Interim Services & Systems Replication Agreement

EXECUTION COPY


INTERIM SERVICES AND SYSTEMS REPLICATION AGREEMENT


BY AND BETWEEN


LUCENT TECHNOLOGIES INC.


AND


AGERE SYSTEMS INC.


DATED AS OF FEBRUARY 1, 2001


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TABLE OF CONTENTS


Page
---- ARTICLE I DEFINITIONS............................................................ 1


ARTICLE II SERVICES............................................................... 2
2.1 Services................................................................. 2
2.2 Term..................................................................... 4
2.3 Charges and Payment...................................................... 4
2.4 General Obligations; Standard of Care.................................... 6
2.5 Certain Limitations...................................................... 8
2.6 Confidentiality.......................................................... 9
2.7 Termination.............................................................. 10
2.8 Disclaimer of Warranties, Limitation of Liability and Indemnification.... 10


ARTICLE III MISCELLANEOUS......................................................... 12
3.1 Taxes.................................................................... 12
3.2 Law and Governmental Regulations......................................... 13
3.3 Relationship of Parties.................................................. 13
3.4 Incorporation of Provisions of the Separation and Distribution Agreement. 13
3.5 Expenses................................................................. 14
3.6 References............................................................... 14
3.7 Modification and Amendment............................................... 14
3.8 Inconsistency............................................................ 14


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INTERIM SERVICES AND SYSTEMS REPLICATION AGREEMENT


THIS INTERIM SERVICES AND SYSTEMS REPLICATION AGREEMENT (this "Agreement"), dated as of February 1, 2001 (the "Effective Date"), is by and between LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), and AGERE SYSTEMS INC., a Delaware corporation ("Agere").


R E C I T A L S


A. WHEREAS, the Board of Directors of Lucent has determined that it is in the best interests of Lucent and its stockholders to separate Lucent's existing businesses into two independent businesses;


B. WHEREAS, in order to effectuate the foregoing, Lucent and Agere have entered into a Separation and Distribution Agreement, dated the date hereof (the "Separation and Distribution Agreement"), which provides, among other things, subject to the terms and conditions thereof, for the Separation of the Lucent Assets and Lucent Liabilities, the IPO, the Distribution and the execution and delivery of certain other agreements in order to facilitate and provide for the foregoing;


C. WHEREAS, in order to ensure an orderly transition under the Separation and Distribution Agreement it will be necessary for each party to provide to the other the Services described herein for a transitional period; and


D. WHEREAS, capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I hereof or in the Separation and Distribution Agreement.


NOW, THEREFORE, in consideration of the premises and for other good and valid consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:


ARTICLE I
DEFINITIONS


For the purposes of this Agreement, in addition to the words and phrases that are defined throughout the body of this Agreement, the following words and phrases shall have the following meanings:


1.1 ADDITIONAL SERVICES shall have the meaning set forth in Section 2.1(c).


1.2 CORPORATE SUPPORT SERVICES shall mean the Services described in the Exhibits set forth in Section 2.1(a)(iii). 4


1.3 DATA PROCESSING SERVICES shall mean the Services described in the Exhibits set forth in Section 2.1(a)(i).


1.4 EXPIRATION DATE shall have the meaning set forth in Section 2.2.


1.5 IMPRACTICABLE (and words of similar import) shall have the meaning set forth in Section 2.5(b).


1.6 INITIAL SERVICES shall have the meaning set forth in Section 2.1(a).


1.7 PROVIDING COMPANY shall mean, with respect to any particular Service, the entity or entities identified on the applicable Exhibit as the party to provide such Service.


1.8 RECEIVING COMPANY shall mean, with respect to any particular Service, the entity or entities identified on the applicable Exhibit as the party to receive such Service.


1.9 REPRESENTATIVE of any party shall mean a managerial level employee appointed by such party to have the responsibilities and authority for any particular Service.


1.10 SERVICE shall have the meaning set forth in Section 2.1(c).


1.11 SYSTEM shall mean the software, hardware, data store or maintenance and support components or portions of such components of a set of information technology assets identified in an Exhibit hereto.


1.12 SYSTEM ERROR shall have the meaning set forth in Section 2.4(d)(iii).


1.13 SYSTEMS REPLICATION AND TRANSFER SERVICES shall mean the Services described in the Exhibits set forth in Section 2.1(a)(iv).


1.14 TELECOMMUNICATIONS SERVICES shall mean the Services described in the Exhibits set forth in Section 2.1(a)(ii).


ARTICLE II
SERVICES


2.1 SERVICES.


(a) INITIAL SERVICES. Except as otherwise provided herein, for the term determined pursuant to Section 2.2 hereof, Providing Company shall provide or cause to be provided to Receiving Company, in each case as identified in the Exhibits attached hereto or subsequently agreed to prior to the Closing Date in accordance with the procedures set forth herein, the following "Initial Services":


(i) DATA PROCESSING SERVICES described in Exhibit MEDP-001;


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(ii) TELECOMMUNICATIONS SERVICES described in Exhibits METC-001 through METC-037;


(iii) CORPORATE SUPPORT SERVICES described in Exhibits MECS-001 (CFO) through MECS-029 (CFO); MECS-101 (HR) through MECS-182 (HR); MECS-401 (Law) through MECS-408 (Law), MECS-411 (Law) and MECS-412 (Law); MECS-409 (PR), MECS-410 (PR) and MECS-428 (PR); MECS-424 (IP) and MECS-425 (IP); MECS-426 (GT) and MECS-427 (GT); MECS-501 (CIO) through MECS-528 (CIO); MECS-601 (EH&S) and MECS-602 (EH&S); MECS-701 (BL) through MECS-713 (BL); and MECS-801 (GEN) through MECS-804 (GEN), as more fully identified in the list preceding each series of Exhibits hereto; and


(iv) SYSTEMS REPLICATION AND TRANSFER SERVICES none of which have been identified as of the date hereof.


(b) FINAL EXHIBITS. The parties have made a good faith efforts as of the date hereof to identify each Initial Service and complete the content of each Exhibit pertaining to the Initial Services. To the extent an Exhibit has not been prepared for an Initial Service or an Exhibit is otherwise incomplete as of the date hereof, the parties shall use good faith efforts to prepare or complete Exhibits by the Closing Date. Any Services reflected on any such additional or amended Exhibit shall be deemed an "Initial Service" as if set forth on such Exhibit as of the date hereof.


(c) ADDITIONAL SERVICES.


(i) From time to time after the Closing Date, the parties may identify additional services that one party will provide to the other party in accordance with the terms of this Agreement (the "Additional Services" and, together with the Initial Services, the "Services"). The parties shall create an Exhibit for each Additional Service setting forth the identities of Providing Company and Receiving Company, a description of the Service, the time period during which the Service will be provided, the charge, if any, for the Service and any other terms applicable thereto and obtain the approval of each party's Representative. Except as set forth in Section 2.1(c)(ii), the parties may, but shall not be required to, agree on Additional Services during the term of this Agreement.


(ii) Except as set forth in the next sentence, Providing Company shall be obligated to perform, at charges established pursuant to Section 2.3(b), any Additional Service that: (A) was provided by Providing Company immediately prior to the Closing Date and that Receiving Company reasonably believes was inadvertently or unintentionally omitted from the list of Initial Services or (B) is essential to effectuate an orderly transition under the Separation and Distribution Agreement unless such performance would significantly disrupt Providing Company's operations or materially increase the scope of its responsibility under this Agreement. If Providing Company reasonably believes the performance of Additional Services required under (A) or (B) of the immediately preceding


-3- 6 sentence would significantly disrupt its operations or materially increase the scope of its responsibility under this Agreement, Providing Company and Receiving Company shall negotiate in good faith to establish terms under which Providing Company can provide such Additional Services, but Providing Company shall not be obligated to provide such Additional Services if, the following good faith negotiation, it is unable to reach agreement on such terms.


(d) SERVICES PERFORMED BY OTHERS. At its option, Providing Company may cause any Service it is required to provide hereunder to be provided by another member of its Group or by any other Person that is providing, or may from time to time provide, the same or similar services for Providing Company. Providing Company shall remain responsible, in accordance with the terms of this Agreement, for performance of any Service it causes to be so provided.


2.2 TERM.


The term of this Agreement shall commence on the Effective Date and shall remain in effect through September 30, 2001 ("Expiration Date"), unless earlier terminated in accordance with Section 2.7. This Agreement may be extended by the parties in writing either in whole or with respect to one or more of the Services, provided, however, that such extension shall only apply to the Service for which the Agreement was extended. The parties shall be deemed to have extended this Agreement with respect to a specific Service if the Exhibit for such Service specifies a completion date beyond the Expiration Date. The parties may agree on an earlier expiration date with respect to a specific Service by specifying such earlier date on the Exhibit for that Service. Services shall be provided up to and including the date set forth in the applicable Exhibit, subject to earlier termination as provided herein, with the understanding that Services scheduled to expire on September 30, 2001 shall expire on the later of September 30, 2001 and the Distribution Date unless the parties otherwise agree with respect to a specific Service.


2.3 CHARGES AND PAYMENT.


(a) CHARGES FOR INITIAL SERVICES. Receiving Company shall pay Providing Company the charges, if any, set forth on the Exhibit for each of the Services listed therein as adjusted, from time to time, in accordance with the process and procedures established under Section 2.3(f) hereof. Wherever practical, charges shall be based on the actual incurred costs, not budgeted or estimated costs. The parties also intend for charges to be easy to administer and justify and, therefore, they hereby acknowledge it may be counterproductive to try to recover every cost, charge or expense particularly those that are insignificant or de minimis. The parties shall use good faith efforts to discuss any situation in which the actual charge for a Service is reasonably expected to exceed the estimated charge, if any, set forth on an Exhibit for a particular Service, provided, however, that the incurrence of charges in excess of any such estimate shall not justify stopping the provision of, or payment for, Services under this Agreement.


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(i) In the case of Data Processing Services, Telecommunications Services or Common Support Services, except as otherwise set forth in an Exhibit for a specific Service, the parties intend for these charges to allow Providing Company to recover the fully allocated direct costs of providing such Services plus all out-of-pocket, third party costs, charges or expenses, but without any profit. Where the number of employees assigned by each party to jointly support an Initial Service is in proportion to the parties' historical or expected use of such Initial Service, and each party is responsible for the costs and expenses of its employees so assigned, recovery may be limited to other direct costs, such as data processing and software license fees.


(ii) In the case of Systems Replication and Transfer Services, except as otherwise set forth in an Exhibit for a specific Service, the parties intend that costs and expenses associated with isolating, separating or replicating a System be borne by the parties in proportion to their usage of the System prior to the Effective Date. The parties shall determine the appropriate proportion of each party for each Systems Replication and Transfer Service prior to the Closing Date. Where the number of employees assigned by each party to jointly replicate or transfer a System is in proportion to the parties' historical or expected use of such System, and each party is responsible for the costs of its em ...