Exhibit 2.5
[Composite Copy Reflecting First Amendment]
EMPLOYEE BENEFITS AGREEMENT
by and between
AT&T CORP.
and
AT&T BROADBAND CORP.
Dated as of
December 19, 2001
TABLE OF CONTENTS
ARTICLE I DEFINITIONS...................................................................................1
1.1 Affiliate.....................................................................................1
1.2 Agreement.....................................................................................1
1.3 Ancillary Agreements..........................................................................1
1.4 Approved Leave of Absence.....................................................................1
1.5 AT&T..........................................................................................2
1.6 AT&T Broadband Common Stock...................................................................2
1.7 AT&T Closing Stock Value......................................................................2
1.8 AT&T Common Stock.............................................................................2
1.9 AT&T Deferral Plan............................................................................2
1.10 AT&T Deferral Plan Participant................................................................2
1.11 AT&T Directors' Deferral Plan.................................................................2
1.12 AT&T Employee.................................................................................2
1.13 AT&T Entity...................................................................................2
1.14 AT&T Executive................................................................................2
1.15 AT&T Executive Benefit Plans..................................................................3
1.16 AT&T Force Management Program.................................................................3
1.17 AT&T Labor Agreement..........................................................................3
1.18 AT&T Long Term Incentive Plan.................................................................3
1.19 AT&T Opening Stock Value......................................................................3
1.20 AT&T Participant..............................................................................4
1.21 AT&T Pension Plans............................................................................4
1.22 AT&T Post-Retirement Welfare Benefits Plan....................................................4
1.23 AT&T Savings Plans............................................................................4
1.24 AT&T Toll Discount Program....................................................................4
1.25 AT&TMPP.......................................................................................4
1.26 AT&TPP........................................................................................4
1.27 Auditing Party................................................................................4
1.28 Award.........................................................................................4
1.29 Benefit Plan..................................................................................4
1.30 Broadband Adjustment Plan.....................................................................5
1.31 Broadband Common Stock Value..................................................................5
1.32 Broadband Employee............................................................................6
1.33 Broadband Entities............................................................................6
1.34 Broadband Long Term Savings Plans.............................................................6
1.35 Broadband Participant.........................................................................6
1.36 Broadband Pension Plans.......................................................................6
1.37 Broadband Severance Plan......................................................................6
1.38 Broadband Transferees.........................................................................6
1.39 Close of the Distribution Date................................................................6
1.40 COBRA.........................................................................................6
1.41 Code..........................................................................................6
1.42 Communications Services Entities..............................................................7
1.43 Distribution..................................................................................7
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1.44 Distribution Date.............................................................................7
1.45 Distribution Ratio............................................................................7
1.46 Distribution Year.............................................................................7
1.47 EBLIP.........................................................................................7
1.48 ERISA.........................................................................................7
1.49 Former Employee...............................................................................7
1.50 Health and Welfare Plans......................................................................7
1.51 HIPAA.........................................................................................8
1.52 Immediately after the Distribution Date.......................................................8
1.53 Individual Agreement..........................................................................8
1.54 Individual Deferral Agreement.................................................................8
1.55 Intrinsic Value...............................................................................8
1.56 Merger Agreement..............................................................................8
1.57 Liabilities...................................................................................8
1.58 Nasdaq........................................................................................9
1.59 Non-parties...................................................................................9
1.60 NYSE..........................................................................................9
1.61 Option........................................................................................9
1.62 Participating Company.........................................................................9
1.63 Person........................................................................................9
1.64 Senior Manager................................................................................9
1.65 Separation and Distribution Agreement.........................................................9
1.66 Separation Transactions.......................................................................9
1.67 SMULIP........................................................................................9
1.68 Subsidiaries..................................................................................9
1.69 SVULIP........................................................................................9
1.70 Tax Sharing Agreement.........................................................................9
1.71 Transition Period............................................................................10
1.72 U.S..........................................................................................10
ARTICLE II GENERAL PRINCIPLES...........................................................................10
2.1 Employment of Broadband Transferees..........................................................10
2.2 Employment of Broadband Employees............................................................10
2.3 Employment of Broadband Transferees on Leave Status..........................................10
2.4 Assumption and Retention of Liabilities; Related Assets......................................10
2.5 Broadband Participation in AT&T Benefit Plans................................................11
2.6 AT&T Participation in Broadband Benefit Plans................................................12
2.7 Terms of Participation by Broadband Transferees in Broadband Benefit Plans...................12
2.8 Service Recognition..........................................................................12
2.9 Approval by AT&T as Sole Shareholder.........................................................12
2.10 AT&T Labor Agreements........................................................................13
2.11 Change in Control Benefits...................................................................13
ARTICLE III DEFINED CONTRIBUTION AND DEFINED BENEFIT PLANS...............................................14
3.1 Savings Plans................................................................................14
(a) Broadband Long Term Savings Plan Trust..............................................14
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(b) AT&T Savings Plans and Trust........................................................14
(c) Assumption of Liabilities and Transfer of Accounts..................................14
(d) Vesting.............................................................................15
(e) Exchange of Data; Account Transfer..................................................15
(f) "Lost" Company Match................................................................15
3.2 AT&T Pension Plans...........................................................................16
(a) Retention of AT&T Pension Plans.....................................................16
(b) Vesting.............................................................................16
(c) Commencement of Pension.............................................................16
(d) Bridging............................................................................16
(e) Conversions to Cash Balance.........................................................16
3.3 Broadband Pension Plans......................................................................16
(a) Assumption of Broadband Pension Plans...............................................16
(b) Vesting.............................................................................17
(c) Bridging............................................................................17
(d) Commencement of Pension.............................................................17
ARTICLE IV HEALTH AND WELFARE PLANS.....................................................................17
4.1 Assumption of Health and Welfare Plan Liabilities............................................17
(a) General.............................................................................17
(b) Certain Specific Claims.............................................................18
4.2 Health and Welfare Plan Transitional Coverage Rules..........................................18
(a) General.............................................................................19
(b) Broadband Transferees and Broadband Benefit Plans...................................19
(c) AT&T Employees and AT&T Benefit Plans; Broadband
Employees and Broadband Benefit Plans ..............................................19
4.3 HCRA/CECRA Post-Distribution Transitional Rules..............................................20
(a) AT&T Health Care Reimbursement Account Plan; Broadband Transferees..................20
(b) AT&T Child/Elder Care Reimbursement Account Plan; Broadband Transferees.............20
4.4 Workers' Compensation Liabilities............................................................20
4.5 Payroll Taxes and Reporting of Compensation..................................................21
4.6 AT&T Post-Retirement Welfare Benefits Plan...................................................21
(a) Retention of AT&T Post-Retirement Welfare Benefits Plan.............................21
(b) Assumption of Broadband Post-Retirement Medical Plans...............................22
(c) Eligibility of Broadband Employees; Rule of 65......................................22
4.7 COBRA and HIPAA Compliance...................................................................22
4.8 Long-Term Care; Direct Pay Arrangements......................................................23
4.9 Severance Benefits...........................................................................23
ARTICLE V EXECUTIVE BENEFITS AND OTHER BENEFITS........................................................23
5.1 Individual Agreements - Assumption of Liabilities and Consents...............................23
5.2 AT&T Short Term Incentive Plan and AT&T Bonus Plan Award.....................................24
5.3 AT&T Long Term Incentive Plans...............................................................25
(a) AT&T Options Held by Current Employees..............................................25
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(b) AT&T Options Held by Former Employees...............................................26
(c) Miscellaneous Option Terms..........................................................27
(d) Vesting and Exercisability of Options...............................................29
(e) Restricted Shares...................................................................29
(f) Restricted Stock Units..............................................................31
(g) Performance Shares..................................................................32
(h) Partial Interests in Shares or Stock Units..........................................34
(i) Incentive Stock Options; Foreign Grants/Awards......................................34
(j) Individual Enforcement..............................................................34
5.4 AT&T Employee Stock Purchase Plan............................................................34
5.5 Savings Clause...............................................................................34
5.6 Registration Requirements....................................................................35
5.7 Non-Competition Guidelines...................................................................35
(a) AT&T Non-Competition Guideline......................................................35
(b) Broadband Non-Competition Guideline.................................................36
(c) Confidentiality and Proprietary Information.........................................36
5.8 Deferral Plans and Individual Deferral Agreements............................................37
5.9 AT&T Non-Qualified Pension Plans and Arrangements............................................37
5.10 Broadband Non-Qualified Pension Plans and Arrangements.......................................38
5.11 Life Insurance Programs......................................................................38
(a) AT&T Senior Management Universal Life Insurance Program.............................38
(b) AT&T Executive Basic Life Insurance Program.........................................38
(c) AT&T Estate Enhancement Program.....................................................39
(d) AT&T Supplemental Variable Universal Life Insurance Program.........................39
5.12 Financial Counseling.........................................................................39
5.13 Toll Discount Program........................................................................40
5.14 Relocation Plan..............................................................................40
5.15 Senior Manager Car Allowance.................................................................40
5.16 Taxable Fringe Benefits......................................................................40
5.17 Separation Plans.............................................................................40
ARTICLE VI GENERAL AND ADMINISTRATIVE...................................................................41
6.1 Payment of Liabilities.......................................................................41
6.2 Sharing of Participant Information...........................................................41
6.3 Best Efforts/Cooperation.....................................................................41
6.4 Non-Termination of Employment; No Third-Party Beneficiaries..................................42
6.5 Audit Rights With Respect to Information Provided............................................42
6.6 Fiduciary Matters............................................................................43
6.7 Collective Bargaining........................................................................43
6.8 Consent of Third Parties.....................................................................43
ARTICLE VII MISCELLANEOUS................................................................................43
7.1 Effect If Distribution Does Not Occur........................................................43
7.2 Relationship of Parties......................................................................44
7.3 Affiliates...................................................................................44
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7.4 Notices......................................................................................44
7.5 Incorporation of Separation and Distribution Agreement Provisions............................45
7.6 Governing Law................................................................................45
7.7 References...................................................................................45
SIGNATURES OF THE PARTIES
SCHEDULE 1.17 AT&T Labor Agreements
SCHEDULE 1.29 Broadband Benefit Plans
SCHEDULE 1.38 List of Broadband Transferees
SCHEDULE 4.9 Severance Multiples
SCHEDULE 5.1(b) Broadband Individual Agreements
SCHEDULE 5.10 Broadband Non-Qualified Pension Arrangements
EXHIBIT 5.7(a) Broadband People Movement Guidelines
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AMENDED AND RESTATED EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of December 19, 2001, is by
and between AT&T Corp., a New York corporation ("AT&T"), and AT&T Broadband
Corp., a Delaware corporation ("AT&T Broadband"), as amended and restated, as of
November 15, 2002. Capitalized terms used herein (other than the formal names of
AT&T Benefit Plans and Broadband Benefit Plans and related trusts of AT&T and
AT&T Broadband) and not otherwise defined shall have the respective meanings
assigned to them in Article I or assigned to them in the Separation and
Distribution Agreement (as defined below), as applicable.
WHEREAS, the Board of Directors of AT&T has determined that it is in
the best interests of AT&T and its shareholders to separate AT&T Broadband from
AT&T's existing businesses and provide for it to be an independent business;
WHEREAS, in furtherance of the foregoing, AT&T and AT&T Broadband have
entered into a Separation and Distribution Agreement, dated as of even date
herewith (the "Separation and Distribution Agreement"), and other specific
agreements that will govern certain matters relating to the Separation
Transactions and the relationship of AT&T, AT&T Broadband and their respective
Subsidiaries following the Distribution Date; and
WHEREAS, pursuant to the Separation and Distribution Agreement, AT&T
and AT&T Broadband have agreed to enter into this Agreement allocating assets,
Liabilities and responsibilities with respect to certain employee compensation
and benefit plans and programs between and among them.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 Affiliate has the meaning given that term in the Separation and
Distribution Agreement.
1.2 Agreement means this Employee Benefits Agreement, including all the
Schedules hereto.
1.3 Ancillary Agreements has the meaning given that term in the Separation
and Distribution Agreement.
1.4 Approved Leave of Absence means an absence from active service (i) due
to an individual's inability to perform his or her regular job duties by reason
of illness or injury and resulting in eligibility to receive benefits pursuant
to the terms of the AT&T Short Term Disability Plan, or (ii) pursuant to an
approved leave policy with a guaranteed right of reinstatement.
1.5 AT&T is defined in the preamble to this Agreement.
1.6 AT&T Broadband Common Stock means the AT&T Broadband Common Stock as
defined in the Separation and Distribution Agreement.
1.7 AT&T Closing Stock Value means the closing per-share price of the AT&T
Common Stock trading "regular way with due bills" as listed on the NYSE as of
4:00 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then
be in effect) on the Distribution Date; provided, however, that if the
Distribution occurs at a time when the NYSE is open for trading, AT&T Closing
Stock Value shall mean the price at which AT&T Common Stock trading "regular way
with due bills" last trades immediately before the Distribution; provided
further, that if the Distribution occurs prior to the first trade of AT&T Common
Stock on the Distribution Date, the AT&T Closing Stock Value shall mean the
price at which AT&T Common Stock trading "regular way with due bills" last
trades on the trading day immediately preceding the Distribution Date.
1.8 AT&T Common Stock has the meaning set forth in the Separation and
Distribution Agreement.
1.9 AT&T Deferral Plan means the AT&T Senior Management Incentive Award
Deferral Plan in effect as of the time relevant to the applicable provision of
this Agreement.
1.10 AT&T Deferral Plan Participant means any individual who has an account
balance in the AT&T Deferral Plan as of the Distribution Date.
1.11 AT&T Directors' Deferral Plan means the AT&T Deferred Compensation
Plan for Non-Employee Directors, as amended from time to time.
1.12 AT&T Employee means any (1) individual who, immediately prior to the
Close of the Distribution Date, is (a) either actively employed by, or then on
Approved Leave of Absence from, any AT&T Entity, other than a Broadband Entity
or (b) designated by mutual written agreement of AT&T and AT&T Broadband as an
AT&T Employee, and (2) solely for purposes of Section 5.3(a)(i) and Section
5.3(d), any former employee or consultant of an AT&T Entity whose last
compensation from an AT&T Entity was paid through a payroll system administered
outside of the United States.
1.13 AT&T Entity means AT&T, a Broadband Entity or a Communications
Services Entity.
1.14 AT&T Executive means an AT&T Employee (other than a Broadband Entity),
at salary grade level "E" or above (or comparable positions), who immediately
before the Close of the Distribution Date is eligible to participate in or
receive a benefit under any AT&T Executive Benefit Plan.
1.15 AT&T Executive Benefit Plans means the executive benefit and
nonqualified plans, programs, and arrangements (exclusive of Individual
Agreements) established, sponsored, maintained, or agreed upon, by any AT&T
Entity (other than a Broadband Entity) for the benefit of employees and former
employees of any AT&T Entity (other than a Broadband Entity) before the Close of
the Distribution Date.
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1.16 AT&T Force Management Program means the AT&T Separation Plan, the AT&T
Senior Management Separation Plan, the AT&T Special Executive Separation Plan
and the AT&T Senior Officer Separation Plan in effect as of the time relevant to
the applicable provision of this Agreement.
1.17 AT&T Labor Agreement shall mean each labor agreement and collective
bargaining agreement, other than any such agreement to which any Broadband
Entity is a party. The AT&T Labor Agreements are listed on Schedule 1.17.
1.18 AT&T Long Term Incentive Plan means any of the AT&T 1987 Long Term
Incentive Program, the AT&T 1997 Long Term Incentive Program and such other
stock-based incentive plans assumed by AT&T by reason of merger, acquisition or
otherwise, including incentive plans of Lin Broadcasting Corporation, ▇▇▇▇▇
Cellular Communications, Inc., Teleport Communications Group, Inc., ACC Corp., U
S WEST, Inc., U S WEST Media Group, Inc., MediaOne Group Inc. and
Tele-Communications Inc. and any other incentive plan identified in writing by
AT&T before the Close of the Distribution Date, all as in effect as of the time
relevant to the applicable provisions of this Agreement.
1.19 AT&T Opening Stock Value means (a) the opening per-share price of AT&T
Common Stock as listed on the NYSE as of the opening of trading on the first
trading day following the Distribution Date; provided, however, that if the
Distribution occurs at a time when the NYSE is open for trading, AT&T Opening
Stock Value shall mean the price at which AT&T Common Stock trades as of the
moment immediately after the Distribution; and provided further, that if the
Distribution occurs prior to opening of trading on the NYSE on the Distribution
Date, the AT&T Opening Stock Value shall mean the price at which AT&T Common
Stock first trades on the Distribution Date; or (b) if there occurs any stock
split, reverse stock split or similar change in capital affecting the AT&T
Common Stock between the time as of which the AT&T Closing Stock Value is
determined and the time as of which the AT&T Opening Stock Value would be
determined under clause (a), the amount determined pursuant to clause (a) shall
be appropriately adjusted to reflect such change in capital. As an example of
the operation of clause (b) of the preceding sentence, if there is a
one-for-five reverse stock split of the AT&T Common Stock Value between the time
as of which the AT&T Closing Stock Value is determined and the time as of which
the AT&T Opening Stock Value would be determined under clause (a) of the
preceding sentence, the AT&T Opening Stock Value will mean one-fifth of the
amount determined under clause (a) of the preceding sentence.
1.20 AT&T Participant means any individual other than a Broadband
Participant who holds an award under any AT&T Long Term Incentive Plan.
1.21 AT&T Pension Plans means the AT&TMPP, the AT&TPP, the AT&T Excess
Benefit and Compensation Plan, and the AT&T Non-Qualified Pension Plan in effect
as of the time relevant to the applicable provision of this Agreement.
1.22 AT&T Post-Retirement Welfare Benefits Plan means the Health and
Welfare Plan of AT&T providing medical expense benefits for retirees, dental
expense benefits for retirees, life insurance benefits for retirees (provided,
that in the case of the life insurance plans, the applicable AT&T Employee,
Broadband Employee or Broadband Transferee was enrolled
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for coverage as an active employee under the corresponding active-employee life
insurance plans at the time of his or her termination of employment) and the
AT&T Toll Discount Program. For purposes of this Agreement, the EBLIP, the
SMULIP, the SVULIP, the AT&T Corp. Estate Enhancement Program (including the
AT&T Corp. Alternative Death Benefit Program and the AT&T Corp. Special Death
Benefit Program) and any other plans, programs or arrangements not expressly
identified in this Section 1.23 shall not be considered part of the AT&T
Post-Retirement Welfare Benefits Plan.
1.23 AT&T Savings Plans means the AT&T defined contribution plans, in
effect as of the time relevant to the applicable provision of this Agreement,
sponsored by AT&T or by any AT&T Entity, other than the Broadband Long Term
Savings Plan.
1.24 AT&T Toll Discount Program means the AT&T Senior Manager Telephone
Discount Program and the AT&T Toll Discount Program in effect as of the time
relevant to the applicable provisions of this Agreement.
1.25 AT&TMPP means the AT&T Management Pension Plan in effect as of the
time relevant to the applicable provision of this Agreement.
1.26 AT&TPP means the AT&T Pension Plan in effect as of the time relevant
to the applicable provision of this Agreement.
1.27 Auditing Party is defined in Section 6.4(a).
1.28 Award, when immediately preceded by "AT&T," means an award under the
AT&T Long Term Incentive Plan. When immediately preceded by "Broadband," Award
means an award under the Broadband Adjustment Plan.
1.29 Benefit Plan shall mean, with respect to an entity or any of its
Subsidiaries, (a) each "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) and all other employee benefits arrangements, policies or payroll
practices (including, without limitation, severance pay, sick leave, vacation
pay, salary continuation, disability, retirement, deferred compensation, bonus,
stock purchase, stock option or other equity-based compensation,
hospitalization, medical insurance or life insurance) sponsored or maintained by
such entity or by any of its Subsidiaries (or to which such entity or any of its
Subsidiaries contributes or is required to contribute) and (b) all "employee
pension benefit plans" (as defined in Section 3(2) of ERISA), occupational
pension plan or arrangement or other pension arrangements sponsored, maintained
or contributed to by such entity or any of its Subsidiaries (or to which such
entity or any of its Subsidiaries contributes or is required to contribute).
When immediately preceded by "AT&T," Benefit Plan means any Benefit Plan
sponsored, maintained or contributed to by AT&T or a Communications Services
Entity. When immediately preceded by "Broadband," Benefit Plan means any Benefit
Plan sponsored, maintained or contributed to by Broadband or any Broadband
Entity. The Broadband Benefit Plans are listed in Schedule 1.29 hereto.
1.30 Broadband Adjustment Plan means the long term incentive plan or
program to be established by AT&T Broadband, effective immediately prior to the
Distribution Date, in connection with the treatment of Awards as described in
Article V.
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1.31 Broadband Common Stock Value means (a) if the AT&T Common Stock trades
"ex-distribution" or "when issued (to give effect to the Distribution)" on the
NYSE on or immediately prior to the Distribution Date, the excess of the AT&T
Closing Stock Value over the AT&T Ex-Distribution Closing Stock Value, and (b)
if the AT&T Common Stock does not trade "ex-distribution" or "when issued (to
give effect to the Distribution)" on the NYSE on or immediately prior to the
Distribution Date, the opening per-share price of Parent Class A Special Common
Stock (as defined in the Merger Agreement) as listed on Nasdaq as of the opening
of trading on the first trading day following the Distribution Date, divided by
the Exchange Ratio (as defined in the Merger Agreement); provided, however, that
if, for purposes of clause (b), the Distribution occurs at a time when Nasdaq is
open for trading, Broadband Common Stock Value shall be determined using the
price at which Parent Class A Special Common Stock trades as of the moment
immediately after the Distribution; and provided further, that if, for purposes
of clause (b), the Distribution occurs prior to opening of trading on Nasdaq on
the Distribution Date, the Broadband Common Stock Value shall be determined
using the price at which Parent Class A Special Common Stock first trades on the
Distribution Date. For purposes of this Section 1.31, the "AT&T Ex-Distribution
Closing Stock Value" means the closing per-share price of the AT&T Common Stock
trading "ex-distribution" or "when issued (to give effect to the Distribution)"
as listed on the NYSE as of 4:00 P.M., Eastern Standard Time or Eastern Daylight
Time (whichever shall then be in effect) on the Distribution Date; provided,
however, that if the Distribution occurs at a time when the NYSE is open for
trading, AT&T Ex-Distribution Closing Stock Value shall mean the price at which
AT&T Common Stock trading "ex-distribution" or "when issued (to give effect to
the Distribution)" last trades immediately before the Distribution; provided
further, that if the Distribution occurs prior to the first trade on the
Distribution Date, the AT&T Ex-Distribution Closing Stock Value shall mean the
price at which AT&T Common Stock trading "ex-distribution" or "when issued (to
give effect to the Distribution)" last trades on the trading day immediately
preceding the Distribution Date.
1.32 Broadband Employee means any individual who, immediately prior to the
Distribution, is either actively employed by or then on Approved Leave of
Absence from a Broadband Entity, other than a Broadband Transferee.
1.33 Broadband Entities means the members of the AT&T Broadband Group, as
defined in the Separation and Distribution Agreement, including without
limitation AT&T Broadband; AT&T Broadband, L.L.C., a Delaware limited liability
company; MediaOne Group Inc., a Delaware corporation; and each of their
respective Subsidiaries and Affiliates.
1.34 Broadband Long Term Savings Plans means the AT&T Broadband Long Term
Savings Plan, the United Artists Cablesystems Corporation Savings and Investment
Plan and the TKR Cable Company Defined Contribution Plan, each as in effect as
of the time relevant to the applicable provision of this agreement.
1.35 . Broadband Participant means any Broadband Employee, Broadband
Transferee and any former employee, director or consultant of an AT&T Entity
whose services immediately before such employment or service ended were being
primarily performed for a Broadband Entity, in each case, who holds an award
under any AT&T Long Term Incentive Plan.
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1.36 Broadband Pension Plans means the AT&T Broadband Pension Plan, the
AT&T Broadband Non-Qualified Pension Plan, the ▇▇▇▇▇▇-Tribune Corporation
Pension Plan and the MediaOne Group Mid Career Plan, each as in effect as of the
time relevant to the applicable provision of this Agreement.
1.37 Broadband Severance Plan means the AT&T Broadband Severance Plan.
1.38 Broadband Transferees means those AT&T Employees who are listed on
Schedule 1.38 hereto, as such Schedule may be amended from time to time by the
mutual written consent of AT&T and AT&T Broadband.
1.39 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.
1.40 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 ss. 4980B and ERISA ▇▇.▇▇. 601 through
608.
1.41 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.
1.42 Communications Services Entities means the members of the AT&T
Communications Group, as defined in the Separation and Distribution Agreement,
and their respective Subsidiaries and Affiliates after the Distribution Date.
1.43 Distribution has the meaning given that term in the Separation and
Distribution Agreement.
1.44 Distribution Date has the meaning given that term in the Separation
and Distribution Agreement.
1.45 Distribution Ratio means a fraction, the numerator of which shall be
the number of shares of AT&T Broadband Common Stock distributed to the
shareholders of AT&T Common Stock in the Distribution, and the denominator of
which is the number of shares of AT&T Common Stock outstanding at the close of
business on the Record Date. [Assumed to be one].
1.46 Distribution Year means the calendar year during which the
Distribution Date occurs.
1.47 EBLIP means the AT&T Executive Basic Life Insurance Program in effect
as of the time relevant to the applicable provisions of this Agreement.
1.48 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.
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1.49 Former Employee means (a) any Former Employee as defined in Section
5.3(b)(i); provided, however, that solely for purposes of Section 5.3(b)(i) and
Section 5.3(d), Former Employee shall not include any former employee or
consultant of an AT&T Entity whose last compensation from an AT&T Entity was
paid through a payroll system administered outside of the United States.
1.50 Health and Welfare Plans shall mean any plan, fund or program which
was established or is maintained for the purpose of providing for its
participants or their beneficiaries, through the purchase of insurance or
otherwise, medical, surgical or hospital care or benefits, or benefits in the
event of sickness, accident, disability, death or unemployment, or vacation
benefits, apprenticeship or other training programs or day care centers,
scholarship funds, or prepaid legal services, including any such plan, fund or
program as defined in Section 3(1) of ERISA. When immediately preceded by
"AT&T," Health and Welfare Plans means each Health and Welfare Plan that is an
AT&T Benefit Plan. When immediately preceded by "Broadband," Health and Welfare
Plans means the AT&T Broadband Health and FSA Plan, the AT&T Broadband Life
Insurance Plan, the AT&T Broadband Long-Term Care Insurance Plan, the AT&T
Broadband Pre-Paid Legal Expense Plan, the AT&T Broadband Severance Plan, the
AT&T Broadband Disability Plan, the MediaOne Group VEBA Trust and the AT&T
Broadband VEBA Trust and each other Health and Welfare Plan that is a Broadband
Benefit Plan.
1.51 HIPAA means the health insurance portability and accountability
requirements for "group health plans" under the Health Insurance Portability and
Accountability Act of 1996, as amended.
1.52 Immediately after the Distribution Date means on the first moment of
the day after the Distribution Date.
1.53 Individual Agreement means an individual contract or agreement
(whether written or unwritten) entered into prior to the Close of the
Distribution Date (other than an Individual Deferral Agreement as defined below)
between any AT&T Entity and an AT&T Executive that establishes the right of such
individual to special executive compensation or benefits, including a
supplemental pension benefit, deferred compensation, severance, hiring bonus,
loan, guaranteed payment, special allowance, tax equalization or disability
benefit, or a share units grant (payable in the form of cash or otherwise) under
individual phantom share agreements. An Individual Agreement does not include
any individual contract, application or agreement entered into or by any AT&T
Entity and an AT&T Executive (or his or her assignee) that relates to
eligibility for coverage under the AT&T Post-Retirement Welfare Benefits Plan,
or life insurance coverage for the AT&T Executive under the EBLIP, the SMULIP,
the SVULIP, or the AT&T Estate Enhancement Program (including the AT&T
Alternative Death Benefit Program and the AT&T Special Death Benefit Program).
1.54 Individual Deferral Agreement means an agreement entered into prior to
the Close of the Distribution Date by any AT&T Entity and any AT&T Executive for
the deferral of compensation (other than a deferral election made by an AT&T
Executive or a Broadband Transferee under the AT&T Deferral Plan or the AT&T
Broadband Deferred Compensation Plan) and with respect to which all events have
occurred and all conditions have been satisfied
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entitling such individual to payment of such deferred compensation other than
termination of employment or the mere passage of time.
1.55 Intrinsic Value means, with respect to an Option, as defined below,
the result obtained by multiplying (a) times (b) where "(a)" equals the result
obtained by subtracting the exercise price per share of the Option from (i) the
AT&T Closing Stock Value or (ii) the AT&T Opening Stock Value or (iii) the AT&T
Broadband Common Stock Value, whichever is applicable, as specified in Section
5.3, and "(b)" equals the number of shares of stock subject to such Option, as
specified in Section 5.3. In cases where the exercise price per share of an
Option exceeds (i) the AT&T Closing Stock Value or (ii) the AT&T Opening Stock
Value or (iii) the AT&T Broadband Common Stock Value, whichever is applicable,
Intrinsic Value shall be a negative number.
1.56 Merger Agreement means the Agreement and Plan of Merger dated as of
December 19, 2001 by and among AT&T Corp., AT&T Broadband Corp., Comcast
Corporation, AT&T Broadband Acquisition Corp., Comcast Acquisition Corp. and
AT&T Comcast Corporation.
1.57 Liabilities has the meaning given that term in the Separation and
Distribution Agreement.
1.58 Nasdaq means The Nasdaq Stock Market.
1.59 Non-parties is defined in Section 6.4.
1.60 NYSE means the New York Stock Exchange.
1.61 Option, when immediately preceded by "AT&T," means an option (either
nonqualified or incentive) to purchase, or a stock appreciation right with
respect to, shares of AT&T Common Stock pursuant to an AT&T Long Term Incentive
Plan. When immediately preceded by "Broadband," Option means an option (either
nonqualified or incentive) to purchase, or a stock appreciation right with
respect to, shares of AT&T Broadband Common Stock pursuant to the Broadband
Adjustment Plan.
1.62 Participating Company means (a) AT&T, (b) any Person (other than an
individual) that AT&T has approved for participation in, and which is
participating in, a plan sponsored by any AT&T Entity, 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.
1.63 Person has the meaning given that term in the Separation and
Distribution Agreement.
1.64 Senior Manager means an employee or former employee, at salary grade
level above "E" or (or comparable positions) of an AT&T Entity (other than a
Broadband Entity), who immediately before the Close of the Distribution Date is
eligible to participate in or receive a benefit under any AT&T Executive Benefit
Plan.
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1.65 Separation and Distribution Agreement is defined in the recitals to
this Agreement.
1.66 Separation Transactions is defined in the recitals to this Agreement.
1.67 SMULIP means the AT&T Senior Management Universal Life Insurance
Program in effect as of the time relevant to the applicable provisions of this
Agreement.
1.68 Subsidiaries has the meaning given that term in the Separation and
Distribution Agreement.
1.69 SVULIP means the AT&T Supplemental Variable Universal Life Insurance
Program in effect as of the time relevant to the applicable provisions of this
Agreement.
1.70 Tax Sharing Agreement means the Tax Sharing Agreement entered into as
of the date hereof between AT&T and AT&T Broadband.
1.71 Transition Period has the meaning set forth in Section 2.8.
1.72 U.S. means the ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the District of Columbia.
ARTICLE II
GENERAL PRINCIPLES
2.1 Employment of Broadband Transferees. Effective not later than
immediately before the Distribution, all Broadband Transferees, other than
Broadband Transferees on Approved Leave of Absence, shall become employees of
AT&T Broadband or another Broadband Entity.
2.2 Employment of Broadband Employees. All Broadband Employees and
Broadband Transferees, other than Broadband Transferees on Approved Leave of
Absence, shall continue to be employees of AT&T Broadband or another Broadband
Entity, as the case may be, immediately after the Distribution.
2.3 Employment of Broadband Transferees on Leave Status. In the case of any
Broadband Transferee who is on Approved Leave of Absence as of the Distribution
Date, AT&T or a Communication Services Entity after the Distribution Date shall
continue to employ such Broadband Transferee on Leave Status until the first
business day following expiration of the Broadband Transferee's Approved Leave
of Absence. A Broadband Transferee on Approved Leave of Absence shall be
transferred to the employ of AT&T Broadband or another Broadband Entity upon his
or her return to active service immediately following the conclusion of such
Approved Leave of Absence (provided such return occurs no later than the first
anniversary of the Distribution Date, or such a later date if such Approved
Leave of Absence is preceded by a short-term disability, e.g., related to
childbirth).
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2.4 Assumption and Retention of Liabilities; Related Assets.
(a) As of the Distribution Date, except as expressly provided in this
Agreement, AT&T and the Communication Services Entities shall assume or retain,
as applicable, and AT&T hereby agrees to pay, perform, fulfill and discharge,
(i) all Liabilities under all AT&T Benefit Plans, (ii) all Liabilities with
respect to the employment or termination of employment of all AT&T Employees and
their dependents and beneficiaries (other than the Broadband Transferees),
former employees of any AT&T Entity (other than a Broadband Entity), including,
without limitation those Liabilities arising out of or resulting from employment
of any Broadband Transferee by any AT&T Entity for periods prior to which they
began performing services for any Broadband Entity on or before the Distribution
Date, and their dependents and beneficiaries, and other service providers
(including any individual who is, or was, an independent contractor, temporary
employee, temporary service worker, consultant, freelancer, agency employee,
leased employee, on-call worker, incidental worker, or nonpayroll worker of any
AT&T Entity (other than a Broadband Entity) or in any other employment,
non-employment, or retainer arrangement, or relationship with any AT&T Entity
(other than a Broadband Entity)), in each case that arose in connection with or
as a result of employment with or the performance of services to any AT&T Entity
(other than a Broadband Entity), (iii) any other Liabilities expressly assigned
to AT&T or a Communications Services Entity under this Agreement and (iv) all
Liabilities with respect to Broadband Transferees on Approved Leave of Absence
Status until their employment by AT&T Broadband or a Broadband Entity begins, as
set forth in Section 2.3 (excluding Liabilities arising in connection with or as
a result of the employment of Broadband Transferees while rendering services to
any Broadband Entity or under any Broadband Benefit Plan). All assets held in
trust to fund the AT&T Benefit Plans and all insurance policies funding the AT&T
Benefit Plans shall be AT&T Communications Assets (as defined in the Separation
and Distribution Agreement), except to the extent specifically provided
otherwise in this Agreement.
(b) From and after the Distribution Date, except as expressly provided
in this Agreement, AT&T Broadband and the Broadband Entities shall assume or
retain, as applicable, and AT&T Broadband hereby agrees to pay, perform, fulfill
and discharge, (i) all Liabilities under all Broadband Benefit Plans, (ii) all
Liabilities with respect to the employment or termination of employment of
Broadband Transferees (and for Broadband Transferees on Approved Leave of
Absence, upon their transfer to employment by AT&T Broadband or a Broadband
Entity as set forth in Section 2.3) and their dependents and beneficiaries,
including without limitation those Liabilities arising out of or resulting from
employment by any AT&T Entity for periods after they began performing services
for any Broadband Entity and on or before the Distribution Date (excluding such
Liabilities with respect to benefits accrued or claims incurred prior to the
Distribution Date under the AT&T Benefit Plans), (iii) all Liabilities with
respect to the employment or termination of employment of all Broadband
Employees, former employees of a Broadband Entity and other service providers
(including any individual who is, or was, an independent contractor, temporary
employee, temporary service worker, consultant, freelancer, agency employee,
leased employee, on-call worker, incidental worker, or nonpayroll worker of AT&T
Broadband or a Broadband Entity or in any other employment, non-employment, or
retainer arrangement, or relationship with AT&T Broadband or a Broadband
Entity), and their dependents and beneficiaries, and (iv) all Liabilities that
are expressly assigned to AT&T Broadband or any Broadband Entity under this
Agreement. Notwithstanding any other
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provision of this Agreement except Sections 5.1 and 6.1, neither AT&T Broadband
nor any Broadband Entity shall have any obligation to or Liabilities with
respect to any Broadband Transferee on Approved Leave of Absence until he or she
becomes an employee of AT&T Broadband or a Broadband Entity as provided in
Section 2.3. All assets held in trust to fund the Broadband Benefit Plans and
all insurance policies funding the Broadband Benefit Plans shall be AT&T
Broadband Assets (as defined in the Separation and Distribution Agreement),
except to the extent specifically provided otherwise in this Agreement.
2.5 Broadband Participation in AT&T Benefit Plans. Effective as of the
Close of the Distribution Date, AT&T Broadband and each other Broadband Entity
shall cease to be a Participating Company in any AT&T Benefit Plan, as well as
the AT&T Work and Family Program, the AT&T Relocation Program and the ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇ Award Program and Trust, and AT&T and AT&T Broadband shall take all
necessary action before the Distribution Date to effectuate such cessation as a
Participating Company.
2.6 AT&T Participation in Broadband Benefit Plans. Effective as of the
Close of the Distribution Date, AT&T and each Communications Services Entity
shall cease to be a Participating Company in any Broadband Benefit Plan, and
AT&T and AT&T Broadband shall take all necessary action before the Distribution
Date to effectuate such cessation as a Participating Company.
2.7 Terms of Participation by Broadband Transferees in Broadband Benefit
Plans. Each Broadband Benefit Plan shall provide that all service, all eligible
compensation as recognized under the Broadband Benefit Plan and all other
benefit-affecting determinations with respect to all Broadband Transferees that,
as of the Close of the Distribution Date, were recognized under any
corresponding AT&T Benefit Plan shall, as of Immediately after the Distribution
Date, receive full recognition, credit and validity and be taken into account
under such Broadband Benefit Plan, except to the extent that duplication of
benefits would result and except for purposes of benefit accruals under any
defined benefit pension plan.
2.8 Service Recognition. AT&T, AT&T Broadband, the Communications Services
Entities and the other Broadband Entities shall (a) mutually credit service
recognized by the others under the terms of their respective Benefit Plans where
appropriate (but not for purposes of benefit accruals under any defined benefit
pension plan), (b) where reasonably practicable, arrange for transfer of
accounts between the Broadband Long Term Savings Plans and the AT&T Savings
Plans, and (c) provide coverage and benefits relating to health and welfare
plans in a manner consistent with the provisions of Sections 4.1, 4.2 and 4.3,
with respect to individuals who cease employment with AT&T Broadband or another
Broadband Entity and immediately become employees of AT&T or a Communications
Services Entity and AT&T Employees who cease employment with AT&T or a
Communications Services Entity and who immediately become employees of AT&T
Broadband or another Broadband Entity, in each case within a period not to
exceed six months in duration after the Distribution Date (the "Transition
Period"). The service crediting described above shall be subject to any
applicable "service bridging" or "break in service" rules under the Broadband
Benefit Plans and the AT&T Benefit Plans.
2.9 Approval by AT&T as Sole Shareholder. Prior to the Distribution, AT&T
shall cause AT&T Broadband to adopt the Broadband Adjustment Plan which shall
have terms and
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conditions that are substantially similar to the AT&T 1997 Long Term Incentive
Program, except that a change of control shall mean a change of control of AT&T
Broadband, which plan shall be approved prior to the Distribution by AT&T as
AT&T Broadband's sole shareholder. If AT&T Broadband or any other Broadband
Entity adopts any other Broadband Benefit Plan, one or more benefit plans for
non-employee directors of AT&T Broadband or any other Broadband Entity or
"change in control" compensation and benefit provisions, or enters into or
assumes any employment agreements with executives of AT&T Broadband or any other
Broadband Entity, while AT&T Broadband or the other Broadband Entities are
wholly owned subsidiaries of AT&T, and the plan, plans, provisions or agreements
are reasonably acceptable to AT&T, and the parties mutually agree that
shareholder approval is legally required or advisable, then AT&T shall cooperate
in obtaining such shareholder approval before the Distribution Date of any such
Broadband Benefit Plan, non-employee director plan, "change in control"
provision or employment agreement. The adoption and approval of such plans,
benefits, provisions or agreements (other than the adoption of the Broadband
Adjustment Plan) shall be subject to Section 8.01(xv) of the Merger Agreement,
without regard to that portion of the introductory language of such Section that
relates to the Employee Benefits Agreement.
2.10 AT&T Labor Agreements. As of the Close of the Distribution Date, AT&T
shall retain all AT&T Labor Agreements and AT&T shall take all actions
reasonably necessary and within its power and authority to ensure that, from and
after the Distribution Date, except as required by applicable law, AT&T
Broadband shall have no obligation related to or derived from (1) any AT&T Labor
Agreement (other than, without limiting any rights of Parent under the Merger
Agreement, as a result of a violation before the Distribution Date by any
Broadband Entity of any obligation that it may have under such AT&T Labor
Agreement) or (2) any other legal obligations, duties, requirements, claims or
Liabilities related to collective bargaining, recognition, or unfair labor
practices involving an AT&T Entity (other than AT&T Broadband or another
Broadband Entity).
2.11 Change in Control Benefits. Various provisions of a number of Benefit
Plans sponsored by AT&T and/or AT&T Broadband are automatically effected in the
event of a "Change in Control" of AT&T, as such term is defined in the AT&T 1997
Long Term Incentive Program, in accordance with the provisions of the
Resolutions of the Board of Directors of AT&T effective as of October 23, 2000.
In addition, from and after the Distribution, corresponding provisions of the
Broadband Benefit Plans will be automatically effected as a result of a "Change
in Control" of AT&T Broadband, as defined in and pursuant to the Broadband
Adjustment Plan. To the extent any such provisions of an AT&T Benefit Plan or a
Broadband Benefit Plan or of such Resolutions differ from the provisions of this
Agreement, those provisions will supersede specific provisions of this Agreement
following any such "Change in Control." AT&T and AT&T Broadband shall continue
to maintain after the Distribution Date such plans and programs as are necessary
to provide the benefits specified in such Resolutions to eligible employees
following such a "Change in Control," as that term is defined in the AT&T 1997
Long Term Incentive Plan as of the date of such resolutions and in the Broadband
Adjustment Plan (as adopted pursuant to Section 2.9), as the case may be (except
that the Broadband Benefit Plans shall be amended as of the Distribution to
provide that a "Change in Control" means a "Change in Control" of AT&T
Broadband).
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ARTICLE III
DEFINED CONTRIBUTION AND DEFINED BENEFIT PLANS
3.1 Savings Plans.
(a) Broadband Long Term Savings Plan Trust. Effective as of the Close
of the Distribution Date, any trusts established and forming part of the
Broadband Long Term Savings Plans (the "Broadband Savings Trust") shall cease to
participate in the AT&T Savings Plan Group Trust. AT&T and AT&T Broadband shall
take all actions necessary or appropriate, and adopt or cause to be adopted any
amendments to any trust agreements or plan documents reasonably necessary to
ensure that settlor responsibility for and control of the Broadband Savings
Trust is assumed or retained by AT&T Broadband following the Distribution. From
and after the Distribution Date, AT&T Broadband shall assume and retain sole and
complete responsibility for the Broadband Long Term Savings Plans and the
Broadband Savings Trust and any and all assets and Liabilities related thereto.
(b) AT&T Savings Plans and Trust. Effective as of the Close of the
Distribution Date, AT&T shall retain sole and complete responsibility for, and
all Liabilities relating to, the AT&T Savings Plans and the AT&T Savings Plan
Group Trust. Without limiting the generality of the foregoing, AT&T and AT&T
Broadband shall take all actions necessary or appropriate, and adopt or cause to
be adopted any amendments to any trust agreements or plan documents reasonably
necessary to ensure that settlor responsibility and control of the AT&T Savings
Plan Group Trust is retained by AT&T from and after the Distribution.
(c) Assumption of Liabilities and Transfer of Accounts. AT&T and AT&T
Broadband shall adopt, or cause to be adopted, all reasonable and necessary plan
amendments and procedures by which each Broadband Employee and each Broadband
Transferee who has an account under the AT&T Savings Plans may make a one-time
election to have such account transferred to the Broadband Long Term Savings
Plan, and each AT&T Employee (excluding Broadband Transferees) who has an
account under the Broadband Long Term Savings Plan may make a one-time election
to have such account transferred to the appropriate AT&T Savings Plan, in each
case, as soon as practicable after April 15 of the year following the
Distribution Year or such earlier date as AT&T and AT&T Broadband shall mutually
determine, or to have such account remain in the AT&T Savings Plans or the
Broadband Long Term Savings Plan until the AT&T Employee, the Broadband Employee
or Broadband Transferee receives a distribution from such plan in accordance
with the terms of the plans and applicable law; provided, however, that such
transfer shall not occur if AT&T or AT&T Broadband reasonably determines that
the transfer could result in the failure of any AT&T Savings Plan or the
Broadband Long Term Savings Plan to qualify under Code Section 401(a). Such
transfers shall be made in such manner and upon such terms and conditions as
AT&T and AT&T Broadband shall mutually agree, but shall accommodate the in-kind
transfer of qualifying employer securities of AT&T and AT&T Broadband and
outstanding loan balances.
(d) Vesting. As of the Close of the Distribution Date, all account
balances of AT&T Employees (excluding Broadband Transferees) in the Broadband
Long Term Savings
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Plan, and all account balances of Broadband Employees and Broadband Transferees
in the AT&T Savings Plans, shall be immediately vested.
(e) Exchange of Data; Account Transfer. AT&T and AT&T Broadband agree
to provide to each other, as soon as practicable after the Distribution Date, a
list of the AT&T Employees (excluding Broadband Transferees) who were
participants in or are otherwise entitled to benefits under the Broadband Long
Term Savings Plan and a list of Broadband Employees and Broadband Transferees
who were participants in or are otherwise entitled to benefits under the AT&T
Savings Plan, including descriptions of their respective account balances and
the protected benefits (within the meaning of Section 411(d)(6) of the Code)
attached to their accounts. Except as otherwise specifically provided above
regarding plan qualification, as soon as practicable after April 15 of the year
following the Distribution Year, or such earlier date as AT&T and AT&T Broadband
shall mutually agree: (i) AT&T Broadband shall cause the accounts (including any
outstanding loan balances) of the AT&T Employees who elect a transfer under the
Broadband Long Term Savings Plan to be transferred to the AT&T Savings Plan and
its related trust in cash or such other assets as mutually agreed by AT&T and
AT&T Broadband (in any event, including in-kind transfers of AT&T Common Stock,
AT&T Broadband Common Stock and participant loan balances), and the AT&T Savings
Plan shall assume and be solely responsible for all Liabilities under each of
the AT&T Savings Plans with respect to AT&T Employees who elect a transfer of
their accounts (to the extent assets related to those accounts are transferred
from the Broadband Long Term Savings Plans); and (ii) AT&T shall cause the
accounts (including any outstanding loan balances) of the Broadband Employees
and Broadband Transferees who elect a transfer under the AT&T Savings Plan to be
transferred to the Broadband Long Term Savings Plan and the Broadband Savings
Trust in cash or such other assets as mutually agreed by AT&T and AT&T Broadband
(in any event, including in-kind transfers of AT&T Common Stock, AT&T Broadband
Common Stock and participant loan balances) and the Broadband Long Term Savings
Plan shall assume and be solely responsible for all Liabilities under the
Broadband Long Term Savings Plans to or relating to Broadband Employees and
Broadband Transferees who elect a transfer of their accounts (to the extent
assets related to those accounts are transferred from the AT&T Savings Plans);
and (iii) AT&T and AT&T Broadband shall cause their respective savings plans and
related trusts to satisfy all protected benefit requirements under the Code and
applicable law with respect to the transferred accounts.
(f) "Lost" Company Match. AT&T shall make a one-time payment directly
to the Broadband Transferees, in the year following the Distribution Year, of
the amount of "lost savings plan matching contributions," if any, to which they
would have been entitled under existing AT&T practices with respect to
compensation earned on or before the Distribution Date that is in excess of the
annual limits imposed by Code Section 401(a)(17).
3.2 AT&T Pension Plans.
(a) Retention of AT&T Pension Plans. Effective as of the Close of the
Distribution Date, AT&T shall retain:
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(i) sponsorship of the AT&T Pension Plans and their related trusts
and any other trust or other funding arrangement established or maintained with
respect to such plans, or any assets held as of the Distribution Date with
respect to such plans; and
(ii) all Liabilities relating to, arising out of or resulting from
claims incurred by or on behalf of any individuals with respect to benefits
under any AT&T Pension Plan.
(b) Vesting. Effective as of the Close of the Distribution Date, each
Broadband Employee and each Broadband Transferee who is a participant in an AT&T
Pension Plan shall be vested in his or her accrued benefit under the AT&T
Pension Plans.
(c) Commencement of Pension. Effective as of the Close of the
Distribution Date, each Broadband Employee and Broadband Transferee who is a
participant in an AT&T Pension Plan shall be deemed to have terminated
employment with the sponsor of such AT&T Pension Plan and shall be eligible to
commence his or her pension in accordance with the terms of such plan.
(d) Bridging. Effective as of the Close of the Distribution Date, all
unbridged net credited service of each Broadband Employee and Broadband
Transferee who transferred, or was reassigned, to a Broadband Entity on or after
March 9, 1999 and before the Close of the Distribution Date from a Participating
Company in the AT&TMPP or the AT&TPP shall be bridged, provided that the
unbridged net credited service would have been eligible for bridging under the
bridging rules of the AT&TMPP or the AT&TPP in the event that the Broadband
Employee and Broadband Transferee had continued to qualify as an "Employee"
under the AT&TMPP or the AT&TPP and satisfied the applicable bridging rules
under those plans.
(e) Conversions to Cash Balance. Each Broadband Employee and Broadband
Transferee who transferred, or was reassigned, to a Broadband Entity on or after
March 9, 1999 from a Participating Company in the AT&TMPP or the AT&TPP who has
a portion of his or her accrued benefit under a prior formula under the AT&T
Pension Plans that has not yet been converted to cash balance shall be deemed to
have completed any minimum period of net credited service that is required for
such conversion.
3.3 Broadband Pension Plans.
(a) Assumption or Retention of Broadband Pension Plans. Effective as
of the Close of the Distribution Date, AT&T Broadband shall assume or retain, as
applicable:
(i) sponsorship of the Broadband Pension Plans and their related
trusts and any other trust or other funding arrangement established or
maintained with respect to such plans, or any assets held as of the Distribution
Date with respect to such plans; and
(ii) all Liabilities relating to, arising out of or resulting from
claims incurred by or on behalf of any individuals with respect to benefits
under any Broadband Pension Plan.
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(b) Vesting. Effective as of the Close of the Distribution Date, the
Broadband Pension Plan shall be amended to provide that each AT&T Employee
(excluding Broadband Transferees) who has any accrued benefits under the
Broadband Pension Plan shall be vested, as of the Close of the Distribution
Date, in his or her accrued benefit under the Broadband Pension Plan.
(c) Bridging. Effective as of the Close of the Distribution Date, the
Broadband Pension Plan shall be amended to provide that any unbridged term of
employment of each AT&T Employee who transferred, or was reassigned, on or after
June 15, 2000 and before the Close of the Distribution Date to AT&T or a
Communications Services Entity from a Broadband Entity shall be bridged,
provided that the unbridged term of employment would have been eligible for
bridging under the bridging rules of the Broadband Pension Plan in the event
that the AT&T Employee had continued to qualify as an "Employee" under the
Broadband Pension Plan and satisfied the applicable bridging rules under such
plan.
(d) Commencement of Pension. Effective as of the Close of the
Distribution Date, each AT&T Employee (excluding Broadband Transferees) who is a
participant in the Broadband Pension Plan shall be deemed to have terminated
employment with the sponsor of such Broadband Pension Plan and shall be eligible
to commence his or her pension in accordance with the terms of such plan.
ARTICLE IV
HEALTH AND WELFARE PLANS
4.1 Assumption of Health and Welfare Plan Liabilities.
(a) General. As of the Close of the Distribution Date, AT&T shall
retain:
(i) sponsorship of all AT&T Health and Welfare Plans and any trust
or other funding arrangement established or maintained with respect to such
plans, or any assets held as of the Distribution Date with respect to such
plans; and
(ii) all Liabilities relating to, arising out of, or resulting
from health and welfare coverage or claims incurred by or on behalf of AT&T
Employees, Broadband Transferees and, to the extent applicable, Broadband
Employees, or their covered dependents under the AT&T Health and Welfare Plans
on or before the Close of the Distribution Date; and
(iii) except as provided in Section 4.1(b), all Liabilities
relating to health and welfare coverage or claims incurred by or on behalf of
AT&T Employees or their covered dependents after the Close of the Distribution
Date under the AT&T Health and Welfare Plans.
Except as provided in Section 4.1(b), AT&T shall not assume any Liability
relating to health and welfare claims incurred by or on behalf of Broadband
Transferees, Broadband Employees or their covered dependents after the
Distribution Date, and such claims shall be satisfied pursuant to Section 4.2.
Except as provided in Section 4.1(b), a claim or Liability (1) for medical,
dental, vision and/or prescription drug benefits shall be deemed to be incurred
upon the rendering of
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health services giving rise to the obligation to pay such benefits; (2) for life
insurance and accidental death and dismemberment and business travel accident
insurance benefits and workers' compensation benefits shall be deemed to be
incurred upon the occurrence of the event giving rise to the entitlement to such
benefits; (3) for salary continuation or other disability benefits shall be
deemed to be incurred upon the effective date that an individual is deemed to be
disabled, giving rise to the entitlement to such benefits; and (4) for a period
of continuous hospitalization shall be deemed to be incurred on the date of
admission to the hospital.
(b) Certain Specific Claims. AT&T shall be responsible for all
Liabilities under the applicable AT&T Health and Welfare Plan that relate to,
arise out of or result from any period of continuous hospitalization of a
Broadband Transferee, a Broadband Employee or his or her covered dependent which
begins before the Close of the Distribution Date under an AT&T Health and
Welfare Plan and continues after the Close of the Distribution Date; provided,
however, that AT&T shall not be responsible for Liabilities in excess of the
benefits otherwise provided by the terms of the respective plans. AT&T also
shall be responsible for all Liabilities under the applicable AT&T Health and
Welfare Plan that relate to, arise out of or result from any denture work,
bridge work, crown installation or root canal therapy for a Broadband
Transferee, a Broadband Employee or his or her covered dependent for which
preparatory dental services have been rendered under an AT&T Health and Welfare
Plan on or before the Distribution Date and such dental treatment continues
after the Distribution Date, provided that such dental treatment is concluded
within allowable time limitations under the applicable AT&T Health and Welfare
Plan. Coverage for any such hospitalization or dental services shall be provided
after the Distribution Date without interruption under the appropriate AT&T
Health and Welfare Plan until such hospitalization or treatment for such
condition is concluded or discontinued subject to applicable plan rules and
limitations. The corresponding Broadband Health and Welfare Plan that covers the
Broadband Transferee or his or her covered dependent after the Distribution Date
shall be secondarily liable (for purposes of coordination of benefits) in
accordance with its terms and conditions with respect to any such
hospitalization or dental treatment.
4.2 Health and Welfare Plan Transitional Coverage Rules.
(a) General. As of the Close of the Distribution Date, AT&T Broadband
shall retain:
(i) sponsorship of all Broadband Health and Welfare Plans and any
trust or other funding arrangement established or maintained with respect to
such plans, or any assets held as of the Distribution Date with respect to such
plans; and
(ii) all Liabilities relating to, arising out of or resulting from
health and welfare coverage or claims incurred by or on behalf of Broadband
Employees and their covered dependents under the Broadband Health and Welfare
Plans on or before the Distribution Date; and
(iii) all Liabilities relating to health and welfare coverage or
claims incurred by or on behalf of Broadband Employees or their covered
dependents and Broadband Transferees or their covered dependents after the
Distribution Date, except as provided in Section 4.1(b).
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(b) Broadband Transferees and Broadband Benefit Plans. Broadband
Transferees and their eligible covered dependents who were participants in the
AT&T Health and Welfare Plans as of the Close of the Distribution Date shall be
immediately eligible, after the Close of the Distribution Date, to participate
in the corresponding Broadband Health and Welfare Plans then available to
similarly situated Broadband Employees, subject to the terms and conditions of
such plans, but without regard for any requirements of proof of insurability and
without regard to any restrictions or limitations with respect to preexisting
condition, provided such pre-existing condition is otherwise a covered condition
under the terms of such plan. Subject to the agreement of any applicable
insurer, all compensation, periods of service, benefit elections, deductible
payments, payments toward the applicable out-of-pocket maximums and other
benefit-affecting determinations affecting Broadband Transferees that, as of the
Close of the Distribution Date, were recognized under the AT&T Health and
Welfare Plans shall receive full recognition, credit and validity and be taken
into account under the Broadband Health and Welfare Plans Immediately after the
Distribution Date in a manner consistent with the manner in which such benefit
affecting determinations were treated under the terms of the AT&T Health and
Welfare Plans immediately prior to the Close of the Distribution Date.
(c) AT&T Employees and AT&T Benefit Plans; Broadband Employees and
Broadband Benefit Plans. Any AT&T Employee who participates in an AT&T Health
and Welfare Plan immediately before the Close of the Distribution Date shall
automatically continue such participation in the AT&T Health and Welfare Plan
without any change in coverage and without the need for any new or additional
enrollment and without change in any election made with respect to coverage
under such plan. Any Broadband Employee who participates in a Broadband Health
and Welfare Plan immediately before the Close of the Distribution Date shall
automatically continue such participation without change in coverage, and
without the need for any new or additional enrollment and without change in any
election made with respect to coverage under such plan.
4.3 HCRA/CECRA Post-Distribution Transitional Rules.
(a) AT&T Health Care Reimbursement Account Plan; Broadband
Transferees. To the extent any Broadband Transferee or Broadband Employee made
contributions to the AT&T Health Care Reimbursement Account Plan ("AT&T HCRA
Plan") during the Distribution Year, such Broadband Transferee or Broadband
Employee shall be permitted to file claims for reimbursement for qualifying
health care expenses incurred during the Distribution Year through the Close of
the Distribution Date, for a total amount not to exceed the amount elected by
such Broadband Transferee or Broadband Employee for that year. Such claims may
be filed at any time on or before April 15 of the year following the
Distribution Year in the manner permitted under the AT&T HCRA Plan. Account
balances, whether positive or negative, shall not be transferred or assigned
from AT&T or a Communication Services Entity to AT&T Broadband or another
Broadband Entity. Any Broadband Transferee or Broadband Employee who made
contributions to the AT&T HCRA Plan during the Distribution Year shall have the
right to elect continuation coverage in the AT&T HCRA for the balance of the
Distribution Year through COBRA.
(b) AT&T Child/Elder Care Reimbursement Account Plan; Broadband
Transferees. To the extent any Broadband Transferee or Broadband Employee made
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contributions to the AT&T Child/Elder Care Reimbursement Account Plan ("AT&T
CECRA Plan") during the Distribution Year and such Broadband Transferee or
Broadband Employee has a positive account balance in his or her "Child/Elder
Care Reimbursement Account" under the AT&T CECRA Plan as of the Close of the
Distribution Date, such Broadband Transferee or Broadband Employee shall be
entitled to file claims for reimbursement for qualifying child and elder care
expenses incurred at any time during the Distribution Year for a total amount
not to exceed the amount of his or her positive account balance determined as of
the Close of the Distribution Date. A Broadband Transferee or Broadband Employee
shall be considered to have a "positive account balance" in the AT&T CECRA Plan
if, as of the determination date, (i) the total amount he or she actually
contributed to the AT&T CECRA Plan for the Distribution Year, minus (ii) the
total amount of reimbursements paid to such Broadband Transferee or Broadband
Employee for qualifying child care and elder care expenses incurred at any time
during the Distribution Year, is a positive number. Such claims may be filed at
any time on or before April 15 of the year following the Distribution Year, in
the manner permitted under the AT&T CECRA Plan. Account balances, whether
positive or negative, shall not be transferred or assigned from AT&T or a
Communication Services Entity to AT&T Broadband or another Broadband Entity.
4.4 Workers' Compensation Liabilities. Except as provided below, all
workers' compensation Liabilities relating to, arising out of, or resulting from
any claim by an AT&T Employee or Broadband Transferee that results from an
accident occurring, or from an occupational disease which becomes manifest, on
or before the Close of the Distribution Date and while such AT&T Employee or
Broadband Transferee was employed by an AT&T Entity (other than a Broadband
Entity) shall be retained by AT&T. AT&T shall assume and be solely responsible
for all workers' compensation Liabilities relating to, arising out of, or
resulting from any claim incurred for a compensable injury sustained (i) by each
individual who was, at the time of such injury, employed by any AT&T Entity
(other than a Broadband Entity), and (ii) by an AT&T Employee after the
Distribution Date. All workers' compensation Liabilities relating to, arising
out of, or resulting from any claim by a Broadband Employee that results from an
accident occurring, or from an occupational disease which becomes manifest, on
or before the Distribution Date and while such Broadband Employee was employed
by AT&T Broadband or another Broadband Entity shall be retained by AT&T
Broadband. AT&T Broadband shall assume and be solely responsible for all
workers' compensation Liabilities relating to, arising out of, or resulting from
any claim incurred for a compensable injury sustained (i) by each individual who
was, at the time of such injury, employed by AT&T Broadband or other Broadband
Entity, and (ii) by a Broadband Employee after the Distribution Date. For
purposes of this Agreement, a compensable injury shall be deemed to be sustained
upon the occurrence of the event giving rise to eligibility for workers'
compensation benefits or an occupational disease becomes manifest, as the case
may be. AT&T, AT&T Broadband, the Communications Services Entities and the other
Broadband Entities shall cooperate with respect to any notification to
appropriate governmental agencies of the Distribution and the issuance of new,
or the transfer of existing, workers' compensation insurance policies and claims
handling contracts.
4.5 Payroll Taxes and Reporting of Compensation. AT&T, AT&T Broadband, the
Communication Services Entities and the other Broadband Entities shall take such
action as may be reasonably necessary or appropriate in order to minimize
Liabilities related to payroll taxes after the Distribution Date, including as
described in Section 5.3(c)(iii)-(vi). AT&T, AT&T
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Broadband, each Communication Services Entities and each other Broadband Entity
shall each bear its responsibility for payroll tax obligations and for the
proper reporting to the appropriate governmental authorities of compensation
earned by their respective employees after the Close of the Distribution Date,
including compensation related to the exercise of Options, as described in
Section 5.3(c)(iii)-(vi).
4.6 AT&T Post-Retirement Welfare Benefits Plan.
(a) Retention of AT&T Post-Retirement Welfare Benefits Plan. As of the
Close of the Distribution Date, AT&T shall retain:
(i) the AT&T Post-Retirement Welfare Benefits Plan and any trust
or other funding arrangement established or maintained with respect to such
plans, or any assets held as of the Distribution Date with respect to such
plans; and
(ii) all Liabilities relating to, arising out of, or resulting
from claims incurred by or on behalf of any participant or their covered
dependents under the AT&T Post-Retirement Welfare Benefits Plans.
(b) Assumption or Retention of Broadband Post-Retirement Medical
Plans. As of the Close of the Distribution Date, AT&T Broadband shall assume or
retain, as applicable:
(i) the post-retirement medical expense portion of the MediaOne
Health Care Plan or any other post-retirement welfare benefit plan maintained by
AT&T Broadband or another Broadband Entity, and any trust or other funding
arrangement established or maintained with respect to such plans, or any assets
held as of the Distribution Date with respect to such plans;
(ii) all Liabilities relating to, arising out of, or resulting
from claims incurred by or on behalf of any participant or their covered
dependents under the MediaOne post-retirement medical expense plan or any other
post-retirement welfare benefit plan maintained by AT&T Broadband or another
Broadband Entity.
(c) Eligibility of Broadband Employees; Rule of 65. As of the Close of
the Distribution Date, AT&T shall amend the AT&T Post-Retirement Welfare
Benefits Plan, to provide that each Broadband Employee or Broadband Transferee
who was an AT&T management employee and was transferred or reassigned to AT&T
Broadband or another Broadband Entity before the Distribution Date and on or
after March 9, 1999, and after attaining at least ten years of net credited
service as of the date of such transfer or reassignment, shall be eligible to
participate in the AT&T Post-Retirement Welfare Benefits Plan, provided that the
sum of such individual's age and net credited service (both expressed in days),
determined as of the Distribution Date, is no less than 23,725 days (which
equals the product of 65 years and 365 days per year) (referred to as the "Rule
of 65"). While a Broadband Employee or a Broadband Transferee who is eligible to
participate in the AT&T Post-Retirement Welfare Benefits Plan is covered as an
active employee under the Broadband Health and Welfare Plans, the coverage
provided to such Broadband Employee or Broadband Transferee and his or her
covered
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dependents (if any) under the AT&T Post-Retirement Welfare Benefits Plan shall
be secondary to the coverage provided under the Broadband Health and Welfare
Plans.
4.7 COBRA and HIPAA Compliance. AT&T shall be responsible for administering
compliance with the health care continuation requirements of COBRA, the
certificate of creditable coverage requirements of HIPAA, and the corresponding
provisions of the AT&T Health and Welfare Plans with respect to Broadband
Transferees and Broadband Employees (if any) and their covered dependents who
incur a COBRA qualifying event or loss of coverage under the AT&T Health and
Welfare Plans at any time on or before the Close of the Distribution Date.
Effective Immediately after the Distribution Date, AT&T and the Communications
Services Entities shall be responsible for administering compliance with the
health care continuation requirements of COBRA, the certificate of creditable
coverage requirements of HIPAA, and the corresponding provisions of the AT&T
Health and Welfare Plans with respect to AT&T Employees and their covered
dependents who incur a COBRA qualifying event or loss of coverage under the AT&T
Health and Welfare Plans at any time after the Close of the Distribution Date.
Effective Immediately after the Distribution Date, AT&T Broadband or another
Broadband Entity shall be responsible for administering compliance with the
health care continuation requirements of COBRA, the certificate of creditable
coverage requirements of HIPAA, and the corresponding provisions of the
Broadband Health and Welfare Plans with respect to Broadband Employees and
Broadband Transferees and their covered dependents who incur a COBRA qualifying
event or loss of coverage under the Broadband Health and Welfare Plans at any
time after the Close of the Distribution Date. AT&T shall assume or retain all
Liabilities and obligations under COBRA with respect to any individual whose
employment with an AT&T Entity terminated prior to the Close of the Distribution
Date and whose last employment with an AT&T Entity was not with AT&T Broadband
or another Broadband Entity. AT&T Broadband or another applicable Broadband
Entity shall assume or retain all Liabilities and obligations under COBRA with
respect to any individual whose employment with an AT&T Entity terminated prior
to the Close of the Distribution Date and whose last employment with an AT&T
Entity was with AT&T Broadband or another Broadband Entity.
4.8 Long-Term Care; Direct Pay Arrangements. As of the Close of the
Distribution Date, AT&T shall retain all Liabilities relating to the AT&T
Long-Term Care Plan for Management Employees and the AT&T Long-Term Care Plan
for Occupational Employees and shall take, or cause its third-party vendor or
insurer to take, all such actions as are or may be reasonably necessary to
enable any Broadband Transferee or Broadband Employee (if any) and his or her
eligible family members covered under either the AT&T Long-Term Care Plan for
Management Employees or the AT&T Long-Term Care Plan for Occupational Employees
as of the Distribution Date to continue such coverage on a direct pay basis
after the Close of the Distribution Date.
4.9 Severance Benefits. AT&T Broadband shall provide to Broadband
Transferees who become eligible to receive severance benefits under the
Broadband Severance Plan after the Close of the Distribution Date but prior to
the first anniversary of the Distribution Date, severance payments in an amount
not less than the greater of (i) the severance payment amounts that such
Broadband Transferees would have received under the AT&T Force Management
Program as in effect on the Distribution Date as set forth in Schedule 4.9 or
(ii) the severance
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payment amounts otherwise payable to Broadband Transferees under the Broadband
Severance Plan as in effect on the date of termination of employment. The
determination of severance payments under either the AT&T Force Management
Program or the Broadband Severance Plan shall take into account service with
AT&T prior to the Close of the Distribution Date and service with AT&T Broadband
or a Broadband Entity after the Close of the Distribution Date.
ARTICLE V
EXECUTIVE BENEFITS AND OTHER BENEFITS
5.1 Individual Agreements - Assumption of Liabilities and Consents.
(a) AT&T has been providing compensation and benefits, subject to
reimbursement from a Broadband Entity, to Broadband Transferees during the
period those Broadband Transferees have been providing services on a
substantially full-time basis to a Broadband Entity. AT&T shall continue to
provide such compensation and benefits through the Distribution Date (or, in the
case of a Broadband Transferee on Approved Leave of Absence, until he or she
becomes a Broadband Employee in accordance with Section 2.3), and be entitled to
reimbursement from AT&T Broadband or another Broadband Entity, in accordance
with established practice and Section 6.1.
(b) Certain Individual Agreements provide for the payment of certain
compensation and benefits in the event of the termination of employment of the
individual covered by the terms of such Individual Agreements. Effective as of
the Close of the Distribution Date (or, in the case of Broadband Transferees on
Approved Leave of Absence, the date on which such Broadband Transferee becomes
employed by AT&T Broadband or another Broadband Entity pursuant to Section 2.3),
AT&T Broadband shall assume or retain, as applicable, all Liabilities with
respect to those Individual Agreements and other matters set forth on Schedule
5.1(b) to this Agreement in consideration of and with respect to services
rendered to AT&T Broadband or another Broadband Entity after the Distribution
Date, including without limitation, payment of any compensation or benefit which
is not yet due and payable pursuant to the terms of such Individual Agreement. A
Broadband Transferee who is a party to an Individual Agreement, the obligations
of which are assumed or retained by AT&T Broadband pursuant to the provisions of
this Section 5.1(b), shall not be deemed to have terminated employment in
connection with or in anticipation of the consummation of the transactions
contemplated by the Separation and Distribution Agreement for purposes of
administering benefits under such Individual Agreement, the payment or vesting
of which is conditioned upon termination of employment.
(c) Effective as of the Close of the Distribution Date, AT&T shall
retain all Liabilities with respect to any Individual Agreements between AT&T
and any AT&T Employee (except for Individual Agreements assumed by AT&T
Broadband pursuant to Section 5.1(b)) in consideration of and with respect to
services rendered prior to, on or after the Distribution Date, including payment
of any compensation or benefits which is not yet due and payable pursuant to the
terms of any such Individual Agreement.
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5.2 AT&T Short Term Incentive Plan and AT&T Bonus Plan Award.
(a) The AT&T Broadband Board of Directors shall be responsible for
determining all awards that would otherwise be payable under the AT&T Short Term
Incentive Plan to Broadband Transferees who are Senior Managers, and AT&T
Broadband shall be responsible for determining all awards that would otherwise
be payable pursuant to the AT&T Bonus Plan Award to Broadband Transferees who
are not Senior Managers, for the Distribution Year. AT&T Broadband shall also
determine for Broadband Transferees (other than for Senior Managers) (i) the
extent to which established performance criteria (as interpreted by AT&T
Broadband, in its sole discretion, after taking into account the effects of the
Separation Transactions) have been met, and (ii) the payment level for each
Broadband Transferee. AT&T Broadband shall assume all Liabilities with respect
to any such awards payable to Broadband Transferees for the Distribution Year
and thereafter. Notwithstanding the foregoing, AT&T Broadband shall honor the
terms of Individual Agreements as set forth in Section 5.1(b).
(b) The AT&T Board of Directors shall be responsible for determining
all awards that would otherwise be payable under the AT&T Short Term Incentive
Plan to AT&T Employees, (excluding Broadband Transferees) who are Senior
Managers, and AT&T shall be responsible for determining all awards that would
otherwise be payable pursuant to the AT&T Bonus Plan Award to AT&T Employees
(excluding Broadband Transferees) who are not Senior Managers, for the
Distribution Year. AT&T shall also determine for AT&T Employees (excluding
Broadband Transferees) who are not Senior Managers (i) the extent to which
established performance criteria (as interpreted by AT&T, in its sole
discretion, after taking into account the effects of the Separation
Transactions) have been met, and (ii) the payment level for each such AT&T
Employee (excluding Broadband Transferees). AT&T shall retain all Liabilities
with respect to any such awards payable to AT&T Employees for the Distribution
Year and thereafter. Notwithstanding the foregoing, AT&T shall honor the terms
of Individual Agreements as set forth in Section 5.1(c).
5.3 AT&T Long Term Incentive Plans. AT&T and AT&T Broadband shall use their
reasonable best efforts to take all actions necessary or appropriate so that
each outstanding award granted under any AT&T Long Term Incentive Plan held by
any individual shall be adjusted as set forth in this Article V.
(a) AT&T Options Held by Current Employees.
(i) As determined by the Committee (as that term is defined in the
AT&T 1997 Long Term Incentive Program) pursuant to its authority under any of
the AT&T Long Term Incentive Plans, each AT&T Option outstanding under any AT&T
Long Term Incentive Plan as of the Distribution Date that is held by an AT&T
Employee (other than a Broadband Transferee) shall be subject to the same terms
and conditions after the Distribution as the terms and conditions applicable to
such AT&T Option immediately prior to the Distribution; provided, however, that
from and after the Close of the Distribution (i) the number of shares of AT&T
Common Stock subject to such AT&T Option, rounded to the nearest whole share,
shall be equal to the product of (x) the number of shares of AT&T Common Stock
subject to such AT&T Option immediately prior to the Distribution Date and (y)
the quotient obtained by
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dividing the AT&T Closing Stock Value by the AT&T Opening Stock Value and (ii)
the exercise price of such AT&T Option, rounded to the nearest whole cent, shall
be equal to the product of (x) the exercise price of such AT&T Option
immediately prior to the Distribution and (y) the quotient obtained by dividing
the AT&T Opening Stock Value by the AT&T Closing Stock Value.
(ii) As determined by the Committee (as that term is defined in
the AT&T 1997 Long Term Incentive Program) pursuant to its authority under any
of the AT&T Long Term Incentive Plans, each AT&T Option outstanding under any
AT&T Long Term Incentive Plan as of the Distribution Date that is held by a
Broadband Employee or a Broadband Transferee shall be converted into a Broadband
Option issued pursuant to the Broadband Adjustment Plan, subject to the same
terms and conditions after the Distribution as the terms and conditions
applicable to such AT&T Option immediately prior to the Distribution; provided,
however, that from and after the Close of the Distribution (i) the number of
shares of AT&T Broadband Common Stock subject to such Broadband Option, rounded
to the nearest whole share, shall be equal to the product of (x) the number of
shares of AT&T Common Stock subject to the AT&T Option immediately prior to the
Distribution Date and (y) the quotient obtained by dividing the AT&T Closing
Stock Value by the Broadband Common Stock Value, (ii) the exercise price of such
Broadband Option, rounded to the nearest whole cent, shall be equal to the
product of (x) the exercise price of the AT&T Option immediately prior to the
Distribution and (y) the quotient obtained by dividing the Broadband Common
Stock Value by the AT&T Closing Stock Value, and (iii) each Broadband Option
shall be subject to the change in control provisions of the Broadband Adjustment
Plan.
(b) AT&T Options Held by Former Employees.
(i) As determined by the Committee (as that term is defined in the
AT&T 1997 Long Term Incentive Program) pursuant to its authority under any of
the AT&T Long Term Incentive Plans, each AT&T Option outstanding under any AT&T
Long Term Incentive Plan as of the Distribution Date that is held by any
individual who is not an AT&T Employee, a Broadband Employee or a Broadband
Transferee (a "Former Employee") shall be converted, immediately prior to the
Distribution, into an adjusted AT&T Option under the applicable AT&T Long Term
Incentive Plan and a Broadband Option under the Broadband Adjustment Plan,
whereby the combined Intrinsic Value of such adjusted AT&T Option and Broadband
Option held by such individual immediately after the Distribution equals the
Intrinsic Value of such AT&T Option immediately before the Distribution.
(ii) The adjustment set forth in Section 5.3(b)(i) shall be made
as follows:
(A) Exercise Price of Adjusted AT&T Option. The exercise
price per share of AT&T Common Stock subject to an adjusted AT&T Option shall
equal the product obtained by multiplying (a) times (b) where "(a)" equals the
exercise price per share of the AT&T Option with respect to which the adjustment
is being made immediately before the Distribution, and "(b)" equals the quotient
obtained by dividing the AT&T Opening Stock Value by the AT&T Closing Stock
Value.
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(B) Exercise Price of Broadband Option. The exercise price
per share of AT&T Broadband Stock subject to a Broadband Option issued pursuant
to Section 5.3(b)(i) shall equal the product obtained by multiplying (c) times
(d) where "(c)" equals the exercise price per share of the AT&T Option with
respect to which the Broadband Option is granted immediately before the
Distribution and "(d)" equals the quotient obtained by dividing the Broadband
Common Stock Value by the AT&T Closing Stock Value.
(C) Number of Shares Subject to the Broadband Options. The
number of shares of AT&T Broadband Common Stock subject to a Broadband Option
granted pursuant to Section 5.3(b)(i) shall equal the quotient obtained by
dividing (a) by (b) where "(a)" equals the amount determined by multiplying the
Intrinsic Value of the AT&T Option with respect to which the adjustment is being
made, based on the AT&T Closing Stock Value and the exercise price per share of
such AT&T Option, by a fraction, the numerator of which is the Broadband Stock
Value and the denominator of which is the AT&T Closing Stock Value, and "(b)"
equals the Intrinsic Value of an Option to purchase one share of AT&T Broadband
Common Stock based on the Broadband Common Stock Value and the exercise price of
such Broadband Option as calculated in (B) above.
(D) Number of Shares Subject to Adjusted AT&T Options. The
number of shares of AT&T Common Stock subject to an adjusted AT&T Option shall
equal the quotient obtained by dividing (a) by (b) where "(a)" equals (i) the
Intrinsic Value of the AT&T Option with respect to which the adjustment is being
made, based on the AT&T Closing Stock Value and the exercise price per share of
such AT&T Option, minus (ii) the Intrinsic Value of the Broadband Option granted
pursuant to Section 5.3(b)(ii)(C) with respect to the AT&T Option for which the
adjustment is being made, based upon the Broadband Stock Value, and "(b)" equals
the Intrinsic Value of an Option to purchase one share of AT&T Common Stock
based on the AT&T Opening Stock Value and the exercise price of such adjusted
AT&T Option as set forth above.
(c) Miscellaneous Option Terms.
(i) AT&T and AT&T Broadband acknowledge that, in the context of
the Separation Transactions, the adjustment to AT&T Options as set forth in this
Section 5.3 will be implemented, in part, by the issuance of Broadband Options
under the terms of the Broadband Adjustment Plan. Accordingly, it is intended
that, to the extent of the issuance of such Broadband Options in connection with
the adjustments set forth in this Section 5.3, the Broadband Adjustment Plan
shall be considered a successor to the AT&T Long Term Incentive Plan and to have
assumed the obligation of the AT&T Long Term Incentive Plan to make the
adjustment of AT&T Options as set forth in this Section 5.3.
(ii) After the Distribution Date, adjusted AT&T Options,
regardless of by whom held, shall be settled by AT&T pursuant to the terms of
the AT&T Long Term Incentive Plan, and Broadband Options, regardless of by whom
held, shall be settled by AT&T Broadband pursuant to the terms of the Broadband
Adjustment Plan.
(iii) Except as provided pursuant to a separate agreement between
AT&T and Qwest Communications International, Inc. (the "Qwest Agreement"), AT&T
or a
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Communications Services Entity shall claim the benefit of federal, state, and
local tax deductions related to the exercise of all adjusted AT&T Options after
the Distribution Date and none of AT&T Broadband or any Broadband Entity shall
claim any such tax deductions. Except as otherwise provided pursuant to the
Qwest Agreement, after the Distribution Date, AT&T and the Communications
Services Entities shall be responsible for the proper payroll tax treatment and
the proper reporting to the appropriate governmental authorities of compensation
relating to all option exercises of AT&T Options.
(iv) Except with respect to Broadband Options granted pursuant to
this Section 5.3 with respect to options subject to the Qwest Agreement, AT&T
Broadband or a Broadband Entity shall claim the benefit of federal, state and
local tax deductions related to the exercise of Broadband Options after the
Distribution Date and neither AT&T nor any Communications Services Entity shall
claim any such tax deductions. Except with respect to Broadband Options granted
pursuant to this Section 5.3 with respect to options subject to the Qwest
Agreement, after the Distribution Date, AT&T Broadband and the Broadband
Entities shall be responsible for the proper payroll tax treatment and the
proper reporting to the appropriate governmental authorities of compensation
relating to all option exercises of Broadband Options.
(v) (A) With respect to any adjusted AT&T Option held by persons,
other than AT&T Employees, who as of the date of exercise are no longer employed
by an AT&T Entity, but whose last employment with an AT&T Entity was with a
Broadband Entity, and (B) with respect to any Broadband Option held by persons,
other than Broadband Employees, who as of the date of exercise are no longer
employed by an AT&T Entity, but whose last employment with an AT&T Entity was
not with a Broadband Entity (each, a "Crossover Option"), in each case ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, or such other entity as AT&T or AT&T Broadband may agree, shall
act as the recordkeeper for the Crossover Options; provided, however, that each
of AT&T and AT&T Broadband shall expeditiously select and agree upon a
recordkeeper so as to avoid any unreasonable expenses. If the exercise of
Crossover Options is made pursuant to a broker-assisted cashless exercise
through the recordkeeper in accordance with the regulations of the Federal
Reserve Board, then immediately after such exercise, the recordkeeper shall sell
the number of shares necessary to remit the following payments (which may be all
the shares): (i) to the issuer of the option, the exercise price; and (ii) to
the former employer of the option holder, the employee's share of income and
payroll taxes. The recordkeeper shall thereafter remit to the option holder (i)
the balance of the proceeds from the sale of all shares or (ii) the remaining
whole shares and cash for any fractional shares, as applicable.
(vi) AT&T and AT&T Broadband agree to act (or to take such action)
with respect to such federal, state, or local tax deductions, and with respect
to fulfilling the payroll tax and reporting obligations on compensation,
consistent with (iii) through (v) above, as are reasonably necessary or
appropriate to achieve, maintain and/or preserve such tax results.
(vii) If (a) as a result of a determination (as defined in Section
1313 of the Code) or (b) in the opinion of nationally recognized tax counsel to
AT&T or AT&T Broadband, which opinion and tax counsel are reasonably acceptable
to the other party hereto, as a result of final or pending Treasury Regulations,
Internal Revenue Service announcement or
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otherwise, in each case, there is a substantial likelihood that the tax
deductions related to the exercise of Options under this Agreement and/or the
payroll tax and reporting obligations related to the exercise of Options, will
be inconsistent with all or any part of Section 5.3(c)(iii) through (vi) above,
the parties shall negotiate in good faith to restructure the arrangements set
forth herein so that (I) if, pursuant to the determination or opinion, a party
gets a tax deduction it was not entitled to claim under the terms of this
Agreement, that party shall pay over to the party entitled to claim the
deduction under the terms of this Agreement, as if and for the tax year(s)
recognized through a reduction in taxes due and/or the receipt of a refund in an
amount equal to the lesser of (x) its tax benefit and (y) the benefit otherwise
available to the party entitled to such deduction under the terms of this
Agreement, as if and for the tax year(s) when such deduction would have resulted
in a reduction in taxes due and/or the receipt of a refund and (II) the
reporting and financial burden of the payroll taxes are, to the extent
practicable, as described above. Any such amounts shall be payable within 30
days of the filing of the return in which the benefit described in (x) or (y) of
the preceding sentence, whichever is later, is reflected. If the parties are
unable to reach an agreement on how to restructure the arrangements set forth
herein within 90 days of such determination or the receipt of the opinion of
counsel described in the first sentence of this subparagraph (vii) such
disagreement shall be resolved by a nationally recognized law firm or accounting
firm ("Independent Third Party"), selected in a manner similar to the procedure
set forth in Section 11.7(a) of the Tax Sharing Agreement, whose judgment shall
be conclusive and binding upon the parties. The cost of any Independent Third
Party shall be shared equally between the parties.
(d) Vesting and Exercisability of Options.
(i) Each adjusted AT&T Option issued to an AT&T Employee (other
than a Broadband Transferee) as part of the adjustment to AT&T Options pursuant
to this Section 5.3 shall, except as specifically provided herein, be subject to
the same terms and conditions set forth in the original AT&T Option with respect
to which the adjusted AT&T Option was issued.
(ii) Each Broadband Option issued to a Broadband Employee or
Broadband Transferee as part of the adjustment to AT&T Options pursuant to this
Section 5.3 shall, except as specifically provided herein, be subject to the
same terms and conditions set forth in the original AT&T Option with respect to
which the Broadband Option was received except that each unvested Broadband
Option shall be subject to the change in control provisions of the Broadband
Adjustment Plan.
(iii) Notwithstanding the foregoing, the adjusted AT&T Options and
Broadband Options shall not be exercisable during a period beginning on a date
prior to the Distribution Date determined by AT&T in its sole discretion, and
continuing until the AT&T Opening Stock Value and the Broadband Common Stock
Value are determined immediately after the Distribution, or such longer period
as AT&T or AT&T Broadband determines necessary to implement the provisions of
this Section 5.3.
(iv) Each Broadband Option and each AT&T Option issued to any
Former Employee as part of the adjustment to AT&T Options pursuant to this
Section 5.3 shall be subject to the same terms and conditions regarding term,
vesting and other provisions
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regarding exercise as set forth in the original AT&T option with respect to
which the adjusted AT&T Option was issued and the Broadband Option was received.
(e) Restricted Shares. As determined by the Committee (as that term is
defined in the AT&T 1997 Long Term Incentive Program) pursuant to its authority
under any of the AT&T Long Term Incentive Plans:
(i) Each AT&T Participant who is the holder of an AT&T Award
consisting of AT&T restricted shares that is outstanding as of the Distribution
Date shall receive, as of the Close of the Distribution Date:
(A) an award under the applicable AT&T Long Term Incentive
Plan for the number of stock units (valued with respect to AT&T Broadband Common
Stock), determined by multiplying the number of AT&T restricted shares held as
of the Distribution Date by the Distribution Ratio; and
(B) a number of adjusted AT&T restricted shares under the
applicable AT&T Long Term Incentive Plan determined by dividing (a) by (b) where
"(a)" equals the value of the AT&T restricted shares held as of the Distribution
Date, based on the AT&T Closing Stock Value, reduced by the value of the stock
units awarded pursuant to Section 5.3(e)(i)(A), based on the Broadband Common
Stock Value, and "(b)" equals the value of a single AT&T restricted share, based
on the AT&T Opening Stock Value.
(ii) Each Broadband Participant holding an AT&T Award consisting
of AT&T restricted shares outstanding as of the Distribution Date shall receive,
as of the Close of the Distribution Date:
(A) an award under the Broadband Adjustment Plan for a number
of AT&T Broadband restricted shares (valued with respect to AT&T Broadband
Common Stock) determined by multiplying the number of AT&T restricted shares
held as of the Distribution Date by the Distribution Ratio; and
(B) an award under the Broadband Adjustment Plan for a number
of AT&T restricted shares, determined by dividing (a) by (b) where "(a)" equals
the value of the AT&T restricted shares held as of the Distribution Date, based
on the AT&T Closing Stock Value, reduced by the value of the AT&T Broadband
restricted shares awarded pursuant to Section 5.3(e)(ii)(A), based on the
Broadband Common Stock Value, and "(b)" equals the value of a single AT&T stock
unit, based on the AT&T Opening Stock Value.
(iii) Each Broadband Participant shall continue to vest or satisfy
service requirements with respect to his or her Broadband Award of restricted
shares under the Broadband Adjustment Plan and shall continue to vest in his or
her adjusted AT&T restricted shares under the AT&T Long-Term Incentive Plan
during his or her employment with AT&T Broadband or another Broadband Entity and
shall continue to be subject to the same terms and conditions of the original
AT&T restricted share award, except: (A) employment with AT&T Broadband or
another Broadband Entity shall be treated as continued employment, (B) any term
of such award with respect to a change in control of AT&T shall be modified to
refer to a change in control of AT&T Broadband; and (C) with respect to
restricted shares granted pursuant to
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Section 5.3(e)(ii)(A) (the value of which is determined by reference to the
underlying value of AT&T Broadband Common Stock), dividend equivalents paid with
respect to any such award shall be payable after the Distribution Date with
reference to dividends on AT&T Broadband Common Stock, if any.
(iv) Each AT&T Participant shall continue to vest or satisfy
service requirements with respect to his or her award of AT&T Award of
restricted shares and stock units under the AT&T Long Term Incentive Plan in
accordance with the terms and conditions of the original AT&T restricted share
award with respect to which the AT&T Award of restricted shares and stock units
are issued, except: (A) each such award shall be settled by AT&T or a
Communications Services Entity in accordance with the terms of such award and
the applicable AT&T Long Term Incentive Plan; and (B) with respect to stock
units granted pursuant to Section 5.3(e)(i)(A) (the value of which is determined
by reference to the underlying value of AT&T Broadband Common Stock), dividend
equivalents paid with respect to any such award shall be payable after the
Distribution Date with reference to dividends on AT&T Broadband Common Stock, if
any.
(f) Restricted Stock Units. As determined by the Committee (as that
term is defined in the AT&T 1997 Long Term Incentive Program) pursuant to its
authority under any of the AT&T Long Term Incentive Plans:
(i) Each AT&T Participant who is the holder of an AT&T Award
consisting of AT&T restricted stock units that is outstanding as of the
Distribution Date shall receive, as of the Close of the Distribution Date:
(A) an award under the applicable AT&T Long Term Incentive
Plan for the number of stock units (valued with respect to AT&T Broadband Common
Stock), determined by multiplying the number of AT&T restricted stock units held
as of the Distribution Date by the Distribution Ratio; and
(B) a number of adjusted AT&T restricted stock units under
the applicable AT&T Long Term Incentive Plan determined by dividing (a) by (b)
where "(a)" equals the value of the AT&T restricted stock units held as of the
Distribution Date, based on the AT&T Closing Stock Value, reduced by the value
of the stock units awarded pursuant to Section 5.3(f)(i)(A), based on the
Broadband Common Stock Value, and "(b)" equals the value of a single AT&T
restricted stock unit, based on the AT&T Opening Stock Value.
(ii) Each Broadband Participant holding an AT&T Award consisting
of AT&T restricted stock units outstanding as of the Distribution Date shall
receive, as of the Close of the Distribution Date:
(A) an award under the Broadband Adjustment Plan for a number
of AT&T Broadband restricted stock units (valued with respect to AT&T Broadband
Common Stock) determined by multiplying the number of AT&T restricted stock
units held as of the Distribution Date by the Distribution Ratio; and
(B) an award under the Broadband Adjustment Plan for a number
of stock units (valued with respect to AT&T Common Stock), determined by
dividing
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(a) by (b) where "(a)" equals the value of the AT&T restricted stock units held
as of the Distribution Date, based on the AT&T Closing Stock Value, reduced by
the value of the AT&T Broadband restricted stock units awarded pursuant to
Section 5.3(f)(ii)(A), based on the Broadband Common Stock Value, and "(b)"
equals the value of a single AT&T stock unit, based on the AT&T Opening Stock
Value.
(iii) Each Broadband Participant shall continue to vest or satisfy
service requirements with respect to his or her Broadband Award of restricted
stock units and stock units under the Broadband Adjustment Plan in accordance
with the terms and conditions of the original AT&T restricted stock unit award
with respect to which the Broadband Award of restricted stock units and stock
units are issued, except: (A) any term of such award with respect to a change in
control of AT&T shall be modified to refer to a change in control of AT&T
Broadband; (B) with respect to restricted stock units granted pursuant to
Section 5.3(f)(ii)(A) (the value of which is determined by reference to the
underlying value of AT&T Broadband Common Stock), dividend equivalents paid with
respect to any such award shall be payable after the Distribution Date with
reference to dividends on AT&T Broadband Common Stock, if any; and (C) each such
award shall be settled by AT&T Broadband or another Broadband Entity in
accordance with the terms of such award and the Broadband Adjustment Plan.
(iv) Each AT&T Participant shall continue to vest or satisfy
service requirements with respect to his or her award of AT&T Award of
restricted stock units and stock units under the AT&T Long Term Incentive Plan
in accordance with the terms and conditions of the original AT&T restricted
stock unit award with respect to which the AT&T Award of restricted stock units
and stock units are issued, except: (A) each such award shall be settled by AT&T
or a Communications Services Entity in accordance with the terms of such award
and the applicable AT&T Long Term Incentive Plan; and (B) with respect to stock
units granted pursuant to Section 5.3(f)(i)(A) (the value of which is determined
by reference to the underlying value of AT&T Broadband Common Stock), dividend
equivalents paid with respect to any such award shall be payable after the
Distribution Date with reference to dividends on AT&T Broadband Common Stock, if
any
(g) Performance Shares. As determined by the Committee (as that term
is defined in the AT&T 1997 Long Term Incentive Program) pursuant to its
authority under any of the AT&T Long Term Incentive Plans:
(i) Each AT&T Participant who is the holder of an AT&T Award
consisting of AT&T performance shares for any open cycle that is outstanding as
of the Distribution Date shall receive, as of the Close of the Distribution
Date:
(A) an award under the applicable AT&T Long Term Incentive
Plan for the number of stock units (valued with respect to AT&T Broadband Common
Stock), determined by multiplying the number of AT&T performance shares held as
of the Distribution Date by the Distribution Ratio; and
(B) an adjusted award of AT&T performance shares under the
applicable AT&T Long Term Incentive Plan for a number of AT&T performance shares
(valued with respect to AT&T Common Stock) determined by dividing (a) by (b)
where "(a)" equals the
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value of the AT&T performance shares held as of the Distribution Date, based on
the AT&T Closing Stock Value, reduced by the value of the stock units awarded
pursuant to Section 5.3(g)(i)(A), based on the Broadband Common Stock Value, and
"(b)" equals the value of a single AT&T performance share, based on the AT&T
Opening Stock Value.
(ii) Each Broadband Participant holding an AT&T Award consisting
of AT&T performance shares for any open cycle that is outstanding as of the
Distribution Date shall receive, as of the Close of the Distribution Date:
(A) an award under the Broadband Adjustment Plan for a number
of AT&T Broadband performance shares (valued with respect to AT&T Broadband
Common Stock) determined by multiplying the number of AT&T performance shares
held as of the Distribution Date by the Distribution Ratio; and
(B) an award under the Broadband Adjustment Plan for a number
of stock units (valued with respect to AT&T Common Stock), determined by
dividing (a) by (b) where "(a)" equals the value of the AT&T performance shares
held as of the Distribution Date, based on the AT&T Closing Stock Value, reduced
by the value of the AT&T Broadband performance shares awarded pursuant to
Section 5.3(g)(ii)(A), based on the Broadband Common Stock Value, and "(b)"
equals the value of a single AT&T stock unit, based on the AT&T Opening Stock
Value.
(iii) Each Broadband Participant shall continue to vest or satisfy
service requirements with respect to his or her Broadband Award of adjusted
performance shares and stock units under the Broadband Adjustment Plan in
accordance with the terms and conditions of the original AT&T performance share
award with respect to which the adjusted performance shares and stock units are
issued, except: (A) any term of such award with respect to a change in control
of AT&T shall be modified to refer to a change in control of AT&T Broadband; (B)
the value and performance criteria of AT&T Broadband performance shares held by
a Broadband Participant will be based on the underlying value of a share of AT&T
Broadband Common Stock and performance measures as determined by the
Compensation and Employee Benefits Committee of the AT&T Broadband Board of
Directors (or its successor) from time to time; (C) each stock unit awarded
pursuant to Section 5.3(g)(ii)(B) shall be deemed earned at 100% of target,
valued by reference to the underlying value of a share of AT&T Common Stock; (D)
with respect to performance shares granted pursuant to Section 5.3(g)(ii)(A)
(the value of which is determined by reference to the underlying value of AT&T
Broadband Common Stock), dividend equivalents paid with respect to any such
award shall be payable after the Distribution Date with reference to dividends
on AT&T Broadband Common Stock, if any; and (E) each such award shall be settled
by AT&T Broadband or another Broadband Entity in accordance with the terms of
such award and the Broadband Adjustment Plan.
(iv) Each AT&T Participant shall continue to vest or satisfy
service requirements with respect to his or her award of adjusted performance
shares and stock units under the AT&T Long Term Incentive Plan in accordance
with the terms and conditions of the original AT&T performance share award with
respect to which the adjusted performance shares and stock units are issued,
except: (A) the value and performance criteria of AT&T performance shares held
by an AT&T Participant will be based on the underlying value of a share of AT&T
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Common Stock after the Distribution and performance measures as determined by
the Compensation and Employee Benefits Committee of the AT&T Board of Directors
(or its successor) from time to time; (B) each stock unit issued pursuant to
Section 5.3(g)(i)(A) shall be deemed earned at 100% of target, valued by
reference to the underlying value of a share of AT&T Broadband Common Stock; (C)
each such award shall be settled by AT&T or a Communications Services Entity in
accordance with the terms of such award and the applicable AT&T Long Term
Incentive Plan; and (D) with respect to stock units granted pursuant to Section
5.3(g)(i)(A) (the value of which is determined by reference to the underlying
value of AT&T Broadband Common Stock), dividend equivalents paid with respect to
any such award shall be payable after the Distribution Date with reference to
dividends on AT&T Broadband Common Stock, if any.
(h) Partial Interests in Shares or Stock Units. To the extent that any
adjustment in stock options, performance shares, stock units, restricted stock,
or restricted stock units results in any fractional interest in shares (or stock
units), normal rounding principles shall be applied such that adjustments
resulting in a fractional interest of .5 or greater will be rounded up to the
nearest whole share or unit and adjustments resulting in a fractional interest
of less than .5 will be rounded down to the nearest whole share or unit. No
fractional interests in shares or stock units shall be payable in cash or
otherwise.
(i) Incentive Stock Options; Foreign Grants/Awards. AT&T and AT&T
Broadband shall use their best efforts to preserve the value and tax treatment
accorded incentive stock options awarded under the AT&T Long Term Incentive
Plan, and to preserve the value and tax treatment accorded grants/awards
provided to non-U.S. employees under any domestic or foreign equity-based
incentive program sponsored by an AT&T Entity. The parties hereby delegate to
the AT&T Executive Vice President-Human Resources, for periods before the
Distribution Date, the authority to determine an appropriate methodology for
adjusting such grants or awards in a manner that is, to the extent possible,
consistent with the treatment of such awards and grants for U.S. employees.
(j) Individual Enforcement. Notwithstanding the provisions of Section
6.3 of this Agreement or any provision of any other Ancillary Agreement (as
defined in the Separation and Distribution Agreement) or the Merger Agreement,
any individual who, immediately prior to the Distribution is a holder of an AT&T
Option, a grant of AT&T restricted stock, restricted stock units, performance
shares or stock units, shall have the right in his or her individual capacity to
enforce the provisions of this Section 5.3, subject to the provisions of Section
5.5.
5.4 AT&T Employee Stock Purchase Plan. In accordance with the AT&T Employee
Stock Purchase Plan, AT&T shall cause (a) all amounts credited to the "Periodic
Deposit Account" of each Broadband Transferee and each Broadband Employee under
the AT&T Employee Stock Purchase Plan to be applied on the next exercise date
coincident with or next following the Distribution Date or, with respect to a
Broadband Transferee who is on an Approved Leave of Absence as of the
Distribution Date, the next exercise date after the date the employment of such
a Broadband Transferee is transferred to a Broadband Entity (the "Next Exercise
Date") toward the purchase of AT&T Common Stock, and then (b) stock certificates
with respect to whole shares of all AT&T Common Stock and any other stock held
by the
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recordkeeper, and cash with respect to fractional shares of AT&T Common Stock
and any other stock held by the recordkeeper, to be distributed as soon as
practicable after the Next Exercise Date, and then (c) the recordkeeping
accounts of all Broadband Transferees and Broadband Employees to be terminated
under the AT&T Stock Purchase Plan.
5.5 Savings Clause. Notwithstanding any other provision of Section 5.3, if
and to the extent either AT&T or AT&T Broadband shall determine in its
reasonable judgment, after consultation with its legal counsel or financial
accountants, as appropriate, that any action required to be taken by it under
Section 5.3 does not comply with applicable laws or does not properly satisfy
all relevant financial accounting pronouncements, then AT&T and AT&T Broadband
shall take such other action as they mutually agree is necessary or appropriate
in order to address such laws or such financial accounting concerns.
5.6 Registration Requirements. As soon as possible following the time as of
which the Form 10 or Form 8-A, as the case may be, is declared effective by the
Securities and Exchange Commission but in any case before the Distribution Date
and before the date of issuance or grant of any Broadband Option and/or shares
of AT&T Broadband Common Stock pursuant to this Article V, AT&T Broadband agrees
that it shall file a Form S-8 Registration Statement with respect to and cause
to be registered pursuant to the Securities Act of 1933, as amended, the shares
of AT&T Broadband Common Stock authorized for issuance under the Broadband
Adjustment Plan as required pursuant to such Act and any applicable rules or
regulations thereunder.
5.7 Non-Competition Guidelines.
(a) AT&T Non-Competition Guideline. Effective as of the Close of the
Distribution Date, AT&T shall cause the AT&T Non-Competition Guideline, to be
amended to provide that all AT&T Employees who terminate employment with AT&T or
a Communications Services Entity and become employed by AT&T Broadband or
another Broadband Entity at any time prior to the end of the sixth calendar
month that ends after the Close of the Distribution Date, shall not be subject
to the AT&T Non-Competition Guideline while such individual is employed by AT&T
Broadband, another Broadband Entity or Parent (as defined in the Merger
Agreement) or any of its Affiliates; provided, however, that nothing in this
Section 5.7(a) shall relieve any person from any obligation under the AT&T
Non-Competition Guideline with respect to engaging in conduct (e.g., recruitment
or solicitation of AT&T Employees or criticism of AT&T) that is "in conflict
with or adverse to the interests of" AT&T, as such terms are defined in the AT&T
Non-Competition Guideline. Notwithstanding the foregoing, no AT&T Employee who
becomes employed by AT&T Broadband or another Broadband Entity shall be deemed
to have violated the AT&T Non-Competition Guideline as a result of the
recruitment or solicitation of any AT&T Employee in accordance with the People
Movement Guidelines set forth in Exhibit 5.7(a) to this Agreement.
Notwithstanding the foregoing, an AT&T Employee, who terminates employment with
AT&T or a Communications Services Entity and becomes employed by AT&T Broadband
or another Broadband Entity at any time prior to the end of the sixth calendar
month that ends after the Close of the Distribution Date, shall be deemed to be
employed by a competitor of AT&T for purposes of determining compliance with the
provisions of the AT&T Non-Competition Guideline only if within the six month
period following such individual's termination of employment with AT&T or such
Communication Services Entity and
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before the end of the sixth calendar month that ends after the Close of the
Distribution Date, such individual becomes employed by a company that is an
active and significant competitor of AT&T excluding Parent or any of its
Affiliates. For purposes of this paragraph, during the six month period
following the Close of the Distribution Date, "active and significant
competitor" means a company in competition with AT&T in a line of business which
represents more than five percent (5%) of AT&T's consolidated gross revenues
(excluding AT&T Broadband's revenues) for its most recently completed fiscal
year. After the end of the six month period following the Close of the
Distribution Date, whether an employer is a competitor of AT&T will be
determined pursuant to AT&T's current usual and customary practice in
administering the AT&T Non-Competition Guideline.
(b) Broadband Non-Competition Guideline. In the event that AT&T
Broadband shall adopt or maintain a non-competition guideline effective for
periods after the Distribution Date, such guideline shall expressly provide that
no employee of AT&T Broadband or other Broadband Entity who terminates
employment with AT&T Broadband or another Broadband Entity and becomes employed
by AT&T or a Communications Services Entity at any time prior to the end of the
sixth calendar month that ends after the Close of the Distribution Date, shall
be treated as being employed by a competitor of AT&T Broadband or another
Broadband Entity for purposes of determining compliance with the non-competition
provisions of such AT&T Broadband non-competition guideline while such
individual remains employed by AT&T or a Communications Services Entity;
provided, however, that nothing in this Section 5.7(b) shall relieve any person
from any obligation under such Broadband non-competition guideline with respect
to engaging in conduct (e.g., recruitment or solicitation of employees or
criticism of AT&T Broadband) that is "in conflict with or adverse to the
interests of" AT&T Broadband or any Broadband Entity, as such terms are defined
in such guideline. Notwithstanding the foregoing, no Broadband Employee who
becomes employed by AT&T or a Communications Services Entity shall be deemed to
have violated such guideline as a result of the recruitment or solicitation of
any employee of AT&T Broadband or another Broadband Entity to the extent that
the hiring of any employee of AT&T Broadband or another Broadband Entity
conforms to procedures set forth in the People Movement Guidelines attached to
this Agreement as Exhibit 5.7(b). Notwithstanding the foregoing, a Broadband
Employee who terminates employment with AT&T Broadband or another Broadband
Entity and becomes employed by AT&T or a Communications Services Entity at any
time prior to the end of the sixth calendar month that ends after the Close of
the Distribution Date shall be deemed to be employed by a competitor of AT&T
Broadband for purposes of determining compliance with the provisions of the
Broadband non-competition guideline only if within the six month period
following such individual's termination of employment with AT&T Broadband or
another Broadband Entity and before the end of the sixth calendar month that
ends after the Close of the Distribution Date, such Broadband Employee becomes
employed by a company excluding AT&T and the Communications Services Entities
that is an active and significant competitor of AT&T Broadband. For purposes of
this paragraph, during the six month period following the Close of the
Distribution Date, "active and significant competitor" means a company in
competition with AT&T Broadband in a line of business which represents more than
five percent (5%) of the AT&T Broadband consolidated gross revenues for its most
recently completed fiscal year (excluding AT&T's revenues). At the conclusion of
such six calendar month period, AT&T Broadband may deem employment, other than
continuing employment with AT&T or a
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Communications Services Entity, to be a violation of such AT&T Broadband
non-competition guideline.
(c) Confidentiality and Proprietary Information. No provision of the
Separation and Distribution Agreement or this Agreement shall be deemed to
release any individual for any violation of the Broadband non-competition
guideline or such AT&T Non-Competition Guideline pertaining to confidential or
proprietary information or any agreement or policy pertaining to confidential or
proprietary information of AT&T Broadband or any of its Affiliates or of AT&T or
any of its Affiliates, respectively, or otherwise relieve any individual of his
or her obligations under such guideline or any such agreements or policies.
(d) Deferral Plans and Individual Deferral Agreements. AT&T shall
retain all Liabilities relating to (i) AT&T Deferral Plan Participants under the
AT&T Deferral Plan, (ii) Non-Employee Directors under the AT&T Directors'
Deferral Plan, and (iii) all Individual Deferral Agreements except as listed on
Schedule 5.1(b), and AT&T shall make payments under such plans and Individual
Deferral Agreements at the times and in the manner designated in the applicable
schedules on file with AT&T as of the Distribution Date and in accordance with
the terms of such plans and Individual Deferral Agreements, including the
Special Distribution Option approved by the AT&T Board. For purposes of this
Section 5.8, no AT&T Deferral Plan Participants, other than Broadband
Transferees, and/or parties to Individual Deferral Agreements, shall be deemed
to have terminated employment for purposes of administration of the AT&T
Deferral Plan or any Individual Deferral Agreements as a result of the
consummation of the transactions contemplated by the Separation and Distribution
Agreement. AT&T Broadband and the Broadband Entities shall assume or retain, as
applicable, all Liabilities with respect to any Individual Deferral Agreement
with respect to Broadband Transferees as listed on Schedule 5.1(b).
Notwithstanding anything in this Section 5.7(d) to the contrary, if any
Broadband Transferee has elected to defer compensation under the AT&T Deferral
Plan prior to the Distribution Date, and as of the Distribution Date such
compensation is not yet otherwise payable pursuant to the terms of any such
election, then AT&T Broadband, at the time such Broadband Transferee becomes an
employee of AT&T Broadband or any other Broadband Entity, shall honor such
deferral election as if it had been properly and timely made under the
applicable AT&T Broadband deferred compensation plan, and shall allow such
Broadband Transferee to immediately commence deferral of such compensation in
accordance with the terms of the original deferral election.
5.8 AT&T Non-Qualified Pension Plans and Arrangements. AT&T shall retain
all Liabilities relating to the AT&T Non-Qualified Pension Plan, the AT&T Excess
Benefit and Compensation Plan, the AT&T Mid-Career Pension Plan, the AT&T Senior
Management Long Term Disability and Survivor Protection Plan, and any individual
non-qualified pension arrangements other than those listed in Schedule 5.10
hereto and all Liabilities relating to AT&T Employees or Broadband Transferees
under the AT&T Non-Qualified Pension Plan, the AT&T Excess Benefit and
Compensation Plan, the AT&T Mid-Career Pension Plan, the AT&T Senior Management
Long Term Disability and Survivor Protection Plan, and any individual
non-qualified pension arrangements other than those listed in Schedule 5.10
hereto and all Liabilities with respect to any participant under such plans and
arrangements as of the Close of the Distribution Date, as well as all assets
held under any trust or other arrangement established as maintained for the
funding of such Liabilities, and shall make benefit payments to AT&T
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Employees and Broadband Transferees at such times and in such manner as is
provided for under the terms of the respective non-qualified pension plans and
arrangements.
5.9 Broadband Non-Qualified Pension Plans and Arrangements. For periods
after the Distribution Date, AT&T Broadband shall retain all Liabilities
relating to the AT&T Broadband Non-Qualified Pension Plan, the MediaOne Group
Mid-Career Plan, the MediaOne Group Non-Qualified Pension & Mid-Career Pension
Trust, the AT&T Broadband Deferred Compensation Plan, the MediaOne Group
Deferred Compensation Trust and any individual non-qualified pension
arrangements identified in Schedule 5.10 hereto and all Liabilities relating to
Broadband Employees under such plans and arrangements as of the Close of the
Distribution Date, and shall make benefit payments to Broadband Employees at
such times and in such manner as is provided for under the terms of the
respective non-qualified pension plans and arrangements.
5.10 Life Insurance Programs.
(a) AT&T Senior Management Universal Life Insurance Program. As of the
Close of the Distribution Date, AT&T shall retain all Liabilities relating to
the AT&T Senior Management Universal Life Insurance Program. The life insurance
amount under the SMULIP shall be frozen (the "frozen SMULIP coverage") as of the
Close of the Distribution Date for any Broadband Transferee who is a SMULIP
participant as of the Close of the Distribution Date and who either (i) is then
eligible to participate in the AT&T Post-Retirement Welfare Benefits Plan or
(ii) may be eligible to participate in the AT&T Post-Retirement Welfare Benefits
Plan pursuant to the provisions of Section 4.6. AT&T shall allow such Broadband
Transferee to continue to participate in the SMULIP until the Broadband
Transferee's attainment of his or her "normal termination date" under the terms
of the SMULIP as such terms exist on the date of this Agreement. During the
Broadband Transferee's participation in the SMULIP after the Distribution Date,
AT&T shall pay the premiums determined to be due under the applicable life
insurance policy (and any tax adjustment payments, determined in accordance with
the terms of the SMULIP as they exist on the date of this Agreement) to provide
the frozen SMULIP coverage amount. The participation of each other Broadband
Transferee who participates in the SMULIP shall terminate as of the Close of the
Distribution Date, the life insurance policy covering the life of such Broadband
Transferee under the SMULIP may be allowed to lapse, surrendered for its cash
surrender value, or continued with premium payments being made from the
Broadband Transferee's (or his or her assignee's) personal assets and, after the
Close of the Distribution Date, none of AT&T, AT&T Broadband, the Broadband
Entities and the Communications Services Entities shall have any further
obligation with respect thereto.
(b) AT&T Executive Basic Life Insurance Program. As of the Close of
the Distribution Date, AT&T shall retain all Liabilities relating to the AT&T
Executive Basic Life Insurance Program. The life insurance amount under the
EBLIP shall be frozen (the "frozen EBLIP coverage") as of the Close of the
Distribution Date for any Broadband Transferee who is an EBLIP participant as of
the Close of the Distribution Date and who either (i) is then eligible to
participate in the AT&T Post-Retirement Welfare Benefits Plan; or (ii) may be
eligible to participate in the AT&T Post-Retirement Welfare Benefits Plan
pursuant to the provisions of Section 4.6. AT&T shall allow such Broadband
Transferee to continue to participate in the EBLIP until Broadband Transferee's
attainment of his or her "normal termination date" under
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the terms of the EBLIP as such terms exist on the date of this Agreement. During
the Broadband Transferee's period of continued participation in the EBLIP, AT&T
shall pay the premiums determined to be due under the applicable life insurance
policy to provide the frozen EBLIP coverage. Notwithstanding any provision of
this Section 5.11(b) to the contrary, after any Broadband Transferee who
continues to participate in the EBLIP attains age 66, the participant's frozen
EBLIP coverage shall be reduced according to the benefit schedule of the EBLIP
for participants age 66 and older as such schedule exists on the date of this
Agreement. The participation of all other Broadband Transferees who participate
in the EBLIP shall terminate as of the Close of the Distribution Date, and AT&T
shall transfer ownership of the life insurance policy covering the Broadband
Transferee ("EBLIP Policy") (after withdrawing the total cash surrender value
from the life insurance policy) to the Broadband Transferee (or his or her
assignee). Following transfer of the EBLIP Policy, AT&T, AT&T Broadband, the
Broadband Entities and the Communications Services Entities, as the case may be,
shall have no further obligation with respect to the EBLIP Policy and the
Broadband Transferee (or his or her assignee) may allow the EBLIP Policy to
lapse or continue the coverage under the EBLIP Policy with premium payments
being made from the Broadband Transferee's (or his or her assignee's) personal
assets.
(c) AT&T Estate Enhancement Program. As of the Close of the
Distribution Date, AT&T shall retain all Liabilities relating to the AT&T Estate
Enhancement Program.
(d) AT&T Supplemental Variable Universal Life Insurance Program. As of
the Close of the Distribution Date, AT&T shall retain all Liabilities relating
to the AT&T Supplemental Variable Universal Life Insurance Program. The
participation of all Broadband Transferees in the SVULIP shall terminate as of
the Close of the Distribution Date. Affected Broadband Transferees may, in their
sole discretion, continue, on a direct-pay basis, part or all of the coverage
previously provided to them under the SVULIP.
5.11 Financial Counseling.
(a) As of the Close of the Distribution Date, AT&T shall retain all
Liabilities relating to the AT&T Senior Management Financial Counseling Program
or the AT&T Executive Financial Counseling Program and all AT&T agreements with
vendors for the provision of financial counseling services. Following the
Distribution Date, AT&T shall provide financial counseling program benefits
(including preparation of income tax returns for the Distribution Year) for one
year following the Distribution Date for those Broadband Transferees who
immediately before the Close of the Distribution Date were (i) receiving
financial counseling program benefits under either the AT&T Senior Management
Financial Counseling Program or the AT&T Executive Financial Counseling Program,
and (ii) then eligible to participate in the AT&T Post-Retirement Welfare
Benefits Plans or who would be eligible to so participate pursuant to Section
4.6. To the extent the provision of any such benefit by AT&T is taxable income
to the Broadband Transferee, AT&T shall make a tax adjustment payment to such
Broadband Transferee in accordance with AT&T tax "gross-up" policies for
similarly situated retiring employees at the AT&T Executive level. AT&T
financial counseling benefits will terminate for all other Broadband Transferees
as of the Close of the Distribution Date.
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(b) Except as provided in Section 5.11(a), AT&T shall have no
responsibility for providing financial counseling services to any Broadband
Transferee.
5.12 Toll Discount Program. As of the Close of the Distribution Date, AT&T
shall retain all Liabilities relating to the AT&T Toll Discount Program. Any
Broadband Employee or Broadband Transferee who is eligible to participate in the
AT&T Post-Retirement Welfare Benefits Plan as of the Close of the Distribution
Date shall be entitled to continue to receive toll reimbursements in accordance
with the terms of the applicable assumed AT&T Toll Discount Program. AT&T shall
discontinue making toll reimbursements to each other Broadband Employee and
Broadband Transferee under the AT&T Toll Discount Program effective as of the
later of (a) the Close of the Distribution Date (or such sooner date when AT&T
terminates the AT&T Toll Discount Program) or (b) the date on which the
Broadband Employee or Broadband Transferee would no longer be in an eligible
class of employees under the applicable AT&T Toll Discount Program.
5.13 Relocation Plan. AT&T Broadband shall be responsible for all
Liabilities with respect to the relocation expenses of any Broadband Transferee
related to their employment by Broadband or a Broadband Entity. AT&T shall be
responsible for all Liabilities with respect to the relocation expenses
authorized by AT&T for any employees who, before the Close of the Distribution
Date, leave the employment of AT&T Broadband or a Broadband Entity to become
employees of AT&T or a Communications Services Entity.
5.14 Senior Manager Car Allowance. As of the Close of the Distribution
Date, AT&T shall retain all Liabilities relating to the Senior Manager Ground
Transportation Program. AT&T shall discontinue making car allowance payments to
each Broadband Transferee under the Senior Manager Ground Transportation Program
effective as of the later of (a) the Close of the Distribution Date (or such
sooner date when AT&T terminates the Senior Manager Ground Transportation
Program) or (b) the date on which the Broadband Transferee would no longer be in
an eligible class of employees under that program.
5.15 Taxable Fringe Benefits. As of the Close of the Distribution Date,
AT&T shall retain all Liabilities with respect to the AT&T Taxable Fringe
Benefit Program. AT&T shall discontinue providing benefits to each Broadband
Transferee under the AT&T Taxable Fringe Benefit Program effective as of the
later of (a) the Close of the Distribution Date (or such sooner date when AT&T
terminates the AT&T Taxable Fringe Benefit Program) and (b) the date on which
the Broadband Transferees would no longer be in an eligible class of employees
under that program.
5.16 Separation Plans. Certain plans and programs of AT&T, including but
not limited to the AT&T Senior Officer Separation Plan (the "SOSP"), the AT&T
Senior Management Separation Plan (the "SMSP") and the AT&T Special Executive
Separation Plan (the "SESP"), provide for the payment of certain compensation
and benefits in the event of the termination of employment of the individual
covered by the terms of such plans. As of the Close of the Distribution Date,
AT&T shall retain all Liabilities relating to the SOSP, the SMSP and the SESP
and all Liabilities relating to, arising out of, or resulting from claims
incurred by or on behalf of any individual under such plans. A Broadband
Transferee shall not be deemed to have terminated employment for purposes of
determining eligibility for benefits under the SOSP, the
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SMSP, the SESP or other similar plans and programs in connection with or in
anticipation of the consummation of the transactions contemplated by the
Separation and Distribution Agreement, and shall cease to be covered thereby as
of the Close of the Distribution Date.
ARTICLE VI
GENERAL AND ADMINISTRATIVE
6.1 Payment of Liabilities. AT&T Broadband shall pay directly, or reimburse
AT&T in accordance with established practice for, all compensation payable to
Broadband Transferees for services rendered to AT&T Broadband or another
Broadband Entity while in the employ of AT&T or an Communication Services Entity
on or before the Distribution Date (or, in the case of a Broadband Transferee on
Approved Leave of Absence, until he or she becomes a Broadband Employee in
accordance with Section 2.3) to the extent not already reimbursed. To the extent
the amount of such Liabilities is not yet determinable because the status of
individuals as Broadband Transferees is not yet determined, except as otherwise
specified herein or in another Ancillary Agreement with respect to particular
Liabilities, AT&T Broadband shall make such payments or reimbursements based
upon AT&T's reasonable estimates of the amounts thereof, and when such status is
determined, AT&T Broadband shall make additional reimbursements or payments, or
AT&T shall reimburse AT&T Broadband, to the extent necessary to reflect the
actual amount of such Liabilities.
6.2 Sharing of Participant Information. AT&T and AT&T Broadband shall
share, and AT&T shall cause each Communications Services Entity to share, and
AT&T Broadband shall cause each other Broadband 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 Broadband Benefit Plans and the AT&T Benefit Plans. AT&T and AT&T
Broadband and their respective authorized agents shall, subject to applicable
laws on confidentiality, be given reasonable and timely access to, and may make
copies of, all information relating to the subjects of this Agreement in the
custody of the other party, to the extent necessary for such administration.
Until the Close of the Distribution Date, all participant information shall be
provided in the manner and medium applicable to Participating Companies in
Benefit Plans of AT&T generally, and thereafter until December 31, 2002, all
participant information shall be provided in a manner and medium as may be
mutually agreed to by AT&T and AT&T Broadband. AT&T Broadband will notify AT&T
of the termination following the Distribution Date of any Broadband Employee or
Broadband Transferee who is eligible to participate in the AT&T Post-Retirement
Welfare Benefits Plans.
6.3 Best Efforts/Cooperation. Each of the parties hereto will use its
commercially reasonable best efforts to promptly take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Each of the parties hereto shall cooperate fully
on any issue relating to the transactions contemplated by this Agreement for
which the other party seeks a determination letter or private letter ruling from
the Internal Revenue Service, an advisory opinion from the Department of Labor
or any other filing, consent or approval with respect to or by a governmental
agency.
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6.4 Non-Termination of Employment; No Third-Party Beneficiaries. Without
limiting the generality of Section 11.5 of the Separation and Distribution
Agreement, which is hereby incorporated herein by reference, except as expressly
provided in Section 5.3(j) of this Agreement, 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 AT&T Employee, Broadband Employee or Broadband Transferee or
other future, present, or former employee of any AT&T Entity under any Broadband
Benefit Plan or AT&T Benefit Plan or otherwise. Without limiting the generality
of the foregoing: (i) except as expressly provided in this Agreement or with
respect to the AT&T Pension Plans and the AT&T Post-Retirement Welfare Benefits
Plan, the occurrence of the Close of the Distribution Date shall not cause any
employee to be deemed to have incurred a termination of employment which
entitles such individual to the commencement of benefits under any of the AT&T
Benefit Plans or any of the Individual Agreements or severance under the AT&T
Force Management Plan or the Broadband Severance Plan; (ii) except as expressly
provided in this Agreement, nothing in this Agreement shall preclude AT&T or any
Communications Services Entity, at any time after the Close of the Distribution
Date, from amending, merging, modifying, terminating, eliminating, reducing, or
otherwise altering in any respect any AT&T Benefit Plan, any benefit under any
Benefit Plan or any trust, insurance policy or funding vehicle related to any
AT&T Benefit Plan; and (iii) except as expressly provided in this Agreement,
nothing in this Agreement shall preclude AT&T Broadband or any other Broadband
Entity, at any time after the Close of the Distribution Date, from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise altering in
any respect any Broadband Benefit Plan, any benefit under any Benefit Plan or
any trust, insurance policy or funding vehicle related to any Broadband Benefit
Plan.
6.5 Audit Rights With Respect to Information Provided.
(a) Each of AT&T and AT&T Broadband, and their duly authorized
representatives, shall have the right to conduct reasonable audits with respect
to all information provided to it by the other party. The party conducting the
audit (the "Auditing Party") may adopt reasonable procedures and guidelines for
conducting audits and the selection of audit representatives under this Section
6.4. 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.
(b) The Auditing Party's audit rights under this Section 6.4 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
to require the other party to request any benefit providers and third parties
with whom the party being audited has a relationship, or agents of such party,
to agree to such an audit 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
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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.
6.6 Fiduciary Matters. It is acknowledged that actions required to be taken
pursuant to this Agreement may be subject to fiduciary duties or standards of
conduct under ERISA or other applicable law, and no party shall be deemed to be
in violation of this Agreement if it fails to comply with any provisions hereof
based upon its good faith determination that to do so would violate such a
fiduciary duty or standard. Each party shall be responsible for taking such
actions as are deemed necessary and appropriate to comply with its own fiduciary
responsibilities and shall fully release and indemnify the other party for any
Liabilities caused by the failure to satisfy any such responsibility.
6.7 Collective Bargaining. To the extent any provision of this Agreement is
contrary to the provisions of any collective bargaining agreement to which AT&T
or any Affiliate of AT&T is a party, the terms of such collective bargaining
agreement with respect to the entities bound by such collective bargaining
agreement shall prevail. Should any provisions of this Agreement be deemed to
relate to a topic determined by an appropriate authority to be a mandatory
subject of collective bargaining, AT&T, AT&T Broadband, another Broadband Entity
or a Communications Services Entity may be obligated to bargain with the union
representing affected employees concerning those subjects.
6.8 Consent of Third Parties. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor or a union) and
such consent is withheld, the parties hereto 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, the parties hereto 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 any party to incur any non-routine or unreasonable expense
or Liability or to waive any right.
ARTICLE VII
MISCELLANEOUS
7.1 Effect If Distribution Does Not Occur. If the Separation and
Distribution Agreement is terminated prior to the Distribution Date, then all
actions and events that are, under this Agreement, to be taken or occur
effective immediately prior to or as of the Close of the Distribution Date, or
Immediately after the Distribution Date, or otherwise in connection with the
Separation Transactions shall not be taken or occur except to the extent
specifically agreed by AT&T and AT&T Broadband.
7.2 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
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contained herein, and no act of the parties, shall be deemed to create any
relationship between the parties other than the relationship set forth herein.
7.3 Affiliates. Each of AT&T and AT&T Broadband 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 another Broadband
Entity or a Communications Services Entity, respectively.
7.4 Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent by
facsimile or sent, postage prepaid, by registered, certified or express mail or
reputable overnight courier service and shall be deemed given when so delivered
by hand or facsimile, or, if mailed, three days after mailing (one Business Day
in the case of express mail or overnight courier service), as follows (or at
such other address for a party as shall be specified by notice given in
accordance with this Section 7.4):
(a) if to AT&T:
AT&T Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with copies to:
AT&T Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to AT&T Broadband:
AT&T Broadband, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
7.5 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 as if fully set forth herein (references in
this Section 7.5 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 VII (relating to Exchange of
Information and Confidentiality); Article VIII (relating to Further Assurances
and Additional Covenants); Article IX (relating to Termination); Article X
(relating to Dispute Resolution and Arbitration); and Article XI (relating to
Miscellaneous), excluding the notice provisions thereof.
7.6 Governing Law. To the extent not preempted by applicable federal law,
this Agreement shall be governed by and construed and interpreted in accordance
with the laws of the State of New York, irrespective of the choice of laws
principles of the State of New York, as to all matters, including matters of
validity, construction, effect, performance and remedies.
7.7 References. Except as provided in Section 7.5, all references to
Sections, Articles, Exhibits or Schedules contained herein mean Sections,
Articles, Exhibits or Schedules of or to this Agreement, as the case may be,
unless otherwise stated.
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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.
AT&T CORP.
By:
------------------------
Name:
Title:
AT&T BROADBAND CORP.
By:
------------------------
Name:
Title:
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