UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X| Filed by a Party other than the Registrant|_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (As Permitted
by Rule 14A-6(e)(2))
|_| Definitive Proxy Statement
| | Definitive Additional Materials
|X| Soliciting Material Pursuant to ss.240.14a-12
LUCENT TECHNOLOGIES INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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LUCENT TECHNOLOGIES [GRAPHIC OMITTED]
Bell Labs Innovations
PATRICIA F. RUSSO 600 Mountain Avenue
Chairman and Murray Hill, NJ 07974 USA
Chief Executive Officer
Phone 908 582 8519
Fax 908 582 5300
pfrusso@lucent.com
August 16, 2006
Mr. Ken Raschke
President
Lucent Retirees Organization
231 Pinetuck Lane
Winston-Salem, NC 27104
Dear Ken:
Attached are responses to the questions you submitted on July 28, 2006. We have
tried to provide answers within the legal constraints on us that exist as a
result of the proxy solicitation period related to the proposed merger. In
addition, as I mentioned in my last letter, we will need to file these responses
with the SEC. The filing will be available on our external website and through
the SEC website.
I hope this information will be useful to your members.
Sincerely,
/s/ Patricia F. Russo
1. MS. RUSSO IN HER LETTER OF APRIL 25 STATED IN PART ...."THE 34
BILLION IN PENSION ASSETS ARE HELD IN TRUST FUNDS EXCLUSIVELY FOR LUCENT
RETIREES". LUCENT'S CFO MADE A SIMILAR STATEMENT TO ANALYSTS WHICH WAS
REPORTED ON AN 8K FILED BY LUCENT. SINCE THE MANAGEMENT PENSION PLAN IS
UNDERFUNDED BY APPROXIMATELY $1 BILLION AND THE NON-MANAGEMENT PLAN
OVERFUNDED BY MORE THAN $2 BILLION, WOULDN'T SEPARATE DISCLOSURE OF BOTH
AMOUNTS BE A FAIRER DISCLOSURE?
In our 10-K, we report the aggregate benefit obligations and fair value of plan
assets, as well as the specific benefit obligations and fair value of assets for
both the U.S. management and U.S. occupational plans, all on a GAAP basis. This
information can be found on page F-61 of the 10-K for fiscal year 2006.
While our U.S. management plan is underfunded on a GAAP basis, on an ERISA
basis, we were not required to make contributions to either plan. We continue to
conduct required thorough measures of our funding levels at the end of each
fiscal year, to ensure we are in line with both GAAP and ERISA guidelines.
On our third fiscal quarter earnings call, Lucent CFO John Kritzmacher said
that, globally, based on preliminary estimates for certain asset classes, the
fair market value of defined benefit plan assets on a GAAP basis was
approximately $34 billion as of June 30, 2006.
In our most recent Form 5500 filing for calendar year 2004, which we filed with
the Department of Labor in October 2005, we stated that as of January 2003, the
represented pension plan was funded at approximately $13.4 billion (accrued
liability: $10.4 billion) and the management plan was funded at approximately
$14.6 billion (accrued liability: $14.4 billion).
2. DOES LUCENT HAVE ANY PLANS TO PROVIDE THE ADDITIONAL FUNDING FOR THE
MANAGEMENT PLAN BEFORE THE ACQUISITION IS COMPLETED?
We are required by ERISA to have independent actuaries review our qualified
pension plans each year to see if we need to contribute funds to them. We
haven't had to make contributions to these qualified plans since their inception
in 1996, and we currently do not expect to make contributions through fiscal
2007, based on current law. The pending merger transaction with Alcatel does not
impact our contribution requirements.
3. ALTHOUGH WE RECOGNIZE THAT THE DEATH BENEFIT WHICH LUCENT ELIMINATED IN
2003 IS CURRENTLY THE SUBJECT OF LITIGATION IN A CLASS ACTION SUIT,
WOULDN'T THIS BE AN APPROPRIATE TIME FOR LUCENT TO CONSIDER RESTORING
THE BENEFIT OR SEARCH FOR SOME WAY TO REACH AGREEMENT WITH THE "CLASS"?
As is our policy, we do not comment on matters in litigation.
4. THE LUCENT RETIREES ORGANIZATION HAS LONG FELT THAT THE FIDUCIARIES
APPOINTED BY LUCENT TO OVERSEE ITS PENSION AND OTHER PLANS ARE NOT TRULY
INDEPENDENT, ALTHOUGH WE RECOGNIZE THAT USING EMPLOYEES OF LUCENT AS
FIDUCIARIES IS NOT ILLEGAL. RATHER THAN SUGGESTING MAJOR CHANGES, WE
WOULD LIKE TO PROPOSE A SMALL MODIFICATION TO THE NUMBER OF FIDUCIARIES.
WE WOULD
PROPOSE TO ASK THAT YOU ADD TWO "EX-OFFICIO" INDIVIDUALS TO THE
FIDUCIARY BODY, ONE FROM MANAGEMENT RETIREES AND ONE FROM NON-MANAGEMENT
RETIREES. THESE INDIVIDUALS WOULD HAVE ACCESS TO ALL OF THE INFORMATION
AVAILABLE TO THE OTHER FIDUCIARIES AND PARTICIPATE IN DISCUSSIONS BUT
WOULD NOT HAVE A VOTE. WE BELIEVE THIS IS A REASONABLE COMPROMISE.
We appreciate your suggestion, but believe we have the appropriate expertise and
a best-in-class approach for managing and protecting the security of our pension
assets and therefore we believe the current structure is appropriate.
The fiduciaries who manage Lucent's pension assets are investment professionals
who have joined Lucent from a variety of highly regarded investment
institutions. They manage a well-diversified portfolio, which is structured to
meet our current and future pension obligations. And they are subject to a high
standard of responsibility to plan participants and beneficiaries.
The returns on our pension assets have generally outpaced the assumptions we
have made regarding the returns on those assets (most recently, Lucent has
assumed an 8.5 percent return). As reported in Lucent's 10-K filing, the actual
10-year rates of return on pension plan assets were 10.6%, 11%, and 9.9% during
fiscal 2005, 2004 and 2003, respectively.
In addition, the identity of the institutions selected, as well as the
investment strategy applied, have considerable competitive value, are highly
confidential, and need to be managed as such.
5. AT THE TIME OF THE ACQUISITION BY ALCATEL, WILL A TRUST BE ESTABLISHED
AND FULLY FUNDED TO PAY SUPPLEMENTAL PENSIONS (THOSE PAID CURRENTLY FROM
OPERATING FUNDS)?
We do not plan to establish this kind of trust. However, you may be aware of an
obligation to fund supplemental pension and deferred compensation that Lucent
inherited in 1996, at the time of our spin-off from AT&T, pursuant to the terms
of an irrevocable trust we were required to establish back then. Under the
original terms of the trust, our obligation to fund it was irrevocable upon the
announcement of a potential change in control such as the planned merger with
Alcatel. As stated in our definitive proxy statement for the special meeting,
the primary beneficiaries of this trust are our current and former executive
officers. Assets of the trust are subject to the claims of Lucent's creditors.
6. ARE THE ASSETS CURRENTLY IN THE LIFE INSURANCE TRUST SUFFICIENT TO PAY
ALL FUTURE CLAIMS FROM BENEFICIARIES OF THOSE CURRENTLY COVERED BY THIS
BENEFIT?
Our intention has been, and continues to be, to provide the life insurance
benefit to our eligible retirees, and to ensure there are adequate resources to
do so. There are no current plans to eliminate or modify this benefit.
As you'll remember, some of the assets of the life insurance trust were used to
help manage our retiree healthcare obligation. But the trust is funded in an
amount that will be sufficient to provide for a number of years of future
claims.
7. HEALTH CARE BENEFITS ARE IMPORTANT TO A LARGE NUMBER OF RETIREES,
ESPECIALLY THOSE UNDER 65. CAN YOU PROVIDE ANY ADDITIONAL INFORMATION AS
TO ANY CHANGES IN BENEFITS THAT MIGHT BE MADE THIS YEAR OR NEXT?
The details about 2007 benefits will be part of the materials you will receive
in October as part of the upcoming open enrollment period.
As has always been the challenge, we need to balance what we can afford and what
we can offer to our retirees. Simply put, we need to manage our costs. Lucent is
not alone in facing rising inflation and healthcare costs, and we're doing our
best to balance these costs with the need to continue investing in the business
to maintain our competitiveness.
8. WILL THE COMPANIES FUND A VEBA TRUST TO PAY FOR THE ADDED HEALTH CARE
COSTS CREATED BY THE TRANSFER OF ALCATEL U.S. EMPLOYEES TO THE NEW
LUCENT U.S. SUBSIDIARY?
Please note that Alcatel provides only access to healthcare for their retirees,
but does not provide a subsidy. Alcatel's retirees are responsible for all of
their healthcare costs.
Therefore, we do not anticipate any impact from Alcatel's U.S. employees or
retirees on these plans.
9. THE COMBINATION OF THE POTENTIAL FOR LOWER ASSET VALUES (LOWER MARKET
VALUES) AND THE POTENTIAL FOR INCREASED PENSION LIABILITIES SHOULD
ALCATEL U.S. EMPLOYEES PARTICIPATE IN THE LRIP, COMBINED WITH THE EFFECT
OF NEW ERISA FUNDING RULES MAY DRIVE THE LRIP FUNDING LEVEL DOWN FROM
ITS 108% LEVEL, AS LAST REPORTED. WILL ALCATEL AND LUCENT ASSURE FUNDING
OF THE PLAN BACK TO THE 108% LEVEL?
No decisions on U.S. employee benefit plans of the combined company have been
made. Once the pending merger transaction has closed, these decisions will be
made. It would be premature to speculate at this point.
10. LUCENT'S RECENT 10K STATED THAT "LEGISLATIVE ACTIONS COULD IMPACT U.S.
PENSION PLANS, IF ADOPTED. THE PROPOSED PENSION REFORM LEGISLATION COULD
SIGNIFICANTLY INCREASE THE FUNDING REQUIREMENTS FOR OUR U.S. PENSION
PLANS." IF THE LEGISLATION IS ADOPTED IN ITS PRESENT FORM WILL LUCENT
SHARE WITH THE LRO YOUR CURRENT ESTIMATE OF THE NEW ERISA FUNDING
LEVELS, SEPARATELY FOR THE MANAGEMENT AND THE NON-MANAGEMENT PENSION
PLANS?
The Pension Protection Act was passed by the House on July 28 and by the Senate
on August 3. This legislation marks the largest set of changes to the pension
and 401(k) plan area since ERISA was passed in 1974.
We are in the process of reviewing the final version approved by the Senate,
which was more than 900 pages. We are working to determine the implications of
the new legislation on our pension plans and on the section 420 provisions that
govern the use of excess pension assets to fund retiree healthcare.
Given the securities law restrictions on selective disclosure of information,
which are even more rigorous during our pending merger transaction, we will
continue to disclose
material information in our public filings, including the
definitive proxy statement, 10-K, 10-Q, 8-K, etc.
11. CAN YOU ASSURE MANAGEMENT RETIREES THAT THE NEW LUCENT WILL NOT USE
MANAGEMENT PENSION PLAN ASSETS TO PAY FOR CORPORATE RESTRUCTURING
INDUCEMENTS TO RETIRE, NAMELY LAYOFF ALLOWANCE AND/OR SEVERANCE PAY NOT
OFFERED TO OTHER VESTED PARTICIPANTS?
There are no current plans to use management pension assets to fund
restructuring actions.
12. IN YOUR APRIL 25, 2006 LETTER TO LUCENT ALUMNI, YOU SAID "THE WAY THE
DEAL IS STRUCTURED, LUCENT WILL BECOME A SUBSIDIARY OF A LARGER PARENT
COMPANY AFTER THE MERGER, AND WILL REMAIN THE PLAN SPONSOR OF THE LUCENT
PENSION PLANS." THIS U.S. SUBSIDIARY IS DESCRIBED MORE FULLY IN THE
ALCATEL F-4 AT PAGE 46 AND ELSEWHERE. WILL YOU PLEASE CONFIRM THAT THE
PARENT COMPANY, TO BE BASED IN FRANCE, REMAINS UNCONDITIONALLY
RESPONSIBLE TO MEET THE PENSION AND BENEFIT OBLIGATIONS OF THE
SUBSIDIARY, IF FOR ANY REASON THE SUBSIDIARY CANNOT MEET THOSE
OBLIGATIONS OR IS DISSOLVED? IF SO, CAN YOU PROVIDE THAT PART OF THE
MERGER AGREEMENT THAT REFERENCES THIS OBLIGATION OF THE PARENT COMPANY?
Post closing, Lucent will remain the sponsor of each plan and will continue to
meet the pension and benefit obligations, consistent with federal requirements.
From a legal and fiduciary perspective, the obligation to our pensioners remains
the same.
And as has always been the case, we will continue to evaluate retiree healthcare
and balance our retirees' needs with what we can afford and remain a viable
player in a very competitive market.
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SAFE HARBOR FOR FORWARD LOOKING STATEMENTS AND OTHER IMPORTANT INFORMATION
This document contains statements regarding the proposed transaction between
Lucent and Alcatel, the expected timetable for completing the transaction,
future financial and operating results, benefits and synergies of the proposed
transaction and other statements about Lucent and Alcatel's managements' future
expectations, beliefs, goals, plans or prospects that are based on current
expectations, estimates, forecasts and projections about Lucent and Alcatel and
the combined company, as well as Lucent's and Alcatel's and the combined
company's future performance and the industries in which Lucent and Alcatel
operate and the combined company will operate, in addition to managements'
assumptions. Words such as "expects," "anticipates," "targets," "goals,"
"projects," "intends," "plans," "believes," "seeks," "estimates," variations of
such words and similar expressions are intended to identify such forward-looking
statements which are not statements of historical facts. These forward-looking
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to assess. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements. These risks and uncertainties are based upon
a number of important factors including, among others: the ability to consummate
the proposed transaction; difficulties and delays in obtaining regulatory
approvals for the proposed transaction; difficulties and delays in achieving
synergies and cost savings; potential difficulties in meeting conditions set
forth in the definitive merger agreement entered into by Lucent and Alcatel;
fluctuations in the telecommunications market; the pricing, cost and other risks
inherent in long-term sales agreements; exposure to the credit risk of
customers; reliance on a limited number of contract manufacturers to supply
products we sell; the social, political and economic risks of our respective
global operations; the costs and risks associated with pension and
postretirement benefit obligations; the complexity of products sold; changes to
existing regulations or technical standards; existing and future litigation;
difficulties and costs in protecting intellectual property rights and exposure
to infringement claims by others; and compliance with environmental, health and
safety laws. For a more complete list and description of such risks and
uncertainties, refer to Lucent's annual report on Form 10-K for the year ended
September 30, 2005 and quarterly reports on Form 10-Q for the periods ended
December 31, 2005 and March 31, 2006 and Alcatel's annual report on Form 20-F
for the year ended December 31, 2005, as amended, as well as other filings by
Lucent and Alcatel with the U.S. Securities and Exchange Commission (the "SEC").
Except as required under the U.S. federal securities laws and the rules and
regulations of the SEC, Lucent and Alcatel disclaim any intention or obligation
to update any forward-looking statements after the distribution of this
document, whether as a result of new information, future events, developments,
changes in assumptions or otherwise.
WHERE TO FIND ADDITIONAL INFORMATION FILED WITH THE SEC
In connection with the proposed transaction between Lucent and Alcatel, Alcatel
has filed a registration statement on Form F-4 (File no. 33-133919) (the "Form
F-4"), which includes a definitive proxy statement/prospectus, dated August 4,
2006, relating to the Alcatel ordinary shares underlying the Alcatel American
Depositary Shares ("ADS") to be issued in the proposed transaction. Alcatel and
Lucent have also filed, and intend to continue to file, additional relevant
materials with the SEC, including a registration statement on Form F-6 (the
"Form F-6" and together with the Form F-4, the "Registration Statements") to
register the Alcatel ADSs to be issued in the proposed transaction. The
Registration Statements and the related proxy statement/prospectus contain
important information about Lucent, Alcatel, the proposed transaction and
related matters. Investors and security holders may obtain free copies of the
documents filed with the SEC by Lucent and Alcatel through the web site
maintained by the SEC at www.sec.gov. In addition, investors and security
holders may obtain free copies of materials filed with the SEC by Lucent and
Alcatel by contacting Investor Relations at www.lucent.com, by mail to 600
Mountain Avenue, Murray Hill, New Jersey 07974 or by telephone at 908-582-8500
and from Alcatel by contacting Investor Relations at www.alcatel.com, by mail to
54, rue La Boetie, 75008 Paris, France or by telephone at 33-1-40-76-10-10.