Document:

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                                                                    Exhibit 4.26

                      ASSOCIATES FIRST CAPITAL CORPORATION
                  (successor to Avco Financial Services, Inc.),

                                    CITICORP,
                                  AS GUARANTOR

                                       AND

                           THE CHASE MANHATTAN BANK,
                                   AS TRUSTEE

                             Supplemental Indenture

                          Dated as of December 1, 2000

                                  to Indenture

                           Dated as of August 1, 1982
<PAGE>   2
         THIS SUPPLEMENTAL INDENTURE dated as of December 1, 2000 (the
"Supplemental Indenture"), by and among Associates First Capital Corporation
(successor to Avco Financial Services, Inc.), a corporation organized and
existing under the laws of the State of Delaware ("AFCC"), Citicorp, a
corporation organized and existing under the laws of the State of Delaware, as
guarantor, and The Chase Manhattan Bank, a New York banking corporation, as
trustee (the "Trustee");

         WHEREAS, AFCC has heretofore executed and delivered to the Trustee an
indenture dated as of August 1, 1982 (the "Indenture"), providing for the
issuance by AFCC from time to time of its debt securities;

         WHEREAS, on the date hereof, AFCC will become a wholly owned subsidiary
of Citicorp;

         WHEREAS, AFCC currently has issued and outstanding $200 million of debt
securities (the "Notes") under the Indenture;

         WHEREAS, as long as AFCC remains a wholly owned subsidiary of Citicorp
and the Notes remain outstanding, Citicorp desires to fully and unconditionally
guarantee the payment obligations of AFCC with respect to the Notes; and

         WHEREAS, the execution of the Supplemental Indenture is authorized and
permitted by Section 11.01(e) of the Indenture and all conditions precedent
provided for in the Indenture relating to the execution of the Supplemental
Indenture have been complied with;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That in order
to effectuate the guarantee described in the preceding paragraph, Citicorp
agrees with the Trustee, for the equal and proportionate benefit of the
respective Holders from time to time of the Notes (the "Holders"), as follows:

                                    ARTICLE I
                                    Guarantee

                  Citicorp does hereby fully and unconditionally guarantee (the
"Guarantee") to the Holders the due and punctual payment of the principal of and
interest on all the Notes, according to their tenor, and the performance of
every covenant of the Indenture on the part of AFCC to be performed or observed
(the "Obligations") in accordance with the provisions of the Indenture, as
supplemented, as provided below:

         (a)      Notice of acceptance of the Guarantee and of default of
                  performance by AFCC is expressly waived, and payment under the
                  Guarantee shall be subject to no condition other than the
                  giving of a written request for payment in accordance with the
                  provisions of the Indenture, stating the fact of default of
                  performance, mailed to Citicorp at the following address:
                  Citicorp, Office of Corporate Finance, 153 East 53rd Street,
                  6th Floor, New York, New York 10043, Attention: Treasurer.

         (b)      The right of the Holders under any debt instrument of AFCC
                  that is outstanding as of the date hereof to claim payment
                  from Citicorp under the Citicorp Guarantee shall rank in
                  priority of payment with Citicorp's other obligations to
                  exactly the same extent that the Obligations of AFCC under
                  such debt instrument rank with AFCC's other obligations if
                  any.
<PAGE>   3
         (c)      The obligations of Citicorp under the Guarantee shall in no
                  way be impaired by: (1) any extension, amendment, modification
                  or renewal of the Obligations; (2) any waiver of any event of
                  default, extension of time or failure to enforce any of the
                  Obligations; or (3) any extension, moratorium or other relief
                  granted to AFCC pursuant to any applicable law or statute.

         (d)      The Guarantee shall be irrevocably valid until, and no claim
                  may be asserted under the Guarantee after, the earliest to
                  occur of: (1) the tenth business day following the maturity
                  date of all the Notes, either upon their respective stated
                  maturities, redemption or otherwise; (2) the date on which
                  AFCC ceases to be a wholly owned subsidiary of Citicorp, as
                  set forth in an Officer's Certificate of Citicorp delivered to
                  the Trustee; and (3) the date on which Citicorp ceases to be a
                  reporting company under the Securities Exchange Act of 1934,
                  as amended, as set forth in an Officer's Certificate of
                  Citicorp delivered to the Trustee.

         (e)      Citicorp shall be obligated to make payment under the
                  Guarantee only by payment to the Trustee, for the benefit of
                  the Holders, at the same address as AFCC is obligated to make
                  payment, provided that such address must be in the United
                  States.

         (f)      Citicorp shall have no obligation to make payment or take
                  action under the Guarantee during any period when payment by
                  AFCC, in accordance with the provisions of the Indenture,
                  would constitute a violation of any applicable laws (other
                  than bankruptcy, liquidation, reorganization or similar laws
                  affecting the enforcement of the rights of creditors
                  generally).

         (g)      Citicorp may assign its obligations under the Guarantee to any
                  of its affiliates, upon providing written notice of such
                  assignment to the Trustee, whereupon such assignee shall be
                  substituted in lieu of Citicorp with respect to the
                  performance of the Obligations theretofore to be performed by
                  Citicorp as described in this Article One.

                                   ARTICLE II

         Section 12.06 of the AFCC Standard Multiple-Series Indenture
Provisions, which are incorporated by reference in the Indenture, is deleted in
its entirety. The following will be inserted as a new Section 12.06 of the
Standard Multiple-Series Indenture Provisions:

Financial Statements and Statements as to Compliance.

         Beginning with the first November 30 which occurs no less than 60 days
following the first date of issuance of any series of Securities under this
Indenture,

         (a) Citicorp will file with the Trustee within four months after the
close of each fiscal year (which, until Citicorp shall otherwise notify the
Trustee, shall be deemed to be the twelve months ended December 31), beginning
with the first fiscal year ended December 31 during which Securities of any
series are issued under this Indenture, a consolidated income statement for, and
a consolidated statement of cash flows and a consolidated balance sheet as of
the end of, such fiscal year, of Citicorp and its Subsidiaries, all certified by
independent public or certified accountants selected by Citicorp (who may be the
accountants who

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<PAGE>   4
regularly audit the books of Citicorp and its Subsidiaries), accompanied by any
report or comments by said accountants made in connection with the certification
of such statements;

         (b) Citicorp and the Company will each file with the Trustee
concurrently with the filing of the foregoing financial statements, and not less
often than annually, a certificate of the principal executive officer, the
principal financial officer or the principal accounting officer of Citicorp or
the Company, as the case may be, stating whether or not, to the knowledge of the
signer, Citicorp or the Company, as the case may be, has complied with all
conditions and covenants on its part contained in this Indenture, and if the
signer has obtained knowledge of any default by Citicorp or the Company, as the
case may be, in the performance, observance or fulfillment of any such condition
or covenant, specifying each such default and the nature thereof (provided that,
for purposes of this subsection (b), compliance shall be determined without
regard to any grace period or requirement of notice provided pursuant to the
terms of this Indenture); and

         (c) Citicorp will file with the Trustee concurrently with the filing of
such financial statements, a written statement of the firm of public accountants
who shall have certified such financial statements, addressed to Citicorp to the
effect that in making the audit necessary to said certification, they have
obtained no knowledge of any default by the Company in the fulfillment of any of
the terms, covenants or conditions of the Securities of every series or this
Indenture, or if such accountants shall have obtained from such examination
knowledge of any such default, they shall disclose in such statement the default
or defaults and the nature thereof, it being understood that such accountants
shall not be liable, directly or indirectly, to anyone for failure to obtain
knowledge of any such default. Subject to the provisions of Section 8.01 hereof,
the Trustee shall have no duty or responsibility in respect of any statement
filed with it pursuant to this Subsection (c) except to exhibit the same to any
Holder upon request.

         All of the financial statements required by Section 12.06 to be filed
with the Trustee shall be open to inspection during business hours by Holders of
Securities.

                                   ARTICLE III
                            Miscellaneous Provisions

         SECTION III.1 Execution as Supplemental Indenture. This Supplemental
Indenture is executed and shall be construed as an indenture supplemental to the
Indenture and, as provided in the Indenture, this Supplemental Indenture forms a
part thereof. Except as herein expressly otherwise defined, the use of the terms
and expressions herein is in accordance with the definitions, uses and
constructions contained in the Indenture. Except as expressly amended hereby,
the Indenture shall continue in full force and effect in accordance with the
provisions thereof and the Indenture is in all respects hereby ratified and
confirmed.

         SECTION III.2 Responsibility for Recitals, etc. The recitals herein and
in the Notes (except in the Trustee's certificate of authentication) shall be
taken as the statements of AFCC, and the Trustee assumes no responsibility for
the correctness thereof. The Trustee makes no representations as to the validity
or sufficiency of this Supplemental Indenture or of the Notes. The Trustee makes
no undertakings or representations in respect of, and shall not be responsible
in any manner whatsoever for and in respect of, the validity or sufficiency of
this Supplemental Indenture or the proper authorization or the due execution
hereof by AFCC or for or in respect of the recitals and statements contained
herein, all of which recitals and statements are made solely by AFCC.

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<PAGE>   5
         SECTION III.3 Provisions Binding on AFCC's Successors. All of the
covenants, stipulations, premises and agreements made in this Supplemental
Indenture by AFCC and Citicorp shall bind their respective successors and
assigns whether so expressed or not.

         SECTION III.4 New York Contract. This Supplemental Indenture shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.

         SECTION III.5 Execution and Counterparts. This Supplemental Indenture
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.

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         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.

                                             ASSOCIATES FIRST
                                             CAPITAL CORPORATION
                                             (successor to Avco
                                             Financial Services,
                                             Inc.)

                                             By:  /s/ Frederic C. Liskow
                                                --------------------------------
                                                 Name:  Frederic C. Liskow
                                                 Title:    Vice President

ATTEST:

By:  /s/ Michael J. Forde

   ---------------------------------
     Name:  Michael J. Forde
     Title:    Vice President

                                             CITICORP, as Guarantor

                                             By:  /s/ Gregory C. Ehlke
                                                --------------------------------
                                                 Name:  Gregory C. Ehlke
                                                 Title:    Vice President

ATTEST:

By:   /s/ Kenneth S. Cohen

   ---------------------------------
     Name:   Kenneth S. Cohen
     Title:     Assistant Secretary

                                             THE CHASE MANHATTAN BANK,
                                              as Trustee

                                             By:   /s/  L. O'Brien
                                                --------------------------------
                                                 Name:  L. O'Brien
                                                 Title:    Vice President

ATTEST:

By:   /s/ Diane Darconte

   ---------------------------------
     Name:  Diane Darconte
     Title:    Trust Officer
<PAGE>   7
STATE OF Texas                 )
                               )  ss.:
COUNTY OF Dallas               )

         On this 30th day of November, 2000, before me personally came Frederic
C. Liskow, to me personally known, who, being by me duly sworn, did depose and
say that he resides in Dallas, Texas, that he is the Vice President of
Associates First Capital Corporation (successor to Avco Financial Services,
Inc.), one of the corporations described in and which executed the above
instrument, that he knows the corporate seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.

[NOTARIAL SEAL]

                                          /s/  Karen Robb
                                        --------------------------------------
                                        Notary Public

STATE OF New York              )
                               )  ss.:
COUNTY OF New York             )

         On this 1st day of December, 2000 before me personally came Gregory C.
Ehlke, to me personally known, who, being by me duly sworn, did depose and say
that he resides in Ossining, New York, that he is an Assistant Treasurer of
Citicorp, one of the corporations described in and which executed the above
instrument, that he knows the corporate seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.

[NOTARIAL SEAL]

                                           /s/ Craig Barrack
                                        ----------------------------------------
                                        Notary Public

STATE OF New York              )
                               )  ss.:
COUNTY OF New York             )

         On this 1st day of December, 2000, before me personally came L.
O'Brien, to me personally known, who, being by me duly sworn, did depose and say
that he resides in NY, NY, that he is a Vice President of The Chase Manhattan
Bank, one of the corporations described in and which executed the above
instrument, that he knows the corporate seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.

[NOTARIAL SEAL]
                                           /s/ Robert S. Peschler
                                        ----------------------------------------
                                        Notary Public<PAGE>   1
                                                                   EXHIBIT 10.20

                               AGERE SYSTEMS INC.
                        NON-EMPLOYEE DIRECTOR STOCK PLAN

     SECTION 1. PURPOSES. The Agere Systems Inc. Non-Employee Director Stock
Plan (the "Plan") is intended to promote the interests of Agere Systems Inc.
(the "Company") and to enable the Company to attract and retain qualified
persons to serve as directors, to enhance the equity interest of directors in
the Company, and to solidify the common interests of its directors and
stockholders in enhancing the value of the Company's common stock ("Shares").
The Plan seeks to encourage the highest level of director performance by
providing directors with a proprietary interest in the Company's performance and
progress. These purposes shall be achieved by the granting of options
("Options") to purchase Shares to members of the Board of Directors of the
Company (the "Board") who are not employees of the Company and who, prior to the
spin-off of the Company from Lucent Technologies Inc. ("Lucent"), are not
employees of Lucent ("Non-Employee Directors"), and making the Shares reserved
under the Plan available to satisfy distributions to Non-Employee Directors with
respect to cash compensation deferred by them into deferred share accounts under
the Agere Systems Inc. Deferred Compensation Plan (the "Agere Deferred
Compensation Plan") and earnings thereon. Under the Plan no Options will be
granted which are qualified as incentive stock options.

     SECTION 2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Corporate Governance and Compensation Committee (the "Committee") of the
Board. The Committee shall, subject to the provisions of the Plan, have the
power, in its absolute discretion, to make discretionary grants of Options to
Non-Employee Directors in addition to or in lieu of the automatic grants set
forth in Sections 5(c) and 5(d) hereof, to set the terms for any such
discretionary grants, to construe the Plan, to determine all questions
hereunder, to adopt and amend such rules and regulations for the administration
of the Plan as may be determined by the Committee, and to make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Decisions of the Committee shall
be final, conclusive and binding upon all persons, including the Company and all
Option holders (each an "Optionee").

     SECTION 3. SHARES SUBJECT TO THE PLAN. The total number of Shares which
shall be available under the Plan shall be 2 million in the aggregate, subject
to adjustment as provided in Section 7. Such Shares may be shares of Class A
common stock ("Class A Stock"), Class B common stock ("Class B Stock") or a
combination thereof. The Shares available under the Plan shall also be used to
satisfy distributions to Non-Employee Directors with respect to cash
compensation deferred into deferred share accounts, and earnings thereon,
pursuant to the Agere Deferred Compensation Plan. The Company shall at all times
reserve such number of Shares as will be sufficient to satisfy the requirements
of the Plan and outstanding Options and, with respect to the Share requirements
described above, the Agere Deferred Compensation Plan. Any Shares issued
hereunder may consist, in whole or in part, of authorized and unissued Shares,
treasury Shares, Shares purchased in the open market or otherwise or any
combination thereof, as the Board or the Treasurer of the Company may from time
to time determine. The underlying Shares with respect to the unexercised portion
of any expired, terminated or canceled Option

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              AGERE SYSTEMS INC. NON-EMPLOYEE DIRECTOR STOCK PLAN

shall again be available for use under the Plan.

     SECTION 4. ELIGIBILITY. Only Non-Employee Directors are eligible to
participate in the Plan and to receive Options and Shares upon the exercise of
Options. Shares issued hereunder in respect of balances under the Agere Deferred
Compensation Plan may be issued only in respect of amounts deferred by
Non-Employee Directors and earnings on such amounts.

     SECTION 5. TERMS OF OPTIONS. Unless otherwise determined by the Committee,
the following shall apply to Options granted under the Plan:

     (a)  Options shall be granted with respect to Class A Stock.

     (b)  The per share purchase price of the Shares covered by an Option
          granted pursuant to the Plan shall be 100% of the Fair Market Value of
          one Share of the type of Shares subject to the Option on the day the
          Option is granted. The Option price will be subject to adjustment in
          accordance with the provisions of Section 7 hereof. For purposes of
          the Plan, the "Fair Market Value" of a Share means the average of the
          highest and lowest reported sales prices, regular way, of Shares in
          transactions reported on the New York Stock Exchange on the date of
          determination of Fair Market Value, or if no sales of Shares are
          reported on the New York Stock Exchange for that date, the comparable
          average sales price for the last previous day for which sales were
          reported on the New York Stock Exchange, unless the date for which
          Fair Market Value is being determined is the date of the final
          prospectus relating to the initial public offering of the Company's
          Shares ("Initial Public Offering"), in which case Fair Market Value
          shall mean the "price to the public" (or equivalent) set forth on the
          cover page of the final prospectus relating to the Initial Public
          Offering .

     (c)  On the date of the final prospectus relating to the Initial Public
          Offering, each Non-Employee Director shall automatically be granted on
          such date, without further action by the Board or the Committee, an
          Option with respect to 50,000 Shares in the case of Non-Employee
          Directors other than the Chairman, and 90,000 Shares in the case of
          the Chairman. Thereafter, on the date that any Non-Employee Director
          first becomes elected as a Non-Employee Director, each such
          Non-Employee Director shall automatically be granted on such date,
          without further action by the Board or the Committee, an Option with
          respect to 50,000 Shares.

     (d)  Each year, on the date of the Company's Annual Meeting of
          Stockholders, each member of the Board who remains a Non-Employee
          Director subsequent to any election of directors occurring at the
          meeting shall be automatically granted on such date, without further
          action by the Board or the Committee, an Option to purchase 30,000
          Shares in the case of Non-Employee Directors other than the Chairman,
          and 55,000 Shares in the case of the Chairman.

     (e)  Options granted under subsection 5(c) above on account of the Initial
          Public Offering or on the date that a Non-Employee Director first
          becomes elected to the

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               AGERE SYSTEMS INC. NON-EMPLOYEE DIRECTOR STOCK PLAN

          Board shall be fully vested and exercisable on the first anniversary
          of the date of grant. Options granted under subsection 5(d) above on
          the date of the Company's Annual Meeting of Stockholders shall be
          fully vested and exercisable on the earlier of the first anniversary
          of the date of grant or the date of the Company's next Annual Meeting
          of Stockholders.

     (f)  The last day to exercise an Option shall be the day preceding the
          seventh anniversary of the date of grant, after which time the Option
          shall expire.

     (g)  Each Option shall be exercised in accordance with procedures
          established by the Company accompanied by payment in full of the
          purchase price for the Shares subject to the Option. Payment for such
          Shares may be made (as determined by the Committee at the time of
          exercise) (i) in cash, (ii) by check, acceptable to the Company,
          payable to the order of the Company in the amount of such purchase
          price, (iii) by delivery to the Company of Shares having an aggregate
          Fair Market Value equal to such purchase price, which shares shall
          have been held by the Optionee for at least six months, (iv) by
          irrevocable instructions to a broker to sell the Shares to be issued
          upon exercise of the Option and to deliver promptly to the Company the
          amount of sale proceeds necessary to pay such purchase price and any
          applicable withholding taxes, or (v) by any combination of the methods
          of payment described in (i) through (iv) above.

     (h)  An Optionee shall not have any of the rights of a stockholder with
          respect to the Shares subject to an Option unless and until such
          Shares are issued to the Optionee.

     (i)  Unless otherwise determined by the Committee prior to the time of
          transfer, no Option shall be transferable, except by will or the laws
          of descent and distribution, and any Option may be exercised during
          the lifetime of the Optionee only by him. No Option granted under the
          Plan shall be subject to execution, attachment or other process.

     SECTION 6. TERMINATION OF OPTION RIGHTS.

     (a) In the event an Optionee ceases to be a member of the Board for any
reason other than death, any then unexercised Options granted to such Optionee
may be exercised, to the extent vested and exercisable on the date of such
cessation for the remainder of the term of the Option. All unvested options on
the date of such cessation shall immediately expire such cessation date.

     (b) In the event that an Optionee ceases to be a member of the Board by
reason of his or her death, all unexercised and unvested Options granted to such
Optionee shall immediately become fully vested and exercisable and all
unexercised Options granted to such Optionee may be exercised by the Optionee's
personal representative, heir or legatee for the remainder of the term of the
Option.

                                      -3-
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               AGERE SYSTEMS INC. NON-EMPLOYEE DIRECTOR STOCK PLAN

     SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, reverse stock split, spin-off or similar
transaction or other change in corporate structure affecting the Shares, such
adjustments and other substitutions shall be made to the Plan and to Options as
the Committee in its sole discretion deems equitable or appropriate, including
without limitation such adjustments in the aggregate number, class and kind of
shares which may be delivered under the Plan, in the number, class, kind and
option or exercise price of shares subject to outstanding Options (including, if
the Committee deems appropriate, the substitution of similar options to purchase
the shares of, or other awards denominated in the shares of, another company) as
the Committee may determine to be appropriate in its sole discretion, provided
that the number of Shares or other securities subject to any Option shall always
be a whole number.

     SECTION 8. FURTHER CONDITIONS OF EXERCISE.

     (a) Unless prior to the exercise of an Option the offer and sale of the
Shares issuable upon such exercise are the subject of an effective registration
statement filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and a prospectus
meeting the requirements of Section 10(a)(3) of the Securities Act has been
distributed to the Optionees, the Company shall be under no obligation to honor
any such exercise unless the Committee determines otherwise in which case the
notice of exercise with respect to such Option shall be accompanied by a
representation or agreement of the Optionee to the Company to the effect that
such shares are being acquired for investment only and not with a view to the
resale or distribution thereof in violation of the Securities Act, or such other
documentation as may be required by the Company, unless, in the opinion of
counsel to the Company, such representation, agreement or documentation is not
necessary to comply with the Securities Act.

     (b) Anything in subsection (a) of this Section 8 to the contrary
notwithstanding, the Company shall not be obligated to issue or sell any Shares
until they have been listed on each securities exchange on which the Shares may
then be listed and until and unless, in the opinion of counsel to the Company,
the Company may issue such shares pursuant to a qualification or an effective
registration statement, or an exemption from registration, under such state and
federal laws, rules or regulations as such counsel may deem applicable. The
Company shall use reasonable efforts to effect such listing, qualification and
registration, as the case may be.

     SECTION 9. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable; provided, however, that the Board may not, without approval by a
majority of the Shares present in person or by proxy and entitled to vote
thereon increase the maximum number of Shares available for use under the Plan.
Termination or any modification or amendment of the Plan shall not, without
consent of an Optionee, negatively affect his rights under an Option previously
granted to him.

     SECTION 10. CHANGE IN CONTROL. In the event of a Change in Control, as
defined below, all outstanding Options issued under the Plan shall become
immediately vested and exercisable notwithstanding any vesting schedule
previously applicable to such Options. A

                                      -4-
<PAGE>   5

               AGERE SYSTEMS INC. NON-EMPLOYEE DIRECTOR STOCK PLAN

"Change in Control" of the Company shall be deemed to occur upon:

     (a)  An acquisition by any individual, entity or group (within the meaning
          of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as
          amended (the "Exchange Act")) (an "Entity") of beneficial ownership
          (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
          of 20% or more of either (A) the then outstanding shares of common
          stock of the Company (the "Outstanding Company Common Stock") or (B)
          the combined voting power of the then outstanding voting securities of
          the Company entitled to vote generally in the election of directors
          (the "Outstanding Company Voting Securities"); excluding, however, the
          following: (1) any acquisition directly from the Company, other than
          an acquisition by virtue of the exercise of a conversion privilege
          unless the security being so converted was itself acquired directly
          from the Company, (2) any acquisition by the Company, (3) any
          acquisition by any employee benefit plan (or related trust) sponsored
          or maintained by the Company or any corporation controlled by the
          Company, or (4) any acquisition by any corporation pursuant to a
          transaction which complies with clauses (A), (B) and (C) of subsection
          (c) of this Section 10; or

     (b)  A change in the composition of the Board during any two year period
          such that the individuals who, as of the beginning of such two year
          period, constitute the Board (such Board shall be hereinafter referred
          to as the "Incumbent Board") cease for any reason to constitute at
          least a majority of the Board; provided, however, that for purposes of
          this definition, any individual who becomes a member of the Board
          subsequent to the beginning of the two year period, whose election, or
          nomination for election by the Company's stockholders, was approved by
          a vote of at least a majority of those individuals who are members of
          the Board and who were also members of the Incumbent Board (or deemed
          to be such pursuant to this proviso) shall be considered as though
          such individual were a member of the Incumbent Board; and provided
          further, however, that any such individual whose initial assumption of
          office occurs as a result of or in connection with a solicitation
          subject to Rule 14a-12(c) of Regulation 14A promulgated under the
          Exchange Act or other actual or threatened solicitation of proxies or
          consents by or on behalf of an Entity other than the Board shall not
          be so considered as a member of the Incumbent Board; or

     (c)  The approval by the stockholders of the Company of a merger,
          reorganization or consolidation or sale or other disposition of all or
          substantially all of the assets of the Company (each, a "Corporate
          Transaction") or, if consummation of such Corporate Transaction is
          subject, at the time of such approval by stockholders, to the consent
          of any government or governmental agency, the obtaining of such
          consent (either explicitly or implicitly by consummation); excluding
          however, such a Corporate Transaction pursuant to which (A) all or
          substantially all of the individuals and entities who are the
          beneficial owners of the Outstanding Company Common Stock and
          Outstanding Company Voting Securities immediately prior to such
          Corporate Transaction will beneficially own, directly or indirectly,
          more than 50% of the outstanding shares of common stock, and the

                                      -5-
<PAGE>   6

               AGERE SYSTEMS INC. NON-EMPLOYEE DIRECTOR STOCK PLAN

          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors of the
          corporation resulting from such Corporate Transaction (including,
          without limitation, a corporation or other Person which as a result of
          such transaction owns the Company or all or substantially all of the
          Company's assets either directly or through one or more subsidiaries
          (a "Parent Company")) in substantially the same proportions as their
          ownership, immediately prior to such Corporate Transaction, of the
          Outstanding Company Common Stock and Outstanding Company Voting
          Securities, (B) no Entity (other than the Company, any employee
          benefit plan (or related trust) of the Company, such corporation
          resulting from such Corporate Transaction or, if reference was made to
          equity ownership of any Parent Company for purposes of determining
          whether clause (A) above is satisfied in connection with the
          applicable Corporate Transaction, such Parent Company) will
          beneficially own, directly or indirectly, 20% or more of,
          respectively, the outstanding shares of common stock of the
          corporation resulting from such Corporate Transaction or the combined
          voting power of the outstanding voting securities of such corporation
          entitled to vote generally in the election of directors unless such
          ownership resulted solely from ownership of securities of the Company
          prior to the Corporate Transaction, and (C) individuals who were
          members of the Incumbent Board will immediately after the consummation
          of the Corporate Transaction constitute at least a majority of the
          members of the board of directors of the corporation resulting from
          such Corporate Transaction (or, if reference was made to equity
          ownership of any Parent Company for purposes of determining whether
          clause (A) above is satisfied in connection with the applicable
          Corporate Transaction, of the Parent Company); or

     (d)  The approval by the stockholders of the Company of a complete
          liquidation or dissolution of the Company; or

     (e)  The occurrence of a "Change in Control" (as such term is defined in
          the Lucent Technologies Inc. 1999 Stock Compensation Plan for
          Non-Employee Directors) if it shall occur prior to the earlier of the
          date of a Change in Control of the Company as defined in this Section
          10 or the Distribution, as defined below.

     Notwithstanding the foregoing, the Distribution, as defined below, shall
not constitute a Change in Control. "Distribution" means the distribution of the
Shares held by Lucent to Lucent's stockholders.

     SECTION 11. EFFECTIVE DATE; TERM OF PLAN. The Plan shall become effective
as of March _, 2001 (the "Effective Date"), the date of the approval of the Plan
by the Board. The Plan shall terminate and no further Options shall be granted
hereunder after the date that is ten (10) years from the Effective Date (the
"Termination Date"); provided, however, that the terms of the Plan shall
continue in operation to the extent necessary with respect to Options
outstanding as of the Termination Date.

                                      -6-

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