment shall be reduced by
the amount of each such purchase from the Alternative IT Supplier. For purposes
of this Section 7(b), failure to meet the needs of AT&T or such controlled
United States subsidiary means circumstances substantially similar to the
following:
<PAGE>
(i) NCR has discontinued an Eligible Product and has
not replaced it
with a comparable, technologically compatible
Eligible Product that
delivers equal or better performance, features, and value.
(ii) NCR is unable or unwilling to provide the
delivery interval or
response time reasonably required by AT&T or such
affected subsidiary
for an Eligible Product, or imposes unreasonable charges
to do so.
(iii) Multiple units of an Eligible Product do not
meet industry
standards or the reasonable requirements of AT&T or
such affected
subsidiary for quality, performance, or reliability.
(iv) A substantial number of units of an Eligible
Product have had an
excessive failure rate, or have performed below NCR's
specifications.
(c) If AT&T or a controlled United States subsidiary purchases any
Information Technology product or service from an Alternative IT Supplier
because NCR has unreasonably refused to modify, extend, or adapt an Eligible
Product to offer functionality, features, performance, or interoperability
required by AT&T or such affected subsidiary, the Commitment may be reduced by a
mutually agreed amount (or absent such agreement, by an amount determined
pursuant to Article V DISPUTE RESOLUTION of the General Agreement, not to exceed
the amount of each such purchase from the Alternative IT Supplier). For purposes
of this Section 7(c), the extent to which NCR's refusal was reasonable will be
evaluated by considering such factors as (i) whether NCR possessed the requisite
know-how (and, if applicable, the production capability) to accommodate AT&T's
or such affected subsidiary's request, (ii) whether the new Eligible Product
could have been marketed to other customers in markets that NCR is addressing
now and new markets it may address in the future, (iii) whether AT&T or such
affected subsidiary has offered to pay a reasonable price for the new Eligible
Product, taking into account NCR's anticipated costs and the potential for sales
to other customers, and (iv) whether the development requested by AT&T or such
affected subsidiary is necessary to sustain the utility, functionality, and
value of other Eligible Products purchased by AT&T or such affected subsidiary.
(d) Subject to the clause in Article VI of the General Agreement
entitled SCOPE OF AGREEMENT, if AT&T or a controlled United States subsidiary
cancels any order, terminates any service, or receives any refund or credit from
NCR due to delays, lateness (except for delays or lateness due to force majeure
conditions under the General Agreement), breach of warranty, breach of
<PAGE>
contract, or nonperformance by NCR, the amount of the Commitment shall be
reduced by the amount (included any related purchases) that AT&T or such
affected subsidiary would have spent but for such event.
(e) AT&T's spending forecast in effect as of January 1, 1997 sets forth
AT&T's initial estimate of its aggregate spending for information technology
products and services obtained from all sources during the Purchasing Period
("Initial Forecasted Spending"). If, after the date of this Agreement, AT&T
adopts a smaller aggregate budget for such information technology spending
during the Purchasing Period ("Revised Forecasted Spending"), the Commitment
will be proportionately reduced according to the following formula:
- -- -- -- --
|Revised Forecasted Spending | |other adjustments|
|---------------------------
X $350 million| - | to Commitment | = adjusted |Initial Forecasted Spending | |
per Section 7 | Commitment
- -- -- -- --
Notwithstanding the foregoing, if AT&T's actual aggregate spending for
information technology Products and Services during the Purchasing Period
("Actual Spending") is less than Initial Forecasted Spending but exceeds Revised
Forecasted Spending, Actual Spending will be used instead of Revised Forecasted
Spending in the above formula; provided, however, that for purposes of the above
formula, the ratio of Revised Forecasted Spending (or Actual Spending, if
applicable) to Initial Forecasted Spending shall not exceed 1/1, and the
adjustment to Commitment described in this Section 7(e) shall not under any
circumstances be used to increase the amount of the Commitment. For purposes of
this Section 7(e), Revised Forecasted Spending and Actual Spending shall exclude
spending by (or on behalf of) any AT&T business organization that was not
included in the projection of Initial Forecasted Spending.
(f) NCR acknowledges that AT&T's ability to fulfill the Commitment will
be impaired if companies engaged in equipment financing or leasing ("Financing
Companies") are unwilling to provide financing or leasing for NCR products on
terms as favorable as those offered for comparable non-NCR products ("Standard
Financing Terms"). Accordingly, the Commitment shall be adjusted in accordance
with this Section 7(f) if any of the following events occurs:
(i) If any Financing Company selected by a customer
of AT&T or its
controlled United States subsidiaries (or by its agent,
including AT&T's
AT&T Solutions business unit) refuses to provide financing
or leasing to
or for that customer for any Eligible Product on
Standard Financing
Terms,
<PAGE>
and if such refusal persists after NCR has had a
reasonable opportunity
to address the reasons therefor, the Commitment shall be
reduced by the
dollar amount of the purchases AT&T represents would
have been made by
or for such customer from NCR (including related
purchases) but for such
refusal.
(ii) If any four Major Financing Companies (as
defined in Section
7(f)(iv)) selected by a dealer or distributor or reseller
(or by any of
their respective agents) or AT&T or its controlled
United States
subsidiary refuse to provide financing or leasing to such
person for any
Eligible Product on Standard Financing Terms, and if
such refusal
persists after NCR has had a reasonable opportunity
(not to exceed 90
days) to address the reasons therefor, the Commitment
shall be reduced
by the dollar amount of the purchases AT&T represents
would have been
made by or for such dealer, distributor or reseller from
NCR (including
related purchases) but for such refusal.
(iii) If any four Major Financing Companies selected by
AT&T (including
its controlled United States subsidiaries) refuse to
provide financing
or leasing to AT&T or such subsidiary for any
Eligible Product on
Standard Financing Terms, and if such refusal persists
after NCR has had
a reasonable opportunity (not to exceed 90 days) to
address the reasons
therefor, AT&T may, at its option, terminate the
Commitment at any time
by giving written notice to NCR. Upon any such
termination, the
Commitment shall be extinguished, AT&T's obligation
thereunder shall be
deemed entirely fulfilled, and the Purchasing Period shall
terminate.
(iv) As used in this Section 7(f), the term "Major
Financing Companies"
includes the five Financing Companies having the
greatest aggregate
dollar volume of current financing or leasing
transactions with AT&T
(including its controlled United States subsidiaries),
plus all other
Financing Companies that are among the 20 largest Financing Companies.
8. MONITORING AND REPORTING.
(a) At least once each calendar quarter, NCR shall furnish to AT&T a
written report of Commitment fulfilled by AT&T's direct purchases from NCR
during the preceding quarter. Each such report shall include a breakdown of
Eligible Products purchased, by product and service category, and shall
summarize the cumulative status of Commitment fulfillment.
<PAGE>
(b) At least once each calendar quarter, AT&T shall furnish to NCR a
written report of Eligible Products purchased by AT&T from NCR VARs and ISVs
both domestic and international during the preceding quarter. AT&T's report
shall also identify any adjustments to Commitment claimed by AT&T pursuant to
Section 7 as a result of events that became known to AT&T in that preceding
quarter.
(c) Within 90 days after the end of each calendar year of the Purchasing
Period, NCR and AT&T shall enter into a written agreement documenting the amount
of Commitment fulfilled achieved during that year and the remaining balance of
unfulfilled Commitment. If the parties are unable to reach agreement during the
90-day interval, either party may initiate alternative dispute resolution
pursuant to Article V of the General Agreement.
(d) Each party shall afford the other party such documentation and
limited audit rights as may be reasonably necessary to enable verification of
the information reported pursuant to this Section 8.
9. NONFULFILLMENT OF COMMITMENT.
(a) If AT&T has failed to fulfill its Commitment by December 31, 1999,
and elects to extend the Purchasing Period until December 31, 2000 pursuant to
Section 2(b), the remaining unfulfilled balance of the Commitment as of January
1, 2000 shall be increased by 5 percent, according to the following formulas:
| adjustments to |
| Commitment | | Commitment |
|unfulfilled |
$350 million - | per Section 7 | - | fulfillment | = |
Commitment |
|through 12/31/99 | |through 12/31/99| |as of
1/1/00|
| unfulfilled |
| Commitment | X 1.05 = Year 2000 Increased
Commitment
| as of 1/1/00 |
(b) If AT&T has failed to fulfill its Increased Commitment by December
31, 2000 and elects to extend the Purchasing Period until
December 31, 2001
pursuant to Section 2(b), the remaining unfulfilled balance of the
Increased
<PAGE>
Commitment as of January 1, 2001 shall be increased by 10 percent, according to
the following formulas:
| adjustments to |
| Year 2000 |
Year 2000 | Commitment | | Year 2000 | |
unfulfilled |
Commitment - | per Section 7 | - | Commitment | = |
Commitment |
| from 1/01/00 | | fulfillment | |
as of 1/1/01|
|through 12/31/00| |through 12/31/00|
|unfulfilled |
| Commitment | X 1.10 = Year 2001 Increased Commitment
|as of 1/1/01|
(c) At the conclusion of the Purchasing Period (as extended, should AT&T
so elect pursuant to Section 2(b)), if AT&T has not fully discharged the
Commitment, NCR shall, in January 2000 (or in January 2001 or 2002, if the
Purchasing Period has been extended), bill AT&T a carrying charge equal to the
shortfall at December 31, 1999, 2000 or 2001, as applicable, multiplied by the
prime rate plus two percent (2%). Thereafter, NCR 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 plus two percent (2%).
(d) In the event AT&T meets or exceeds the Commitment as defined in
Section 2(a), NCR agrees to extend the prices described in this Agreement and
make them available to the AT&T Entities until December 31, 2000.
(e) NCR EXPRESSLY AGREES THAT THE REMEDY DESCRIBED IN
SECTION 9(c) SHALL
BE NCR's SOLE AND EXCLUSIVE REMEDY FOR AT&T's FAILURE TO FULFILL
THE COMMITMENT.
NCR HEREBY WAIVES ANY OTHER REMEDIES THAT ARE OR MAY BECOME
AVAILABLE, AND NCR
HEREBY RELEASES AT&T (AND ASSOCIATED ENTITIES, AND THEIR
RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS) FROM ANY AND ALL CLAIMS IN
EXCESS OF SUCH
REMEDY, FOR AT&T's FAILURE TO FULFILL THE COMMITMENT.
<PAGE>
(f) UNDER NO CIRCUMSTANCES SHALL EITHER PARTY (OR A
PARTY's AFFILIATES,
OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, OR
AGENTS) BE HEREUNDER
LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, OR
PUNITIVE DAMAGES (EVEN IF MADE AWARE OF THE POSSIBILITY OF SUCH
DAMAGES), OR FOR
LOSS OF PROFITS OR REVENUE.
(g) THE LIMITATIONS OF REMEDIES AND LIABILITIES SET
FORTH IN SECTIONS
9(e) THROUGH 9(f) SHALL APPLY REGARDLESS OF THE FORM OF
ACTION, WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE, WHETHER ACTIVE OR PASSIVE),
OR OTHERWISE,
AND SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT.
10. TERMS AND CONDITIONS GOVERNING PURCHASES. Contemporaneously with the
execution of this Agreement, AT&T and NCR are entering into a General Procedures
Agreement (hereinabove and below referred to as the "General Agreement"), to
establish terms and conditions governing AT&T's purchases of products and
services from NCR. In the event of any conflict between the terms and conditions
of this Agreement and those in the General Agreement, the terms and conditions
of this Agreement shall prevail and control.
11. COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.
(a) This 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.
(b) This Agreement, including the documents incorporated by reference
herein, together with the General Agreement, contains the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all previous agreements, negotiations, discussions, writings, understandings,
commitments, and conversations with respect to such subject matter.
(c) AT&T represents on behalf of itself and each of its subsidiaries,
and NCR represents on behalf of itself and each of its subsidiaries, 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 this Agreement and to
consummate the
transactions contemplated hereby; and
<PAGE>
(ii) this Agreement has been duly executed and
delivered by it and
constitutes a valid and binding agreement of it
enforceable in
accordance with the terms thereof.
12. SUCCESSOR COMPANIES. The parties recognize that the
ownership and
organization of their respective companies may change during the
term of this
Agreement. Accordingly, the parties agree as follows:
(a) If a third party (including without limitation any present or future
NCR parent or affiliate) succeeds to any substantial portion of the business of
NCR with respect to any Eligible Product ("NCR Successor Company"), NCR shall
use reasonable efforts to continue making such Eligible Product available to
AT&T under this Agreement and the General Agreement. These efforts may include,
at NCR's option, arranging for NCR to resell the Eligible Product to AT&T.
Alternatively, NCR may obtain the NCR Successor Company's agreement to join in
the terms and conditions of this Agreement and of the General Agreement, in
which event the parties shall promptly amend the definitions of NCR in this
Agreement and in the General Agreement to include the NCR Successor Company. If
NCR is unable or unwilling to continue making the Eligible Product available to
AT&T under this Agreement and the General Agreement, NCR shall be deemed to have
failed to meet AT&T's needs for the Eligible Product, and any resulting AT&T
purchases from Alternative IT Suppliers shall reduce the Commitment in
accordance with Section 7(b).
(b) If AT&T notifies NCR that any third party has succeeded or will
succeed to any substantial portion of the business of AT&T ("AT&T Successor
Company"), the parties shall take the following steps:
(i) If the AT&T Successor Company directly or indirectly
controls AT&T,
or if the AT&T Successor Company and AT&T are under
substantial common
control, and if the AT&T Successor Company's spending
for Information
Technology products and services is included in the
aggregate AT&T
budget for information technology spending described in
Section 7(e),
the parties (subject to the concurrence of the AT&T
Successor Company)
will amend the definitions of AT&T in this Agreement and
in the General
Agreement to include the AT&T Successor Company. Such
amendments will
enable the AT&T Successor Company to purchase from NCR
under the prices,
terms, and conditions of this Agreement and of the
General Agreement,
and all such purchases by the AT&T Successor Company
will be deemed
purchases by AT&T for purposes of Commitment fulfillment.
<PAGE>
(ii) If the AT&T Successor Company is an affiliate of
AT&T but does not
control and is not under common control with AT&T, or if the
AT&T Successor
Company's spending for information technology products and
services is not
included in the aggregate AT&T budget for information
technology spending
described in Section 7(e), NCR and AT&T (in consultation
with the AT&T
Successor Company) will mutually determine whether to amend
this Agreement
and the General Agreement in the manner described in Section
12(b)(i). If
NCR and AT&T fail to agree upon such amendments within 60 days after AT&T's
notice, AT&T may, at its option, reduce the Commitment
pursuant to Section
7(e) by excluding all future purchases by the AT&T
Successor Company from
AT&T's Revised Forecasted Spending and AT&T's Actual Spending.
(iii) If the AT&T Successor Company is neither a parent nor
an affiliate of
AT&T, AT&T may, at its option, reduce the Commitment
pursuant to Section
7(e) by excluding all future purchases by the AT&T
Successor Company from
AT&T's Revised Forecasted Spending and AT&T's Actual Spending.
(iv) If AT&T elects to reduce the Commitment as
permitted by Sections
12(b)(ii) or (iii), NCR will have no obligation to
make the pricing
described in this Agreement available to the AT&T Successor
Company, and
future purchases by the AT&T Successor Company will not
count toward
Commitment fulfillment.
13. MISCELLANEOUS. The provisions of Article 8 of the
Distribution Agreement
are specifically incorporated herein by reference.
AT&T Corp. NCR Corporation
By: By:
Name: ______________________________ Name:
- -------------------------
Title: _____________________________ Title:
- ------------------------
Date: ______________________________ Date:
- -------------------------
AT&T
SENIOR MANAGEMENT LONG TERM
DISABILITY AND SURVIVOR PROTECTION PLAN
As Amended and Restated effective January 1, 1995
<PAGE>
AT&T
SENIOR MANAGEMENT LONG TERM
DISABILITY AND SURVIVOR PROTECTION PLAN
Table of Contents
ARTICLE 1
DEFINITIONS.........................................................4
ARTICLE 2 DISABILITY
ALLOWANCE................................................7
ARTICLE 3 MINIMUM RETIREMENT
BENEFIT.........................................11
ARTICLE 4 SURVIVING SPOUSE
BENEFIT...........................................12
ARTICLE 5 DEATH
BENEFITS.....................................................13
ARTICLE 6 SOURCE OF
PAYMENT..................................................14
6.01. SOURCE OF
PAYMENTS......................................................14
6.02. UNFUNDED
STATUS.........................................................14
ARTICLE 7 ADMINISTRATION OF THE
PLAN.........................................16
7.01. ADMINISTRATION AND
AUTHORITIES..........................................16
7.02.
COMMITTEE...............................................................16
7.03.
INDEMNIFICATION.........................................................16
7.04. BENEFIT CLAIMS AND
APPEALS..............................................16
ARTICLE 8 ADOPTION, AMENDMENT AND
TERMINATION................................18
8.01. ADOPTION OF
PLAN........................................................18
8.02. AMENDMENT AND
TERMINATION...............................................18
8.03. SALE, SPIN-OFF, OR OTHER DISPOSITION OF PARTICIPATING
COMPANY...........20
ARTICLE 9 GENERAL
PROVISIONS.................................................21
9.01. EFFECTIVE
DATE..........................................................21
9.02. ASSIGNMENT OF
BENEFITS..................................................21
9.03. CLAIMS
RELEASE..........................................................21
9.04. DAMAGE CLAIMS OR
SUITS..................................................21
9.05. JUDGMENT OR
SETTLEMENT..................................................22
9.06. FORFEITURE OF
BENEFITS..................................................22
9.07. PAYMENT UNDER
LAW.......................................................22
9.08. GOVERNING
LAW...........................................................22
9.09.
SEVERABILITY............................................................22
9.10. FACILITY OF
PAYMENT.....................................................23
9.11.
HEADINGS................................................................23
9.12. TAX
WITHHOLDING.........................................................23
9.13. FIDUCIARY
RELATIONSHIP..................................................23
9.14. NO GUARANTEE OF
EMPLOYMENT..............................................23
9.15. PLAN
YEAR...............................................................24
9.16. ENTIRE
PLAN.............................................................24
APPENDIX A PRIOR PLAN
PROVISIONS..............................................25
<PAGE>
ARTICLE 1
DEFINITIONS
For the purpose of the Plan, the following terms shall have the meanings set
forth in thisArticle 1.
1.01. "Administrator" shall mean the person identified
as the Pension
Plan Administrator under the Pension Plan or such
other person or
entity designated by the Company.
1.02. "Affiliated Corporation" shall mean any corporation
or other entity
of which 50 percent or more of the voting stock is
owned directly or
indirectly by AT&T.
1.03. "AT&T" or "Company" shall mean AT&T Corp. (formerly
American Telephone
and Telegraph Company), a New York Corporation, or its
successors.
1.04. "Annual Basic Pay" shall mean the Participant's
annual base salary
rate on the last day the Participant was on the active
payroll plus,
with respect to a Participant whose last day on the
active payroll
occurred after April 15, 1991, an amount determined
with reference to
the Short Term Plan, but excluding all
differentials regarded as
temporary or extra payments and all awards and
distributions made under
the Long Term Plan. For purposes of determining
the Disability
Allowance under Article 2, the amount determined with
reference to
the Short Term Plan shall be the last Short Term
Award granted to
the Participant prior to the last day the
Participant was on the
active payroll. For purposes of determining the
Minimum Retirement
Benefit under Article 3 and the Surviving Spouse
Benefit under
Article 4, the amount determined with reference to
the Short Term
Plan shall be the greater of (1) the Short Term Award for
the last full
calendar year of service prior to the earlier of the
Participant's
retirement, termination or death, or (2) the Short Term
Award granted
with respect to any later partial calendar year of
service.
1.05. "Board" shall mean the Board of Directors of AT&T Corp.
1.06. "Committee" shall mean the Employees' Benefit
Committee appointed
by the Company to administer the Pension Plan.
1.07. "Disability Benefit Plan" shall mean a Participating
Company's Sickness
and Accident Disability Benefit Plan.
1.08. "Insured Annuitant's Plan" shall mean the AT&T
Senior Management
Post-Retirement Insured Annuitant's Benefit Plan
established as part of
the AT&T Senior Management Individual Life Insurance
Program.
1.09. "Long Term Plan" shall mean the AT&T Senior
Management Long Term
Incentive Program or predecessor long term incentive plans.
1.10. (a) "Participant" for purposes of the
Disability Allowance
under Article 2, shall mean an employee of a
Participating
Company holding a position evaluated or
classified as above
"E-band" or equivalent, except that no
employee who has been
notified in writing that the assignment to such
position will
be temporary shall be considered as a
Participant for any
purpose under this Plan.
(b) "Participant" for purposes of the Minimum
Retirement Benefit
under Article 3, shall mean an employee
described in Section
1.10 (a) above, or a former employee of a
Participating
Company who was a Participant under Section
1.10 (a) on the
last day of employment, if such former employee
is retired on
a service pension under the Pension Plan.
(c) "Participant" for purposes of the Surviving
Spouse Benefit
under Article 4, shall mean an employee
described in Section
1.10 (a) above, or a former employee of a
Participating
Company who was a Participant under Section
1.10 (a) on the
last day of employment, if such former
employee (1) is
eligible to receive a Disability Allowance under
Article 2, or
(2) is eligible to receive a Minimum Retirement
Benefit under
Article 3.
(d) "Participant" for purposes of the Death Benefit
under Article
5, shall mean a former employee of a
Participating Company who
was a Participant under Section 1.10 (a) above
on the last day
of employment, if such former employee is
eligible to receive
a Disability Allowance under Article 2, or
is eligible to
receive a Minimum Retirement Benefit under
Article 3.
(e) For purposes of Sections 1.10 (b), 1.10
(c), and 1.10 (d)
above, a former employee shall be considered to
be eligible to
receive a Disability Allowance under Article
2 or a Minimum
Retirement Benefit under Article 3 if he
has met the
conditions specified in Article 2 or in Article
3, even though
the receipt of other benefits by such
former employee
precludes his or her receipt of any benefits
under Article 2
or under Article 3.
1.11. "Participating Company" shall mean AT&T and any
Affiliated Corporation
that has elected, with the approval of the Committee
as required by
Section 8.01, to participate in the Plan.
1.12. "Pension Plan" shall mean the AT&T Management
Pension Plan or
predecessor pension plans.
1.13. "Plan" shall mean this AT&T Senior Management Long Term
Disability and
Survivor Protection Plan.
1.14. "Short Term Award" means the actual amount awarded
(including any
amounts deferred pursuant to the AT&T Senior Management
Incentive Award
Deferral Plan) annually to a Participant pursuant to
the AT&T Short
Term Incentive Plan or predecessor short term incentive
plans. Short
Term Awards shall, for purposes of this Plan, be
considered to be
awarded on the last day of the performance period with
respect to which
they are earned.
1.15. "Short Term Plan" shall mean the AT&T Short Term
Incentive Plan or
predecessor short term incentive plans.
1.16. "Successor Plan Sponsor" shall mean Lucent
Technologies Inc. and any
other corporation or entity that enters into an agreement
or agreements
providing for the assumption of liabilities arising
under this Plan
comparable to the Management Interchange Agreement dated
as of April 8,
1996, and the Employee Benefits Agreement dated as of
March 29, 1996,
between AT&T and Lucent Technologies Inc.
1.17. "Term of Employment" shall have the same meaning
as the meaning
assigned to such expression in the Pension Plan.
1.18. "Transition Participant" shall mean a Participant or a
person eligible
to receive a Surviving Spouse Benefit or a Death Benefit
as to whom the
responsibility and liability for the payment of
benefits accrued or
payable under this Plan has been assumed by a Successor
Plan Sponsor.
<PAGE>
ARTICLE 2
DISABILITY ALLOWANCE
2.01. (a) A Participant shall be considered to be
"disabled" at any
time during the first fifty-two week period
following the
onset of a physical or mental impairment, if
such impairment
prevents the Participant from meeting
the performance
requirements of the position held immediately
preceding the
onset of the physical or mental impairment.
(b) A Participant shall be considered to be
"disabled" after the
first fifty-two week period following the onset
of a physical
or mental impairment if such impairment
prevents the
Participant from meeting the performance
requirements of (1)
the position held immediately preceding
the onset of the
physical or mental impairment, (2) a similar
position, or (3)
any appropriate position with the Company
or any other
Participating Company which the Participant
would otherwise be
capable of performing by reason of the
Participant's
background and experience.
(c) The Administrator shall make the
determination of whether a
Participant is disabled within the meaning of
paragraph (a)
above; the Committee shall make such
determination with
respect to paragraph (b) above.
2.02. A Participant who is disabled during a period
described in Section
2.01(a) shall be eligible to receive a monthly
disability allowance
equal to 100 percent of the Participant's monthly base
salary rate on
the last day the Participant was on the active payroll,
reduced by any
amounts described in Section 2.05(a) which are
attributable to the
period for which benefits are provided under this Section
2.02.
2.03. A Participant who is disabled during a period
described in Section
2.01(b) shall, prior to his or her sixty-fifth birthday,
be eligible to
receive a monthly disability allowance equal to sixty
percent of the
Participant's monthly base salary rate on the last day
the Participant
was on the active payroll, reduced by any amounts
described in Section
2.05(b) which are attributable to the period for
which benefits are
provided under this Section 2.03.
2.04. A Participant who is disabled during a period
described in Section
2.01(b) shall commencing with his or her sixty-fifth
birthday or the
start of the period described in Section 2.01 (b),
if later, be
eligible to receive a monthly disability allowance equal
to the greater
of:
(i) one and one-quarter percent of the Participant's
annual basic
pay, as defined in Section 1.04, on the
last day the
Participant was on the active payroll, or
(ii) if the Participant's Term of Employment has
been five years
or more, ninety percent of the sum of (a) the
monthly pension
the Participant would have been entitled to
receive commencing
at age sixty-five under the Pension Plan (as in
effect on the
last day the Participant was on the
active payroll, but
ignoring any minimum service requirements
for eligibility
to a pension), if the period after the
last day the
Participant was on the active payroll and
prior to the
Participant's sixty-fifth birthday had been
included in the
Participant's term of employment as of
the end of the
applicable averaging period under the Pension
Plan, plus (b)
the monthly pension the Participant would have
been entitled
to receive commencing at age 65 under the AT&T
Non-Qualified
Pension Plan (as in effect on the last day the
Participant was
on the active payroll, but ignoring any
minimum service
requirements for eligibility to a pension),
if the period
after the last day the Participant was on the
active payroll
and prior to the Participant's sixty-fifth
birthday had been
included in the Participant's Term of
Employment as of the
end of the applicable averaging period
under the AT&T
Non-Qualified Pension Plan, reduced by any
amounts described
in Section 2.05(c) that are attributable to
the period for
which benefits are provided under this paragraph.
2.05. (a) The Disability allowance determined for any
period under
Section 2.02 shall be reduced by the sum of
the following
benefits received by the Participant which
are attributable
to the period for which such disability
allowance is provided:
a service pension, deferred vested pension,
or disability
pension under the Pension Plan, a pension
under the AT&T
Excess Benefit and Compensation Plan, a
pension under the
AT&T Non-Qualified Pension Plan, a pension
under the AT&T
Mid-Career Pension Plan, an accident
disability benefit or
sickness disability benefit under the
Disability Benefit
Plan, any Workers' Compensation Benefit, plus
any comparable
benefits provided under the plans or
programs of any
Successor Plan Sponsor and any other benefit
payments required
by law on account of the Participant's
disability. However,
no reduction shall be made on account of any
pension under the
Pension Plan at a rate greater than the rate of
such pension
on the date the Participant first
received such pension
after his or her disability, and no reduction
shall be made
on account of any pension under the AT&T
Non-Qualified
Pension Plan, the AT&T Excess Benefit and
Compensation Plan,
or the AT&T Mid-Career Pension Plan at a rate
greater than the
rate of such pension, including adjustments if
any to reflect
post-retirement incentive awards to the
Participant under the
Short Term Plan, as of the first date
the Participant
was entitled to receive such pension
after his or her
disability.
(b) The disability allowance determined for
any period under
Section 2.03 shall be reduced by the sum of
the following
benefits received by the Participant which
are attributable
to the period for which such disability
allowance is provided:
a service pension, deferred vested pension
or disability
pension under the Pension Plan, a pension
under the AT&T
Excess Benefit and Compensation Plan, a pension
under the AT&T
Non-Qualified Pension Plan, a pension
under the AT&T
Mid-Career Pension Plan, an accident disability
benefit under
the Disability Benefit Plan, any other
retirement income
payments from the Participant's Participating
Company or any
Successor Plan Sponsor, any Workers'
Compensation Benefit,
plus any Social Security Insurance
Benefit. However, no
reduction shall be made on account of any
pension under the
Pension Plan at a rate greater than the rate
of such pension
on the date the Participant first received such
pension after
his or her disability, and no reduction
shall be made on
account of any pension under the AT&T
Non-Qualified Pension
Plan, the AT&T Excess Benefit and
Compensation Plan, or
under the AT&T Mid-Career Pension Plan at a
rate greater
than the rate of such pension, including
adjustments if any to
reflect post-retirement incentive awards to
the Participant
under the Short Term Plan, as of the
first date the
Participant was entitled to receive such
pension after his
or her disability, and no reduction shall be
made on account
of any Social Security Benefit at a rate
greater than the
rate which the Participant would have first
been eligible to
receive after his or her disability and
as if no other
members of his or her family were eligible
for any Social
Security Benefit. Furthermore, the Board of
Directors of the
Company, in its discretion, may reduce
the disability
allowance by the amount of outside
compensation or earnings
of the Participant for work
performed by the
Participant during the period for which
such disability
allowance is provided.
(c) The disability allowance determined for
any period under
Section 2.04 shall be reduced by the sum of
the following
benefits received by the Participant which
are attributable
to the period for which such disability
allowance is provided:
a service pension, deferred vested pension
or disability
pension under the Pension Plan, a pension
under the AT&T
Excess Benefit and Compensation Plan, a
pension under the
AT&T Non-Qualified Pension Plan, a pension
under the AT&T
Mid-Career Pension Plan, an accident disability
benefit under
the Disability Benefit Plan, any other
retirement income
payments from the Participant's
Participating Company or
any Successor Plan Sponsor, plus any
Workers' Compensation
Benefit. However, no reduction shall be made on
account of any
pension under the Pension Plan at a rate
greater than the
rate of such pension on the date the
Participant first
received such pension after his or her
disability, and no
reduction shall be made on account of any
pension under the
AT&T Non-Qualified Pension Plan, the AT&T
Excess Benefit and
Compensation Plan, or under the AT&T
Mid-Career Pension Plan
at a rate greater than the rate of such
pension, including
adjustments if any to reflect post-retirement
incentive awards
to the Participant under the Short Term Plan,
as of the first
date the Participant was entitled to receive
such pension
after his or her disability.
2.06. For purposes of Sections 2.01(a) and 2.01(b), the
measurement of time
following the onset of a physical or mental impairment
shall coincide
with the measurement of time used to calculate periods
of Sickness and
Accident Disability Benefits under Sections 4 and 5 of
the Disability
Benefit Plan. Successive periods of physical or mental
impairment shall
be counted together in computing the periods
during which the
Participant shall be entitled to the benefits provided
under Sections
2.02 and 2.03, except that any disability absence after
the Participant
has been continuously engaged in the performance of
duty for thirteen
weeks shall be considered to commence a new period
of physical or
mental impairment under Section 2.01 (a), so that
such Participant
shall be entitled during such new period to the benefits
provided under
Section 2.02.
2.07. With respect to a Participant not subject to mandatory
retirement at
age 65 under the Age Discrimination in Employment Act
(29 U.S.C. 631),
the period of eligibility for the disability
allowance provided in
Section 2.03 and the period of eligibility for the
disability allowance
provided in Section 2.04, shall be the period
described in Section
2.03, and the period described in Section 2.04,
respectively, or such
other period as is required under the Age Discrimination
in Employment
Act or under any applicable governing regulations or
interpretations
thereunder.
<PAGE>
ARTICLE 3
MINIMUM RETIREMENT BENEFIT
3.01. A Participant described in Section 1.10(a) whose term
of employment
has been five years or more and is not disabled,
who terminates
employment on or after his or her sixty-second
birthday, or a
Participant described in Section 1.10(b) who is
retired on a service
pension under the Pension Plan, shall be eligible to
receive a monthly
minimum retirement benefit equal to one and
one-quarter percent of
Participant's annual basic pay, as defined in Section
1.04, on the last
day the Participant was on the active payroll reduced
by the sum of
the following benefits received by the
Participant which are
attributable to the period for which benefits are
provided under
this Article 3: a service pension or deferred vested
pension under
the Pension Plan, a pension under the AT&T
Excess Benefit and
Compensation Plan, a pension under the AT&T Non-Qualified
Pension Plan,
a pension under the AT&T Mid-Career Pension Plan, and
by any other
retirement income payments received by the
Participant from his
or her Participating Company or from a Successor Plan
Sponsor. However,
no reduction shall be made on account of any pension
under the Pension
Plan at a rate greater than the rate of such pension
on the date the
Participant first received such pension after his or
her retirement
or other termination of employment, and no reduction
shall be made on
account of any pension under the AT&T Non-Qualified
Pension Plan,
the AT&T Excess Benefit and Compensation Plan, or
under the AT&T
Mid-Career Pension Plan at a rate greater than the
rate of such
pension, including adjustments if any to reflect
post-retirement
incentive awards to the Participant under the Short
Term Plan, as
of the first date the Participant was entitled to
receive such pension
after his or her retirement or other termination of
employment.
3.02. If an amendment to the Pension Plan effective on or
after January 1,
1988, provides for an increase in the service pensions
of previously
retired employees, then a Participant's minimum
retirement benefit
shall be increased pursuant to the same terms and
conditions as are set
forth in such Pension Plan amendment.
<PAGE>
ARTICLE 4
SURVIVING SPOUSE BENEFIT
4.01. In the event of the death of a Participant, who is
described in
Section 1.10(c), the surviving lawful spouse of such
Participant shall
be eligible to receive a monthly benefit equal to one
and one-quarter
percent of the Participant's annual basic pay, as
defined in Section
1.04, on the last day the Participant was on the active
payroll prior
to his or her death reduced by the sum of the
following benefits
received by the Participant's surviving lawful spouse
on account of
the death of the Participant and which are attributable
to the period
for which benefits are provided under this Article 4:
an annuitant's
pension under the Pension Plan, an annuity
under the Insured
Annuitant's Plan, an annuitant's pension under the AT&T
Excess Benefit
and Compensation Plan, an annuitant's pension
under the AT&T
Non-Qualified Pension Plan and any other lifetime
payments to such
surviving lawful spouse from the Participant's
Participating Company
or from any Successor Plan Sponsor. However, no
reduction shall be
made on account of an annuitant's pension under the
Pension Plan, or
on account of an annuitant's pension under the AT&T
Non-Qualified
Pension Plan or on account of an annuitant's pension
under the AT&T
Excess Benefit and Compensation Plan, or on account
of any annuity
under the Insured Annuitant's Plan at a rate greater
than (1) the rate
of such pension or annuity on the date such pension
or annuity was
first payable in the case of the death of a Participant
who is on the
active payroll or (2) the rate of such pension or
annuity on the date
such pension or annuity first would have been
payable had the
Participant died on the day after the last day the
Participant was on
the active payroll in the case of the death of a
Participant who is
not on the active payroll.
4.02. Notwithstanding any provision of Section 4.01 to the
contrary, the
surviving lawful spouse of a Participant shall not
be eligible to
receive benefits under this Article 4 if, prior to the
Participant's
death, he could have elected under the Pension
Plan or under any
predecessor pension plan maintained by a
Participating Company to
receive a reduced pension for his or her life in
order to provide
thereafter an annuity for the life of his or her lawful
spouse, but he
declined to make such an election.
4.03. If an amendment to the Pension Plan effective on or
after January 1,
1988, provides for an increase in the survivor annuities
payable under
said Plan, then the Surviving Spouse Benefit payable
under Section 4.01
above shall be increased pursuant to the same terms and
conditions as
are set forth in such Pension Plan amendment,
except that no such
increase shall apply to the Surviving Spouse
Benefit related to a
deceased Participant who had not terminated employment or
died prior to
the effective date of such amendment.
<PAGE>
ARTICLE 5
DEATH BENEFITS
5.01. Upon the death of a Participant described in Section
1.10(d) whose last
day on the active payroll occurred on or after January 1,
1987, and who
has not retired on a service pension or a disability
pension under the
Pension Plan, a death benefit in the amount of the
Participant's annual
base salary rate in effect on the last day said
Participant was on the
active payroll shall be paid to one or more of the
beneficiaries listed
in Section 5.02 below as determined by the
Committee, provided,
however, that such death benefit shall be reduced by
the sum of any
death benefit paid under Section 5 of the Pension Plan
on account of
the Participant's death.
5.02. The persons who may be the beneficiaries of the death
benefit described
in Section 5.01 are the Participant's legal spouse if
living with him
at the time of his or her death, his or her unmarried
child or children
under age 23 (or over that age if physically or
mentally incapable of
self-support) who were being supported in whole or
in part by the
deceased at his or her death, or a dependent parent or
parents living
with the deceased at the time of his or her death or
in a separate
household in the vicinity of the deceased and provided by
him.
5.03. If the Participant is not survived by any person
listed in Section
5.02, a death benefit up to the maximum amount shown
in Section 5.01
above may be payable, at the discretion of the
Committee, to any other
dependent relative receiving or entitled to receive
support from the
deceased; if no such dependent relative survives the
deceased, no death
benefit will be payable under this Plan.
<PAGE>
ARTICLE 6
SOURCE OF PAYMENT
6.01. Source of Payments.
AT&T may establish a trust to hold assets to be used to
make benefit
payments under the terms of this Plan, provided such
trust does not
cause the Plan to be "funded" within the meaning of
ERISA. Funds
invested hereunder shall, for purposes of this Plan, be
considered to
be part of the general assets of the Participating
Company which
invested the funds, and no Participant, beneficiary or
lawful spouse
shall have any interest or right in such funds. To the
extent trust
assets are available, they may be used to pay benefits
arising under
this Plan and all costs, charges and expenses relating
thereto. To the
extent that the funds held in the trust are
insufficient to pay such
benefits, costs, charges and expenses, AT&T or
the responsible
Participating Company shall pay such benefits,
costs, charges and
expenses from its general assets. In addition, AT&T
may, in its sole
discretion, direct that payments required under
this Plan to any
Participant or surviving lawful spouse be made through
the purchase and
distribution of one or more nontransferable annuity
contracts or cause
the trustee of the trust to purchase and distribute
such annuity
contracts. Any such purchase and distribution of an
annuity contract
shall be a full and complete discharge of the Plan's,
AT&T's and the
Participating Companies' liability for payments assumed
by the issuer
of the annuity contract. Further, the Senior Vice
President, Human
Resources, may determine, in his or her sole
discretion, to pay
additional sums to any Senior Manager, from the
Company's general
assets or from the trust, if any, to reimburse the
Senior Manager for
additional federal and state income taxes estimated to
be incurred by
reason of the distribution of any such annuity
contracts. The Senior
Vice President, Human Resources shall establish a
methodology or
methodologies for determining the amount of such
additional sums. The
methodology or methodologies selected shall be those
that the Senior
Vice President, Human Resources determines, in his
or her sole
discretion, to be the most effective and
administratively feasible for
the purpose of producing after tax periodic benefit
payments that
approximate the after tax periodic benefit payments
that would have
been received by Participants in the absence of the
distribution of the
annuity contract.
6.02. Unfunded Status.
The Plan at all times shall be entirely unfunded for
purposes of the
Internal Revenue Code of 1986, and ERISA, and, except
as provided in
Section 6.01, no provision shall at any time be made
with respect to
segregating any assets of a Participating Company for
payment of any
benefits hereunder. Funds invested hereunder shall
continue for all
purposes to be part of the general assets of the
Participating Company
which invested the funds. The Plan constitutes a mere
promise by the
Participating Company to make payments, if any, in
the future. No
Participant, spouse, beneficiary or any other person
shall have any
interest in any particular assets of a Participating
Company by reason
of the right to receive a benefit under the Plan and to
the extent the
Participant, surviving lawful spouse, beneficiary or
any other person
acquires a right to receive benefits under this Plan,
such right shall
be no greater than the right of any unsecured general
creditor of a
Participating Company.
<PAGE>
ARTICLE 7
ADMINISTRATION OF THE PLAN
7.01. Administration and Authorities.
The Plan shall be administered by the Company and it
shall have full
discretionary authority to manage and control the
operation and
administration of the Plan, including the power to
interpret provisions
of the Plan, make determinations of fact,
promulgate rules and
regulations, determine benefit eligibility of individual
and classes of
Participants, delegate its powers and duties
hereunder to the
Committee, the Administrator or others and take such
other action as it
shall find necessary and appropriate to implement the
provisions of the
Plan. The Committee and the Administrator may
retain attorneys,
consultants, accountants or other persons (who may be
employees of the
Company or an Affiliated Corporation) to render advice
and assistance
and may delegate any of the authorities conferred on it
to such persons
as it shall determine to be appropriate to effect the
discharge of its
duties hereunder. The Company, the Affiliated
Corporations and any of
their officers and employees shall be entitled to rely
upon the advice,
opinions, and determinations of any such persons. Any
exercise of the
authorities set forth in this Section, whether by the
Company, the
Committee or its Delegate, or the Administrator,
shall be final and
binding upon the Company, its Affiliated Corporations,
their officers,
directors and affected Participants and beneficiaries.
7.02. Committee.
The Company has delegated to the Committee authority to
make the final
determination to grant or deny claims for benefits under
the Plan with
respect to Participants and to authorize disbursements
according to the
terms of the Plan.
7.03. Indemnification.
No member of the Board or the Committee or the
Administrator shall be
personally liable by reason of any contract or
other instrument
executed by such individual on his or her behalf or
in his or her
capacity as a member of the Board, Committee or the
Administrator nor
for any mistake of judgment made in good faith,
and AT&T shall
indemnify and hold harmless each member of the Board,
each member of
the Committee, the Administrator and each other
employee, officer, or
director of AT&T or any Participating Company to whom any
duty or power
relating to the administration or interpretation of
the Plan may be
allocated or delegated, against any cost or
expense (including
attorneys' fees) or liability (including any sum paid in
settlement of
a claim) arising out of any act or omission to act in
connection with
the Plan unless arising out of such person's own fraud or
bad faith.
7.04. Benefit Claims and Appeals.
(a) Benefit Claims. All claims for benefit
payments under the
Plan shall be submitted in writing by
Participants to the
person designated by the Company to make
determinations
as to eligibility for benefits under the Plan
and such person
shall notify the Participant in writing within
90 days after
receipt as to whether the claim has been
granted or denied.
This period may be extended for up to an
additional 90 days
in unusual cases provided that written
notice of the
extension is furnished to the claimant prior to
the
commencement of the extension. In the
event the claim is
denied, such notice shall (i) set forth the
specific
reason or reasons for denial, (ii) make
reference to the
pertinent Plan provisions on which the denial
is based,
(iii) describe any additional material or
information
necessary before the Participant's request may
be acted upon
favorably, and (iv) explain the procedure for
appealing the
adverse determination.
(b) Benefit Appeals. A Participant whose claim
for benefits has
been denied may, within 60 days of receipt of
any adverse
benefit determination, appeal such denial to
the Committee.
All appeals shall be in the form of a written
statement and
shall (i) set forth all of the reasons in
support of favorable
action on the appeal, (ii) identify those
provisions of
the Plan upon which the claimant is
relying, and (iii)
include copies of any other documents or
materials which
may support favorable consideration of the
claim. The
Committee shall decide the issues presented
within
60 days after receipt of such request, but this
period may be
extended for up to an additional 60 days in
unusual cases
provided that written notice of the extension
is furnished to
the claimant prior to the commencement of the
extension. The
decision of the Committee shall be set
forth in writing,
include specific reasons for the decision,
refer to pertinent
Plan provisions on which the decision is
based, and shall be
final and binding on all persons affected
thereby.
<PAGE>
ARTICLE 8
Adoption, Amendment and Termination
8.01. Adoption of Plan.
Any Affiliated Corporation that participates in the
Pension Plan may,
with the consent of the Committee, elect to
participate in the Plan.
Such Affiliated Corporation shall become a Participating
Company as of
the date specified by the Committee in its resolution
approving the
participation of the Affiliated Corporation in the Plan.
8.02. Amendment and Termination.
AT&T is the Sponsor of the Plan and the Board or its
delegate, may from
time to time amend, modify or change the Plan as set
forth in this
document, and the Board or its delegate (acting pursuant
to the Board's
delegations of authority then in effect) may terminate
the Plan at any
time. Plan amendments may include, but are not limited
to, elimination
or reduction in the level or type of benefits provided
to any class or
classes or Participants, surviving lawful spouses and
beneficiaries).
Any and all Plan amendments may be made without the
consent of any
employee, Participant, spouse or beneficiary.
Notwithstanding the
foregoing, the exercise of the power to amend, modify or
terminate the
Plan shall be subject to the limitations described in
paragraphs (a)
and (b) below.
(a) Such amendment, modification or termination
shall not affect
the rights of any Participant or surviving
lawful spouse,
without his or her consent, to any benefit
under the Plan to
which such Participant or surviving lawful
spouse may have
previously become entitled as a result of
disability, death or
termination of employment which occurred prior
to the later of
the adoption date or the effective date of
such amendment or
termination.
(b) Such amendment, modification or termination
shall not
affect the rights of any Participant or his or
her surviving
lawful spouse, without his or her consent, to
any future
benefits payable under Article 3 or Article
4, provided
that, prior to the later of the adoption date
or the
effective date of such amendments or
termination, such
participant either (i) had satisfied the
requirements for
eligibility for the benefits described in
Article 3,
other than the termination of employment
requirement, or
(ii) had begun to receive a disability
allowance under
Article 2. For purpose of determining a
spouse's benefit,
it shall be assumed that a Participant who
is receiving
a disability allowance as of the later of the
adoption
date or effective date of such amendment
will continue to
receive said allowance until his or her
death. The annual
basic pay used to compute such future benefits
under
Article 3 or Article 4 shall be the
Participant's highest
annual basic pay as described in Section 1.04
on any day
during the term of his or her employment
completed prior to
the later of the adoption date or the
effective date of such
amendments or termination as if the
Participant had
terminated employment on that day.
<PAGE>
8.03. Sale, Spin-Off, or Other Disposition of Participating
Company.
(a) Subject to Section 8.02 of this Plan, in the
event AT&T sells,
spins off, or otherwise disposes of an
Affiliated Corporation,
or disposes of all or substantially all of
the assets of an
Affiliated Corporation such that one or
more Participants
terminate employment for the purposes of
accepting employment
with the purchaser of such stock or
assets, any person
employed by such Affiliated Corporation who
ceases to be an
employee of the Company or an Affiliated
Corporation as a
result of the sale, spin-off, or disposition
shall be deemed
to have terminated his or her employment with a
Participating
Company for all relevant purposes under this Plan.
(b) Notwithstanding the foregoing provisions
of this
Section 8.03, and subject to Section 8.02 of
this Plan, if
the sale, spin-off, or other disposition of
the stock or
assets of an Affiliated Corporation is to a
Successor Plan
Sponsor with the effect that a Participant is
or becomes a
Transition Participant, the Successor Plan
Sponsor shall
be solely liable for the payment of the pension
and death
benefits described in this Plan, and the
entitlement of
the Transition Participant or his or her
surviving lawful
spouse or beneficiary to benefits under this
Plan shall
terminate. A Transition Participant shall not
be considered
to have terminated his or her employment with
AT&T or a
Participating Company for any purpose under this Plan.
<PAGE>
ARTICLE 9
GENERAL PROVISIONS
9.01. Effective Date.
This Plan was first adopted with effect on March
17, 1976 and is
amended and restated effective January 1, 1995. The
amendments set
forth herein shall be effective with respect to
Participants who first
become eligible for benefits under this Plan on or
after January 1,
1995.
9.02. Assignment of Benefits.
The benefits payable hereunder or the right to receive
future benefits
under the Plan may not be anticipated, alienated,
sold, transferred,
assigned, pledged, executed upon, encumbered, or
subjected to any
charge or legal process; no interest or right to receive
a benefit may
be taken, either voluntarily or involuntarily, for the
satisfaction of
the debts of, or other obligations or claims against,
such person or
entity, including without limitation, any judgment
or claim for
alimony, support or separate maintenance pursuant
to a domestic
relations order within the meaning of Section
206(d)(3) of ERISA and
claims in bankruptcy proceedings. Any such attempted
disposition shall
be null and void.
9.03. Claims Release.
In case of accident resulting in injury to or death of
a Participant
which entitles the Participant or his or her surviving
lawful spouse to
benefits under the Plan, the Participant or his or her
surviving lawful
spouse may elect to accept such benefits or to prosecute
such claims at
law as the Participant or the surviving lawful spouse
may have against
one or more Participating Companies. If an election is
made to accept
the benefits under the Plan, such election shall be
in writing and
shall release such Participating Company or such
Participating
Companies from all claims and demands that the
Participant or his or
her surviving lawful spouse may have against it, or
against them,
otherwise than under this Plan or under any other plan
maintained by a
Participating Company, on account of such accident.
The right of the
Participant to a disability allowance under Article 2 of
the Plan shall
lapse if election to accept such benefits, as above
provided, is not
made within sixty days after injury, or within such
greater time as the
Company shall fix for the making of such election.
9.04. Damage Claims or Suits.
Should a claim other than under this Plan or under
any other plan
maintained by a Participating Company be presented
or suit brought
against a Participating Company, for damages on
account of injury or
death of a Participant, nothing shall be payable
under this Plan on
account of such injury or death except as provided in
Section 9.05,
provided, however, that the Company may, in its
discretion and upon
such terms as it may prescribe waive this provision if
such claims be
withdrawn or if such suit be discontinued.
9.05. Judgment or Settlement.
In case any judgment is recovered against a
Participating Company or
any settlement is made of any claim or suit on account of
the injury or
death of a Participant, and the total amount which would
otherwise have
been payable under the Plan and under any other plan
maintained by the
Participating Company is greater than the amount paid
on account of
such judgment or settlement, the lesser of (a) the
difference between
such two amounts or (b) the amount which would
otherwise have been
payable under this Plan, may in the discretion of
the Company, be
distributed to the beneficiaries who would have received
benefits under
this Plan.
9.06. Forfeiture of Benefits.
All Benefits to which a Participant and his or her
lawful spouse would
be otherwise eligible hereunder may be forfeited, at the
discretion of
the Board or of the Committee, if an individual without
the Company's
consent establishes a relationship with a competitor of
the Company or
engages in any activity in conflict with or adverse to
the interests of
the Company under the standards of the AT&T
Non-Competition Guideline
and as determined by the Board or the Committee in its
sole discretion.
9.07. Payment under Law.
In the case of any benefit, which the Committee shall
determine to be
of the same general character as a payment provided by
the Plan, shall
be payable to any participant, to his or her
beneficiaries, his or her
estate or his or her annuitant under any law now in
force or hereafter
enacted, only the excess, if any, of the amount
prescribed in the Plan
above the amount of such payment prescribed by law
shall be payable
under the Plan; provided, however, that no benefit
payable under the
Plan shall be reduced by reason of any governmental
benefit or pension
payable on account of military service or by reason
of any benefit
which the recipient would be entitled to receive
under the Social
Security Act or Railroad Retirement Act. In those cases
where, because
of differences in the beneficiaries or in the time
or methods of
payment or otherwise, the determination of any such
excess is not
ascertainable by mere comparison but adjustments are
necessary, the
Committee or the Administrator, as applicable,
shall, in its
discretion, determine whether or not in fact any such
excess exists and
make the adjustments necessary to carry out in a fair
and equitable
manner the spirit of the provision for the payment of any
such excess.
9.08. Governing Law.
To the extent such laws are not preempted by the laws
of the United
States of America, the Plan shall be governed by the
laws of the State
of New Jersey, except as to its principles of conflict of
laws.
9.09. Severability.
If any section, clause, phrase, provision or portion
of this Plan or
the application thereof to any person or circumstance
shall be invalid
or unenforceable under any applicable law, such event
shall not affect
or render invalid or unenforceable the remainder of this
Plan and shall
not affect the application of any section, clause,
provision, or
portion hereof to other persons or circumstances.
9.10. Facility of Payment.
If the Administrator shall find that any person to whom
any amount is
or was payable under the Plan is unable to care for his
or her affairs
because of illness or accident, then any payment, or any
part thereof,
due to such person (unless a prior claim therefor has
been made by a
duly appointed legal representative), may, if the
Administrator so
directs AT&T, be paid to the same person or
institution that benefit
with respect to such person is paid or to be paid
under the Pension
Plan if applicable, or the Participant's lawful
spouse, a child, a
relative, an institution maintaining or having custody
of such person,
or any other person deemed by the Administrator
to be a proper
recipient on behalf of such person otherwise entitled to
payment. Any
such payment shall be in complete discharge of the
liability of AT&T,
the Board, the Committee, the Administrator, and the
Participating
Company therefor. If any payment to which a Participant
or beneficiary
is entitled under this Plan is unclaimed or otherwise
not subject to
payment to the person or persons so entitled, such
amounts representing
such payment or payments shall be forfeited after a
period of two years
from the date the first such payment was payable and
shall not escheat
to any state or revert to any party; provided, however,
that any such
payment or payments shall be restored if any person
otherwise entitled
to such payment or payments makes a valid claim.
9.11. Headings.
The captions of the preceding the sections and
articles hereof have
been inserted solely as a matter of convenience and
shall not in any
manner define or limit the scope or intent of any
provision of the
Plan.
9.12. Tax Withholding.
AT&T shall withhold all federal, state, local or other
taxes required
by law to be withheld from payments or accruals under the
Plan.
9.13. Fiduciary Relationship.
Nothing contained in the Plan, and no action taken
pursuant to the
provisions of the Plan, shall create or be construed to
create a trust
or contract of any kind, or a fiduciary relationship
between or among
AT&T, any other Participating Company, any Affiliated
Corporation, the
Board, the Administrator, the Committee, any Participant,
employee, any
surviving lawful spouse or any other person.
9.14. No Guarantee of Employment.
Neither the Plan nor any action taken hereunder shall
be construed as
(i) a contract of employment or deemed to give any
employee the right
to be retained in the employment of a Participating
Company, the right
to any level of compensation, or the right to future
participation in
the Plan; or (ii) affecting the right of the
Participating Company to
discharge or dismiss any employee at any time.
9.15. Plan Year.
For purposes of administering the Plan, the plan year shall begin on
January 1 and end on December 31.
9.16. Entire Plan.
This written Plan document is the final and exclusive
statement of the
terms of this Plan, and any claim of right or
entitlement under the
Plan shall be determined in accordance with its
provisions pursuant to
the procedures described in Article 7. Unless otherwise
authorized by
the Board or its delegate, no amendment or
modification to this Plan
shall be effective until reduced to writing and
adopted pursuant to
Section 8.02.
<PAGE>
Appendix A
Prior Plan Provisions
Section 1. Definition of Annual Basic Pay
For retirements occurring after August 10, 1980, and before April 15, 1991, the
following was the applicable definition of "Annual Basic Pay":
"Annual Basic Pay" shall mean the Participant's annual base salary rate on the
last day the Participant was on the active payroll plus, with respect to a
Participant whose last day on the active payroll occurred after August 9, 1980,
an amount determined with reference to the Short Term Plan, but excluding all
differentials regarded as temporary or extra payments and all cash payments and
distributions made under the Long Term Plan. The amount determined with
reference to the Short Term Plan shall be the lesser of the Participant's
standard Short Term Award in effect on the last day the Participant was on the
active payroll or the Participant's position rate on the last day the
participant was on the active payroll multiplied by the applicable percentage
determined as follows:
Last Day on Active Payroll % of
Position Rate
---------------------------
- ------------------
August 10, 1980 through October 30,
1981 15%
October 31, 1981 through September 29,
1983 50%
On or after September 30,
1983 60%
THE AT&T
DIRECTORS INDIVIDUAL LIFE INSURANCE
PROGRAM
January 1, 1987
Revised 12/1/95
<PAGE>
TABLE OF CONTENTS
PAGE
PROGRAM
OVERVIEW...............................................................1
ELIGIBILITY....................................................................1
COVERAGE.......................................................................1
INSURABILITY...................................................................1
PREMIUM SHARING/BENEFIT
SHARING................................................2
PREMIUM
PERIOD.................................................................2
PREMIUM
AMOUNT.................................................................3
PREMIUM
WAIVERS................................................................3
OWNERSHIP......................................................................3
CASH
VALUE.....................................................................3
CASH
AVAILABILITY..............................................................3
EARLY
RETIREMENT...............................................................3
CONTRACTUAL
AGREEMENT..........................................................3
TAXES..........................................................................4
ENROLLMENT.....................................................................4
<PAGE>
Enrollment Package
Program Overview
The Directors Individual Life Insurance Program (DILIP) is an arrangement where
the Company and you purchase a permanent life insurance policy on your life and
share the premium payment. If you die while AT&T is still a party to the policy,
typically before you reach age 70, the death benefit is also shared between the
Company and your designated beneficiary. This type of arrangement this known in
the insurance industry as "Split Dollar." After attaining age 70 or if later, 10
years (in some cases it may be longer to avoid violation of the Internal Revenue
Service Regulations Section 7702 guidelines) from the date of issuance of this
policy, the Company will recoup its premium payments from the cash value
build-up in the policy and cease to have any interest in the policy. The
remaining cash value will be sufficient to give you a "paid-up" death benefit
after attaining normal retirement age, i.e., all premiums will cease and the
death benefit of the policy will be secured for the designated beneficiary with
no further cost to you.
At the time of enrollment your death benefit will be $100,000. Your death
benefit will increase annually at 7%. The premium cost to you will also increase
to reflect your increasing age as well as the increased death benefit. The
Company will pay a significant portion of the premium (see the attached
illustration). Over time, the Company portion of the premium will decrease.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up occurring coincident with the premium
payments that continues after the premium payments cease. Once sufficient funds
have accumulated and the Company no longer has an interest in the policy,
because it has recouped its premiums, you have the option to use some or all of
the remaining cash in lieu of some or all of the death benefit.
Eligibility
DILIP is for non-employee members of the AT&T Board of Directors.
Coverage
The death benefit will automatically increase 7% on January 1 of each year.
Insurability
If you enroll within 60 days of becoming a Board Member, you are guaranteed to
be insured. If you choose to delay enrollment, proof of insurability may be
required at that time before a policy can be written or coverage increased. If
you are on disability at the time of eligibility, enrollment must be delayed
until you return to work.
<PAGE>
Premium Sharing/Benefit Sharing
DILIP has its origin in what the insurance industry calls a "Split Dollar"
program. The term "Split Dollar" insurance comes from a concept of the Employer
and the Employee sharing the premium payment on a life insurance policy on the
employee. At age 70 or if later, 10 years (in some cases it may be longer to
avoid violation of the Internal Revenue Service Regulations Section 7702
guidelines) from the date of issuance of the policy, the Company's aggregate
premiums are returned from a "special" cash value built into the policy
expressly for this purpose. Should you die before the Company's aggregate
premiums are returned, death benefit payments are made to both the Company and
your beneficiary. However, the benefit the Company receives does not reduce the
death benefit paid to your beneficiary. After the Company's aggregate premiums
are returned, the Company no longer has an interest in the policy. At that time
you will have a "paid up" permanent life insurance policy with a cash value that
can be made available to you at your option.
<TABLE>
Example:*
Sample Director's Program
Current Age 55
Annual
Premium Cash Value
<S> <C> <C>
<C> <C> <C>
Attained Death
Age Benefit Director
Company Director Company
- --- ------- --------
- ------- -------- -------
55 $100,000 $ 620
$10,959 0 $ 9,085
60 140,300 1,459
10,120 $ 9,362 64,447
65 196,700 3,345
8,234 52,636 112,066
69 257,900 4,384
7,195 118,594 142,495
70# 257,900 0
0 122,893 0
</TABLE>
* This example is for illustrative purposes only and assumes a 7% annual growth
in death benefit (assumed base salary) and an 8% yield on investment for the
cash value. The yield on investment is not guaranteed.
# At normal retirement the death benefit becomes constant, premiums cease, the
Company's aggregate premiums are returned and your cash value may continue to
grow.
Premium Period
DILIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to both you and the Company. This period is normally from
the time of your enrollment until you reach age 70, however, premiums must be
paid for a minimum of 10 years (in some cases it may be longer to avoid
violation of the Internal Revenue Service Regulations Section 7702 guidelines).
Therefore, if you enroll in the program after age 60, you and the Company will
continue premium contributions until the minimum is reached.
<PAGE>
Premium Amount
Included as an attachment is a personal illustrations. The illustration shows
the Company's as well as your annual premium through the life of the policy.
Premium Waivers
There are no Premium Waivers associated with this policy.
Ownership
There are three options:
Board Member as Owner
All paperwork should be signed by Senior Manager as proposed insured
and owner.
Owner at Enrollment is not the Board Member
Another option is for you not to take ownership, but
rather another,
i.e., individual, trust, etc., apply for ownership of the
policy. It is
of particular importance that if the owner of the
policy is not you,
the owner must sign as the "Applicant/Owner" and you
must sign the
application as the "Proposed Insured".
Transfer of Ownership
The owner of this policy may subsequently transfer
ownership to
another, i.e., an individual, trust, etc. Please contact
Kathy Pruna at
908 630-2827 for the necessary forms and/or information.
Since ownership has long term and/or irrevocable implications, we urge you to
consult with an attorney and/or tax advisor before making this decision.
Cash Value
This program is designed to provide you with a pre- and post-retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to increase the
death benefit, build on a tax advantaged basis in the policy.
<PAGE>
Cash Availability
Cash Build-up
Your share of the cash build-up will not begin until
several years into
the policy but will build quickly after that. As with
any cash amount,
the longer it is left intact the greater the amount will
be.
Loans
The cash value attributed to you may be withdrawn in the
form of a loan
after the Company no longer has an interest in the
policy. There are
certain restrictions and tax implications associated
with a loan. We
suggest that you speak with your financial counselor/tax
advisor before
taking such a step.
Income Stream or Lump Sum
It is possible, after retirement, to convert all or any
portion of the
policy from a death benefit to either an income
"stream" (i.e., an
annuity) or a lump sum cash payout. The extent to which
you convert to
income or cash will cancel or reduce the valuable death
benefit. Once
you convert, it is not possible to re-establish the
original death
benefit.
Early Retirement
If you before age 70, the death benefit will continue to increase until age 70.
Both you and the Company will continue to pay premiums until you reach age 70 or
if later, 10 years (in some cases it may be longer to avoid violation of the
Internal Revenue Service Regulations Section 7702 guidelines) from the date of
issuance of the policy. At that time the premiums will cease and the Company's
aggregate premiums will be returned to the Company. If you leave the Company and
engage in competitive activity as determined by AT&T, the Company's aggregate
premiums will be immediately returned to the Company. You can, at your option,
either maintain the policy by continuing to pay the total premium, i.e., both
your amount and the amount previously paid by the Company, use the remaining
cash value (if any) to buy paid up life insurance, or withdraw any remaining
cash value and cancel the policy.
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T. This agreement has no relationship to employment
or any other benefit but rather defines the responsibilities of both the Company
and you in the operation of the policy. You will own the policy and determine
who beneficiary. The Company will hold the policy and have a "Collateral
Assignment" from the owner (you or another you name) entitling AT&T, as long as
it has a collateral interest in the policy, to an amount equal to its premiums
paid. This document is a legal agreement and as such includes a significant
amount of detail and warrants your careful review before signing. Although
somewhat unique to life insurance, a collateral assignment is similar in context
to an automobile loan where the car becomes "collateral" for the money lent to
buy it. In this case, a portion of the value and benefit of the policy is the
collateral the Company receives for contributing premium payments to "buy" the
life insurance policy. The agreement is satisfied when the premium paid by the
Company is returned. Some of the major sections of the agreement are:
- Description of the policy - How the premiums
are paid - How
the proceeds are paid - How the agreement
terminates - Claims
procedure - Description of the assignment
The Agreement is included with this package.
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
Included with this package are the documents required for enrolling in the
Directors Individual Life Insurance Program. The Application Form while
appearing lengthy requires, for our purposes, just a few basic pieces of
information, as does the Beneficiary Designation form. Both of these documents
include instructions on how to complete. The Collateral Assignment requires
signatures only.
AT&T EXCESS BENEFIT AND COMPENSATION PLAN
AT&T Corp.
and
Such of its Subsidiary Companies which are
Participating Companies
Effective October 1, 1996
<PAGE>
AT&T EXCESS BENEFIT AND COMPENSATION PLAN
Table of Contents
1. BACKGROUND AND
PURPOSE......................................................1
2.
DEFINITIONS.................................................................3
2.1.
ADMINISTRATOR........................................................3
2.2. AFFILIATED
CORPORATION...............................................3
2.3.
AT&T.................................................................3
2.4.
BENEFICIARY..........................................................3
2.5. BENEFIT
LIMITATION...................................................3
2.6.
BOARD................................................................3
2.7.
CODE.................................................................3
2.8.
COMMITTEE............................................................3
2.9. COMPENSATION
LIMITATION..............................................4
2.10.
EBA.................................................................4
2.11.
ERISA...............................................................4
2.12. EXCESS RETIREMENT
BENEFIT...........................................4
2.13.
EXECUTIVE...........................................................4
2.14.
PARTICIPANT.........................................................4
2.15. PARTICIPATING
COMPANY...............................................4
2.16.
PLAN................................................................4
2.17.
SUBSIDIARY..........................................................4
2.18. SURVIVING
SPOUSE....................................................4
2.19. TERM OF
EMPLOYMENT..................................................5
2.20. TRANSFERRED
INDIVIDUAL..............................................5
3.
ELIGIBILITY.................................................................6
3.1.
PARTICIPATION........................................................6
3.2. SURVIVING SPOUSE
BENEFIT.............................................6
3.3. RELATIONSHIP TO OTHER
PLANS..........................................6
3.4. FORFEITURE OF
BENEFITS...............................................6
4. RETIREMENT AND DEATH
BENEFITS...............................................7
4.1. EXCESS RETIREMENT
BENEFITS...........................................7
4.2. AMOUNT OF EXCESS RETIREMENT
BENEFIT..................................7
4.3. COMMENCEMENT AND FORM OF BENEFITS PAYABLE TO PARTICIPANT
OR SURVIVING
SPOUSE..................................................8
4.4. NO SURVIVING
SPOUSE..................................................8
4.5. FUTURE BENEFIT
ADJUSTMENTS...........................................8
4.6. DETERMINATION OF
BENEFITS............................................9
4.7. SUSPENSION AND RECOMMENCEMENT OF BENEFIT
PAYMENTS....................9
4.8. MANDATORY PORTABILITY
AGREEMENT......................................9
4.9. EXCESS DEATH
BENEFIT.................................................9
5. DISPOSITION OF PARTICIPATING
COMPANY.......................................11
5.1. SALE, SPIN-OFF, OR OTHER DISPOSITION OF PARTICIPATING
COMPANY.......11
6. SOURCE OF
PAYMENT..........................................................12
6.1. SOURCE OF
PAYMENTS..................................................12
6.2. UNFUNDED
STATUS.....................................................12
6.3. FIDUCIARY
RELATIONSHIP..............................................13
7. ADMINISTRATION OF THE
PLAN.................................................14
7.1.
ADMINISTRATION......................................................14
7.2.
INDEMNIFICATION.....................................................14
7.3. CLAIMS
PROCEDURE....................................................14
7.4. NAMED
FIDUCIARIES...................................................15
7.5. ROLE OF THE
COMMITTEE...............................................15
7.6. ALLOCATION OF
RESPONSIBILITIES......................................15
7.7. MULTIPLE
CAPACITIES.................................................15
8. AMENDMENT AND
TERMINATION..................................................16
8.1. AMENDMENT AND
TERMINATION...........................................16
9. GENERAL
PROVISIONS.........................................................17
9.1. BINDING
EFFECT......................................................17
9.2. NO GUARANTEE OF
EMPLOYMENT..........................................17
9.3. TAX
WITHHOLDING.....................................................17
9.4. ASSIGNMENT OF
BENEFITS..............................................17
9.5. FACILITY OF
PAYMENT.................................................17
9.6.
SEVERABILITY........................................................18
9.7. PLAN
YEAR...........................................................18
9.8.
HEADINGS............................................................18
9.9. GOVERNING
LAW.......................................................18
9.10. ENTIRE
PLAN........................................................18
<PAGE>
ADMINISTRATION OF THE PLAN
AT&T EXCESS BENEFIT AND COMPENSATION PLAN
AMENDED and RESTATED effective October 1, 1996
Article
1. Background and Purpose
The AT&T Excess Benefit Plan was established to provide eligible
management and occupational employees of AT&T Corp. (formerly American Telephone
and Telegraph Company) ("AT&T") and its subsidiaries that became Participating
Companies with certain benefits which would have been payable under the AT&T
Management Pension Plan or the AT&T Pension Plan, respectively, but for the
limitations placed on benefits payable under the AT&T Management Pension Plan or
the AT&T Pension Plan by section 415 of the Internal Revenue Code of 1986, as
amended (and its predecessor, the Internal Revenue Code of 1954, as amended)
("Code"). Effective January 1, 1989, AT&T established an additional plan to
provide eligible management employees with certain benefits which would have
been payable under the AT&T Management Pension Plan but for the limitations
placed on eligible compensation by Code ss. 401(a)(17). The aforementioned plans
are intended to encompass those plans identified in AT&T's December 28, 1992
filing with the Pension and Welfare Benefits Administration ("PWBA") in response
to the PWBA's September 21, 1992 Notice (Extension of Grace Period for
Assessment of Civil Penalties for Failure to File Timely Annual Return Reports;
Top Hat Plans and Pre-Grace Period Late Filers). These plans are amended and
restated, effective January 1, 1994, and shall hereinafter be referred to
collectively as the "AT&T Excess Benefit and Compensation Plan" or "Plan."
The Plan is intended to constitute an unfunded "excess benefit plan" as
defined in section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), to the extent it provides benefits that would be paid
under the AT&T Management Pension Plan or the AT&T Pension Plan but for the
limitations imposed by Code ss. 415, and an "unfunded plan of deferred
compensation for a select group of management or highly compensated employees"
for purposes of Title I of ERISA, to the extent it provides other benefits.
Except as expressly provided below, this amended and restated plan
document applies only to employees who terminate employment on or after October
1, 1996. For former employees who terminated employment before
October 1, 1996,
the provisions of the AT&T Excess Benefit and Compensation Plan in effect at
termination of the former employee's employment governs.
Effective October 1, 1996, Lucent Technologies Inc. established the
Lucent Technologies Inc. Excess Benefit and Compensation Plan as a successor to
the AT&T Excess Benefit and Compensation Plan, in effect as of September 30,
1996, with respect to Transferred Individuals (as defined in Article 2).
Accordingly, the AT&T Excess Benefit and Compensation Plan relinquished to the
Lucent Technologies Inc. Excess Benefit and Compensation Plan all liabilities as
of September 30, 1996 relating to Transferred Individuals, and the Lucent
Technologies Inc. Excess Benefit and Compensation Plan assumed and is solely
responsible for all such liabilities. Except to the extent required by law or
Article 5 of this Plan, the Plan shall not recognize service and compensation
before October 1, 1996 with respect to Transferred Individuals. Effective as of
the date an individual becomes a "Transition Individual" (as defined in Section
1.38(a) or (d) of the Management Interchange Agreement or Section 1.30(a) or (d)
of the Occupational Interchange Agreement), the Plan shall also assume and be
solely responsible for all liabilities relating to such Transition Individuals.
<PAGE>
Article
2. Definitions
Unless the context clearly indicates otherwise, the following terms
have the meanings described below when used in this Plan and references to a
particular Article or Section shall mean the Article or Section so delineated in
this Plan.
2.1. Administrator
With respect to individuals covered by the AT&T Management Pension
Plan, the Pension Plan Administrator under the AT&T Management
Pension Plan and,
with respect to individuals covered by the AT&T Pension Plan,
the Pension Plan
Administrator under the AT&T Pension Plan.
2.2. Affiliated Corporation
Any corporation of which more than 50 percent of the voting stock is
owned directly or indirectly by AT&T.
2.3. AT&T
AT&T Corp. (formerly the American Telephone and
Telegraph Company), a
New York corporation, or its successor.
2.4. Beneficiary
Any person entitled to an Excess Death Benefit pursuant to Section 4.9.
2.5. Benefit Limitation
The maximum benefit payable to a Participant under the AT&T Management
Pension Plan or the AT&T Pension Plan in accordance with Code ss. 415, but after
application of the Compensation Limitation, if any, under the AT&T Management
Pension Plan or the AT&T Pension Plan.
2.6. Board
The Board of Directors of AT&T.
2.7. Code
The Internal Revenue Code of 1986, as amended from time to time. Any
reference to a particular section of the Code includes any applicable
regulations promulgated under that section.
2.8. Committee
The AT&T Employees' Benefit Committee.
2.9. Compensation Limitation
The maximum amount of annual compensation under Code ss. 401(a)(17)
that may be taken into account in any Plan Year for benefit accrual purposes
undeR the AT&T Management Pension Plan or for purposes of calculating an
Accident Death Benefit, Sickness Death Benefit or Pensioner Death Benefit under
the AT&T Management Pension Plan.
2.10. EBA
The Employee Benefits Agreement between AT&T and
Lucent Technologies
Inc. as of February 1, 1996, as amended.
2.11. ERISA
The Employee Retirement Income Security Act of 1974, as amended from
time to time. Any reference to a particular section of ERISA includes any
applicable regulations promulgated under that section.
2.12. Excess Retirement Benefit
The benefit, if any, described in Article 4 which is payable to a
Participant or a Surviving Spouse under the terms of the Plan.
2.13. Executive
An individual who is considered to be within "a select group of
management or highly compensated employees" for purposes of Title I of ERISA and
whose annual compensation in any year exceeds the Compensation Limitation.
2.14. Participant
An individual and/or an Executive who has satisfied the eligibility
requirements in Section 3.1 for accrual of an Excess Retirement Benefit.
2.15. Participating Company
AT&T and any Affiliated Corporation which is a Participating Company
under the AT&T Management Pension Plan or the AT&T Pension Plan.
2.16. Plan
This AT&T Excess Benefit and Compensation Plan.
2.17. Subsidiary
Any corporation of which more than 80% of the voting stock is owned
directly or indirectly by AT&T.
2.18. Surviving Spouse
A deceased Participant's surviving spouse who is eligible to receive a
survivor annuity benefit under the AT&T Management Pension Plan or the AT&T
Pension Plan.
2.19. Term of Employment
"Term of Employment" within the meaning of the AT&T Management Pension
Plan or the AT&T Pension Plan, as applicable, for purposes of calculating the
amount of a Participant's benefit.
2.20. Transferred Individual
A "Transferred Individual" within the meaning of the EBA.
<PAGE>
Article
3. Eligibility
3.1. Participation
(i) Each individual who becomes eligible or is eligible for a deferred
vested pension, a disability pension or a service pension, under the terms and
conditions of either the AT&T Management Pension Plan or the AT&T Pension Plan,
shall be eligible to participate in this Plan, and/or (ii) each Executive who,
in any year, has annual compensation in excess of the Compensation Limitation
and who becomes or is eligible for a deferred vested pension, a disability
pension or a service pension, under the terms and conditions of the AT&T
Management Pension Plan, shall be eligible to participate in this Plan.
3.2. Surviving Spouse Benefit
Each Surviving Spouse of a Participant shall be eligible to receive an
Excess Retirement Benefit under the Plan, if eligible as provided in Section 4.1
of the Plan.
3.3. Relationship To Other Plans
The Excess Retirement Benefit and Excess Death Benefit payable under
the Plan shall be in addition to any other benefits provided, directly or
indirectly, to a Participant, Surviving Spouse or Beneficiary by any the
Participating Company. Participation in the Plan shall not preclude or limit the
participation of the Participant in any other benefit plan sponsored by a
Participating Company for which such Participant would otherwise be eligible.
The Excess Retirement Benefit and Excess Death Benefit payable to a Participant,
Surviving Spouse or Beneficiary under this Plan shall not duplicate benefits
payable to such Participant, Surviving Spouse or Beneficiary under any other
plan or arrangement of a Participating Company or any Affiliated Corporation.
3.4. Forfeiture of Benefits
If any Participant who otherwise would be entitled to an Excess
Retirement Benefit under this Plan is discharged for cause due to conviction of
a felony related to his or her employment, the rights of such Participant to an
Excess Retirement Benefit under this Plan, including the rights of the
Participant's spouse to an Excess Retirement Benefit as a Surviving Spouse
and/or the rights of a Beneficiary to an Excess Death Benefit, shall be
forfeited.
<PAGE>
Article
4. Retirement and Death Benefits
4.1. Excess Retirement Benefits
If the benefit payable to a Participant or a Surviving Spouse under the
AT&T Management Pension Plan or the AT&T Pension Plan is limited by reason of
the application of the Benefit Limitation and/or, for an Executive or a
Surviving Spouse of an Executive, the Compensation Limitation, an Excess
Retirement Benefit shall be paid as provided in this Article 4 to the
Participant or the Surviving Spouse.
4.2. Amount of Excess Retirement Benefit
The amount, if any, of the Excess Retirement Benefit payable monthly to
a Participant or a Surviving Spouse shall be equal to the difference between (i)
and (ii) where:
(i) is the amount of the monthly pension
benefit which would
be provided to the Participant or Surviving Spouse
under the AT&T
Management Pension Plan or the AT&T Pension Plan, without
regard to the
Benefit Limitation and/or for an Executive, or a
Surviving Spouse of an
Executive, without regard to the Compensation Limitation
under the AT&T
Management Pension Plan, based upon the AT&T Management
Pension Plan or
the AT&T Pension Plan formula, as applicable, in effect
as of the date
of termination of employment or death; and
(ii) is the amount of the monthly pension
benefit actually
payable to such Participant or Surviving Spouse
under the AT&T
Management Pension Plan or the AT&T Pension Plan.
The amount of the Excess Retirement Benefit payable as a result of the
application of the Benefit Limitation under the AT&T Management Pension Plan or
the AT&T Pension Plan shall be determined or redetermined, based upon the AT&T
Management Pension Plan or the AT&T Pension Plan formula, as applicable, in
effect as of the date of termination of employment or termination of
reemployment pursuant to Section 4.7 or death, (a) as of the date when benefits
are to commence pursuant to Section 4.3 or recommence pursuant to Section 4.7;
(b) as of the effective date of any subsequent increases and/or decreases in the
Benefit Limitation, and/or (c) as of the effective date of any special increases
in the monthly benefit payable, prior to application of the Benefit Limitation,
as a result of amendments to the AT&T Management Pension Plan and/or the AT&T
Pension Plan, whichever is applicable. Further, the amount of the Excess
Retirement Benefit shall be reduced for commencement of the Excess Retirement
Benefit prior to age 55 and/or for the cost of the survivor annuity, if any, in
the same manner as is set forth in the AT&T Management Pension Plan or the AT&T
Pension Plan, as applicable.
4.3. Commencement and Form of Benefits Payable to Participant
or Surviving
Spouse
The Excess Retirement Benefit provided under this Plan payable to
either the Participant or the Surviving Spouse (a) shall commence at the same
time, (b) shall be paid for as long as (subject to Section 4.2) and (c) shall be
paid in the same benefit form as the Participant's or Surviving Spouse's
benefits are paid under the AT&T Management Pension Plan or the AT&T Pension
Plan; whichever is applicable, provided, however, that the Committee shall have
the right to approve the Participant's election of the form of the Excess
Retirement Benefit payable to the Participant.
4.4. No Surviving Spouse
If a Participant dies before the date as of which his or her benefit
commences under the AT&T Management Pension Plan or the AT&T Pension Plan, and
he or she does not have a Surviving Spouse on his or her date of death, no
Excess Retirement Benefit shall be paid after the death of the Participant with
respect to the Participant.
4.5. Future Benefit Adjustments
(a)......If a Participant has commenced receiving a service or
disability pension under the AT&T Management Pension Plan or the AT&T Pension
Plan in the form of a joint and 50 percent survivor annuity and his or her
designated annuitant subsequently predeceases him or her, the Participant's
Excess Retirement Benefit under this Plan shall be calculated in accordance with
Section 4.02 and thereafter paid, prospectively, by restoring the original cost
of the joint and 50 percent survivor annuity form of benefit under the AT&T
Management Pension Plan or the AT&T Pension Plan, whichever is applicable. Such
adjustment shall be effective as of the first day of the first month following
the death of the Participant's surviving annuitant.
(b)......In the event that, following commencement of benefits to a
Participant under the Plan, the AT&T Management Pension Plan benefit is
subsequently adjusted to include any payments considered Compensation under the
AT&T Management Pension Plan paid after commencement of the AT&T Management
Pension Plan benefit, the Excess Retirement Benefit to the Participant under
this Plan shall be recalculated as soon as practicable after the AT&T Management
Pension Plan benefit is adjusted and shall be paid retroactively to the date the
AT&T Management Pension Plan benefit commences, if the AT&T Management Pension
Plan benefit is adjusted retroactively to such date.
(c)......In the event that, following commencement of benefits to a
Participant or Surviving Spouse under the Plan, the AT&T Management Pension Plan
or AT&T Pension Plan benefit is subsequently increased as a result of a
successful claim for benefits under the AT&T Management Pension Plan or AT&T
Pension Plan, the Excess Retirement Benefit to the Participant or Surviving
Spouse under this Plan shall be recalculated as soon as practicable after the
AT&T Management Pension Plan or the AT&T Pension Plan benefit is adjusted.
4.6. Determination of Benefits
Excess Retirement Benefit payments and Excess Death Benefit payments
under this Plan shall be calculated in accordance with the rules, procedures,
and assumptions utilized under the AT&T Management Pension Plan or the AT&T
Pension Plan, whichever is applicable. Thus, whenever it is necessary to
determine whether one benefit is less than, equal to, or larger than another, or
to determine the equivalent actuarial value of any benefit, whether or not such
form of benefit is provided under this Plan, such determination shall be made,
at the Administrator's discretion, by AT&T's enrolled actuary, using mortality,
interest and other assumptions normally used at the time in determining
actuarial equivalence under the AT&T Management Pension Plan or AT&T Pension
Plan, whichever is applicable.
4.7. Suspension and Recommencement of Benefit Payments
A Participant's employment or reemployment subsequent to retirement or
termination of employment with entitlement to an Excess Retirement Benefit under
this Plan shall result in the permanent suspension of payment of the Excess
Retirement Benefit to the Participant for the period of such employment or
reemployment to the extent and in a manner consistent with the terms and
conditions applicable to the suspension of benefit payments under the AT&T
Management Pension Plan or the AT&T Pension Plan, whichever is applicable. A
Participant's Excess Retirement Benefit shall recommence simultaneously with the
recommencement of his or her benefits under the AT&T Management Pension Plan or
the AT&T Pension Plan. The amount of the Participant's Excess Retirement Benefit
upon recommencement shall be adjusted to reflect adjustments, if any, in the
amount of the Participant's pension benefit under the AT&T Management Pension
Plan or the AT&T Pension Plan resulting from the period of reemployment,
pursuant to Section 4.2. Following recommencement of payment under this Plan,
the Participant (or Surviving Spouse) shall not be eligible to receive any
Excess Retirement Benefit payments that would otherwise have been payable but
for the suspension.
4.8. Mandatory Portability Agreement
A Participant (a) who is employed by an "Interchange Company", as that
term is defined under the Mandatory Portability Agreement ("MPA"), subsequent to
retirement or termination of employment from AT&T, its subsidiaries or any
Affiliated Company, (b) who is covered under the terms and conditions of the
MPA, and (c) for whom assets and liabilities are transferred from the AT&T
Management Pension Plan or the AT&T Pension Plan, shall forfeit his rights to an
Excess Retirement Benefit under this Plan, including the rights of the
Participant's spouse to an Excess Retirement Benefit as a Surviving Spouse and
the rights of Beneficiary to an Excess Death Benefit.
4.9. Excess Death Benefit
(a)......If the actual Accident Death Benefit, Sickness Death Benefit
or Pensioner Death Benefit ("Death Benefit") payable to any person as a result
of the death of a Participant under the terms of the AT&T Management Pension
Plan is reduced or limited by reason of the Compensation Limitation, an Excess
Death Benefit shall be paid as provided in this Section 4.9 to the beneficiary
otherwise entitled to receive the Death Benefit under the terms and conditions
of the AT&T Management Pension Plan.
(b)......The amount, if any, of the Excess Death Benefit payable shall
be equal to the difference between (i) and (ii) where:
(i) is the amount of the Death Benefit which
would be provided
to the beneficiary under the AT&T Management Pension
Plan without
regard to the Compensation Limitation under the AT&T
Management Pension
Plan in effect as of the date of death; and
(ii) is the amount of the Death Benefit actually payable to
such beneficiary under the AT&T Management Pension Plan.
(c)......The Excess Death Benefit provided under this Plan (i) shall
commence at the same time, (ii) shall be paid for as long as, and (iii) shall be
paid in the same benefit form as the Committee or its delegate has determined
with respect to the Death Benefit payable under the AT&T Management Pension
Plan.
<PAGE>
Article
5. Disposition of Participating Company
5.1. Sale, Spin-Off, or Other Disposition of Participating
Company
(a)......Subject to Sections 4.8 and 9.1, in the event AT&T sells,
spins off, or otherwise disposes of a Subsidiary or an Affiliated Corporation,
or disposes of all or substantially all of the assets of a Subsidiary or an
Affiliated Corporation such that one or more Participants terminate employment
for the purpose of accepting employment with the purchaser of such stock or
assets, any person employed by such Subsidiary or Affiliated Corporation who
ceases to be an employee as a result of the sale, spin-off, or disposition shall
be deemed to have terminated his or her employment with a Participating Company
and be eligible for an Excess Retirement Benefit commencing at the same time as
his or her benefit, if any, commences under the AT&T Management Pension Plan or
the AT&T Pension Plan. Further, if the Participant dies after termination of
employment as described in this Section 5.1, his or her Surviving Spouse may be
entitled to an Excess Retirement Benefit, if eligible as provided in Section
4.1, and/or his or her Beneficiary may be entitled to an Excess Death Benefit,
if eligible as provided in Section 4.9.
(b)......Notwithstanding the foregoing provisions of this Section 5.1,
and subject to Section 9.1, if, as part of the sale, spin-off, or other
disposition of the stock or assets of a Subsidiary or Affiliated Corporation,
the Subsidiary or Affiliated Corporation, its successor owner, or any other
party agrees in writing to assume the liability for the payment of the Excess
Retirement Benefit and/or the Excess Death Benefit to which the Participant,
Surviving Spouse and/or Beneficiary would have been entitled under the Plan but
for such sale, spin-off, or other disposition, then the entitlement of the
Participant or his or her Surviving Spouse to an Excess Retirement Benefit
and/or any Beneficiary to an Excess Death Benefit under this Plan shall
terminate. Any subsequent entitlement of the former Participant or his or her
Surviving Spouse or Beneficiary to the Excess Retirement Benefit and/or the
Excess Death Benefit shall be the sole responsibility of the assuming party.
Upon the assumption of the liability for the payment of an Excess Retirement
Benefit and Excess Death Benefit by Lucent Technologies Inc. pursuant to Section
6.1 of the EBA, the entitlement of a Transferred Individual (as defined in the
EBA), and/or his or her Surviving Spouse or Beneficiary, to an Excess Retirement
Benefit and/or an Excess Death Benefit under this Plan shall terminate. Upon the
assumption of the liability for the payment of an Excess Retirement Benefit and
Excess Death Benefit by Lucent Technologies Inc. pursuant to Section 7.1 of the
Management Interchange Agreement or Section 3.1 of the Occupational Interchange
Agreement, both dated as of April 8, 1996, between AT&T and Lucent Technologies
Inc., the entitlement of a Transition Individual (as defined in Section 1.38(b)
or (c) of the Management Interchange Agreement or Section 1.30(b) or (c) of the
Occupational Interchange Agreement), and/or his or her Surviving Spouse or
Beneficiary, to an Excess Retirement Benefit and/or an Excess Death Benefit
under this Plan shall terminate.
<PAGE>
Article
6. Source of Payment
6.1. Source of Payments
Benefits arising under this Plan and all costs, charges, and expenses
relating thereto will be payable from the Company's general assets. The Company
may, however, establish a trust to pay such benefits and related expenses,
provided such trust does not cause the Plan to be "funded" within the meaning of
ERISA. To the extent trust assets are available, they may be used to pay
benefits arising under this Plan and all costs, charges, and expenses relating
thereto. To the extent that the funds held in the trust, if any, are
insufficient to pay such benefits, costs, charges and expenses, the Company
shall pay such benefits, costs, charges, and expenses from its general assets.
In addition, the Company may, in its sole discretion, purchase and distribute
one or more commercial annuity contracts, or cause the trustee of the trust to
purchase and distribute one or more commercial annuity contracts, to make
benefit payments required under this Plan, to any Senior Manager, as defined in
the AT&T Non-Qualified Pension Plan, or the Surviving Spouse of any Senior
Manager, provided, however, that the purchase and distribution of any such
annuity contracts shall be no sooner than the expiration of any forfeiture
provisions applicable to the Senior Manager under the AT&T Non-Competition
Guidelines. Such annuity contracts may be purchased from a commercial insurer
acceptable to the Executive Vice President - Human Resources. Further, the
Executive Vice President - Human Resources, may determine, in his sole
discretion, to pay additional sums to any Senior Manager, from the Company's
general assets or from the trust, if any, to reimburse the Senior Manager for
additional federal and state income taxes estimated to be incurred by reason of
the distribution of any such annuity contracts. The Executive Vice President
Human Resources shall establish a methodology or methodologies for determining
the amount of such additional sums. The methodology or methodologies selected
shall be those that the Executive Vice President - Human Resources determines,
in his sole discretion, to be the most effective and administratively feasible
for the purpose of producing after tax periodic benefit payments that
approximate the after tax periodic benefit payments that would have been
received by Senior Managers in the absence of the distribution of the annuity
contract.
6.2. Unfunded Status
The Plan at all times shall be entirely unfunded for purposes of the
Code and ERISA and no provision shall at any time be made with respect to
segregating any assets of a Participating Company for payment of any benefits
hereunder. Funds that may be invested through a trust described in Section 6.1
shall continue for all purposes to be part of the general assets of the
Participating Company which invested the funds. The Plan constitutes a mere
promise by AT&T and the Participating Companies to make Excess Retirement
Benefit payments and Excess Death Benefit payments, if any, in the future. No
Participant, Surviving Spouse or any other person shall have any interest in any
particular assets of a Participating Company by reason of the right to receive a
benefit under the Plan and to the extent the Participant, Surviving Spouse or
any other person acquires a right to receive benefits under this Plan, such
right shall be no greater than the right of any unsecured general creditor of a
Participating Company.
6.3. Fiduciary Relationship
Nothing contained in the Plan, and no action taken pursuant to the
provisions of the Plan, shall create or be construed to create a trust or a
fiduciary relationship between or among AT&T, any other Participating Company,
the Board, the Administrator, the Committee, any Participant, any Surviving
Spouse, or any other person, except as provided in Section 7.4.
<PAGE>
Article
7. Administration of the Plan
7.1. Administration
AT&T shall be the "plan administrator" of the Plan as that term is
defined in ERISA.
7.2. Indemnification
Neither the Administrator, any member of the Board or of the Committee,
nor each other officer to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, shall be personally
liable by reason of any contract or other instrument executed by such individual
or on his or her behalf in his or her capacity as the Administrator or as a
member of the Board or of the Committee, nor for any mistake of judgment made in
good faith, and AT&T shall indemnify and hold harmless the Administrator, each
member of the Board, each member of the Committee, and each other employee or
officer to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or bad faith.
7.3. Claims Procedure
(a)......All claims for benefit payments under the Plan shall be
submitted in writing by the Participant, Surviving Spouse, Beneficiaries, or any
individual duly authorized by them ("Claimant" for purposes of Section 7.3), to
the Administrator. The Administrator shall notify the Claimant in writing within
90 days after receipt as to whether the claim has been granted or denied. This
period may be extended for up to an additional 90 days in unusual cases provided
that written notice of the extension is furnished to the Claimant prior to the
commencement of the extension. In the event the claim is denied, such notice
shall (i) set forth the specific reasons for denial, (ii) make reference to the
pertinent Plan provisions on which the denial is based, (iii) describe any
additional material or information necessary before the Claimant's request may
be acted upon, and (iv) explain the procedure for appealing the adverse
determination.
(b)......Any Claimant whose claim for benefits has been denied, in
whole or in part, may, within 60 days of receipt of any adverse benefit
determination, appeal such denial to the Committee. All appeals shall be in the
form of a written statement and shall (i) set forth all of the reasons in
support of favorable action on the appeal, (ii) identify those provisions of the
Plan upon which the Claimant is relying, and (iii) include copies of any other
documents or materials which may support favorable consideration of the claim.
The Committee shall decide the issues presented within 60 days after receipt of
such request, but this period may be extended for up to an additional 60 days in
unusual cases provided that written notice of the extension is furnished to the
Claimant prior to the commencement of the extension. The decision of the
Committee shall be set forth in writing, include specific reasons for the
decision, refer to pertinent Plan provisions on which the decision is based, and
shall be final and binding on all persons affected thereby.
Any Claimant whose claim for benefits has been denied shall have such
further rights of review as are provided in ERISA ss. 503, and the Committee anD
Administrator shall retain such right, authority, and discretion as is provided
in or not expressly limited by ERISA ss. 503.
(c)......The Committee shall serve as the final review committee, under
the Plan and ERISA, for the review of all appeals by Claimants whose initial
claims for benefits have been denied, in whole or in part, by the Administrator.
The Committee shall have the authority to determine conclusively for all parties
any and all questions arising from administration of the Plan, and shall have
sole and complete discretionary authority and control to manage the operation
and administration of the Plan, including, but not limited to, authorizing
disbursements according to the Plan, the determination of all questions relating
to eligibility for participation and benefits, interpretation of all Plan
provisions, determination of the amount and kind of benefits payable to any
Participant, Surviving Spouse or Beneficiary, and the construction of disputed
and doubtful terms. Such decisions by the Committee shall be conclusive and
binding on all parties and not subject to further review.
7.4. Named Fiduciaries
AT&T, the Committee, the Pension Plan Administrator(s) and each
Participating Company is each a named fiduciary as that term is used in ERISA
with respect to the particular duties and responsibilities herein provided to be
allocated to each of them.
7.5. Role of the Committee
(a)......The Committee shall have the specific powers elsewhere herein
granted to it and shall have such other powers as may be necessary in order to
enable it to administer the Plan, except for powers herein granted or provided
to be granted to others.
(b)......The procedures for the adoption of by-laws and rules of
procedure and for the employment of a secretary and assistants shall be the same
as are set forth in AT&T Management Pension Plan or the AT&T Pension Plan.
7.6. Allocation of Responsibilities
AT&T may allocate responsibilities for the operation and administration
of the Plan consistent with the Plan's terms, including allocation of
responsibilities to the Committee and the other Participating
Companies. AT&T
and other named fiduciaries may designate in writing other persons to carry out
their respective responsibilities under the Plan, and may employ persons to
advise them with regard to any such responsibilities.
7.7. Multiple Capacities
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
<PAGE>
Article
8. Amendment and Termination
8.1. Amendment and Termination
Pursuant to ERISA ss. 402(b)(3), the Board or its delegate (acting
pursuant to the Board's delegations of authority then in effect) may from time
to time amend, suspend, or terminate the Plan at any time. Plan amendments may
include, but are not limited to, elimination or reduction in the level or type
of benefits provided prospectively to any class or classes of Participants (and
Surviving Spouses and Beneficiaries). Any and all Plan amendments may be made
without the consent of any Participant, Surviving Spouse or Beneficiary.
Notwithstanding the foregoing, no such amendment, suspension, or termination
shall retroactively impair or otherwise adversely affect the rights of any
Participant, Surviving Spouse, or other person to benefits under the Plan, the
AT&T Management Pension Plan or the AT&T Pension Plan which have arisen prior to
the date of such action.
<PAGE>
Article
9. General Provisions
9.1. Binding Effect
The Plan shall be binding upon and inure to the benefit of each
Participating Company and its successors and assigns, and to each Participant,
his or her successors, designees, Beneficiaries, designated annuitants, and
estate. The Plan shall also be binding upon any successor corporation or
organization succeeding to substantially all of the assets and business of AT&T.
Nothing in the Plan shall preclude AT&T from merging or consolidating into or
with, or transferring all or substantially all of its assets to, another
corporation which assumes the Plan and all obligations of AT&T hereunder. AT&T
agrees that it will make appropriate provision for the preservation of the
rights of Participants, Surviving Spouses and Beneficiaries under the Plan in
any agreement or plan or reorganization into which it may enter to effect any
merger, consolidation, reorganization, or transfer of assets. Upon such a
merger, consolidation, reorganization, or transfer of assets, the term
"Participating Company" shall refer to such other corporation and the Plan shall
continue in full force and effect.
9.2. No Guarantee of Employment
Neither the Plan nor any action taken hereunder shall be construed as
(i) a contract of employment or deemed to give any Participant the right to be
retained in the employment of a Participating Company, the right to any level of
compensation, or the right to future participation in the Plan; or (ii)
affecting the right of a Participating Company to discharge or dismiss any
Participant at any time.
9.3. Tax Withholding
AT&T or a Participating Company, as applicable, shall withhold all
federal, state, local, or other taxes required by law to be withheld from Excess
Retirement Benefit payments under the Plan. AT&T shall also withhold all FICA
taxes required by law to be withheld on an Executive's Excess Retirement
Benefits under the Plan.
9.4. Assignment of Benefits
No Excess Retirement Benefit or Excess Death Benefit under this Plan or
any right or interest in such Excess Retirement Benefit or Excess Death Benefit
shall be assignable or subject in any manner to anticipation, alienation, sale,
transfer, claims of creditors, garnishment, pledge, execution, attachment or
encumbrance of any kind, including, but not limited to, pursuant to any domestic
relations order (within the meaning of ERISA ss.
206(d)(3) and Code ss.
414(p)(1)(B)) or judgment or claims for alimony, support, separate maintenance,
and claims in bankruptcy proceedings, and any such attempted disposition shall
be null and void.
9.5. Facility of Payment
If the Administrator shall find that any person to whom any amount is
or was payable under the Plan is unable to care for his or her affairs because
of illness or accident, then any payment, or any part thereof, due to such
person (unless a prior claim therefor has been made by a duly appointed legal
representative), may, if the Administrator so directs AT&T, be paid to the same
person or institution that the benefit with respect to such person is paid or to
be paid under the AT&T Management Pension Plan or AT&T Pension Plan, if
applicable, or the Participant's lawful spouse, a child, a relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Administrator to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be in complete discharge
of the liability of AT&T, the Board, the Committee, the Administrator, and the
Participating Company therefor. If any payment to which a Participant, Surviving
Spouse or Beneficiary is entitled under this Plan is unclaimed or otherwise not
subject to payment to the person or persons so entitled, such amounts
representing such payment or payments shall be forfeited after a period of two
years from the date the first such payment was payable and shall not escheat to
any state or revert to any party; provided, however, that any such payment or
payments shall be restored if any person otherwise entitled to such payment or
payments makes a valid claim.
9.6. Severability
If any section, clause, phrase, provision, or portion of this Plan or
the application thereof to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Plan and shall not affect the
application of any section, clause, provision, or portion hereof to other
persons or circumstances.
9.7. Plan Year
For purposes of administering the Plan, each plan year shall begin on
January 1 and end on December 31.
9.8. Headings
The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and shall not in any manner define or
limit the scope or intent of any provisions of the Plan.
9.9. Governing Law
The Plan shall be governed by the laws of the State of New Jersey
(other than its conflict of laws provisions) from time to time in effect, except
to the extent such laws are preempted by the laws of the United States of
America.
9.10. Entire Plan
This written Plan document is the final and exclusive statement of the
terms of this Plan, and any claim of right or entitlement under the Plan shall
be determined in accordance with its provisions pursuant to the procedures
described in Article 7. Unless otherwise authorized by the Board or its
delegate, no amendment or modification to this Plan shall be effective until
reduced to writing and adopted pursuant to Section 8.1.
AT&T NON-QUALIFIED PENSION PLAN
As Amended and Restated effective January 1, 1995
<PAGE>
AT&T NON-QUALIFIED PENSION PLAN
TABLE OF CONTENTS
ARTICLE 1
PURPOSE.............................................................4
ARTICLE 2
DEFINITIONS.........................................................5
ARTICLE 3 PARTICIPATION AND
ELIGIBILITY.......................................9
3.01.
PARTICIPATION............................................................9
3.02.
ELIGIBILITY..............................................................9
ARTICLE 4 PENSION
BENEFITS...................................................12
4.01. BENEFIT
ELIGIBILITY.....................................................12
4.02. BENEFIT
FORMULAS........................................................13
4.03. MONTHLY
PAYMENTS........................................................16
4.04. COMMENCEMENT AND DURATION OF
PAYMENTS...................................16
4.05. TREATMENT DURING SUBSEQUENT
EMPLOYMENT..................................16
4.06. METHOD AND FORM OF
PAYMENT..............................................16
ARTICLE 5 DEATH
BENEFITS.....................................................18
5.01.
PARTICIPATION...........................................................18
5.02. DEATH
BENEFITS..........................................................18
ARTICLE 6 SOURCE OF
PAYMENT..................................................21
6.01. SOURCE OF
PAYMENTS......................................................21
6.02. UNFUNDED
STATUS.........................................................21
ARTICLE 7 ADMINISTRATION OF THE
PLAN.........................................23
7.01. ADMINISTRATION AND
AUTHORITIES..........................................23
7.02.
COMMITTEE...............................................................23
7.03.
INDEMNIFICATION.........................................................23
7.04. BENEFIT CLAIMS AND
APPEALS..............................................24
ARTICLE 8 ADOPTION, AMENDMENT AND
TERMINATION................................25
8.01. ADOPTION OF
PLAN........................................................25
8.02. AMENDMENT AND
TERMINATION...............................................25
8.03. SALE, SPIN-OFF, OR OTHER DISPOSITION OF PARTICIPATING
COMPANY...........25
ARTICLE 9 GENERAL
PROVISIONS.................................................27
9.01. BINDING
EFFECT..........................................................27
9.02. FIDUCIARY
RELATIONSHIP..................................................27
9.03. NO GUARANTEE OF
EMPLOYMENT..............................................27
9.04. TAX
WITHHOLDING.........................................................28
9.05. ASSIGNMENT OF
BENEFITS..................................................28
9.06. FACILITY OF
PAYMENT.....................................................28
9.07.
SEVERABILITY............................................................28
9.08. EFFECTIVE
DATE..........................................................29
9.09. PLAN
YEAR...............................................................29
9.10.
HEADINGS................................................................29
9.11. GOVERNING
LAW...........................................................29
9.12. FORFEITURE OF
BENEFITS..................................................29
9.13. OPTION DURING
DISABILITY................................................29
9.14. SPECIAL
CLASSIFICATION..................................................30
9.15. CLAIMS
RELEASE..........................................................30
9.16. DAMAGE CLAIMS OR
SUITS..................................................30
9.17. JUDGMENT OR
SETTLEMENT..................................................30
9.18. PAYMENT UNDER
LAW.......................................................31
9.19. ENTIRE
PLAN.............................................................31
APPENDIX
A....................................................................32
APPENDIX
B....................................................................36
APPENDIX
C....................................................................37
<PAGE>
AT&T NON-QUALIFIED PENSION PLAN
ARTICLE 1
PURPOSE
This AT&T Non-Qualified Pension Plan (the "Plan") is an Amendment and
Restatement of predecessor programs sponsored by the Company that where first
adopted on October 1, 1980, to provide supplemental pension, disability and
death benefits to certain employees of the Company. The Plan is intended to
constitute an unfunded plan of deferred compensation for a select group of
management or highly compensated employees for purposes of Title I of ERISA.
<PAGE>
ARTICLE 2
DEFINITIONS
Whenever used herein, the terms set forth below have the following meanings
unless a different meaning is clearly required by the context:
2.01. "Active Service" means the period of active employment
but excluding
any time the individual is absent on account of
disability and
receiving or eligible to receive sickness or
accident disability
benefits under the Company's Sickness and Accident
Disability Benefit
Plan.
2.02. "ADEA" means the Age Discrimination in Employment Act
of 1967, as it
may be amended from time to time.
2.03. "Adjusted Career Average Pay" as used in the
Alternate Formula
described in Section 4.02(b), means (i) in the case of
an Officer, the
sum of A and B below divided by such Officer's Term of
Employment and
(ii) in the case of an E-band Employee, the amount
described in B below
divided by such E-band Employee's Term of Employment:
A. the sum of (1) the average of an
Officer's annual
Short Term Incentive Awards and any
salary amounts
deferred under the AT&T Senior
Management Incentive
Award Deferral Plan includable in
the 1989 Base
Period multiplied by his or her Term
of Employment
as of December 31, 1989 and (2)
his or her Short
Term Incentive Awards includable
under the Basic
Formula and any salary amounts
deferred under the
AT&T Senior Management Incentive
Award Deferral
Plan for the period from January
1, 1990 to the
date of retirement.
B. the sum of (a) the product of (i) the
Participant's
average annual "Compensation" as
defined in the
Pension Plan for the 1992 Base
Period and (ii) the
Participant's Term of Employment as
of December 31,
1992 and (b) the Participant's
"Compensation" for
the period from January 1, 1993 to
the last day of
his or her Term of Employment.
2.04. "Administrator" means the person identified as
the Pension Plan
Administrator under the Pension Plan or such other
person or entity
designated by the Company.
2.05. "Affiliated Corporation" means any corporation or
other entity of
which 50 percent or more of the voting stock is
owned directly or
indirectly by AT&T.
2.06. "AT&T" or "Company" means AT&T Corp. (formerly American
Telephone and
Telegraph Company), a New York Corporation, or its
successors.
2.07. "1989 Base Period" means the period from January
1, 1987, to
December 31, 1989.
2.08. "1992 Base Period" means the period from January
1, 1990, to
December 31, 1992.
2.09. "Board" means the Board of Directors of AT&T.
2.10. "Committee" means the Employees' Benefit Committee
appointed by the
Company to administer the Pension Plan.
2.11. "Covered Compensation Base" means an amount which is the
average of the
maximum wage amounts on which an employee's
liability for Social
Security taxes were determined for each year beginning
with January 1,
1958 and ending with the year in which the calculation is
made.
2.12. "Delegate" means the Board's authorized
representative designated
pursuant to a delegation of authority by the Board to
act on behalf
of or to perform one or more administrative
responsibilities under the
Plan.
2.13. "E-band Employee" means any employee of a
Participating Company
employed in a position evaluated or classified as
an "E-band" or
equivalent position by the Company, except that no
employee who is
assigned to such a position on a temporary basis after
being notified
in writing of the temporary status of such
assignment shall be an
"E-band Employee" for any purpose under this Plan.
2.14. "ERISA" means the Employee Retirement Income Security
Act of 1974, as
amended from time to time.
2.15. "Long Term Disability Plan" means the AT&T Senior
Management Long
Term Disability and Survivor Protection Plan.
2.16. "Normal Retirement Age" means the Normal Retirement
Age determined
under the Pension Plan.
2.17. "Officer" means any employee of a Participating
Company holding a
position evaluated or classified above the
"E-band" level by the
Company, except that no employee who is assigned to such
a position on
a temporary basis after being notified in writing of
the temporary
status of such assignment shall be an "Officer" for any
purpose under
this Plan.
2.18. "Participant" means an Officer who is eligible for a
service pension,
deferred vested pension or disability pension under
the terms of the
Pension Plan or an E-band Employee who is eligible
for a service
pension under the terms of the Pension Plan.
2.19. "Participating Company" means AT&T and any
Affiliated Corporation
which has elected, with the approval of the Committee
as required by
Section 8.01, to participate in the Plan.
2.20. "Pension Plan" means the AT&T Management Pension Plan,
as amended from
time to time.
2.21. "Pension Plan Benefit" means the annual pension
benefit determined
under the Pension Plan without regard to the
limitations on covered
compensation under Section 401(a)(17) of the Internal
Revenue Code of
1986, or the limitations on benefit accruals and payments
under Section
415 of the Internal Revenue Code of 1986, and before
any reduction in
such pension benefit for the cost of a survivor
annuity or for early
retirement.
2.22. "Plan" means this AT&T Non-Qualified Pension Plan, as
set forth herein
and as amended from time to time.
2.23. "Position Rate" means an amount established periodically
by the Company
for each Officer position upon which base salaries are
administered.
2.24. "Short Term Incentive Award" means the actual amount
awarded (including
any amounts deferred pursuant to the AT&T Senior
Management Incentive
Award Deferral Plan) annually to an Officer pursuant to
the AT&T Short
Term Incentive Plan or predecessor short term incentive
plans. Short
Term Incentive Awards shall, for purposes of this Plan,
be considered
to be awarded on the last day of the performance period
with respect to
which they are earned.
2.25. "Standard Award" means an amount determined
periodically for each
Position Rate under the AT&T Short Term Incentive Plan
or predecessor
short term incentive plans.
2.26. "Successor Plan Sponsor" means Lucent Technologies Inc.
and any other
corporation or entity that enters into an agreement
or agreements
providing for the assumption of liabilities arising
under this Plan
comparable to the Management Interchange Agreement dated
as of April 8,
1996, and the Employee Benefits Agreement dated
February 1, 1996, and
amended and restated as of March 29, 1996, between
AT&T and Lucent
Technologies Inc.
2.27. "Term of Employment" means the period of employment
described in
Section 2.38 of the Pension Plan and, unless expressly
limited by the
context, shall also mean the number of full or partial
calendar years
comprising Years of Service as defined in Section 2.39
of the Pension
Plan.
2.28. "Total Compensation" As used in the Alternate Minimum
Formula described
in Section 4.02(c) means the sum of (i) the elements of
Compensation as
defined in Section 4.2(f) of the Pension Plan, (ii)
salary amounts
deferred under the AT&T Senior Management Incentive
Award Deferral
Plan, and (iii) Short Term Incentive Awards.
2.29. "Transition Participant" means a Participant as
to whom the
responsibility and liability for the payment of
benefits accrued or
payable under this Plan has been assumed by a Successor
Plan Sponsor.
<PAGE>
ARTICLE 3
PARTICIPATION AND ELIGIBILITY
3.01. Participation.
All Officers and E-band Employees who meet the
criteria set forth in
Section 2.18 shall be eligible to participate in this Plan.
3.02. Eligibility.
(a) Service Benefit. Each Participant who is
eligible for a
service pension pursuant to the terms of the
Pension Plan (
excluding for purposes of this Section 3.02(a)
the effect of
any management pension enhancement pursuant to
Section 4.2(h)
of the Pension Plan) and who meets the
relevant requirements
of Article 4 shall be eligible for a service
benefit pursuant
to this Plan.
(b) Deferred Benefit.
(i) Except as otherwise specified in Sections
4.04 and 4.05,
an Officer who is eligible for a deferred
vested pension
pursuant to the terms and conditions of
the Pension Plan
is eligible for a deferred benefit
pursuant to this
Plan.
(ii) An Officer who leaves the service of a
Participating
Company and who has elected to have his or
her deferred
vested pension payable early in reduced
amounts pursuant
to the terms and conditions of the Pension
Plan shall be
deemed to have elected to have his or
her deferred
benefits under this Plan payable
early in reduced
amounts under the same terms and
conditions as set forth
in the Pension Plan. In the event of
such an election,
the amount of deferred benefit
otherwise payable at
Normal Retirement Age under this
Plan to such
participant shall be reduced in accordance
with the same
formulas as are set forth in the
Pension Plan for the
discounting of the deferred vested pension.
(iii) The Committee, the Administrator or a
Delegate, as
appropriate, shall notify each Officer
who leaves the
employment of such Participating Company
(except to take
employment without a break in service
with another
Participating Company or other
Affiliated Corporation)
of his or her eligibility, if any,
for a deferred
benefit by mailing, within a reasonable
time after his
or her leaving, a notice to his or
her last known
address as shown on the Participating
Company's records.
(c) Disability Benefit. A Participant who, while an
Officer, has
become eligible for a Disability Pension
pursuant to Section
4.1(c) of the Pension Plan shall be eligible
for a Disability
Benefit hereunder. Should the
Disability Pension be
discontinued (other than by reason of
conversion to a Service
Pension) pursuant to the terms of the
Pension Plan, the
Disability Benefit hereunder shall be discontinued as well.
(d) Contingent Benefits.
(i) An Officer who, on or after January
1, 1986, is
reassigned to a position evaluated
below the E-band
level for reasons other than
unsatisfactory performance,
and who has satisfied the vesting
requirements of
Section 3.02(a) or Section 3.02(b) of
this Plan as of
the reassignment date, will be
eligible for Officer
benefits upon his or her termination
of employment
provided he or she is then eligible for
either a service
pension under Section 4.1(a) or a
deferred vested
pension under Section 4.1(b) of the
Pension Plan. The
determination of the amount of such
former Officer's
benefits will be based on his or her Term
of Employment
completed as of the reassignment date
and shall be
computed in accordance with Section
4.02(a) in effect on
such date.
(ii) An Officer who, on or after January
1, 1986, is
reassigned to a position evaluated below
the E-band, and
who has not satisfied the vesting
requirements of this
Plan as of the reassignment date, will
not be eligible
for benefits under this Plan upon his or
her termination
of employment.
(iii) An Officer who, on or after January
1, 1986, is
reassigned to a position evaluated at
the E-band level
for reasons other than unsatisfactory
performance, and
who has satisfied the vesting
requirements of Section
3.02(a) or Section 3.02(b) of this
Plan as of the
reassignment date shall be eligible for
a benefit (A)
under Section 3.02(a), if such Officer is
eligible for a
service pension under Section 4.1(a) of
the Pension Plan
on the last day of his or her Term of
Employment or (B)
under Section 3.02(b), if such Officer
is not eligible
for a service pension under Section
4.1(a) of the
Pension Plan on the last day of his or
her Term of
Employment. The benefit of any
reassigned Officer
described in this Section
3.02(d)(iii)(A) shall be
computed based on his or her Term of
Employment and in
accordance with Section 4.02(b) in
effect on the last
day of such Term of Employment. The
benefit of any
reassigned Officer described in
this Section
3.02(d)(iii)(B) shall be computed based
on his or her
Term of Employment completed as of the
last day of the
year in which his or her job is
reclassified and in
accordance with Section 4.02(a) in effect
as of the date
of such reassignment.
(iv) A Participant, other than an Officer
whose job is
classified or reclassified during or
after 1986 to a
level below E-band will be eligible
for the service
benefit described in Section 3.02(a)
and computed in
accordance with Section 4.02(b) based on
his or her Term
of Employment completed as of the last day
of 1988 or if
later, the last day of the year in which
his or her job
is reclassified and based on the
provisions of the Plan
in effect on such day, provided he
or she is then
eligible for a service pension under the
Pension Plan,
and further provided he or she is not
demoted subsequent
to such day because of unsatisfactory
job performance
prior to retiring under the Pension Plan.
<PAGE>
ARTICLE 4
PENSION BENEFITS
4.01. Benefit Eligibility.
(a) Officers. The following provisions govern the
eligibility for
benefits of Officers whose retirement date
is on or after
December 31, 1993.
(i) The benefit of an Officer who had at least
five Years of
Service as an Officer as of December
31, 1993 will be
the greater of the annual benefit
amounts determined
under the Basic Formula, the Alternate
Formula or the
Alternate Minimum Formula described in
Sections 4.02(a),
(b) and (c) respectively.
(ii) The benefit of an Officer who is not
described in
Section 4.01(a)(i) but who is eligible
for a service
pension under Section 4.1(a) of the
Pension Plan as of
the last day of his or her Term of
Employment will be
the greater of the annual benefit
amounts under the
Basic Formula or the Alternate Formula
described in
Sections 4.02(a) and (b) respectively.
(iii) The benefit of an Officer who is not
described in
Sections 4.01(a)(i) or (ii) but who is
eligible for a
deferred vested pension under Section
4.1(b) or a
disability pension under Section 4.1(c)
the Pension Plan
as of the last day of his or her Term of
Employment will
be the amount determined under the
Basic Formula
described in Section 4.02(a).
(iv) The benefit payable to the surviving
lawful spouse of an
Officer shall be determined in
accordance with Section
4.02(d)(i), if the Officer is an employee
at the time of
death and in accordance with Sections
4.02(d)(ii) and
(iii), if the Officer is not an employee
at the time of
death.
<PAGE>
(b) E-band Employees. The annual service
benefit of an E-band
Employee whose retirement date is on or
after October 19,
1993, will be the amount computed under the
Alternate Formula
described in Section 4.02(b). The benefit
payable to the
surviving lawful spouse of an E-band
Employee shall be
determined in accordance with Section
4.02(d)(i), if the
E-band Employee is an employee at the time
of death. The
formulas for computing the pension
benefits of an E-band
Employee whose employment terminated prior
to October 19,
1993, are shown in Appendix A.
4.02. Benefit Formulas.
(a) Basic Formula. The annual service or disability
benefit under
the Basic Formula shall be determined by
adding (A) the
product of one and five-tenths percent (1.5%)
of the average
annual Short Term Incentive Awards for the
1989 Base Period
and the Officer's Term of Employment as of
December 31, 1989,
and (B) the sum of one and six-tenths percent
(1.6%) of the
Short Term Incentive Award for each successive
full or partial
calendar year of employment following 1989.
(i) Early Retirement Discount. The monthly
service benefit,
determined in accordance with the Basic
Formula of this
Section 4.02(a), for each Officer who
is granted a
service benefit for reasons other than
total disability
as a result of sickness or injury, shall
be reduced by
one-half percent (0.5%) for each calendar
month or part
thereof by which his or her age at time
benefits are
first paid under this Plan is less than
fifty-five (55)
years, except that each Officer retired
with thirty (30)
or more years of service shall receive a
monthly benefit
allowance reduced by one-quarter
percent (0.25%) for
each calendar month or part thereof
by which such
Officer's age at the time benefits are
first paid under
this Plan is less than fifty-five (55)
years.
(ii) Deferred Benefit Amount. The monthly
benefit for each
Officer eligible for a deferred
benefit under the
provisions of Section 3.02(b) shall
be calculated
exclusively in accordance with the
provisions specified
as applicable to those receiving a
benefit under this
Section 4.02(a) effective as of the
date such Officer
leaves the service of a Participating
Company.
(iii) An Officer who leaves the service of a
Participating
Company with eligibility for a
deferred benefit in
accordance with Section 3.02(b) but who
is not entitled
to any other class of pension or benefit
under this Plan
shall not be considered a retiree
pursuant to the
Pension Plan or a retired Officer.
(b) Alternate Formula. The annual benefit under
the Alternate
Formula shall be the excess of B over A,
where A equals the
Participant's Pension Plan Benefit and B equals
the product of
one and seven-tenths percent (1.7%) of the
Participant's
Adjusted Career Average Pay, less eight-tenths
of one percent
(0.8%) of the Participant's Covered Compensation
Base, and the
Participant's Term of Employment. The service
benefit under
this Alternate Formula will be reduced in case
of retirement
before age 60 by applying the appropriate
reduction factor
from the Table of such factors shown in
Appendix C to such
benefit.
(c) Alternate Minimum Formula. The annual
benefit under the
Alternate Minimum Formula in this Section
4.02(c) shall be an
amount equal to (A) the product of the greater
of the amount
determined under Formula A or the amount
determined under
Formula B, multiplied by the applicable
factor set forth in
Appendix B, less (B) the amount of the
Officer's Pension Plan
Benefit.
(i) Formula A. For purposes of the Alternate
Minimum Formula
in this Section 4.02(c), Formula A means
the sum of (a)
the product of one and five tenths
percent (1.5%) of
average calendar year Total
Compensation for the 1992
Base Period and the Term of Employment
as of December
31, 1992 and (b) one and six tenths
percent (1.6%)of
Total Compensation for the
calendar year 1993
actuarially reduced in case of retirement
before age 55
by applying the appropriate reduction
factor set forth
in Section 4.02(a)(i).
(ii) Formula B. For purposes of this
Alternate Minimum
Formula in this Section 4.02(c),
Formula B means the
product of (a) the excess of one and
seven tenths
percent (1.7%) of Adjusted Career
Average Pay, over
eight tenths of one percent (0.8%)
of the Covered
Compensation Base, and (b) the
Officer's Term of
Employment at December 31, 1993,
reduced in case of
retirement before age 60 by applying
the appropriate
reduction factor set forth in Appendix C.
(d) Automatic Survivor Annuities.
(i) Before-Retirement. In the event of
the death of an
active Participant whose Term of
Employment includes at
least fifteen years or who is eligible
for a service
benefit under Section 4.02(a) at the time
of his or her
death and who leaves a surviving lawful
spouse, such
surviving lawful spouse shall receive,
effective on the
day following the date of death, a
survivor annuity in
the amount of forty five percent (45%)
of the benefit
which would have been payable had
such Participant
retired with a service benefit, regardless
of his or her
actual eligibility therefor, on the date
of his or her
death. For purposes of the automatic
survivor annuity
provided in this Section
4.02(d)(i), the early
retirement discounts in Sections
4.02(a)(i) and 4.02
(b)(i) shall not apply.
(ii) Post-Retirement. Upon the death of an
Officer receiving
a service or disability benefit under
this Plan who
retired on or after December 31, 1986 or
retired prior
to that date but had not reached age 55
on or before
December 31, 1983, a survivor annuity in
the amount of
45% of such retired Officer's monthly
benefit amount
will be payable beginning on the day
following the date
of his or her death to the surviving
lawful spouse of
such retired Officer.
(iii) Post-Retirement Transition Cases. In
the case of a
deceased Officer who retired prior to
December 31, 1987,
the survivor annuity payable under
Section 4.02(d)(ii)
above, shall be increased by the amount
required, if
any, to bring the total monthly survivor
annuity payable
under this Plan to an amount computed by
multiplying the
product of the average of such Officer's
Standard Awards
for a maximum of six (6) years prior
to his or her
retirement year and sixty-five
hundredths percent
(0.65%) by his or her Term of
Employment, and dividing
the result by twelve (12); the
Standard Awards
includable in this computation cannot
exceed sixty
percent (0.60%) of such Officer's Position
Rate.
(e) Special Increases. Service and disability
benefit payments, as
determined under Sections 4.02(a) and (b), of
retired Officers
and service benefit payments, as determined
under Section
4.02(b), of retired E-band Employees, and
survivor annuities
in pay status under Sections 4.02(d)(i),
(d)(ii), and (d)(iii)
shall be increased by the same percentage and
pursuant to the
same terms and conditions as are set forth
for comparable
payments, from time to time, in the Pension Plan.
<PAGE>
4.03. Monthly Payments.
The annual benefit determined under this Article 4 shall
be divided by
twelve (12) and shall be payable monthly or at such
other periods as
the Committee or the Administrator, as applicable,
may determine in
each case.
4.04. Commencement and Duration of Payments
(i) Subject to the exception set forth in paragraph
(ii) herein,
benefits granted under this Plan shall commence on
the date the
benefits under the Pension Plan are first paid to the
Participant and
shall, except for the reasons specified in Sections
3.02(c), 4.05 and
9.12, continue to the death of the recipient.
(ii) Any benefit payable to an Officer pursuant to
Section 4.02(c) who
had at least five Years of Service as an Officer as of
December 31,
1993 and as to whom the sum of his or her attained
age and Term of
Employment equaled or exceeded seventy (70) as of that
date shall be
payable as of the last day of his or her Term of
Employment and shall,
except for the reasons specified in Section 4.05 and
Section 9.12,
continue to his or her death. (iii) Benefit amounts
accrued and payable
under this Article 4 but not actually paid at the time
of death of a
Participant shall be paid in accordance with the
standards and
procedures set forth in the Pension Plan.
4.05. Treatment During Subsequent Employment.
When a Participant's Term of Employment includes service
with more than
one Participating Company or with a company that is not a
Participating
Company, the last Participating Company to
employ him or her
immediately prior to his or her retirement or termination
of employment
with entitlement to a benefit hereunder shall be
responsible for the
full benefit under this Plan. Employment with any
Participating Company
subsequent to retirement or termination of employment
with entitlement
to any type of benefit under this Plan shall result in
the permanent
suspension of the benefit for the period of such
employment or
reemployment to the extent and in a manner consistent
with the terms
and conditions applicable to the suspension of benefit
payments under
the Pension Plan. Payment of a Participant's benefit
under this Plan
shall resume simultaneously with the recommencement
of his or her
benefits under the Pension Plan. Following
recommencement of payment
under this Plan, the Participant (or surviving lawful
spouse) shall not
be eligible to receive any payments under this
Plan that would
otherwise have been payable but for the suspension.
4.06. Method and Form of Payment.
Payments under this Article 4 shall be made in the same manner as set
forth under the Pension Plan.
<PAGE>
ARTICLE 5
DEATH BENEFITS
5.01. Participation.
Upon the death of an active Officer or an Officer
who, on or after
August 10, 1980, retires on a service or disability
pension under the
Pension Plan (excluding for purposes of this Section 5.01
the effect of
any management pension enhancement pursuant to Section
4.2(h) of the
Pension Plan) or who terminates employment with
eligibility to receive
payments under the Long Term Disability Plan, a Death
Benefit shall be
provided under this Article 5. The Death Benefits under
this Article 5
are in addition to the accident, sickness and pensioner
death benefits
under the Death Benefit Plan in the Pension Plan and
shall be paid to
the same beneficiary or beneficiaries and
administered in the same
manner as such benefits under the Pension Plan.
5.02. Death Benefits.
(a) Primary Death Benefit. In the case of the death
of an Officer
described in Section 5.01 a benefit equal to
one year's wages
shall be paid.
(i) Death Prior to June 1, 1991. For purposes
of determining
the benefit payable under this Section
5.02(a) with
respect to an Officer who dies on or
after August 10,
1980 but prior to June 1, 1991, one
year's wages is
defined as the lesser of the Officer's
Standard Award in
effect as of the earlier of his or her
retirement date,
termination date or date of death, or
the percentage
shown below of his or her Position
Rate as of the
earlier of such dates:
Percentage
Retirement, Termination or Death: of Position Rate
On or After September 30, 1983 through May 31,
1991 60%
October 31, 1981 through September 29,
1983 50%
August 10, 1980 through October 30,
1981 15%
(ii) Death On or After June 1, 1991.
For purposes of
determining the benefit payable under
this Section
5.02(a) with respect to an Officer who
dies on or after
June 1, 1991, one year's wages is defined
as the greater
of (A) his or her Short Term Award for the
calendar year
preceding the earlier of his or her
date of death or
date of retirement, or (B) the
Officer's Short Term
Award payable with respect to any later
partial calendar
year period of service.
(b) Other Post-Retirement Death Benefits. An
additional death
benefit described in this Section 5.02(b)
shall be provided
under this Plan in the case of an Officer
who retires on a
service or disability Pension under the
Pension Plan after
December 31, 1986, or before such date provided
he or she did
not attain age 55 on or before December 31,
1983. The death
benefits under Section 5.02(b)(ii) are
provided also in the
case of an Officer who terminates employment
with entitlement
to Long Term Disability Plan payments.
(i) Group Life Differential. Upon the death
of an Officer
age 66 or older who retired after December
31, 1986, and
before October 1, 1990, the
difference between the
amount of his or her Basic Group Life
Insurance under
the Company's Group Life Insurance
Program which was in
effect on the day before his or her
sixty-sixth (66)
birthday and the amount of such
insurance in effect on
the date of his or her death shall be paid
in a lump sum
to a beneficiary or beneficiaries
designated by the
Officer, or, if there is no such
beneficiary, to the
Officer's Estate.
(ii) Tax Differential. An individual who is
the beneficiary
of a deceased retired Officer or
an Officer who
terminated employment with entitlement
to Long Term
Disability payments and who receives one
or more of the
benefits listed below, shall be
eligible to receive,
under this Section 5.02(b)(ii), a
tax differential
payment related to the difference
between the
beneficiary's assumed Federal Income
tax liability on
such benefit or benefits and the
beneficiary's assumed
Federal Income Tax liability had
such benefit or
benefits been funded by the proceeds of a
life insurance
policy on the life of the retired Officer:
(A) Post-Retirement Survivo Annuity
described in Section
4.02(d)(ii),
(B) Pensioner Death Benefit described in
Section 5.02(a),
(C) Group Life Differential Death
Benefit described in
Section 5.02(b)(i),
(D) Pensioner Death Benefit described in
Paragraph 3 of
Section 5 of the Pension Plan, and
(E) The Death Benefit described in Section
5 of the Long
Term Disability Plan.
Federal Estate Tax and state and local
inheritance or income
taxes shall not be considered in
computing the tax
differential payment under this Section
5.02(b)(ii).
<PAGE>
ARTICLE 6
SOURCE OF PAYMENT
6.01. Source of Payments.
AT&T may establish a trust to hold assets to be used to
make benefit
payments under the terms of this Plan, provided such
trust does not
cause the Plan to be "funded" within the meaning of
ERISA. Funds
invested hereunder shall, for purposes of this Plan, be
considered to
be part of the general assets of the Participating
Company which
invested the funds, and no Participant, beneficiary or
lawful spouse
shall have any interest or right in such funds. To the
extent trust
assets are available, they may be used to pay benefits
arising under
this Plan and all costs, charges and expenses relating
thereto. To the
extent that the funds held in the trust are
insufficient to pay such
benefits, costs, charges and expenses, AT&T or
the responsible
Participating Company shall pay such benefits,
costs, charges and
expenses from its general assets. In addition, AT&T
may, in its sole
discretion, direct that payments required under
this Plan to any
Participant or surviving lawful spouse be made through
the purchase and
distribution of one or more nontransferable annuity
contracts or cause
the trustee of the trust to purchase and distribute
such annuity
contracts. Any such purchase and distribution of an
annuity contract
shall be a full and complete discharge of the Plan's,
AT&T's and the
Participating Companies' liability for payments assumed
by the issuer
of the annuity contract. Further, the Senior Vice
President, Human
Resources, may determine, in his sole discretion, to
pay additional
sums to any Senior Manager, from the Company's general
assets or from
the trust, if any, to reimburse the Senior Manager
for additional
federal and state income taxes estimated to be
incurred by reason of
the distribution of any such annuity contracts.
The Senior Vice
President, Human Resources shall establish a
methodology or
methodologies for determining the amount of such
additional sums. The
methodology or methodologies selected shall be those
that the Senior
Vice President, Human Resources determines, in his sole
discretion, to
be the most effective and administratively feasible for
the purpose of
producing after tax periodic benefit payments that
approximate the
after tax periodic benefit payments that would have
been received by
[Senior Managers] in the absence of the distribution
of the annuity
contract.
6.02. Unfunded Status.
The Plan at all times shall be entirely unfunded for
purposes of the
Internal Revenue Code of 1986 and ERISA, and, except
as provided in
Section 6.01, no provision shall at any time be made
with respect to
segregating any assets of a Participating Company for
payment of any
benefits hereunder. The Plan constitutes a mere
promise by the
Participating Company to make payments, if any, in
the future. No
Participant, surviving lawful spouse or any other person
shall have any
interest in any particular assets of a Participating
Company by reason
of the right to receive a benefit under the Plan and to
the extent the
Participant, surviving lawful spouse or any other
person acquires a
right to receive benefits under this Plan, such
right shall be no
greater than the right of any unsecured general
creditor of a
Participating Company.
<PAGE>
ARTICLE 7
ADMINISTRATION OF THE PLAN
7.01. Administration and Authorities.
The Plan shall be administered by the Company and it
shall have full
discretionary authority to manage and control the
operation and
administration of the Plan, including the power to
interpret provisions
of the Plan, make determinations of fact,
promulgate rules and
regulations, determine benefit eligibility of individual
and classes of
Participants (including, without limitation,
determinations of a
Participant's applicable Term of Employment, Position
Rate and rate of
pay), delegate its powers and duties hereunder to the
Committee, the
Administrator or others and take such other action as
it shall find
necessary and appropriate to implement the provisions of
the Plan. The
Committee and the Administrator may retain
attorneys, consultants,
accountants or other persons (who may be employees of the
Company or an
Affiliated Corporation) to render advice and
assistance and may
delegate any of the authorities conferred on it to such
persons as it
shall determine to be appropriate to effect the discharge
of its duties
hereunder. The Company, the Affiliated Corporations
and any of their
Officers and E-band Employees shall be entitled to
rely upon the
advice, opinions, and determinations of any such
persons. Any exercise
of the authorities set forth in this Section, whether
by the Company,
the Committee or its Delegate, or the Administrator,
shall be final and
binding upon the Company, its Affiliated Corporations,
their officers,
directors and affected Participants and beneficiaries.
7.02. Committee.
The Company has delegated to the Committee authority to
make the final
determination to grant or deny claims for benefits under
the Plan with
respect to Participants, surviving lawful
spouses, and other
beneficiaries and to authorize disbursements according
to the terms of
the Plan.
7.03. Indemnification.
No member of the Board, the Committee or the
Administrator shall be
personally liable by reason of any contract or
other instrument
executed by such individual or on his or her behalf
in his or her
capacity as a member of the Board, Committee or the
Administrator nor
for any mistake of judgment made in good faith,
and AT&T shall
indemnify and hold harmless each member of the Board,
each member of
the Committee, the Administrator and each other
employee, officer, or
director of AT&T or any Participating Company to whom any
duty or power
relating to the administration or interpretation of
the Plan may be
allocated or delegated, against any cost or
expense (including
attorneys' fees) or liability (including any sum paid in
settlement of
a claim) arising out of any act or omission to act in
connection with
the Plan unless arising out of such person's own fraud or
bad faith.
7.04. Benefit Claims and Appeals
(a) Benefit Claims. All claims for benefit payments
under the Plan
shall be submitted in writing by Participants
to the person
designated by the Company to make
determinations as to
eligibility for benefits under the Plan and
such person shall
notify the Participant in writing within 90 days
after receipt
as to whether the claim has been granted or
denied. This
period may be extended for up to an
additional 90 days in
unusual cases provided that written notice of
the extension is
furnished to the claimant prior to the
commencement of the
extension. In the event the claim is denied,
such notice shall
(i) set forth the specific reason or reasons for
denial, (ii)
make reference to the pertinent Plan
provisions on which the
denial is based, (iii) describe any
additional material or
information necessary before the Participant's
request may be
acted upon favorably, and (iv) explain the
procedure for
appealing the adverse determination.
(b) Benefit Appeals. A Participant whose claim
for benefits
has been denied may, within 60 days of
receipt of any
adverse benefit determination, appeal such
denial to the
Committee. All appeals shall be in the
form of a written
statement and shall (i) set forth all of
the reasons in
support of favorable action on the appeal, (ii)
identify those
provisions of the Plan upon which the claimant
is relying, and
(iii) include copies of any other documents or
materials which
may support favorable consideration of
the claim. The
Committee shall decide the issues presented
within 60 days
after receipt of such request, but this period
may be extended
for up to an additional 60 days in unusual cases
provided that
written notice of the extension is furnished
to the claimant
prior to the commencement of the extension.
The decision of
the Committee shall be set forth in writing,
include specific
reasons for the decision, refer to pertinent
Plan provisions
on which the decision is based, and shall be
final and bindin
on all persons affected thereby.
<PAGE>
ARTICLE 8
Adoption, Amendment and Termination
8.01. Adoption of Plan.
Any Affiliated Corporation that participates in the
Pension Plan may,
with the consent of the Committee, elect to
participate in the Plan.
Such Affiliated Corporation shall become a Participating
Company as of
the date specified by the Committee in its resolution
approving the
participation of the Affiliated Corporation in the Plan.
8.02. Amendment and Termination.
AT&T is the Sponsor of the Plan and the Board or its
Delegate, may from
time to time amend, modify or change the Plan as set
forth in this
document, and the Board or its Delegate (acting pursuant
to the Board's
delegations of authority then in effect) may terminate
the Plan at any
time. Plan amendments may include, but are not limited
to, elimination
or reduction in the level or type of benefits provided
to any class or
classes of Participant (and surviving lawful spouses).
Any and all Plan
amendments may be made without the consent of
any Participant,
surviving lawful spouse or beneficiary. Notwithstanding
the foregoing,
no such amendment, suspension or termination shall
retroactively impair
or otherwise adversely affect the rights of any
Participant or
surviving lawful spouse to benefits under the Plan to
which they have
previously become entitled as a result of a
Participant's satisfaction
of the vesting schedule of this Plan which is the
same as and never
will be greater than the vesting schedule under the
Pension Plan.
8.03. Sale, Spin-Off, or Other Disposition of Participating
Company.
(a) Subject to Section 9.01 of this Plan, in the
event AT&T sells,
spins off, or otherwise disposes of an
Affiliated Corporation,
or disposes of all or substantially all of
the assets of an
Affiliated Corporation such that one or
more Participants
terminate employment for the purposes of
accepting employment
with the purchaser of such stock or
assets, any person
employed by such Affiliated Corporation who
ceases to be an
employee of the Company or an Affiliated
Corporation as a
result of the sale, spin-off, or disposition
shall be deemed
to have terminated his or her employment with a
Participating
Company for all relevant purposes under this Plan.
(b) Notwithstanding the foregoing provisions of this
Section 8.03,
and subject to Section 9.01 of this Plan,
if the sale,
spin-off, or other disposition of the stock
or assets of an
Affiliated Corporation is to a Successor Plan
Sponsor with the
effect that a Participant is or becomes
a Transition
Participant, the Successor Plan Sponsor shall be
solely liable
for the payment of the pension and death
benefits described in
this Plan, and the entitlement of the
Transition Participant
or his or her surviving lawful spouse or
beneficiary to
benefits under this Plan shall terminate.
A Transition
Participant shall not be considered to have
terminated his or
her employment with AT&T or a Participating
Company for any
purpose under this Plan.
<PAGE>
ARTICLE 9
GENERAL PROVISIONS
9.01. Binding Effect.
The Plan shall be binding upon and inure to the
benefit of each
Participating Company and its successors and
assigns, and each
Participant, employee, his or her successors,
assigns, designees,
spouse, and estate. The Plan shall also be binding upon
any successor
corporation or organization succeeding to
substantially all of the
assets and business of AT&T, but nothing in the Plan
shall preclude
AT&T from merging or consolidating into or with, or
transferring all or
substantially all of its assets to, another corporation
which assumes
the Plan and all obligations of AT&T hereunder. AT&T
agrees that it
will make appropriate provision for the preservation of
the rights of
Participants, employees and surviving lawful spouses
under the Plan in
any agreement or plan or reorganization into which
it may enter to
effect any merger, consolidation, reorganization or
transfer of assets.
Upon such a merger, consolidation, reorganization,
or transfer of
assets and assumption that results in a Participant
continuing to be
employed by the Company or an Affiliated
Corporation, the term
"Participating Company" shall refer to such other
corporation and the
Plan shall continue in full force and effect as to that
Participant and
his or her lawful spouse or other beneficiary.
9.02. Fiduciary Relationship.
Nothing contained in the Plan, and no action taken
pursuant to the
provisions of the Plan, shall create or be construed to
create a trust
or contract of any kind, or a fiduciary relationship
between or among
AT&T, any other Participating Company, any Affiliated
Corporation, the
Board, the Administrator, the Committee, any Participant,
employee, any
surviving lawful spouse or any other person.
9.03. No Guarantee of Employment.
Neither the Plan nor any action taken hereunder shall
be construed as
(i) a contract of employment or deemed to give any
employee the right
to be retained in the employment of a Participating
Company, the right
to any level of compensation, or the right to future
participation in
the Plan; or (ii) affecting the right of the
Participating Company to
discharge or dismiss any employee at any time.
<PAGE>
9.04. Tax Withholding.
AT&T shall withhold all federal, state, local or other
taxes required
by law to be withheld from payments or accruals under the
Plan.
9.05. Assignment of Benefits.
The benefits payable hereunder or the right to receive
future benefits
under the Plan may not be anticipated, alienated,
sold, transferred,
assigned, pledged, executed upon, encumbered, or
subjected to any
charge or legal process; no interest or right to receive
a benefit may
be taken, either voluntarily or involuntarily, for the
satisfaction of
the debts of, or other obligations or claims against,
such person or
entity, including without limitation, any judgment
or claim for
alimony, support or separate maintenance pursuant
to a domestic
relations order within the meaning of Section
206(d)(3) of ERISA and
claims in bankruptcy proceedings. Any such attempted
disposition shall
be null and void.
9.06. Facility of Payment.
If the Administrator shall find that any person to whom
any amount is
or was payable under the Plan is unable to care for his
or her affairs
because of illness or accident, then any payment, or any
part thereof,
due to such person (unless a prior claim therefor has
been made by a
duly appointed legal representative), may, if the
Administrator so
directs AT&T, be paid to the same person or
institution that the
benefits with respect to such person are paid under the
Pension Plan if
applicable, or to the Participant's surviving lawful
spouse, a child, a
relative, an institution maintaining or having custody
of such person,
or to any other person deemed by the Administrator
to be a proper
recipient on behalf of such person otherwise entitled to
payment. Any
such payment shall be in complete discharge of the
liability of AT&T,
the Board, the Committee, the Administrator, and the
Participating
Company therefor. If any payment to which a Participant
or beneficiary
is entitled under this Plan is unclaimed or otherwise
not subject to
payment to the person or persons so entitled, such
amounts representing
such payment or payments shall be forfeited after a
period of two years
from the date the first such payment was payable and
shall not escheat
to any state or revert to any party; provided, however,
that any such
payment or payments shall be restored if any person
otherwise entitled
to such payment or payments makes a valid claim.
9.07. Severability.
If any section, clause, phrase, provision or portion
of this Plan or
the application thereof to any person or circumstance
shall be invalid
or unenforceable under any applicable law, such event
shall not affect
or render invalid or unenforceable the remainder of this
Plan and shall
not affect the application of any section, clause,
provision, or
portion hereof to other persons or circumstances.
9.08. Effective Date.
This Plan first became effective for Officers actively
employed on or
after October 1, 1980 and for E-band Employees actively
employed on or
after on January 1, 1984 and is amended and restated
effective January
1, 1995.
9.09. Plan Year.
For purposes of administering the Plan, the plan year
shall begin on
January 1 and end on December 31.
9.10. Headings.
The captions of the preceding sections and articles
hereof have been
inserted solely as a matter of convenience and shall not
in any manner
define or limit the scope or intent of any provision of
the Plan.
9.11. Governing Law.
To the extent such laws are not preempted by the laws
of the United
States of America, the Plan shall be governed by the
laws of the State
of New Jersey, except as to its principles of conflict of
laws.
9.12. Forfeiture of Benefits.
Except as provided in this Section 9.12 and Section
3.02, benefits
previously awarded may not be canceled and, upon
attaining the right
under the Plan for an immediate service benefit or
deferred benefit or
for an automatic survivor annuity, such right shall be
nonforfeitable.
Notwithstanding any eligibility or entitlement to
benefits of an
individual arising or conferred under any other
provision or paragraph
of this Plan, all benefits for which a Participant
would otherwise be
eligible hereunder may be forfeited, at the discretion
of the Board or
the Committee, if an individual without the
Company's consent
establishes a relationship with a competitor of the
Company or engages
in activity in conflict with or adverse to the interests
of the Company
under the standards of the AT&T Non-Competition
Guideline and as
determined by the Board or the Committee in its sole
discretion.
9.13. Option During Disability.
If an employee who has left the service of a
Participating Company has
elected to continue receiving disability benefits which
he or she had
been receiving prior to his or her termination and to
defer receiving
pension payments under the Pension Plan to which he or
she is eligible,
benefits under the Plan shall be deferred until
such time as the
employee begins to receive payments under the Pension
Plan.
9.14. Special Classification.
For purposes of the Plan, the determination of those
causes of death
not classified as due to accident shall be
accomplished in the same
manner as set forth in the Pension Plan.
9.15. Claims Release.
In case of accident resulting in the death of a
Participant which
entitles his or her beneficiaries or his or her
annuitant to death
benefits under the Plan, such beneficiaries or annuitant
shall, prior
to the payment of any such benefits, sign a release,
releasing the
Company or other Participating Companies, as
applicable, from all
claims and demands which the deceased had and
which his or her
beneficiaries or his or her annuitant may have against
them, otherwise
than under the Plan, on account of such accident. If any
persons other
than the beneficiaries under this Plan might legally
assert claims
against a Participating Company on account of the
death of the
individual, no part of the death benefit under the Plan
shall be due or
payable until there have also been delivered to the
Committee or the
Administrator, as applicable, good and sufficient
releases of all
claims, arising from or growing out of the death of
the individual,
which such other persons might legally assert against any
Participating
Company. The Committee or the Administrator, as
applicable, in its
discretion, may require that the releases described above
shall release
any other company connected with the accident, including
the Company or
any other Participating Company, as applicable. This
requirement of a
release or releases shall not apply in the case of
Survivor Annuities
as described in Section 4.02(d).
9.16. Damage Claims or Suits.
Should a claim other than under the Plan be presented
or suit brought
against the Company or any Participating Company for
damages on account
of death of a Participant, nothing shall be payable
under the Plan on
account of such death except as provided in Section
9.17; provided,
however, that the Committee or the Administrator, as
applicable, may,
in its discretion and upon such terms as it may
prescribe, waive this
provision if such claim be withdrawn or if such suit be
discontinued;
and provided further that this provision shall not
preclude the payment
of Survivor Annuities as described in Section 4.02(d).
9.17. Judgment or Settlement.
In case any judgment is recovered against any
Participating Company or
any settlement is made of any claim or suit on account
of the death of
a Participant, and the amount paid to the beneficiaries
who would have
received benefits under the Plan is less than what would
otherwise have
been payable under the Plan, the difference between
the two amounts
may, in the discretion of the Committee or the
Administrator, as
applicable, be distributed to such beneficiaries.
9.18. Payment under Law.
In the case of any benefit (which the Committee or the
Administrator,
as applicable, shall determine to be of the same general
character as a
payment provided by the Plan)that is payable to any
Participant, to his
or her beneficiaries, his or her estate or his or her
annuitant under
any law now in force or hereafter enacted, only the
excess, if any, of
the amount prescribed in the Plan above the amount of
such payment
prescribed by law shall be payable under the Plan;
provided, however,
that no benefit payable under the Plan shall be
reduced by reason of
any governmental benefit or pension payable on
account of military
service or by reason of any benefit which the
recipient would be
entitled to receive under the Social Security
Act or Railroad
Retirement Act. In those cases where, because of
differences in the
beneficiaries or in the time or methods of payment or
otherwise, the
determination of any such excess is not
ascertainable by mere
comparison but adjustments are necessary, the
Committee or the
Administrator, as applicable, shall, in its
discretion, determine
whether or not in fact any such excess exists and make
the adjustments
necessary to carry out in a fair and equitable manner the
spirit of the
provision for the payment of any such excess. Further,
in determining
whether or not there is an excess, to the extent any
payments under any
law are considered in determining whether there is any
excess payable
to an employee under any other comparable plan
sponsored by the
Company, the amount of such payments under law shall not
be considered
under this Plan.
9.19. Entire Plan.
This written Plan document is the final and exclusive
statement of the
terms of this Plan, and any claim of right or
entitlement under the
Plan shall be determined in accordance with its
provisions pursuant to
the procedures described in Article 7. Unless otherwise
authorized by
the Board or its delegate, no amendment or
modification to this Plan
shall be effective until reduced to writing and
adopted pursuant to
Section 8.02.
<PAGE>
Appendix A
Prior Pension Formulas
The pension formulas in effect for retirements between
the period from
August 10, 1980 to April 14, 1991, inclusive, are
outlined below. The
Basic Formula shown in Part 1. applies solely to
Officers; the
Alternate Formula in Part 2. applies to all
participants for service
benefit purposes only, and an Officer is entitled
to the greater
benefit provided under either the Basic Formula or
Alternate Formula.
Part 1 - Basic Formula:
The product of one and six tenths percentum (1.6%) and
an Officer's
Adjusted Career Income. The early retirement
discounts shown is
Paragraphs 3(b)(ii) and 4(b)(i) of Section 4 of the
Plan apply to
pension benefits under this Formula.
"Adjusted Career Income" is calculated in two steps:
Step 1 - Determine the average of the amount of short
term incentive
awards or standard awards up to a permitted maximum
amount which were
paid or effective during a specified pay base period and
multiply this
average amount by Term of Employment completed as of the
end of the pay
base period;
Step 2 - Total the amount of the applicable awards
after the pay base
period to retirement and add this amount to the amount
calculated under
Step 1.
The components of the adjusted career income
calculation are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C>
Type of Award Type
of Award Limitation on Amount
Date of Pay Base Includable in
Includable after of Award Includable in
Retirement Period Pay Base Period* Pay
Base Period* Pension Computation
- ---------- ------ ----------------
- ---------------- -------------------
8-10-80 to 1-1-75 to Actual Short Term
Actual Short Term 15% of Position Rate
1-30-82 12-31-79 Incentive Award
Incentive Award
1-31-82 to 10-1-76 to Actual
Actual for 1981 and 50% of Position Rate
9-29-83 9-30-81 1982;
Standard for 1983
9-30-83 to 10-1-77 to Actual
Actual for 1982; 60% of Position Rate
1-30-86 9-30-82
Standard for 1983
and after
1-31-86 to 7-1-79 to Actual to 1-1-83;
Standard 60% of Position Rate
5-30-88 6-30-85 Standard for 1983
and after
5-31-88 to 1-1-84 to Standard
Standard 60% of Position Rate
4-14-91 6-30-85
<FN>
* Awards for partial years during and after the Pay Base
Period and for the
year of retirement are prorated. In addition, no award is
includable for
the year of retirement if an Officer does not complete at
least 3 months of
Active Service during such year.
</FN>
</TABLE>
<PAGE>
Appendix A
Part 2 - Alternate Formula:
Provisions applicable from January 2, 1984 through May 30, 1988
The following Alternate Formula was effective for retirements on or after
January 2, 1984 through May 30. 1988:
A. The product of one and two-tenths percentum (1.2%) and
Adjusted Career
Average Pay,
PLUS
B. Ten dollars ($10.) and the product of five-hundredths
percentum (.05%)
and the difference between the Covered Compensation Base
for the year
of retirement and the Adjusted Career Average Pay.
TIMES
C. Term of employment at retirement,
MINUS
D. Annual Service pension payable under the Pension Plan
before reduction
for a Survivor Annuity or early retirement.
The early retirement discount described in Appendix C of this
Plan applies to the amounts computed under the Alternate Formula.
"Adjusted Career Average Pay" in the case of
an Officer is
calculated by dividing the sum of the total
Adjusted Career
Income under the Basic Formula of this
Plan in effect at
retirement and the total Adjusted Career
Income under the
Pension Plan formula in effect at retirement by
such Officer's
Term of Employment at retirement.
"Adjusted Career Average Pay" for an
E-band Employee is
Calculated by dividing the total Adjusted
Career Income under
the Pension Plan formula in effect at
retirement by such
employee's Term of Employment at retirement.
<PAGE>
Provisions applicable from May 31, 1988 through October 18, 1993
The following Alternate Formula was effective for retirements on or after May
31, 1988 through October 18. 1993:
A. The product of one and seven-tenths percentum (1.7%)
and Adjusted
Career Average Pay,
MINUS
B. The product of eight-tenths (0.8%) and the Covered
Compensation Base,
TIMES
C. Term of employment at retirement,
MINUS
D. Annual Service pension payable under the Pension Plan
before reduction
for a Survivor Annuity or early retirement.
The early retirement discount described in Appendix C of this
Plan applies to the amounts computed under the Alternate Formula.
"Adjusted Career Average Pay" is calculated
by dividing the
sum of the total Adjusted Career Income
under the Basic
Formula of this Plan in effect at retirement
and the total
Adjusted Career Income under the Pension
Plan formula in
effect at retirement by such Officer's Term of
Employment at
retirement.
Part 3 - Waiver of Death Benefit
Waiver of the Death Benefit. If an Officer is deemed to
have waived the
death benefit under the Pension Plan, he or she will be
deemed to have
waived such death benefits pursuant to this Plan as
well, provided he
or she either died before January 1, 1987 or he or
she retired or
terminated employment before December 31, 1986 and had
attained age 55
on or before December 31, 1983; if a prior waiver by
an Officer of
death benefits under the Pension Plan is deemed
rescinded under the
Pension Plan, such waiver is deemed rescinded under this
Plan effective
December 31, 1986.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
Section 4.02(c) Alternate Minimum Formula - Table of
Factors
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Age
Service 50 51 52 53 54 55 56
57 58 59 60 61 62 63 64 65
20 or less 1.33 1.33 1.33 1.36 1.43 1.47 1.43
1.38 1.33 1.28 1.25 1.20 1.15 1.10 1.05 1.00
21 1.38 1.32 1.32 1.35 1.42 1.46 1.42
1.37 1.32 1.27 1.24 1.19 1.14 1.09 1.05 1.00
22 1.42 1.37 1.31 1.34 1.41 1.45 1.41
1.36 1.30 1.26 1.23 1.18 1.14 1.09 1.05 1.00
23 1.47 1.41 1.36 1.33 1.40 1.44 1.40
1.35 1.29 1.25 1.22 1.17 1.13 1.09 1.04 1.00
24 1.52 1.46 1.40 1.39 1.39 1.43 1.39
1.34 1.29 1.24 1.21 1.17 1.12 1.08 1.04 1.00
25 1.58 1.51 1.45 1.43 1.45 1.42 1.38
1.33 1.28 1.23 1.20 1.16 1.12 1.08 1.04 1.00
26 1.57 1.50 1.44 1.42 1.44 1.41 1.37
1.32 1.27 1.22 1.19 1.15 1.11 1.08 1.04 1.00
27 1.57 1.49 1.43 1.42 1.43 1.40 1.36
1.31 1.26 1.21 1.18 1.15 1.11 1.07 1.04 1.00
28 1.56 1.48 1.42 1.41 1.43 1.39 1.36
1.31 1.25 1.21 1/18 1.14 1.11 1.07 1.04 1.00
29 1.55 1.48 1.42 1.40 1.42 1.39 1.35
1.30 1.25 1.20 1.17 1.14 1.10 1.07 1.03 1.00
30 1.38 1.36 1.33 1.35 1.39 1.38 1.34
1.29 1.24 1.19 1.17 1.13 1.10 1.07 1.03 1.00
31 1.38 1.35 1.33 1.34 1.39 1.37 1.34
1.29 1.24 1.19 1.16 1.13 1.10 1.06 1.03 1.00
32 1.37 1.35 1.32 1.34 1.38 1.37 1.33
1.28 1.23 1.18 1.16 1.12 1.09 1.06 1.03 1.00
33 1.37 1.34 1.32 1.34 1.38 1.36 1.33
1.28 1.23 1.18 1.15 1.12 1.09 1.06 1.03 1.00
34 1.36 1.34 1/31 1.33 1.37 1.36 1.32
1.27 1.22 1.17 1.15 1.12 1.09 1.06 1.03 1.00
35 or more 1.36 1.33 1.31 1.33 1.37 1.35 1.32
1.27 1.22 1.17 1.14 1.11 1.09 1.06 1.03 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX C
Section 4.02(b) Alternate Formula
Early Retirement Factors Based Upon Attained Years and
Months of Age
Attained Age
Years Months
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
0 1 2 3 4 5
6 7 8 9 10 11
- - - - - -
- - - - - -- --
50 .29 .29 .30 .30 .31 .31
.32 .32 .32 .33 .33 .34
--
51 .34 .34 .35 .35 .36 .36
.37 .37 .37 .38 .38 .39
--
52 .39 .40 .40 .41 .42 .42
.43 .44 .44 .45 .46 .46
--
53 .47 .48 .48 .49 .50 .50
.51 .52 .52 .53 .54 .54
--
54 .55 .56 .57 .57 .58 .59
.60 .60 .61 .62 .63 .63
--
55 .64 .64 .66 .66 .66 .66
.67 .67 .67 .67 .69 .69
--
56 .69 .69 .71 .71 .71 .72
.72 .72 .74 .74 .74 .76
--
57 .76 .76 .78 .78 .78 .79
.79 .79 .81 .81 .81 .83
--
58 .83 .83 .84 .84 .86 .86
.88 .88 .88 .90 .90 .91
--
59 .91 .91 .93 .93 .95 .95
.97 .97 .97 .98 .98 1.00
--
60 1.00
--
</TABLE>
AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN
(as amended December 20, 1995)
1. ELIGIBILITY
Any Senior Manager (as defined in the AT&T 1987 Long
Term Incentive
Program [the "1987 Plan"]) of American Telephone and Telegraph Company ("AT&T")
or an Affiliate (as defined in the 1987 Plan) who is eligible for an award under
the AT&T Short Term Incentive Plan (the "Short Term Incentive Plan") and/or who
has been granted a Performance Award or a Stock Unit Award under the AT&T Senior
Management Long Term Incentive Plan (the "Long Term Incentive Plan") or the 1987
Plan, or who is eligible for an award under the AT&T Paradyne GMT Short Term
Incentive Plan (the "Paradyne Plan"), shall be eligible to participate in this
AT&T Senior Management Incentive Award Deferral Plan (the "Plan"). For purposes
of the Plan, AT&T and any Affiliate shall be referred to as a "Participating
Company". Prior to January 1, 1984, the Plan was named the Bell System Senior
Management Incentive Award Deferral Plan.
2. PARTICIPATION
(a) Prior to the beginning of any calendar year, any Senior Manager may
elect to participate in the Plan by directing that (i) all or part of the awards
under the Short Term Incentive Plan or the Paradyne Plan, or the Performance
Awards or the Stock Unit Awards under the Long Term Incentive Plan or the 1987
Plan and/or (ii) all or part of the dividend equivalent payments under the Long
Term Incentive Plan or the 1987 Plan, which such employee's Participating
Company would otherwise pay currently to such employee in such calendar year and
subsequent calendar years, shall be credited to a deferred account subject to
the terms of the Plan. However, in no event shall the part of an award under any
plan credited during any calendar year be less than $1,000 (based on a valuation
at the time the award would otherwise be paid). There shall be no such minimum
limitation on amounts credited during any calendar year that are related to
dividend equivalent payments.
In addition, prior to the beginning of any calendar year, the Chairman
of the Board and any other Senior Manager designated by the Chairman of the
Board may elect to participate in the Plan by directing that all or part of such
Senior Manager's salary, which such employee's Participating Company would
otherwise pay currently to such employee in such calendar year and subsequent
calendar years, shall be credited to a deferred account subject to the terms of
the Plan.
(b) Such an election to participate in the Plan shall be in the form of
a document executed by the employee and filed with the employee's Participating
Company. An election related to awards, dividend equivalent payments and/ or
salary otherwise payable currently in any calendar year shall become irrevocable
on the last day prior to the beginning of such calendar year.
(c) An election shall continue until the employee terminates or
modifies such election by written notice. Any such termination or modification
shall become effective as of the end of the calendar year in which such notice
is given with respect to all awards, dividend equivalents and/or salary
otherwise payable in subsequent calendar years.
(d) An eligible employee who has filed a termination of election may
thereafter again file an election to participate with respect to awards,
dividend equivalent payments and/or salary otherwise payable in calendar years
subsequent to the filing of such election.
3. DEFERRED ACCOUNTS
(a) (i) Deferred amounts related to awards, dividend equivalent
payments which would otherwise have been distributed in cash by a Participating
Company and deferred amounts related to salary shall be credited to the
employee's account and shall bear interest from the date the awards, dividend
equivalent payments and/or salary would otherwise have been paid. The interest
credited to the account will be compounded at the end of each calendar quarter,
and the annual rate of interest applied at the end of any calendar quarter shall
be determined by the AT&T Board of Directors from time to time.
(ii) Furthermore, if an employee made an election described in
Section 2, which election was effective on December 31, 1983, then such
employee's account shall also be credited during 1984 with an amount equal to
the deferred amounts which would have been credited to the employee's account
during 1984 had the company which employed the employee on December 31, 1983
continued to be a Participating Company during 1984, and such amount shall bear
interest in accordance with (a)(i) above from the date such amount would have
been credited had such company continued to be a Participating Company during
1984.
(b) Deferred amounts related to awards which would otherwise have been
distributed in AT&T common shares by a Participating Company shall be credited
to the employee's account as deferred AT&T shares. Furthermore, if an employee
made an election described in Section 2, which election was effective on
December 31, 1983, then such employee's account shall also be credited during
1984 with the deferred AT&T Shares which would have been credited to the
employee's account had the company which employed the employee on December 31,
1983 continued to be a Participating Company in the Plan and in the Long Term
Incentive Plan during 1984. The employee's account shall also be credited on
each dividend payment date for AT&T shares with an amount equivalent to the
dividend payable on the number of AT&T common shares equal to the number of
deferred AT&T shares in the employee's account on the record date for such
dividend. Such amount shall then be converted to a number of additional deferred
AT&T shares determined by dividing such amount by the price of AT&T common
shares, as determined in the following sentence. The price of AT&T common shares
related to any dividend payment date shall be the average of the daily high and
low sale prices of AT&T common shares on the New York Stock Exchange ("NYSE")
for the period of five trading days ending on such dividend payment date, or the
period of five trading days immediately preceding such dividend payment date if
the NYSE is closed on the dividend payment date.
(c) In the event of any change in outstanding AT&T common shares by
reason of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change, the AT&T
Board of Directors shall make such adjustments, if any, that it deems
appropriate in the number of deferred AT&T shares then credited to employees'
accounts. Any and all such adjustments shall be conclusive and binding upon all
parties concerned.
4. DISTRIBUTION
(a) At the time an eligible employee makes an election to participate
in the Plan, the employee shall also make an election with respect to the
distribution (during the employee's lifetime or in the event of the employee's
death) of the amounts credited to the employee's deferred account. Such an
election related to the distribution during the employee's lifetime, of amounts
otherwise payable currently in any calendar year, shall become irrevocable on
the last day prior to the beginning of such calendar year.
The election related to the distribution in the event of the employee's
death, including the designation of a beneficiary or beneficiaries, may be
changed by the employee at any time by filing the appropriate document with the
Secretary of the Company.
Amounts credited as cash plus accumulated interest shall be distributed
in cash; amounts credited as deferred AT&T shares shall be distributed in the
form of an equal number of AT&T shares.
(b) An employee may elect to receive the amounts credited to the
employee's account in one payment or in some other number of approximately equal
annual installments (not exceeding 20), provided however, that the number of
annual installments may not extend beyond the life expectancy of the employee,
determined as of the date the first installment is paid. The employee's election
shall also specify that the first installment (or the single payment if the
employee has so elected) shall be paid either (1) on the first day of the
calendar quarter next following the end of the month in which the employee
attains the age specified in such election, which age shall not be earlier than
age 55 or later than age 70-1/2, (2) on the first day of the calendar quarter
next following the end of the month in which the employee retires from a
Participating Company or otherwise terminates employment with any Participating
Company (except for a transfer to another Participating Company); provided,
however, that the AT&T Board of Directors or the Compensation Committee of such
Board may, in its sole discretion, direct that the first installment (or the
single payment) shall be paid on the first day of the first calendar quarter in
the calendar year next following the year of retirement or other termination of
employment, or (3) on the first day of the first calendar quarter in the
calendar year next following the calendar year in which the employee retires
from a Participating Company or otherwise terminates employment with any
Participating Company (except for a transfer to another Participating Company).
(c) Notwithstanding an election pursuant to Paragraph (b) of this
Section 4, the entire amount then credited to an employee's account shall be
paid immediately in a single payment (a) if the employee is discharged for cause
by his or her Participating Company, (b) if the Board of Directors of such
Participating Company determined that the employee engaged in misconduct in
connection with the employee's employment with the Participating Company, (c) if
the employee without the consent of the Board of Directors of his or her
Participating Company, while employed by such Participating Company or after the
termination of such employment, becomes associated with, employed by, or renders
services to, or owns an interest in, any business that is in competition with
any Participating Company or with any business in which a Participating Company
has a substantial interest (other than as a shareholder with a non-substantial
interest in such business), or (d) the employee becomes employed by a
governmental agency having jurisdiction over the activities of a Participating
Company or any of its subsidiaries.
(d) An employee may elect that, in the event the employee should die
before full payment of all amounts credited to the employee's account, the
balance of the deferred amounts shall be distributed in one payment or in some
other number of approximately equal annual installments (not exceeding 10) to
the beneficiary or beneficiaries designated in writing by the employee, or if no
designation has been made, to the estate of the employee. The first installment
(or the single payment if the employee has so elected) shall be paid on the
first day of the calendar quarter next following the month of death; provided,
however, that the AT&T Board of Directors or the Compensation Committee of such
Board may, in its sole discretion, direct that the first installment (or the
single payment) shall be paid on the first day of the first calendar quarter in
the calendar year next following the year of death.
(e) Installments subsequent to the first installment to the employee,
or to a beneficiary or to the employee's estate, shall be paid on the first day
of the applicable calendar quarter in each succeeding calendar year until the
entire amount credited to the employee's deferred account shall have been paid.
Deferred amounts held pending distribution shall continue to be credited with
interest or additional deferred AT&T shares, as applicable, determined in
accordance with Section 3(a) and (b).
(f) In the event an employee, or the employee's beneficiary after the
employee's death, incurs a severe financial hardship, the AT&T Board of
Directors or the Compensation Committee of such Board, in its sole discretion,
may accelerate or otherwise revise the payment schedule from the employee's
account to the extent reasonably necessary to eliminate the severe financial
hardship. For the purpose of this subsection (f), a severe financial hardship
must have been caused by an accident, illness, or other event beyond the control
of the employee or, if applicable, the beneficiary.
(g) The obligation to make a distribution of deferred amounts credited
to an employee's account during any calendar year plus the additional amounts
credited on such deferred amounts pursuant to Section 3(a) and (b) shall be
borne by the Participating Company which otherwise would have paid the related
award or salary currently. However, the obligation to make distribution with
respect to deferred amounts which are related to amounts credited to an
employee's account under Section 3(a)(ii) and under the second sentence of
Section 3(b), and with respect to which no Participating Company would otherwise
have paid the related award currently, shall be borne by the Participating
Company which employed the employee on January 1, 1984.
5. MISCELLANEOUS
(a) The deferred amounts shall be held in the general funds of the
Participating Companies. The Participating Companies shall not be required to
reserve, or otherwise set aside, funds for the payment of such amounts.
(b) The rights of an employee to any deferred amounts plus the
additional amounts credited pursuant to Section 3(a) and (b) shall not be
subject to assignment by the employee.
(c) The Senior Vice President - Human Resources of AT&T shall have the
authority to administer and to interpret the Plan.
(d) The AT&T Board of Directors may at any time amend the Plan or
terminate the Plan, but such amendment or termination shall not adversely affect
the rights of any employee, without his or her consent, to any benefit under the
Plan to which such employee may have previously become entitled prior to the
effective date of such amendment or termination. The Senior Vice President Human
Resources of AT&T with the concurrence of the Senior Vice President and General
Counsel of AT&T shall be authorized to make minor or administrative changes to
the Plan, as well as amendments required by applicable federal or state law (or
authorized or made desirable by such statutes).
AT&T MID-CAREER PENSION PLAN
AT&T Corp.
and
Such of its Subsidiary Companies which are
Participating Companies
Amended and Restated as of October 1, 1996
<PAGE>
AT&T MID-CAREER PENSION PLAN
Table of Contents
1. BACKGROUND AND
PURPOSE......................................................1
2.
DEFINITIONS.................................................................2
2.1.
ADEA.................................................................2
2.2.
ADMINISTRATOR........................................................2
2.3. AFFILIATED
CORPORATION...............................................2
2.4. AT&T CONTROLLED
GROUP................................................2
2.5.
BOARD................................................................2
2.6.
CODE.................................................................2
2.7.
COMMITTEE............................................................2
2.8.
COMPANY..............................................................2
2.9.
COMPENSATION.........................................................2
2.10.
D-BAND..............................................................2
2.11.
E-BAND..............................................................3
2.12. INTERCHANGE
AGREEMENT...............................................3
2.13. INTERCHANGE
COMPANY.................................................3
2.14. MANDATORY RETIREMENT
AGE............................................3
2.15. MID-CAREER PENSION
CREDITS..........................................3
2.16. NORMAL RETIREMENT
AGE...............................................3
2.17. PARTICIPATING
COMPANY...............................................3
2.18. PENSION
PLAN........................................................4
2.19.
PLAN................................................................4
2.20. PLAN
YEAR...........................................................4
2.21.
SUBSIDIARY..........................................................4
2.22. TERM OF
EMPLOYMENT..................................................4
2.23. TRANSFERRED
INDIVIDUAL..............................................4
3.
ADMINISTRATION..............................................................5
3.1.
ADMINISTRATION.......................................................5
3.2. ROLE OF THE
COMMITTEE................................................5
3.3. CLAIMS
PROCEDURE.....................................................5
(a) Benefit
Claims....................................................5
(b) Benefit
Appeals...................................................5
(c) Final
Review......................................................6
3.4.
INDEMNIFICATION......................................................6
3.5. NAMED
FIDUCIARIES....................................................6
3.6. ALLOCATION OF
RESPONSIBILITIES.......................................6
3.7. MULTIPLE
CAPACITIES..................................................6
4.
BENEFITS....................................................................7
4.1.
PARTICIPANT..........................................................7
4.2.
ELIGIBILITY..........................................................7
(a)
Employee..........................................................7
(b) Service and Disability
Benefit....................................8
(c) Deferred
Benefit..................................................8
(d) Contingent
Benefits...............................................8
4.3. BENEFIT
AMOUNTS......................................................8
(a) Calculation of Monthly Pension
Benefit............................8
(b) Early Retirement
Discount........................................10
(c) Deferred Benefit
Amount..........................................10
(d) Management Pension
Enhancement...................................10
(e) Special
Increases................................................11
4.4. TREATMENT DURING SUBSEQUENT
EMPLOYMENT..............................11
4.5. COMMENCEMENT AND DURATION OF
PAYMENTS...............................11
(a) Service or Disability
Benefit....................................11
(b) Deferred
Benefit.................................................11
4.6. FORFEITURE OF
BENEFITS..............................................11
5. GENERAL
PROVISIONS.........................................................13
5.1. NO GUARANTEE OF
EMPLOYMENT..........................................13
5.2. ASSIGNMENT OR
ALIENATION............................................13
5.3. BREAKS IN
SERVICE...................................................13
5.4. LEAVE OF
ABSENCE....................................................13
5.5. METHOD OF
PAYMENT...................................................13
5.6. AMOUNTS ACCRUED PRIOR TO
DEATH......................................13
5.7. FACILITY OF
PAYMENT.................................................13
5.8. OPTION DURING
DISABILITY............................................14
5.9. PAYMENTS UNDER
LAW..................................................14
5.10. BINDING
EFFECT.....................................................14
5.11.
SEVERABILITY.......................................................15
5.12.
HEADINGS...........................................................15
5.13. ENTIRE
PLAN........................................................15
6. PLAN
MODIFICATION..........................................................16
6.1. AMENDMENT AND
TERMINATION...........................................16
7. SOURCE OF
PAYMENT..........................................................17
7.1. SOURCE OF
PAYMENTS..................................................17
7.2. UNFUNDED
STATUS.....................................................17
8. DISPOSITION OF PARTICIPATING
COMPANY.......................................18
8.1. SALE, SPIN-OFF, OR OTHER DISPOSITION OF PARTICIPATING
COMPANY.......18
<PAGE>
DISPOSITION OF PARTICIPATING COMPANY
AT&T MID-CAREER PENSION PLAN
AMENDED AND RESTATED effective October 1, 1996.
Article 8
1. Background and Purpose
The purpose of the AT&T Mid-Career Pension Plan is to provide certain
unfunded single life pension payments, as set forth more fully herein, to
eligible employees of the Company and such other subsidiaries of the Company
that become Participating Companies. The Plan is intended to constitute an
unfunded pension plan for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income Security Act
of 1974, as amended.
Except as expressly provided below, this amended and restated plan
document applies only to Employees who terminate employment on or after October
1, 1996. For former Employees who terminated employment before
October 1, 1996 ,
the provisions of the AT&T Mid-Career Pension Plan in effect at
termination of
the former Employee's employment governs.
Effective October 1, 1996, Lucent Technologies Inc.
established the
Lucent Technologies Inc. Mid-Career Pension Plan as a
successor to the AT&T
Mid-Career Pension Plan, in effect as of September 30, 1996,
with respect to
Transferred Individuals (as defined in Article 2).
Accordingly, the AT&T
Mid-Career Pension Plan relinquished to the Lucent Technologies Inc. Mid-Career
Pension Plan all liabilities as of September 30, 1996 relating to Transferred
Individuals, and the Lucent Technologies Inc. Mid-Career Pension Plan assumed
and is solely responsible for all such liabilities. Except to the extent
required by law or Article 8 of this Plan, the Plan shall not recognize service
and compensation before October 1, 1996 with respect to Transferred Individuals.
Effective as of the date an individual becomes a "Transition Individual" (as
defined in Section 1.38(a) or (d) of the Management Interchange Agreement or
Section 1.30(a) or (d) of the Occupational Interchange Agreement), the Plan
shall also assume and be solely responsible for all liabilities relating to such
Transition Individuals.
<PAGE>
Article
2. Definitions
Unless the context clearly indicates otherwise, the following terms
have the meanings described below when used in this Plan and references to a
particular Article or Section shall mean the Article or Section so delineated in
this Plan.
2.1. ADEA
The Age Discrimination in Employment Act of 1967, as amended from time
to time.
2.2. Administrator
The "Pension Plan Administrator" under the Pension Plan.
2.3. Affiliated Corporation
Any corporation of which more than 50 percent of the voting stock is
owned directly or indirectly by the Company.
2.4. AT&T Controlled Group
The "AT&T Controlled Group" within the meaning of the Pension Plan.
2.5. Board
The Board of Directors of the Company.
2.6. Code
The Internal Revenue Code of 1986, as amended from time to time. Any
reference to a particular section of the Code includes any applicable
regulations promulgated under that section.
2.7. Committee
The Employees' Benefit Committee appointed by the Company
to administer
the Pension Plan.
2.8. Company
AT&T Corp., a New York corporation, or its successors.
2.9. Compensation
"Compensation" within the meaning of the Pension Plan.
2.10. D-band
"D-band," formerly D-level, Fourth level and SG-10 and SG-11, shall
mean the level directly above C-band, or any equivalent salary grade or level as
determined by the Company.
2.11. E-band
"E-band," formerly E-Level, Fifth level and SG-12 through SG-14, shall
mean the level directly above D-band, or any equivalent salary grade or level as
determined by the Company.
2.12. Interchange Agreement
An "Interchange Agreement" within the meaning of the Pension Plan.
2.13. Interchange Company
An "Interchange Company" within the meaning of the Pension Plan.
2.14. Mandatory Retirement Age
Age 65 for those employees referred to in ADEA ss. 12(c)(1) or at such
later time as may first be permissible under such section of the ADEA. For those
employees for whom age is a bona fide occupational qualification within the
meaning of ADEA ss. 4(f)(1), the Mandatory Retirement Age shall be as may be
applicable under the ADEA.
2.15. Mid-Career Pension Credits
(a)......For those employees hired or rehired by a Participating
Company at E-band or above, and all of whose Term of Employment is at E-band or
above, Mid-Career Pension Credits is the difference between 35 years and the
Term of Employment that could accrue if the employee worked to the later of
Normal Retirement Age, retirement or termination of employment, provided that
the Mid-Career Pension Credits shall not exceed the actual Term of Employment
and shall not include any part-time service if the employee was hired on or
after November 18, 1981.
(b)......For those employees hired or rehired by a Participating
Company at D-band or above, and whose Term of Employment includes service at
D-band or below, Mid-Career Pension Credits is computed by multiplying the
employee's Mid-Career Pension Credits as defined in Section 2.15(a), by a
fraction, the numerator of which shall be the number of years and months of
service completed at E-band and above, and the denominator of which shall be the
actual Term of Employment at termination of employment, provided, however, that
for any employee on the active roll as of August 29, 1991, his or her benefit
under this Plan shall equal the greater of the benefit calculated under the
definition of Mid-Career Pension Credits in this Section 2.15(b) as of the
employee's retirement or termination of employment or the benefit accrued under
the AT&T Mid-Career Pension Plan in effect as of August 29, 1991.
2.16. Normal Retirement Age
"Normal Retirement Age" within the meaning of the Pension
Plan.
2.17. Participating Company
The Company or any subsidiary of the Company which is a
Participating
Company under the Pension Plan.
2.18. Pension Plan
The AT&T Management Pension Plan.
2.19. Plan
This AT&T Mid-Career Pension Plan.
2.20. Plan Year
The Plan Year for the Plan shall be January 1 through December 31.
2.21. Subsidiary
Any corporation of which more than 80% of the voting stock is owned
directly or indirectly by the Company.
2.22. Term of Employment
"Term of Employment" within the meaning of the Pension Plan for
purposes of calculating the amount of an employee's benefit, except that "Term
of Employment" shall not include any period of part-time employment completed
after November 18, 1981, in the case of an employee hired or rehired by a
Participating Company on or after November 18, 1981.
2.23. Transferred Individual
A "Transferred Individual" within the meaning of the
Employee Benefits
Agreement between the Company and Lucent Technologies Inc. dated
as of February
1, 1996, as amended.
<PAGE>
Article
3. Administration
3.1. Administration
The Company shall be the "plan administrator" and the
"sponsor" of the
Plan as those terms are defined in ERISA.
3.2. Role of the Committee
(a)......The Committee shall have the specific powers elsewhere herein
granted to it and shall have such other powers as may be necessary in order to
enable it to administer the Plan, except for powers herein granted or provided
to be granted to others.
(b)......The procedures for the adoption of by-laws and rules of
procedure and for the employment of a secretary and assistants shall be the same
as are set forth in the Pension Plan.
3.3. Claims Procedure
(a) Benefit Claims
All claims for benefit payments under the Plan shall be submitted in
writing by the Participant or any individual duly authorized by him ("Claimant"
for purposes of Section 3.3) to the Administrator. The Administrator shall
notify the Claimant in writing within 90 days after receipt as to whether the
claim has been granted or denied. This period may be extended for up to an
additional 90 days in unusual cases provided that written notice of the
extension is furnished to the Claimant prior to the commencement of the
extension. In the event the claim is denied, such notice shall (i) set forth the
specific reasons for denial, (ii) make reference to the pertinent Plan
provisions on which the denial is based, (iii) describe any additional material
or information necessary before the Claimant's request may be acted upon, and
(iv) explain the procedure for appealing the adverse determination.
(b) Benefit Appeals
A Claimant whose claim for benefits has been denied, in whole or in
part, may, within 60 days of receipt of any adverse benefit determination,
appeal such denial to the Committee. All appeals shall be in the form of a
written statement and shall (i) set forth all of the reasons in support of
favorable action on the appeal, (ii) identify those provisions of the Plan upon
which the Claimant is relying, and (iii) include copies of any other documents
or materials which may support favorable consideration of the claim. The
Committee shall decide the issues presented within 60 days after receipt of such
request, but this period may be extended for up to an additional 60 days in
unusual cases provided that written notice of the extension is furnished to the
Claimant prior to the commencement of the extension. The decision of the
Committee shall be set forth in writing, include specific reasons for the
decision, refer to pertinent Plan provisions on which the decision is based, and
shall be final and binding on all persons affected thereby.
Any Claimant whose claim for benefits has been denied shall have such
further rights of review as are provided in ERISA ss. 503, and the Committee anD
Administrator shall retain such right, authority, and discretion as is provided
in or not expressly limited by ERISA ss. 503.
(c) Final Review
The Committee shall serve as the final review committee, under the Plan
and ERISA, for the review of all appeals by Claimants whose initial claims for
benefits have been denied, in whole or in part, by the Administrator. The
Committee shall have the authority to determine conclusively for all parties any
and all questions arising from administration of the Plan, and shall have sole
and complete discretionary authority and control to manage the operation and
administration of the Plan, including, but not limited to, authorizing
disbursements according to the Plan, the determination of all questions relating
to eligibility for participation and benefits, interpretation of all Plan
provisions, determination of the amount and kind of benefits payable to any
Participant, and the construction of disputed and doubtful terms. Such decisions
by the Committee shall be conclusive and binding on all parties and not subject
to further review.
3.4. Indemnification
Neither the Administrator, any member of the Board or of the Committee,
nor each other employee or officer to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
shall be personally liable by reason of any contract or other instrument
executed by such individual or on his or her behalf in his or her capacity as
the Administrator or as a member of the Board or of the Committee, nor for any
mistake of judgment made in good faith, and the Company shall indemnify and hold
harmless the Administrator, each member of the Board, each member of the
Committee, and each other employee or officer to whom any duty or power relating
to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including attorneys' fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or bad faith.
3.5. Named Fiduciaries
The Committee, the Administrator and each Participating Company is each
a named fiduciary as that term is used in ERISA with respect to the particular
duties and responsibilities allocated to each of them.
3.6. Allocation of Responsibilities
The Company may allocate responsibilities for the operation and
administration of the Plan consistent with the Plan's terms, including
allocation of responsibilities to the Committee and the other Participating
Companies. The Company and other named fiduciaries may designate in writing
other persons to carry out their respective responsibilities under the Plan, and
may employ persons to advise them with regard to any such responsibilities.
3.7. Multiple Capacities
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
<PAGE>
Article
4. Benefits
4.1. Participant
An individual is a Participant in this Plan if (a) the individual was
hired or rehired by a Participating Company at age 35 or older and, (b) the
individual was hired or rehired at D-band or above, and (c) the individual's
Term of Employment includes at least one year of continuous employment for a
Participating Company at D-band or above, provided, however, that if an
individual was hired or rehired on or after November 18, 1981, such continuous
employment was on a full-time basis (as classified by the Company), and (d) the
individual terminates employment at E-band or above.
4.2. Eligibility
(a) Employee
For purposes of this Article 4, the word "Employee" shall mean (a) a
Participant, as defined in Section 4.1 and (b) who (i) if hired or rehired by a
Participating Company before November 18, 1981, has completed a Term of
Employment of at least five years for one or more Participating Companies at
E-band or above, prior to the last day of the month in which he or she reaches
Normal Retirement Age, or (ii) if hired or rehired by a Participating Company on
or after November 18, 1981, has completed a Term of Employment of at least five
years, classified by the Company as full-time, for one or more Participating
Companies at E-band or above, prior to the last day of the month in which he or
she reaches Normal Retirement Age, provided, however, that unless approved by
the Board, or its delegate, an individual is not an Employee if:
(i) the individual (ineligible to
participate in this Plan
because he or she was hired after age 35 and/or he or
she was hired
below D-band) terminates employment with a
Participating Company, and
is rehired by a Participating Company within one year
of his or her
termination of employment;
(ii) the individual terminates employment with
a company with
which a Participating Company has an Interchange
Agreement, and is
hired by a Participating Company within one year of
termination of
employment, if the individual has not waived coverage
pursuant to the
terms of the applicable Interchange Agreement;
(iii) the individual terminates employment
with a company in
which a Participating Company has an ownership
interest, and is hired
or rehired by a Participating Company within one year of
termination of
employment, unless he or she was a Participant in the
Plan prior to
employment with the AT&T non-Controlled Group
company or the
nonparticipating AT&T Controlled Group company; or
(iv) the individual is employed by a company
which is acquired
by a Participating Company.
(b) Service and Disability Benefit
Any Employee shall be eligible for a service benefit or a
disability benefit pursuant to this Plan if he or she is eligible for a service
or a disability pension pursuant to the Pension Plan, including an Employee who
is eligible for a service pension as the result of a Transition Leave of Absence
or a Transition to Retirement as set forth in the Pension Plan.
(c) Deferred Benefit
Any Employee is eligible for a deferred benefit pursuant to
this Plan if the Employee is not eligible for either a service or a disability
pension under the Pension Plan.
(d) Contingent Benefits
An Employee whose job category has been reclassified during the
Grandfathering Period, defined below, from E-band to a salary grade level below
E-band, and who has completed a Term of Employment of at least five years at (1)
E-band or above, or (2) the reclassified level below E-band prior to the end of
the Grandfathering period, shall be entitled to a frozen benefit under this Plan
based upon the terms of this Plan and his or her Term of Employment as of the
last day of the Grandfathering Period, provided, however, that such Employee
shall not be entitled to a benefit under this Plan if he or she has been demoted
for performance subsequent to job reclassification and prior to attainment of
the requisite number of years of benefit eligibility. The Grandfathering Period
shall be January 1, 1986 through the later of December 31, 1988 or the last day
of the calendar year in which the job has been reclassified. If an Employee
whose job has been reclassified, as described in this Section 4.2(d), is
promoted to E-band or above, his or her benefit under this Plan shall be
calculated as if his or her job had never been reclassified.
4.3. Benefit Amounts
(a) Calculation of Monthly Pension Benefit
(i) Formula
The annual benefit amount will equal:
[GRAPHIC OMITTED]
+
[GRAPHIC OMITTED]
Where:
A = Mid-Career Pension Credits;
B = One-half of the Pension Plan Base Formula
Multiplier;
C = Average Base Period Compensation x Term of
Employment to
the end of the Base Period divided by
Total Term of
Employment;
D = One-half of the AT&T Non-Qualified Pension
Plan ("NQPP")
Base Formula Multiplier;
E = NQPP Average Base Period
Compensation x Term of
Employment to the end of the Base Period
divided by Total
Term of Employment;
F = One-half of the Pension Plan Post-Base
Formula Multiplier;
G = Post-Base Period Compensation divided by
Total Term of
Employment;
H = One-half of the NQPP Post-Base Formula
Multiplier;
I = NQPP Post-Base Period Compensation divided
by Total Term
of Employment.
(ii) Mid-Career Pension Credits
For purposes of determining A in Section 4.3(b)(i), "Mid-Career Pension
Credits" is defined in Section 2.15(a) or (b), as applicable.
(iii) Base Period
For purposes of determining B and C in Section 4.3(a)(i), "Base Period"
shall be the pay base averaging period as is set forth in the Pension Plan
effective August 1, 1994, provided, however, that if an Employee's benefit under
the Pension Plan is determined under an earlier pay base averaging period, such
other pay base averaging period shall be used for determining B & C in Section
4.3(a)(i). For purposes of determining D and E in Section 4.3(a)(i), "Base
Period" shall be the 1989 Base Period as is set forth in the Basic Formula of
the NQPP.
(iv) Base Formula Multiplier
For purposes of determining B in Section 4.3(a)(i), the "Pension Plan
Base Formula Multiplier" shall be the numerical percentage which is multiplied
by the Employee's average annual Compensation for the Base Period, in the
calculation of the Employee's accrued pension benefit under the Pension Plan.
For purposes of determining D in Section 4.3(a)(i), the "NQPP Base Formula
Multiplier" shall be the numerical percentage which is multiplied by the
Employee's average annual Short Term Incentive Awards for the Base Period, in
the calculation of the Employee's accrued pension benefit under the Basic
Formula of the NQPP.
(v) Average Base Period Compensation
For purposes of determining C in Section 4.3(a)(i), "Average Base
Period Compensation" shall be the Employee's average annual Compensation for the
Base Period, in the calculation of the Employee's accrued pension benefit under
the Pension Plan, except that Compensation shall be defined for this purpose as
not being limited by Code ss. 401(a)(17). For purposes of determining E in
Section 4.3(a)(i), "NQPP Average Base Period Compensation" shall be the average
annual Short Term Incentive Awards for the Base Period in the calculation of the
Employee's accrued pension benefit under the Basic Formula of the NQPP.
(vi) Total Term of Employment
For purposes of determining C, E, G & I in Section 4.3(a)(i), "Total
Term of Employment" shall be the Employee's actual Term of Employment as of
retirement or termination of employment.
(vii) Post-Base Formula Multiplier
For purposes of determining F in Section 4.3(a)(i), "Pension Plan
Post-Base Formula Multiplier" shall be the numerical percentage which is
multiplied by the Employee's Compensation for periods after the Base Period, in
the calculation of the Employee's accrued pension benefit under the Pension
Plan. For purposes of determining H in Section 4.3(a)(i), the "NQPP Post-Base
Formula Multiplier" shall be the numerical percentage which is multiplied by the
Employee's Short Term Incentive Awards for periods after the Base Period, in the
calculation of the Employee's accrued pension benefit under the Basic Formula of
the NQPP.
(viii) Post-Base Period Compensation
For purposes of determining G in Section 4.3(a)(i), "Post-Base Period
Compensation" shall be the Employee's Compensation after the Base Period, in the
calculation of the Employee's accrued pension benefit under the
Pension Plan,
except that Compensation shall be defined for this purpose as not being limited
by Code ss. 401(a)(17). For purposes of determining I in Section 4.3(a)(i),
"NQPP Post-Base Period Compensation" shall be the Employee's Short Term
Incentive Awards for periods after the Base Period, in the calculation of the
Employee's accrued pension benefit under the Basic Formula of the NQPP.
(b) Early Retirement Discount
Where an Employee terminates from service under the age of 55 years and
commences a service pension under the Pension Plan, his or her monthly service
benefit, as set forth in Section 4.2(b), shall be reduced in the same manner as
is set forth in the Pension Plan in the case of service pensions.
(c) Deferred Benefit Amount
The monthly benefit amount for each person eligible for a deferred
benefit under the provisions of Section 4.2(c) shall be calculated exclusively
in accordance with the provisions specified as applicable to those receiving a
benefit under Section 4.2(b) effective as of the date his or her benefit
payments commence pursuant to Section 4.5(b). No recomputation of the benefit
shall be made after such date or as a result of amendments made to this Plan
subsequent to such date.
(d) Management Pension Enhancement
The calculation of benefit amounts and eligibility for a benefit amount
shall be determined without regard to the Management Pension Enhancement set
forth in the Pension Plan.
(e) Special Increases
Monthly service and disability benefit payments, as determined in
Section 4.3(a), of retired Employees shall be increased by the same percentage
and pursuant to the same terms and conditions as are set forth in the Pension
Plan.
4.4. Treatment During Subsequent Employment
Notwithstanding any other provision of this Plan, employment with any
Participating Company or with any Interchange Company (if the Employee is
covered by the applicable Interchange Agreement and, if applicable, has not
waived coverage pursuant to the terms of the Interchange Agreement), subsequent
to retirement or termination of employment with entitlement to any type of
benefit described heretofore shall result in the permanent suspension of the
benefit for the period of such employment or reemployment. Notwithstanding any
other provision of this Plan, employment with any AT&T Controlled Group company
which is not a Participating Company subsequent to retirement or termination of
employment with entitlement to any type of benefit described heretofore shall
result in the permanent suspension of the benefit for the period of such
employment or reemployment if the Employee's benefit under the Pension Plan is
suspended by reason of such employment.
4.5. Commencement and Duration of Payments
Except for the reasons specified in Section 4.6, or as may be otherwise
determined by the Company, benefits granted under this Plan shall commence as
follows:
(a) Service or Disability Benefit
Payment of a service or disability benefit under this Plan shall
commence to an Employee at the same time as the Employee's service or disability
pension benefits commence under the Pension Plan and shall continue to the
Employee's date of death, or, in the case of a disability benefit, until
termination of disability pension payments under the Pension Plan, if earlier,
subject to Section 4.4 of this Plan.
(b) Deferred Benefit
(i) Payment of a deferred benefit under this Plan shall
commence to an Employee at the same time as the Employee's deferred vested
pension benefits commence under the Pension Plan and shall continue to the
Employee's date of death, subject to Section 4.4 of this Plan.
(ii) Eligibility for a deferred benefit payable before Normal
Retirement Age in reduced amounts shall be pursuant to the same terms and
conditions as are set forth in the Pension Plan with respect to deferred vested
pensions.
4.6. Forfeiture of Benefits
(a) Notwithstanding Section 4.5, all or a portion of benefits for which
an Employee would be otherwise eligible hereunder may be forfeited under the
following circumstances, at the discretion of the Board or its delegate:
(i) The Employee is discharged by a
Participating Company for
cause. For purposes of this Plan, cause shall mean:
(A) The Employee's conviction
(including a plea of
guilty or nolo contendere) of a felony or any
crime of theft,
dishonesty or moral turpitude;
(B) Gross omission or gross
dereliction of any
statutory or common law duty of loyalty to the Company.
(ii) Determination by the Board or its
delegate that the
Employee engaged in misconduct in connection with
the Employee's
employment with a Participating Company or with any
other entity of
which the Company has an ownership interest.
(iii) The Employee, without the consent of the
Board, violates the AT&T Non-Competition Guideline.
(b)......The portion of the benefit subject to forfeiture under the
conditions described in this Section 4.6(a), are as follows:
(i) The total benefit, or any unpaid benefit
if the former
Employee is in pay status, is subject to forfeiture,
except as provided
in Section 4.6(b)(ii).
(ii) In the case of an Employee who is retiring
at his or her
Mandatory Retirement Age, as defined in ADEA, the
provisions of Section
4.6(b)(i) shall not apply to that portion of the
benefits computed
under Section 4 of this Plan which, when added to
the retirement
payments payable under the Pension Plan (prior to any
reduction for the
cost of a survivor annuity) and the AT&T
Excess Benefit and
Compensation Plan, does not exceed the nonforfeitable
retirement income
requirement of ADEA ss. 12(c)(i).
<PAGE>
Article
5. General Provisions
5.1. No Guarantee of Employment
Neither the Plan nor any action taken hereunder shall be construed as
(i) a contract of employment or deemed to give any Participant the right to be
retained in the employment of a Participating Company, the right to any level of
compensation, or the right to future participation in the Plan; or (ii)
affecting the right of a Participating Company to discharge or dismiss any
Participant at any time.
5.2. Assignment or Alienation
No service, disability, or deferred benefit under this Plan or any
right or interest in such service, disability, or deferred benefit shall be
assignable or subject in any manner to anticipation, alienation, sale, transfer,
claims of creditors, garnishment, pledge, execution, attachment or encumbrance
of any kind, including, but not limited to, pursuant to any domestic relations
order (within the meaning of ERISA ss. 206(d)(3) and Code ss. 414(p)(1)(B)) or
judgment or claims for alimony, support, separate maintenance, and claims in
bankruptcy proceedings, and any such attempted disposition shall be null and
void.
5.3. Breaks in Service
For purposes of this Plan a break in service shall be defined and
treated in the same manner as is set forth in the Pension Plan.
5.4. Leave of Absence
For purposes of this Plan, a leave of absence shall be defined and
administered in the same manner as is set forth in the Pension Plan.
5.5. Method of Payment
Payments under this Plan shall be made in the same manner as is set
forth under the Pension Plan.
5.6. Amounts Accrued Prior to Death
Benefit amounts accrued but not actually paid at the time of death of a
former employee or retiree shall be paid in accordance with the standards and
procedures set forth in the Pension Plan.
5.7. Facility of Payment
If the Administrator shall find that any person to whom any amount is
or was payable under the Plan is unable to care for his or her affairs because
of illness or accident, then any payment, or any part thereof, due to such
person (unless a prior claim therefor has been made by a duly appointed legal
representative), may, if the Administrator so directs the Company, be paid to
the same person or institution that the benefit with respect to such person is
paid or to be paid under the Pension Plan, or to the Participant's lawful
spouse, a child, a relative, or institution maintaining or having custody of
such person, or any other person deemed by the Administrator to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payments made pursuant to this Section 5.7 shall be in complete discharge of the
liability of the Company, the Board, the Committee, the Administrator, and the
Participating Company therefor. If any payment to which a Participant or
beneficiary is unclaimed, such payment shall be forfeited after a period of two
years from the date the first such payment was payable and shall not escheat to
any state or revert to any party; provided, however, that any such payment or
payments shall be restored if any person otherwise entitled to such payment or
payments makes a valid claim.
5.8. Option During Disability
For an employee who has left the service of a Participating Company and
has elected to continue receiving disability benefits which he or she had been
receiving prior to his or her termination of employment (including disability
benefits under the AT&T Senior Manager Long Term Disability and Survivor
Protection Plan) and to defer receiving pension payments under the Pension Plan
to which he or she is eligible, benefits under this Plan shall be deferred until
such time as the employee begins to receive payments under the Pension Plan.
5.9. Payments Under Law
In case any benefit which the Committee shall determine to be of the
same general character as a payment provided by the Plan that is payable to a
former employee of a Participating Company under any law now in force or
hereafter enacted, the excess only, if any, of the amount prescribed in the Plan
the amount of such payment prescribed by law shall be payable under the Plan;
provided, however, that no benefit payable under this Plan shall be reduced by
reason of any governmental benefit or pension payable on account of military
service, or by reason of any benefit which the recipient would be entitled to
receive under the Social Security Act or the Railroad Retirement Act. In those
cases where, because of differences in the beneficiaries, or differences in the
time or methods of payment, or otherwise, whether or not there is such excess is
not ascertainable by mere comparison but adjustments are necessary, the
Committee has discretion to determine whether or not in fact any such excess
exists and to make the adjustments necessary to carry out in a fair and
equitable manner the spirit of the provision for the payment of such excess.
Further, in determining whether or not there is an excess, to the extent any
payments under any law are considered in determining whether there is any excess
payable to an employee under the Pension Plan, the amount of such payments under
law shall not be considered under this Plan.
5.10. Binding Effect
The Plan shall be binding upon and inure to the benefit of each
Participating Company and its successors and assigns, and to each Participant,
his or her successors, designees, beneficiaries, designated annuitants, and
estate. The Plan shall also be binding upon any successor corporation or
organization succeeding to substantially all of the assets and business of a
Participating Company. Nothing in the Plan shall preclude a Participating
Company from merging or consolidating into or with, or transferring all or a
portion of all of its assets to, another corporation which assumes the Plan or a
portion of the Plan and all or a portion of the obligations of a Participating
Company hereunder. Each Participating Company agrees that it will make
appropriate provision for the preservation of the rights of Participants and
beneficiaries under the Plan in any agreement or plan or reorganization into
which it may enter to effect any merger, consolidation, reorganization into
which it may enter to effect any merger, consolidation, reorganization, or
transfer of assets. Upon such a merger, consolidation, reorganization, or
transfer of assets, the term "Participating Company" shall refer to such other
corporation and the Plan shall continue in full force and effect.
5.11. Severability
If any section, clause, phrase, provision, or portion of this Plan or
the application thereof to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Plan and shall not affect the
application of any section, clause, provision, or portion hereof to other
persons or circumstances.
5.12. Headings
The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and shall not in any manner define or
limit the scope or intent of any provisions of the Plan.
5.13. Entire Plan
This written Plan document is the final and exclusive statement of the
terms of this Plan, and any claim of right or entitlement under the Plan shall
be determined in accordance with its provisions pursuant to the procedures
described in Article 3. Unless otherwise authorized by the Board or its
delegate, no amendment or modification to this Plan shall be effective until
reduced to writing and adopted pursuant to Section 6.1.
<PAGE>
Article
6. Plan Modification
6.1. Amendment and Termination
Pursuant to ERISA ss. 402(b)(3), the Board or its delegate, (acting
pursuant to the Board's delegations of authority then in effect) may from time
to time amend, modify or change the Plan at any time as set forth in this
document, and the Board or its delegate (acting pursuant to the Board's
delegations of authority then in effect) may terminate the Plan at any time.
Plan amendments may include, but are not limited to, elimination or reduction in
the level or type of benefits provided to employees. Any and all Plan amendments
may be made without the consent of any employee. Notwithstanding the foregoing,
no such amendment, suspension or termination shall retroactively impair or
otherwise adversely affect the accrued benefit of any employee as of the date of
such action.
<PAGE>
Article
7. Source of Payment
7.1. Source of Payments
Benefits arising under this Plan and all costs, charges, and expenses
relating thereto will be payable from the Company's general assets. The Company
may, however, establish a trust to pay such benefits and related expenses,
provided such trust does not cause the Plan to be "funded" within the meaning of
ERISA. To the extent trust assets are available, they may be used to pay
benefits arising under this Plan and all costs, charges, and expenses relating
thereto. To the extent that the funds held in the trust, if any, are
insufficient to pay such benefits, costs, charges and expenses, the Company
shall pay such benefits, costs, charges, and expenses from its general assets.
In addition, the Company may, in its sole discretion, purchase and distribute
one or more commercial annuity contracts, or cause the trustee of the trust to
purchase and distribute one or more commercial annuity contracts, to make
benefit payments required under this Plan, to any Senior Manager, as defined in
the AT&T Non-Qualified Pension Plan, or the Surviving Spouse of any Senior
Manager, provided, however, that the purchase and distribution of any such
annuity contracts shall be no sooner than the expiration of any forfeiture
provisions applicable to the Senior Manager under the AT&T Non-Competition
Guidelines. Such annuity contracts may be purchased from a commercial insurer
acceptable to the Executive Vice President - Human Resources. Further, the
Executive Vice President - Human Resources, may determine, in his sole
discretion, to pay additional sums to any Senior Manager, from the Company's
general assets or from the trust, if any, to reimburse the Senior Manager for
additional federal and state income taxes estimated to be incurred by reason of
the distribution of any such annuity contracts. The Executive Vice President
Human Resources shall establish a methodology or methodologies for determining
the amount of such additional sums. The methodology or methodologies selected
shall be those that the Executive Vice President - Human Resources determines,
in his sole discretion, to be the most effective and administratively feasible
for the purpose of producing after tax periodic benefit payments that
approximate the after tax periodic benefit payments that would have been
received by Senior Managers in the absence of the distribution of the annuity
contract.
7.2. Unfunded Status
The Plan at all times shall be entirely unfunded for purposes of the
Code and ERISA and no provision shall at any time be made with respect to
segregating any assets of a Participating Company for payment of any benefits
hereunder. Funds that may be invested through a trust described in Section 7.1
shall continue for all purposes to be part of the general assets of the
Participating Companies which invested the funds. The Plan constitutes a mere
promise by the Participating Companies to make benefit payments under this Plan
in the future. No Participant shall have any interest in any particular assets
of a Participating Company by reason of the right to receive a benefit under the
Plan and to the extent the Participant acquires a right to receive benefits
under this Plan, such right shall be no greater than the right of any unsecured
general creditor of a Participating Company.
<PAGE>
Article
8. Disposition of Participating Company
8.1. Sale, Spin-Off, or Other Disposition of Participating
Company
(a)......Subject to Section 5.10, in the event the Company sells, spins
off, or otherwise disposes of a Subsidiary or an Affiliated Corporation, or
disposes of all or substantially all of the assets of a Subsidiary or an
Affiliated Corporation such that one or more Participants terminate employment
for the purpose of accepting employment with the purchaser of such stock or
assets, any person employed by such Subsidiary or Affiliated Corporation who
ceases to be an employee as a result of the sale, spin-off, or disposition shall
be deemed to have terminated his or her employment with a Participating Company
and be eligible for a Mid-Career Pension benefit commencing at the same time as
his or her benefit, if any, commences under the Pension Plan.
(b)......Notwithstanding the foregoing provisions of this Section 8.1,
and subject to Section 5.10, if, as part of the sale, spin-off, or other
disposition of the stock or assets of a Subsidiary or Affiliated Corporation,
the Subsidiary or Affiliated Corporation, its successor owner, or any other
party agrees in writing to assume the liability for the payment of the
Mid-Career Pension benefit to which the Participant would have been entitled
under the Plan but for such sale, spin-off, or other disposition, then the
entitlement of the Participant to a Mid-Career Pension benefit under this Plan
shall terminate. Any subsequent entitlement of the former Participant to the
Mid-Career Pension benefit shall be the sole responsibility of the assuming
party. Upon the assumption of the liability for the payment of a Mid-Career
Pension benefit by Lucent Technologies Inc. pursuant to Section 7.1 of the
Management Interchange Agreement or Section 3.1 of the Occupational Interchange
Agreement, both dated as of April 8, 1996, between Lucent Technologies Inc. and
AT&T Corp., the entitlement of a Transition Individual (as defined in Section
1.38(b) or (c) of the Management Interchange Agreement or Section 1.30(b) or (c)
of the Occupational Interchange Agreement), to a Mid-Career Pension benefit
under this Plan shall terminate.
<PAGE>
AT&T CORP.
SENIOR MANAGEMENT
BASIC LIFE INSURANCE PROGRAM
OCTOBER 1, 1990
Revised 5/17/95
<PAGE>
SENIOR MANAGEMENT BASIC LIFE INSURANCE PROGRAM
TABLE OF CONTENTS
PROGRAM
OVERVIEW...............................................................1
ELIGIBILITY....................................................................2
COVERAGE.......................................................................2
CONVERSION
RIGHTS..............................................................2
PROGRAM
ILLUSTRATION...........................................................2
IMPUTED INCOME RATE COMPARISON WITH BASIC GROUP LIFE
INSURANCE.................3
PREMIUM
PERIOD.................................................................3
CASH
VALUE.....................................................................3
CASH
AVAILABILITY..............................................................4
INSURABILITY...................................................................4
TRANSFER/ASSIGNMENT OF
OWNERSHIP...............................................4
EARLY RETIREMENT OR
TERMINATION................................................5
DEMOTION.......................................................................5
CONTRACTUAL
AGREEMENT..........................................................6
SECURED
BENEFIT................................................................6
TAXES..........................................................................7
ENROLLMENT.....................................................................7
Program Overview
The Senior Management Basic Life Insurance Program (SMBLIP) is an arrangement
where the Company and you purchase a permanent life insurance policy on your
life. SMBLIP replaces the pre-age 65 one times salary rounded to the next higher
$1,000 death benefit provided under the AT&T Corp. Basic Group Life Insurance
Plan.
The Company pays the annual premium. Your W-2 will reflect an imputed income
amount associated with the insurance coverage provided to you under the policy.
In certain cases, e.g., your death before retirement, the total benefits will be
shared between the Company and your designated beneficiary but the Company will
share in the death benefit only to the extent that the total insurance amount
exceeds one times your salary rounded to the next highest $1,000. This type of
arrangement is known in the insurance industry as "Split Dollar."
After attaining normal retirement (age 65) or, if later, 10 years (in some cases
it may be longer to avoid violation of the Internal Revenue Service Regulations
Section 7702 guidelines) from the date of issuance of this policy, the Company
will recoup its premium payments from the cash value build-up and cease to have
any interest in the policy. The remaining cash value will be sufficient to
maintain your death benefit without further premium payments.
As in the Basic Group Life Insurance Plan, your death benefit will change to
reflect any change in your salary. At retirement, your death benefit will become
frozen at your final annual salary rounded to the next higher $1,000. During the
period in which the Company makes premium payments, your imputed income will
increase to reflect your increasing age, as well as any increase in death
benefit. Your imputed income will be lower than under the current Basic Group
Life Insurance Plan because it will be based on the insurers' term life
insurance rates, which are lower than the corresponding federal government
standard rates for group insurance. After premium payments discontinue, i.e.,
the later of your attaining age 65 or 10 years (in some cases it may be longer
to avoid violation of the Internal Revenue Service Regulations Section 7702
guidelines) from the policy issue date, you will have no further imputed income.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up. Once sufficient funds have
accumulated and the Company no longer has an interest in the policy because it
has recouped its premiums, you have the option to use some or all of the
remaining cash in lieu of some or all of the death benefit.
AT&T Corp. has selected two insurers to provide the SMBLIP coverage. You will
therefore have two policies on your life; one from each insurer, and each
insurer will provide half the defined amount of death benefit on
your life.
Eligibility
SMBLIP is for active AT&T Corp. Senior Managers. Employees who
are promoted to
or hired as Senior Managers are immediately eligible to enroll in
this program.
Coverage
SMBLIP is provided as a replacement to the death benefit coverage associated
with the Basic Group Life Insurance Plan. The benefit is one times salary
rounded to the next higher $1,000.
The death benefit will be updated to reflect changes in your salary. There may
be circumstances where a large increase in salary and, therefore, a
corresponding increase in death benefit, will require providing medical
information to the insurer. By providing this medical information, the insurer
is able to keep the premium payments at the lowest level. A medical information
waiver, signed by you, will be kept on file in the event this circumstance
occurs. This will allow the Company to release, to the insurer, the required
information from your Company medical records. Higher death benefit coverage
associated with salary increases is guaranteed, no matter what your health
circumstances may be at that time.
Conversion Rights
If you were a participant in the AT&T Corp. Basic Group Life Insurance Plan at
the time you became eligible for SMBLIP, for a limited period of time you have
the right to convert your coverage under the Basic Group Plan to a separate
individual policy provided by the group insurance carrier. We suggest you
discuss this with your financial advisor before exercising or declining this
right. You may exercise this right by contacting your Executive Human Resources
Consultant or Rosemarie Wolfstromer at Metropolitan Life directly on
201-712-5463.
Program Illustration
Included as an attachment is a personal illustration based on your current
salary. This illustration shows your costs and benefits as well as the
Company's, over the life of the policy. It is provided to give a picture of how
the policy works and what your tax on imputed income might be, using an assumed
salary growth. The actual ongoing life insurance amounts will be different from
this illustration.
<PAGE>
Imputed Income Rate Comparison with Basic Group Life Insurance
SMBLIP offers a cost-effective life insurance program for Senior Managers, with
imputed income rates substantially below the Basic Group Life rates. (The cost
to you of the SMBLIP will be the income tax payable on the amount of your
imputed income.)
Annual Imputed Income Rate per $1,000 of Life
Insurance
Federal Government
Standard Rates for
Age Basic Group
Life SMBLIP
---
- ---------------- ------
40 $
2.04 $ .57
45
3.48 .82
50
5.76 1.15
55
9.00 1.62
60
14.04 2.59
Premium Period
SMBLIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to the Company. This period is normally from the time of
your enrollment until the first policy anniversary after you reach age 65.
However, in all cases, premiums must be paid for a minimum of 10 years(in some
cases it may be longer to avoid violation of the Internal Revenue Service
Regulations Section 7702 guidelines). Therefore, if you enroll in the program
after age 55, the Company will continue premium payments and you will continue
to recognize income until the minimum is reached.
Cash Value
This program is designed to provide you with a pre- and post retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to provide the
death benefit coverage build on a tax advantaged basis in the policy. The
policy's cash value is the basis for your subsequent "premium free" death
benefit.
<PAGE>
Cash Availability
Under SMBLIP you have considerably greater flexibility than under the Basic
Group Life Insurance Plan. After the Company interest has been satisfied, you
may reduce your death benefit and utilize the policy cash value in a number of
ways. For example:
a) Loans
The cash value attributed to you may be withdrawn in
the form of a
loan. There could be tax implications as well as
death benefit
diminution associated with a loan.
b) Income Stream or Lump Sum
It is possible to convert all or any portion of the
policy from a
death benefit to either an income "stream" (i.e., an
annuity) or a
lump sum cash payout. The extent to which you
convert to income or
cash will cancel or reduce the death benefit. Once
you convert, it
is not possible to re-establish the original death
benefit.
We suggest that you speak with your financial advisor before exercising these
options.
Insurability
During the enrollment period you will be guaranteed to be insured. Your imputed
income rate, however, will not depend on your health or smoking status. Rather,
it will differ from others depending only on age and amount of
Death Benefit.
This enrollment methodology also applies to new Senior Managers who enroll
within 60 days of becoming a Senior Manager. Enrollment after 60 days may
require a medical questionnaire or examination.
Transfer of Ownership
As with the Basic Group Life Insurance Plan, after you take ownership in the
policy, you may transfer ownership to anyone you choose, e.g., an individual,
trust, etc. Since these transfers are generally construed to be irrevocable, we
urge you to consult with an attorney and/or tax advisor before making this
decision.
Another option is for you to not take ownership, but rather another, e.g.,
individual, trust, etc., may apply for ownership of the policy. It is of
particular importance that if the original owner of the policy is not you, that
the owner should sign as the "Applicant/Owner" and you should sign the
application as the "Proposed Insured".
Early Retirement or Termination
If, at retirement, you are "Pension Eligible" (i.e., you retire on an immediate
Service or Disability Pension under the AT&T Corp. Management Pension Plan, or
with a Disability Allowance or Minimum Retirement Benefit under the AT&T Corp.
Senior Management Long Term Disability and Survivor Protection Plan) and you
have not reached normal retirement age (65), the Company will continue to pay
premiums until you reach age 65 or, if later, ten years (in some cases it may be
longer to avoid violation of the Internal Revenue Service Regulations Section
7702 guidelines) from the date of issuance of the policy. During this period you
will continue to have imputed income based on your age and the amount of
insurance in force. At the end of this period, i.e., the later of the policy
anniversary immediately following your attainment of age 65 or the tenth (in
some cases it may be longer to avoid violation of the Internal Revenue Service
Regulations Section 7702 guidelines) policy anniversary, the premiums will cease
and the aggregate Company premiums will be returned to the Company.
If you separate from the Company without being Pension Eligible, the aggregate
amount of Company premiums paid up to that point will be immediately returned to
the Company from the cash value of the policy. You can, at your option, either
maintain the policy by paying the policy premiums, or you may use the remaining
cash value (if any) to buy other "self-supporting" life insurance, or you may
withdraw any remaining cash value and cancel the policy.
Whether or not you are Pension Eligible, if you leave the Company, and without
the Company's consent, establish a relationship with a competitor of the Company
or engage in activity in conflict with or adverse to the interests of the
Company under the standards of the AT&T Corp. Non-Competition Guidelines and as
determined by the AT&T Corp. Management Executive Committee, the process will be
the same as with retirement/termination without being Pension Eligible.
Demotion
If you are demoted to a position which is not a Senior Manager, the effect is
the same as if terminated from the Company. You will however, automatically
become re-eligible for coverage under the AT&T Corp. Basic Group Life Insurance
Plan.
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T Corp.. This agreement has no relationship to
employment or any other benefit but rather defines the responsibilities of both
the Company and you in the operation of the policy. You, or another, will own
the policy and determine who the beneficiary is. The Company will hold the
policy and have a "Collateral Assignment" from the owner entitling AT&T Corp.,
as long as it has a collateral interest in the policy, to any death benefit
amounts in excess of one times your salary, and all cash values up to an amount
equal to its cumulative premiums paid. This document is a legal agreement and as
such includes a significant amount of detail and warrants careful review before
signing. Although somewhat unique to life insurance, a collateral assignment is
similar in context to an automobile loan where the car becomes "collateral" for
the money lent to buy it. In this case, a portion of the cash value and death
benefit of the policy is the collateral the Company receives for contributing
premium payments to "buy" the life insurance policy. The agreement is satisfied
when the aggregate premiums paid by the Company are returned. Some of the major
sections of the agreement are:
- Description of the
policy
- How the premiums are
paid
- How the proceeds are
paid
- How the agreement
terminates
- Claims procedure
- Description of the
assignment
The Agreement is included with this package.
Secured Benefit
Changes to the tax law over the years have required more and more of the Senior
Management benefit programs to be paid from Company operating income. SMBLIP
allows the Company to contribute towards the cost of this program on a timely
basis while securing the benefit payment from a third party (the insurance
companies).
<PAGE>
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
AT&T Corp. has selected two insurers to provide the coverage for each Senior
Manager. This was done to provide the best combination of premium rates and
Senior Manager protection. As such, there may be a requirement for some
duplication of forms, signatures, etc. Once enrollment has been completed,
however, this two insurer approach should have a minimal impact on you.
The documents required for enrolling in the Senior Management Basic Life
Insurance Program are included. The Application Forms require, for this program,
just a few basic pieces of information, as do the Beneficiary
Designation forms.
The documents include instructions on how to fill them out.
The Collateral Assignment requires signature only.
After completing the forms, enclose them in the self-addressed envelope and
return to the Executive Human Resources Group.
Form of
EMPLOYMENT AGREEMENT
This Agreement, dated as of October 23, 1996, by and between AT&T
Corp., a New York Corporation with its headquarters at 32 Avenue of the
Americas, New York, New York 10013 (hereinafter called the "Company"), and John
R. Walter (hereinafter called the "Employee").
WHEREAS the Employee was employed as a senior
executive with another
company; and
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 President and Chief Operating Officer of the Company,
reporting to the Chairman, with the contemplation that after a transition period
he will become Chief Executive Officer of the Company and later be named
Chairman of the Board. Employee has also been elected a member of the Company's
Board of Directors.
WHEREAS, it is of special importance for the Company to mitigate the
impact on Employee of early departure from the Employee's prior employer;
NOW, therefore, and in consideration of the promises
and the mutual
agreements as set forth above and 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 President and Chief Operating Officer of
the Company during the employment term set forth in Section 2 of this Agreement
with the contemplation that at the time periods announced by the Company,
Employee will become Chairman and Chief Executive Officer. The Company has also
elected Employee as a member of the Company's Board of Directors. 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 and that entering into this Agreement will not be
in violation of any other agreement. Such employment shall be upon the terms and
conditions hereinafter contained.
2. Term of Employment. The term of employment hereunder ("the
Employment Term") shall commence on October 23, 1996 (the "Effective Date") and
will terminate at the will of either party to this Agreement upon written notice
to the other and shall be subject to the terms and conditions of the Agreement.
3. Employee's Compensation and Benefits. Subject to this Agreement and
as more fully set forth hereinbelow, during the Employment Term, 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 no less favorable than,
Senior Managers of the Company at a similar level and with comparable
responsibilities. Employee shall receive no additional compensation for serving
as a member of the Board of Directors of the Company or as an officer or
director of any subsidiary or affiliate.
(a) Base Salary. The Company agrees to pay and the Employee
agrees to accept for services to be rendered hereunder during the Employment
Term, a base salary of not less than $975,000 a year, payable in installments on
a monthly or other periodic basis in accordance with the prevailing payroll
practices of the Company. Employee will be eligible for consideration by the
Compensation Committee of base salary increases as appropriate from time to
time.
<PAGE>
(b) Perquisites. During the Employment Term, 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, during the Employment Term, 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. Employee shall be entitled to five (5) weeks of annual
vacation applicable to 1997 and subsequent years, provided however, Employee may
commence taking his 1997 vacation any time after the Effective Date. Employee
shall also be entitled to:
-- Relocate under the terms of the AT&T Management
Relocation Plan
-- Utilize the assistance of one or more firms of
his choice for
purposes of the Company's financial counseling program
-- Receive death benefit coverage at a rate of two
times base salary
under the AT&T Senior Management Basic Life
Insurance Plan, a
split-dollar life insurance program, or any successor
program.
-- Commencing the month Employee closes on his New Jersey
residence, in
lieu of any Mortgage Interest or High
Housing Cost Area
Differentials under the AT&T Management Relocation
Plan, the Company
will provide a temporary (i.e., 36 month) monthly
housing allowance
of $10,500 for each of the first 12 months, 8,400
for each of the
next 12 months and $6,300 for each of the final 12
months.
(d) Incentive Plans. During the Employment Term, the Employee
will be eligible for consideration for both long term and annual incentive
awards pursuant to the terms of the Company's 1987 Long Term Incentive Program
and Short-Term Incentive Plan, respectively (the "Incentive Plans") or
replacements thereof, as are in effect from time to time, at levels and on terms
and conditions consistent with awards to other Senior Managers. Annual
incentives for AT&T Senior Managers currently take the form of AT&T Performance
Awards (APA) and Merit Awards (MA). Award levels under the APA program are
predicated on overall corporate performance and award levels under the MA
program are determined by individual and team contributions. Employee will be
eligible for a prorated 1996 Annual Incentive based on his partial service in
1996. The Company cannot make any representations regarding the continuation of
the APA/MA incentive format, or the size of Employee's APA and MA awards in any
given year, if any. Notwithstanding the foregoing, Employee's standard (or
target) annual incentive opportunity under such Incentive Plans, or those
replacement plans as may from time-to-time be in effect, for 1997 (payable in
1998) shall not be less than $1,170,000 and for 1998 and 1999 it is contemplated
such target annual incentive opportunities shall not be less than 120% of
Employee's base salary as of the first day of such year.
<PAGE>
As of the Effective Date, the Compensation Committee has awarded 34,175
Performance Shares/Stock Units to the Employee under the Company's 1987 Long
Term Incentive Program covering the 1996 - 1998 performance period, subject to
the terms and conditions set forth in the Stock Unit Award Agreement provided to
Employee with this Agreement. Distributions of Long Term Performance
Shares/Stock Units will be in accordance with the applicable 1987 Long Term
Incentive Program and award provisions, provided, however, that as a result of
the Company's restructuring and the difficulty of setting long-term financial
targets while the restructure is in progress, the performance criteria
established for the 1996 - 1998 long-term cycle are not applicable. For such
performance period, the criteria are deemed to have been met at the target
level. However, the opportunity to earn a payout above 100% is eliminated, and
all other terms and conditions of the award continue to apply. In January 1997,
Employee will also be eligible to receive a Performance Share/Stock Unit Award
for the 1997 - 1999 performance period or a replacement long term incentive
vehicle of generally comparable value. The Compensation Committee of the Board
has not yet determined the format or magnitude of such award.
Also, as of the Effective Date of this Agreement, a Stock Option Award
with respect to 112,500 shares of AT&T Common Stock has been granted to the
Employee under the Company's 1987 Long Term Incentive Program. Such Award is
subject to the terms and conditions set forth in the Non-statutory Stock Option
Agreement provided to Employee with this Agreement. The option price is 100% of
market price on the Effective Date. In January 1997, Employee will also be
eligible to receive another Stock Option grant, the magnitude of which has not
yet been determined by the Compensation Committee.
As with the Annual Incentive Award, Long Term Incentives are closely
linked with the Company's strategy to meet the challenges of an ever changing
marketplace. Accordingly, other than the grants as made in this Agreement, the
Company cannot guarantee continuation of the Long Term Incentive Plan in its
current format, nor can it guarantee annual grant levels to individual
participants. Notwithstanding the foregoing, to further incent Employee to
achieve Company's goal of substantially enhancing shareowner wealth, it is
contemplated Employee will receive (i) Stock Option grants for Company Stock
that will average no less than 200,000 options per year (adjusted for stock
splits or other occurrences that result in adjustments of shares subject to
outstanding stock options) during 1997, 1998 and 1999 delivered through a
variety of grant forms e.g., standard annual grants, special grants and
"premium" grants and (ii) awards of Performance Shares/Stock Units or
replacement long term equity incentives that will have an average value at the
time of grant during 1997, 1998 and 1999 of at least $1,350,000, per year on
terms and conditions as the Compensation Committee shall determine at the time
of the awards, provided that such terms and conditions shall be no less
favorable to Employee than for long term equity awards being simultaneously made
to other Senior Managers.
The terms and conditions of various long-term incentive awards set
forth in the attached Award Agreements and in this Agreement, are in accordance
with the scope and provisions of the Company's 1987 Long-Term Incentive Program.
(e) Hiring Bonus. To recognize certain
forfeitures Employee
will incur when he leaves his current employer and to incent
him to join the
Company, the Compensation Committee has as of the Effective
Date of this
Agreement granted the following one time special arrangements to
Employee:
<PAGE>
-- An award of 34,175 "Seasoned" 1995 - 1997
AT&T Performance
Shares/Stock Units (i.e., Performance
Shares/Stock Units which
would have been granted to Employee had he
been with the
Company in 1995) under the AT&T Long Term
Incentive Program,
as set forth in the Stock Unit Award
Agreement provided to
Employee with this Agreement. As a result
of Company's
restructuring and the difficulty of
setting long-term
financial targets while the restructure is in
progress, the
performance criteria established for the 1995 -
1997 cycle are
not applicable and for this performance
period, the criteria
are deemed to have been met at the target
level. However, the
opportunity to earn a payout above 100% is
eliminated, and all
other terms and conditions of the award continue
to apply.
-- A $5,000,000 cash bonus payable within
ten days of the
Effective Date. Employee has expressed a
desire that he will
use a substantial portion of the after-tax
proceeds of the
bonus to purchase, with the intent to retain
for long term
investment purposes, 50,000 shares of AT&T
Common Stock.
-- A stock option award on the Effective Date
with respect to
112,500 shares of AT&T Common Stock, subject to
the terms and
conditions set forth in the Non-statutory
Stock Option
Agreement provided to Employee with this
Agreement, which
terms include, but are not limited to, an
option exercise
price equal to the market price per share of
AT&T Common Stock
on the Effective Date.
-- An award of 75,000 AT&T Restricted Stock Units,
subject to the
terms and conditions set forth in the
Stock Unit Award
Agreement provided to Employee with this Agreement.
-- Two "premium" stock option awards on the
Effective Date, each
with respect to 100,000 shares of AT&T Common
Stock, subject
to the terms and conditions set forth in the
Non-statutory
Stock Option Agreements provided to
Employee with this
Agreement, which terms include, but are not
limited to, an
option exercise price equal to the market
price per share of
AT&T Common Stock on the Effective Date.
-- Establishment of a Deferred Account to be
maintained and paid
to Employee in accordance with the following
provisions: On
the Effective Date, the Company shall
credit the Deferred
Account with an initial balance of
$7,000,000. The Deferred
Account will be maintained as a bookkeeping
account on the
records of the Company and the Employee will
have no ownership
interest in the Deferred Account, nor in
any asset of the
Company with respect thereto. The Deferred
Account may not be
assigned, pledged or otherwise alienated by
the Employee and
any attempt to do so, or any garnishment,
execution or levy of
any kind with respect to the Deferred
Account, will not be
recognized. Employee shall not have any right
to receive any
payment with respect to the Deferred
Account, except as
expressly provided below. The Company shall
credit interest to
the Deferred Account as of the end of each
calendar quarter
(and compounded quarterly) at a rate equal to
one quarter of
120% of the Applicable Annual Federal Mid-Term
Rate in effect
for the last month of such quarter. The vesting,
forfeiture or
distribution of the Deferred Account shall be
in accordance
with the following provisions:
In the event of termination of Employee's
employment prior to
the fifth anniversary of the Effective Date:
<PAGE>
-- For any reason other than death, "Long
Term Disability"
(as defined below), Company-initiated
termination for
other than "Cause" (as defined below),
or Employee-
initiated termination for "Good
Reason" (as defined
below), then all amounts in the Deferred
Account shall
be cancelled and Employee shall
not receive any
distribution with respect to the
Deferred Account; or
have any further interest in the Deferred
Account
-- By reason of death or Long-Term
Disability, all amounts
credited through the last day of the
first calendar
quarter of the calendar year
following the year in
which such termination of employment
occurs shall be
paid to Employee (or, in the event of
the Employee's
death to Employee's beneficiary
designated on a Company
form filed with Executive Human
Resources, or to his
estate if no beneficiary has been
designated), within
30 business days of the end of such
calendar quarter;
or
-- By reason of Company-initiated
termination for other
than Cause, or Employee-initiated
termination for Good
Reason, amounts credited to the Deferred
Account shall
continue to accrue interest through
the later of (i)
the last day of the calendar quarter in
which the fifth
anniversary of this Agreement occurs or
(ii) the last
day of the first calendar quarter of the
calendar year
following the year in which such
termination occurs, at
which time the balance credited to the
Deferred Account
shall be paid to the Employee (or
his designated
beneficiary or estate, as described
above, in the event
of his death) within 30 business days
after the end of
such quarter;
In the event of termination of Employee's employment after the fifth
anniversary of the Effective Date for any reason, all amounts credited to the
Deferred Account through the last day of the first calendar quarter of the
calendar year following the year in which such termination of employment occurs
shall be paid to the Employee (or his designated beneficiary, or estate, as
described above, in the event of his death) within 30 business days after the
end of such quarter.
Payments from the Deferred Account are in addition to and not in lieu
of any pension, savings, or other defined benefit or defined contribution plan,
program or arrangement covering Employee, including other provisions of this
Agreement. The Company shall pay to Employee an additional amount which, after
gross-up for applicable Federal and state income, payroll and other withholding
taxes in accordance with the Company's tax gross-up policies applicable to
Senior Management, is equal to the FICA Medicare tax withholding due from
Employee on the initial $7,000,000 deferral (but not earnings thereon) upon the
establishment of the Deferred Account or, if not then so taxable, when such FICA
Medicare tax becomes due.
For purposes of this Agreement:
"Long Term Disability" shall mean termination of Employee's employment
with the Company with eligibility to receive a disability allowance under the
AT&T Senior Management Long Term Disability and Survivor Protection Plan or a
replacement plan.
<PAGE>
"Good Reason" shall mean a material breach of this Agreement by the
Company which is not cured within twenty days of the giving of written notice
thereof by Employee. Good reason shall include any uncured failure by the
Company to provide the compensation and benefits required hereunder, to provide
the contemplated equity and incentive awards as stated hereunder (except those
that cannot legally be continued) or awards that the Compensation Committee
believes in good faith provide substantially, in the aggregate, equivalent
pre-tax economic benefits and opportunities to the foregoing, to elect the
Employee to the future offices contemplated by this Agreement within the time
framework announced by the Company, to maintain Employee in such positions, or
to effect an assumption as provided in Section 10(b). Employee's sole remedy for
any breach of this Agreement by the Company during the Employment Term which
would provide him with a right to terminate with Good Reason, including but not
limited to failures referred to in the prior sentence, shall be a termination
for Good Reason and the amounts and benefits provided hereunder upon such
termination (as well as any accrued but unpaid base salary, accrued vacation and
amounts due under the terms of any plan or program upon such termination), and
in no event shall the Company or its affiliates be liable for any other damages
of any kind whatsoever as a result of any such breach. The amounts paid and
benefits provided upon such a Good Reason termination shall be deemed to include
liquidated damages for such breach, and Employee shall not be entitled to any
actual damages (which the parties agree would be difficult, if not impossible,
to determine). Any notice of termination of employment for Good Reason shall be
given within 180 days after the occurrence of the event on which such Good
Reason termination is to be based.
For purposes of this Agreement, any award agreement, and any other
agreement, plan or program of the Company to which Employee is a party or by
which he is covered, "Cause" or "cause" (or words of similar import) shall mean:
(i) The Employee is convicted (including a plea of
guilty or nolo
contendere) of a felony involving theft or
moral turpitude,
other than a felony predicated on
Employee's vicarious
liability. Vicarious liability means, and
only means, any
liability which is based on acts of the Company
for which the
Employee is charged solely as a result of
his offices with
the Company and in which he was not directly
involved or did
not have prior knowledge of such actions or
intended actions.
(ii) The Employee engages in conduct that constitutes
willful gross
neglect or willful gross misconduct in carrying
out his duties
under this Agreement, resulting, in either
case, in material
economic harm to the Company.
4. Special Pension and Other Post-Termination
Arrangements.
(a) In the event Employee's employment terminates on or after
Employee's 55th birthday for any reason other than for a Company-initiated
termination for Cause, the Company will provide an immediate pension benefit
(the "Special Pension") based on (1) the greater of the pension amounts
reflected in Attachment A or (2) actual Company Net Credited Service and
compensation calculated under the then-existing Company qualified and
non-qualified pension formulas, but without reference to age and service
eligibility requirements for purposes of determining benefit commencement,
(i.e., such accrued pension benefits would normally under plan provisions be
payable at age 65, therefore waiving the age and service eligibility requirement
will facilitate payment of such accrued benefits commencing as early as age 55).
Non-qualified pensions affected by these practices would include those provided
under the AT&T Non-Qualified Pension Plan, 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. Special Pension payments shall be paid to the Employee
from Company operating income and Employee shall be a general creditor of the
Company with regard to such benefits. Such benefits may not be assigned, pledged
or otherwise alienated by the Employee and any attempt to do so, or any
garnishment, execution or levy of any kind with respect to the Special Pension,
<PAGE>
will not be recognized. The total pension amount which results from application
of the preceding provisions of this Section 4 will be reduced by (1) the pension
payable by Employee's former employer and (2) all amounts actually received by
Employee or his surviving spouse under any other Company or affiliate's
qualified or non-qualified pension, retirement, disability or annuity plan or
program, except the AT&T Long-Term Savings Plan for Management Employees and the
AT&T Senior Management Incentive Award Deferral Plan. Special Pension benefits
payable under this Section 4 will be afforded the same post employment "ad hoc"
inflation adjustments, if any, as may be applicable to the AT&T Non-Qualified
Pension Plan from time to time.
Employee may elect, prior to the commencement of the Special
Pension (or, if earlier, such earlier date such that the election would not be
subject to constructive receipt treatment) to receive the benefit in the form of
a joint and 50% survivor annuity with his spouse (or under any other optional
form of benefit then available under the AT&T Management Pension Plan or
replacement plan) at the time of such election, subject to the adjustments as
provided for in Attachment A. To the extent any adjustments in form of any
benefit are required to calculate an offset, the actuarial practices applicable
to the AT&T Management Pension Plan or replacement plan shall be used. Any
benefits with a later starting date than this Special Pension benefit shall be
offset only when such offsetting benefits commence. In the event termination is
as a result of the Employee's death, a 50% survivor annuity shall be paid to
Employee's spouse, if any, assuming, for benefit calculation purposes, he had
terminated his employment and commenced benefits in the form of a joint and 50%
survivor annuity on the day before his death.
(b) Conditioned upon termination and eligibility to an
immediate pension under Section 4(a), Employee will be entitled to the following
post-termination ancillary entitlements, administered in a manner consistent
with the then-current treatment of Service Pension eligible Senior Managers and
in accordance with the terms and conditions applicable to each Senior Management
plan, program or practice (or replacement therefor) as they may exist from time
to time.
-- Two times base salary Senior Management Basic
Life Insurance
-- One and one half times salary Senior
Management Individual
Life Insurance
-- One times salary plus annual incentive death
benefit normally
payable under the AT&T Management Pension
Plan and AT&T
Non-Qualified Pension Plan to certain
qualified survivors,
e.g., spouse or dependent child of a Service
Pensioner. In the
event: (1) such benefit is available to
Service Pensioners
upon Employee's death and (2) Employee is
not eligible for
such benefit, then in such case a death benefit
equal to such
benefit will be paid from the Company's
operating income to a
qualified survivor, if any, per comparable
death benefit
provisions under the AT&T Management Pension
Plan. Any lump
sum death benefit payable under the AT&T
Senior Management
Long Term Disability and Survivor Protection
Plan will be an
offset to the death benefit payable under this
provision.
-- Participation in the post-retirement Senior
Management benefit
or prerequisite plans, programs and practices
as well as any
employee benefit plan, (except those for
which alternate
coverage is made available in the Agreement
or through a
special Senior Management plan, program or
practice), but only
to the extent and under such terms and
conditions as such
employee benefits and Senior Management
benefits and
perquisites are available to Service Pension
eligible Senior
Managers at the time of Employee's termination.
<PAGE>
-- Immediate (or, if later, six months from the
date of grant)
vesting and exercisability of all outstanding
Stock Options
granted under this Agreement as of the
Effective Date, other
than premium options, without regard to
any prorated
cancellation under the Award Agreements of
awards granted in
the year of termination of employment or
retirement
-- Immediate vesting in all outstanding
Performance Share/Stock
Units awards granted under this Agreement as of
the Effective
Date with payout thereof being made as
if Employee's
employment continued through payout at
the end of the
applicable Performance Period.
-- Acceleration or continuation of vesting and/or
exercisabilit
of other awards under this Agreement or
any long-term
incentive plan to the extent and under the
same terms and
conditions applicable to Service Pension
eligible Senior
Managers at the time such awards were
granted, all as set
forth in the applicable long-term award
agreements.
-- Immediate vesting of the 75,000
Restricted Stock Units
described in Section 3(e) of this Agreement.
-- Retention of the two "premium" Stock Option
grants described
in Section 3(e) of this Agreement,
with vesting and
exercisability as if Employee had remained an
active employee
of the Company.
5. Powers and Duties. The Employee shall devote his full business time
and best efforts 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.
Furthermore, so long as it does not interfere with his Company duties and
subject to the AT&T Non-Competition Guideline, Employee may continue to manage
his passive investments.
6. Indemnification. The Company and Employee shall
promptly enter
into the Indemnity Agreement annexed hereto as Attachment B.
7. Restrictive Convenants.
(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 "establishes a relationship with
a competitor" or "engages in an activity" which is in conflict with or adverse
to the interest of the Company, all within the meaning of the Non-Competition
Guidelines referred to below (a "Competitive Activity"). The payments, benefits
and other entitlements hereunder are being made in part in consideration of the
obligations of this Section 7 and in particular the post-employment payments,
benefits and other entitlements are being made in consideration of, and
dependent upon, compliance with this Section 7(a) and, to the extent set forth
in Section 8, the Release and Agreement referred to in Section 8. Attachment C
is a copy of the Non-Competition Guideline.
<PAGE>
(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 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 or as may be required by law, provided that, if
Employee receives legal process with regard to disclosure of such information,
he shall promptly notify the Company and cooperate with the Company in seeking a
protective order.
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 which are
in his possession, 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 and his personal
rolodex, phone book and similar items.
Employee agrees that the Company's remedies at law would be inadequate
in the event of a breach or threatened breach of this Paragraph (b);
accordingly, the Company shall be entitled, in addition to its rights at law, to
an injunction and other equitable relief without the need to post a bond.
(c) Any Competitive Activity by the Employee not permitted by
the provisions of Section 7(a) above shall result, at the discretion of the
Company, in the cancellation of all rights and entitlements of the Employee
hereunder (including but not limited to those for payments or benefits),
provided that: (i) the Deferred Account in such event shall not be forfeited,
but may at the Company's discretion be immediately paid out and (ii) no
forfeiture or cancellation (or accelerated payout of the Deferred Account) shall
take place with respect to any payments, benefits or entitlements hereunder or
under any other award agreement, plan or practice unless the Company shall have
first given the Employee written notice of its intent to so forfeit, or cancel
or pay out and Employee has not, within thirty (30) days of giving such notice,
ceased such unpermitted Competitive Activity, provided that the foregoing prior
notice procedure shall not be required with respect to (x) a Competitive
Activity which Employee initiated after the Company had informed the Employee in
writing that it believed such Competitive Activity violated Section 7(a) or the
AT&T Non-Competition Guidelines, (y) any Competitive Activity regarding local,
regional or long distance telephone services or other products or services which
are part of a line of business which represents more than 5% percent of the
Company's consolidated gross revenues for its most recent completed fiscal year
at the time the Competitive Activity commences.
8. Termination Provision.
(a) If, at any time during the period beginning with the
Effective Date and ending on the day prior to the Employee's 55th birthday,
Employee is terminated by the Company for any reason other than Cause or Long
Term Disability or Employee terminates his Company employment for Good Reason,
the Employee will be entitled to:
-- Monthly payments for a 12 month period
following termination,
each such payment in an amount equal to one
twelfth of the
greater of (1) $3,217,500 or (2) 150% of the sum
of Employee's
annual base salary rate plus target Annual
Incentive rate in
effect as of the date of Employee's termination.
<PAGE>
-- An annual incentive award for the year of
termination payable at
the target amount but prorated to the nearest half
month based on
actual service in the final performance year
and payable to
Employee within fifteen (15) business
days after such
termination.
-- Distribution of the Deferred Account as
provided for in
Section 3(e).
-- The Special Pension provided for in Section
4(a) of this
Agreement determined on the basis that
Employee's age at
termination was the greater of age 55 or his
actual age plus two
years, and further provided that such pension
will commence no
earlier than his actual attainment of age 55.
-- The post-termination benefits and entitlements
as described in
Section 4(b)
(b) If, at any time during the period beginning with the
Effective Date of this Agreement and ending on the day prior to the Employee's
55th birthday, Employee's employment terminates because of Long
Term Disability, the Employee will be entitled to:
-- Distribution of the Deferred Account as provided
for in Section
3(e)
-- The Special Pension provided for in Section
4(a) of this
Agreement assuming Employee's age at termination
was the greater
of age 55 or his actual age plus two years, and
further provided
that such pension will commence no earlier than his
actual
attainment of age 55.
-- The post-termination benefits entitlements as
described in
Section 4(b)
(c) In the event Employee's employment terminates because of
Employee's death at any time during the period beginning with the Effective Date
and ending on the day prior to the Employee's 55th birthday:
-- Employee's surviving spouse shall be entitled
to a survivor
pension for her lifetime commencing the month
after the month
which includes the date of Employee's death. The
amount of such
pension shall be $29,000 per month. This survivor
pension will be
offset by the minimum surviving spouse pension
benefit (or lump
sum alternate if such becomes available) payable
under the AT&T
Senior Management Long Term Disability and
Survivor Protection
Plan (or replacement plan) and any other
benefit under any
Company qualified or non-qualified retirement
or annuity plan
payable to the surviving spouse.
-- In addition, amounts and benefits shall be paid
or provided as
otherwise specified herein or as provided in
the applicable
Company programs and plans upon an in-service death.
(d) In the event Employee's employment terminates voluntarily
(other than for Good Reason) or as the result of a Company-initiated termination
for Cause, at any time during the period beginning with the Effective Date and
ending on the day prior to the Employee's 55th birthday, Employee shall only
receive such amounts and benefits as are provided under the Company's programs
and plans.
<PAGE>
(e) Any payments or benefits made pursuant to this Section 8
are: (1) subject to the provisions, restrictions and limitations of Section 7(a)
and (c) above, but not otherwise subject to offset or mitigation, (2) subject to
Employee signing a Release and Agreement not to sue the Company in the form of
Attachment D hereto with such changes therein or additions thereto as needed
under then applicable law to give effect to the intent of the Release and
Agreement and (3) receipt of Employee's resignation from all offices,
directorships and fiduciary positions with the Company, its affiliates and their
respective benefit plans. Notwithstanding the due date of any post-employment
payment, any amounts due under this Section 8 shall not be due until after the
end of any applicable revocation period with regard to the Release and
Agreement.
9. 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, other than that for injunctive relief under
Section 7(b), 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 either 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 an appointment of a neutral arbitrator, or if such Association is not then
in existence or does not act in the matter within 30 days of application, either
party may apply to the Presiding Judge of the Superior Court of any county in
New Jersey for an 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 equity shall be instituted or, if instituted, further
prosecuted by either party other than to enforce the award of the neutral
arbitrator. The award of the neutral arbitrator may be entered in any court that
has jurisdiction. In the event that the Employee is successful in pursuing any
claim or dispute arising out of this Agreement, the Company shall reimburse all
of the Employee's attorney's fees and costs, including the compensation and
expenses of any arbitrator, relating solely, or allocable, to such successful
claim. In any other case, the Employee and the Company shall each bear all their
own costs and attorneys fees, except the Company shall pay the costs of any
arbitrator appointed hereunder.
10. 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, but shall be binding upon and inure to
the benefit of his heirs, administrators, and executors..
(b) Company. This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, provided that the
Company may not assign this Agreement except in connection with an assignment of
all or substantially all of the assets of the Company or by law as a result of a
merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Employee, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
11. 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.
<PAGE>
12. Other. The Company reserves the right to prospectively discontinue
or modify its compensation, incentive, benefit and perquisite plans, programs
and practices, but any such discontinuance or modification shall not diminish
any specified right of Employee hereunder. Moreover, the very brief summaries
contained herein are subject to the terms of such plans, programs and practices.
For purposes of the employee benefit plans, the definition of compensation is as
stated in the plans. Currently, pensions are based on base salary and annual
incentives. Other benefits are based on either base salary or base salary plus
annual incentives. All other compensation and payments included in this
Agreement are not included in the base for calculation of employee benefits. The
amounts paid under this Agreement upon a termination of employment are in lieu
of and inclusive of any amounts payable under any other plan, program or
practice of the Company with regard to termination of employment.
13. Entire Agreement; Amendments. This Agreement, which may be executed
in two or more counterparts, comprises 23 pages, 16 Sections and 4 Attachments
and represents the entire Agreement between Employee and the Company in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, convenants, 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, by the Chairman of the
Compensation Committee or his specially authorized representative, and the
Employee.
14. Survivorship. The respective rights and
obligations of the
parties hereunder shall survive any termination of the Employee's
employment to
the extent necessary to the intended preservation of
such rights and
obligations.
15. Notices. Any notice given to a party shall be in writing and shall
be deemed to have been given when delivered personally or two days after mailing
if sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently give such notice of:
If to the Company:
AT&T
295 North Maple Ave.
Basking Ridge, NJ 07920
Attn: Executive Vice President, Human
Resources
If to the Employee:
John R. Walter
President and Chief Operating Officer
AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
With a copy to:
Robert J. Stucker
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle St., Suite 2600
Chicago, IL 60601
<PAGE>
16. Governing Law. This Agreement shall be construed
and enforced in
accordance with the laws of the State of New Jersey without
consideration
of conflict of law principles.
In Witness Whereof, the parties hereto have executed this Agreement and
Company has affixed its corporate seal as of the day and year first above
written.
Company:
By: ________________________
H. W. Burlingame
Date: ________________________
Witnessed: ________________________
Date: ________________________
Employee: ________________________
Date: ________________________
Witnessed: ________________________
Date: ________________________
<PAGE>
Attachment A
MINIMUM PENSION SCHEDULE
(Amounts Assume 50% Joint and Survivor Pension is
declined)*
Retirement Age# Total Monthly
Pension**
---------------
- ---------------------
55 $ 69,444
56 75,000
57 80,554
58 86,109
59 91,664
60 97,219
61 102,774
62 108,329
63 113,884
64 119,433
65 125,000
* If survivor annuity is elected, amounts will be
decreased to reflect
practices in effect upon Employee's termination.
** The above Minimum Pension Schedule is subject to offsets
provided for in
Section 4(a) of the Agreement.
# Minimum Pension amounts will be prorated to the nearest whole
month.
Exhibit 12
AT&T Corp.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions)
(Unaudited)
For the Year Ended December 31,
1996 1995 1994
1993 1992
---- ---- ----
- ---- ----
Earnings Before Income Taxes $8,866 $5,255 $7,240
$6,359 $5,386
Less Interest Capitalized
during the Period 193 107 39
61 54
Less Undistributed Earnings
of Less than 50%
Owned Affiliates 155 205 91
59 76
Add Fixed Charges 1,127 1,350 1,224
1,269 1,293
Total Earnings $9,645 $6,294 $8,334
$7,508 $6,549
Fixed Charges
Total Interest Expense
Including Capitalized
Interest $ 887 $1,095 $ 951 $
980 $1,002
Interest Portion of
Rental Expense 240 255 273
289 291
Total Fixed Charges $1,127 $1,350 $1,224
$1,269 $1,293
Ratio of Earnings to
Fixed Charges 8.6 4.7 6.8
5.9 5.1
Management's Discussion and Analysis
1996 was a historic year for AT&T as we successfully separated into three
independent entities.
In 1996 we successfully completed our plan to separate into three publicly
held stand-alone companies, each focused on serving certain core businesses.
This began with the initial public offering (IPO) of 17.6% of Lucent
Technologies Inc. (Lucent) shares in April 1996, the largest IPO in history. We
distributed to our shareowners all of the shares we owned of Lucent on September
30, 1996. On October 1, 1996, we completed the sale of our majority interest in
AT&T Capital Corporation (AT&T Capital) and we received $1.8 billion in cash.
Finally, on December 31, 1996 we completed our plan when we distributed to our
shareowners all of our shares in NCR Corporation (NCR).
The actions taken in 1996 leave us in a strong position for the future. Our
debt ratio, excluding financial services, at the end of 1996 was 18.7%, among
the lowest in our industry. Our return on average assets from continuing
operations was approximately 10.3%, among the highest in our industry.
We made significant expenditures in 1996 for strategic investments into
various markets which we believe complement our core business. These include
internet access, consulting and outsourcing and local expansion. In 1996 we
continued our market share leadership in the consumer and business long distance
markets.
We continued to provide new products and services to our customers, such as
our AT&T One Rate program, a flat 15-cents-a-minute plan for consumers.
Announced at the end of September, the program already had nearly 3 million
subscribers at the end of December. Although the majority of One Rate customers
are existing AT&T customers moving from other calling plans, One Rate has
attracted a number of wins from competitors. Success in the telecommunications
market is about meeting complex customer needs and providing valuable and
reliable services. We are committed to meeting these needs by providing the
necessary service plans and by maintaining the AT&T long distance network which
has unparalleled reliability by almost any measure.
We continued to expand our relationship with our business customers from
one of simply carrying voice and data traffic playing a consultative role and
<PAGE>
becoming strategic partners. We now provide business consulting, outsourcing and
electronic commerce solutions among other services to business markets. For
example, we signed a $1.1 billion, ten-year contract with Textron, Inc. to
upgrade, expand and manage their global communications infrastructure.
As a result of the strategic restructuring, some changes in our financial
reporting format have been made. In order to appropriately reflect the ongoing
operations of the "new" AT&T, certain reclassifications have been made to
reflect the results of businesses that we have divested or plan to divest.
Accordingly, the revenues and expenses, assets and liabilities and cash flows of
Lucent, NCR and AT&T Capital, as well as certain other businesses, have been
excluded from the respective captions in the Consolidated Statements of Income,
Consolidated Balance Sheets and Consolidated Statements of Cash Flows. The net
operating results of these businesses have been reported as "Income (loss) from
discontinued operations," net of applicable income taxes, the net assets as "Net
assets of discontinued operations" and the net cash flows as "Net cash used in
discontinued operations." In addition, the consolidated results for continuing
operations have been reclassified to improve comparability with the
communications services industry. As a result of the spin-offs of Lucent and NCR
and the sale of AT&T Capital, our Consolidated Balance Sheet at December 31,
1996 no longer includes these entities in "Net assets of discontinued
operations." Additionally, the results of operations and net cash flows for
Lucent and AT&T Capital are reflected in our Consolidated Statements of Income
and Consolidated Statements of Cash Flows through the date these dispositions
occurred.
Restructuring and Other Charges
In the fourth quarter of 1995 we recorded a pretax charge of $3,029 million
for restructuring costs of $2,307 million and asset impairments and other
charges of $722 million. The charges covered consolidating and reorganizing
numerous corporate and business unit operations over several years. The total
pretax charge was recorded as $844 million in network and other communications
services, $934 million in depreciation and amortization, $1,245 million in
selling, general and administrative and $6 million in financial services
expenses. The tax benefit associated with the charges was $993 million.
During 1996 we continued to implement our restructuring plans. We completed
the restructuring of our proprietary network and messaging services business,
closed several call servicing centers, sold certain international operations,
and reorganized and reduced certain corporate support functions. As of December
31, 1996, approximately 5,000 management employees and 1,000 occupational
employees have been separated. Of the 5,000 management separations,
approximately 3,000 accepted voluntary separation packages. We expect the
<PAGE>
majority of our plans to be completed during 1997. However, certain severance
and facility costs have payment terms extending beyond 1997. A detailed
discussion of restructuring and other charges is in Note 5 to the Consolidated
Financial Statements.
AT&T operates in two industry segments, the telecommunications industry and
the financial services industry. Our communications services (which is part of
the telecommunications industry) consists of a wide range of services to
residential and business customers, including domestic and international
wireline long distance voice, data and video services, wireless services,
network management, business consulting, outsourcing, electronic commerce
solutions and internet access service. Our financial services segment primarily
consists of our AT&T Universal Card credit card business.
COMMUNICATIONS SERVICES
Communications services revenues grew 4.4% in 1996 and 5.4% in 1995.
Dollars in millions 1996 1995 1994
Revenues
Wireline $45,647 $44,226 $42,320
Wireless 3,476 2,926 2,280
Products and other services 1,392 1,251 1,338
Total communications services
revenues $50,515 $48,403 $45,938
Operating income $ 8,746 $5,159 $ 7,370
Operating margin 17.3% 10.7% 16.0%
Wireline services revenue, which includes traditional long distance toll
calling, network management, messaging and other network-enabled services,
increased 3.2% in 1996 and 4.5% in 1995. We handled a record 68 billion calls in
1996, causing conversation minutes for switched long distance services (volume)
to rise 5.9%. The volume growth in 1996 slowed from the nearly 9.0% growth
registered in 1995, reflecting competitive pressures from traditional sources in
the consumer markets as well as nontraditional sources such as smaller
telecommunications companies and dial-around resellers. This pressure was
somewhat offset by strong volume growth in business inbound services,
particularly toll-free 800 and 888 services.
Volume growth continued to exceed revenue growth in 1996. This reflected
lower pricing from promotional discounts, increased movement of customers to
optimal calling plans and increased discounts given to large accounts. As we
continued to expand internationally, international volumes increased while
related revenue remained relatively flat.
<PAGE>
In 1995 we saw volume growth in calling card, business inbound services and
consumer international services. Although volume growth exceeded revenue growth
(due primarily to customers taking advantage of our calling plans and
promotions), the gap between revenues and volumes was about 4% in 1995. This
reflected movement among calling plans by both business and residential
customers and some targeted price increases.
The long distance market is increasingly characterized by aggressive
pricing actions, the introduction of new competitors (such as dial-around
resellers) and price sensitivity on the part of consumers. As a result, revenue
as well as volume growth was adversely impacted. We expect that these conditions
will intensify in the future as the Regional Bell Operating Companies (RBOCs)
are permitted to provide long distance services in their home regions, thereby
negatively impacting our long distance volume and revenue. As the RBOCs, who
currently have zero market share, begin providing long distance services, we
will lose long distance market share. However, we will gain market share in the
local telephone service market as we are able to enter it.
Wireless services revenue, which includes cellular, messaging services, and
air-to-ground services, grew 18.8% in 1996 and 28.3% in 1995. The growth in both
periods was the result of consolidated cellular subscriber growth of 31.7% in
1996 and 39.2% in 1995.
Cellular customers, reported on the same basis as consolidated wireless
revenues, stood at 5.2 million at December 31, 1996 compared with 3.9 million at
December 31, 1995 and 2.8 million at December 31, 1994. Cellular customers
served by companies in which we have or share a controlling interest increased
to 7.1 million at December 31, 1996 from 5.5 million at December 31, 1995 and
4.0 million at December 31, 1994. Cellular revenue per subscriber was
approximately $60 per month in 1996 compared with approximately $69 in 1995 and
approximately $79 in 1994. The decline reflected industry wide pricing
pressures, as well as lower average usage per subscriber as expansion included
growth in subscribers who are more casual users (e.g. for emergency and other
personal use). However, based on reported financial information of wireless
competitors, our revenue per subscriber is above the industry average. The
number of casual users is expected to continue to grow in 1997, which will
likely result in lower average revenue per subscriber next year.
By combining our 800 MHZ cellular and 1900 MHZ personal communications
services (PCS) licenses, we can eventually provide wireless telecommunication
services to markets covering approximately 93% of the U.S. population. In
October 1996 we launched AT&T Digital PCS service in more than 40 of our
existing 800 MHZ wireless markets, covering 70 million potential customers. The
difference between AT&T Digital PCS and analog cellular service is in the
features. AT&T Digital PCS provides longer battery life, short text messaging
service, caller identification, message waiting indicator and enhanced security.
<PAGE>
AT&T Digital PCS allows customers to make and receive voice and data
transmissions to people rather than places. At December 31, 1996, we had more
than 900,000 digital subscribers, including over 500,000 receiving AT&T Digital
PCS service.
The overall penetration rate (number of cellular customers as a percentage
of the total population in the service territory) for markets in which we have
or share a controlling interest increased from 5.9% at December 31, 1995 to 7.5%
at December 31, 1996.
Products and other services revenue includes wireless product sales, online
services, consulting and outsourcing services, and other sales and services to
businesses and consumers. Products and other services revenue increased 11.2% in
1996 and decreased 6.5% in 1995. The roll-out of new and nontraditional services
drove the increase in 1996. The 1995 decrease was mainly due to lower other
services in our wireless business.
During 1996 we began offering internet access service under AT&T
WorldNet(sm) and had 568,000 subscribers by the end of the year. Our AT&T
WorldNet(sm) and hosting services and our consulting and outsourcing businesses
contributed to the increase in revenues. However, these start-up businesses
required significant expenditures in both years. These investments are necessary
for us to expand into the strategic areas we believe are important to our
future.
We signed numerous agreements in 1996 to provide consulting and outsourcing
services to various companies. We expect these agreements to increase products
and other services revenue in 1997. Revenue expected under contracts executed in
1996 primarily for outsourcing amounted to approximately $2.9 billion at
December 31, 1996. This is earned over the contract term, which can extend to up
to 10 years. Since revenue depends on actual usage under service contracts,
actual revenue for a particular contract may be higher or lower than the
reported expected amount.
Operating Expenses
Operating expenses for communications services included $3,023 million of
restructuring and other charges in 1995 and $246 million of McCaw Cellular
Communications, Inc. (McCaw) merger-related expenses in 1994. Excluding these
charges, operating expenses for communications services increased 3.9% in 1996
and 5.0% in 1995. The 1996 growth was due to increased selling, general and
administrative expenses and increased network and other communications services
expenses partially offset by decreased access and other interconnection
expenses. The 1995 growth was primarily due to increased selling, general and
administrative expenses. The expense growth rate decreased in 1996 primarily due
to lower access and other interconnection charges. As a result, the operating
margin for communications services increased in 1996 to 17.3% from 16.9% in
1995, excluding restructuring and other charges, and 16.6% in 1994.
<PAGE>
Access and other interconnection expenses are the charges for facilities
provided by local exchange carriers and other domestic service providers and
fees paid to foreign telephone companies (international settlements) to connect
calls made to or from foreign countries on our behalf. These charges are
designed to reimburse these carriers for the common and dedicated facilities and
switching equipment used to connect our network with their network. These costs
declined in both 1996 and 1995 due to lower per-minute access cost resulting
from changes in the price setting methodology approved by the Federal
Communications Commission (FCC), operational improvements in our infrastructure
and reduced international settlements. The decrease in 1996 was also partially
due to a second quarter accounting adjustment of previously estimated accruals
to reflect actual billing. These reductions were partially offset by increased
volumes and international traffic mix. Access and other interconnection expenses
as a percentage of wireline services revenue were 35.8% in 1996, 39.8% in 1995
and 42.1% in 1994.
Network and other communications services expenses include operating and
maintaining our network, operator services, nonincome taxes and the provision
for uncollectible receivables. Network and other communications services
expenses, excluding $844 million in 1995 related to restructuring and other
charges, increased in both 1996 and 1995 due to increased costs from our
expansion into new initiatives, enhancements made in customer care facilities
and higher provisions for uncollectibles.
New initiatives such as AT&T WorldNet(sm) and hosting services, preparing
for local service entry and our consulting and outsourcing businesses
represented approximately half of the increase in network and other
communications services expenses in 1996 and most of the increase in 1995. We
filed to offer local service in all 50 states less than three weeks after the
Telecommunications Act of 1996 (the Telecommunications Act) was signed in
February 1996. As of December 31, 1996, we had received authority to provide
local service in 42 states.
The higher provision for uncollectibles in 1996 reflects collection issues
as well as a shift in industry wide credit risk profiles of business customers
which resulted in increased bankruptcies, delinquencies and fraud. In particular
the business reseller market has experienced significant competition which has
had a negative impact on these customers' payment patterns. Our ongoing
provision for uncollectibles will continue to reflect the increased risk in our
business markets.
In 1996 the cost of operating our worldwide intelligent network was
essentially unchanged despite increased calling volumes and the increased
complexity of our service offerings.
<PAGE>
Depreciation and amortization expenses, excluding $934 million of
restructuring and other charges in 1995, increased $154 million or 6.0% in 1996.
This increase was primarily the result of additions to the telecommunications
network and was partially offset by the impact of the asset write-downs at the
end of 1995. We expect depreciation and amortization expense to continue to
increase with the expansion of our networks. (See Financial Condition and Cash
Flows - Investing activities for a discussion of capital expenditures.)
Additionally, subsequent to their divestment, purchases from Lucent and NCR
are recorded at the full commercial price. When these entities were part of our
consolidated results, these purchases were reflected at their manufacturing
costs. Going forward, this will result in higher capital expenditures and
related depreciation expense as well as higher period expenses for those items
not capitalized. We have committed to purchase $3,000 million from Lucent by the
end of 1998 and $350 million from NCR by the end of 1999. By the end of 1996 we
had purchased $2,726 million from Lucent and NCR under these agreements.
In 1995 depreciation and amortization expenses increased $192 million or
8.0%, excluding restructuring and other charges, due to increased capital
expenditures to support our telecommunications network services, to provide for
growth in calling volumes, to introduce new technology and to enhance
reliability. Also contributing to the increase was amortization associated with
the acquisition of the remaining interest in LIN Broadcasting Corporation (LIN)
in October 1995.
Selling, general and administrative expenses, excluding $1,245 million of
restructuring and other charges in 1995 and $246 million of McCaw merger-related
expenses in 1994, were 29.3% of communications services revenues in 1996, 27.1%
in 1995 and 24.8% in 1994. These costs increased as a percentage of
communications services revenues in both 1996 and 1995 due to expenditures for
new initiatives, higher marketing and sales expenses and enhancements to
customer care facilities.
Our initiatives for online services, such as AT&T WorldNet(sm), local
expansion and our consulting and outsourcing businesses represented about 30% of
our increase in 1996 and approximately 15% of our increase in 1995.
These increases were slightly offset in 1996 by lower costs per point for
our True Rewards program as well as the expiration of some True Rewards points.
Additionally, further offsetting the 1996 increase were cost reduction benefits
obtained from the 1995 restructuring.
Also included in selling, general and administrative expenses were $640
million, $563 million and $463 million of research and development expenses in
1996, 1995 and 1994, respectively. Research and development expenditures are
<PAGE>
mainly for work on wireless technology, advanced communications services and
projects aimed at international growth. These expenses included $6 million of
restructuring and other charges in 1995.
Financial Services
Dollars in millions 1996 1995 1994
Revenues (1) $ 1,669 $ 2,261 $ 1,838
Operating income 64 294 216
Operating margin 3.8% 13.0% 11.8%
Universal Card Information:
Total owned finance receivables $ 7,056 $10,618 $12,380
Total owned and managed
finance receivables 13,556 14,118 12,380
Cardholder accounts in millions 18.3 17.6 15.1
(1) Reflects revenues from owned receivables only. Owned receivables as a
percentage of total owned and managed receivables were 52% in 1996 and 75% in
1995.
Our financial services segment is primarily our AT&T Universal Card
Services business. Contributing to a lesser degree are some finance assets that
we retained from AT&T Capital as a result of their 1993 restructuring. Universal
Card continued to experience competitive pricing pressures and higher
charge-offs in 1996, as did the industry. The reserve for credit losses is set
based on experience, current delinquencies and the outlook for the economy.
Revenues have decreased in 1996 compared with 1995 primarily due to the impact
of securitizations we completed during 1995 and 1996. Additionally, lower rate
offers continued to decrease margins. In 1995 revenues increased due to a higher
level of average owned receivables. Universal Card's total managed receivables
included $6,500 million and $3,500 million of cumulative securitized receivables
at the end of 1996 and 1995, respectively. Universal Card retains the servicing
and customer relationships of the credit card accounts that were securitized.
Financial services expenses decreased $356 million or 18.2% in 1996, excluding
$6 million in 1995 for restructuring and other charges. This decrease reflects a
decrease in overall direct portfolio expenses (interest, provisions for credit
losses and other related costs) due to decreased owned receivables primarily
associated with the securitization program. Selling, general and administrative
expenses increased $83 million primarily due to customer loyalty programs.
Financial services operating income decreased $236 million in 1996, and
increased $84 million in 1995, excluding restructuring and other charges.
Operating margin was 3.8% in 1996, 13.3% in 1995 and 11.8% in 1994. The decrease
in 1996 was primarily due to the continued declinein portfolio credit
<PAGE>
performance and increased selling, general and administrative expenses. The
increase in 1995 was due to a higher level of average earning assets.
Other Income Statement Line Items
Other income - net includes sales and exchanges of cellular properties, net
equity earnings from investments, increases in the value of corporate-owned life
insurance policies on officers, minority owners' interests in the earnings or
losses of subsidiaries and other miscellaneous transactions.
In addition to the above, other income for 1996 included a loss on our
investment in Novell, Inc. stock and other income for 1994 included the loss
from a lost satellite and preferred dividends of a subsidiary.
Interest expense decreased in 1996 compared with 1995 due to lower levels
of average debt. The lower levels of average debt are primarily attributable to
the assignment of debt to Lucent and the application of the proceeds from the
sale of AT&T Capital. Interest expense in 1995 compared with 1994 increased as a
result of higher levels of average debt offset partially by lower average rates
on long-term debt.
The effective income tax rate is the provision for income taxes as a
percentage of income from continuing operations before income taxes. The
effective income tax rate for 1996 of 36.7% was impacted by tax benefits
associated with various legal entity restructurings. The 1995 effective income
tax rate of 39.0% was impacted by the restructuring and other charges. Excluding
such charges, our 1995 effective income tax rate was 36.7% which was favorably
impacted by lower state tax rates and higher research credits. The 1994
effective income tax rate of 39.3% was impacted by McCaw merger-related expenses
as well as a tax benefit of $74 million as a result of the redemption of a
subsidiary's preferred stock. Excluding these charges, our effective income tax
rate for 1994 was 38.8%.
Income from discontinued operations was $138 million in 1996, $251 million
in 1995 excluding restructuring and other charges of $3,317 million, and $317
million in 1994. Income from discontinued operations includes the results of NCR
and other businesses, and the results of Lucent and AT&T Capital through
September 30, 1996. As a result, the decline in 1996 relates primarily to Lucent
and AT&T Capital being included for only a portion of the year. Discontinued
operations also includes the elimination of intercompany transactions, an
allocation of AT&T's interest expense (based on a ratio of net assets of
discontinued operations to total AT&T consolidated assets), and a portion of
AT&T's consolidated taxes attributable to discontinued businesses. We recognized
a $162 million after-tax gain on the sale of AT&T Capital as a separate
component of discontinued operations in 1996. Included in 1996 income from
discontinued operations in 1996.
<PAGE>
Included in 1996 income from discontinued operations is a nonrecurring tax
benefit of $155 million as a result of reversing deferred tax liabilities on the
earnings of Lucent's non-U.S. consolidated subsidiaries. The subsidiaries have
the ability and specific intention to permanently reinvest such undistributed
earnings. These deferred tax liabilities reduced income from discontinued
operations in earlier years.
Financial Condition and Cash Flows
Operating activities. Cash flow from operating activities decreased 3.6% to
$8,734 million in 1996 and increased 14.0% to $9,060 million in 1995. The
decrease in 1996 related to required cash payments for restructuring and other
charges amounting to $471 million. We expect that another $1.4 billion will
require future cash payments. The increase in 1995 was consistent with the
growth in our income from continuing operations, excluding restructuring and
other charges.
EBITDA (earnings before interest, taxes, depreciation and amortization) for
our communications services business was $11,938 million in 1996, $11,098
million in 1995 (excluding restructuring and other charges) and $10,138 million
in 1994 (excluding merger-related expenses). The increase in EBITDA in both 1996
and 1995 relates to a higher level of revenues and lower access and
interconnection expenses. EBITDA is a measure of our ability to generate cash
flows, and should be considered in addition to, but not as a substitute for,
other measures of financial performance reported in accordance with generally
accepted accounting principles.
Investing activities. We used $1,490 million in 1996, $8,987 million in 1995 and
$7,276 million in 1994 for investing activities. Included in 1996 investing
activities were net capital expenditures, proceeds received from securitizations
and proceeds received from divestments, including the sale of AT&T Capital.
Capital expenditures (primarily associated with our network and wireless
infrastructure), acquisitions of businesses and investments and the acquisitions
of PCS and cellular licenses were approximately $7.3 billion in 1996, $10.0
billion in 1995 and $3.9 billion in 1994. This resulted in net cash outlays for
the foregoing in each of 1996, 1995 and 1994 of approximately $6.9 billion,
$10.1 billion and $3.8 billion, respectively.
In 1996 we continued to invest in our communications network in order to
increase capacity, reliability and enhance network intelligence to provide new
products and services. This included the continued deployment of Synchronous
Optical Network Technology (SONET) for our long distance network, as well as
SONET rings which provide millisecond restoration of traffic in the event of a
fiber cut. We also invested in switching system software associated with
advanced call features. Further, we expanded our wireless infrastructure to
provide higher capacity and improve service quality. Substantial investments in
our communications services business are expected to continue as we upgrade our
network and invest in new markets.
<PAGE>
Competition in communications is global and increasingly involves
multinational firms and partners. We believe commitments of resources to expand
globally are necessary for future growth. For example, we have established a
presence in the United Kingdom to compete directly with the dominant national
provider.
Also contributing to investing activities is our financial services
business. Securitizations of credit card receivables brought in cash of $3.0
billion in 1996 and $3.5 billion in 1995. Securitization may continue to be used
as a financing alternative in the future.
Financing activities. Cash used for financing activities was $5,381 million in
1996 and $222 million in 1994. In 1995 financing activities provided cash of
$1,420 million. AT&T has raised all necessary external financing through
issuances of commercial paper and long-term debt, as well as asset-backed
securities (the Universal Card securitizations) and equity. We expect to be able
to arrange any necessary future 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.
During 1996 we retired long-term debt of $1,236 million and decreased
short-term debt by $5,302 million. The changes in debt reflect the use of
alternative sources of funding, such as securitizations, as well as the impact
of Lucent obtaining its own external financing in 1996. Additionally, the cash
collection of the $2.0 billion in accounts receivable retained by AT&T
continuing operations as part of the restructuring plan and the proceeds of $1.8
billion from the sale of AT&T Capital were used to pay down our debt.
In 1995 we retired $2,137 million of long-term debt, but borrowed an
additional $2,392 million of long-term debt and $1,939 million of short-term
debt. In 1994 we retired $4,078 million in long-term debt and borrowed $3,422
million of long-term debt and $1,217 million of short-term debt.
In each of the past three years, we issued new shares of common stock in
our shareowner and employee benefit stock-ownership plans. In 1997 stock used in
our shareowner and employee benefit stock-ownership plans will now be purchased
in the stock market instead of using unissued or treasury shares. This will
minimize the dilutive effects of these plans on equity shareowners, but will
require us to use cash to purchase the shares. We also paid dividends of $2,122
million in 1996, $2,088 million in 1995 and $1,870 million in 1994.
<PAGE>
On a limited basis, we use certain derivative financial instruments in an
effort to manage exposure to interest rate risk and foreign exchange risk. Our
utilization of these instruments is limited to interest rate swap agreements,
forward contracts and options in foreign currencies to hedge exposures. We do
not enter into such instruments for speculative purposes. All hedging activity
is in accordance with board-approved policies. Any potential loss or exposure
related to our use of derivative instruments is immaterial to our overall
operations, financial condition and liquidity. 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 counterparty
to perform its payment obligations 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, 1996, nor have we ever recorded any charge-offs
related to derivative contracts.
Total assets decreased from the end of 1995 primarily due to lower net
assets of discontinued operations, finance receivables and current deferred
income taxes. The decrease in net assets of discontinued operations is primarily
due to the dispositions of Lucent, NCR and AT&T Capital in 1996. Finance
receivables decreased mainly due to the Universal Card securitizations. The
decrease in current deferred income tax assets is partially offset by the
decrease in long-term deferred income tax liabilities. These decreases reflect
the portion of long-term deferred income tax liabilities at year-end 1995 that
became current in 1996.
The decreases in assets were partially offset by increases in property,
plant and equipment and accounts receivable. The increase in property, plant and
equipment was primarily due to capital expenditures for the AT&T network and
wireless infrastructure. The increased accounts receivable was driven by our
increased revenues.
Total liabilities decreased from December 31, 1995 primarily due to lower
short- and long-term debt, deferred income taxes and other long-term liabilities
and deferred credits. The lower levels of debt are primarily attributable to the
Universal Card securitization program, the assignment of debt to Lucent, and the
application of the cash received from the $2.0 billion in retained receivables
from Lucent and the proceeds from the sale of AT&T Capital. Long-term deferred
income tax liabilities declined due to the reclassification of deferred income
taxes to current as discussed above. Other long-term liabilities and deferred
credits were down primarily due to certain restructuring-related liabilities
becoming current.
These decreases were offset by increases in accounts payable and other
current liabilities. Increased accounts payable relate to increased capital
expenditures, higher international settlement payables due to timing of payments
and payables related to increased marketing and sales efforts. Increased current
<PAGE>
liabilities reflect increased current taxes payable due primarily
to the sale of
AT&T Capital.
Shareowners' equity was $20,295 million at December 31, 1996 and $17,274
million at December 31, 1995. The increase is due primarily to net income and
shares issued under employee plans offset primarily by the impact of the Lucent
and NCR spin-offs of approximately $2.2 billion and dividends of $2.1 billion.
The ratio of total debt to total capital (debt plus equity) decreased to
33.8% at December 31, 1996, compared with 54.5% at December 31, 1995. Most of
our debt supports financial services operations. Excluding financial services,
our debt ratio was 18.7% at the end of 1996 and 41.3% at the end of 1995. In
1996 we reduced our debt levels significantly as discussed above. The 1995 ratio
was higher because of the restructuring and other charges and by the issuance of
additional debt to finance the acquisitions of PCS licenses and the remaining
48% of LIN. Additionally, we had approximately $6.0 billion of unused available
lines of credit at December 31, 1996.
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 the 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 asset in 1996.
Legislative Developments, Regulatory Developments and Competition
In February 1996 the Telecommunications Act became law. The
Telecommunications Act, among other things, was designed to foster local
exchange competition by establishing a regulatory framework to govern new
competitive entry in local and long distance telecommunications services. The
Telecommunications Act permits RBOCs to provide interexchange services after
demonstrating to the FCC that such provision is in the public interest and
satisfying the conditions for developing local competition established by the
Telecommunications Act.
In August 1996 the FCC adopted rules and regulations (the Implementing
Rules) to implement the local competition provisions of the Telecommunications
Act. The Implementing Rules rely on each state to develop the specific rates and
procedures in such state within the framework prescribed by the FCC for
developing such rates and procedures. In October 1996 the United States Court of
Appeals for the 8th circuit ordered a stay of the effectiveness of certain of
the Implementing Rules until such court resolves challenges thereto by local
telephone companies and telephone regulators in several states.
<PAGE>
We believe that such stay may inhibit the establishment of appropriate
permanent rates for the provision of network elements and wholesale services.
Absent full effectiveness of the stayed Implementing Rules, each state will
determine the applicable rates and procedures independent of the framework of
the Implementing Rules. Since the stay was issued, many states have used the
Implementing Rules as guidelines in establishing interim rates that will apply
pending the determination of permanent rates in subsequent state proceedings.
Nevertheless, in the absence of the Implementing Rules, there can be no
assurance that the prices and other conditions established in each state will
provide for effective local service entry and competition or provide us with new
market opportunities.
In addition to the matters referred to above, various other factors,
including market acceptance, start-up and ongoing costs associated with the
provision of new services and local conditions and obstacles, could adversely
affect the timing and success of our entrance into the local exchange services
market and our ability to offer combined service packages that include local
service. Because it is widely anticipated that substantial numbers of long
distance customers will seek to purchase local, interexchange and other services
from a single carrier as part of a combined or full service package, any
competitive disadvantage, inability to profitably provide local service at
competitive rates or delays or limitations in providing local service or
combined service packages could adversely affect our future revenues and
earnings. In addition, the simultaneous entrance of numerous new competitors for
interexchange and combined service packages is likely to adversely affect our
long distance revenues and could adversely affect earnings.
We currently face significant competition in the communications services
industry and expect that the level of competition will continue to increase. The
Telecommunications Act has already begun to intensify the competitive
environment in recent months. Non-RBOC local exchange carriers, which are not
required to implement the Telecommunications Act competitive checklist prior to
offering long distance in their home markets, anticipating changes in the
industry, have begun integrating their local service offerings with long
distance offerings in advance of AT&T being able to offer combined local and
long distance service in these areas. In addition, most of the RBOCs have
indicated their intention to petition the FCC during 1997 for permission to
offer interexchange services in one or more states within their home regions.
Recent Pronouncements
In June 1996 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This statement
requires that liabilities incurred or obtained by transferors as part of a
transfer of financial assets be initially measured at fair value, if practical.
<PAGE>
It also requires that servicing assets and other retained interests in
transferred assets be recognized and measured by allocating the previous
carrying amount between assets sold and retained interests based upon their
relative fair values at the date of transfer. The statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and early adoption is prohibited. The
adoption of this standard will not have a material impact on our consolidated
financial statements.
Forward Looking Statements
Except for the historical statements and discussions contained herein,
statements contained in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward looking statements rely on
a number of assumptions concerning future events, and are subject to a number of
uncertainties and other factors, many of which are outside our control, that
could cause actual results to differ materially from such statements.
Readers are cautioned not to put undue reliance on such forward looking
statements. These factors and uncertainties include the adoption of balanced and
effective rules and regulations by the state public regulatory agencies, our
ability to achieve a significant market penetration in new markets and the
related costs thereof, and competitive pressures. Shareowners may review our
reports filed with the Securities and Exchange Commission for a more detailed
description of the uncertainties and other factors that could cause actual
results to differ materially from such forward looking statements. We disclaim
any intention or obligation to update or revise forward looking statements,
whether as a result of new information, future events or otherwise.
<PAGE>
SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(UNAUDITED)
AT&T Corp. and Subsidiaries
Dollars in millions (except per share amounts)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1996 1995* 1994 1993* 1992 1991*
- ------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Total revenues $52,184 $50,664 $47,776 $45,002 $43,784 $42,309
Operating income 8,810 5,453 7,586 6,675 6,278 2,503
Income from continuing
operations before cumulative
effects of accounting changes 5,608 3,205 4,393 3,882 3,253 1,083
Income before cumulative
effects of accounting changes 5,908 139 4,710 3,702 3,442 171
Net income (loss) 5,908 139 4,710 (5,906) 3,442 171
Earnings per common share:
Income from continuing
operations before cumulative
effects of accounting changes 3.47 2.01 2.81 2.51 2.14 0.73
Income before cumulative
effects of accounting changes 3.66 0.09 3.01 2.39 2.27 0.12
Net income (loss) 3.66 0.09 3.01 (3.82) 2.27 0.12
Dividends declared per
common share 1.32 1.32 1.32 1.32 1.32 1.32
ASSETS AND CAPITAL
Property, plant and
equipment - net $19,794 $16,083 $14,470 $13,699 $13,638 $13,096
Total assets -
continuing operations 55,026 54,969 48,578 42,217 41,239 37,450
Total assets 55,552 62,395 57,448 50,181 50,632 48,781
Long-term debt 7,883 8,542 8,934 10,287 12,210 12,167
<PAGE>
SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA (Cont'd)
(UNAUDITED)
AT&T Corp. and Subsidiaries
Dollars in millions (except per share amounts)
1996 1995* 1994 1993* 1992 1991*
- ------------------------------------------------------------------------------------------------
Total debt 10,343 20,718 18,533 18,191 17,122 16,756
Shareowners' equity 20,295 17,274 17,921 13,374 20,313 17,973
Gross capital expenditures 6,785 4,522 3,370 2,554 2,319 2,435
Employees -
continuing operations 130,400 128,400 119,100 121,900 122,000 119,100
OTHER INFORMATION
Operating income as a
percentage of revenues 16.9% 10.8% 15.9% 14.8% 14.3% 5.9%
Income from continuing
operations as a percentage
of revenues 10.7% 6.3% 9.2% 8.6% 7.4% 2.6%
Return on average common
equity 28.0% 0.7% 29.5% (47.1)% 17.6% 0.9%
Data at year-end:
Stock price per share** $41.31 $44.40 $34.46 $36.00 $34.97 $26.83
Book value per common share $12.50 $10.82 $11.42 $ 8.65 $13.31 $12.05
Debt ratio 33.8% 54.5% 50.8% 57.6% 45.7% 48.2%
Debt ratio excluding
financial services 18.7% 41.3% 30.0% 43.0% 36.5% 42.9%
- ------------------------------------------------------------------------------------------------
<FN>
*1995 continuing operations data reflect $3.0 billion of pretax business
restructuring and other charges.
1993 net income reflects a $9.6 billion net charge for three accounting
changes.
1991 continuing operations data reflect $3.5 billion of pretax business
restructuring and other charges. **Stock prices have been restated to reflect
the spin-offs of Lucent and NCR.
</FN>
</TABLE>
<PAGE>
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
Corp. and subsidiaries (AT&T) 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
accountants 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
accountants meet privately with the Audit Committee. These accountants also have
access to the Audit Committee and its individual members at any time.
<PAGE>
The financial statements in this annual report have been audited by Coopers
& Lybrand L.L.P., Independent Accountants. Their audits were conducted in
accordance with generally accepted auditing standards and include an assessment
of the internal control structure and selective tests of transactions. Their
report follows.
Richard W. Miller Robert E. Allen
Senior Executive Vice President, Chairman of the Board,
Chief Financial Officer Chief Executive Officer
REPORT OF INDEPENDENT ACCOUNTANTS
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, 1996 and 1995, and the related consolidated
statements of income, changes in shareowners' equity and cash flows for the
years ended December 31, 1996, 1995 and 1994. 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, 1996 and 1995, and the consolidated results of their operations and
their cash flows for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York
January 22, 1997
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions (except per share amounts) 1996 1995 1994
Sales and Revenues
Communications services..................... $50,515 $48,403 $45,938
Financial services.......................... 1,669 2,261 1,838
Total revenues.............................. 52,184 50,664 47,776
Operating Expenses
Access and other interconnection............ 16,332 17,618 17,797
Network and other communications services... 7,911 7,750 6,747
Depreciation and amortization............... 2,740 3,520 2,394
Selling, general and administrative......... 14,786 14,356 11,630
Total communications services expenses.... 41,769 43,244 38,568
Financial services expenses................. 1,605 1,967 1,622
Total operating expenses.................... 43,374 45,211 40,190
Operating income............................ 8,810 5,453 7,586
Other income - net.......................... 390 280 89
Interest expense............................ 334 478 435
Income from continuing operations before
income taxes.............................. 8,866 5,255 7,240
Provision for income taxes.................. 3,258 2,050 2,847
Income from continuing operations........... 5,608 3,205 4,393
Discontinued operations
Income(loss) from discontinued operations
(net of tax benefits of $374 in 1996,
$1,254 in 1995 and $39 in 1994)........... 138 (3,066) 317
Gain on sale of discontinued operation
(net of taxes of $138).................... 162 - -
Net income ................................. $ 5,908 $ 139 $ 4,710
Weighted-average common shares and
common share equivalents (millions)....... 1,616 1,592 1,564
Per common share
Income from continuing operations........... $ 3.47 $ 2.01 $ 2.81
Income(loss) from discontinued operations... 0.09 (1.92) 0.20
Gain on sale of discontinued operation...... 0.10 - -
Net income.................................. $ 3.66 $ 0.09 $ 3.01
The notes on pages 34 through 44 are an integral part of the consolidated
financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS AT&T CORP. AND SUBSIDIARIES
At December 31
Dollars in millions 1996 1995
ASSETS
Cash and cash equivalents................... $ 134 $ 129
Receivables, less allowances of $1,336 and $1,252
Accounts receivable....................... 8,973 8,359
Finance receivables....................... 7,087 10,665
Deferred income taxes....................... 1,413 2,437
Other current assets........................ 703 498
TOTAL CURRENT ASSETS........................ 18,310 22,088
Property, plant and equipment - net......... 19,794 16,083
Licensing costs, net of accumulated
amortization of $913 and $743............. 8,071 8,056
Investments................................. 3,883 3,646
Long-term finance receivables............... 703 768
Prepaid pension costs....................... 1,933 1,793
Other assets................................ 2,332 2,535
Net assets of discontinued operations....... 526 7,426
TOTAL ASSETS................................ $55,552 $62,395
LIABILITIES
Accounts payable............................ $ 6,173 $ 5,089
Payroll and benefit-related liabilities..... 2,635 2,908
Debt maturing within one year............... 2,460 12,176
Dividends payable........................... 536 527
Other current liabilities................... 4,514 3,880
TOTAL CURRENT LIABILITIES................... 16,318 24,580
Long-term debt.............................. 7,883 8,542
Long-term benefit-related liabilities....... 3,037 2,871
Deferred income taxes....................... 4,827 5,446
Other long-term liabilities and deferred
credits 3,192 3,682
TOTAL LIABILITIES........................... 35,257 45,121
SHAREOWNERS' EQUITY
Common shares, par value $1 per share....... 1,623 1,596
Authorized shares: 2,000,000,000
Outstanding shares: 1,623,487,646 at December 31, 1996;
1,596,005,351 at December 31, 1995
Additional paid-in capital.................. 15,643 16,614
Guaranteed ESOP obligation.................. (96) (254)
Foreign currency translation adjustments.... 47 5
Retained earnings (deficit)................. 3,078 (687)
TOTAL SHAREOWNERS' EQUITY................... 20,295 17,274
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY... $55,552 $62,395
The notes on pages 34 through 44 are an integral part of the consolidated
financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREOWNERS' EQUITY AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions 1996 1995 1994
Common shares
Balance at beginning of year $ 1,596 $ 1,569 $ 1,547
Shares issued:
Under employee plans 19 13 11
Under shareowner plans 8 13 8
Other - 1 3
Balance at end of year 1,623 1,596 1,569
Additional paid-in capital
Balance at beginning of year 16,614 15,825 14,324
Shares issued:
Under employee plans 975 598 536
Under shareowner plans 434 687 424
Other - 31 133
Preferred stock redemption - - 408
Dividends declared - (527) -
Spin-offs of Lucent and NCR(a) (2,380) - -
Balance at end of year 15,643 16,614 15,825
Guaranteed ESOP obligation
Balance at beginning of year (254) (305) (355)
Amortization 52 51 50
Assumption by Lucent(a) 106 - -
Balance at end of year (96) (254) (305)
Foreign currency translation adjustments
Balance at beginning of year 5 145 (32)
Translation adjustments (33) (140) 177
Spin-offs of Lucent and NCR(a) 75 - -
Balance at end of year 47 5 145
Retained earnings (deficit)
Balance at beginning of year (687) 687 (2,110)
Net income 5,908 139 4,710
Dividends declared (2,132) (1,570) (1,940)
Other changes (11) 57 27
Balance at end of year 3,078 (687) 687
Total Shareowners' Equity $20,295 $17,274 $17,921
(a) The net impact of the spin-offs of Lucent and NCR on total shareowners'
equity was $2,199 million.
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. In connection
with the Lucent spin-off, $106 million of the unamortized guaranteed ESOP
obligation was assumed by Lucent.
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 34 through 44 are an integral part of the consolidated
financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS AT&T CORP. AND SUBSIDIARIES
Years Ended December 31
Dollars in millions 1996 1995 1994
OPERATING ACTIVITIES
Net income $ 5,908 $ 139 $ 4,710
Add:(Income)loss from discontinued operations (138) 3,066 (317)
Gain on sale of discontinued operation (162) - -
Income from continuing operations 5,608 3,205 4,393
Adjustments to reconcile net income to net cash provided by
operating activities
of continuing operations:
Restructuring and other charges - 3,029 -
Depreciation and amortization 2,740 2,586 2,394
Provision for uncollectibles 2,443 2,272 1,697
Increase in accounts receivable (2,149) (2,231) (1,857)
Increase in accounts payable 438 850 562
Net (increase)decrease in other operating
assets and liabilities (861) (93) 319
Other adjustments for noncash items - net 515 (558) 436
NET CASH PROVIDED BY OPERATING ACTIVITIES
OF CONTINUING OPERATIONS 8,734 9,060 7,944
INVESTING ACTIVITIES
Capital expenditures (6,339) (4,616) (3,302)
Proceeds from sale or disposal of property,
plant and equipment 145 204 54
Decrease(increase) in finance assets 139 (2,364) (3,537)
Proceeds from securitizations of
finance receivables 3,000 3,492 -
Acquisitions of licenses (267) (1,978) (293)
Net increase in investments (290) (101) (114)
Dispositions(acquisitions), net of
cash acquired 2,145 (3,406) (105)
Other investing activities - net (23) (218) 21
NET CASH USED IN INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (1,490) (8,987) (7,276)
FINANCING ACTIVITIES
Proceeds from long-term debt issuances - 2,392 3,422
Retirements of long-term debt (1,236) (2,137) (4,078)
Issuance of common shares 1,293 1,214 976
Dividends paid (2,122) (2,088) (1,870)
(Decrease)increase in short-term
borrowings - net (5,302) 1,939 1,217
Other financing activities - net 1,986 100 111
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES OF CONTINUING OPERATIONS (5,381) 1,420 (222)
Effect of exchange rate changes on cash 9 40 (6)
Net cash used in discontinued operations (1,867) (1,624) (392)
Net increase(decrease) in cash and
cash equivalents 5 (91) 48
Cash and cash equivalents at
beginning of year 129 220 172
Cash and cash equivalents at
end of year $ 134 $ 129 $ 220
The notes on pages 34 through 44 are an integral part of the consolidated
financial statements.
<PAGE>
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. This represents the majority of our
investments. Generally, investments in which we have less than a 20% ownership
interest are accounted for under the cost method of accounting.
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
We recognize wireline and wireless services revenue based upon minutes of
traffic processed and contracted fees. Generally, we recognize products and
other services revenue in accordance with contract terms. Our financial services
revenue is recognized over the life of the finance receivables using the
interest method.
ADVERTISING COSTS
We expense costs of advertising as incurred. Advertising expense was
$2,667, $2,148 and $2,050 in 1996, 1995 and 1994, 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.
EARNINGS PER SHARE
We use the weighted-average number of shares of common shares and common
share equivalents outstanding during each period to compute earnings per common
share. Common share equivalents are stock options assumed to be exercised for
purposes of this computation.
<PAGE>
STOCK-BASED COMPENSATION
We apply the intrinsic value based method of accounting for our stock-based
compensation plans, and except for certain plans, we do not record compensation
expense.
CASH EQUIVALENTS
We consider all highly liquid investments with original maturities of
generally three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
We state property, plant and equipment at cost, unless impaired, and
determine depreciation based upon the assets= estimated useful lives using
either the group or unit method. The group method is used for most depreciable
assets. When we sell or retire assets that were depreciated using the group
method, we deduct the cost from property, plant and equipment and accumulated
depreciation. The unit method is used primarily for large computer systems and
undersea submarine cables. When we sell assets that were depreciated using the
unit method, we include the gains or losses in operating results.
We use accelerated depreciation methods primarily for digital equipment
used in the telecommunications network, except for 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.
Long-lived assets are 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 undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and carrying value of the asset.
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 accounted for as purchases. We amortize
goodwill on a straight-line basis over the periods benefited ranging from 5 to
40 years. Goodwill is reviewed for impairment annually or whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount, a loss is recognized for the difference between the
fair value and carrying value of the asset.
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 - net.
<PAGE>
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
certain items such as long-term contracts, allowance for doubtful accounts,
depreciation and amortization, employee benefit plans, taxes, restructuring
reserves and contingencies.
RECLASSIFICATIONS
We reclassified certain amounts for previous years to conform with the 1996
presentation.
2. DISCONTINUED OPERATIONS
On September 20, 1995, AT&T announced a plan, subject to certain
conditions, to separate into three independent, publicly held, global companies:
communications services (AT&T), communications systems and technologies (Lucent
Technologies Inc., "Lucent") and transaction-intensive computing (NCR
Corporation, "NCR"). In April 1996 Lucent sold 112 million shares of common
stock in an initial public offering (IPO), representing 17.6% of the Lucent
common stock outstanding. Because of AT&T's plan to spin off its remaining 82.4%
interest in Lucent, the sale of the Lucent stock was recorded as an equity
transaction, resulting in an increase in AT&T's additional paid-in capital at
the time of the IPO. In addition, in connection with the restructuring, Lucent
assumed $3.7 billion of AT&T debt in 1996. On September 30, 1996, AT&T
distributed to AT&T shareowners of record as of September 17, 1996, the
remaining Lucent common stock held by AT&T. The shares were distributed on the
basis of .324084 of a share of Lucent for each AT&T share outstanding.
Also announced as part of the separation plan was AT&T's intent to pursue
the sale of its remaining approximate 86% interest in AT&T Capital Corporation
(AT&T Capital). On October 1, 1996, AT&T sold its remaining interest in AT&T
Capital for approximately $1.8 billion, resulting in a gain of $162, or $.10 per
share, after taxes.
On December 31, 1996, AT&T also distributed all of the outstanding common
stock of NCR to AT&T shareowners of record as of December 13, 1996. The shares
were distributed on the basis of .0625 of a share of NCR for each AT&T share
outstanding on the record date. As a result of the Lucent and NCR distributions,
AT&T's shareowners' equity was reduced by $2.2 billion. The distributions of the
Lucent and NCR common stock to AT&T shareowners were noncash transactions which
did not affect AT&T's results of operations. The distribution of NCR stock
completed AT&T's strategic restructuring plan as announced on September 20,
1995.
The consolidated financial statements of AT&T have been restated to reflect
the dispositions of Lucent, NCR and AT&T Capital and the planned dispositions of
other businesses as discontinued operations. Accordingly, the revenues, costs
and expenses, assets and liabilities, and cash flows of Lucent, NCR, AT&T
Capital and other businesses have been excluded from the respective captions in
the Consolidated Statements of Income, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, and have been reported through the dates
of disposition as "Income (loss) from discontinued operations," net of
applicable income taxes; as "Net assets of discontinued operations"; and as "Net
cash used in discontinued operations" for all periods presented.
<PAGE>
Summarized financial information for the discontinued
operations is as
follows:
1996 1995 1994
Revenues $22,341 $28,945 $27,318
Income (loss) before
income taxes (236) (4,320) 278
Net income (loss) 138 (3,066) 317
Current assets 554 17,415
Total assets 862 34,181
Current liabilities 230 14,787
Total liabilities 336 26,755
Net assets of discontinued
operations $ 526 $ 7,426
The income (loss) before income taxes includes allocated interest expense
of $45, $134 and $198 in 1996, 1995 and 1994, respectively. Interest expense was
allocated to discontinued operations based on a ratio of net assets of
discontinued operations to total AT&T consolidated assets.
3. CHANGES IN ACCOUNTING PRINCIPLES
In 1997 we will adopt Statement of Financial Accounting Standards (SFAS)
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Among other provisions, this standard requires
that in connection with the transfer of financial assets, liabilities incurred
should be measured at fair value and retained interests should be recorded as a
portion of the original carrying amount of the transferred financial assets. The
adoption of this standard will not have a material impact on our results of
operations, financial position or cash flows.
4. SUPPLEMENTARY FINANCIAL INFORMATION SUPPLEMENTARY INCOME
STATEMENT
INFORMATION
Years ended December 31 1996 1995 1994
INCLUDED IN DEPRECIATION AND AMORTIZATION
Amortization of licensing costs $ 170 $ 133 $ 115
Amortization of goodwill 52 74 38
INCLUDED IN SELLING, GENERAL AND
ADMINISTRATIVE
Research and development expenses $ 640 $ 563 $ 463
FINANCIAL SERVICES EXPENSES
Interest expense $ 392 $ 638 $ 453
Provision for losses 504 663 539
Other costs 410 450 361
Selling, general and administrative 299 216 269
Total $1,605 $1,967 $1,622
<PAGE>
OTHER INCOME - NET 1996 1995 1994
Interest income $ 18 $ 38 $ 30
Minority interests in earnings
of subsidiaries (15) (17) (22)
Net equity earnings from investments 67 103 104
Officers' life insurance 74 73 34
Sale/exchange of cellular investments 158 64 12
Miscellaneous - net 88 19 (69)
Total other income - net $ 390 $ 280 $ 89
DEDUCTED FROM INTEREST EXPENSE
Capitalized interest $ 193 $ 107 $ 39
SUPPLEMENTARY BALANCE SHEET INFORMATION
At December 31 1996 1995
PROPERTY, PLANT AND EQUIPMENT
Machinery, electronic and other equipment $32,858 $27,320
Buildings and improvements 6,288 5,973
Land and improvements 376 411
Total property, plant and equipment 39,522 33,704
Accumulated depreciation (19,728) (17,621)
Property, plant and equipment - net $19,794 $16,083
OTHER ASSETS
Unamortized goodwill $ 1,325 $ 1,345
Deferred charges 491 596
Other 516 594
Total other assets $ 2,332 $ 2,535
SUPPLEMENTARY CASH FLOW INFORMATION
Years ended December 31 1996 1995 1994
Interest payments net of
amounts capitalized $ 765 $ 1,049 $ 873
Income tax payments 2,121 2,154 2,136
On September 30, 1996 AT&T distributed to AT&T shareowners all of the
remaining 82.4% of Lucent common stock held by AT&T, resulting in a noncash
distribution of $2.7 billion. Also, on December 31, 1996 AT&T distributed all of
the outstanding stock of NCR to AT&T shareowners, resulting in a noncash
distribution of $2.1 billion.
In 1995 we acquired the remaining 48% of LIN Broadcasting Corporation (LIN)
for approximately $3.3 billion. The purchase price was allocated to the fair
value of assets acquired of $4.0 billion and the fair value of liabilities
assumed of $.7 billion.
<PAGE>
5. BUSINESS RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1995 we recorded a pretax charge of $3,029 to
cover restructuring costs of $2,307 and asset impairments and other charges of
$722. This charge included plans to exit certain proprietary network and
messaging services; restructure customer service organizations; consolidate call
servicing centers; exit certain satellite services; reorganize corporate support
functions such as information systems, human resources and financial operations;
and restructure certain international operations.
As part of our plan to sell certain businesses and to restructure our
operations, restructuring liabilities of $1,718 were recorded for employee
separation costs, costs associated with early termination of building leases and
other items. In addition, asset impairments of $567 (which directly reduced the
carrying value of the related asset balances) and $22 of benefit plan losses
were recorded. 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 1995 restructure charge of $2,307 included separation costs for nearly
17,000 employees, which included approximately 12,000 management and 5,000
occupational employees. As of December 31, 1996, approximately 5,000 management
employees and 1,000 occupational employees have been separated. Of the 5,000
management sepa rations, approximately 3,000 accepted voluntary severance
packages.
During 1996 we completed the restructuring of our proprietary network and
messaging services business, closed several call servicing centers, sold certain
international operations and reorganized certain corporate support functions.
The implementation of certain restructuring activities are occurring at a slower
pace than planned. There have been delays in exiting certain businesses and
reorganizing corporate support functions, in part, to ensure customer
satisfaction during this transition period. We expect the majority of our plans
to be completed during 1997. However, certain severance and facility costs have
payment terms extending beyond 1997. We believe that the balance is adequate to
complete these plans.
<PAGE>
The following table displays a rollforward of the liabilities for business
restructuring from December 31, 1994 to December 31, 1996:
1995
----------------------
Dec. 31, Dec. 31,
1994 Amounts 1995
Balance Additions Utilized Balance
Type of Cost
Employee separations $ 76 $ 934 $ (79) $ 931
Facility closings 512 497 (248) 761
Other 111 287 8 406
Total $ 699 $1,718 $(319) $2,098
- ---------------------------------------------------------------------------
1996
----------------------
Dec. 31, Dec. 31,
1995 Amounts 1996
Balance Additions Utilized Balance
Type of Cost
Employee separations $ 931 - $(325) $ 606
Facility closings 761 - (233) 528
Other 406 - (152) 254
Total $2,098 - $(710) $1,388
- ---------------------------------------------------------------------------
Utilization primarily represents cash payments and other noncash
utilization of restructuring reserves. 1996 noncash utilization includes $112 of
net transfers to Lucent and NCR.
The December 31, 1994 business restructuring balance included reserves
primarily for real estate and reengineering operator services. As of December
31, 1996, $319 of the $699 December 31, 1994 balance remained. This balance is
primarily related to excess space in various leased facilities and is expected
to be fully utilized over the remaining terms of the leases. The balance is
adequate to complete these plans.
The 1995 charge of $722 for asset impairments and other charges included
$668 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 charge also
included $54 of other items, none of which individually exceed 1% of the total
charge.
The total pretax charge of $3,029 for 1995 was recorded as $844 in network
and other communications services; $934 in depreciation and amortization; $1,245
in selling, general and administrative; and $6 in financial services expenses.
If viewed by type of cost, the combined charges reflect $956 for employee
separations and other related items; $1,235 for asset write-downs; $497 for
closing, selling and consolidating facilities; and $341 for other items. The
total charge reduced income from continuing operations by $2,036, or $1.28 per
share.
<PAGE>
In addition, charges of $1,172 (net of taxes) in the third quarter of 1995
and $2,145 (net of taxes) in the fourth quarter of 1995 are reflected in the
loss from discontinued operations. These charges reduced income from
discontinued operations by a total of $3,317, or $2.08 per share in 1995.
6. 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:
Years ended December 31 1996 1995 1994
U.S. federal statutory income tax rate 35% 35% 35%
Federal income tax at statutory rate $3,103 $1,839 $2,534
Amortization of investment tax credits (21) (35) (32)
State and local income taxes, net of
federal income tax effect 272 186 270
Amortization of intangibles 13 62 3
Foreign rate differential 131 (11) 14
Taxes on repatriated and accumulated
foreign income, net of tax credits 19 17 1
Legal entity restructuring (195) - -
Research credits (13) (24) (12)
Other differences - net (51) 16 69
Provision for income taxes $3,258 $2,050 $2,847
Effective income tax rate 36.7% 39.0% 39.3%
The U.S. and foreign components of income before income taxes and the
provision for income taxes are presented in this table:
Years ended December 31 1996 1995 1994
INCOME BEFORE INCOME TAXES
United States $9,069 $5,742 $7,367
Foreign (203) (487) (127)
Total $8,866 $5,255 $7,240
PROVISION FOR INCOME TAXES
CURRENT
Federal $2,289 $2,029 $2,144
State and local 397 395 309
Foreign 25 1 (12)
$2,711 $2,425 $2,441
DEFERRED
Federal $ 534 $ (232) $ 338
State and local 23 (109) 107
Foreign 11 1 -
$ 568 $ (340) $ 445
Deferred investment tax credits (21) (35) (39)
Provision for income taxes $3,258 $2,050 $2,847
Deferred income tax liabilities are taxes we expect to pay in future
periods. Similarly, deferred income tax assets are recorded for expected
reductions in taxes payable in future periods. Deferred income taxes arise
because of differences in the book and tax bases of certain assets and
liabilities.
<PAGE>
Deferred income tax liabilities and assets consist of the following:
At December 31 1996 1995
LONG-TERM DEFERRED INCOME TAX LIABILITIES
Property, plant and equipment $5,302 $5,042
Investments 96 125
Other 1,403 2,069
Total long-term deferred income tax liabilities $6,801 $7,236
LONG-TERM DEFERRED INCOME TAX ASSETS
Business restructuring $ 195 $ 447
Net operating loss/credit carryforwards 220 181
Employee pensions and other benefits - net 1,300 623
Reserves and allowances 121 141
Valuation allowance (164) (128)
Other 302 526
Total long-term deferred income tax assets $1,974 $1,790
Net long-term deferred income tax liabilities $4,827 $5,446
CURRENT DEFERRED INCOME TAX LIABILITIES
Total current deferred income tax liabilities* $ 130 $ 104
CURRENT DEFERRED INCOME TAX ASSETS
Business restructuring $ 250 $ 141
Net operating loss/credit carryforwards 3 61
Employee pensions and other benefits 525 1,186
Reserves and allowances 734 768
Valuation allowance (2) (1)
Other 20 386
Total current deferred income tax assets $1,530 $2,541
Net current deferred income tax assets $1,400 $2,437
*Includes $13 of foreign deferred income taxes recorded in other current
liabilities.
At December 31, 1996 we had net operating loss carryforwards (tax effected)
for federal and state income tax purposes of $15 and $57, respectively, expiring
through 2010. We also had foreign net operating loss carryforwards (tax
effected) of $103, of which $96 has no expiration date, with the balance
expiring by the year 2000. We also had federal tax credit carryforwards of $47
which 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.
7. 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.
<PAGE>
Immediately following the spin-off of Lucent on September 30, 1996, Lucent
established separate defined benefit plans, and a share of the pension
obligations and pension assets held in trust were transferred from AT&T to
Lucent based on methods and assumptions that were agreed to by both companies.
The asset and pension obligation amounts that were transferred to Lucent are
subject to final adjustment. The final amounts to be transferred to Lucent are
not expected to be materially different from the estimated amounts.
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 1996, 1995 and 1994.
Pension cost includes the following components:
Years ended December 31 1996 1995 1994
Service cost - benefits earned during
the period $ 299 $ 203 $ 239
Interest cost on projected benefit
obligation 863 748 701
Amortization of unrecognized prior
service costs 99 90 73
Credit for expected return on plan
assets* (1,195) (1,043) (1,015)
Amortization of transition asset (183) (193) (193)
Charges for special pension options - 58 -
Net pension credit $ (117) $ (137) $ (195)
* The actual return on plan assets was $2,981 in 1996, $1,044 in 1995 and $156
in 1994.
The net pension credit in 1995 includes a one-time charge of $58 for early
retirement options and curtailments.
This table shows the funded status of the defined benefit plans:
At December 31 1996 1995
Actuarial present value of accumulated benefit
obligation, including vested benefits of
$10,083 and $9,874 $11,520 $10,959
Plan assets at fair value $17,680 $15,294
Less: Actuarial present value of projected
benefit obligation 12,380 11,572
Excess of assets over projected benefit obligation 5,300 3,722
Unrecognized prior service costs 766 804
Unrecognized transition asset (889) (1,136)
Unrecognized net gain (3,303) (1,620)
Net minimum liability of nonqualified plans (51) (49)
Prepaid pension costs $ 1,823 $ 1,721
<PAGE>
We used these rates and assumptions to calculate the projected benefit
obligation:
At December 31 1996 1995
Weighted-average discount rate 7.5% 7.0%
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 $56 and $61 of AT&T common stock
at December 31, 1996 and 1995, respectively), corporate and governmental debt,
real estate investments and cash and cash equivalents.
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 $180 in 1996,
$159 in 1995 and $134 in 1994.
8. POSTRETIREMENT BENEFITS
Our benefit plans for retirees include health care benefits, life insurance
coverage and telephone concessions.
Immediately following the spin-off of Lucent on September 30, 1996, Lucent
established separate postretirement benefit plans, and a share of the
postretirement benefit obligations and postretirement benefit assets held in
trust were transferred from AT&T to Lucent based on methods and assumptions that
were agreed to by both companies. The assets and postretirement benefit
obligations that were transferred to Lucent are subject to final adjustment. The
final amounts to be transferred to Lucent are not expected to be materially
different from the estimated amounts.
This table shows the components of the net postretirement benefit cost:
Years ended December 31 1996 1995 1994
Service cost - benefits earned during the period $ 54 $ 41 $ 45
Interest cost on accumulated postretirement
benefit obligation 263 258 245
Expected return on plan assets* (99) (78) (64)
Amortization of unrecognized prior service costs 39 23 4
Amortization of net loss (gain) 2 (5) 1
Charge for special options 1 2 -
Net postretirement benefit cost $260 $241 $231
* The actual return on plan assets was $313 in 1996, $256 in 1995 and $(11) in
1994.
We had approximately 37,900, 34,500 and 34,000 retirees as of December 31,
1996, 1995 and 1994, respectively.
<PAGE>
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
1996 1995
Accumulated postretirement benefit obligation:
Retirees $2,244 $2,138
Fully eligible active plan participants 453 432
Other active plan participants 1,042 1,195
Total accumulated postretirement benefit obligation 3,739 3,765
Plan assets at fair value 1,566 1,241
Unfunded postretirement obligation 2,173 2,524
Less:
Unrecognized prior service costs 206 263
Unrecognized net gain
(510) (54)
Accrued postretirement benefit obligation
$2,477 $2,315
We made these assumptions in valuing our postretirement benefit obligation
at December 31:
1996 1995
Weighted-average discount rate
7.5% 7.0%
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
5.6% 6.1%
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 1996 to
4.7% by the year 2006 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 accumulated postretirement benefit obligation at December
31, 1996 by $166 and our 1996 postretirement benefit costs by $19.
9. STOCK-BASED COMPENSATION PLANS
Under the 1987 Long-Term Incentive Program, we grant stock options,
performance shares, restricted stock 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. Generally, the options vest over three
years and are exercisable up to ten years from the date of grant. Performance
share units are awarded to key employees in the form of either common stock or
cash at the end of a three year period based on AT&T's return-to-equity
performance compared with a target.
Under the AT&T 1996 Employee Stock Purchase Plan (Plan) which was effective
July 1, 1996, we are authorized to issue up to 50 million shares of common stock
to our eligible employees. Under the terms of the Plan, employees may have up to
10% of their earnings withheld to purchase AT&T's common stock. The purchase
price of the stock on the date of exercise is 85% of the average high and low
sale prices of shares on the New York Stock Exchange for that day. Under the
Plan, we sold approximately 3 million shares to employees during 1996.
<PAGE>
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for our plans.
Accordingly, no compensation expense has been recognized for our stock-based
compensation plans other than for our performance-based and restricted stock
awards, SARs, and prior to July 1, 1996 for the stock purchase plan for former
McCaw Cellular Communications, Inc. employees. Compensation costs charged
against income were $41 in 1996.
A summary of option transactions is shown below:
Weighted-
Average
Exercise
Shares in thousands 1996 Price
1995 1994
Outstanding at January 1 47,689 $43.21 40,285
38,012
Lucent and NCR
spin-off adjustments 22,678 -
- - -
Options granted 9,132 $45.53
13,276 5,803
Options and SARs
exercised (10,708) $19.16 (8,181)
(2,498)
Average exercise price $29.39
$25.04
Options assumed in
purchase of LIN - -
3,382 -
Options canceled or
forfeited:
Lucent and NCR spin-offs (16,179) $37.25
- - -
Other employee plans (5,702) $37.12 (1,073)
(1,032)
At December 31:
Options outstanding 46,910 $33.89 47,689
40,285
Average exercise price $43.21
$36.61
Options exercisable 28,034 $28.81 28,775
28,010
Shares available for grant 19,693 - 17,524
22,015
Effective on the dates of spin-off of Lucent and NCR, AT&T stock options
held by Lucent and NCR employees were canceled. For the holders of unexercised
AT&T stock options, the number of options was adjusted and all exercise prices
were decreased immediately following each spin-off date to preserve the economic
values of the options that existed prior to those dates.
During 1996, 73,145 SARs were exercised and no SARs were granted. The
number of outstanding SARs was adjusted by 131,088 in connection with the Lucent
and NCR spin-offs. At December 31, 1996, 743,840 SARs remained unexercised, all
of which were exercisable.
<PAGE>
AT&T has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." If AT&T had elected to recognize
compensation costs based on the fair value at the date of grant for awards in
1996 and 1995, consistent with the provisions of SFAS No. 123, AT&T's net income
and earnings per common share would have been reduced to the following pro forma
amounts:
Years ended December 31 1996
1995
Income from continuing operations $5,537
$3,192
Income (loss) from discontinued operations 111
(3,072)
Net income $5,810
$ 120
Earnings per common share
Continuing operations $ 3.43 $
2.00
Discontinued operations .07
(1.92)
Net income $ 3.60
$ .08
Without the effect of pro forma costs related to the conversion of options
in the Lucent and NCR spin-offs, pro forma income from continuing operations was
$5,567 or $3.44 per share in 1996.
The pro forma effect on net income for 1996 and 1995 may not be
representative of the pro forma effect on net income of future years because the
SFAS No. 123 method of accounting for pro forma compensation expense has not
been applied to options granted prior to January 1, 1995.
The weighted-average fair values at date of grant for options granted
during 1996 and 1995 were $13.12 and $14.02, respectively, and were estimated
using the Black-Scholes option-pricing model. The following assumptions were
applied for periods before the Lucent spin-off and subsequent to the Lucent
spin-off, respectively: (i) expected dividend yields of 2.4% and 2.8%, (ii)
expected volatility rates of 19.0% and 21.0%, and (iii) expected lives of 5.0
years and 4.5 years. The risk-free interest rates applied for 1996 and 1995 were
6.11% and 6.44%, respectively.
The following table summarizes information about stock options outstanding
at December 31, 1996:
Options Outstanding Options
Exercisable
Number Weighted- Number
Outstanding Average Weighted-
Exercisable Weighted-
Range of at Remaining Average
at Average
Exercise Dec. 31, 1996 Contractual Exercise Dec. 31,
1996 Exercise
Prices (in thousands) Life Price (in
thousands) Price
$ 1.11 - $15.76 1,619 2.45 $11.90
1,619 $11.90
15.83 - 27.12 12,666 4.03 23.26
12,647 23.26
27.16 - 34.95 8,991 6.89 34.16
5,036 33.59
35.20 - 36.96 10,106 6.81 35.96
7,157 36.08
$37.02 - $47.37 13,528 8.53 44.74
1,575 42.38
46,910 6.42 $33.89
28,034 $28.81
<PAGE>
10. DEBT OBLIGATIONS
DEBT MATURING WITHIN ONE YEAR
At December 31 1996 1995
Commercial paper $1,950 $10,917
Long-term debentures and notes 463 1,193
Other 47 66
Total debt maturing within one year $2,460 $12,176
Weighted-average interest rate of
short-term debt 5.5% 5.7%
A consortium of lenders provides revolving credit facilities of $6.0
billion to AT&T. These credit facilities are intended for general corporate
purposes, which include support for AT&T's commercial paper, and were unused at
December 31, 1996.
LONG-TERM OBLIGATIONS
At December 31 1996 1995
Interest Rates (a) Maturities
DEBENTURES
4 3/8% to 4 3/4% 1998-1999 $ 500 $ 750
5 1/8% to 6% 2000-2001 500 500
8 1/8% to 8 5/8% 1997-2031 1,996 1,999
NOTES
4 1/4% to 7 3/4% 1997-2025 4,341 5,380
7 4/5% to 8 19/20% 1997-2025 786 838
9% to 13% 1997-2004 60 101
Variable rate 1997-2054 115 120
Total debentures and notes 8,298 9,688
Other 112 122
Less: Unamortized discount - net 64 75
Total long-term obligations 8,346 9,735
Less: Amounts maturing within one year 463 1,193
Net long-term obligations $7,883 $8,542
(a) 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, 1996, of the $8,346 in
total long-term obligations:
1997 1998 1999 2000 2001
Later Years
$463 $892 $1,065 $670 $652
$4,604
<PAGE>
11. 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, 1996
and 1995, 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 with the Universal
Bank, which issues the cards. The unused portion of available credit was $69,041
at December 31, 1996 and $72,179 at December 31, 1995. 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 are 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 and
do not create any additional risk to AT&T.
GUARANTEES OF DEBT
From time to time we guarantee the debt of our subsidiaries and certain
unconsolidated joint ventures. Additionally, in connection with restructurings
of AT&T, we issued guarantees for certain debt obligations of AT&T Capital and
NCR. At December 31, 1996, the amount of guaranteed debt associated with AT&T
Capital and NCR was $230.
<PAGE>
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 at December 31, 1996
are at rates ranging from 4.68% to 7.75%. 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,
1996 and 1995 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.
1996 1995
Fixed to variable swaps - notional amount $1,342 $1,417
Average receive rate 6.67% 6.57%
Average pay rate 5.45% 5.62%
Variable to fixed swaps - notional amount $ 351 $ 894
Average receive rate 5.77% 5.64%
Average pay rate 5.71% 6.05%
The weighted average remaining terms of the swap contracts are 4 years for
1996 and 8 years for 1995.
FOREIGN EXCHANGE
We enter into foreign currency exchange contracts, including forward and
option contracts, to manage our exposure to changes in currency exchange rates,
principally French francs, Deutsche marks, pounds sterling and Japanese yen. The
use of these derivative financial instruments allows us to reduce our exposure
to the risk of adverse changes in exchange rates on the eventual reimbursement
to foreign telephone companies for their portion of the revenues billed by AT&T
for calls placed in the U.S. to a foreign country. These transactions are
generally expected to occur in less than one year. Gains or losses on foreign
exchange contracts that are designated for forecasted and other foreign currency
transactions are recognized in other income as the exchange rates change.
<PAGE>
FAIR VALUES OF FINANCIAL INSTRUMENTS INCLUDING DERIVATIVE
FINANCIAL INSTRUMENTS
The following table summarizes the notional amounts 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.
1996 1995
Contract/ Contract/
Notional Notional
Amount Amount
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $ 1,693 $ 2,311
Foreign exchange:
Forward contracts 646 491
Option contracts 65 8
Letters of credit 264 260
Guarantees of debt 328 112
The tables below show the valuation methods and the carrying amounts and
estimated fair values of material financial instruments.
Financial instrument Valuation method
Universal Card finance receivables Carrying amounts. These
accrue interest
at a prime-based rate
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 Not practicable. There are
no quoted
market prices for similar agreements
available
Interest rate swap agreements Market quotes obtained from
dealers
Foreign exchange contracts Market quotes
For finance receivables other than leases, the carrying amount equals the
fair value. These amounts were $6,688 and $10,263 for 1996 and 1995,
respectively. For debt excluding capital leases, the carrying amounts and fair
values were $10,330 and $10,620, respectively, for 1996; and $20,698 and
$21,225, respectively, for 1995.
<PAGE>
1996
Carrying Amount
Fair Value
Asset Liab.
Asset Liab.
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $ 5 $ 9
$47 $23
Foreign exchange forward contracts 6 15
7 35
1995
Carrying Amount
Fair Value
Asset Liab.
Asset Liab.
DERIVATIVES AND OFF BALANCE SHEET
INSTRUMENTS
Interest rate swap agreements $ 8 $ 6
$63 $46
Foreign exchange forward contracts 6 28
10 20
SECURITIZATION OF RECEIVABLES
For the years ended December 31, 1996 and 1995, we securitized portions of
our short-term finance receivable portfolios amounting to $3,000 and $3,500,
with proceeds received of $3,000 and $3,492, respectively. We continue to
service these accounts for the purchasers. At December 31, 1996 and 1995, $6,500
and $3,500, respectively, of receivables previously securitized remained
outstanding.
12. SEGMENT INFORMATION
INDUSTRY SEGMENTS
AT&T operates in two industry segments, the telecommunications industry and
the financial services industry. Our communications services (which is part of
the telecommunications industry) consist of a wide range of services to
residential and business customers, including domestic and international
wireline long distance voice, data and video services, wireless services,
network management, business consulting, outsourcing, electronic commerce
solutions and internet access service. Additionally, we are embarking on a
strategy to expand our services to local service. Financial services is
primarily our AT&T Universal Card credit card business. Revenues between
industry segments are not material.
<PAGE>
1996
1995 1994
REVENUES
Communications services $50,515 $48,403
$45,938
Financial services 1,669 2,261
1,838
Total revenues $52,184 $50,664
$47,776
OPERATING INCOME (LOSS)
Communications services $ 9,198 $ 5,834 $
7,861
Financial services 78
300 218
Corporate and nonoperating (410)
(879) (839)
Income from continuing operations
before income taxes $ 8,866 $ 5,255 $
7,240
ASSETS
Communications services $46,092 $42,440
$34,443
Financial services 8,462 12,049
13,737
Corporate assets 729
589 476
Eliminations (257)
(109) (78)
Total assets - continuing operations 55,026 54,969
48,578
Net assets of discontinued operations 526 7,426
8,870
Total assets $55,552 $62,395
$57,448
DEPRECIATION AND AMORTIZATION
Communications services $ 2,740 $ 3,520 $
2,394
Financial services 12
7 18
GROSS CAPITAL EXPENDITURES
Communications services $ 6,776 $ 4,522 $
3,361
Financial services 9
- - 9
TOTAL LIABILITIES
Financial services $ 7,534 $10,842
$12,670
CONCENTRATIONS
As of December 31, 1996 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 labor, services, or licenses or
other rights that could, if suddenly eliminated, severely impact our operations.
<PAGE>
13. 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, 1996, $59 of
the guaranteed debt remained outstanding.
AT&T Credit Holdings, Inc. holds the finance assets of the former AT&T
Credit Corporation and prior to the sale of AT&T Capital on October 1, 1996,
held the majority of AT&T's investment in AT&T Capital. 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.
1996
1995 1994
Total revenues $ 202 $
190 $ 58
Income from continuing operations 31
26 19
Income from discontinued operation 200
93 73
Net income $ 231 $
119 $ 92
Finance receivables $1,102 $1,149
Net assets of discontinued operation - 835
Total assets 3,075 2,355
Total debt 60 100
Total liabilities 1,891 1,343
Total shareowners' equity $1,184 $1,012
14. COMMITMENTS AND 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, 1996. 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.
We lease land, buildings and equipment through contracts that expire in
various years through 2014. Our rental expense under operating leases was $721
in 1996, $766 in 1995 and $819 in 1994. The following table shows our future
minimum lease payments due under noncancelable operating leases at December 31,
1996. Such payments total $2,873. The total of minimum rentals to be received in
the future under noncancelable subleases as of December 31, 1996 was $329.
1997 1998 1999 2000 2001
Later Years
$606 $469 $359 $312 $234
$893
We have entered into agreements with Lucent and NCR pursuant to which we
will purchase products and services totaling at least $3,000 cumulatively by the
end of 1998 from Lucent and $350 from NCR by the end of 1999. As of December 31,
1996 we purchased $2,726 of products and services from Lucent and NCR under
these agreements.
<PAGE>
In January 1997 one of our satellites went out of orbital alignment.
Contact could not be reestablished and the satellite was declared permanently
out of service. Under various contracts related to previous sales of
transponders associated with this satellite, we are required to either repair or
replace the transponder or refund portions of the sale price. We have insurance
to cover a portion of our exposure under these warranties as well as the
carrying value of the satellite. We believe that the ultimate resolution will
not have a material impact on our results of operations.
15. QUARTERLY INFORMATION (UNAUDITED)
1996 First Second
Third Fourth
Total revenues $12,850 $12,868
$13,228 $13,238
Operating income 2,413 2,319
2,174 1,904
Income from continuing operations 1,469 1,538
1,359 1,242
Income(loss) from discontinued
operations (107) (47)
73 219
Gain on sale of discontinued
operation - -
- - 162
Net income 1,362 1,491
1,432 1,623
Income(loss) per common share:
Continuing operations .92 .95
.84 .76
Discontinued operations (.07) (.03)
.05 .14
Gain on sale of discontinued
operation - -
- - .10
Net income .85 .92
.89 1.00
Dividends declared .33 .33
.33 .33
Stock price*:
High $68 7/8 $64 7/8 $62
3/8 $44 1/2
Low 60 1/8 58 49
1/4 33 1/4
Quarter-end close 61 1/8 62 52
1/4 43 3/8
* Stock prices obtained from the Composite Tape.
Stock prices on or before September 30, 1996 have not been restated to
reflect the Lucent spin-off. Stock prices on or before December 31, 1996 have
not been restated to reflect the NCR spin-off.
<PAGE>
1995 First Second
Third Fourth
Total revenues $12,244 $12,614
$12,920 $12,886
Operating income(loss) 2,068 2,240
2,396 (1,251)
Income(loss) from continuing
operations 1,261 1,367
1,525 (948)
Loss from discontinue operations (63) (12)
(1,263) (1,728)
Net income(loss) 1,198 1,355
262 (2,676)
Income(loss) per common share:
Continuing operations .80 .86
.96 (.59)
Discontinued operations (.04) (.01)
(.80) (1.08)
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
* Stock prices obtained from the Composite Tape.
In the third quarter of 1995, we recorded $1,597 of charges which decreased
income from discontinued operations by $1,172 or $0.74 per share.
In the fourth quarter of 1995, we recorded pre-tax charges
of $3,029 which
decreased income from continuing operations by $2,036, or $1.27
per share. In
addition, the loss from discontinued operations includes charges
of $2,145 (net
of taxes), or $1.34 per share.
- ----------
Information contained on the outside back cover of the Annual Report to
Shareowners and incorporated herein is as follows:
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 and Geneva.
Shareowners of record as of December 31, 1996: 2,120,340.
Exhibit (21)
List of Subsidiaries of AT&T Corp.
As of 2/28/97
Jurisdiction of
Incorporation
- -------------
Alascom,Inc.......................................................Alaska
Actuarial Sciences
Associates,Inc.................................Delaware
American Transtech,
Inc...........................................Delaware
AT&T Canada Long Distance Services
Company........................Canada
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 Communications Services International
Inc....................Delaware
AT&T Communications (UK)
LTD......................................United Kingdom
AT&T Global Communications Services
Inc...........................Delaware
AT&T
Istel........................................................United
Kingdom
AT&T Solutions
Inc................................................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
ROSNET International
J.S.C........................................Russia
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 and 33-49465), 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), and Post-Effective
Amendment No. 1 on
Form S-8 to Form S-8 Registration Statement (Registration No.
33-54797) for the
AT&T 1996 Employee Stock Purchase Plan, 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 dated January 22, 1997, on our audits of the
consolidated financial
statements and consolidated financial statement schedule of the
Company and its
subsidiaries at December 31, 1996 and 1995, and for the years
ended December 31,
1996, 1995 and 1994, 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
March 28, 1997
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March 1997.
/s/ R. E. Allen
--------------------
By: R. E. Allen
Chairman of the Board and
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ J. R. Walter
----------------------
By: J. R. Walter
President, Chief Operating
Officer
and Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ R. W. Miller
----------------------
By: R. W. Miller
Senior Executive Vice
President
and Chief Financial
Officer
<PAGE>
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 S. L.
PRENDERGAST and M. J. WASSER, 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 17th day of March, 1997.
/s/ M. B. Tart
--------------------
By: M. B. Tart
Vice President and
Controller
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 18th day of March, 1997.
/s/ Kenneth T. Derr
---------------------
By: Kenneth T. Derr
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ M. Kathryn Eickhoff
------------------------
By: M. Kathryn Eickhoff
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 March, 1997.
/s/ Walter Y. Elisha
----------------------
By: Walter Y. Elisha
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ Ralph S. Larsen
----------------------
By: Ralph S. Larsen
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ Donald F. McHenry
-----------------------
By: Donald F. McHenry
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 17th day of March, 1997.
/s/ Michael I. Sovern
------------------------
By: Michael I. Sovern
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 March, 1997.
/s/ Joseph D. Williams
-----------------------
By: Joseph D. Williams
Director
<PAGE>
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 S. L.
PRENDERGAST, M. B. TART and M. J. WASSER 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 March, 1997.
/s/ Thomas H. Wyman
----------------------
By: Thomas H. Wyman
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
audited balance sheet of AT&T at December 31, 1996 and the audited consolidated
statement of income for the twelve-month period ended December 31, 1996 and is
qualified in its entirety by reference to such financial statements. </LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 10,309
<ALLOWANCES> 1,336
<INVENTORY> 0
<CURRENT-ASSETS> 18,310
<PP&E> 39,522
<DEPRECIATION> 19,728
<TOTAL-ASSETS> 55,552
<CURRENT-LIABILITIES> 16,318
<BONDS> 7,883
0
0
<COMMON> 1,623
<OTHER-SE> 18,672
<TOTAL-LIABILITY-AND-EQUITY> 55,552
<SALES> 0
<TOTAL-REVENUES> 52,184
<CGS> 0
<TOTAL-COSTS> 43,374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,443
<INTEREST-EXPENSE> 334
<INCOME-PRETAX> 8,866
<INCOME-TAX> 3,258
<INCOME-CONTINUING> 5,608
<DISCONTINUED> 300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,908
<EPS-PRIMARY> 3.66
<EPS-DILUTED> 0
</TABLE>
