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Exhibit 10.3
EXECUTION COPY
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EMPLOYEE BENEFITS AGREEMENT
BY AND BETWEEN
LUCENT TECHNOLOGIES INC.
AND
AGERE SYSTEMS INC.
DATED AS OF FEBRUARY 1, 2001
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS..................................................... 1
1.1. Agere......................................................... 1
1.2. Agere Committee............................................... 1
1.3. Agere Entity.................................................. 1
1.4. Agere Individual.............................................. 1
1.5. Agere Master Pension Trust.................................... 2
1.6. Agere Plans................................................... 2
1.7. Agere RIP..................................................... 2
1.8. Agere Stock Value............................................. 2
1.9. Agere WCP Claims.............................................. 2
1.10. Agreement..................................................... 2
1.11. ASO Contract.................................................. 3
1.12. Assigned Policies............................................. 3
1.13. Auditing Party................................................ 3
1.14. Award......................................................... 3
1.15. CECRA PLAN.................................................... 3
1.16. Change in Control............................................. 3
1.17. Close of the Distribution Date................................ 3
1.18. COBRA......................................................... 3
1.19. Code.......................................................... 3
1.20. Collective Bargaining Agreement............................... 3
1.21. CWA........................................................... 3
1.22. Deferral Plan................................................. 3
1.23. Distribution Date............................................. 4
1.24. DOL........................................................... 4
1.25. ERISA......................................................... 4
1.26. Executive Benefit Plans....................................... 4
1.27. First Transfer Date........................................... 4
1.28. FMLA.......................................................... 4
1.29. Group Life Program............................................ 4
1.30. HCFA.......................................................... 4
1.31. HCRA Plan..................................................... 4
1.32. Health and Welfare Plans...................................... 4
1.33. Health Plans.................................................. 5
1.34. HMO........................................................... 5
1.35. HMO Agreements................................................ 5
1.36. IBEW.......................................................... 5
1.37. Immediately after the Distribution Date....................... 5
1.38. Individual Agreement.......................................... 5
1.39. IPO........................................................... 5
1.40. IRS........................................................... 5
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1.41. Legally Permissible........................................... 5
1.42. LESOP......................................................... 5
1.43. LESOP Trust................................................... 5
1.44. LRIP.......................................................... 6
1.45. LTSSP......................................................... 6
1.46. Lucent........................................................ 6
1.47. Lucent Entity................................................. 6
1.48. Lucent Executive.............................................. 6
1.49. Lucent Executive and Non-Employee Director Life Insurance
Program....................................................... 6
1.50. Lucent Leave of Absence Programs.............................. 6
1.51. Lucent LTD VEBA............................................... 6
1.52. Lucent Master Pension Trust................................... 6
1.53. Lucent Pension Plan........................................... 6
1.54. Lucent Plans.................................................. 7
1.55. Lucent STD.................................................... 7
1.56. Lucent Stock Value............................................ 7
1.57. Lucent WCP.................................................... 7
1.58. Material Feature.............................................. 7
1.59. Medical Plans................................................. 7
1.60. MPA........................................................... 7
1.61. Non-Employee Director......................................... 8
1.62. Non-Employee Director Plan.................................... 8
1.63. Non-parties................................................... 8
1.64. Nonrepresented Employee....................................... 8
1.65. Nonrepresented Health VEBA.................................... 8
1.66. Non-U.S. Plan................................................. 8
1.67. Offering Date................................................. 8
1.68. Option........................................................ 8
1.69. Participating Company......................................... 8
1.70. Participation Commencement Date............................... 8
1.71. PBGC.......................................................... 8
1.72. Pension Plan.................................................. 8
1.73. Pension Plans................................................. 9
1.74. Pension Transfer Amount....................................... 9
1.75. Plan.......................................................... 9
1.76. Postretirement Life Trust..................................... 9
1.77. QDRO.......................................................... 9
1.78. QMCSO......................................................... 9
1.79. Rabbi Trust................................................... 9
1.80. Ratio......................................................... 9
1.81. Represented Employee.......................................... 9
1.82. Represented Health VEBA....................................... 10
1.83. Represented Transition Period................................. 10
1.84. RFA........................................................... 10
1.85. Savings Plans................................................. 10
1.86. Second Transfer Date.......................................... 10
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1.87. Separation and Distribution Agreement......................... 10
1.88. Short Term Incentive Plan..................................... 10
1.89. Stock Award Plan.............................................. 10
1.90. Stock Purchase Plan........................................... 11
1.91. Transferred Individual........................................ 11
1.92. Transition Individual......................................... 11
1.93. Trust-Owned Life Insurance (VEBA)............................. 11
1.94. U.S........................................................... 11
1.95. VEBA.......................................................... 12
ARTICLE II. GENERAL PRINCIPLES............................................. 12
2.1. Assumption of Liabilities..................................... 12
2.2. Agere Participation in Lucent Plans........................... 12
(a) Participation in Lucent Plans........................... 12
(b) Agere's General Obligations as Participating Company.... 12
(c) Termination of Participating Company Status............. 13
2.3. Establishment of Agere Plans.................................. 13
2.4. Terms of Participation by Agere Individuals and Transferred
Individuals in Agere Plans.................................... 13
2.5. Transition Individuals........................................ 14
(a) Mandatory Portability Agreement......................... 14
(b) Represented Interchange Agreement....................... 14
ARTICLE III. DEFINED BENEFIT PLANS......................................... 14
3.1. Establishment of Mirror Pension Trust......................... 14
3.2. Assumption of Pension Plan Liabilities and Allocation of
Interests in the Lucent Master Pension Trust.................. 15
(a) Assumption of Liabilities by Agere Pension Plans........ 15
(b) Asset Allocations and Transfers......................... 15
(c) Pension Transfer Amount................................. 16
ARTICLE IV. DEFINED CONTRIBUTION PLANS..................................... 17
4.1. Savings Plans................................................. 17
(a) Nonrepresented Savings Plan Trust....................... 17
(b) Assumption of Liabilities and Transfer of Assets........ 17
(c) Maintenance of Frozen Employer Security Funds........... 18
4.2. LTSSPs and LESOPs............................................. 18
(a) Represented Savings Plan Trust.......................... 18
(b) Assumption of LTSSP Liabilities......................... 18
(c) Leveraged Stock Ownership Plan.......................... 19
ARTICLE V. HEALTH AND WELFARE PLANS........................................ 20
5.1. Establishment of Mirror Health and Welfare Plan Trusts........ 20
5.2. Assumption of Health and Welfare Plan Liabilities............. 20
5.3. Lucent Represented Health VEBA Asset Transfer................. 22
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5.4. Postretirement Life Trust Asset Transfer; Transfer of
Retirement Funding Account Assets............................. 22
5.5. Vendor Contracts.............................................. 23
(a) Third-Party ASO Contracts............................... 23
(b) HMO Agreements.......................................... 24
5.6. Short-Term Disability......................................... 25
5.7. Group Life Programs........................................... 25
5.8. COBRA......................................................... 25
5.9. Leave of Absence Programs and FMLA............................ 25
5.10. Lucent Workers' Compensation Program.......................... 26
(a) Administration of Claims................................ 26
(b) Cooperation............................................. 26
(c) AT&T Liability.......................................... 26
5.11. Lucent Employee Assistance Program............................ 26
5.12. Unemployment Insurance Tax Management Program................. 26
5.13. Administration................................................ 27
(a) Coordination of Benefits for Spouses, Dependents and
Domestic Partners....................................... 27
(b) Other Post-Distribution Transitional Rules.............. 27
5.14. Application of Article V to Agere Entities.................... 27
5.15. Lucent Work & Family Programs................................. 28
ARTICLE VI. EXECUTIVE BENEFITS, NON-EMPLOYEE DIRECTOR BENEFITS, AND OTHER
STOCK-BASED COMPENSATION....................................... 28
6.1. Assumption of Obligations..................................... 28
6.2. Lucent Short Term Incentive Plan.............................. 28
6.3. Lucent Stock Award Plans...................................... 29
(a) Stock Options-General................................... 29
(b) Stock Options-Change in Control......................... 29
(c) Stock Options - Foreign Plans........................... 29
(d) Restricted Stock and Restricted Stock Units............. 30
(e) 1999 - 2001 Performance Share Payments.................. 30
6.4. Lucent Deferral Plan.......................................... 30
6.5. Rabbi Trust................................................... 30
(a) Establishment of Mirror Rabbi Trust..................... 31
(b) Funding of Agere Rabbi Trust............................ 31
6.6. Lucent Executive Life Insurance............................... 31
6.7. 162(m)........................................................ 32
ARTICLE VII. MISCELLANEOUS BENEFITS........................................ 32
7.1. Stock Purchase Plan Recordkeeping............................. 32
7.2. Service Anniversary and Retirement Award Program.............. 32
7.3. 2001 Incentive Compensation Payments.......................... 32
ARTICLE VIII. GENERAL AND ADMINISTRATIVE................................... 33
8.1. Actuarial and Accounting Methodologies and Assumptions........ 33
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8.2. Sharing of Participant Information............................ 33
8.3. Reporting, Disclosure and Communications to Participants...... 33
8.4. Non-Termination of Employment; No Third-Party Beneficiaries... 34
8.5. Plan Audits................................................... 34
(a) Audit Rights with Respect to the Allocation or Transfer
of Plan Assets.......................................... 34
(b) Audit Rights With Respect to Information Provided....... 35
(c) Audits Regarding Vendor Contracts....................... 35
8.6. Beneficiary Designations...................................... 35
8.7. Requests for IRS Rulings and DOL Opinions..................... 36
(a) Cooperation............................................. 36
(b) Applications............................................ 36
(c) Life Insurance.......................................... 36
8.8. Fiduciary Matters............................................. 36
8.9. Collective Bargaining......................................... 37
8.10. Consent of Third Parties...................................... 37
8.11. Quiet Periods................................................. 37
8.12. Lucent's and Agere's General Obligations as Plan Sponsors..... 38
8.13. Adjustments to Plan Transfers................................. 38
ARTICLE IX. MISCELLANEOUS.................................................. 38
9.1. Non-U.S. Plans................................................ 38
9.2. Effect If Distribution Does Not Occur......................... 38
9.3. Relationship of Parties....................................... 38
9.4. Affiliates.................................................... 38
9.5. Incorporation of Separation and Distribution Agreement
Provisions.................................................... 38
Signatures
Schedule I Lucent Plans
Schedule II Description of Non-U.S. Plan Treatment
Exhibit A Represented Interchange Agreement Between Lucent Technologies Inc.
and Agere
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EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of February 1, 2001, is
by and between Lucent and Agere. Capitalized terms used herein (other than the
formal names of Lucent Plans (as defined below) and related trusts of Lucent)
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).
R E C I T A L S
WHEREAS, the Board of Directors of Lucent has determined that it is
in the best interests of Lucent and its stockholders to separate Lucent's
existing businesses into two independent businesses;
WHEREAS, in furtherance of the foregoing, Lucent and Agere 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
Distribution and the relationship of Lucent and Agere and their respective
Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement,
Lucent and Agere 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, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, 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. AGERE. Agere means Agere Systems Inc.
1.2. AGERE COMMITTEE. Agere Committee means the Corporate Governance
and Compensation Committee of the Agere Board of Directors, or such other
committee as is appointed to administer the provisions of the Agere Stock Award
Plans.
1.3. AGERE ENTITY. Agere Entity means any Person that is, at the
relevant time, a Subsidiary of Agere or is otherwise controlled, directly or
indirectly, by Agere.
1.4. AGERE INDIVIDUAL. Agere Individual means any individual who,
regardless of any subsequent termination of employment or retirement, is (i) on
the Offering Date, either actively employed by, or covered by a Lucent Leave of
Absence Program (other than a transition leave of absence) while employed by,
Agere or an Agere Entity, (ii) employed
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by Lucent or a Lucent Entity and is assigned to Agere at any time between the
Offering Date and the Close of the Distribution Date, in accordance with
principles agreed by the parties prior to the date hereof, (iii) an employee
assigned to Agere on the Offering Date who is under a Lucent force management
program whose off-roll date is after the Offering Date, (iv) an employee
assigned to Lucent on the Offering Date who is under a Lucent force management
program who applies for, obtains and accepts employment with Agere after the
Offering Date and before the Close of Distribution Date or (v) hired by Agere or
an Agere Entity on or after the Participation Commencement Date and prior to the
Distribution Date, without prior employment by Lucent or a Lucent Entity.
Individuals who are on short-term disability on the Offering Date and who have
been assigned to Agere on that date shall be Agere Individuals. For purposes of
Section 5.10, individuals who have been receiving benefits under a workers
compensation program who have been assigned to Agere as of the Participation
Commencement Date shall be Agere Individuals. An alternate payee under a QDRO,
an alternate recipient under a QMCSO, a beneficiary or a covered dependent, in
each case of an employee described in any of the preceding three sentences shall
also be an Agere Individual with respect to that employee's benefit under the
applicable Plans. Such an alternate payee, alternate recipient, beneficiary, or
covered dependent shall not otherwise be considered an Agere Individual with
respect to his or her own benefits under any applicable Plans unless he or she
is an Agere Individual by virtue of the first sentence of this definition.
1.5. AGERE MASTER PENSION TRUST. Agere Master Pension Trust is
defined in Section 3.1.
1.6. AGERE PLANS. Agere Plans means the plans to be established by
Agere described in Section 2.3.
1.7. AGERE RIP. Agere RIP means the Agere Retirement Income Plan.
1.8. AGERE STOCK VALUE. Agere Stock Value means a price for Agere
Common Stock on the Distribution Date or, if such date is not a trading day on
the NYSE, on the next preceding day that was a trading day on the NYSE,
calculated using a methodology to be determined by Lucent. Notwithstanding the
foregoing, if an adjustment is required under Article VI with respect to a
Change in Control, Agere Stock Value shall mean the price at which shares of
Agere Common Stock are offered to purchasers in the IPO. Unless Lucent has
elected to convert all of its shares of Agere Class B Common Stock to shares of
Agere Class A Common Stock prior to the date on which the IPO Registration
Statement shall have become effective, Agere Common Stock, as used in the first
sentence of this definition shall mean Agere Class B Common Stock. If Lucent has
made such an election, references to Agere Common Stock shall mean Agere Class A
Common Stock. References to Agere Common Stock in the second sentence of this
definition shall mean Agere Class A Common Stock.
1.9. AGERE WCP CLAIMS. Agere WCP Claims is defined in Section
5.10(a).
1.10. AGREEMENT. Agreement means this Employee Benefits Agreement,
including all the Schedules and Exhibits hereto.
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1.11. ASO CONTRACT. ASO Contract is defined in Section 5.5(a)(i).
1.12. ASSIGNED POLICIES. Assigned Policies is defined in Section
6.6.
1.13. AUDITING PARTY. Auditing Party is defined in Section
8.5(b)(i).
1.14. AWARD. Award means an award under a Stock Award Plan or a
Short Term Incentive Plan.
1.15. CECRA PLAN. CECRA Plan, when immediately preceded by "Lucent,"
means the Lucent Child/Elder Care Reimbursement Account Plan. When immediately
preceded by "Agere," CECRA means the child/elder care reimbursement account plan
to be established by Agere pursuant to Section 2.3.
1.16. CHANGE IN CONTROL. Change in Control means (i) the occurrence,
on or after the Offering Date and prior to the Distribution Date, of a "Change
in Control" as such term is defined in the Lucent Technologies Inc. 1996 Long
Term Incentive Program as amended through the date hereof, or (ii) of a "Change
in Control" under the foregoing definition after substitution of the term
"Agere" for the term "Company" in each place where it appears in such
definition.
1.17. CLOSE OF THE DISTRIBUTION DATE. Close of the Distribution Date
means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever
shall then be in effect), on the Distribution Date.
1.18. COBRA. 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.
1.19. CODE. 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.
1.20. COLLECTIVE BARGAINING AGREEMENT. Collective Bargaining
Agreement means the 1998 CWA/IBEW/Lucent National Memorandum of Understanding
dated May 30, 1998, including all attachments, National Items and letters
included as a part thereof, between Lucent, the CWA and IBEW in effect on the
Distribution Date, and such local collective bargaining agreements for
bargaining units of Agere Individuals into which the CWA/IBEW/Lucent National
Memorandum of Understanding has been incorporated and which are in effect on the
Distribution Date.
1.21. CWA. CWA means the Communications Workers of America, AFL-CIO.
1.22. DEFERRAL PLAN. Deferral Plan, when immediately preceded by
"Lucent," means the Lucent Technologies Inc. Deferred Compensation Plan. When
immediately preceded by "Agere", Deferral Plan means the deferred compensation
plan to be established by Agere.
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1.23. DISTRIBUTION DATE. Distribution Date means the date determined
pursuant to Section 4.3 of the Separation and Distribution Agreement when Agere
Common Stock will be distributed to Lucent stockholders.
1.24. DOL. DOL means the United States Department of Labor.
1.25. ERISA. 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.
1.26. EXECUTIVE BENEFIT PLANS. Executive Benefit Plans, when
immediately preceded by "Lucent," means the executive benefit and nonqualified
plans, programs, Individual Agreements and arrangements, other than Stock Award
Plans and Stock Purchase Plans, established, maintained, agreed upon, or assumed
by Lucent or a Lucent Entity for the benefit of one or more employees and former
employees of Lucent or a Lucent Entity before the Close of the Distribution
Date, including the plans and Individual Agreements listed in Schedule I, but
excluding the Senior Management Ground Transportation Program. When immediately
preceded by "Agere," Executive Benefit Plans means the executive benefit and
nonqualified plans, programs, Individual Agreements and arrangements, other than
Stock Award Plans and Stock Purchase Plans, to be established or assumed by
Agere pursuant to Section 2.3 that correspond to the respective Lucent Executive
Benefit Plans.
1.27. FIRST TRANSFER DATE. First Transfer Date is defined in Section
3.2(b).
1.28. FMLA. FMLA means the Family and Medical Leave Act of 1993, as
amended.
1.29. GROUP LIFE PROGRAM. Group Life Program, when immediately
preceded by "Lucent," means the Lucent Dependent Accidental Loss Insurance Plan,
the Lucent Dependent Group Life Insurance Plan, the Lucent Group Life Insurance
Plan, the Lucent Supplementary Accidental Loss Insurance Plan and the Lucent
Supplementary Life Insurance Plan. When immediately preceded by "Agere," Group
Life Program means the life insurance plans and programs to be established by
Agere pursuant to Section 2.3 that correspond to the respective Lucent Group
Life Programs.
1.30. HCFA. HCFA means the Health Care Financing Administration.
1.31. HCRA PLAN. HCRA Plan, when immediately preceded by "Lucent,"
means the Lucent Health Care Reimbursement Account Plan. When immediately
preceded by "Agere," HCRA Plan means the health care reimbursement account plan
to be established by Agere pursuant to Section 2.3.
1.32. HEALTH AND WELFARE PLANS. Health and Welfare Plans, when
immediately preceded by "Lucent," means the health and welfare plans listed on
Schedule I established and maintained by Lucent for the benefit of employees and
retirees of Lucent and certain Lucent 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 "Agere," Health and Welfare Plans
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means the health and welfare plans to be established by Agere pursuant to
Section 2.3 that correspond to the respective Lucent Health and Welfare Plans.
1.33. HEALTH PLANS. Health Plans, when immediately preceded by
"Lucent," means the Lucent Technologies Inc. Dental Expense Plan for Active
Employees, the Lucent Technologies Inc. Dental Expense Plan for Retired
Employees, the Lucent Medical Plans, the Lucent HCRA Plan, the Voluntary
Benefits Program offered through Real Life Benefits and the Lucent Technologies
Inc. Vision Care Plan (through Real Life Benefits). When immediately preceded by
"Agere," Health Plans means the health plans to be established by Agere pursuant
to Section 2.3 that correspond to the respective Lucent Health Plans.
1.34. HMO. HMO means a health maintenance organization that provides
benefits under the Lucent Medical Plans or the Agere Medical Plans.
1.35. HMO AGREEMENTS. HMO Agreements is defined in Section
5.5(b)(i).
1.36. IBEW. IBEW means the International Brotherhood of Electrical
Workers.
1.37. IMMEDIATELY AFTER THE DISTRIBUTION DATE. 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.
1.38. INDIVIDUAL AGREEMENT. Individual Agreement means an individual
contract or agreement (whether written or unwritten) entered into between
Lucent, a Lucent Entity, Agere or an Agere Entity and a Lucent 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.
1.39. IPO. IPO means the initial public offering by Agere of shares
of Agere Common Stock pursuant to the IPO Registration Statement.
1.40. IRS. IRS means the Internal Revenue Service.
1.41. LEGALLY PERMISSIBLE. Legally Permissible is defined in Section
5.10(a).
1.42. LESOP. LESOP, when immediately preceded by "Lucent," means the
portion of the Lucent LTSSP that is a leveraged employee stock ownership plan.
When immediately preceded by "Agere," LESOP means the portion of the Agere LTSSP
that is a leveraged employee stock ownership plan.
1.43. LESOP TRUST. LESOP Trust, when immediately preceded by
"Lucent," means the trust established by Lucent under Article 20 of the Lucent
LTSSP. When immediately preceded by "Agere," LESOP Trust has the meaning set
forth in Section 4.2(c)(i).
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1.44. LRIP. LRIP means the Lucent Retirement Income Plan. Unless the
context indicates otherwise, LRIP includes disability pensions payable from the
Lucent LTD VEBA.
1.45. LTSSP. LTSSP, when immediately preceded by "Lucent," means the
Lucent Technologies Inc. Long Term Savings and Security Plan. When immediately
preceded by "Agere," LTSSP means the represented savings plan to be established
by Agere pursuant to Section 2.3 that corresponds to the Lucent LTSSP.
1.46. LUCENT. Lucent means Lucent Technologies Inc., a Delaware
corporation.
1.47. LUCENT ENTITY. Lucent Entity means any Person that is, at the
relevant time, an Affiliate of Lucent, except that, after the Close of the
Distribution Date, the term "Lucent Entity" shall not include Agere or an Agere
Entity.
1.48. LUCENT EXECUTIVE. Lucent Executive means an employee or former
employee of Lucent, a Lucent Entity, Agere or an Agere Entity, who immediately
before the Close of the Distribution Date is eligible to participate in or
receive a benefit under any Lucent Executive Benefit Plan.
1.49. LUCENT EXECUTIVE AND NON-EMPLOYEE DIRECTOR LIFE INSURANCE
PROGRAM. Lucent Executive and Non-Employee Director Life Insurance Program means
the life insurance policies purchased by Lucent on behalf of certain Lucent
Executives and Lucent Non-Employee Directors, with respect to which such Lucent
Executives or Lucent Non-Employee Directors (or their assignees or delegates),
respectively, have executed collateral assignments for the benefit of Lucent.
1.50. LUCENT LEAVE OF ABSENCE PROGRAMS. Lucent Leave of Absence
Programs means the Local Leave, Disability Leave, Educational Leave of Absence,
Accompanying Lucent 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, Special Leave, Enhanced
Leave, and ELOA Plus Leave Programs offered from time to time under the
personnel policies and practices of Lucent or a Lucent Entity.
1.51. LUCENT LTD VEBA. Lucent LTD VEBA means the Lucent Technologies
Inc. Long Term Disability Plans Benefit Trust.
1.52. LUCENT MASTER PENSION TRUST. Lucent Master Pension Trust is
defined in Section 3.2.
1.53. LUCENT PENSION PLAN. Lucent Pension Plan means the Lucent
Technologies Inc. Pension Plan. Unless the context indicates otherwise, Lucent
Pension Plan includes disability pensions payable from the Lucent LTD VEBA and
death benefits payable under the Lucent Special Accidental Death Insurance
Policy.
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1.54. LUCENT PLANS. Lucent Plans means the Lucent Pension Plans, the
Lucent Savings Plans, the Lucent Health and Welfare Plans, the Lucent Executive
Benefit Plans, and the Lucent Stock Awards Plans.
1.55. LUCENT STD. Lucent STD means the Lucent Technologies Inc.
Short Term Disability Plan and the Lucent Technologies Inc. Sickness and
Accident Disability Benefit Plan.
1.56. LUCENT STOCK VALUE. Lucent Stock Value means a price for
Lucent Common Stock on the Distribution Date, or, if such date is not a trading
day on the NYSE, on the next preceding day that was a trading day on the NYSE,
calculated using a methodology to be determined by Lucent. Notwithstanding the
foregoing, if an adjustment is required under Article VI with respect to a
Change in Control, Lucent Stock Value shall mean the closing price on the NYSE
for Lucent Common Stock on the Offering Date.
1.57. LUCENT WCP. Lucent WCP means the Lucent Workers' Compensation
Program, comprised of the various arrangements established by Lucent or a Lucent
Entity to comply with the workers' compensation requirements of the states in
which Lucent and its Affiliates conduct business.
1.58. MATERIAL FEATURE. 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 dependents or beneficiaries) to such Plan.
1.59. MEDICAL PLANS. Medical Plans, when immediately preceded by
"Lucent," means the Lucent Technologies Inc. Medical Expense Plan for Management
Employees, the Lucent Technologies Inc. Medical Expense Plan for Represented
Employees and the Lucent Technologies Inc. Medical Expense Plan for Retired
Employees. When immediately preceded by "Agere," Medical Plans means the medical
plans to be established by Agere pursuant to Section 2.3 that correspond to the
respective Lucent Medical Plans.
1.60. MPA. MPA means the Mandatory Portability Agreement,
established as of January 1, 1985, among AT&T, American Information Technologies
Corporation, Xxxx Atlantic Corporation, Xxxx Communications Research, Inc.,
BellSouth Corporation, Cincinnati Xxxx Telephone Company, NYNEX Corporation,
Pacific Telesis Group, Inc., The Southern New England Telephone Company,
Southwestern Xxxx 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.
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1.61. NON-EMPLOYEE DIRECTOR. Non-Employee Director, when immediately
preceded by "Lucent," means a member of Lucent's Board of Directors who is not
an employee of Lucent, a Lucent Entity, Agere, or an Agere Entity. When
immediately preceded by "Agere," Non-Employee Director means a member of Agere's
Board of Directors who is not an employee of Lucent, a Lucent Entity, Agere or
an Agere Entity.
1.62. NON-EMPLOYEE DIRECTOR PLAN. Non-Employee Director Plan, when
immediately preceded by "Lucent," means the 1999 Stock Compensation Plan for
Non-Employee Directors. When immediately preceded by "Agere," Non-Employee
Director Plan means the plan to be established by Agere pursuant to Section 2.3.
1.63. NON-PARTIES. Non-parties is defined in Section 8.5(b)(ii).
1.64. NONREPRESENTED EMPLOYEE. Nonrepresented Employee means any
individual who is classified by Lucent as a Lucent Business Assistant or who is
an "Employee" as defined under the terms of the LRIP or the pension plan to be
established by Agere pursuant to Section 2.3 that corresponds to the LRIP.
1.65. NONREPRESENTED HEALTH VEBA. Nonrepresented Health VEBA, when
immediately preceded by "Lucent," means the Lucent Technologies Inc. Management
and Nonrepresented Employees Postretirement Health Benefits Trust.
1.66. NON-U.S. PLAN. Non-U.S. Plan means a Plan maintained by
Lucent, a Lucent Entity, Agere, or an Agere Entity for the benefit of employees
outside the U.S. or for any such employees resident in territories of the U.S.
who are not covered under U.S. Plans.
1.67. OFFERING DATE. Offering Date means the date of the final
Prospectus.
1.68. OPTION. Option, when immediately preceded by "Lucent," means
an option to purchase Lucent Common Stock. When immediately preceded by "Agere,"
Option means an option to purchase Agere Common Stock, in each case pursuant to
a Stock Award Plan.
1.69. PARTICIPATING COMPANY. Participating Company means (a) Lucent,
(b) any Person other than an individual that Lucent has approved for
participation in, and which is participating in, a Plan sponsored by Lucent, 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.
1.70. PARTICIPATION COMMENCEMENT DATE. Participation Commencement
Date means February 1, 2001.
1.71. PBGC. PBGC means the Pension Benefit Guaranty Corporation.
1.72. PENSION PLAN. Pension Plan, when immediately preceded by
"Lucent," means the Lucent Technologies Inc. Pension Plan. When immediately
preceded by "Agere,"
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Pension Plan means the Agere Pension Plan to be established by Agere that
corresponds to the Lucent Pension Plan.
1.73. PENSION PLANS. Pension Plans, when immediately preceded by
"Lucent," means the LRIP and the Lucent Pension Plan. When immediately preceded
by "Agere," Pension Plans means the respective nonrepresented and represented
pension plans to be established by Agere pursuant to Section 2.3 that correspond
to the Lucent Pension Plans.
1.74. PENSION TRANSFER AMOUNT. Pension Transfer Amount is defined in
Section 3.2(c).
1.75. PLAN. Plan, when immediately preceded by "Lucent" or "Agere,"
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
Lucent or a Lucent Entity, or Agere or an Agere Entity, as applicable.
1.76. POSTRETIREMENT LIFE TRUST. Postretirement Life Trust, when
immediately preceded by "Lucent," means the Lucent Technologies Inc. Post
Retirement Life Insurance Benefits Trust. When immediately preceded by "Agere,"
Postretirement Life Trust means the trust to be established by Agere that
corresponds to the Lucent Postretirement Life Insurance Benefits Trust.
1.77. QDRO. 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 Lucent
Pension Plans or the Lucent Savings Plans.
1.78. QMCSO. 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 a Lucent Health Plan.
1.79. RABBI TRUST. Rabbi Trust, when immediately preceded by
"Lucent," means the Lucent Technologies Inc. Benefits Protection Trust. When
immediately preceded by "Agere," Rabbi Trust means the grantor trust to be
established by Agere pursuant to Section 6.5(a) that corresponds to the Lucent
Rabbi Trust.
1.80. RATIO. Ratio means the amount obtained by dividing the Lucent
Stock Value by the Agere Stock Value; provided, however, that, in determining
the Ratio, adjustments may be made to minimize the independent, determinable and
verifiable effects of events other than the Distribution on the Lucent Stock
Value and the Agere Stock Value.
1.81. REPRESENTED EMPLOYEE. Represented Employee means any
individual, other than an individual classified by Lucent as a Lucent Business
Assistant, who is an "Employee" as defined under the terms of the Lucent Pension
Plan or the pension plan to be established by Agere pursuant to Section 2.3 that
corresponds to the Lucent Pension Plan.
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1.82. REPRESENTED HEALTH VEBA. Represented Health VEBA, when
immediately preceded by "Lucent," means the Lucent Technologies Inc. Represented
Employees Post-Retirement Health Benefits Trust. When immediately preceded by
"Agere," Represented Health VEBA means the welfare benefit fund to be
established by Agere that corresponds to the Lucent Represented Health VEBA.
1.83. REPRESENTED TRANSITION PERIOD. Represented Transition Period
means the period beginning Immediately after the Distribution Date and ending no
later than May 31, 2003, the scheduled expiration date of the Collective
Bargaining Agreement as in effect on the date hereof.
1.84. RFA. RFA means Retirement Funding Account.
1.85. SAVINGS PLANS. Savings Plans, when immediately preceded by
"Lucent," means the Lucent Savings Plan and the Lucent Technologies Inc. Long
Term Savings and Security Plan. When immediately preceded by "Agere," Savings
Plans means (i) the savings plans to be established by Agere pursuant to Section
2.3 that correspond to the Lucent Savings Plan and the Lucent Technologies Inc.
Long Term Savings and Security Plan and (ii) The Xxxxx Corporation 401(k)
Savings Plan.
1.86. SECOND TRANSFER DATE. Second Transfer Date is defined in
Section 3.2(b).
1.87. SEPARATION AND DISTRIBUTION AGREEMENT. Separation and
Distribution Agreement is defined in the second recital of this Agreement.
1.88. SHORT TERM INCENTIVE PLAN. Short Term Incentive Plan, when
immediately preceded by "Lucent," means the Lucent Short Term Incentive Plan.
When immediately preceded by "Agere," Short Term Incentive Plan means the
short-term incentive plan to be established by Agere pursuant to Section 2.3.
1.89. STOCK AWARD PLAN. Stock Award Plan, when immediately preceded
by "Lucent," means any of the Lucent Technologies Inc. Founders Grant Stock
Option Plan, the Lucent Technologies Inc. 2000 Stock Option Plan, the Lucent
Technologies Inc. 1998 Global Stock Option Plan, the Lucent Technologies Inc.
1997 Long Term Incentive Plan, the Lucent Technologies Inc. 1996 Long Term
Incentive Program and such other stock-based incentive plans that have been
assumed by Lucent by reason of merger, acquisition, or otherwise, each as
amended through the date hereof. All such plans and programs are listed in
Schedule I. Schedule I shall also be deemed to include the stock award plans of
companies acquired by (i) Agere or an Agere Entity after the date hereof and
prior to the Distribution Date, if Agere or an Agere Entity assumes those Plans,
or (ii) Lucent or a Lucent Entity after the date hereof and prior to the
Distribution Date, if Lucent or a Lucent Entity assumes those plans and the
company so acquired will become either an Agere Entity or a business owned by
Agere or an Agere Entity. When immediately preceded by "Agere," Stock Award
Plans means the Agere Systems Inc. 2001 Long Term Incentive Plan and such other
stock award plans as may be established by Agere pursuant to Section 2.3 and
Section 6.3, other than the Agere Stock Purchase Plan.
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1.90. STOCK PURCHASE PLAN. Stock Purchase Plan, when immediately
preceded by "Lucent," means the Lucent Technologies Inc. 1996 Employee Stock
Purchase Plan, or any successor thereto. When immediately preceded by "Agere,"
Stock Purchase Plan means the stock purchase plan to be established by Agere
pursuant to Section 2.3.
1.91. TRANSFERRED INDIVIDUAL. Transferred Individual means any Agere
Individual, unless such individual was an employee of Lucent or a Lucent Entity
after the latest date on which he was an Agere Individual and prior to the Close
of the Distribution Date. For purposes of Article VI, a Transferred Individual
means an Agere Individual who continues to be an employee of Agere or an Agere
Entity on the Close of the Distribution Date.
1.92. TRANSITION INDIVIDUAL. Transition Individual means any
Represented Employee who:
(a) is a Transferred Individual who during the Represented
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 a Lucent Pension Plan;
(b) is an employee or former employee of Lucent or a Lucent Entity
as of the Distribution Date who during the Represented Transition Period becomes
an employee of Agere or an Agere 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 a
Lucent Pension Plan; or
(c) is an individual described in clause (a) or (b) of this
definition whose employer changes during the Represented Transition Period
either (i) from Lucent or a Lucent Entity to Agere or an Agere Entity, or (ii)
from Agere or an Agere Entity to 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 a Lucent Pension Plan.
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.
1.93. TRUST-OWNED LIFE INSURANCE (VEBA). Trust-Owned Life Insurance
(VEBA) means the group life insurance policies purchased from The Prudential
Insurance Company of America by the trustee of the Lucent Nonrepresented Health
VEBA.
1.94. U.S. U.S. means the 50 states comprising the United States of
America, territories thereof, and the District of Columbia.
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1.95. VEBA. VEBA, when immediately preceded by "Lucent," means any
voluntary employees' beneficiary association trust sponsored by Lucent. When
immediately preceded by "Agere," VEBA means any voluntary employees' beneficiary
association trust sponsored by Agere.
ARTICLE II.
GENERAL PRINCIPLES
2.1. ASSUMPTION OF LIABILITIES.
AGERE LIABILITIES. Except as otherwise provided in this Agreement or
in any of the agreements referred in Section 2.5, Agere hereby agrees, as of the
dates set forth herein, to assume and pay, perform, fulfill and discharge, or to
cause an Agere Plan to assume, pay, perform, fulfill and discharge, in
accordance with their respective terms, all Liabilities (regardless of when or
where such Liabilities arose or arise or were or are incurred) to or relating to
Transferred Individuals, under or with respect to the employee compensation
programs, plans or policies or any Plan listed in Schedule I, other than
Liabilities with respect to the Lucent Stock Purchase Plan, to the extent
relating to, arising out of or resulting from future, present or former
employment with Agere, an Agere Entity, Lucent or a Lucent Entity (including
Liabilities under Lucent Plans and Agere Plans). Notwithstanding the foregoing,
(i) Agere 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, and (ii) neither Agere nor any Agere
Entity shall, by virtue of this Section 2.1, be deemed to have assumed a
Liability that would otherwise be the Liability of any Agere Plan.
2.2. AGERE PARTICIPATION IN LUCENT PLANS.
(a) PARTICIPATION IN LUCENT PLANS. Effective as of the
Participation Commencement Date and subject to the terms and conditions of this
Agreement, Agere shall be a Participating Company in the Lucent Plans in effect
as of the Participation Commencement Date, and Lucent hereby consents to such
status. Each Agere Entity that is, as of the Participation Commencement Date, a
Participating Company in any of such Lucent Plans shall continue as such.
Effective as of any date on or after the Participation Commencement Date and
before the Distribution Date, an Agere Entity not described in the preceding
sentence may, at its request and with the consent of Lucent (which shall not be
unreasonably withheld), become a Participating Company in any or all of the
Lucent Plans. Without Lucent's consent, neither Agere nor any Agere Entity shall
become a Participating Company in any such Lucent Plan after the Distribution
Date.
(b) AGERE'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY.
Agere shall perform with respect to its participation in the Lucent Plans, and
shall cause each other Agere Entity that is a Participating Company in any
Lucent 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 Lucent Plan; (ii) cooperating fully with benefit
personnel and
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benefit vendors; (iii) preserving the confidentiality of all financial
arrangements Lucent has or may have with any vendors, claims administrators,
trustees or any other entity or individual with whom Lucent has entered into an
agreement relating to the Lucent Plans; and (iv) preserving the confidentiality
of participant health information (including health information in relation to
FMLA leaves).
(c) TERMINATION OF PARTICIPATING COMPANY STATUS. Agere and
each Agere Entity shall cease to be a Participating Company in the Lucent Plans,
other than the Lucent Stock Purchase Plan, at the Close of the Distribution
Date. Agere and each Agere Entity shall cease to be a Participating Company in
the Lucent Stock Purchase Plan with respect to periods after June 30, 2001.
Notwithstanding the foregoing, in the event of a Change in Control, Agere and
each Agere Entity shall cease to be a Participating Company in the Lucent Stock
Award Plans as of the date as of which the adjustments called for by Section
6.3(b) have been made.
2.3. ESTABLISHMENT OF AGERE PLANS. Effective as of the Offering
Date, Agere shall adopt, or cause to be adopted, the Agere Stock Award Plans and
the Agere Stock Purchase Plan for the benefit of Agere Individuals and other
current and future employees of Agere and the Agere Entities, including
Transferred Individuals. Effective Immediately after the Distribution Date,
Agere shall adopt, or cause to be adopted, the Agere Pension Plans, the Agere
Savings Plans, the Agere Health and Welfare Plans and, unless previously
adopted, the Agere Executive Benefit Plans, for the benefit of Transferred
Individuals and other current and future employees of Agere and the Agere
Entities. Except for the Agere Stock Award Plans, the Agere Stock Purchase Plan
and the employer security funds of the Agere Savings Plans, the foregoing Agere
Plans as in effect immediately after their effective dates shall be
substantially similar in all Material Features to the corresponding Lucent Plans
as in effect immediately prior to the effective dates of the Agere Plans,
provided that Agere shall not be obligated to adopt an Agere Plan corresponding
to the Lucent Technologies Inc. Supplemental Variable Universal Life Plan. The
Agere Stock Purchase Plan and those Agere Stock Awards Plans as to which
shareholder approval is required shall be adopted by Agere and approved by
Lucent as sole shareholder of Agere, prior to their effective dates. On or prior
to the Distribution Date, Agere may adopt a plan or other arrangement for the
payment of compensation of the Agere Non-Employee Directors in Agere Common
Stock or Agere Options.
2.4. TERMS OF PARTICIPATION BY AGERE INDIVIDUALS AND TRANSFERRED
INDIVIDUALS IN AGERE PLANS. The Agere Plans shall be, with respect to Agere
Individuals and Transferred Individuals, in all respects the successors in
interest to, and shall not provide benefits that duplicate benefits provided by,
the corresponding Lucent Plans. Lucent and Agere shall agree on methods and
procedures to prevent Agere Individuals and Transferred Individuals from
receiving duplicative benefits from the Lucent Plans and the Agere Plans. With
respect to Agere Individuals, each Agere Plan that is effective on the Offering
Date shall provide that all service, all compensation and all other
benefit-affecting determinations that, immediately prior to their effective
dates, were recognized under the corresponding Lucent Plan shall, as of the
Offering Date, receive full recognition, credit, and validity and be taken into
account under such Agere Plan to the same extent as if they occurred under such
Agere Plan, except to the extent that duplication of benefits would result. With
respect to Transferred Individuals, each Agere Plan
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effective Immediately after the Distribution Date 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 Lucent Plan shall, Immediately after the Distribution Date,
receive full recognition, credit, and validity and be taken into account under
such Agere Plan to the same extent as if they occurred under such Agere 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
Lucent Plans (including Non-U.S. Plans) to the corresponding trusts relating to
Agere Plans (including Non-U.S. Plans) are based upon the understanding of the
parties that each such Agere Plan will assume all Liabilities of the
corresponding Lucent Plan to or relating to Transferred Individuals, as provided
for herein. If any such Liabilities are not effectively assumed by the
appropriate Agere Plan and are retained by the corresponding Lucent Plan, then
the amount of assets transferred to the trust relating to such Agere Plan from
the trust relating to the corresponding Lucent Plan shall be recomputed, ab
initio, as set forth below but taking into account the retention of such
Liabilities by such Lucent Plan, and assets shall be transferred by the trust
relating to such Agere Plan to the trust relating to such Lucent 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.
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, Lucent shall designate Agere as, and Agere
shall become, an Interchange Company under the MPA, with all the applicable
rights and obligations of such an Interchange Company. Each Agere 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 Agere Entity that becomes a Participating Company in the Lucent Pension
Plans pursuant to Section 2.2 may at its request and with the consent of Lucent
(which shall not be unreasonably withheld), become an Interchange Company.
Effective Immediately after the Distribution Date, the Agere Pension Plans shall
be "Interchange Company Pension Plans" under, and subject to the terms of, the
MPA.
(b) REPRESENTED INTERCHANGE AGREEMENT. Effective on the
Participation Commencement Date, Lucent and Agere shall enter into a Represented
Interchange Agreement in the form attached hereto as Exhibit A.
ARTICLE III.
DEFINED BENEFIT PLANS
3.1. ESTABLISHMENT OF MIRROR PENSION TRUST. Effective Immediately
after the Distribution Date, Agere 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), and forming part of the Agere Pension
Plans (the "Agere Master Pension Trust").
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3.2. ASSUMPTION OF PENSION PLAN LIABILITIES AND ALLOCATION OF
INTERESTS IN THE LUCENT MASTER PENSION TRUST.
(a) ASSUMPTION OF LIABILITIES BY AGERE PENSION PLANS.
Immediately after the Distribution Date, all Liabilities to or relating to
Transferred Individuals under the LRIP or the Lucent Pension Plan, as
applicable, shall cease to be Liabilities of the LRIP or the Lucent Pension
Plan, as applicable, and shall be assumed by the corresponding Agere Pension
Plans.
(b) ASSET ALLOCATIONS AND TRANSFERS. Unless otherwise agreed
by the parties prior to May 15, 2001, on or about June 1, 2001, Lucent shall
establish subaccounts (the "Transfer Subaccounts") of the following accounts of
the Lucent Technologies Inc. Master Pension Trust (the "Lucent Master Pension
Trust") in the approximate amounts set forth below:
Title of Account Account Numbers Amount to be transferred
----------------- --------------- ------------------------
SSgA S&P 500 22-01150 60% of initial Pension Transfer Amount
BGI Commingled 22-02231 25% of initial Pension Transfer Amount
Fixed Income Index
SSgA EAFE Index 22-52516 15% of initial Pension Transfer Amount
The initial Pension Transfer Amount shall be an amount equal to
ninety percent (90%) of Lucent's reasonable best estimate on June 1, 2001 of the
Pension Transfer Amount. On the first day after the Distribution Date on which
the New York Stock Exchange is open for business (the "First Transfer Date"),
Lucent shall transfer or cause to be transferred from the Lucent Master Pension
Trust to the Agere Master Pension Trust the assets of the LRIP and the Lucent
Pension Plan then in the Transfer Subaccounts.
On a date agreed upon by Lucent and Agere that is no later than six
months after the Distribution Date, or on such later date as they may agree (the
"Second Transfer Date"), Lucent shall transfer or cause to be transferred from
the Lucent Master Pension Trust to the Agere Master Pension Trust assets of the
Lucent Pension Plans, or Agere shall transfer or cause to be transferred from
the Agere Master Pension Trust to the Lucent Master Pension Trust assets of the
Agere Pension Plans, in an amount having a value equal to the difference between
the Pension Transfer Amount and the value on the First Transfer Date of the
assets held in the Transfer Subaccounts that were transferred on the First
Transfer Date, plus earnings or minus losses equal to the amount that would have
been earned or lost (taking into account dividends and all realized and
unrealized gains and losses) if (A) 60% of such difference had been invested in
and achieved a rate of return equal to the S&P 500 Index less one basis point
(0.01%), (B) 25% of such difference had been invested in and achieved a rate of
return equal to the Xxxxxx Brothers Aggregate Index less one basis point (0.01%)
and (C) 15% of such difference had been invested in and achieved a rate of
return equal to the EAFE Index less six basis points (0.06%), in each case from
the First Transfer Date to, but not including, the Second Transfer Date. The
amount to be transferred as of the Second Transfer Date shall be adjusted by the
aggregate amount of any pension benefit payments made by the Lucent Master
Pension Trust on behalf of the Agere Master Pension Trust (and by the aggregate
amount of any pension benefit
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payments made by the Agere Master Pension Trust on behalf of the Lucent Master
Pension Trust) prior to the Second Transfer Date, and to reflect data
corrections and computational refinements. The amounts to be transferred on the
Second Transfer Date will, unless Lucent and Agere agree otherwise, be
transferred in the form of cash. In the event the amount to be transferred on
the Second Transfer Date is a negative amount, then Agere shall, unless Lucent
and Agere agree otherwise, transfer or cause to be transferred from the Agere
Master Pension Trust back to the Lucent Master Pension Trust such amount in
cash.
On or prior to the Second Transfer Date, Lucent shall provide Agere
with a copy of the actuarial reports relating to the determination of the
Pension Transfer Amount, together with a written certification of the Pension
Transfer Amount prepared by the enrolled actuary for the Lucent plans.
(c) PENSION TRANSFER AMOUNT.
(i) For purposes of this Section 3.2, "Pension Transfer
Amount" shall mean the lesser of (A) and (B), where (A) shall be an amount equal
to the sum of the following calculations for each plan: the fair market value of
the assets (including updated values as of the Distribution Date for private
equity investments) of the LRIP or the Lucent Pension Plan, respectively, as of
the Distribution Date multiplied by a fraction, the numerator of which shall be
the projected benefit obligation for Transferred Individuals under each such
plan as of the Distribution Date (using the actuarial methods and assumptions
utilized by Lucent in accordance with FAS 87 reporting for determining the
disclosure of the projected benefit obligation as of September 30, 2001, and the
denominator of which shall be such projected benefit obligation in respect of
all participants (including Transferred Individuals) under each such plan (using
the same actuarial methods and assumptions), and (B) shall be an amount such
that the projected net pension and other postretirement health and life benefit
income to Agere under FAS 87 and 106 for the calendar quarter commencing the
first of the month immediately following the Distribution Date, based on the
plan provisions in effect on the Distribution Date and based on the assumptions
set forth in the remainder of this Section 3.2(c), is $0.
(ii) Notwithstanding the foregoing provisions of this
paragraph 3.2(c), in no event shall the Pension Transfer Amount be less than the
minimum required transfer amount for Transferred Individuals determined in
accordance with the terms of the LRIP and the Lucent Pension Plan and the
requirements of Section 414(l) of the Code, utilizing the "safe harbor" rates
and assumptions set forth in the regulations promulgated by the PBGC under
Section 4044 of ERISA as of the Distribution Date and the turnover assumptions
used to determine the funding requirements for the 2000 plan year (provided that
the inclusion of this turnover assumption shall not reduce the total Pension
Transfer Amount for both plans) except that no expense load, including any
loading charge determined under the Loading Assumptions set forth in Appendix C
to Part 4044 of the PBGC Regulations, shall be charged.
(iii) The amount specified in clause (B) of Section
3.2(c)(i) shall be determined on a pro-forma basis as of the Distribution Date
using the applicable actuarial methods and assumptions utilized by Lucent in
accordance with its FAS 87 and 106 reporting as of September 30, 2001 and after
giving effect to the estimated amounts of the
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transfers described in Sections 5.3, 5.4, and 6.6. In making such
determinations, unrecognized accounting items will be allocated between Agere
and Lucent pursuant to Question and Answer 81 contained in the Implementation
Guidelines of Statement of Financial Accounting Standards No. 87. If clause (B)
of Section 3.2(c)(i) is less than clause (A), the amount of pension assets to be
allocated to the Agere RIP and the Agere Pension Plan will be determined such
that the ratio of the funded ratios of the Agere Pension Plan and the Agere RIP
immediately after the Distribution Date equals the ratio of the funded ratios of
the Lucent Pension Plan and the LRIP immediately before the Distribution Date.
(iv) For purposes of determining all actuarial
liabilities required under this Section 3.2(c), active and inactive employee
data shall be based on the census data as of the Distribution Date. To the
extent that there are transfers of pension assets with respect to participants
relating to pre-Distribution Date transactions and/or obligations, the following
principles shall apply: (A) with respect to MPA transfers, transfers of pension
assets into the Lucent pension plans with respect to employees covered by the
MPA for whom pension assets had not transferred as of the Distribution Date
shall be allocated to the respective pension plan to which the participant is
assigned as of the Distribution Date; and transfers of pension assets from the
Lucent Pension Plans (without regard to the Agere Pension Plans' assets) with
respect to employees covered by the MPA for whom pension assets had not
transferred as of the Distribution Date shall be transferred from the respective
Lucent Pension Plans to Agere Pension Plans; (B) with respect to internal
transfers (LRIP to the Lucent Pension Plan, or reverse), the audited pension
asset transfer amounts shall be adjusted to reflect the internal transfers
between the LRIP and the Lucent Pension Plan that were not taken into account
prior to the Distribution Date; (C) any other pension asset transfers not
described above will be treated in a manner consistent with the principles
underlying the methodologies described in items (A) and (B) above; and (D) with
respect to Liabilities for Transferred Individuals that (I) are required to be
assumed by an Agere Pension Plan, (II) are not finally determined until after
the Distribution Date, and (III) were based on events occurring prior to the
Distribution Date that would have been included in the projected benefit
obligation for Transferred Individuals as of the Distribution Date, had they
been determined as of such date, the Pension Transfer Amount shall be adjusted
to take into account such Liabilities as soon as practicable after they have
been determined.
ARTICLE IV.
DEFINED CONTRIBUTION PLANS
4.1. SAVINGS PLANS.
(a) NONREPRESENTED SAVINGS PLAN TRUST. Effective Immediately
after the Distribution Date, Agere shall establish, or cause to be established,
a separate trust qualified under Code Section 401(a), exempt from taxation under
Code Section 501(a), and forming part of the Agere Savings Plan.
(b) ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS.
Effective Immediately after the Distribution Date: (i) the Agere Savings Plan
shall assume and be solely responsible for all Liabilities to or relating to
Transferred Individuals under the Lucent Savings
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Plan and (ii) Lucent shall cause the accounts of the Transferred Individuals
under the Lucent Savings Plan which are held by its related trust as of the
Close of the Distribution Date to be transferred to the Agere Savings Plan and
its related trusts, and Agere shall cause such transferred accounts to be
accepted by such plans and trusts. Effective no later than Immediately after the
Distribution Date, Agere shall use its reasonable best efforts to enter into
agreements satisfactory to Agere to accomplish such assumptions and transfers,
the maintenance of the necessary participant records, the appointment of
Fidelity Management Trust Company as initial trustee under the Agere Savings
Plan, and the engagement of Fidelity Institutional Retirement Services Company
as initial recordkeeper under such plans. The 2001 variable match for
Transferred Individuals who are participants in the Agere Savings Plan will be
determined and funded by Agere in an amount at least equal to that which would
have been provided under the Lucent Savings Plan had the assumption of
liabilities and transfer of assets described herein not occurred.
(c) MAINTENANCE OF FROZEN EMPLOYER SECURITY FUNDS. Agere
agrees that it will continue to maintain a Lucent Stock Fund and a Lucent
Employer Shares Fund under the Agere Savings Plans to hold shares of Lucent
Common Stock credited to Transferred Individuals under the corresponding
investment funds under the Lucent Savings Plans. Agere will maintain such funds
for three years from the Distribution Date, or until such earlier date, for
either fund, on which 80% of the respective assets of such fund shall have been
distributed or transferred to another investment fund. Lucent agrees that it
will continue to maintain an Agere Stock Fund to hold shares of Agere Common
Stock received by the Lucent Stock Fund in connection with the Distribution, for
the benefit of participants who are not Transferred Individuals, for three years
from the Distribution Date, or until such earlier date on which 80% of the
assets of such investment fund have been distributed or transferred to another
investment fund. Lucent and Agere acknowledge that no further contributions or
investment transfers will be allowed into either the Agere Stock Fund under the
Lucent Savings Plans or the Lucent Stock Fund under the Agere Savings Plans
after the Distribution Date.
4.2. LTSSPs AND LESOPs.
(a) REPRESENTED SAVINGS PLAN TRUST. Effective Immediately
after the Distribution Date, Agere 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), and forming part of the Agere LTSSP.
(b) ASSUMPTION OF LTSSP LIABILITIES. Effective Immediately
after the Distribution Date: (i) the Agere LTSSP shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
the Lucent LTSSP and (ii) Lucent shall cause the accounts of the Transferred
Individuals under the Lucent LTSSP which are held by its related trust as of the
Close of the Distribution Date to be transferred to the Agere LTSSP and its
related trust, and Agere shall cause such transferred accounts to be accepted by
such plans and trusts. Effective no later than Immediately after the
Distribution Date, Agere shall use its reasonable best efforts to enter into
agreements satisfactory to Agere to accomplish such assumption and transfer, the
maintenance of the necessary participant records, the appointment of Fidelity
Management Trust Company as initial trustee under the Agere LTSSP, and the
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engagement of Fidelity Institutional Retirement Services Company as initial
recordkeeper under such plans.
(c) LEVERAGED STOCK OWNERSHIP PLAN.
(i) Effective as of Immediately after the Distribution
Date, Agere shall establish, or cause to be established, a separate trust (the
"Agere LESOP Trust"), qualified in accordance with Code Section 401(a), exempt
from taxation under Code Section 501(a), and forming part of the Agere LTSSP.
(ii) Effective as of Immediately after the Distribution
Date: (A) the Agere LTSSP shall assume and be solely responsible for all
Liabilities relating to Transferred Individuals under the Lucent LTSSP that
relate to, arise out of or result from the Lucent LESOP; (B) Lucent shall cause
the accounts of the Transferred Individuals under the Lucent LTSSP which are
held by the Lucent LESOP Trust as of the Close of the Distribution Date to be
transferred to the Agere LTSSP and the Agere LESOP Trust; (C) Agere shall cause
all accounts so transferred to be accepted by such plan and trust.
Notwithstanding any other provision of the Agreement (including without
limitation Section 8.13), the parties may agree to an adjustment to the LESOP
transfer procedures described in this Section 4.3, as appropriate so that such
transfers reflect the proper characterization of participants as Transferred
Individuals. Effective no later than Immediately after the Distribution Date,
Agere shall use its reasonable best efforts to enter into agreements acceptable
to Agere to accomplish such assumption and transfers, the maintenance of the
necessary participant account records, the appointment of Fidelity Management
Trust Company as initial trustee of the Agere LESOP Trust, and the engagement of
Fidelity Institutional Retirement Services Company as initial recordkeeper of
the Agere LESOP.
(iii) The parties intend that, as the result of the
above-described transactions, after the Close of the Distribution Date, the
Agere LESOP and Agere LESOP Trust will, in addition to the assumption of
Liabilities provided for above, continue to maintain those protections and
rights that are required under the Code to be nonterminable, so that securities
acquisition loans made to the Lucent LESOP Trust and the Agere LESOP Trust, if
any, will be exempt from the prohibited transaction rules of the Code and ERISA
pursuant to Code Section 4975(d)(3).
(iv) The parties acknowledge that, as a result of the
transfer of assets described in Section 4.2(c)(ii) and the Distribution, both
the Lucent LESOP and the Agere LESOP will, after the Close of the Distribution
Date, hold shares of both Lucent Common Stock and Agere 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. In furtherance of
any required dispositions and reinvestments, Lucent and Agere may take all
actions necessary or appropriate to permit the exchange of shares of Agere
Common Stock held by the Lucent LESOP Trust for shares of Lucent Common Stock
held by the Agere LESOP Trust, including the engagement of a fiduciary not
affiliated with
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either Lucent or Agere to advise the parties regarding the time and manner
(including the exchange ratio) of such exchange.
(v) The parties acknowledge their expectation that all
shares of Lucent Common Stock acquired under the Lucent LESOP Trust with the
proceeds of a securities acquisition loan will have been fully allocated prior
to the Distribution Date. If any such shares have not been so allocated as of
the Distribution Date, Lucent and Agere agree to take all reasonable actions to
complete such allocations or take such other actions as they deem appropriate as
soon as practicable after the Distribution Date on a basis that will insure that
each of the Lucent LESOP and the Agere LESOP will continue to satisfy all
applicable requirements for qualification as an employee stock ownership plan
under the applicable provisions of Code Sections 401(a) and 4975(e)(7).
ARTICLE V.
HEALTH AND WELFARE PLANS
5.1. ESTABLISHMENT OF MIRROR HEALTH AND WELFARE PLAN TRUSTS. On or
before the Distribution Date, Agere shall establish, or cause to be established
the following trusts, if assets will be transferred from the corresponding
Lucent trusts pursuant to Sections 5.3 or 5.4: (a) the Agere Postretirement
Health Trusts, for the purpose of funding claims for post-retirement benefits
under the Agere Health Plans, and (b) the Agere Postretirement Life VEBA, for
the purpose of funding claims for post-retirement life insurance benefits. Such
trusts shall meet the requirements of Code Sections 419, 419A, 501(a), and
501(c)(9). Agere shall use its reasonable best efforts to enter into agreements
satisfactory to Agere for the appointment as initial trustee under each such
trust of the trustee of the corresponding Lucent trust.
5.2. ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) Effective Immediately after the Distribution Date, all
Liabilities to or relating to Transferred Individuals under the Lucent Health
and Welfare Plans shall cease to be Liabilities of the Lucent Health and Welfare
Plans and shall be assumed by the corresponding Agere Health and Welfare Plans.
(b) All treatments which are being provided to a Transferred
Individual as of the Distribution Date by a provider that is not participating
in any Agere Health and Welfare Plan shall be provided without interruption
under the appropriate Lucent Health and Welfare Plan until such treatment is
concluded or discontinued pursuant to applicable plan rules and limitations, but
Agere shall be responsible for all Liabilities relating to, arising out of or
resulting from such on-going treatments after the Distribution Date.
Notwithstanding the above, Lucent agrees to remain responsible for
the payment of claims for Transferred Individuals who are being treated as
hospital inpatients as of the Distribution Date until such time as they are
released from the hospital. This commitment is subject to a maximum amount of
$25,000 per Transferred Individual with respect to claims incurred after the
Distribution Date. Agere will be responsible for any inpatient treatment amount
over the $25,000 limit.
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(c) Agere shall assume, effective Immediately after the
Distribution Date, all Liabilities relating to, arising out of or resulting from
special commitments made by AT&T Corp., and assumed by Lucent in connection with
the distribution to stockholders of Lucent Common Stock from AT&T Corp., to
provide benefits with respect to Transferred Individuals for custodial care or
other services not covered by any Lucent Health and Welfare Plans. Before the
Distribution Date, Lucent shall transfer to Agere copies of any documentation,
and a complete written description, of the terms of all such special commitments
to Transferred Individuals.
(d) Agere shall not be required to make any contributions to a
Lucent VEBA.
(e) Agere shall cause its Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by
Transferred Individuals under the Lucent Health and Welfare Plans. Agere shall
apply such elections under its Health and Welfare Plans for the remainder of the
period or periods for which the elections are by their terms applicable. The
movement of Transferred Individuals from Lucent to Agere shall neither
constitute nor be treated as a "status change" under the Health and Welfare
Plans of Lucent or Agere.
(f) Agere shall also cause its Health and Welfare Plans to
recognize and give credit for (i) all amounts applied by Transferred Individuals
under the Lucent Health and Welfare Plans to deductibles, out-of-pocket
maximums, and other applicable benefit coverage limits with respect to which
such expenses have been incurred during the calendar year in which the
Distribution Date occurs, and (ii) all benefits paid to, or received by,
Transferred Individuals under the Lucent Health and Welfare Plans, in either
case, for purposes of determining when such persons have received the maximum
benefits, including lifetime maximum benefits, provided under its Health and
Welfare Plans.
(g) Agere shall (i) provide coverage to Transferred
Individuals under its Group Life Program without the need to undergo a physical
examination or otherwise provide evidence of insurability, and (ii) recognize
and maintain all irrevocable assignments and accelerated benefit option
elections made by Transferred Individuals under the Lucent Group Life Program.
(h) In carrying out its obligations under Section 5.2(e), (f),
and (g), Agere may rely on the most recent explanation of benefits furnished to
Agere by a Transferred Individual and such other information as is readily
available from Lucent's business records and as is timely provided to Agere.
(i) To the extent any Transferred Individual contributed to an
account under the Lucent CECRA Plan or the Lucent HCRA Plan during the calendar
year in which the Distribution Date occurs, Lucent shall transfer to the
corresponding Agere Health and Welfare Plan the account balances of the
Transferred Individual for such calendar year under the Lucent CECRA Plan or the
Lucent HCRA Plan, as applicable, and, in the case of the Lucent HCRA Plan,
regardless of whether the account balance is positive or negative.
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5.3. LUCENT REPRESENTED HEALTH VEBA ASSET TRANSFER.
(a) This Section 5.3 shall govern the transfer of assets from
the Lucent Represented Health VEBA to the corresponding Agere Represented Health
VEBA. As soon as practicable after the Distribution Date, Lucent shall determine
the aggregate value, as of the Close of the Distribution Date, of the
accumulated postretirement benefit obligations of each Lucent Plan funded by the
Lucent Represented Health VEBA, with respect to all Transferred Individuals who
are Represented Employees. As soon as practicable after such determination is
made and as of the last business day of a month, and subject (to the extent
reasonably determined by Lucent) to Lucent's receipt of a favorable ruling from
the Internal Revenue Service with respect to such transfer, there shall be
transferred from the Lucent Represented Health VEBA to the corresponding Agere
Represented Health VEBA an amount of assets determined as set forth below.
Assets of the Lucent Represented Health VEBA, equal to the fair market value as
of the Close of the Distribution Date of the assets of the plan funded by such
Lucent VEBA multiplied by a fraction, the numerator of which shall be the
accumulated postretirement health benefit obligation under FAS 106 for
Transferred Individuals whose postretirement health benefit is funded by such
VEBA, and the denominator of which shall be the accumulated postretirement
health benefit obligation under FAS 106 for all participants and dependents
whose postretirement health benefit is funded by such VEBA, shall be transferred
to the Agere Represented Health VEBA.
(b) For purposes of Section 5.3(a), all determinations shall
be made as of the Distribution Date, based on the active and inactive census
data as of the Distribution Date. For purposes of determining the accumulated
postretirement benefit obligation, the assumptions and methods used by Lucent in
determining the disclosure of accumulated postretirement benefit obligation
under FAS 106 as of September 30, 2001 shall be used. The amounts to be
transferred as described above shall be adjusted by the aggregate amount of any
payments made by the Lucent Represented Health VEBA for Transferred Individuals
(and by the aggregate amount of any payments made by the Agere Represented
Health VEBA on behalf of the Lucent Represented Heath VEBA) prior to such
transfer, and increased by realized and unrealized earnings or decreased by
realized and unrealized losses on such amounts (net of expenses and applicable
unrelated business income tax) from the Distribution Date through the date of
such transfer. The asset transfers required by this Section 5.3 shall be made in
cash, by transfer of a pro-rata portion of the entire assets of the transferor
VEBA, or in such other form as may be agreed by the parties. Nothing in this
Agreement shall be interpreted to provide that any assets so transferred have
reverted to Lucent or Agere.
5.4. POSTRETIREMENT LIFE TRUST ASSET TRANSFER; TRANSFER OF
RETIREMENT FUNDING ACCOUNT ASSETS. This Section 5.4 shall govern the transfer of
assets from the Lucent Postretirement Life Trust to the corresponding Agere
Postretirement Life Trust. The Lucent Postretirement Life Trust has a group term
life insurance policy with an RFA 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 Distribution Date and as of the last business day of a month, and subject
(to the extent determined by Lucent) to Lucent's receipt of favorable rulings
from the Internal Revenue Service with respect to such transfers, Lucent
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shall take such steps as may be necessary to create a second group life
insurance policy within the Lucent Postretirement Life Trust and shall cause to
be transferred to the corresponding Agere Postretirement Life Trust a group life
insurance policy with an RFA in an amount equal to the product of (a) and (b)
below, adjusted by the aggregate amount of any payments made by the Lucent
Postretirement Life Trust for Transferred Individuals (and by the aggregate
amount of any payments made by the Agere Postretirement Life Trust on behalf of
the Lucent Postretirement Life Trust) prior to such transfer, and increased by
actual earnings or decreased by actual losses on such amount (net of expenses
and applicable unrelated business income tax) from the Distribution Date through
the date of such transfer. For purposes of the immediately preceding sentence,
(a) shall be a fraction (the "Life VEBA Ratio") the numerator of which shall be
the accumulated postretirement life insurance benefit obligation under FAS 106
for Transferred Individuals as of the Distribution Date (determined in
accordance with the assumptions and methods used by Lucent in determining the
disclosure of accumulated postretirement benefit obligations under FAS 106 as of
September 30, 2001), and the denominator of which shall be the accumulated
postretirement life insurance benefit obligation under FAS 106 as of the
Distribution Date for all participants under the Lucent Plan funded by the
Postretirement Life Trust (determined in accordance with such assumptions and
methods), and (b) shall be the fair market value of all Lucent Postretirement
Life Trust assets as of the Distribution Date. Lucent and Agere 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. The parties agree that the amount of assets of
the Lucent Postretirement Life VEBA attributable to contributions made to the
RFA (or predecessor RFAs) before January 1, 1986 (the "Pre-DEFRA Reserves") to
be transferred to the Agere Postretirement Life VEBA shall be equal to the
Pre-DEFRA Reserves of the Lucent Postretirement Life VEBA multiplied by the Life
VEBA Ratio. Nothing in this Agreement shall be interpreted to provide that any
assets so transferred have reverted to Lucent or Agere.
5.5. VENDOR CONTRACTS.
(a) THIRD-PARTY ASO CONTRACTS.
(i) At Agere's request, Lucent shall use its reasonable
best efforts to amend each administrative services only contract with a
third-party administrator that relates to any of the Lucent Health and Welfare
Plans (an "ASO Contract") in existence as of the date of this Agreement to
permit Agere 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. Lucent shall use its reasonable best efforts to cause all
ASO Contracts into which Lucent enters after the date of this Agreement but
before the Close of the Distribution Date to allow Agere to participate in the
terms and conditions thereof effective Immediately after the Distribution Date
on the same basis as Lucent.
(ii) Lucent shall have the right to determine, and shall
promptly notify Agere of, the manner in which Agere's participation in the terms
and conditions of ASO Contracts as set forth above shall be effectuated. The
permissible ways in which Agere's
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participation may be effectuated include automatically making Agere a party to
the ASO Contracts or obligating the third party to enter into a separate ASO
Contract with Agere providing for the same terms and conditions as are contained
in the ASO Contracts to which Lucent 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. The request by Agere for Lucent to amend its ASO Contracts as
described in Section 5.5(a)(i) above shall be deemed to be the authorization by
Agere of Lucent to act on its behalf to extend to Agere the terms and conditions
of the ASO Contracts. Agere shall use its reasonable best efforts to cooperate
with Lucent in such efforts, and Agere shall not perform any act, including
discussing any alternative arrangements with any third party, that would
prejudice Lucent's efforts.
(iii) If it becomes reasonably likely that Lucent will
not be successful in negotiating contract language that will permit compliance
with Sections 5.5(a)(i) and 5.5(a)(ii), Lucent shall so notify Agere promptly,
and after such notification, Agere shall be released from the restriction
contained in the last sentence of Section 5.5(a)(ii). In such case, Lucent may
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 Agere, with
terms and conditions as similar as practicable to those of the ASO Contract with
Lucent. Agere shall, effective Immediately after the Distribution Date, either
adopt its own contingency plan or the contingency plan established by Lucent for
such arrangement.
(b) HMO AGREEMENTS.
(i) At Agere's request, Lucent shall use its reasonable
best efforts to amend all letter agreements with HMOs that provide medical
services under the Lucent Medical Plans ("HMO Agreements") in existence as of
the date of this Agreement to permit Agere to participate in the terms and
conditions of such HMO Agreements, in each case, from the Participation
Commencement Date until December 31, 2001, or such other date as the parties may
agree upon.
(ii) Lucent shall have the right to determine, and shall
promptly notify Agere of, the manner in which Agere's participation in the terms
and conditions of all HMO Agreements as set forth above shall be effectuated.
The permissible ways in which Agere's participation may be effectuated include
automatically making Agere a party to the HMO Agreements or obligating the HMOs
to enter into letter agreements with Agere which are similar to the HMO
Agreements. Such terms and conditions shall include the financial and
termination provisions of the HMO Agreements. The request of Agere described in
Section 5.5(b)(i) above shall be deemed Agere's authorization of Lucent to act
on its behalf to extend to Agere the terms and conditions of the HMO Agreements.
Agere shall use its reasonable best efforts to cooperate with Lucent in such
efforts, and Agere shall not perform any act, including discussing any
alternative arrangements with any third-party that would prejudice Lucent's
efforts.
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(iii) Notwithstanding anything in this Article V to the
contrary, Agere shall have the sole discretion to determine which HMOs to offer
to the participants in the Agere Medical Plans Immediately after the
Distribution Date.
5.6. SHORT-TERM DISABILITY. Lucent shall transfer to Agere,
effective Immediately after the Distribution Date, responsibility for
administering all claims incurred under the Lucent STD by Transferred
Individuals before the Close of the Distribution Date that are administered by
Lucent as of the Close of the Distribution Date. Agere shall have sole
discretionary authority to make any necessary determinations with respect to
such claims, including entering into settlements with respect to such claims.
5.7. GROUP LIFE PROGRAMS. Effective Immediately after the
Distribution Date, Lucent 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 Lucent Group Life Program to: (a) perform an experience rating; (b)
allocate the applicable premium stabilization reserves between Lucent and Agere
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.
5.8. COBRA. Through the Close of the Distribution Date, Lucent shall
be solely responsible for administering compliance with the health care
continuation coverage requirements of COBRA and the Lucent Health and Welfare
Plans with respect to Agere Individuals and Agere and the Agere Entities shall
be responsible for filing all necessary employee change notices with respect to
their respective employees in accordance with applicable Lucent policies and
procedures. Effective Immediately after the Distribution Date, Agere shall be
solely responsible for administering compliance with the health care
continuation coverage requirements of COBRA, the Agere Health and Welfare plans,
and, with respect to Transferred Individuals and beneficiaries and dependents
thereof, the Lucent Health and Welfare Plans.
5.9. LEAVE OF ABSENCE PROGRAMS AND FMLA.
(a) Effective Immediately after the Distribution Date: (i)
Agere shall honor, and shall cause each Agere Entity to honor, all terms and
conditions of leaves of absence which have been granted to any Transferred
Individual under a Lucent Leave of Absence Program or FMLA before the Close of
the Distribution Date by Lucent, Agere, or an Agere Entity, including such
leaves that are to commence after the Distribution Date; (ii) Agere and each
Agere Entity shall be solely responsible for administering leaves of absence and
compliance with FMLA with respect to their employees; and (iii) Agere and each
Agere Entity shall recognize all periods of service of Transferred Individuals
with Lucent or a Lucent Entity, as applicable, to the extent such service is
recognized by Lucent for the purpose of eligibility for leave entitlement under
the Lucent Leave of Absence Programs and FMLA; provided, that no duplication of
benefits shall be required by the foregoing.
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(b) As soon as administratively possible after the Close of
the Distribution Date, Lucent shall provide to Agere copies of all records
pertaining to the Lucent Leave of Absence Programs and FMLA with respect to all
Transferred Individuals to the extent such records have not been provided
previously to Agere or an Agere Entity.
5.10. LUCENT WORKERS' COMPENSATION PROGRAM.
(a) ADMINISTRATION OF CLAIMS. Effective immediately after the
Participation Commencement Date, Agere shall be responsible for the
administration of all claims that are, or have been, incurred under the Lucent
WCP before the Participation Commencement Date by Agere Individuals ("Agere WCP
Claims"). Agere shall discharge its responsibility by securing insurance
coverage or, to the extent Legally Permissible (as defined below), securing a
self-insurance certificate in one or more states. For purposes of this Section
5.10(a), "Legally Permissible" shall be determined on a state-by-state basis,
and shall mean that administration of Agere WCP Claims by Agere is permissible
under the applicable state's workers' compensation laws (taking into account all
relevant facts, including that Agere may have a self-insurance certificate in
that state).
(b) COOPERATION. Each party shall fully cooperate with the
other with respect to the administration and reporting of Agere WCP Claims and
the transfer of the administration of any Agere WCP Claims to Agere as
determined under this Section 5.10. Upon the request of Agere, Lucent will make
reasonable efforts to support any application Agere may make for a
self-insurance certificate in one or more states.
(c) AT&T LIABILITY. Agere shall protect and hold Lucent
harmless from and against all Liabilities Lucent may incur to AT&T Corp. in
respect of Agere WCP Claims.
5.11. LUCENT EMPLOYEE ASSISTANCE PROGRAM. Effective Immediately
after the Distribution Date, Agere shall contract with an employee assistance
program vendor to provide employee assistance program services to Transferred
Individuals. As of the Close of the Distribution Date, the Lucent Employee
Assistance Program shall cease to have any responsibility to provide employee
assistance services for any Transferred Individuals.
5.12. UNEMPLOYMENT INSURANCE TAX MANAGEMENT PROGRAM.
At Agere's request, Lucent shall use its reasonable best efforts to cause
its agreement with its unemployment insurance tax management vendor and any
successor thereto to permit Agere to participate in the terms and conditions of
such agreements from Immediately after the Distribution Date through December
31, 2001. These efforts shall substantially conform to the guidelines set forth
in Section 5.5(a) as if such agreements were ASO Contracts. Lucent shall use its
reasonable best efforts to cause such agreements to provide that Agere's
participation shall include administration of all unemployment compensation
claims of Transferred Individuals, regardless of whether such claims were filed
before, on, or after the Distribution Date.
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5.13. ADMINISTRATION.
(a) COORDINATION OF BENEFITS FOR SPOUSES, DEPENDENTS AND
DOMESTIC PARTNERS. Effective Immediately after the Distribution Date, Agere
shall cause the Agere Health and Welfare Plans to permit eligible Transferred
Individuals to cover their lawful spouses and their domestic partners as
dependents if such lawful spouses and domestic partners are active or retired
Lucent employees. Effectively immediately after the Distribution Date, Lucent
shall cause the Lucent Health and Welfare Plans to permit eligible Lucent and
Lucent Entity employees to cover their lawful spouses or their domestic partners
as dependents if such lawful spouses or domestic partners are active or retired
Agere employees. All benefits provided under either the Agere Health and Welfare
Plans or the Lucent Health and Welfare Plans to a lawful spouse or domestic
partner dependent of the other company's plans shall be coordinated pursuant to
the terms and conditions of the applicable Health and Welfare Plans as in effect
from time to time.
(b) HCFA DATA MATCH. Immediately after the Distribution Date,
Agere shall assume all Liabilities relating to, arising out of or resulting from
claims verified by Lucent or Agere under the HCFA data match reports that relate
to Transferred Individuals. Agere and Lucent shall share all information
necessary to verify HCFA data match reports regarding Transferred Individuals.
Agere shall not change any employee identification numbers assigned by Lucent
without notifying Lucent of the change and the new Employee Identification
Number. To the extent that Lucent enters into any settlement negotiations
between its health plan carriers or claims administrators and HCFA before the
end of the Represented Transition Period, Agere shall have the right to
participate in such negotiations.
(c) OTHER POST-DISTRIBUTION TRANSITIONAL RULES.
(i) HEALTH AND WELFARE PLANS SUBROGATION RECOVERY. After
the Distribution Date, Lucent shall pay to Agere or the Agere Nonrepresented
Health VEBA (as appropriate) any amounts Lucent recovers from time to time
through subrogation or otherwise for claims incurred by or reimbursed to any
Transferred Individual. If Agere recovers any amounts through subrogation or
otherwise for claims incurred by or reimbursed to employees and former employees
of Lucent or a Lucent Entity and their respective beneficiaries and dependents
(other than Agere Individuals), Agere shall pay such amounts to Lucent or the
Lucent Nonrepresented Health VEBA (as appropriate).
(ii) EXCHANGE OF HISTORICAL DATA. Lucent acknowledges
that Agere shall have access to medical claims and eligibility data for Agere
Individuals from the Medstat System 2 through the Close of the Distribution
Date. Lucent will allow Agere to make written requests for this historical data
until December 31, 2001. Lucent will use its best efforts to respond to complete
requests. If any Agere request must be referred to Medstat programmers because
the request is outside the capabilities of System 2 or otherwise cannot be
completed by Lucent, then any Medstat charges for such services will be paid by
Agere.
5.14. APPLICATION OF ARTICLE V TO AGERE ENTITIES. Any reference in
this Article V to "Agere" shall include a reference to an Agere Entity when and
to the extent Agere has
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caused the Agere Entity to (a) become a party to a vendor contract, group
insurance contract, or HMO letter agreement associated with an Agere Health and
Welfare Plan, (b) become a self-insured entity for the purposes of one or more
Agere 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 a Lucent Health and Welfare Plan and which were
expressly assumed by Agere 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 Agere 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 an Agere Entity. In all such instances in
which a reference in this Article V to "Agere" includes a reference to an Agere
Entity, Agere shall be responsible to Lucent for ensuring that the Agere Entity
complies with the applicable terms of this Agreement and the Transferred
Individuals allocated to such Agere Entity shall have the same rights and
entitlements to benefits under the applicable Agere Health and Welfare Plans
that the Transferred Individual would have had if he or she had instead been
allocated to Agere.
5.15. LUCENT WORK & FAMILY PROGRAMS. Immediately after the
Distribution Date, Agere shall contract with a national dependent care resource
and referral vendor to provide a family resource program to Transferred
Individuals. In addition, Immediately after the Distribution Date, Agere shall
provide an adoption reimbursement program to Transferred Individuals and shall
assume responsibility for any claims of Transferred Individuals that relate to
any adoption not finalized prior to the Close of the Distribution Date. As of
the Close of the Distribution Date, the Lucent Technologies Inc. Work and Family
Program shall no longer have any responsibility to provide the Lucent
Technologies Inc. Family Resource Program or coverage under the Lucent
Technologies Inc. Adoption Assistance Plan for any Transferred Individuals.
ARTICLE VI.
EXECUTIVE BENEFITS, NON-EMPLOYEE DIRECTOR BENEFITS, AND OTHER STOCK-BASED
COMPENSATION
6.1. ASSUMPTION OF OBLIGATIONS. Effective Immediately after the
Distribution Date, Agere and the Agere Entities shall assume and be solely
responsible for all Liabilities to or relating to Transferred Individuals under
all Lucent Executive Benefit Plans other than the Lucent Stock Award Plans and
the Lucent Stock Purchase Plan.
6.2. LUCENT SHORT TERM INCENTIVE PLAN. Lucent and Agere shall
cooperate in determining, with respect to all Officer Awards that would
otherwise be payable under the Lucent Short Term Incentive Plan to Transferred
Individuals for the 2001 performance year, (a) the extent to which established
performance criteria (as interpreted by Lucent and Agere, in their discretion,
after taking into account the effects of the Distribution) have been met and (b)
the payment level for each such Transferred Individual. Agere shall be
responsible for paying such Officer Awards.
6.3. LUCENT STOCK AWARD PLANS. Lucent and Agere shall use their
reasonable best efforts to take all actions necessary or appropriate so that
each outstanding Award granted
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under any Lucent Stock Award Plan to and held by any Transferred Individual or,
in the event of a Change in Control, by any Agere Individual, shall be replaced
with an adjusted Award under a corresponding Agere Stock Award Plan as provided
in this Section 6.3.
(a) STOCK OPTIONS-GENERAL. Except as otherwise provided in
this Section 6.3, the Corporate Governance and Compensation Committee of
Lucent's Board of Directors and the Agere Committee shall cause each Award
consisting of a Lucent Option that is outstanding as of the Distribution Date
and is held by a Transferred Individual to be adjusted, effective as of the
Distribution Date, by substitution of an Agere Option under an Agere Stock Award
Plan. Each such Agere Option shall provide for the purchase of a number of
shares of Agere Common Stock equal to the number of shares of Lucent Common
Stock subject to the corresponding Lucent Option as of the Distribution Date,
multiplied by the Ratio, with fractional shares rounded down to the nearest
whole share. The per-share exercise price of such Agere Option shall equal the
per-share exercise price of the corresponding Lucent Option as of Distribution
Date, divided by the Ratio, rounded to the nearest hundredth of a cent. Each
such Agere Option shall otherwise have the same terms and conditions as were
applicable to the corresponding Lucent Option as of the Distribution Date,
except that references to Lucent, and to Lucent's Affiliates, shall be amended
to refer to Agere, and to Agere's Affiliates.
(b) STOCK OPTIONS-CHANGE IN CONTROL. In the event of a Change
in Control, each Award consisting of a Lucent Option that is outstanding as of
the day before the Change in Control and is held by an Agere Individual shall be
adjusted by substitution as of such date of an Agere Option under an Agere Stock
Award Plan. Each such Agere Option shall provide for the purchase of a number of
shares of Agere Common Stock equal to the number of shares of Lucent Common
Stock subject to the corresponding Lucent Option, multiplied by the Ratio, with
fractional shares rounded down to the nearest whole share. The per share
exercise price of such Agere Option shall equal the per share exercise price of
the corresponding Lucent Option, divided by the Ratio rounded to the nearest
hundredth of a cent. Each such Agere Option shall otherwise have the same terms
and conditions as were applicable to the corresponding Lucent Option, except
that references to Lucent, and to Lucent's Affiliates shall be amended to refer
to Agere, and to Agere's Affiliates. The Corporate Governance and Compensation
Committee of Lucent's Board of Directors and the Agere Committee shall take any
and all actions as may be necessary or appropriate to carry out the purpose and
intention of this Section 6.3(b). This Section 6.3(b) and provisions of this
Agreement related thereto shall survive any termination of the Separation and
Distribution Agreement, notwithstanding any provision thereof to the contrary.
(c) STOCK OPTIONS - FOREIGN PLANS. Subject to applicable law
in non-U.S. jurisdictions, outstanding "Substitute Awards" as such term is
defined under Lucent Stock Award Plans shall be adjusted with the aim of
achieving equivalent treatment as described above. Notwithstanding the above, no
adjustments or conversions shall be made to Awards which are qualified under the
laws of France that are held by Transferred Individuals who are subject to
taxation under the laws of France. In the case of the exercise of such Awards by
Transferred Individuals whose employment is terminated in connection with a
"Company Action" (as such term is defined in the applicable Stock Award Plan)
after the Distribution Date, within 30 days of receiving a request from Lucent
for reimbursement Agere shall reimburse
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Lucent for the incremental social tax costs that Lucent incurs under the laws of
France upon the exercise of such Awards.
(d) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Agere
Committee shall cause each Award that consists of restricted shares of Lucent
Common Stock or restricted stock units relating to shares of Lucent Common Stock
that is outstanding as of the Distribution Date and is held by a Transferred
Individual to be adjusted, effective as of the Distribution Date, by
substitution of a new Award under an Agere Stock Award Plan consisting of a
number of restricted shares of Agere Common Stock and/or restricted stock units
relating to shares of Agere Common Stock equal to the number of restricted
shares or restricted stock units of Lucent Common Stock constituting such Award
as of the Distribution Date multiplied by the Ratio, with fractional shares
rounded down. Each such adjusted Award shall otherwise have the same terms and
conditions as were applicable to the corresponding Lucent Award as of the
Distribution Date, except that references to Lucent and its Affiliates shall be
amended to refer to Agere and its Affiliates and dividend equivalent payments,
if any, shall be payable after the Distribution Date with reference to dividends
on Agere Common Stock. In the event of a Change in Control, the adjustments and
substitution provided for herein shall be made as of the Offering Date with
respect to the Awards outstanding on the day before the Change in Control and
held by Agere Individuals, based on the Ratio.
(e) 1999 - 2001 PERFORMANCE SHARE PAYMENTS. Lucent shall
provide information to Agere regarding the accrual of any Performance Share
payments for the 1999 through 2001 cycle and Agere, in its sole discretion,
shall determine the amount of any Performance Share payments for such
individuals for the 1999 through 2001 cycle. Agere shall be responsible for
making such Performance Share payments to Transferred Individuals for the 1999
through 2001 Performance Share cycle.
6.4. LUCENT DEFERRAL PLAN. Each Transferred Individual who has a
deferred Lucent share unit account under the Lucent 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
Lucent Deferral Plan, which election shall be made in accordance with procedures
established by Lucent, in its sole discretion, before and effective as of the
Distribution Date. Immediately after the Distribution Date, the balance of any
Transferred Individual in either a Lucent share unit account or a cash account
under the Lucent Deferral Plan as of the Close of the Distribution Date shall be
transferred to a Agere share unit account or cash account, respectively, under
the Agere Deferral Plan, with a number of Agere share units equal to the number
of Lucent share units under the Lucent Deferral Plan as of the Close of the
Distribution Date multiplied by the Ratio. In the event of a Change in Control,
the election rights, account transfers and conversion of Lucent share units to
Agere share units shall all be provided or done as of the Offering Date.
6.5. RABBI TRUST.
(a) ESTABLISHMENT OF MIRROR RABBI TRUST. Effective no later
than Immediately after the Distribution Date, Agere shall establish, or cause to
be established, the Agere Rabbi Trust as a grantor trust subject to Code
Sections 671 et seq., which shall, unless otherwise
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determined by the Agere Committee, be substantially similar in all Material
Features to the Lucent Rabbi Trust, other than the definitions of the terms
"potential change in control" and "change in control." Agere shall appoint as
trustee under the Agere Rabbi Trust the then-current trustee of the Lucent Rabbi
Trust.
(b) FUNDING OF AGERE RABBI TRUST.
(i) As soon as practicable after the Close of the
Distribution Date, Lucent shall determine the amount of the liabilities under
the Lucent Executive Benefits Plans that are payable from the Lucent Rabbi Trust
as of the Distribution Date and the amount of such liabilities attributable to
Transferred Individuals. Lucent shall then cause the trustee of the Lucent Rabbi
Trust to transfer to the trustee of the Agere Rabbi Trust an amount in cash
equal to the present value of liabilities attributable to Transferred
Individuals, to the extent such liabilities are funded under the Lucent Rabbi
Trust as of the Distribution Date. For purposes of this Section 6.5(b)(i),
liabilities shall be determined based upon the "Full Funding Amount" as defined
in Section 2.5 of the Lucent Rabbi Trust.
(ii) As of the Distribution Date, Agere and Lucent shall
identify the Transferred Individuals and other individuals insured by
trust-owned life insurance polices held by the trustee of the Lucent Rabbi Trust
and (after any transfers described in Section 6.5(b)(i)) the trustee of the
Agere 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.
6.6. LUCENT EXECUTIVE LIFE INSURANCE. Lucent and Agere shall take
all actions necessary or appropriate to assign to Agere, effective as of the
Distribution Date, Lucent's rights and interests, to the extent attributable to
Transferred Individuals, in (a) the life insurance policies under the Executive
Life Insurance Program issued by Metropolitan Life Insurance Company, (b) any
additional life insurance program that may be implemented by Lucent before the
Close of the Distribution Date, with respect to Transferred Individuals,
effective Immediately after the Distribution Date, and (c) under the Lucent
Non-Employee Director Plan effective as of the Distribution Date (such policies,
the "Assigned Policies"). Such actions shall include Agere's acceptance of any
collateral assignments, policy endorsements or such other documentation executed
by or on behalf of Transferred Individuals and Agere Non-Employee Directors, or
any trustee of any trust to which such individual's policy rights or incidents
of ownership under the Assigned Policies have been assigned, and Agere's
entering into such agreements as may be necessary to fulfill any obligations of
Lucent to any insurance company or insurance agent or broker under the Assigned
Policies. From and after the date of the assignment of any Assigned Policy to
Agere, Agere shall assume and be solely responsible for all Liabilities, and
shall be entitled to all benefits, of Lucent under such policy and under the
Executive Life Insurance Program, the Lucent Non-Employee Director Plan and any
additional life insurance program that may be implemented by Lucent 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
Agere Non-Employee Directors. This Section 6.6 shall not apply to the life
insurance policies purchased under the Lucent Technologies Inc. Voluntary Life
Insurance Plan, which shall be retained by Lucent.
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6.7. 162(m). Notwithstanding any other provision of this Article,
Lucent and the Corporate Governance and Compensation Committee of Lucent's Board
of Directors and Agere and the Agere Committee may modify the procedures for
approval and payment of compensation under Article VI to persons who are
"covered employees" for purposes of Code Section 162(m), to the extent they
reasonably determine that modifications are necessary and desirable to preserve
the deductibility of compensation paid to such employees; provided, however,
that no such modification shall reduce the compensation payable to such
employees below the amount that would have been paid had there been no
distribution of Agere Common Stock to Lucent stockholders.
ARTICLE VII.
MISCELLANEOUS BENEFITS
7.1. STOCK PURCHASE PLAN RECORDKEEPING. Lucent and Agere shall
cooperate in monitoring the application of Code Section 423 to the Agere Stock
Purchase Plan and the Lucent Stock Purchase Plan as reasonably necessary to
permit each plan to continue to meet the requirements of such Section.
7.2. SERVICE ANNIVERSARY AND RETIREMENT AWARD PROGRAM.
(a) Before the Close of the Distribution Date, at the request
of Agere, Lucent shall use its reasonable best efforts to amend the service
anniversary merchandise vendor contract in existence as of the date of this
Agreement and related to the Lucent Service Anniversary and Retirement Award
Program to permit Agere and the Agere 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 5.5(a) as if the service anniversary merchandise vendor contract were an
ASO Contract.
(b) Agere and the Agere Entities may provide to their
employees service anniversary merchandise bearing the name and/or logo of Lucent
ordered by Lucent before the date of this Agreement and delivered under the
Agere Service Anniversary and Retirement Award Program to Transferred
Individuals and other employees and former employees of Agere and the Agere
Entities whose service anniversary occurs on or before December 31, 2001,
subject to the terms and conditions of any separate agreement between Lucent and
Agere regarding the use of the corporate names, logos, service marks and other
intellectual property of Lucent and a Lucent Entity. No service anniversary
merchandise bearing the corporate name and/or logo of Lucent shall be delivered
to any Transferred Individuals or other employees and former employees of Agere
and the Agere Entities with respect to a service anniversary on or after January
1, 2002, without the express written consent of Lucent.
7.3. 2001 INCENTIVE COMPENSATION PAYMENTS. Unless otherwise agreed,
Agere shall be responsible for paying fiscal 2001 short term incentive
compensation payments to eligible Agere Individuals who have not become
employees of Lucent or a Lucent Entity, as of the date of payment, and to
eligible Transferred Individuals (collectively, "Eligible Agere Participants").
Lucent and Agere shall cooperate in determining the extent to which performance
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awards shall be paid to Represented Employees who are Eligible Agere
Participants for the fiscal 2001 performance year and Agere shall make such
payment.
ARTICLE VIII.
GENERAL AND ADMINISTRATIVE
8.1. 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 Lucent and Agere 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 2000, or, if such Plan is not subject to such minimum
funding requirements, used to determine Lucent's deductible Contributions under
Code Section 419A or, if such Plan is not subject to Code Section 419A, the
assumptions used to prepare Lucent's audited financial statements for fiscal
2000, 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.
Agere Liabilities relating to, arising out of or resulting from the status of
Agere and the Agere Entities as Participating Companies in Lucent Health and
Welfare Plans, as provided for in Section 2.2 and all accruals relating thereto
shall be determined by Lucent using actuarial assumptions and methodologies
(including with respect to demographics, medical trends and other relevant
factors) determined by Lucent in a manner consistent with Lucent's practice as
in effect on the Distribution 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 Lucent consistent with its 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
Lucent Plan (whether or not such assets are being transferred to an Agere Plan)
shall be made pursuant to procedures to be established by the parties before the
Distribution Date.
8.2. SHARING OF PARTICIPANT INFORMATION. Lucent and Agere shall
share, Lucent shall cause each applicable Lucent Entity to share, and Agere
shall cause each applicable Agere 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 Lucent Plans and the Agere Plans during the respective Transition Periods
applicable to such Plans, and with respect to each of the Lucent Health and
Welfare Plans and Agere Health and Welfare Plans, Lucent and Agere 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.
8.3. REPORTING, DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS. While
Agere is a Participating Company in the Lucent Plans, Agere shall take, and
shall cause each other applicable Agere Entity to take, all actions necessary or
appropriate to facilitate the distribution of all Lucent Plan-related
communications and materials to employees, participants and beneficiaries,
including summary plan descriptions and related summaries of material
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modification, summary annual reports, and notices for the Lucent Plans. Agere
shall pay Lucent the cost relating to the copies of all such documents provided
to Agere, except to the extent such costs are charged pursuant to an Ancillary
Agreement. Agere shall assist, and Agere shall cause each other applicable Agere
Entity to assist, Lucent in complying with all reporting and disclosure
requirements of ERISA, including the preparation of Form 5500 annual reports for
the Lucent Plans, where applicable.
8.4. 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 Agere Individual or Transferred
Individual or other future, present or former employee of Lucent, a Lucent
Entity, Agere, or an Agere Entity under any Lucent Plan or Agere Plan or
otherwise. Without limiting the generality of the foregoing: (i) neither the
IPO, the Distribution nor the termination of the Participating Company status of
Agere or an Agere Entity shall cause any employee to be deemed to have incurred
a termination of employment or layoff which entitles such individual to the
commencement of benefits under any of the Lucent Plans, any of the Agere Plans,
or any of the Individual Agreements; and (ii) except as expressly provided in
this Agreement, nothing in this Agreement shall preclude Agere, at any time
after the Close of the Distribution Date, from amending, merging, modifying,
terminating, eliminating, reducing, or otherwise altering in any respect any
Agere Plan, any benefit under any Plan or any trust, insurance policy or funding
vehicle related to any Agere Plan.
8.5. PLAN AUDITS.
(a) AUDIT RIGHTS WITH RESPECT TO THE ALLOCATION OR TRANSFER OF
PLAN ASSETS. The determination of the Pension Transfer Amount and the allocation
of Pension Plan assets and liabilities pursuant to Section 3.2, the
determination and transfer of assets from Lucent VEBAs pursuant to Sections 5.3
and 5.4, the transfer of RFA assets pursuant to Section 5.4 and the
determination and transfer of assets from the Lucent Rabbi Trust pursuant to
Section 6.6, shall be audited on behalf of both Lucent and Agere by the
consulting firm of The Xxxxx Company. The scope of such audit shall be limited
to the accuracy of the final data relied upon 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 8.5(a), such audit
shall not be binding on the parties. The auditing firm shall provide its report
to both Lucent and Agere. No other audit shall be conducted with respect to the
transfer or allocation of Plan assets. The costs of such audit shall be shared
proportionately to the asset split between Lucent and Agere, 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 any Agere Plan of less than 0.25 % of the amount originally
determined by Lucent's actuaries under each of Sections 3.2, 5.3, 5.4, and 6.6,
as applicable to each transfer, 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.
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(b) AUDIT RIGHTS WITH RESPECT TO INFORMATION PROVIDED.
(i) Each of Lucent and Agere, and their respective 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 8.5(b); provided, that audits with respect to
the allocation or transfer of Plan assets and liabilities shall be subject only
to Section 8.5(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 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 ten business days after receiving
such draft.
(ii) The Auditing Party's audit rights under this
Section 8.5(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 the Participation
Commencement Date through the Distribution Date, Lucent and Agere and their duly
authorized representatives shall have the right to conduct joint audits with
respect to any vendor contracts that relate to the Lucent 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, vendors' internal
corrections of previous errors and any other documents or instruments relating
to the services performed by the vendor under the applicable vendor contracts.
Lucent and Agere shall agree on the performance standards, audit methodology,
auditing policy and quality measures and reporting requirements relating to the
audits described in this Section 8.5 and the manner in which costs incurred in
connection with such audits will be shared.
8.6. BENEFICIARY DESIGNATIONS. All beneficiary designations made by
Transferred Individuals for Lucent Plans shall be transferred to and be in full
force and effect under the corresponding Agere Plans until such beneficiary
designations are replaced or revoked by the Transferred Individual who made the
beneficiary designation.
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8.7. REQUESTS FOR IRS RULINGS AND DOL OPINIONS.
(a) COOPERATION. Agere shall cooperate fully with Lucent on
any issue relating to the transactions contemplated by this Agreement for which
Lucent elects to seek a determination letter or private letter ruling from the
IRS or an advisory opinion from the DOL. Lucent shall cooperate fully with Agere
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 Agere
Plans relating to the transactions contemplated by this Agreement.
(b) APPLICATIONS.
(i) Lucent and Agere 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 Lucent Nonrepresented Health VEBA and the
Lucent Postretirement Life Trust to the Agere Nonrepresented Health VEBA and the
Agere Postretirement Life Trust will neither (i) result in any adverse tax,
legal or fiduciary consequences to Lucent and Agere, the Lucent Nonrepresented
Health VEBA and the Lucent Postretirement Life Trust, the Agere Nonrepresented
Health VEBA and the Agere Postretirement Life Trust, or any participant therein
or beneficiaries thereof, or any successor welfare benefit funds established by
or on behalf of Agere, or the trustees of such trusts, nor (ii) contravene any
statute, regulation or technical pronouncement issued by any regulatory agency.
Within 60 days after the Close of the Distribution Date, Agere shall prepare and
file all forms required to obtain favorable tax-exempt determination letters
from the IRS for the Agere Postretirement Health and Postretirement Life Trusts.
Agere and Lucent agree to cooperate with each other to fulfill any filing and/or
regulatory reporting obligations with respect to such transfers.
(ii) Promptly after the Distribution Date, Agere will
submit its Pension and Savings Plans to the IRS for favorable determination
letters as to their qualified status under section 401(a) of the Code and the
tax-exempt status of the trusts under such Plans under section 501(a) of the
Code, and will make such changes as may be reasonably required by the IRS as a
condition to the grant of favorable determination letters.
(c) LIFE INSURANCE. To the extent the transfer or allocation
under the terms of this Agreement 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
Lucent or Agere (or their respective trusts, if any), or (ii) multiple claims
for insurance proceeds, Lucent and Agere 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, Lucent
and Agere 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.
8.8. FIDUCIARY MATTERS. Lucent and Agere each acknowledges that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards
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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.
8.9. COLLECTIVE BARGAINING.
(a) Lucent and Agere are parties to a National Memorandum of
Understanding ("National MOU") with the Communications Workers of America (CWA)
and the International Brotherhood of Electrical Workers (IBEW), dated May 30,
1998. The National MOU settles certain terms and conditions of employment for
represented occupational employees of Lucent and Agere. The National MOU, and
the local collective bargaining agreements (CBAs) which it amends and
supplements, expire on May 31, 2003.
(b) The parties agree that for the life of the National MOU,
it shall continue to apply to both companies according to its terms. The parties
further agree that for the life of the National MOU and any CBA covering a
bargaining unit of represented occupational employees of both Lucent and Agere,
any proposed changes to the National MOU or to the CBA(s) shall require
reasonable advance notice to the other party, and the opportunity to participate
in any bargaining that may occur with the union(s).
(c) To the extent that any provisions of this Agreement are
inconsistent with the National MOU or any CBA which covers a bargaining unit of
represented occupational employees of both Lucent and Agere, the provisions of
the National MOU and/or the CBA(s) prevail.
(d) In the event of a force surplus declaration by either
party affecting represented occupational employees in a bargaining unit
containing both Lucent and Agere employees, resulting in the involuntary
separation of one or more employees from the rolls of the party not declaring
the surplus, the party declaring the surplus shall bear the cost of any
severance payable to such employee(s).
8.10. CONSENT OF THIRD PARTIES. If any provision of this Agreement
is dependent on the consent of any third party (such as a vendor) and such
consent is withheld, Lucent and Agere 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, Lucent and Agere 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.
8.11. QUIET PERIODS. Agere shall take such action as is necessary to
ensure that participants in the Agere LTSSP, the Agere Savings Plan, and the
Stock Award Plans are notified that a quiet period will occur, during which
changes in investment direction, withdrawals, exercises and other activity with
respect to participants' accounts and Awards generally will not be permitted.
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8.12. LUCENT'S AND AGERE'S GENERAL OBLIGATIONS AS PLAN SPONSORS.
Lucent and Agere, respectively, shall continue to administer, or cause to be
administered, in accordance with their terms and applicable law, their
respective Deferral Plans, Executive Benefit Plans, Non-U.S. Plans, Health and
Welfare Plans, LESOP, if any, Pension Plans, Savings Plans, Stock Award Plans,
and any other Plan, and shall have the sole discretion and authority to
interpret their respective Plans as set forth therein.
8.13. ADJUSTMENTS TO PLAN TRANSFERS. In the event of transfers of
employment status, or corrections to data, calculations or methods used to
calculate any Liabilities or assets transferred to the trust relating to an
Agere Plan from the trust relating to the corresponding Lucent Plan that occur
prior to May 31, 2003, such Liabilities and assets shall be recomputed, ab
initio, 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. Any such adjustments to amounts transferred pursuant to this
Agreement from a Lucent Plan or trust thereunder to a Agere Plan or a trust
thereunder shall be made between such Plans or trusts. If an employee assigned
to either Agere or Lucent is not correctly reported on the records of any Plan,
any Liability arising from such error shall be the responsibility of the
employer of the individual on the date such error is identified, or of a Plan
sponsored by such employer. 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.
ARTICLE IX.
MISCELLANEOUS
9.1. NON-U.S. PLANS. Schedule II sets forth the principles that will
govern Lucent and Agere's treatment of Non-U.S. Plans.
9.2. 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 Agere
and Lucent.
9.3. 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.
9.4. AFFILIATES. Each of Lucent and Agere 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 Lucent Entity or an
Agere Entity, respectively.
9.5. 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
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as if fully set forth herein (references in this Section 9.5 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 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).
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IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.
LUCENT TECHNOLOGIES INC.
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
AGERE SYSTEMS INC.
By: /s/ XXXX X. XXXXXXX
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
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