UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
CURRENT REPORT
(AMENDMENT NO. 1)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 26, 1998
U S WEST, Inc.
(Formerly "USW-C, Inc.")
(Exact Name of Registrant as Specified in its Charter)
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Delaware 1-14087 84-0953188
(State or Other Commission File Number I.R.S. Employer
Jurisdiction of Incorporation Identification Number
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1801 California Street
Denver, Colorado 80202
(Address of principal executive offices) (zip code)
(303) 672-2700
(Registrant's telephone number, including area code)
USW-C, Inc.
(Former name or former address, if changed since last report)
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Item 5. Other Events
The Separation
On June 12, 1998, U S WEST, Inc. (which was renamed "MediaOne Group,
Inc." and is referred to herein as "Old U S WEST") separated into two
independent companies (the "Separation"), all in accordance with the terms of
the Separation Agreement (the "Separation Agreement"), dated as of June 5, 1998,
between Old U S WEST and the Registrant, USW-C, Inc. (which was renamed "U S
WEST, Inc." and is referred to herein as "New U S WEST").
Pursuant to the Separation Agreement, Old U S WEST (i) contributed the
businesses of the U S WEST Communications Group and the domestic directories
business of the U S WEST Media Group ("Dex") to new U S WEST and (ii) redeemed
each outstanding share of U S WEST Communications Group Common Stock for one
share of Common Stock of New U S WEST and distributed $850 million in value of
New U S WEST Common Stock (the "Dex Dividend") to holders of U S WEST Media
Group Common Stock in connection with the alignment of Dex with New U S WEST.
The number of shares of New U S WEST Common Stock distributed per share of U S
WEST Media Group Stock pursuant to the Dex Dividend was 0.02731, which was
calculated in accordance with Section 4.3(b) of the Separation Agreement. The
conformed execution copy of the Separation Agreement, the Employee Matters
Agreement, and the Tax Sharing Agreement are filed as Exhibits to this Current
Report on Form 8-K.
New U S WEST
New U S WEST is a diversified communications company providing services
principally to customers in a 14-state mountain and western region of the United
States, which is comprised of the states of Arizona, Colorado, Idaho, Iowa,
Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota,
Utah, Washington and Wyoming. New U S WEST has operations in four principal
areas: (i) telecommunications and related services; (ii) wireless services;
(iii) high-speed data and Internet services; and (iv) directory services. The
major component of new U S WEST is U S WEST Communications, Inc., which provides
communications service to more than 25 million residential and business
customers in its region.
As of the date hereof, new U S WEST has three classes of director. The
first class, which expires in 1999, consists of Allen R. Jacobson, George J.
Harad and Marilyn C. Nelson. The second class, which expires in 2000, consists
of Frank Popoff, Jerry O. Williams, Richard D. McCormick and Peter S. Hellman.
The third class, which expires in 2001, consists of Sol Trujillo, Craig R.
Barrett, Jerry J. Colangelo and Linda G. Alvarado. After initial classification,
each class will hold office for three years. Mr. McCormick was appointed
Chairman of the Board of Directors.
In connection with the Separation, New U S WEST entered into a Rights
Agreement (the "Rights Agreement") with State Street Bank and Trust Company, as
rights agent, as described more fully in the Old U S WEST Proxy Statement, dated
April 20, 1998, filed with the Securities and Exchange Commission on Schedule
14A. The calculated exercise price of a right under the Rights Agreement is
$229.7813.
This Form 8-K/A amends the Registrant's Form 8-K dated June 17, 1998
to include the date of the Separation Agreement as referenced in Exhibit 99.2
(the Employee Matters Agreement) as well as conformed signatures on Exhibits
99.1, 99.2 and 99.3.
Item 7. Financial Statements and Exhibits
(c) Exhibits
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Exhibit No. Description
Exhibit 3(ii) Bylaws of U S WEST, Inc. (formerly USW-C, Inc.), effective as of
June 12, 1998.
Exhibit 99.1 Separation Agreement between U S WEST, Inc. (renamed
"MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST,
Inc."), dated June 5, 1998.
Exhibit 99.2 Employee Matters Agreement between U S WEST, Inc. (renamed
"MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST,
Inc."), dated June 5, 1998.
Exhibit 99.3 Tax Sharing Agreement between U S WEST, Inc. (renamed
"MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST,
Inc."), dated June 5, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U S WEST, Inc. (formerly USW-C, Inc.)
By: /s/ Thomas O. McGimpsey
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THOMAS O. McGIMPSEY
Assistant Secretary
Dated: June 26, 1998
BYLAWS
OF
U S WEST, INC.
(formerly USW-C, INC.)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of U S
WEST, INC. (formerly USW-C, Inc.) (the "Corporation") in the State of Delaware
shall be at 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801 and its registered agent at such address shall be The Corporation Trust
Company, or such other office or agent as the Board of Directors of the
Corporation (the "Board") shall from time to time select.
SECTION 2. Other Offices. The Corporation may also have an
office or offices, and keep the books and records of the Corporation, except as
may otherwise be required by law, at such other place or places, either within
or without the State of Delaware, as the Board may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meeting. All meetings of the stockholders
of the Corporation shall be held at the office of the Corporation or at such
other places, within or without the State of Delaware, as may from time to time
be fixed by the Board.
SECTION 2. Annual Meetings. The annual meeting of the
stockholders for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on the first
Friday of June in each year, at an hour to be named in the notice of the
meeting, unless such day should fall on a legal holiday in the State of
Colorado, in which event the meeting shall be held on the next succeeding
business day that is not a legal holiday, or on such date and at such hour as
shall from time to time be fixed by the Board. Any previously scheduled annual
meeting of the stockholders may be postponed by action of the Board taken prior
to the time previously scheduled for such annual meeting of stockholders.
SECTION 3. Special Meetings. Except as otherwise required by
law or the Certificate of Incorporation of the Corporation (the "Certificate"),
special meetings of the stockholders for any purpose or purposes may be called
by the Chairman of the Board, the Chief Executive Officer or a majority of the
entire Board. Only such business as is specified in the notice of any special
meeting of the stockholders shall come before such meeting.
SECTION 4. Notice of Meetings. Except as otherwise provided by
law, written notice of each meeting of the stockholders, whether annual or
special, shall be given, either by personal delivery or by mail, not less than
10 nor more than 60 days before the date of the meeting to each stockholder of
record entitled to notice of the meeting. If mailed, such notice shall be deemed
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date and hour of the
meeting, and the purpose or purposes for which the meeting is called. Notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy without protesting, prior to
or at the commencement of the meeting, the lack of proper notice to such
stockholder, or who shall sign a written waiver of notice thereof, whether
before or after such meeting. Notice of adjournment of a meeting of stockholders
need not be given if the time and place to which it is adjourned are announced
at such meeting, unless the adjournment is for more than 30 days or, after
adjournment, a new record date is fixed for the adjourned meeting.
SECTION 5. Quorum. Except as otherwise provided by law or by
the Certificate, the holders of a majority of the votes entitled to be cast by
the stockholders entitled to vote generally, present in person or by proxy,
shall constitute a quorum for the transaction of business at any meeting of the
stockholders; provided, however, that in the case of any vote to be taken by
classes, the holders of a majority of the votes entitled to be cast by the
stockholders of a particular class shall constitute a quorum for the transaction
of business by such class.
SECTION 6. Adjournments. The chairman of the meeting or the
holders of a majority of the votes entitled to be cast by the stockholders who
are present in person or by proxy may adjourn the meeting from time to time
whether or not a quorum is present. In the event that a quorum does not exist
with respect to any vote to be taken by a particular class, the chairman of the
meeting or the holders of a majority of the votes entitled to be cast by the
stockholders of such class who are present in person or by proxy may adjourn the
meeting with respect to the vote(s) to be taken by such class. At such adjourned
meeting at which a quorum may be present, any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 7. Order of Business. (a) At each meeting of the
stockholders, the Chairman of the Board or, in the absence of the Chairman of
the Board, the Chief Executive Officer or, in the absence of the Chief Executive
Officer, such person as shall be selected by the Board shall act as chairman of
the meeting. The order of business at each such meeting shall be as determined
by the chairman of the meeting. The chairman of the meeting shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof, and the opening
and closing of the voting polls.
(b) At any annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the annual meeting (i) by
or at the direction of the chairman of the meeting, (ii) pursuant to the notice
provided for in Section 4 of this Article II or (iii) by any stockholder who is
a holder of record at the time of the giving of such notice provided for in this
Section 7, who is entitled to vote at the meeting and who complies with the
procedures set forth in this Section 7.
(c) For business properly to be brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation (the "Secretary"). To
be timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 90 days prior
to the date of an annual meeting of stockholders. To be in proper written form,
a stockholder's notice to the Secretary shall set forth in writing as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address of the stockholder proposing such business and all persons or
entities acting in concert with the stockholder; (iii) the class and number of
shares of the Corporation which are beneficially owned by the stockholder and
all persons or entities acting in concert with such stockholder; and (iv) any
material interest of the stockholder in such business. The foregoing notice
requirements shall be deemed satisfied by a stockholder if the stockholder has
notified the Corporation of his or her intention to present a proposal at an
annual meeting and such stockholder's proposal has been included in a proxy
statement that has been prepared by management of the Corporation to solicit
proxies for such annual meeting; provided, however, that if such stockholder
does not appear or send a qualified representative to present such proposal at
such annual meeting, the Corporation need not present such proposal for a vote
at such meeting, notwithstanding that proxies in respect of such vote may have
been received by the Corporation. Notwithstanding anything in the bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 7. The chairman of an
annual meeting shall, if the facts warrant, determine that business was not
properly brought before the annual meeting in accordance with the provisions of
this Section 7 and, if the chairman should so determine, the chairman shall so
declare to the annual meeting and any such business not properly brought before
the annual meeting shall not be transacted.
SECTION 8. List of Stockholders. It shall be the duty of the
Secretary or other officer who has charge of the stock ledger to prepare and
make, at least 10 days before each meeting of the stockholders, a complete list
of the stockholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in such stockholder's name. Such list shall be produced and kept available at
the times and places required by law.
SECTION 9. Voting. (a) Except as otherwise provided by law or
by the Certificate, each stockholder of record of any class or series of capital
stock of the Corporation shall be entitled at each meeting of stockholders to
such number of votes for each share of such stock as may be fixed in the
Certificate or in the resolution or resolutions adopted by the Board providing
for the issuance of such stock, registered in such stockholder's name on the
books of the Corporation:
(1) on the date fixed pursuant to Section 6 of Article VII of
these bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting; or
(2) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which notice
of such meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is
held.
(b) Each stockholder entitled to vote at any meeting of
stockholders may authorize not in excess of three persons to act for such
stockholder by proxy. Any such proxy shall be delivered to the secretary of such
meeting at or prior to the time designated for holding such meeting. No such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
(c) At each meeting of the stockholders, all corporate actions
to be taken by vote of the stockholders (except as otherwise required by law and
except as otherwise provided in the Certificate or these bylaws) shall be
authorized by a majority of the votes cast by the stockholders entitled to vote
thereon who are present in person or represented by proxy, and where a separate
vote by class is required, a majority of the votes cast by the stockholders of
such class who are present in person or represented by proxy shall be the act of
such class.
(d) Unless required by law or determined by the chairman of
the meeting to be advisable, the vote on any matter, including the election of
directors, need not be by written ballot. In the case of a vote by written
ballot, each ballot shall be signed by the stockholder voting, or by such
stockholder's proxy.
SECTION 10. Inspectors. The chairman of the meeting shall
appoint one or more inspectors to act at any meeting of stockholders. Such
inspectors shall perform such duties as shall be specified by the chairman of
the meeting. Inspectors need not be stockholders. No director or nominee for the
office of director shall be appointed such inspector.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate directed or required to be
exercised or done by the stockholders.
SECTION 2. Number, Qualification and Election. (a) Except as
otherwise fixed by or pursuant to the provisions of Article V of the Certificate
relating to the rights of the holders of any class or series of stock having
preference over the common stock of the corporation as to dividends or upon
liquidation, the number of directors of the Corporation shall be determined from
time to time by the Board by the affirmative vote of directors constituting at
least a majority of the entire Board; provided that the number thereof may not
be less than six nor more than seventeen.
(b) The directors, other than those who may be elected by the
holders of shares of any class or series of stock having a preference over the
common stock of the Corporation as to dividends or upon liquidation pursuant to
the terms of Article V of the Certificate or any resolution or resolutions
providing for the issuance of such stock adopted by the Board, shall be
classified, with respect to the time for which they severally hold office, into
three classes as nearly equal in number as possible, with each class to hold
office until its successors are elected and qualified. Subject to the rights of
the holders of any class or series of stock having a preference over the common
stock of the Corporation as to dividends or upon liquidation, at each such
annual meeting of the stockholders, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.
(c) Each director shall be at least 21 years of age. Directors
need not be stockholders of the Corporation.
(d) In any election of directors held at a meeting of
stockholders, the persons receiving a plurality of the votes cast by the
stockholders entitled to vote thereon at such meeting who are present or
represented by proxy, up to the number of directors to be elected in such
election, shall be deemed elected.
SECTION 3. Notification of Nomination. Subject to the rights of the holders
of any class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of directors may be
made by the Board or by any stockholder who is a stockholder of record at the
time of giving of the notice of nomination provided for in this Section 3 of
this Article III and who is entitled to vote for the election of directors. Any
stockholder of record entitled to vote for the election of directors at a
meeting may nominate persons for election as directors only if timely written
notice of such stockholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the Secretary.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation (i) with respect to an
election to be held at an annual meeting of stockholders, not less than 90 days
prior to the date of such annual meeting and (ii) with respect to an election to
be held at a special meeting of stockholders for the election of directors,
within 15 days following the public announcement of the date of such special
meeting. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination, of all persons or entities
acting in concert with the stockholder, and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or entities acting in
concert with the stockholder (naming such person or entities) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by the stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board; (e) the class and number of shares of
the Corporation that are beneficially owned by the stockholder and all persons
or entities acting in concert with the stockholder; and (f) the consent of each
nominee to being named in a proxy statement as nominee and to serve as a
director of the Corporation if so elected. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made after compliance
with the foregoing procedure. Only such persons who are nominated in accordance
with the procedures set forth in this Section 3 of this Article III shall be
eligible to serve as directors of the Corporation.
SECTION 4. Quorum and Manner of Acting. Except as otherwise
provided by law, the Certificate or these bylaws, a majority of the entire Board
shall constitute a quorum for the transaction of business at any meeting of the
Board, and, except as so provided, the vote of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board. The chairman of the meeting or a majority of the directors present may
adjourn the meeting to another time and place whether or not a quorum is
present. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called.
SECTION 5. Place of Meeting. The Board may hold its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time determine or as shall be specified or fixed in the respective
notice or waivers of notice thereof.
SECTION 6. Regular Meetings. Regular meetings of the Board
shall be held at such times and places as the Chairman of the Board or the Board
shall from time to time by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday under the laws of the place where the meeting
is to be held, the meeting which would otherwise be held on that day shall be
held at the same hour on the next succeeding business day.
SECTION 7. Special Meetings. Special meetings of the Board
shall be held whenever called by the Chairman of the Board or by a majority of
the directors.
SECTION 8. Notice of Meetings. Notice of regular meetings of
the Board or of any adjourned meeting thereof need not be given. Notice of each
special meeting of the Board shall be given by overnight delivery service or
mailed to each director, in either case addressed to such director at such
director's residence or usual place of business, at least two days before the
day on which the meeting is to be held or shall be sent to such director at such
place by telegraph or telecopy or be given personally or by telephone, not later
than the day before the meeting is to be held, but notice need not be given to
any director who shall, either before or after the meeting, submit a signed
waiver of such notice or who shall attend such meeting without protesting, prior
to or at its commencement, the lack of notice to such director. Every such
notice shall state the time and place but need not state the purpose of the
meeting.
SECTION 9. Rules and Regulations. The Board may adopt such
rules and regulations not inconsistent with the provisions of law, the
Certificate or these bylaws for the conduct of its meetings and management of
the affairs of the Corporation as the Board may deem proper.
SECTION 10. Participation in Meeting by Means of Communication
Equipment. Any one or more members of the Board or any committee thereof may
participate in any meeting of the Board or of any such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
SECTION 11. Action without Meeting. Any action required or
permitted to be taken at any meeting of the Board or any committee thereof may
be taken without a meeting if all of the members of the Board or of any such
committee consent thereto in writing and the writing or writings are filed with
the minutes or proceedings of the Board or of such committee.
SECTION 12. Resignations. Any director of the Corporation may
at any time resign by giving written notice to the Board, the Chairman of the
Board, the Chief Executive Officer, the President or the Secretary. Such
resignation shall take effect at the time specified therein or, if the time be
not specified therein, upon receipt thereof; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 13. Removal of Directors. Directors may be removed
only as provided in Section 5 of Article VI of the Certificate.
SECTION 14. Vacancies. Subject to the rights of the holders of
any class or series of stock having a preference over the common stock of the
Corporation as to dividends or upon liquidation, any vacancies on the Board
resulting from death, resignation, removal or other cause shall only be filled
by the Board by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board, or by a sole
remaining director, and newly created directorships resulting from any increase
in the number of directors shall be filled by the Board, or if not so filled, by
the stockholders at the next annual meeting thereof or at a special meeting
called for that purpose in accordance with Section 3 of Article II of these
bylaws. Any director elected in accordance with the preceding sentence of this
Section 14 of this Article III shall hold office for the remainder of the full
term of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified.
SECTION 15. Compensation. Each director, in consideration of
such person serving as a director, shall be entitled to receive from the
Corporation such amount per annum and such fees for attendance at meetings of
the Board or of committees of the Board, or both, as the Board shall from time
to time determine. In addition, each director shall be entitled to receive from
the Corporation reimbursement for the reasonable expenses incurred by such
person in connection with the performance of such person's duties as a director.
Nothing contained in this Section 15 of this Article III shall preclude any
director from serving the Corporation or any of its subsidiaries in any other
capacity and receiving proper compensation therefor.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. Establishment of Committees of the Board of
Directors; Election of Members of Committees of the Board of Directors;
Functions of Committees of the Board of Directors. The Board may, in accordance
with and subject to the General Corporation Law of the State of Delaware, from
time to time establish committees of the Board to exercise such powers and
authorities of the Board, and to perform such other functions, as the Board may
from time to time determine.
SECTION 2. Procedure; Meetings; Quorum. Regular meetings of
committees of the Board, of which no notice shall be necessary, may be held at
such times and places as shall be fixed by resolution adopted by a majority of
the members thereof. Special meetings of any committee of the Board shall be
called at the request of a majority of the members thereof. Notice of each
special meeting of any committee of the Board shall be given by overnight
delivery service or mailed to each member, in either case addressed to such
member at such member's residence or normal place of business, at least two days
before the day on which the meeting is to be held or shall be sent to such
members at such place by telegraph or telecopy or be given personally or by
telephone, not later than the day before the meeting is to be held, but notice
need not be given to any member who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend such meeting without
protesting, prior to it or at its commencement, the lack of such notice to such
member. Any special meeting of any committee of the Board shall be a legal
meeting without any notice thereof having been given, if all the members thereof
shall be present thereat. Notice of any adjourned meeting of any committee of
the Board need not be given. Any committee of the Board may adopt such rules and
regulations not inconsistent with the provisions of law, the Certificate or
these bylaws for the conduct of its meetings as such committee of the Board may
deem proper. A majority of the members of any committee of the Board shall
constitute a quorum for the transaction of business at any meeting, and the vote
of a majority of the members thereof present at any meeting at which a quorum is
present shall be the act of such committee. Each committee of the Board shall
keep written minutes of its proceedings and shall report on such proceedings to
the Board.
ARTICLE V
OFFICERS
SECTION 1. Number; Term of Office. The officers of the
Corporation shall be such officers as the Board may from time to time determine,
which may include a Chairman of the Board, Chief Executive Officer, President,
Chief Financial Officer, General Counsel and one or more Vice Presidents
(including, without limitation, Assistant, Executive and Senior Vice Presidents)
and a Treasurer, Secretary and Controller and such other officers or agents with
such titles and such duties as the Board may from time to time determine, each
to have such authority, functions or duties as provided in these bylaws or as
the Board may from time to time determine, and each to hold office for such term
as may be prescribed by the Board and until such person's successor shall have
been chosen and shall qualify, or until such person's death or resignation, or
until such person's removal in the manner hereinafter provided. One person may
hold the offices and perform the duties of any two or more of said officers;
provided, however, that no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law, the
Certificate or these bylaws to be executed, acknowledged or verified by two or
more officers. The Board may from time to time authorize any officer to appoint
and remove any such other officers and agents and to prescribe their powers and
duties. The Board may require any officer or agent to give security for the
faithful performance of such person's duties.
SECTION 2. Removal. Any officer may be removed, either with or
without cause, by the Board at any meeting thereof or, except in the case of any
officer elected by the Board, by any superior officer upon whom such power may
be conferred by the Board.
SECTION 3. Resignation. Any officer may resign at any time by
giving notice to the Board, the Chief Executive Officer or the Secretary. Any
such resignation shall take effect at the date of receipt of such notice or at
any later date specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal or any other cause may be filled for the unexpired
portion of the term in the manner prescribed in these bylaws for election to
such office.
SECTION 5. Chairman of the Board; Powers and Duties. The
Chairman of the Board shall preside at all meetings of the stockholders and the
Board at which he or she is present. Unless otherwise precluded from doing so by
these By-laws, the Chairman of the Board may be a member of the committees of
the Board. The Chairman of the Board shall act as chairman at all meetings of
the stockholders at which he or she is present unless he or she elects that the
Chief Executive Officer shall so preside. The Chairman of the Board may be
designated by the Board as an officer of the Company and may be elected by the
Board as the Chief Executive Officer. The Chairman of the Board shall perform
all duties as may be assigned to him or her by the Board of Directors. In case
of the absence or disability of the Chairman of the Board or a vacancy in the
office, Chief Executive Officer or, if none, the President shall exercise all
the powers and perform all the duties of the Chairman of the Board.
SECTION 6. Chief Executive Officer; Powers and Duties. Subject
to the control of the Board, the Chief Executive Officer shall supervise and
direct generally all the business and affairs of the Corporation. Any document
may be signed by the Chief Executive Officer or any other person who may be
thereunto authorized by the Board or the Chief Executive Officer. The Chief
Executive Officer may appoint such assistant officers as are deemed necessary.
SECTION 7. President, Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents; Powers and Duties. The President shall be the
chief operating officer of the Corporation. The President and each Executive
Vice President, each Senior Vice President, and each Vice President shall have
such powers and perform such duties as may be assigned by the Board of Directors
or the Chief Executive Officer.
SECTION 8. Secretary and Assistant Secretaries; Powers and
Duties. The Secretary shall attend all meetings of the stockholders and the
Board and shall keep the minutes for such meetings in one or more books provided
for that purpose. The Secretary shall be custodian of the corporate records,
except those required to be in the custody of the Treasurer or the Controller,
shall keep the seal of the Corporation, and shall execute and affix the seal of
the Corporation to all documents duly authorized for execution under seal on
behalf of the Corporation, and shall perform all of the duties incident to the
office of Secretary, as well as such other duties as may be assigned by the
Chief Executive Officer or the Board.
The Assistant Secretaries shall perform such of the
Secretary's duties as the Secretary shall from time to time direct. In case of
the absence or disability of the Secretary or a vacancy in the office, an
Assistant Secretary designated by the Chief Executive Officer or by the
Secretary, if the office is not vacant, shall perform the duties of the
Secretary.
SECTION 9. Chief Financial Officer; Powers and Duties. The
Chief Financial Officer shall be responsible for maintaining the financial
integrity of the Corporation, shall prepare the financial plans for the
Corporation, and shall monitor the financial performance of the Corporation and
its subsidiaries, as well as performing such other duties as may be assigned by
the Chief Executive Officer or the Board.
SECTION 10. Treasurer and Assistant Treasurers; Powers and
Duties. The Treasurer shall have care and custody of the funds and securities of
the Corporation, shall deposit such funds in the name and to the credit of the
Corporation with such depositories as the Treasurer shall approve, shall
disburse the funds of the Corporation for proper expenses and dividends, and as
may be ordered by the Board, taking proper vouchers for such disbursements. The
Treasurer shall perform all of the duties incident to the office of Treasurer,
as well as such other duties as may be assigned by the Chief Executive Officer
or the Board.
The Assistant Treasurers shall perform such of the Treasurer's
duties as the Treasurer shall from time to time direct. In case of the absence
or disability of the Treasurer or a vacancy in the office, an Assistant
Treasurer designated by the Chief Executive Officer or by the Treasurer, if the
office is not vacant, shall perform the duties of the Treasurer.
SECTION 11. General Counsel; Powers and Duties. The General
Counsel shall be a licensed attorney at law and shall be the chief legal officer
of the Corporation. The General Counsel shall have such power and exercise such
authority and provide such counsel to the Corporation as deemed necessary or
desirable to enforce the rights and protect the property and integrity of the
Corporation, shall also have the power, authority, and responsibility for
securing for the Corporation all legal advice, service, and counseling, and
shall perform all of the duties incident to the office of General Counsel, as
well as such other duties as may be assigned by the Chief Executive Officer or
the Board.
SECTION 12. Controller and Assistant Controllers; Powers and
Duties. The Controller shall be the chief accounting officer of the Corporation
and shall keep and maintain in good and lawful order all accounts required by
law and shall have sole control over, and ultimate responsibility for, the
accounts and accounting methods of the Corporation and the compliance of the
Corporation with all systems of accounts and accounting regulations prescribed
by law. The Controller shall audit, to such extent and at such times as may be
required by law or as the Controller may think necessary, all accounts and
records of corporate funds or property, by whomsoever kept, and for such
purposes shall have access to all such accounts and records. The Controller
shall make and sign all necessary and proper accounting statements and financial
reports of the Corporation, and shall perform all of the duties incident to the
office of Controller, as well as such other duties as may be assigned by the
Chief Executive Officer or the Board.
The Assistant Controllers shall perform such of the
Controller's duties as the Controller shall from time to time direct. In case of
the absence or disability of the Controller or a vacancy in the office, an
Assistant Controller designated by the Chief Executive Officer or the
Controller, if the office is not vacant, shall perform the duties of the
Controller.
SECTION 13. Salaries. The salaries of all officers of the
Corporation shall be fixed by or in the manner provided by the Board. If
authorized by a resolution of the Board, the salary of any officer other than
the Chief Executive Officer may be fixed by the Chief Executive Officer or a
Committee of the Board. No officer shall be disqualified from receiving a salary
by reason of also being a director of the Corporation.
ARTICLE VI
INDEMNIFICATION
SECTION 1. Scope of Indemnification. (a) The Corporation shall
indemnify an indemnified representative against any liability incurred in
connection with any proceeding in which the indemnified representative may be
involved as a party or otherwise, by reason of the fact that such person is or
was serving in an indemnified capacity, except to the extent that any such
indemnification against a particular liability is expressly prohibited by
applicable law or where a judgment or other final adjudication adverse to the
indemnified representative establishes, or where the Corporation determines,
that his or her acts or omissions (i) were in breach of such person's duty of
loyalty to the Corporation or its stockholders, (ii) were not in good faith or
involved intentional misconduct or a knowing violation of law, or (iii) resulted
in receipt by such person of an improper personal benefit. The rights granted by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification, contribution, or advancement of expenses may be
entitled under any statute, certificate of incorporation, agreement, contract of
insurance, vote of stockholders or disinterested directors, or otherwise. The
rights of indemnification and advancement of expenses provided by or granted
pursuant to this Article shall continue as to a person who has ceased to be an
indemnified representative in respect of matters arising prior to such time and
shall inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
(b) If an indemnified representative is not entitled to
indemnification with respect to a portion of any liabilities to which such
person may be subject, the Corporation shall nonetheless indemnify such
indemnified representative to the maximum extent for the remaining portion of
the liabilities.
(c) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the indemnified representative
is not entitled to indemnification.
(d) To the extent permitted by law, the payment of
indemnification provided for by this Article, including the advancement of
expenses pursuant to Section 2 of this Article VI, with respect to proceedings
other than those brought by or in the right of the Corporation, shall be subject
to the conditions that the indemnified representative shall give the Corporation
prompt notice of any proceeding, that the Corporation shall have complete charge
of the defense of such proceeding and the right to select counsel for the
indemnified representative, and that the indemnified representative shall assist
and cooperate fully in all matters respecting the proceeding and its defense or
settlement. The Corporation may waive any or all of the conditions set forth in
the preceding sentence. Any such waiver shall be applicable only to the specific
payment for which the waiver is made and shall not in any way obligate the
Corporation to grant such waiver at any future time. In the event of a conflict
of interest between the indemnified representative and the Corporation that
would disqualify the Corporation's counsel from representing the indemnified
representative under the rules of professional conduct applicable to attorneys,
it shall be the policy of the Corporation to waive any or all of the foregoing
conditions subject to such limitations or conditions as the Corporation shall
deem to be reasonable in the circumstances.
(e) For purposes of this Article:
(1) "indemnified capacity" means any and all past, present, or
future services by an indemnified representative in one or more capacities as a
director, officer, employee, or agent of the Corporation or, at the request of
the Corporation, as a director, officer, employee, agent, fiduciary, or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan, or other entity or enterprise; any indemnified representative serving an
affiliate of the Corporation in any capacity shall be deemed to be doing so at
the request of the Corporation;
(2) an "affiliate of the Corporation" means an entity that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Corporation;
(3) "indemnified representative" means any and all directors,
officers, and employees of the Corporation and any other person designated as an
indemnified representative by the Board;
(4) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, expert witness fees, costs of investigation, litigation and appeal
costs, attorneys' fees, and disbursements); and
(5) "proceeding" means any threatened, pending, or completed
action, suit, appeal, or other proceeding of any nature, whether civil,
criminal, administrative, or investigative, whether formal or informal, whether
external or internal to the Corporation, and whether brought by or in the right
of the Corporation, a class of its security holders or otherwise.
SECTION 2. Advancing Expenses. All reasonable expenses
incurred in good faith by an indemnified representative in advance of the final
disposition of a proceeding described in Section 1 of this Article VI shall be
advanced to the indemnified representative by the Corporation. Before making any
such advance payment of expenses, the Corporation shall receive an undertaking
by or on behalf of the indemnified representative to repay such amount if it
shall ultimately be determined that such indemnified representative is not
entitled to be indemnified by the Corporation pursuant to this Article VI. No
advance shall be made by the Corporation if a determination is reasonably and
promptly made by a majority vote of disinterested directors, even if the
disinterested directors constitute less than a quorum, or (if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel in a written opinion, that, based upon the
facts known to the Board or counsel at the time such determination is made, the
indemnified representative has acted in such a manner as to permit or require
the denial of indemnification pursuant to the provisions of Section 1 of this
Article VI.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Share Ownership. (a) Holders of shares of stock of
each class of the Corporation shall be recorded on the books of the Corporation
and ownership of such stock shall be evidenced by a certificate or other form as
shall be approved by the Board. Certificates representing shares of stock of
each class, if any, shall be signed by, or in the name of, the Corporation by
the Chairman of the Board or the President, any Vice President and by the
Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer
of the Corporation, and sealed with the seal of the Corporation, which may be a
facsimile thereof. Any or all such signatures may be facsimiles if countersigned
by a transfer agent or registrar. Although any officer, transfer agent or
registrar whose manual or facsimile signature is affixed to such a certificate
ceases to be such officer, transfer agent or registrar before such certificate
has been issued, it may nevertheless be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still such at the
date of its issue.
(b) The stock ledger and blank share certificates shall be
kept by the Secretary or by a transfer agent or by a registrar or by any other
officer or agent designated by the Board.
SECTION 2. Transfer of Shares. Transfers of shares of stock of
each class of the Corporation shall be made only on the books of the Corporation
by the holder thereof, or by such holder's attorney thereunto authorized by a
power of attorney duly executed and filed with the Secretary or a transfer agent
for such stock, if any, and on surrender of the certificate or certificates, if
any, for such shares properly endorsed or accompanied by a duly executed stock
transfer power (or by proper evidence of succession, assignment or authority to
transfer) and the payment of any taxes thereon; provided, however, that the
Corporation shall be entitled to recognize and enforce any lawful restriction on
transfer. The person in whose name shares are registered on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation; provided, however, that whenever any transfer of shares shall be
made for collateral security and not absolutely, and written notice thereof
shall be given to the Secretary or to such transfer agent, such fact shall be
stated in the entry of the transfer. No transfer of shares shall be valid as
against the Corporation, its stockholders and creditors for any purpose, except
to render the transferee liable for the debts of the Corporation to the extent
provided by law, until it shall have been entered in the stock records of the
Corporation by an entry showing from and to whom transferred.
SECTION 3. Registered Stockholders and Addresses of
Stockholders. (a) The Corporation shall be entitled to recognize the exclusive
right of a person registered on its records as the owner of shares of stock to
receive dividends and to vote as such owner, shall be entitled to hold liable
for calls and assessments a person registered on its records as the owner of
shares of stock, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
(b) Each stockholder shall designate to the Secretary or
transfer agent of the Corporation an address at which notices of meetings and
all other corporate notices may be delivered or mailed to such person, and, if
any stockholder shall fail to designate such address, corporate notices may be
delivered to such person by mail directed to such person at such person's post
office address, if any, as the same appears on the stock record books of the
Corporation or at such person's last known post office address.
SECTION 4. Lost, Destroyed and Mutilated Certificates. The
Corporation may issue to any holder of shares of stock the certificate for which
has been lost, stolen, destroyed or mutilated a new certificate or certificates
for shares, upon the surrender of the mutilated certificate or, in the case of
loss, theft or destruction of the certificate, upon satisfactory proof of such
loss, theft or destruction. The Board, or a committee designated thereby, or the
transfer agents and registrars for the stock, may, in their discretion, require
the owner of the lost, stolen or destroyed certificate, or such person's legal
representative, to give the Corporation a bond in such sum and with such surety
or sureties as they may direct to indemnify the Corporation and said transfer
agents and registrars against any claim that may be made on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 5. Regulations. The Board may make such additional
rules and regulations as it may deem expedient concerning the issue and transfer
of shares of stock of each class of the Corporation and may make such rules and
take such action as it may deem expedient concerning the issue of certificates
in lieu of certificates claimed to have been lost, destroyed, stolen or
mutilated.
SECTION 6. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment or any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action. A determination of stockholders entitled to
notice of or to vote at a meeting of the stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
SECTION 7. Transfer Agents and Registrars. The Board may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
ARTICLE VIII
SEAL
The Board shall provide a corporate seal, which shall be in
the form of a circle and shall bear the full name of the Corporation and the
words and figures of "Corporate Seal Delaware", or such other words or figures
as the Board may approve and adopt. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall end on the 31st day
of December in each year.
ARTICLE X
AMENDMENTS
Any bylaw may be adopted, repealed, altered or amended by
two-thirds of the entire Board at any meeting thereof. The stockholders of the
Corporation shall have the power to amend, alter or repeal any provision of
these bylaws only to the extent and in the manner provided in the Certificate.
SEPARATION AGREEMENT
SEPARATION AGREEMENT, dated as of June 5, 1998, between U S
WEST, INC., a Delaware corporation ("U S WEST"), to be renamed "MEDIAONE GROUP,
INC.," and USW-C, INC., a Delaware corporation and indirect wholly owned
subsidiary of U S WEST ("New U S WEST"), to be renamed "U S WEST, INC."
W I T N E S S E T H:
WHEREAS, pursuant to the Restated Certificate of Incorporation
of U S WEST (the "Restated Certificate"), U S WEST's assets, liabilities and
businesses are divided between the Communications Group (as defined in the
Restated Certificate) and the Media Group (as defined in the Restated
Certificate);
WHEREAS, pursuant to the Restated Certificate, the domestic
directories business of U S WEST (the "Directories Business") conducted by U S
WEST Dex, Inc., a Colorado corporation ("Dex"), is currently attributed to the
Media Group;
WHEREAS, the Board of Directors of U S WEST has determined
that it is in the best interests of U S WEST and its stockholders to (i) align
the Directories Business with the Communications Group and (ii) separate the
Communications Group and the Media Group into two separately traded public
companies;
WHEREAS, in furtherance of the foregoing, the Board of
Directors of U S WEST and New U S WEST have approved this Agreement, pursuant to
which, among other things, (a) U S WEST shall effect a restructuring of certain
of its assets, liabilities and businesses, as a result of which New U S WEST
shall own the Directories Business and the businesses currently attributed to
the Communications Group and (b) U S WEST shall distribute all of the
outstanding capital stock of New U S WEST to its stockholders, all on the terms
and subject to the conditions described herein;
WHEREAS, it is the intention of the parties hereto that the
transactions contemplated by this Agreement shall be tax-free transactions under
Sections 332, 368(a) and 355 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the rules and regulations promulgated thereunder; and
<PAGE>
WHEREAS, the parties hereto desire to make certain covenants
and agreements and to allocate certain assets, liabilities and obligations in
connection with the transactions contemplated hereby and to prescribe various
conditions to the transactions contemplated hereby.
NOW, THEREFORE, in furtherance of the foregoing and in
consideration of the mutual promises and undertakings contained herein and in
any other document executed in connection with this Agreement, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1.1 General. For the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Action" shall mean any action, claim (whether or not filed),
suit, arbitration, inquiry, demand proceeding or investigation.
"Affiliate" shall mean, with respect to any specified Person,
any other Person directly or indirectly controlling, controlled by, or under
common control with, such specified Person; provided, however, that for purposes
of this Agreement, no member of either Group shall, after giving effect to the
Separation, be deemed to be an Affiliate of any member of the other Group.
"Agreement" shall mean this Separation Agreement, together
with all exhibits and schedules hereto, as the same may be amended from time to
time in accordance with the terms hereof.
"AirTouch" shall mean AirTouch Communications,
Inc., a Delaware corporation.
"AirTouch Funds" shall mean the portion of the funds received
in the AirTouch Transaction which is not used to repay outstanding indebtedness.
"AirTouch Merger Agreement" shall mean Agreement and Plan of
Merger, dated as of January 29, 1998, among U S WEST, MGI, NewVector, PCS
Holdings and AirTouch.
<PAGE>
"AirTouch Stock" shall mean all of the shares of common stock
and preferred stock of AirTouch which MGI receives in connection with the
AirTouch Transaction.
"AirTouch Transaction" shall mean the merger of NewVector and
PCS Holdings with and into AirTouch pursuant to the terms of the AirTouch Merger
Agreement.
"Applicable Law" shall mean, with respect to any Person, all
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Authority applicable to such Person and its business, properties and assets.
"Asset" shall mean any and all right, title and interest in
and to all of the rights, properties, assets, claims, Contracts and businesses
of every kind, character and description, whether real, personal or mixed,
whether accrued, contingent or otherwise, and wherever located, including,
without limitation, the following: (i) all Cash Equivalents, notes, prepaid
expenses and accounts receivable (whether current or non-current); (ii) all
capital stock, partnership interests and other equity or ownership interests or
rights, directly or indirectly, in any entity; (iii) debentures, evidences of
indebtedness, certificates of interest or participation, collateral trust
certificates, preorganization certificates or subscriptions, investment
contracts, foreign currency and interest rate contracts (including, without
limitation, forward, option, cap and swap contracts), trust certificates, puts,
calls, straddles, options and other securities or hedging arrangements of any
kind; (iv) all registered and unregistered trademarks, service marks, service
names, trade styles and trade names (including, without limitation, trade dress
and other names, marks and slogans) and all associated goodwill; all statutory,
common law and registered copyrights; all patents; all applications for any of
the foregoing together with all rights to use all of the foregoing and all other
rights in, to and under the foregoing; and all know-how, inventions,
discoveries, improvements, processes, formulae (secret or otherwise),
specifications, trade secrets (whether patentable or not), licenses and other
similar agreements, confidential information, and all drawings, records, books
or other indicia, however evidenced, of the foregoing; (v) all Contracts and
rights existing thereunder and under all other business arrangements; (vi) all
real estate and all plants, buildings and other improvements thereon; (vii) all
leasehold improvements and all machinery, tools, dies, equipment (including all
transportation and
<PAGE>
office equipment), fixtures, trade fixtures and furniture; (viii) all
ingredients, supplies, spare parts, other miscellaneous supplies and other
tangible property of any kind; (ix) all raw materials, work-in-process, finished
goods, consigned goods and other inventories; (x) all computer hardware,
software, computer programs, systems and codes and documentation relating
thereto and all databases and reference and resource materials; (xi) all
prepayments of prepaid expenses; (xii) all claims, causes of action, choses in
action, rights under express or implied warranties, rights of recovery and
rights of set-off of any kind; (xiii) the right to receive mail, accounts
receivable payments and other communications; (xiv) all customer lists and
records pertaining to customers and accounts, personnel records, all lists and
records pertaining to suppliers and agents, and all books, ledgers, files and
business records of every kind; (xv) all advertising materials and all other
printed or written materials; (xvi) all permits, licenses, approvals and
authorizations issued by any Governmental Authority or third party; (xvii) all
goodwill as a going concern and all other intangible properties; and (xviii) all
employee Contracts, including, without limitation, the right thereunder to
restrict the employee from competing in certain respects.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which banks located in New York City are authorized or required
by law to close.
"Capital Funding" shall mean U S WEST Capital Funding, Inc., a
Colorado corporation.
"Capital Funding Indebtedness" shall mean the
Capital Funding Private Indebtedness, the Capital Funding
Public Indebtedness and the Capital Funding Trust
Indebtedness.
"Capital Funding Private Indebtedness" shall mean all of the
indebtedness owed by Capital Funding to third parties immediately prior to the
Separation Time other than the Capital Funding Public Indebtedness and the
Capital
Funding Trust Indebtedness.
"Capital Funding Public Indebtedness" shall mean all of the
indebtedness of Capital Funding listed in Section 1.1(a) of the Separation
Disclosure Schedule.
<PAGE>
"Capital Funding Trust Indebtedness" shall mean all of the
indebtedness owed by Capital Funding to the Trusts (other than a portion of such
indebtedness equal to the liquidation value of the common securities of the
Trusts).
"Cash Equivalents" shall mean cash on hand, all other cash in
any bank, savings or similar accounts at any financial institution, and checks,
drafts and similar instruments and any bonds or similar marketable securities,
certificates of deposit, commercial paper, eurodollar deposits and any other
cash equivalents, held in the name of or for the account of U S WEST or any of
its Subsidiaries.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C.
ss.ss. 9601 et seq.).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Communications Employees" shall have the meaning ascribed to
such term in the Employee Matters Agreement.
"Communications Employee Arrangements" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"Communications Employee Benefit Plans" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"Communications Stock" shall mean the U S WEST Communications
Group Common Stock, par value $.01 per share, of U S WEST.
"Contract" shall mean any contract, agreement, lease, license,
sales order, purchase order, instrument or other commitment, written or oral,
that is binding on any Person or any part of its property under Applicable Law.
"Covered Employee" shall mean an employee of the U S WEST
Group or the New U S WEST Group at the grade 5 manager level or above.
"Employee Arrangements" shall mean all employment
or consulting agreements, and all bonus or other incentive
<PAGE>
compensation, deferred compensation, disability, severance, stock award, stock
option or stock purchase agreements, policies or arrangements with respect to
the employment and termination of employment of any employee, officer, director
or other Person employed at any time by U S WEST or any of its Subsidiaries.
"Employee Benefit Plan" shall mean (i) each employee benefit
plan, as defined in Section 3(3) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), together with the regulations promulgated
thereunder, and (ii) each international employee benefit plan, whether or not
each plan in (i) and (ii) is covered by ERISA, which U S WEST or any of its
Subsidiaries maintains or to which U S WEST or any of its Subsidiaries has an
obligation to make contributions.
"Employee Matters Agreement" shall mean the Employee Matters
Agreement, substantially in the form of Exhibit A to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
"Financial Services" shall mean U S WEST Financial Services,
Inc., a Colorado corporation.
"Financial Services Indebtedness" shall mean all of the
indebtedness of Financial Services listed in Section 1.1(b) of the Separation
Disclosure Schedule.
"Governmental Authority" shall mean any foreign, federal,
state or local government, court, agency or commission or other governmental or
regulatory body or authority.
"Group" shall mean either the New U S WEST Group or the U S
WEST Group and "Groups" shall mean the New U S WEST Group and the U S WEST
Group, collectively.
"Indemnifiable Losses" shall mean, with respect to any claim
by an Indemnified Party for indemnification under this Agreement, any and all
damages, losses, deficiencies, Liabilities, obligations, penalties, judgments,
settlements, claims, payments, fines, interest, costs and expenses (including,
without limitation, the costs and expenses of any and all Actions, demands,
assessments, judgments,settle-
<PAGE>
ments and compromises relating thereto and the reasonable costs and expenses of
attorneys', accountants', consultants' and other professionals' fees and
expenses incurred in the investigation or defense thereof or the enforcement of
rights thereunder), including (i) direct, consequential, exemplary, special and
punitive damages and lost profits and (ii) (A) with respect to the matters
described in Section 8.1(a)(iv), any funds expended by a member of the U S WEST
Group to remedy the triggering of a cross-default provision in a MediaOne
Obligation as a result of a default by a member of the New U S WEST Group under
a New U S WEST Obligation and (B) with respect to the matters described in
Section 8.2(a)(iv), any funds expended by a member of the New U S WEST Group to
remedy the triggering of a cross- default provision in a New U S WEST Obligation
as a result of a default by a member of the U S WEST Group under a MediaOne
Obligation.
"Indemnified Party" shall mean any Person that is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
"Indemnifying Party" shall mean any party hereto from which
any Indemnified Party is seeking indemnification pursuant to the provisions of
this Agreement.
"Information" shall mean all records, books, Contracts,
instruments, computer data and other data, technology and information.
"Insurance Administration" shall mean, with respect to each
Joint Insurance Arrangement, (i) the accounting for premiums, retrospectively
rated premiums, defense costs, indemnity payments, deductibles and retentions,
as appropriate under the terms and conditions of each of the Joint Insurance
Arrangements, (ii) the reporting to Insurers of any losses or claims that may
cause the peroccurrence, per claim or aggregate limits of any Joint Insurance
Arrangement to be exceeded and (iii) the processing of claims made under the
Joint Insurance Arrangements, including, without limitation, the reporting of
claims to the Insurers' management and defense of claims and providing for
appropriate releases upon settlement of claims.
"Insurance Arrangement" shall mean insurance policies and
insurance contracts of any kind (other than insurance policies and insurance
contracts which are
<PAGE>
Employee Benefit Plans), including, without limitation, primary and excess
policies, commercial general liability policies, automobile policies, product
liability policies, directors' and officers' liability policies, fiduciary
liability policies, workers' compensation policies, and self-insurance programs
and captive insurance company arrangements, together with the rights, benefits
and privileges thereunder.
"Insurance Proceeds" shall mean those monies received by an
insured from an Insurer or paid by an Insurer on behalf of an insured, in either
case net of any applicable premium adjustment, retrospectively rated premium,
deductible, retention or cost of reserve paid or held by or for the benefit of
such insured.
"Insured Claims" shall mean those Liabilities which,
individually or in the aggregate, are covered within the terms and conditions of
any of the Joint Insurance Arrangements, whether or not subject to deductibles,
co-insurance, uncollectibility or retrospectively rated premium adjustments.
"Insurer" shall mean a third party insurance carrier.
"Intercompany Indebtedness" shall mean, with respect to any
Subsidiary of U S WEST, the aggregate principal amount of indebtedness owed by
such Subsidiary to Capital Funding immediately prior to the Reorganization.
"Joint Insurance Arrangements" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
that are owned or maintained by or on behalf of U S WEST or any of its
predecessors (other than Insurance Arrangements of Western Range) and that
relate to both (a) the MediaOne Business and/or the MediaOne Liabilities and (b)
the New U S WEST Business and/or the New U S WEST Liabilities.
"Joint Other Intellectual Property" shall mean all Other
Intellectual Property of U S WEST and its Subsidiaries that is not either
MediaOne Other Intellectual Property or New U S WEST Other Intellectual
Property, and shall include Other Intellectual Property licensed to or acquired
by U S WEST and its Subsidiaries for use by both the New U S WEST Business and
the MediaOne Business, or which is created by
<PAGE>
or for both the New U S WEST Business and the MediaOne Business prior to the
Separation Time.
"Joint Patents" shall mean the U.S. patents (and
any non-U.S. patents corresponding thereto) listed in
Section 1.1(c) of the Separation Disclosure Schedule, as
well as any divisions, continuations, continuations-in-part
(but only to the extent claims are supported by the
specification of the patents listed in Section 1.1(c) of the
Separation Disclosure Schedule), re-examinations, reissues,
extensions or renewals of such U.S. or non-U.S. patents.
"LESOP Notes" shall mean the indebtedness of the U S WEST
Savings Plan/ESOP, all of which is guaranteed by U S WEST.
"Liability" shall mean, with respect to any Person, except as
otherwise expressly provided herein, any direct or indirect liability (whether
absolute, accrued or unaccrued, contingent, liquidated or unliquidated, matured
or unmatured or known or unknown), indebtedness, obligation, expense, claim,
deficiency, guarantee or endorsement of or by such Person (including, without
limitation, those arising under any Applicable Law or Action or under any award
of any court, tribunal or arbitrator of any kind, and those arising under any
Contract or undertaking).
"Litigation Matters" shall mean actual, threatened or future
Actions that have been or may be asserted against, or otherwise adversely
affect, any member of either Group.
"Market Value" on any Trading Day shall mean the average of
the high and low reported sales prices regular way of a share of Communications
Stock as reported on the NYSE Composite Tape; provided, however, that, for
purposes of determining the market value of a share of Communications Stock for
any period, the high and low sales prices of a share of Communications Stock on
any day prior to any "ex- dividend" date occurring during such period for any
dividend paid or to be paid with respect to the Communications Stock shall be
reduced by the amount of such dividend.
"Media Employees" shall have the meaning ascribed to such term
in the Employee Matters Agreement.
"Media Employee Arrangements" shall have the meaning ascribed
to such term in the Employee Matters Agreement.
<PAGE>
"Media Employee Benefit Plans" shall have the meaning ascribed
to such term in the Employee Matters Agreements.
"MediaOne Business" shall mean the businesses of U S WEST
currently attributed to the Media Group pursuant to the Restated Certificate
other than the Directories Business (including the domestic wireless business
attributed to the Media Group transferred to AirTouch pursuant to the AirTouch
Transaction).
"MediaOne Insurance Arrangements" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the MediaOne Business and/or the MediaOne
Liabilities (other than Shared Liabilities), including, without limitation, the
Insurance Arrangements provided by Western Range (other than the Western Range
Transferred Insurance Arrangements).
"MediaOne Patents" shall mean the U.S. patents (and any
non-U.S. patents corresponding thereto) listed in Section 1.1(d) of the
Separation Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.
"MediaOne Other Intellectual Property" shall mean all Other
Intellectual Property licensed to or acquired by U S WEST and its Subsidiaries
for use only by the MediaOne Business or which is created by or for only the
MediaOne Business prior to the Separation Time.
"MediaOne Trademarks" shall mean the Trademarks listed in
Section 1.1(e) of the Separation Disclosure Schedule.
"Media Savings Plan/ESOP" shall have the meaning ascribed to
such term in the Employee Matters Agreement.
"Media Stock" shall mean the U S WEST Media Group Common
Stock, par value $.01 per share, of U S WEST.
"MGI" shall mean U S WEST Media Group, Inc., a Delaware
corporation.
<PAGE>
"New Trust" shall mean a newly formed Delaware statutory
business trust, all of the common securities of which shall be owned by U S
WEST.
"New U S WEST" shall have the meaning set forth in the
preamble to this Agreement.
"New U S WEST Business" shall mean (i) all of the businesses
of U S WEST currently attributed to the Communications Group pursuant to the
Restated Certificate
and (ii) the Directories Business.
"New U S WEST Group" shall mean, at and after the Separation
Time, New U S WEST and all of its Subsidiaries.
"New U S WEST Insurance Arrangements" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the New U S WEST Business and/or the New U
S WEST Liabilities (other than Shared Liabilities) including, without
limitation, the Western Range Transferred Insurance Arrangements.
"New U S WEST Other Intellectual Property" shall mean all
Other Intellectual Property licensed to or acquired by U S WEST and its
Subsidiaries for use only by the New U S WEST Business or which is created by or
for only the New U S WEST Business prior to the Separation Time.
"New U S WEST Patents" shall mean the U.S. patents (and any
non-U.S. patents corresponding thereto) listed in Section 1.1(f) of the
Separation Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of such
U.S. or non-U.S. patents.
"New U S WEST Trademarks" shall mean the Trademarks listed in
Section 1.1(g) of the Separation Disclosure Schedule.
"NewVector" shall mean U S WEST NewVector Group, Inc., a
Colorado corporation.
"Other Intellectual Property" shall mean all registered and
unregistered copyrights, all know-how, discoveries, inventions, improvements,
processes, formulae, specifications, trade secrets (whether patentable or not),
<PAGE>
business plans, marketing data, software, tools and documentation and all
drawings, records, books or other indicia, however evidenced, of the foregoing,
but excluding patents, patent applications and Trademarks.
"Person" or "person" shall mean and include any individual,
partnership, joint venture, corporation, association, joint stock company,
limited liability company, trust, unincorporated organization or similar entity.
"PCS Holdings" shall mean U S WEST PCS Holdings, Inc., a
Delaware corporation.
"Privileged Information" shall mean, with respect to either
Group, Information regarding a member of such Group, or any of its operations,
Assets or Liabilities (whether in documents or stored in any other form or known
to its employees or agents) that is or may be protected from disclosure pursuant
to the attorney-client privilege, the work-product doctrine or other applicable
privileges.
"Representative" shall mean, with respect to any Person, any
of such Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"SEC" shall mean the United States Securities and
Exchange Commission.
"SEC Documentation" shall mean the Proxy Statement, the Form
S-4, the Form 8-A, the Form 8-B/A, any filings required in connection with the
Exchange Offers and any offers to purchase prepared in connection with the
Tender Offers (and all documents incorporated therein by reference).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Separation Disclosure Schedule" shall mean the Separation
Disclosure Schedule, dated as of the date hereof, as the same may be amended or
supplemented pursuant to this Agreement.
"Shared Contingent Gain" shall mean any right of U S WEST and
its Subsidiaries against any Person to the extent such right (i) does not relate
primarily to the New
<PAGE>
U S WEST Business or the MediaOne Business or (ii) relates primarily to both the
New U S WEST Business and the MediaOne Business, including, without limitation,
the rights listed in Section 1.1(h) of the Separation Disclosure Schedule.
"Shared Liability" shall mean any Liability of U S WEST or any
of its Subsidiaries (whether arising prior to, at or following the Separation
Time) which (i) arises out of or is in connection with or otherwise relates to
the management or conduct prior to the Separation Time of the businesses of U S
WEST and its Subsidiaries and is not otherwise included in the definition of
"New U S WEST Liabilities" or "MediaOne Liabilities" or allocated to one of the
Groups pursuant to this Agreement or the Tax Sharing Agreement or (ii) arises
out of any Transaction Suit, including, without limitation, the Liabilities
listed in Section 1.1(i) of the Separation Disclosure Schedule, but excluding
Transaction Costs.
"Subsidiary" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership in which such Person or another Subsidiary of such Person is the
general partner or otherwise controls such partnership.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) and shall include any transferee liability in respect of Taxes.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement,
substantially in the form of Exhibit B to this Agreement.
<PAGE>
"Terminated Communications Employees" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"Terminated Media Employees" shall have the meaning ascribed
to such term in the Employee Matters Agreement.
"Trademarks" shall mean all registered and unregistered
trademarks, service marks, service names, trade styles and trade names
(including, without limitation, trade dress and other names, marks and slogans)
and all associated goodwill and all applications for any of the foregoing,
together with all rights to use any of the foregoing.
"Trading Day" shall mean each weekday other than any day on
which the Communications Stock is not traded on the NYSE.
"Transaction Costs" shall mean the costs and expenses
associated with the transactions contemplated by this Agreement listed in
Section 1.1(j) of the Separation Disclosure Schedule.
"Transaction Documents" shall mean this Agreement, the
Employee Matters Agreement and the Tax Sharing Agreement and documents,
schedules, exhibits and annexes attached hereto or thereto or delivered pursuant
hereto or thereto, including, without limitation, the deeds, lease assignments
and assumptions, leases, subleases and sub-subleases, and the supplemental and
other agreements and instruments relative thereto.
"Transaction Suit" shall mean (i) any Action that is commenced
against any member of the U S WEST Group or any member of the New U S WEST Group
or any of their respective directors, officers or employees challenging this
Agreement or any other Transaction Document or any of the transactions
contemplated hereby or thereby or any of the terms thereof or (ii) arises out of
any untrue statement or alleged untrue statement of a material fact contained in
any of the SEC Documentation, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (but only with respect to information relating to transactions
contemplated by this Agreement or any other Transaction Document contained in or
omitted from the SEC
<PAGE>
Documentation); provided, however, that any Action arising out of or relating to
the transfer of Assets between employee benefits trusts sponsored by the Groups
shall not be a "Transaction Suit" and shall be governed by the provisions of the
Employee Matters Agreement.
"Trusts" shall mean U S WEST Financing I, a Delaware statutory
business trust, and U S WEST Financing II, a Delaware statutory business trust.
"Trust Securities" shall mean the 7.96% Trust Originated
Preferred Securities of U S WEST Financing I, a Delaware statutory business
trust, and the 8 1/4% Trust Originated Preferred Securities of U S WEST
Financing II, a Delaware statutory business trust.
"U S WEST" shall have the meaning set forth in the
preamble to this Agreement.
"U S WEST Group" shall mean, at and after the Separation Time,
U S WEST and all of its Subsidiaries (other than New U S WEST and its
Subsidiaries).
"U S WEST Savings Plan/ESOP" shall have the meaning ascribed
to such term in the Employee Matters Agreement.
1.2 Terms Defined Elsewhere in the Agreement. For the purposes
of this Agreement, the following terms have the meanings set forth in the
Sections indicated:
<TABLE>
<CAPTION>
<S> <C>
Term Section
AAA Rules............................................................................ 12.2
Archive Vendor.......................................................................10.1(d)
Archived Joint Books and Records.....................................................10.1(d)
Asserted Liability....................................................................8.3(a)
AT....................................................................................3.3(c)
AT&T..................................................................................3.3(a)
Beneficial Holder.....................................................................9.4(c)
Borrower Subsidiaries....................................................................3.2
Charter Amendments....................................................................2.1(b)
Claim Notice..........................................................................8.3(a)
CGI...................................................................................3.1(g)
Code................................................................................recitals
Communications........................................................................3.3(c)
Communications Certificates...........................................................4.4(b)
Communications Group................................................................recitals
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Communications Redemption..............................................................4.1(a)
Communications Rights...............................................................2.6(b)(i)
Contribution..............................................................................3.3
Demand...................................................................................12.2
Dex..................................................................................recitals
Directories Business.................................................................recitals
Disputes..................................................................................2.2
Distribution Agent.....................................................................4.4(c)
Dividend Number........................................................................4.3(b)
Domestic Cable.........................................................................3.1(c)
Exchange Agent.........................................................................3.2(l)
Exchange Offers........................................................................3.2(j)
Federal Relations......................................................................3.1(e)
FinanceCo..............................................................................3.2(a)
Financially Reasonable Terms........................................................8.3(c)(i)
Form 8-A............................................................................2.3(b)(i)
Form 8-B/A.........................................................................2.3(b)(ii)
Form S-4...........................................................................2.3(a)(ii)
International..........................................................................3.1(e)
Interactive Services...................................................................3.1(e)
Joint Books and Records...............................................................10.1(c)
Media Certificates.....................................................................4.4(b)
Media Dividend.........................................................................4.1(b)
Media Group..........................................................................recitals
Media Rights........................................................................2.6(b)(i)
MediaOne Assets........................................................................3.3(b)
MediaOne Common Stock..................................................................4.1(c)
MediaOne Delaware......................................................................3.1(d)
MediaOne Exchange Securities...........................................................3.2(j)
MediaOne Georgia.......................................................................3.1(a)
MediaOne Liabilities...................................................................3.4(b)
MediaOne New Indebtedness..............................................................3.2(a)
MediaOne Obligation....................................................................9.3(a)
MGRM..................................................................................10.4(a)
Multimedia.............................................................................3.1(b)
National Contract......................................................................9.4(e)
New U S WEST ........................................................................Recitals
New U S WEST Action....................................................................5.1(a)
New U S WEST Assets....................................................................3.3(a)
New U S WEST Common Stock..............................................................2.1(a)
New U S WEST DRS System................................................................4.4(d)
New U S WEST Exchange Securities.......................................................3.2(j)
New U S WEST Indemnified Parties.......................................................8.2(a)
New U S WEST Liabilities...............................................................3.4(a)
New U S WEST New Indebtedness..........................................................3.2(h)
New U S WEST Obligation................................................................9.3(a)
New U S WEST Right.....................................................................2.6(a)
New U S WEST Rights Agreement..........................................................2.6(a)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
New U S WEST SIP.......................................................................4.4(a)
New U S WEST SIP Account...............................................................4.4(a)
Non-Managing Party.....................................................................8.3(b)
Non-Receiving Party....................................................................8.3(b)
Notice Period......................................................................... 8.3(a)
NYSE...................................................................................2.3(b)
Panel................................................................................. 12.2
Party................................................................................. 12.2
Pre-Separation Adjustment..............................................................3.3(d)
Provider..................................................................................5.3
Proxy Statement.....................................................................2.3(a)(i)
PSE....................................................................................2.3(b)
Real Estate............................................................................3.1(e)
Recipient.................................................................................5.3
Receiving Party........................................................................8.3(b)
Record Date.........................................................................4.3(a)(i)
Record Holder..........................................................................9.4(c)
Redemption Date...................................................................4.3(a)(iii)
Refinancing............................................................................3.2(j)
Reorganization............................................................................3.1
Restated Certificate.................................................................recitals
Separation................................................................................4.1
Separation Committee.....................................................................12.2
Separation Time...........................................................................4.2
Shared Asserted Liability..............................................................8.3(b)
Shared Claim Notice....................................................................8.3(b)
Shared Liability Insurance Proceeds....................................................7.2(c)
SIP Participant........................................................................4.4(a)
Stockholders' Meeting.....................................................................2.2
Tender Offers..........................................................................3.2(j)
Trust Exchange Securities..............................................................3.2(j)
U S WEST.............................................................................Recitals
U S WEST Action........................................................................5.1(b)
U S WEST Indemnified Parties...........................................................8.1(a)
U S WEST Rights Agreement..............................................................2.6(b)
U S WEST SIP...........................................................................4.4(a)
U S WEST SIP Account...................................................................4.4(a)
USWRM.................................................................................10.4(a)
Western Range.......................................................................3.3(b)(i)
Western Range Transferred Insurance Arrangements.......................................7.1(a)
</TABLE>
1.3 Other Definitional Provisions. (a) The words "hereof",
"herein", and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
<PAGE>
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
1.4 References to Time. All references in this Agreement to
times of the day shall be to Mountain time.
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
2.1 Certificates of Incorporation; Bylaws; Name Changes. (a)
Prior to the Separation Time, U S WEST shall cause New U S WEST to take all
actions necessary to amend its Certificate of Incorporation and Bylaws in the
manner specified by U S WEST. The Certificate of Incorporation of New U S WEST
shall, among other things, authorize (i) 2,000,000,000 shares of Common Stock,
par value $.01 per share ("New U S WEST Common Stock"), of New U S WEST and (ii)
200,000,000 shares of Preferred Stock, par value $.01 per share, of New U S
WEST.
(b) Prior to the Separation Time, U S WEST shall take all
actions necessary in accordance with Applicable Law and the Restated Certificate
to amend the Restated Certificate (the "Charter Amendments") as specified by U S
WEST to, among other things, (i) permit the redemption of the Communications
Stock in exchange for shares of New U S WEST Common Stock pursuant to Section
4.1 and (ii) following such redemption, delete all references to the
Communications Stock and amend certain terms of the Media Stock set forth
therein.
(c) Prior to the Separation Time, the parties hereto shall
take all actions necessary so that, immediately after the Separation Time, (i)
New U S WEST's name shall be changed to "U S WEST, Inc." and (ii) U S WEST's
name shall be changed to "MediaOne Group, Inc."
2.2 Stockholders' Meeting. U S WEST shall take all actions
necessary in accordance with Applicable Law, the Restated Certificate and U S
WEST's Bylaws to call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders' Meeting") as soon as practicable for the
<PAGE>
purpose of obtaining (i) the adoption of the Charter Amendments by the
stockholders of U S WEST and (ii) such other approvals as may be determined by
the Board of Directors of U S WEST.
2.3 Registration and Listing. (a) Prior to the Separation
Time, (i) U S WEST shall prepare and file with the SEC a proxy statement under
the Exchange Act relating to the Stockholders' Meeting (the "Proxy Statement")
and (ii) New U S WEST shall prepare and file with the SEC a registration
statement on Form S-4 registering under the Securities Act the shares of New U S
WEST Common Stock to be issued to stockholders of U S WEST pursuant to Section
4.1, in which the Proxy Statement shall be included as a prospectus (the "Form
S-4"). The parties hereto shall use their reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after the filing thereof. U S WEST shall cause the Proxy Statement to be mailed
to U S WEST's stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. New U S WEST shall use its
reasonable best efforts to take all such actions as may be necessary or
appropriate under state securities and "blue sky" laws in connection with the
Separation.
(b) Prior to the Separation Time, (i) New U S WEST shall
prepare and file with the SEC a registration statement on Form 8-A registering
under the Exchange Act the New U S WEST Common Stock (the "Form 8-A") and (ii) U
S WEST shall prepare and file with the SEC an amendment on Form 8-K to U S
WEST's existing registration statement on Form 8-B amending the terms of the
Media Stock to reflect the changes set forth in the Charter Amendments (the
"Form 8-B/A"). New U S WEST shall take all actions necessary to list the New U S
WEST Common Stock on The New York Stock Exchange ("NYSE") and the Pacific Stock
Exchange (the "PSE"), subject to official notice of issuance. U S WEST shall
take all actions necessary to list the MediaOne Common Stock on the NYSE and the
PSE.
(c) The parties hereto shall cooperate in preparing and filing
with the SEC and causing to be declared effective any registration statements or
amendments thereto that are necessary or appropriate in order to reflect the
establishment of, or amendments to, any employee benefit plans contemplated by
this Agreement or any other Transaction Document requiring registration under
the Securities Act.
<PAGE>
2.4 Boards of Directors. Prior to the Separation Time, the
parties hereto shall take all actions necessary so that, effective immediately
after the Separation Time, the Boards of Directors of U S WEST and New U S WEST
shall be comprised of the individuals so named in the Proxy Statement.
2.5 Rights Agreements. (a) Prior to the Separation Time, New U
S WEST shall enter into a Rights Agreement (the "New U S WEST Rights Agreement")
on terms specified by U S WEST pursuant to which one Preferred Stock Purchase
Right of New U S WEST (a "New U S WEST Right") will be attached to each share of
New U S WEST Common Stock issued to U S WEST pursuant to Section 4.1. All
references in this Agreement to New U S WEST Common Stock shall be deemed to
include such New U S WEST Rights.
(b) Prior to the Separation Time, the Amended and Restated
Rights Agreement, dated as of October 31, 1995 (the "U S WEST Rights
Agreement"), between U S WEST and State Street Bank and Trust Company, as rights
agent, shall be amended to provide (i) that the U S WEST Communications Group
Rights (as defined in the U S WEST Rights Agreement) (the "Communications
Rights") and the U S WEST Media Group Rights (as defined in the U S WEST Rights
Agreement) (the "Media Rights") shall not become exercisable, distributed or
unredeemable as a result of the consummation of the Separation; (ii) that the
Communications Rights will expire at the Separation Time; and (iii) for certain
amendments to the terms of the Media Rights.
2.6 The Transaction Documents. Prior to the Separation Time,
each of U S WEST and New U S WEST shall enter into, or cause the appropriate
members of the Group of which it is a member to enter into, the Transaction
Documents.
2.7 U S WEST Approval of Certain New U S WEST Actions. Prior
to the Separation Time, U S WEST shall take and/or ratify all actions necessary
under Applicable Law, as the sole stockholder of New U S WEST, to effectuate the
transactions contemplated by this Agreement, including, without limitation,
adopting and implementing appropriate plans, agreements and arrangements for New
U S WEST Employees.
<PAGE>
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
3.1 Reorganization. Subject to the terms and conditions of
this Agreement, at such time as determined by U S WEST in its sole discretion, U
S WEST shall cause the following transactions to occur in the order set forth
below (collectively, the "Reorganization"):
(a) MediaOne, Inc., a Georgia corporation ("MediaOne
Georgia"), shall cause:
(i) MediaOne Business Services, Inc., a Colorado corporation,
to be merged with and into MediaOne Georgia;
(ii) MediaOne of Clayton County, Inc., a Georgia corporation,
to be merged with and into MediaOne Georgia;
(iii) MediaOne of Cobb County, Inc., a Georgia corporation, to
be merged with and into MediaOne Georgia;
(iv) MediaOne of Conyers Rockdale, Inc., a Georgia
corporation, to be merged with and into MediaOne Georgia;
(v) MediaOne of Fayette County, Inc., a Georgia corporation,
to be merged with and into MediaOne Georgia;
(vi) MediaOne of Fulton County, Inc., a Georgia corporation,
to be merged with and into MediaOne Georgia;
(vii) MediaOne of Georgia, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(viii) MediaOne of Henry County, Inc., a Georgia corporation,
to be merged with and into MediaOne Georgia;
<PAGE>
(ix) Peachtree SMATV Corporation, a Georgia corporation, to be
merged with and into MediaOne Georgia; and
(x) Atlanta Home Network, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia.
(b) MediaOne Group, Inc. (formerly U S WEST Multimedia
Communications, Inc.), a Colorado corporation ("Multimedia"), shall cause
MediaOne Georgia to be merged
with and into Multimedia.
(c) MGI shall assume from Domestic Cable, Inc. (formerly U S
WEST Domestic Cable, Inc.), a Colorado corporation ("Domestic Cable"), all of
the Intercompany Indebtedness of Domestic Cable, in repayment of a corresponding
amount of the indebtedness owed by MGI to Domestic Cable.
(d) MediaOne of Delaware, Inc., a Delaware corporation
("MediaOne Delaware"), shall assume from MGI all of the indebtedness owed by MGI
to Domestic Cable (after giving effect to the repayment contemplated by Section
3.1(c)).
(e) MediaOne Delaware shall assume from MGI a portion of the
Intercompany Indebtedness of MGI equal to the difference between (A) the total
amount of Intercompany Indebtedness of MGI (after giving effect to the
assumption contemplated by Section 3.1(c)) and (B) the sum of (1) the difference
between (x) $3.9 billion and (y) the Intercompany Indebtedness of Dex plus (2)
the difference between (x) the principal amount of the indebtedness owed by
Capital Funding to U S WEST and (y) the principal amount of the Intercompany
Indebtedness of U S WEST Federal Relations, Inc., a Delaware corporation
("Federal Relations").
(f) MGI shall contribute as a capital contribution to
Multimedia:
(i) all of the issued and outstanding shares of capital stock
of: (A) MediaOne Capital Corporation (formerly U S WEST Capital
Corporation), a Colorado corporation; (B) MediaOne Interactive
Services, Inc. (formerly U S WEST Interactive Services, Inc.), a
Colorado corporation ("Interactive Services"); (C) MediaOne
International Holdings, Inc. (formerly U S
<PAGE>
WEST International Holdings, Inc.), a Delaware corporation
("International"); (D) MediaOne Investments Holdings, Inc. (formerly U
S WEST Investments, Inc.), a Colorado corporation; (E) MediaOne
Delaware; (F) Far East Investment Company, a Colorado corporation; (G)
Domestic Cable; (H) MediaOne Cellular Holdings, Inc. (formerly U S WEST
Cellular Holdings, Inc.), a Delaware corporation; and (I) MediaOne PCS
Services, Inc. (formerly U S WEST PCS Services, Inc.), a Colorado
corporation; and
(ii) all of the AirTouch Stock.
(g) MGI shall distribute as a dividend all of the issued and
outstanding capital stock of Multimedia to U S WEST.
(h) U S WEST shall merge U S WEST Communications Group, Inc.,
a Colorado corporation ("CGI"), with and into New U S WEST, with New U S WEST
continuing as the surviving corporation. Pursuant to such merger, the issued and
outstanding capital stock of CGI shall be converted into a number of shares of
New U S WEST Common Stock equal to the sum of (i) the number of shares of
Communications Stock that will be issued and outstanding immediately prior to
the Separation Time plus (ii) the aggregate number of shares of New U S WEST
Common Stock to be issued to holders of Media Stock in connection with the
Separation pursuant to Section 4.1. Each share of New U S WEST Common Stock so
issued to U S WEST shall be fully paid, nonassessable and free of preemptive
rights.
3.2 Refinancing of Indebtedness. Following consummation of the
Reorganization, U S WEST shall cause the following actions to be taken with
respect to certain indebtedness of U S WEST and its Subsidiaries (as used in
this Section 3.2, all references to "amounts" or "aggregate principal amounts"
of any indebtedness shall refer to the face amount of such indebtedness):
(a) A newly formed direct or indirect Subsidiary of U S WEST
("FinanceCo") shall incur an aggregate principal amount of indebtedness equal to
the difference between (i) the sum of (A) the total aggregate principal amount
of the Capital Funding Indebtedness attributed to the Media Group plus (B) the
total aggregate principal amount of the Financial Services Indebtedness plus (C)
an aggregate principal amount of indebtedness sufficient to fund the
<PAGE>
costs and expenses which are the responsibility of the U S WEST Group in
connection with the Separation and (ii) the sum of (A) $3.9 billion plus (B) the
amount of the AirTouch Funds (the "MediaOne New Indebtedness"). All of the
indebtedness incurred by FinanceCo shall be guaranteed by
U S WEST.
(b) FinanceCo shall lend to Financial Services an amount of
funds equal to the total aggregate principal amount of the Financial Services
Indebtedness.
(c) FinanceCo shall lend to each of (i) PCS Holdings, (ii)
Interactive Services, (iii) Financial Services, (iv) International and (v)
MediaOne Real Estate, Inc. (formerly U S WEST Real Estate, Inc.), a Colorado
corporation ("Real Estate"), an amount of funds equal to the Intercompany
Indebtedness of such entity. Each such entity shall, in turn, use the funds so
borrowed from FinanceCo to repay its Intercompany Indebtedness.
(d) U S WEST shall assume from Capital Funding the
indebtedness owed by Capital Funding to International. U S WEST shall, in turn,
contribute such indebtedness to FinanceCo.
(e) FinanceCo shall lend to MediaOne Delaware an amount of
funds equal to the sum of the Intercompany Indebtedness of Multimedia and
MediaOne Delaware (after giving effect to the assumption made pursuant to
Section 3.1(c)). MediaOne Delaware shall, in turn, use a portion of the funds so
borrowed from FinanceCo to repay its Intercompany Indebtedness and shall
distribute as a dividend to Multimedia the balance of the funds so borrowed from
FinanceCo. Multimedia shall, in turn, use such balance of funds to repay its
Intercompany Indebtedness.
(f) Capital Funding shall repay a portion of the indebtedness
owed by Capital Funding to U S WEST equal to the aggregate principal amount of
the Intercompany Indebtedness of Federal Relations by distributing to U S WEST
the Intercompany Indebtedness of Federal Relations. U S WEST will, in turn,
contribute as a capital contribution to Federal Relations such Intercompany
Indebtedness and Federal Relations shall transfer such capital contribution to
Capital Funding to repay such Intercompany Indebtedness.
(g) U S WEST shall contribute as a capital contribution to MGI
all of the indebtedness owed by Capital
<PAGE>
Funding to U S WEST. MGI shall use such indebtedness to repay a corresponding
aggregate principal amount of its Intercompany Indebtedness.
(h) Capital Funding shall incur an aggregate principal amount
of new indebtedness equal to the sum of (i) the total aggregate principal amount
of Capital Funding Indebtedness attributed to the Communications Group plus (ii)
$3.9 billion plus (iii) an aggregate principal amount of new indebtedness
sufficient to fund the costs and expenses which are the responsibility the New U
S WEST Group in connection with the Separation, as well as the Pre- Separation
Adjustment (the "New U S WEST New Indebtedness"). All of the new indebtedness
incurred by Capital Funding shall be guaranteed by New U S WEST.
(i) FinanceCo shall loan to U S WEST all of the proceeds of
the indebtedness incurred by FinanceCo to fund the costs and expenses which are
the responsibility of the U S WEST Group in connection with the Separation and U
S WEST shall use such funds to pay or cause to be paid such costs and expenses
(including by contributing funds to Capital Funding to fund the costs and
expenses of the Refinancing as described below). Capital Funding shall loan to
New U S WEST all of the proceeds of the indebtedness incurred by Capital Funding
to fund the costs and expenses which are the responsibility of the New U S WEST
Group in connection with the Separation (other than costs and expenses included
in the Pre-Separation Adjustment) and New U S WEST shall use such funds to pay
or cause to be paid such costs and expenses. Capital Funding shall loan to U S
WEST an amount of funds equal to the Pre-Separation Adjustment and New U S WEST
shall, in turn, assume from U S WEST all of the obligations of U S WEST under
such indebtedness. U S WEST shall contribute, as a capital contribution, to
Capital Funding the amount of funds necessary for Capital Funding to fund all of
the costs and expenses of the Refinancing payable by Capital Funding and Capital
Funding shall use such funds to pay such costs and expenses.
(j) U S WEST shall take all actions necessary to cause the
Capital Funding Public Indebtedness, the Capital Funding Private Indebtedness,
the Trust Securities and the Financial Services Indebtedness to be refinanced
(collectively, the "Refinancing") through one or more of: (i) offers to purchase
the Capital Funding Public Indebtedness, the Financial Services Indebtedness and
the
<PAGE>
Trust Securities (the "Tender Offers"); (ii) offers to exchange (the "Exchange
Offers") (A) the Capital Funding Public Indebtedness for new debt securities of
Capital Funding guaranteed by New U S WEST (the "New U S WEST Exchange
Securities") or new debt securities of FinanceCo guaranteed by U S WEST (the
"MediaOne Exchange Securities") and (B) the Trust Securities for new trust
securities of New Trusts (the "Trust Exchange Securities"); (iii) repayments of
the Capital Funding Private Indebtedness; and (iv) defeasance of the Capital
Funding Public Indebtedness, Financial Services Indebtedness and the Capital
Funding Trust Indebtedness.
(k) Capital Funding shall use a portion of the proceeds of the
New U S WEST New Indebtedness, together with the AirTouch Funds, if any, and the
funds it receives from Interactive Services, Financial Services, Real Estate,
International, MediaOne Delaware and Multimedia (collectively, the "Borrower
Subsidiaries") pursuant to Sections 3.2 (c) and (e) to (i) repay all of the
Capital Funding Private Indebtedness, (ii) repay all of the Capital Funding
Public Indebtedness tendered pursuant to the Tender Offers, (iii) repurchase all
of the Trust Securities tendered in the Tender Offers and the Exchange Offers
and (iv) defease all of the Capital Funding Public Indebtedness and Capital
Funding Trust Indebtedness to be defeased pursuant to the Refinancing. Capital
Funding shall use the Trust Securities which it repurchases pursuant to the
Tender Offers to satisfy its obligations under a corresponding aggregate
principal amount of Capital Funding Trust Indebtedness. Financial Services shall
use the funds it receives from FinanceCo pursuant to Section 3.2(b) to repay all
of the Financial Services Indebtedness tendered pursuant to the Tender Offers.
(l) In the event that holders of Capital Funding Public
Indebtedness offer to exchange such indebtedness for New U S WEST Exchange
Securities pursuant to the Exchange Offers, the amount of New U S WEST New
Indebtedness shall be reduced by an amount equal to the aggregate principal
amount of the New U S WEST Exchange Securities issued. In no event shall New U S
WEST Exchange Securities be issued in an aggregate principal amount which
exceeds the aggregate principal amount of the New U S WEST New Indebtedness. In
the event that holders of Capital Funding Public Indebtedness offer to exchange
such indebtedness for MediaOne Exchange Securities pursuant to the Exchange
Offers, (i) FinanceCo shall distribute to U S WEST such
<PAGE>
MediaOne Exchange Securities, U S WEST shall contribute such MediaOne Exchange
Securities to Capital Funding and Capital Funding shall issue such MediaOne
Exchange Securities in exchange for the Capital Funding Public Indebtedness
offered for exchange, (ii) the amount of MediaOne New Indebtedness shall be
reduced by an amount equal to the aggregate principal amount of the MediaOne
Exchange Securities issued, (iii) Capital Funding shall transfer to U S WEST all
of its rights under an amount of Intercompany Indebtedness of the Borrower
Subsidiaries equal to the aggregate principal amount of such MediaOne Exchange
Securities (in which event the transactions contemplated by Sections 3.2(c) and
3.2(e) shall not be effected with respect to an amount equal to the amount of
such Intercompany Indebtedness) and (iv) MediaOne Funding shall declare as a
dividend to U S WEST a note in an amount equal to the aggregate principal amount
of such MediaOne Exchange Securities. In the event that holders of Trust
Securities offer to exchange such securities for Trust Exchange Securities
pursuant to the Exchange Offers, (i) Capital Funding shall repurchase such Trust
Securities as described in Section 3.2(k), (ii) the exchange agent for the
Exchange Offers (the "Exchange Agent") shall use the funds which Capital Funding
would otherwise pay to such holders to purchase, on behalf of such holders,
Trust Exchange Securities from one or more New Trusts with an aggregate
liquidation amount corresponding to the aggregate liquidation amount of the
Trust Securities repurchased by Capital Funding and shall deliver such Trust
Exchange Securities to such holders, (iii) each New Trust shall loan to
FinanceCo the funds received upon issuance of such Trust Exchange Securities and
FinanceCo shall use such funds to repay a portion of the MediaOne New
Indebtedness and (iv) Capital Funding shall use the Trust Securities which it so
repurchases to satisfy its obligations under a corresponding aggregate principal
amount of Capital Funding Trust Indebtedness. In no event shall MediaOne
Exchange Securities and Trust Exchange Securities be issued in an aggregate
principal amount which exceeds the aggregate principal amount of the MediaOne
New Indebtedness.
(m) In the event that less than all of the Capital Funding
Public Indebtedness, Trust Securities and Financial Services Indebtedness are
tendered or exchanged pursuant to the Refinancing and U S WEST does not elect to
defease such indebtedness (or, in the case of the Trust Securities, the related
Capital Funding Trust Indebtedness), (i) U S WEST shall assume from Capital
Funding all of the Capital Funding Public Indebtedness not tendered or
<PAGE>
exchanged and an amount of Capital Funding Trust Indebtedness equal to the
liquidation amount of the Trust Securities not tendered or exchanged, (ii) the
amount of the MediaOne New Indebtedness shall be reduced by an amount equal to
the principal amount of the indebtedness assumed by U S WEST from Capital
Funding, (iii) Capital Funding shall transfer to U S WEST all of its rights
under an amount of Intercompany Indebtedness of the Borrower Subsidiaries equal
to the aggregate principal amount of the indebtedness assumed by U S WEST from
Capital Funding (in which event the transactions contemplated by Sections 3.2(c)
and 3.2(e) shall not be effected with respect to an amount equal to the amount
of such Intercompany Indebtedness), (iv) MediaOne Funding shall declare as a
dividend to U S WEST a note in an amount equal to the aggregate principal amount
of the indebtedness assumed by U S WEST from Capital Funding and (v) FinanceCo
shall not make the loans contemplated by Section 3.2(b) with respect to an
amount equal to the amount of Financial Services Indebtedness not tendered.
(n) U S WEST shall cause the U S WEST Savings Plan/ESOP to
repay all LESOP Notes outstanding immediately prior to the Separation Time.
3.3 Contribution. Subject to the terms and conditions of this
Agreement, following consummation of the Reorganization and the transactions
contemplated by Section 3.2, U S WEST and New U S WEST shall cause the following
transactions to occur in the order set forth below (collectively, the
"Contribution"):
(a) U S WEST shall, as a capital contribution to New U S WEST,
convey, transfer, assign and deliver to New U S WEST all of U S WEST's right,
title and interest in and to all of the following Assets (together with all of
the Assets of New U S WEST and its Subsidiaries prior to such transfer, the "New
U S WEST Assets"):
(i) all of the issued and outstanding capital stock, together
with all the Assets, of: (A) MGI; (B) Capital Funding; (C) Federal
Relations; (D) U S WEST Investment Management Company, a Colorado
corporation; (E) U S WEST SPF Co., a Colorado corporation; and (F) U S
WEST IP Holdings, Inc., a Delaware corporation;
(ii) except as set forth in Section 3.3(c), all of the Assets
included on the combined balance sheet of the Communications Group as
of March 31, 1998 and any
<PAGE>
Assets acquired by U S WEST or any of its Subsidiaries relating
primarily to the businesses attributed to the Communications Group from
April 1, 1998 to the Separation Time (including, in each case, the
proceeds received upon disposition of any such Assets);
(iii) all of the Assets included on the consolidated balance
sheet of Dex, as of March 31, 1998 and any Assets acquired by U S WEST
or any of its Subsidiaries relating primarily to the Directories
Business from April 1, 1998 to the Separation Time (including, in each
case, the proceeds received upon disposition of any such Assets);
(iv) subject to Section 5.6 and except as otherwise agreed to
by U S WEST and New U S WEST, all of the New U S WEST Trademarks, New U
S WEST Patents and New U S WEST Other Intellectual Property and an
equal and undivided interest in the Joint Patents and the Joint Other
Intellectual Property;
(v) all of the New U S WEST Insurance Arrangements, an equal
and undivided interest in the Joint Insurance Arrangements and all of
the other rights granted, and Assets contemplated to be transferred, to
New U S WEST pursuant to Article VII;
(vi) all of the rights granted, and Assets contemplated to be
transferred, to New U S WEST and the Communications Employee Benefit
Plans and Communications Employee Arrangements pursuant to the
Employee Matters Agreement;
(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(a)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the New U S WEST Business;
(viii) 50% of all Shared Contingent Gains;
(ix) all of the leasehold interests listed in Section
3.3(a)(ix) of the Separation Disclosure
Schedule;
(x) all of the Assets listed in Section 3.3(a)(x) of the
Separation Disclosure Schedule;
<PAGE>
(xi) all Contracts entered into by or for U S WEST on behalf
of, or which relate primarily to, the New U S WEST Business, including,
without limitation, agreements between U S WEST and Amerian Telephone
and Telegraph Company ("AT&T") pursuant to the Modification of Final
Judgment (and the subsequent approved Plan of Reorganization) by the
United States District Court for the District of Columbia (Civil Action
82-0192), and any follow-on agreements or rights such as the right of U
S WEST to elect a license under AT&T patents pursuant to the agreement,
effective January 1, 1989, between AT&T and Bell Communications
Research, Inc.; and
(xii) U S WEST Education Foundation, a Washington nonprofit
corporation, and U S WEST Foundation, a Colorado nonprofit corporation;
(b) U S WEST shall retain and shall not contribute to New U S
WEST, and the New U S WEST Assets shall not include, all of U S WEST's right,
title and interest in all of the Assets of U S WEST other than the New U S WEST
Assets (together with any Assets transferred to U S WEST or any member of the U
S WEST Group pursuant to Section 3.3(c) or the Employee Matters Agreement, the
"MediaOne Assets"), including, without limitation, the following Assets:
(i) all of the issued and outstanding capital stock, together
with all of the assets, of (A) Multimedia; (B) MediaOne of Michigan,
Inc., a Michigan corporation; (C) Western Range Insurance Co, a Vermont
corporation ("Western Range"); and (D) if FinanceCo is a Subsidiary of
U S WEST, FinanceCo;
(ii) all of the Assets included on the combined balance sheet
of the Media Group as of March 31, 1998 (other than the Assets of Dex
and its Subsidiaries) and any Assets acquired by U S WEST or any of its
Subsidiaries relating primarily to the MediaOne Business from April 1,
1998 to the Separation Time (including, in each case, the proceeds
received upon disposition of any such Assets);
(iii) all of the shares of Media Stock held as treasury stock
by U S WEST;
<PAGE>
(iv) all of the common securities of the Trusts, any New
Trusts and U S WEST Financing III, a Delaware statutory business trust;
(v) subject to Section 5.6 and except as otherwise agreed to
by U S WEST and New U S WEST, all of the MediaOne Trademarks, MediaOne
Patents and MediaOne Other Intellectual Property, and an equal and
undivided interest in the Joint Patents and the Joint Other
Intellectual Property;
(vi) all of the MediaOne Insurance Arrangements, an equal and
undivided interest in the Joint Insurance Arrangements and all of the
rights granted to, and Assets contemplated to be retained by, U S WEST
pursuant to Article VII;
(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(b)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the MediaOne Business;
(viii) 50% of all Shared Contingent Gains;
(ix) all of the leasehold interests listed in Section
3.3(b)(ix) of the Separation Disclosure
Schedule;
(x) all of the Assets listed in Section 3.3(b)(x) of the
Separation Disclosure Schedule; and
(xi) all Contracts entered into by or for U S WEST on behalf
of, or which relate primarily to, the MediaOne Business.
(c) New U S WEST shall cause the following transfers:
(i) U S WEST Advanced Technologies, Inc., a Colorado
corporation which will be a Subsidiary of New U S WEST upon
consummation of the Reorganization ("AT"), shall convey, transfer,
assign and deliver to U S WEST all of AT's right, title and interest in
and to the Assets of AT listed in Section 3.3(c) of the Separation
Disclosure Schedule.
<PAGE>
(ii) U S WEST Communications, Inc., a Colorado corporation
which will be a Subsidiary of New U S WEST upon consummation of the
Reorganization ("Communications") shall convey, transfer, assign and
deliver to U S WEST all of Communications' right, title and interest in
and to the Assets of Communications listed in Section 3.3(c) of the
Separation Disclosure Schedule.
(iii) Federal Relations shall convey, transfer, assign and
deliver to U S WEST all of Federal Relation's right, title and interest
in and to the Assets of Federal Relations listed in Section 3.3(c) of
the Separation Disclosure Schedule.
(d) Prior to the Separation Time, the Chief Financial Officer
of the Communications Group and the Chief Financial Officer of the Media Group
shall agree in writing as to the amount of the Pre-Separation Adjustment (as
determined below). The "Pre-Separation Adjustment" shall be determined in the
manner set forth in Section 3.3(d) of the Separation Disclosure Schedule. The
Pre-Separation Adjustment shall be satisfied in the manner contemplated by
Section 3.2(i).
3.4 Discharge of Liabilities. (a) From and after the
Separation Time, New U S WEST agrees to (or to cause a member of the New U S
WEST Group to) discharge or perform when due all of the following Liabilities
(the "New U S WEST Liabilities"):
(i) all Liabilities of U S WEST arising out of or relating
primarily to the New U S WEST Assets or the operation of the New U S
WEST Business, whether arising before or after the Separation Time;
(ii) all of the Liabilities included on the combined balance
sheet of the Communications Group as of March 31, 1998 and any
Liabilities incurred by U S WEST or any of its Subsidiaries relating
primarily to the businesses attributed to the Communications Group from
April 1, 1998 to the Separation Time;
(iii) all of the Liabilities included on the consolidated
balance sheet of Dex as of March 31, 1998 and any Liabilities incurred
by U S WEST or any of its Subsidiaries relating primarily to the
Directories Business from April 1, 1998 to the Separation Time;
<PAGE>
(iv) all indebtedness incurred by Capital Funding pursuant to
Section 3.2 and all of the indebtedness of U S WEST Communications,
Inc., a Colorado corporation;
(v) all Liabilities identified in Section 2(a) of the Employee
Matters Agreement and all other Liabilities identified in the Employee
Matters Agreement as Liabilities of the New U S WEST Group;
(vi) subject to Section 3.3(d), the Transaction Costs
identified in Section 1.1(j) of the Separation Disclosure Schedule as
the responsibility of New U S WEST;
(vii) for each category of Shared Liabilities listed in
Section 1.1(i) of the Separation Disclosure Schedule, the percentage of
such category of Shared Liabilities indicated in such section as the
responsibility of New U S WEST;
(viii) the Actions and Liabilities listed in Section
3.4(a)(viii) of the Separation Disclosure Schedule
(ix) the Liabilities listed in Section 3.4(a)(ix) of the
Separation Disclosure Schedule; and
(x) all Liabilities that are expressly contemplated by any of
the Transaction Documents as Liabilities of any member of the New U S
WEST Group.
(b) U S WEST shall retain and discharge or perform when due,
and New U S WEST shall have no liability with respect to, all Liabilities of U S
WEST other than the New U S WEST Liabilities (the "MediaOne Liabilities"),
including, without limitation, the following:
(i) all Liabilities arising out of or relating primarily to
the MediaOne Assets or the operation of the MediaOne Business, whether
arising before or after the Separation Time;
(ii) all of the Liabilities included on the combined balance
sheet of the Media Group as of March 31, 1998 (other than (A) the
Liabilities of Dex and its Subsidiaries and (B) $3.9 billion of
indebtedness (net of any indebtedness of Dex and its Subsidiaries)) and
any Liabilities incurred by U S WEST or any of its
<PAGE>
Subsidiaries relating primarily to the MediaOne
Business from April 1, 1998 to the Separation Time;
(iii) all indebtedness incurred by FinanceCo or assumed by U S
WEST from Capital Funding or Financial Services pursuant to Section 3.2
and all indebtedness of MediaOne Delaware;
(iv) all Liabilities identified in Section 2(b) of the
Employee Matters Agreement and all other Liabilities contemplated by
the Employee Matters Agreement as Liabilities of the U S WEST Group;
(v) subject to Section 3.3(d), the Transaction Costs
identified in Section 1.1(j) of the Separation Disclosure Schedule as
the responsibility of U S WEST;
(vi) for each category of Shared Liabilities listed in Section
1.1(i) of the Separation Disclosure Schedule, the percentage of such
category of Shared Liabilities indicated in such section as the
responsibility of U S WEST;
(vii) the Actions and Liabilities listed in Section
3.4(b)(vii) of the Separation Disclosure
Schedule;
(viii) the Liabilities listed in Section 3.4(b)(viii) of the
Separation Disclosure Schedule; and
(ix) all Liabilities that are expressly contemplated by any of
the Transaction Documents as Liabilities of any member of the U S WEST
Group.
3.5 Closing; Delivery; Methods of Transfer and Assumption. (a)
Unless otherwise provided in this Agreement, or in any other Transaction
Document, the closing of the Reorganization, the Refinancing and the
Contribution shall occur immediately prior to the Separation Time at the offices
of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153.
(b) In connection with the Reorganization and the
Contribution, (i) U S WEST shall execute and deliver and shall cause its
Subsidiaries to execute and deliver, such deeds, bills of sale, stock powers,
certificates of title, assignments of leases and contracts, assumption
agreements and other instruments of contribution, grant, conveyance,
<PAGE>
assignment, transfer, delivery and assumption necessary to evidence the
Reorganization and the Refinancing and (ii) U S WEST and New U S WEST shall (and
shall cause their Subsidiaries, as applicable, to) execute and deliver such
deeds, bills of sale, stock powers, certificates of title, assignments of leases
and contracts, assumption agreements and other instruments of contribution,
grant, conveyance, assignment, transfer, delivery and assumption necessary to
evidence the Contribution and the transactions contemplated by Section 3.4. All
such instruments shall be deemed to have been delivered as of the Separation
Time.
ARTICLE IV
THE SEPARATION
4.1 The Separation. Subject to the terms and conditions of
this Agreement, at the Separation Time, U S WEST shall cause the following
transactions to occur (collectively, the "Separation"):
(a) U S WEST shall, in accordance with the terms of Section
2.4.3 of Article V of the Restated Certificate (as amended by the Charter
Amendments), redeem each share of Communications Stock issued and outstanding
immediately prior to the Separation Time for one share of New U S WEST Common
Stock (the "Communications Redemption"). Each share of Communications Stock held
as treasury stock by U S WEST shall be cancelled.
(b) U S WEST shall distribute as a dividend (the "Media
Dividend") on each share of Media Stock outstanding as of the close of trading
on the Record Date (other than shares of Media Stock held as treasury stock by U
S WEST) a number of shares of New U S WEST Common Stock equal to the Dividend
Number (as determined in accordance with Section 4.3(b)).
(c) From and after the Separation Time, each outstanding share
of Media Stock shall remain outstanding and shall thereafter represent a share
of common stock, par value $.01 per share, of U S WEST, with the terms set forth
in the Restated Certificate (as amended by the Charter Amendments). As used
herein, such common stock is referred to as "MediaOne Common Stock".
<PAGE>
(d) From and after the Separation Time, each outstanding share
of Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share, of
U S WEST; Series D Convertible Preferred Stock, par value $1.00 per share, of U
S WEST; and Series E Convertible Preferred Stock, par value $1.00 per share, of
U S WEST, shall remain outstanding.
4.2 Separation Time. The Board of Directors shall determine
the time at which the Separation shall become effective (the "Separation Time"),
which time shall be following the satisfaction or waiver of all of the
conditions set forth in Section 4.5 as determined by the Board of Directors of U
S WEST.
4.3 Certain Determinations. (a) Prior to the Separation Time,
the Board of Directors of U S WEST shall (i) fix the record date for determining
the holders of Media Stock entitled to receive the Media Dividend (the "Record
Date"), (ii) declare the Media Dividend, (iii) fix the date on which the
Communications Stock shall be redeemed pursuant to the Communications Redemption
(the "Redemption Date") and (iv) give notice to holders of Communications Stock
of the Communications Redemption. The Redemption Date and the Record Date shall
be the date on which the Separation Time shall occur.
(b) The "Dividend Number" shall equal the quotient of (i)
$850,000,000 divided by (ii) the product of (x) the number of shares of Media
Stock outstanding immediately prior to the Separation Time (other than shares of
Media Stock held by U S WEST) multiplied by (y) the average Market Value of the
Communications Stock over the period of 20 Trading Days ending on the fifth
Trading Day prior to the date of the Separation Time, rounded to the nearest
one-hundred thousandth (or if there shall not be a nearest one-hundred
thousandth, to the next highest one-hundred thousandth).
4.4 New U S WEST SIP Accounts; Certificates; Distribution
Procedures. (a) Prior to the Separation Time, New U S WEST shall establish a
Shareowner Investment Plan (the "New U S WEST SIP"). As of the Separation Time,
New U S WEST shall establish an account (a "New U S WEST SIP Account") under the
New U S WEST SIP for each stockholder of U S WEST (each, a "SIP Participant")
which, immediately prior to the Separation Time, maintained an account (a "U S
WEST SIP Account") under the U S WEST Shareowner Investment
<PAGE>
Plan (the "U S WEST SIP"). As of the Separation Time, the New U S WEST SIP
Account of each SIP Participant shall, without any action on the part of the SIP
Participants, be credited by New U S WEST with that number of shares of New U S
WEST Common Stock that such SIP Participant has the right to receive pursuant to
the provisions of Section 4.1 and all shares of Communications Stock held in the
U S WEST SIP Account of such SIP Participant shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist. SIP
Participants shall be mailed the cash in lieu of fractional shares of New U S
WEST Common Stock to which they are entitled pursuant to Section 4.4(h).
(b) As of the Separation Time, all shares or fractions of a
share of Communications Stock redeemed pursuant to the Communications Redemption
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist. As of the Separation Time, each certificate that
immediately prior to the Separation Time evidenced shares of Communication Stock
("Communications Certificates") shall be deemed at any time after the Separation
Time to represent only the right to receive the shares of New U S WEST Common
Stock issuable in respect thereof pursuant to Section 4.1 and the unpaid
dividends and distributions payable with respect to such shares pursuant to this
Article IV. As of the Separation Time, each certificate that as of the Record
Date evidenced shares of Media Stock ("Media Certificates") shall after the
Separation Time represent a corresponding number of shares of MediaOne Common
Stock, the right to receive the shares of New U S WEST Common Stock issuable in
respect thereof pursuant to Section 4.1 and the unpaid dividends and
distributions payable with respect to such shares pursuant to this Article IV.
(c) Prior to the Separation Time, New U S WEST shall establish
a Direct Registration System which shall enable holders of New U S WEST Common
Stock to hold such shares in uncertificated book-entry form (the "New U S WEST
DRS System"). As of the Separation Time, U S WEST shall deposit with Boston
Equiserve, as Distribution Agent ("Distribution Agent"), (a) for the benefit of
holders of Communications Certificates, the shares of New U S WEST Common Stock
to which such holders are entitled pursuant to Section 4.1, (b) for the benefit
of holders of Media Certificates, the shares of New U S WEST Common Stock and
certificates evidencing the shares of MediaOne Common Stock to which such
holders are entitled pursuant to Section 4.1
<PAGE>
and (c) for the benefit of SIP Participants, certificates evidencing the shares
of MediaOne Common Stock to which such holders are entitled pursuant to Section
4.1. New U S WEST shall provide to the Distribution Agent the funds necessary to
pay any cash payable in lieu of fractional shares of New U S WEST Common Stock
pursuant to Section 4.4(h) and the funds or other property necessary to pay or
make any dividends or distributions with respect to shares of New U S WEST
Common Stock pursuant to Section 4.4(g).
(d) As soon as reasonably practicable after the Separation
Time, the Distribution Agent shall mail to each holder of record of
Communications Certificates (i) a letter of transmittal (which shall be in such
form and have such provisions as U S WEST reasonably may specify), (ii) an
affidavit of loss for use by holders whose Communications Certificates are lost,
mutilated or destroyed and (iii) instructions for use in effecting the surrender
of the Communications Certificates or completing such affidavit of loss. Upon
surrender of a Communications Certificate for cancellation to the Distribution
Agent or such affidavit of loss together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to such
instructions, the holder of such Communications Certificate shall be entitled to
receive in exchange therefor that number of shares of New U S WEST Common Stock
that such holder has the right to receive pursuant to Section 4.1 in respect
thereof in uncertificated book-entry form through the New U S WEST DRS System
and the Communications Certificate (if any) so surrendered shall forthwith be
canceled.
(e) As soon as reasonably practicable after the Separation
Time, the Distribution Agent shall mail to each holder of record of Media
Certificates (i) a letter of transmittal (which shall be in such form and have
such provisions as U S WEST reasonably may specify), (ii) an affidavit of loss
for use by holders whose Media Certificates are lost, mutilated or destroyed and
(iii) instructions for use in effecting the surrender of the Media Certificates
or completing such affidavit of loss. Upon surrender of a Media Certificate for
cancellation to the Distribution Agent or such affidavit of loss together with
such letter of transmittal, duly executed, and such other customary documents as
may be required pursuant to such instructions, the holder of such Media
Certificate shall be entitled to receive in exchange therefor a new certificate
representing that number of shares of MediaOne
<PAGE>
Common Stock represented by such Media Certificate and the Media Certificate (if
any) so surrendered shall forthwith be canceled. As soon as reasonably
practicable after the Separation Time, the Distribution Agent shall mail to each
holder of record of Media Certificates information indicating the number of
shares of New U S WEST Common Stock that such holder has the right to receive
pursuant to Section 4.1 in respect thereof in uncertificated book-entry form
through the New U S WEST DRS System and the amount of cash payable in lieu of
fractional shares of New U S WEST Common Stock to which such holder is entitled
pursuant to Section 4.4(h). As soon as reasonably practicable after the
Separation Time, the Distribution Agent shall mail to each SIP Participant a
certificate representing a number of shares of MediaOne Common Stock equal to
the number of shares of Media Stock held in such SIP Participant's U S WEST SIP
Account. Following such mailing to SIP Participants, the U S WEST SIP shall be
terminated.
(f) In the event of a transfer of ownership of shares of
Communications Stock or Media Stock that is not registered in the transfer
records of U S WEST, certificates evidencing the proper number of shares of New
U S WEST Common Stock and MediaOne Common Stock may be issued in accordance with
this Section 4.4 to a transferee if the Communications Certificate or Media
Certificate evidencing such shares of Communications Stock or Media Stock is
presented to the Distribution Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(g) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Separation Time shall be
paid with respect to any shares of New U S WEST Common Stock represented by a
Communications Certificate until such Communications Certificate or an affidavit
of loss is surrendered for exchange as provided herein. Subject to the effect of
Applicable Laws, following surrender of any such Communications Certificate or
affidavit of loss, there shall be paid to the holder of the shares of New U S
WEST Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Separation Time theretofore payable with respect to such shares
of New U S WEST Common Stock and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at
<PAGE>
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Separation Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such shares of New
U S WEST Common Stock, less the amount of any withholding taxes which may be
required thereon.
(h) No certificates or scrip representing fractional shares of
New U S WEST Common Stock shall be issued pursuant to the Media Dividend and
such fractional share interests will not entitle the holder thereof to vote or
to any rights of a stockholder of New U S WEST. Notwithstanding any provision of
this Agreement, each Person who immediately prior to the Separation Time was a
holder of shares of Media Stock who would otherwise have been entitled to
receive a fraction of a share of New U S WEST Common Stock (after taking into
account all of the shares of Media Stock owned by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of New U S WEST Common Stock multiplied by the average Market Value
of the Communications Stock over the period of 20 Trading Days ending on the
fifth Trading Day prior to the date of the Separation Time, rounded to the
nearest cent (or if there shall not be a nearest cent, to the next highest
cent).
(i) None of U S WEST, New U S WEST or the Distribution Agent
shall be liable to any holder of shares of Communications Stock or Media Stock
for shares of New U S WEST Common Stock, cash in lieu of fractional shares of
New U S WEST Common Stock or dividends or distributions with respect to shares
of New U S WEST Common Stock that have been delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(j) U S WEST shall be entitled to, or shall be entitled to
cause the Distribution Agent to, deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Communication Stock or Media Stock such amounts as are required to be deducted
and withheld with respect to the making of such payment under the Code, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by U S WEST or the Distribution Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Communications Stock or Media Stock in respect of which such
<PAGE>
deduction and withholding was made by U S WEST or the Distribution Agent.
(k) If any Communications Certificates or Media Certificates
shall not have been surrendered prior to seven years after the Separation Time
(or immediately prior to such earlier date on which any shares of New U S WEST
Common Stock, cash in lieu of fractional shares of New U S WEST Common Stock or
unpaid dividends or distributions with respect to shares of New U S WEST Common
Stock in respect of such Communications Certificates or Media Certificates would
otherwise escheat to or become the property of any Governmental Authority), any
undistributed shares of New U S WEST Common Stock in respect of Communications
Certificates or unpaid dividends or distributions in respect of such shares
shall, to the extent permitted by Applicable Laws, become the property of New U
S WEST and any undistributed shares of New U S WEST Common Stock in respect of
Media Certificates or cash in lieu of fractional shares or unpaid dividends or
distributions in respect of such shares shall, to the extent permitted by
Applicable Laws, become the property of U S WEST.
(l) Notwithstanding any other provision of this Article IV,
stockholders who are entitled to receive shares of New U S WEST Common Stock
pursuant to Section 4.1 with an aggregate value greater than or equal to $15
million will not receive such shares until such stockholders make all required
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. Shares of New U S WEST Common Stock issuable to stockholders required
to make such filings shall be held in escrow by the Distribution Agent until
such time as New U S WEST receives evidence from such stockholders that such
filings have been made.
4.5 Conditions to the Separation. (a) The undertaking of U S
WEST to effect the Separation is subject to the satisfaction of each of the
following conditions, unless waived by the Board of Directors of U S WEST in its
sole and absolute discretion:
(i) All of the transactions contemplated by this Agreement to
be performed on or prior to the consummation of the Separation shall
have been consummated.
(ii) The Form S-4, the Form 8-A and the Form
<PAGE>
8-B/A shall each have been declared effective by the SEC, and no stop
order with respect thereto shall be in effect.
(iii) The Charter Amendments shall have been approved and
adopted by the stockholders of U S WEST.
(iv) The Charter Amendments shall have been executed,
acknowledged and filed with the Secretary of State of the State of
Delaware in accordance with Section 242 of the Delaware General
Corporation Law.
(v) The Board of Directors of U S WEST shall have set the
Redemption Date and given notice of the Communications Redemption to
the holders of Communications Stock.
(vi) The Board of Directors of U S WEST shall have fixed the
Record Date and declared the Media Dividend.
(vii) The New U S WEST Common Stock shall have been approved
for listing on the NYSE and the PSE, subject to official notice of
issuance.
(viii) No order, injunction or decree shall have been issued
by any Governmental Authority and remain in effect preventing the
consummation of the Separation.
(ix) All consents of, approvals of, notices to and filings
with any Governmental Authority or any other Person necessary to
consummate the Reorganization, the Contribution or the Separation shall
have been obtained and be in full force and
effect.
(x) U S WEST shall have provided the NYSE and the PSE with the
prior written notice of the Redemption Date and the Record Date as
required by Rule 10b-17 of the Exchange Act and the rules and
regulations of the NYSE.
(xi) U S WEST shall have obtained an advance letter ruling
from the Internal Revenue Service that certain aspects of the
Reorganization, the Contribution and the Separation will qualify as
tax-free transactions within the meaning of Sections 332,
<PAGE>
368(a)(1)(D) and 355 of the Code, and such ruling shall be in full
force and effect at the Separation Time.
(xii) On or prior to the Separation Time, each of U S WEST and
New U S WEST shall have entered into, or caused the appropriate members
of the Group of which it is a member to enter into, each of the
Transaction Documents.
(b) Any determination made by the Board of Directors of U S
WEST on behalf of any of the parties hereto prior to the Separation Time
concerning the satisfaction or waiver of any or all of the conditions set forth
in this Section 4.5 shall be conclusive.
ARTICLE V
POST-SEPARATION INTERCOMPANY
BUSINESS RELATIONSHIPS
5.1 Pending Litigation. Following the Separation Time, subject
to the provisions of Section 8.3, (a) New U S WEST shall have exclusive
authority and control over the investigation, prosecution, defense and appeal of
all pending Actions relating to the New U S WEST Liabilities, including, but not
limited to, the pending Actions listed in Section 3.4(a) of the Separation
Disclosure Schedule (each, a "New U S WEST Action"), and may settle or
compromise, or consent to the entry of any judgment with respect to, any such
New U S WEST Action without the consent of U S WEST and (b) U S WEST shall have
exclusive authority and control over the investigation, prosecution, defense and
appeal of all pending Actions relating to the MediaOne Liabilities, including,
but not limited to, the pending Actions listed in Section 3.4(b) of the
Separation Disclosure Schedule (each, a "U S WEST Action"), and may settle or
compromise, or consent to the entry of any judgment with respect to, any such U
S WEST Action without the consent of New U S WEST; provided, however, that if
any member of the New U S WEST Group or any of their respective directors,
officers or employees is named as a party to a U S WEST Action or any member of
the U S WEST Group or any of their respective directors, officers or employees
is named as a party to a New U S WEST Action, neither U S WEST nor New U S WEST,
as the case may be, may settle or compromise, or consent to the entry of any
judgment with respect to, any such Action without the prior written consent of
such other named party
<PAGE>
(which consent may not be unreasonably withheld), unless such settlement (i)
includes a complete release of such other named party and such party's
directors, officers or employees (to the extent such directors, officers or
employees are named in such Action) and (ii) does not require such other named
party or such party's directors, officers or employees (to the extent such
directors, officers or employees are named in such Action) to make or forego any
payment or forego or take any action. Each of U S WEST and New U S WEST shall
cooperate fully with the other and its counsel in the investigation, defense and
settlement of any U S WEST Action or New U S WEST Action.
5.2 Settlements for Cash Collections and Disbursements After
the Separation Time. (a) For each calendar month commencing with the month in
which the Separation Time occurs and, unless sooner terminated by agreement of
the parties, continuing for a period of two years thereafter, (i) within 30
Business Days of the end of the month in question, New U S WEST shall prepare
and deliver to U S WEST, and U S WEST shall fully cooperate in preparing, a
statement of transactions that shall reflect a complete analysis of any cash
collections and cash disbursements by the New U S WEST Group on behalf of the U
S WEST Group during the relevant month or for any prior month that should have
been (but was not) included in a prior statement and (ii) within 30 Business
Days of the end of the month in question, U S WEST shall prepare and deliver to
New U S WEST, and New U S WEST shall fully cooperate in preparing, a statement
of transactions that shall reflect a complete analysis of any cash collections
and cash disbursements by the U S WEST Group on behalf of the New U S WEST Group
during the relevant month or for any prior month that should have been (but was
not) included in a prior statement; provided, however, in each case that, with
respect to the first such monthly period, such statement shall not reflect any
cash collections or disbursements occurring prior to the Separation Time.
(b) Not later than five Business Days (unless otherwise
specifically provided in the relevant Transaction Document) following delivery
of each such monthly statement, New U S WEST shall pay to U S WEST or U S WEST
shall pay to New U S WEST, as the case may be, in cash an amount necessary to
eliminate the account balance as reflected in each such statement (which amounts
may be set off against each other as appropriate). Any disputes relating to such
amounts payable shall be submitted to the Separation
<PAGE>
Committee for resolution in accordance with the procedures set forth in Section
12.2.
(c) Following the end of the two-year period referred to in
Section 5.2(a) (or such earlier period as the parties hereto may agree), U S
WEST and New U S WEST shall continue to deliver the statement of transactions
referred to in Section 5.2(a) and pay the amounts necessary to eliminate the
account balance as reflected in such statement in accordance with Section
5.2(b), at such intervals as the parties may agree. Any disputes relating to
such amounts payable shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.
(d) Each of U S WEST and New U S WEST hereby grants the other
a limited irrevocable power-of-attorney to endorse, deposit and negotiate any
check, draft or other form of payment made in respect of any invoice
representing a receivable payable to one of them but which is sent by the payor
to a lock box maintained by the other or is made payable to either of them or
any of their subsidiaries but which is the payment of a receivable that is a
receivable of the other.
5.3 Transition Services. (a) From and after the Separation
Time, each party will provide, or cause one or more of the members of its Group
to provide, to the other Group such services on such terms as may be agreed upon
between U S WEST and New U S WEST from time to time in writing. The party that
is to provide the services (the "Provider") will use its commercially reasonable
efforts to provide such services to the other party (the "Recipient") in a
satisfactory and timely manner and as further specified in writing by the
parties.
(b) All employees and representatives of the Provider
providing services to the Recipient pursuant to this Section 5.3 shall be deemed
for purposes of all compensation and employee benefits matters to be employees
or representatives of the Provider and not employees or representatives of the
Recipient. In performing such services, such employees and representatives will
be under the direction, control and supervision of the Provider (and not the
Recipient) and the Provider will have the sole right to exercise all authority
with respect to the employment (including, without limitation, termination of
employment), assignment and compensation of such employees and
<PAGE>
representatives. Any disputes relating to the provision of services under this
Section 5.3 shall be submitted to the Separation Committee for resolution in
accordance with the procedures set forth in Section 12.2.
5.4 U S WEST Name. (a) U S WEST acknowledges that the name "U
S WEST", whether alone or in combination with one or more words, is an asset
being transferred to New U S WEST pursuant to the Contribution. U S WEST agrees
to provide all necessary cooperation to New U S WEST in order to transfer the
name and the rights thereto as well as to enforce and protect the same against
third parties. Promptly after the Separation Time, U S WEST shall cause each
member of the U S WEST Group whose corporate name includes the name "U S WEST"
to change its name to delete any reference therein to "U S WEST" (for example,
without limiting the generality of the foregoing, the word "U S WEST" shall be
removed from the name of "U S WEST International Holdings, Inc."). Promptly
after the Separation Time, U S WEST shall, and shall cause each member of the U
S WEST Group to, subject to the requirements of Section 7.8 of the AirTouch
Merger Agreement, (i) assign, and does hereby assign, to New U S WEST any
license to use the name U S WEST (including any appurtenant rights and
obligations such as quality control) with all agents, franchisees and licensees
of the U S WEST Group and the MediaOne Business (to the extent permitted by the
terms of such license), including any license granted pursuant to Section 7.8 of
the AirTouch Merger Agreement, (ii) to the extent assignment is not permitted,
terminate any license to use the name U S WEST with all agents, franchisees and
licensees of the U S WEST Group and the MediaOne Business (to the extent
permitted by the terms of such license) and (iii) if neither assignment or
termination is permitted, the U S WEST Group shall cooperate with New U S WEST,
and if appropriate enter into necessary agreements, to preserve New U S WEST's
ownership rights in the U S WEST name. U S WEST further agrees not to use the
name "U S WEST" in connection with the operations of the U S WEST Group or the
MediaOne Business, or otherwise interfere in any way with New U S WEST's
ownership rights in the U S WEST name; provided, however, that for a period of
six months after the Separation Time, the U S WEST Group may continue to use the
"U S WEST" name for internal purposes on business forms, business cards (with
the company name manually corrected) and stationery. Nothing herein shall
require U S WEST or any member of the U S WEST Group to retrieve from customers
telephones, accessories or other equipment or materials
<PAGE>
labeled with the "U S WEST" name and remove such name from such telephones,
accessories or other equipment or materials.
(b) For a period of two years following the Separation Time,
New U S WEST shall not, and shall cause each member of the New U S WEST Group
not to, use the names "U S WEST Media Group," "U S WEST Media," "U S WEST
Interactive Services," "U S WEST International" or "U S WEST NewVector" in the
operations of the New U S WEST Business; provided, however, that,
notwithstanding the foregoing, the New U S WEST Group shall be permitted to use
the words "Media Group," "Media," "Interactive Services," and "International" as
long as such words do not immediately follow the name "U S WEST" as referenced
above. By way of example, New U S WEST may use as "taglines" references to "the
Media Group of U S WEST," the "International Division of U S WEST" or similar
references in the operation of the New U S WEST Business. Promptly after the
Separation Time, New U S WEST shall cause MGI to change its corporate name to
delete any reference therein to the words "Media Group".
5.5 Transfer Taxes. New U S WEST and U S WEST agree to
cooperate to determine the amount of sales, transfer or other similar taxes or
fees (including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement. U S WEST and New U S WEST agree to
file promptly and timely returns for such taxes and fees with the appropriate
taxing authorities. The amounts payable with respect to such taxes and fees
shall be borne equally by U S WEST and New U S WEST. Any disputes relating to
such amounts payable shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.
5.6 Intellectual Property. (a) At the Separation Time, subject
to Section 5.6(b), (i) the U S WEST Group shall become the sole and exclusive
owner of all right, title and interest in the MediaOne Patents, the MediaOne
Trademarks and the MediaOne Other Intellectual Property, (ii) the New U S WEST
Group shall become the sole and exclusive owner of all right, title and interest
in the New U S WEST Patents, the New U S WEST Trademarks and the New U S WEST
Other Intellectual Property and (iii) the U S WEST Group and the New U S WEST
Group shall each have, as joint owners, an equal and undivided interest in and
to all right, title and interest in both the Joint Patents and the Joint
<PAGE>
Other Intellectual Property. The parties agree to file appropriate assignment
documents with the U.S. Patent and Trademark Office (or other appropriate
agencies) in order to effect and record the ownership of the MediaOne Patents,
the MediaOne Trademarks, the New U S WEST Patents, the New U S WEST Trademarks
and the Joint Patents as provided under this Section 5.6(a).
(b) From and after the Separation Time, subject to the
protection of Information required by Section 10.5, (i) the New U S WEST Group
shall have the non-exclusive right to use (both for internal purposes and, if
reasonably expected by its nature, by copying, modifying and incorporating
during the course of providing products and services to others) all MediaOne
Other Intellectual Property which is in the legitimate possession of, and is
used by or for which there are good faith plans for use by, the New U S WEST
Group as of the Separation Time and (ii) the U S WEST Group shall have the
non-exclusive right to use (both for internal purposes and, if reasonably
expected by its nature, by copying, modifying and incorporating during the
course of providing products and services to others) all New U S WEST Other
Intellectual Property which is in the legitimate possession of, and is used by
or for which there are good faith plans for use by, the U S WEST Group as of the
Separation Time.
(c) It is understood that (i) the right of the New U S WEST
Group to use MediaOne Other Intellectual Property under Section 5.6(b) (and the
right of the New U S WEST Group to use New U S WEST Other Intellectual Property
which is in its possession and which is used, or for which there are good faith
plans to use, as of the Separation Time) shall include (but only to the extent
necessary for such use) rights under MediaOne Patents and (ii) the right of the
U S WEST Group to use New U S WEST Other Intellectual Property under Section
5.6(b) (and the right of the U S WEST Group to use MediaOne Other Intellectual
Property which is in its possession and which is used, or for which there are
good faith plans to use, as of the Separation Time) shall include (but only to
the extent necessary for such use) rights under New U S WEST Patents.
(d) Subject to the protection of Information required by
Section 10.5 and any third party rights, Joint Other Intellectual Property may
be used, copied, modified and provided or licensed to others (and exploited in
any
<PAGE>
other manner) by either Group without accounting to the
other Group.
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employees. Effective as of the Separation Time, except as
otherwise provided in the Employee Matters Agreement, (a) those Media Employees
who are employed by U S WEST or any of its Subsidiaries immediately prior to the
Separation Time shall remain or become employees of U S WEST or any Subsidiary
thereof and (b) those Communications Employees who are employed by U S WEST or
any of its Subsidiaries immediately prior to the Separation Time shall become
employees of New U S WEST or any Subsidiary thereof.
6.2 Employee Benefit Plans and Employee Arrangements. U S WEST
and New U S WEST shall take all actions necessary to effect the transfer to New
U S WEST and the assumption by New U S WEST of the Employee Benefit Plans and
Employee Arrangements and the Assets and Liabilities thereunder as described in
the Employee Matters Agreement.
6.3 Internal Revenue Service Forms. U S WEST and New U S WEST
agree that pursuant to the "Alternative Procedure" provided in Section 5 of
Revenue Procedure 96-60, 1996-53, I.R.B. 24, with respect to preparing, filing
and furnishing the Internal Revenue Service Forms W-2, W-3, 941 and W-5, (i) U S
WEST and New U S WEST shall report on a "predecessor-successor" basis as set
forth therein, (ii) U S WEST shall be relieved from furnishing Forms W-2 to the
New U S WEST Employees and (iii) New U S WEST shall assume the obligations of U
S WEST to furnish such forms to the New U S WEST Employees for the full 1998
calendar year.
ARTICLE VII
INSURANCE MATTERS
7.1 Policies and Rights Included Within Assets. (a) At such
time as the parties agree, U S WEST shall cause Western Range to transfer to an
Insurer or to a member of the New U S WEST Group all of the Insurance
Arrangements provided by Western Range (as well as the liabilities and
corresponding reserves) which relate to members of the New
<PAGE>
U S WEST Group or the New U S WEST Business or New U S WEST Liabilities (the
"Western Range Transferred Insurance
Arrangements").
(b) The MediaOne Assets shall include (i) all MediaOne
Insurance Arrangements, (ii) all of the workers' compensation Assets of U S WEST
in Western Range and (iii) subject to the provisions of this Article VII, an
equal and undivided interest in the Joint Insurance Arrangements. The New U S
WEST Assets shall include (i) all New U S WEST Insurance Arrangements (including
the Western Range Transferred Insurance Arrangements) and (ii) subject to the
provisions of this Article VII, an equal and undivided interest in the Joint
Insurance Arrangements.
(c) As of the Separation Time, all of the Joint Insurance
Arrangements shall be discontinued and each of the Groups shall be responsible
for arranging separate Insurance Arrangements with respect to injuries, losses,
liabilities, damages and expenses arising after the Separation Time with respect
to such Group and its businesses. At the Separation Time, all prepaid and unused
premiums with respect to each Joint Insurance Arrangement shall be distributed
to U S WEST and New U S WEST in the same ratio in which such premiums were
allocated by U S WEST to the MediaOne Business and the New U S WEST Business
prior to the Separation Time. Following the Separation Time, any refunds
received by U S WEST or New U S WEST with respect to a Joint Insurance
Arrangement shall be distributed to U S WEST and New U S WEST in the same ratio
in which premiums payable with respect to such Joint Insurance Arrangement were
allocated by U S WEST to the MediaOne Business and the New U S WEST Business
prior to the Separation Time. To the extent U S WEST or New U S WEST receives
any such refund, the party receiving such refund shall promptly transfer to the
other party the portion of such refund to which such other party is entitled.
7.2 Administration; Other Matters. (a) From and after the
Separation Time, except as set forth in Section 7.2(c), U S WEST shall be
responsible for Insurance Administration under the Joint Insurance Arrangements
with respect to MediaOne Liabilities and New U S WEST shall be responsible for
Insurance Administration under the Joint Insurance Arrangements with respect to
New U S WEST Liabilities. The disbursements, out-of-pocket expenses and costs of
employees or agents of U S WEST or New U S WEST relating to Insurance
Administration contemplated by this
<PAGE>
Section 7.2(a) shall be borne by the party incurring such expenses or costs.
Insurance Proceeds with respect to claims, costs and expenses under the Joint
Insurance Arrangements shall be paid by the Insurer to the party making the
Insured Claim thereunder. In the event U S WEST or New U S WEST makes an Insured
Claim under a Joint Insurance Arrangement, such party shall deliver notice to
the other party of such Insured Claim and shall keep the other party
periodically updated as to the status of such Insured Claim.
(b) From and after the Separation Time, subject to Section
7.2(c), each of U S WEST and New U S WEST shall have the right to claim coverage
for Insured Claims under each Joint Insurance Arrangement with respect to any
claim covered by such Joint Insurance Arrangement as and to the extent that such
insurance is available up to the full extent of the applicable limits of
liability, if any, of such Joint Insurance Arrangement (and may receive any
Insurance Proceeds with respect thereto); provided, however, that, prior to
receiving any payment under a Joint Insurance Arrangement, U S WEST or New U S
WEST, as the case may be, shall be required to have retained a portion of the
Liability underlying such Insured Claim equal to the amount of the self-insured
retention or deductible, if any, of such party with respect to such Liability.
In the event that the total Insurance Proceeds payable to the U S WEST Group and
the New U S WEST Group under a Joint Insurance Arrangement shall have exhausted
the limits of liability, if any, under such Joint Insurance Arrangement, payment
of any future claims which are not reimbursed under such Joint Insurance
Arrangement as a result of such exhaustion of the limits of liability shall be
the sole responsibility of the party having liability for such claim under
Section 3.4. Each of the parties agrees to use commercially reasonable efforts
to maximize available coverage under those Joint Insurance Arrangements
applicable to it, and to take all commercially reasonable steps to recover from
all other responsible parties in respect of an Insured Claim.
(c) With respect to any Insured Claim in respect of a Shared
Liability, U S WEST and New U S WEST shall share any Insurance Proceeds received
in respect of such Insured Claim in the same proportions in which such Shared
Liability is shared by U S WEST and New U S WEST. In the event of any such
Insured Claim, U S WEST and New U S WEST shall jointly determine which party
shall be responsible for Insurance Administration under the Joint Insurance
Arrangements in
<PAGE>
respect of such Insured Claim. The disbursements, out-of-pocket expenses and
costs relating to Insurance Administration contemplated by this Section 7.2(c)
shall be borne by the parties in the same proportions in which the Shared
Liability underlying such Insured Claim is shared by U S WEST and New U S WEST.
7.3 Cooperation; Disagreements. The parties shall use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated by this Agreement. Any disagreements between U S
WEST and New U S WEST under this Article VII shall be submitted to the
Separation Committee in accordance with the procedures set forth in Section
12.2.
ARTICLE VIII
INDEMNIFICATION
8.1 New U S WEST's Agreement to Indemnify. (a) Except as
otherwise specifically provided in the other Transaction Documents,
subject to the terms and conditions set forth in this Agreement, from and after
the Separation Time, New U S WEST shall indemnify, defend and hold harmless
U S WEST and its directors, officers, employees, representatives, advisors,
agents and Affiliates (collectively, the "U S WEST Indemnified Parties")
from, against and in respect of any and all Indemnifiable Losses of the
U S WEST Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly:
(i) any and all New U S WEST Liabilities (including any New
U S WEST Liability which could be covered by the terms of
the indemnification provisions contained in the Bylaws of U S WEST
prior to the Separation Time);
(ii) New U S WEST's failure to observe from and after the
Separation Time its obligations under this Agreement or any of the
other Transaction Documents;
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Documentation, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
<PAGE>
not misleading (but, in each case, only with respect to information
relating to the New U S WEST Business contained in or omitted from the
SEC Documentation); and
(iv) (A) any obligation for which any member of the U S WEST
Group may be liable as guarantor, original tenant, primary obligor or
otherwise under any New U S WEST Obligation or (B) the triggering of
any cross- default provision contained in any MediaOne Obligation as a
result of a default by a member of the New U S WEST Group under any New
U S WEST Obligation (other than, in each case, to the extent any
Indemnifiable Losses arise out of, relate to or result from actions
taken by a member of the U S WEST Group).
(b) Notwithstanding New U S WEST's obligations to indemnify U
S WEST Indemnified Parties pursuant to Section 8.1(a), U S WEST hereby waives,
releases and agrees not to make any claim or bring any contribution, cost
recovery or other action against any member of the New U S WEST Group, and, if
applicable, their respective directors, officers, employees, representatives,
agents and Affiliates and their heirs, successors and assigns, under CERCLA or
any similar federal, state or local environmental law or regulation now existing
or hereafter enacted that seeks to allocate liabilities between U S WEST and New
U S WEST in a different manner than as expressly set forth in this Agreement.
8.2 U S WEST's Agreement to Indemnify. (a) Except as
otherwise specifically provided in the other Transaction Documents, subject to
the terms and conditions set forth in this Agreement, from and after the
Separation Time, U S WEST shall indemnify, defend and hold harmless New U S WEST
and each of its directors, officers, employees, representatives, advisors,
agents and Affiliates (collectively, the "New U S WEST Indemnified Parties")
from, against and in respect of any and all Indemnifiable Losses of the New
U S WEST Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly:
(i) any and all MediaOne Liabilities;
(ii) U S WEST's failure to observe from and after the
Separation Time its obligations under this Agreement or any of the
other Transaction Documents;
<PAGE>
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Documentation, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(but, in each case, only with respect to information relating to the
MediaOne Business contained in or omitted from the SEC Documentation);
and
(iv) (A) any obligation for which any member of the New U S
WEST Group may be liable as guarantor, original tenant, primary obligor
or otherwise under any MediaOne Obligation or (B) the triggering of any
cross- default provision contained in any New U S WEST Obligation as a
result of a default by a member of the U S WEST Group under any
MediaOne Obligation (other than, in each case, to the extent any
Indemnifiable Losses arise out of, relate to or result from actions
taken by a member of the New U S WEST Group).
(b) Notwithstanding U S WEST's obligations to indemnify New U
S WEST Indemnified Parties pursuant to Section 8.2(a), New U S WEST hereby
waives, releases and agrees not to make any claim or bring any contribution,
cost recovery or other action against any member of the U S WEST Group, and, if
applicable, their respective directors, officers, employees, representatives,
agents and Affiliates and their heirs, successors and assigns, under CERCLA or
any similar federal, state or local environmental law or regulation now existing
or hereafter enacted that seeks to allocate liabilities between New U S WEST and
U S WEST in a different manner than as expressly set forth in this Agreement.
8.3 Procedure for Indemnification. Except as set forth in the
Employee Matters Agreement, all claims for indemnification under this Article
VIII shall be asserted and resolved as follows:
(a) Third Party Claims (other than with respect to Shared
Liabilities). In the event that any claim or demand for which an Indemnifying
Party may be liable to an Indemnified Party hereunder (other than with respect
to Shared Liabilities) is asserted against or sought to be collected by a third
party from an Indemnified Party (an "Asserted Liability"), the Indemnified Party
shall as soon as possible notify the Indemnifying Party in writing of such
<PAGE>
Asserted Liability, specifying the nature of such Asserted Liability (the "Claim
Notice"); provided that no delay on the part of the Indemnified Party in giving
any such Claim Notice shall relieve the Indemnifying Party of any
indemnification obligation hereunder except to the extent that the Indemnifying
Party is materially prejudiced by such delay. The Indemnifying Party shall have
60 days (or less if the nature of the Asserted Liability requires) from its
receipt of the Claim Notice to notify the Indemnified Party whether or not the
Indemnifying Party desires, at the Indemnifying Party's sole cost and expense
and by counsel of its own choosing, to defend against such Asserted Liability;
provided, however, that if, under applicable standards of professional conduct a
conflict on any significant issue between the Indemnifying Party and any
Indemnified Party exists in respect of such Asserted Liability, then the
Indemnifying Party shall reimburse the Indemnified Party for the reasonable fees
and expenses of one additional counsel (who shall be reasonably acceptable to
the Indemnifying Party).
The Indemnified Party shall have the right to control, pay or
settle any Asserted Liability which the Indemnifying Party shall have undertaken
to defend so long as the Indemnified Party shall also (at the time it exercises
such right to control, pay or settle such Asserted Liability) waive any right to
indemnification therefor by the Indemnifying Party. If the Indemnifying Party
undertakes to defend against such Asserted Liability, the Indemnified Party
shall cooperate fully with the Indemnifying Party and its counsel in the
investigation, defense and settlement thereof, but the Indemnifying Party shall
control the investigation, defense and settlement thereof. If the Indemnified
Party desires to participate in any such defense, it may do so at its sole cost
and expense. If the Indemnifying Party elects not to defend against such
Asserted Liability, then the Indemnifying Party shall have the right to
participate in any such defense at its sole cost and expense, but the
Indemnified Party shall control the investigation, defense and settlement
thereof at the reasonable cost and expense of the Indemnifying Party. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), consent to
any settlement unless such settlement (i) includes a complete release of the
Indemnified Party and (ii) does not require the Indemnified Party to make or
forego any payment or forego or take any action. The Indemnifying Party shall
not be liable for any
<PAGE>
settlement of any Asserted Liability effected without its prior written consent
(which consent shall not be unreasonably withheld). In the event a dispute
arises as to which party has responsibility under this Agreement for an Asserted
Liability, the Indemnified Party shall have the right to defend such Asserted
Liability until such dispute is resolved in accordance with the procedures set
forth in Section 12.2; provided, however, that in such circumstances (i) the
Indemnified Party shall not have the right to settle such Asserted Liability
unless the Indemnified Party shall also (at the time it exercises such right to
settle such Asserted Liability) waive any right to indemnification therefor by
the Indemnifying Party and (ii) if it is subsequently determined pursuant to
Section 12.2 that such Asserted Liability is the responsibility of the
Indemnifying Party, the Indemnifying Party shall thereafter have the right to
defend against such Asserted Liability in accordance with this Section 8.3(a).
Any disputes between the Indemnifying Party and the Indemnified Party under this
Section 8.3(a) shall be submitted to the Separation Committee in accordance with
the procedures set forth in Section 12.2.
(b) Third Party Claims with Respect to Shared Liabilities. In
the event that any claim or demand with respect to a Shared Liability is
asserted against or sought to be collected by a third party (a "Shared Asserted
Liability"), the Indemnifying Party receiving notice of such claim (the
"Receiving Party") shall as soon as practicable notify the other Indemnifying
Party (the "Non-Receiving Party") in writing of such Shared Asserted Liability,
specifying the nature of such Shared Asserted Liability (the "Shared Claim
Notice"); provided, however, that no delay on the part of the Receiving Party in
giving any such Shared Claim Notice shall relieve the Non-Receiving Party of any
indemnification obligation hereunder except to the extent that the Non-Receiving
Party is materially prejudiced by such delay. If one of the Indemnifying Parties
has responsibility for greater than 50% of such Shared Asserted Liability as set
forth in Section 1.1(i) of the Separation Disclosure Schedule, such Indemnifying
Party shall have management and administrative responsibility in respect of such
Shared Asserted Liability (the "Managing Party"), including responsibility for
the defense of such Shared Asserted Liability, negotiation with claimants and
potential claimants (subject to the limitations in the following paragraph) and
other activities related thereto. If one of the Indemnifying Parties does not
have responsibility for
<PAGE>
greater than 50% of such Shared Asserted Liability as set forth in Section
1.1(i) of the Separation Disclosure Schedule, New U S WEST shall be the Managing
Party.
The Managing Party shall assume the defense of the Shared
Asserted Liability with counsel selected by the Managing Party and shall control
the defense of such Shared Asserted Liability, although the Indemnifying Party
that is not the Managing Party (the "Non-Managing Party") shall have the right
at its own cost to participate in such defense and to employ counsel separate
from the counsel employed by the Managing Party. The Non-Managing Party shall
cooperate with the Managing Party in the defense or prosecution of such Shared
Asserted Liability. In the event a dispute arises as to whether the
Non-Receiving Party has any responsibility under this Agreement for the Shared
Asserted Liability, the Receiving Party shall have the right to defend such
Shared Asserted Liability until such dispute is resolved in accordance with the
procedures set forth in Section 12.2; provided, however, that in such
circumstances (i) the Receiving Party shall not have the right to settle such
Shared Asserted Liability unless the Indemnified Party shall also (at the time
it exercises such right to settle such Shared Asserted Liability) waive any
right to indemnification therefor by the Non-Receiving Party and (ii) if the
Non-Receiving Party becomes the Managing Party, the Managing Party shall
thereafter defend against such Shared Asserted Liability in accordance with this
Section 8.3(b).
In no event will the Managing Party admit any liability with
respect to, or settle, compromise or discharge, any such Shared Asserted
Liability without the prior written consent of the Non-Managing Party; provided,
however, that the Managing Party shall have the right to settle, compromise or
discharge, any such Shared Asserted Liability without the consent of the
Non-Managing Party if the aggregate amount payable by the Indemnifying Parties
in respect of such settlement, compromise or discharge does not exceed
$5,000,000 and such settlement, compromise or discharge does not require the
Non-Managing Party to take any action other than the payment of damages;
provided, further, that the Managing Party shall have the right to settle,
compromise or discharge such Shared Asserted Liability without the consent of
the Non-Managing Party if the Managing Party releases in writing the
Non-Managing Party from its indemnification obligation hereunder with respect to
such Shared Asserted Liability and such settlement, compromise or discharge
would not otherwise
<PAGE>
adversely affect the Non-Managing Party; and provided, further, that if the
Managing Party recommends a settlement, compromise or discharge of such Shared
Asserted Liability to the Non-Managing Party that does not require the Non-
Managing Party to take any action other than the payment of damages and the
Non-Managing Party does not consent to such settlement, compromise or discharge,
then the Non-Managing Party shall be required to indemnify the Managing Party
for any amount that the Managing Party may be required to pay in the future in
connection with such Shared Asserted Liability which is in excess of the amount
that would have been paid by or on behalf of the Managing Party pursuant to such
settlement, compromise or discharge. All amounts payable by the Indemnifying
Parties in connection with a Shared Asserted Liability, including all reasonable
legal and other expenses incurred in connection with such Shared Asserted
Liability (including reasonable legal expenses of the Non- Managing Party),
shall be shared by the parties in the same proportions in which the related
Shared Liability is shared. Any disputes between the parties under this Section
8.3(b) shall be submitted to the Separation Committee in accordance with the
procedures set forth in Section 12.2.
(c) Non-Third Party Claims. In the event that an Indemnified
Party should have a claim against the Indemnifying Party hereunder that does not
involve a claim or demand being asserted against or sought to be collected from
it by a third party, the Indemnified Party shall send a notice with respect to
such claim to the Indemnifying Party. The Indemnifying Party shall have 60 days
from the date such notice is delivered during which to notify the Indemnified
Party in writing of any good faith objections it has to the Indemnified Party's
notice or claims for indemnification, setting forth in reasonable detail each of
the Indemnifying Party's objections thereto. If the Indemnifying party does not
deliver such written notice of objection within such 60- day period, the
Indemnifying Party shall be deemed to not have any objections to such claim. If
the Indemnifying Party does deliver such written notice of objection within such
60-day period, the Indemnifying Party and the Indemnified Party shall attempt in
good faith to resolve any such dispute within 60 days of the delivery by the
Indemnifying Party of such written notice of objection. If the Indemnifying
Party and the Indemnified Party are unable to resolve any such dispute within
such 60-day period, such dispute shall be submitted to the Separation Committee
in accordance with the procedures set forth in Section 12.2.
<PAGE>
8.4 Miscellaneous Indemnification Provisions.
(a) The Indemnifying Party agrees to indemnify any successors
of the Indemnified Party to the same extent and in the same manner and on the
same terms and conditions as the Indemnified Party is indemnified by the
Indemnifying Party under this Article VIII.
(b) The amount that an Indemnifying Party is required to pay
to any Indemnified Party pursuant to this Article VIII shall be reduced
(retroactively or prospectively) by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnified Party in respect of the
related Indemnifiable Loss (including any Insurance Proceeds in respect of a
Shared Liability recovered by or on behalf of such Indemnified Party in respect
of the related Indemnifiable Loss). If an Indemnified Party shall have received
the payment required by this Article VIII in respect of an Indemnifiable Loss
and shall subsequently actually receive Insurance Proceeds or other amounts in
respect of such Indemnifiable Loss, then such Indemnified Party shall pay to
such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or
other amounts actually received, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this Article VIII in respect
of such Indemnifiable Loss.
(c) In determining the amount of any indemnity payable under
this Article VIII, such amount shall be reduced by any related Tax benefits if
and when actually realized or received (but only after taking into account any
Tax benefits (including, without limitation, any net operating losses or other
deductions) to which the Indemnified Party would be entitled without regard to
such item), except to the extent such Tax benefit has already been taken into
account in determining the amount of any indemnity payable under this Article
VIII in respect of the related Indemnifiable Loss. Any such Tax benefit shall be
promptly repaid by the Indemnified Party to the Indemnifying Party following the
time at which such recovery is realized or received pursuant to the previous
sentence, minus all reasonably allocable costs, charges and expenses incurred by
the Indemnified Party in obtaining such Tax benefit. Notwithstanding the
foregoing, if (x) the amount of Indemnifiable Losses for which the Indemnifying
Party is obligated to indemnify the Indemnified Party is reduced by any Tax
benefit in accordance with the provisions of the
<PAGE>
previous sentence and (y) the Indemnified Party subsequently is required to
repay the amount of any such Tax benefit or such Tax benefit is disallowed, then
the obligation of the Indemnifying Party to indemnify with respect to such
amounts shall be reinstated immediately and such amounts shall be paid promptly
to the Indemnified Party in accordance with the provisions of this Agreement.
(d) No Indemnifying Party shall be liable to an Indemnified
Party under this Article VIII in respect of consequential, exemplary, special or
punitive damages, or lost profits, except to the extent such consequential,
exemplary, special or punitive damages, or lost profits are actually paid to a
third party.
8.5 Contribution. (a) If the indemnification
provided for in this Article VIII is not permitted under
Applicable Law, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Indemnifiable Losses (i) any amount that
such Indemnified Party would be entitled to pursuant to Article VIII of this
Agreement or the relevant indemnity provisions of any other Transaction Document
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relevant benefits of the indemnity provisions described in clause (i) above, but
also the relative ownership of the Assets or responsibility for the Liabilities
associated with such Indemnifiable Losses.
(b) The amounts paid or payable by an Indemnified Party as a
result of Indemnifiable Losses referred to in Section 8.5(a) above shall be
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
8.6 Tax Matters; Construction of Agreements.
(a) Except as set forth in the Tax Sharing Agreement, all
indemnification relating to Taxes shall be governed by the Tax Sharing
Agreement.
(b) Notwithstanding any other provision in this Agreement to
the contrary, except as set forth in Section 8.6(a), in the event and to the
extent that there shall be a
<PAGE>
conflict between the provisions of this Article VIII and the provisions of any
other part of this Agreement or any exhibit or schedule hereto, the provisions
of this Article VIII shall control, and in the event and to the extent that
there shall be a conflict between the provisions of this Agreement (including,
without limitation, the provisions of this Article VIII) and the provisions of
any other Transaction Document, the provisions of such other Transaction
Document shall control.
8.7 Remedies Cumulative. The remedies provided in this Article
VIII shall be cumulative and, subject to the provisions of Section 12.2, shall
not preclude assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.
ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1 Licenses and Permits. Each party hereto shall cause the
appropriate members of its Group to prepare and file with the appropriate
licensing and permitting authorities applications for the transfer or issuance,
as may be necessary or advisable in connection with the Separation, to its Group
of all material governmental licenses and permits required for the members of
its Group to operate its business after the Separation. The members of the New U
S WEST Group and the members of the U S WEST Group shall cooperate and use all
reasonable best efforts to secure the transfer or issuance of such licenses and
permits.
9.2 Intercompany Agreements. All contracts, licenses,
agreements, commitments or other arrangements, formal or informal, between any
member of the U S WEST Group, on the one hand, and any member of the New U S
WEST Group, on the other, in existence as of the Separation Time, pursuant to
which any member of either Group provides services to any member of the other
Group (including, without limitation, management, administrative, financial,
accounting, data processing, insurance or technical support), or the use of any
Assets of any member of the other Group, or the secondment of any employee, or
pursuant to which rights, privileges or benefits are afforded to members of
either Group or Affiliates of the other Group, shall terminate as of the close
of business on the day prior
<PAGE>
to the Separation Time, except (i) as specifically provided herein or in the
Transaction Documents or as otherwise agreed to by the parties, (ii) for the
agreements listed in Section 9.2 of the Separation Disclosure Schedule, which
will remain in effect following the Separation Time and (iii) to the extent
required by the terms of the AirTouch Merger Agreement, for any agreements
between a member of the New U S WEST Group, on the one hand, and NewVector or
any of its Subsidiaries or investments or PCS Holdings, on the other hand. From
and after the Separation Time, no member of either Group shall have any rights
under any contract, license, agreement, commitment or arrangement so terminated.
9.3 Guarantee Obligations. (a) U S WEST and New U S WEST shall
cooperate, and shall cause their respective Groups to cooperate, (i) to
terminate, or to cause a member of the New U S WEST Group to be substituted in
all respects for any member of the U S WEST Group in respect of, all obligations
of any member of the U S WEST Group under any loan, letter of credit, financing,
lease, contract or other obligation in existence as of the Separation Time
pertaining to the New U S WEST Business (each, a "New U S WEST Obligation") for
which such member of the U S WEST Group may be liable as guarantor, original
tenant, primary obligor or otherwise, including, without limitation, the leases
listed in Section 9.3(a) of the Separation Disclosure Schedule, and (ii) to
eliminate any cross-default provision contained in any loan, letter of credit,
financing, lease, contract or other obligation in existence as of the Separation
Time pertaining to the MediaOne Business (each, a "MediaOne Obligation") which
would be triggered by a default by a member of the New U S WEST Group under any
New U S WEST Obligation, including, without limitation, the cross-default
provisions listed in Section 9.3(a) of the Separation Disclosure Schedule. If
such a termination, substitution or elimination is not effected by the
Separation Time, without the prior written consent of U S WEST, from and after
the Separation Time, New U S WEST shall not, and shall not permit any member of
the New U S WEST Group or any of its Affiliates to, renew or extend the term of,
increase in any material respect its obligations under (which, in the case of a
lease, shall mean an increase in the rent for the property by more than 10%
annually), transfer to a third party (other than Affiliates), or amend in any
manner materially adverse to the U S WEST Group (which, in the case of a lease,
shall mean an increase in the rent for the property by more than 10% annually),
any such New U S WEST Obligation unless all obligations of the U S WEST Group
with
<PAGE>
respect thereto are thereupon terminated and all such cross- default provisions
with respect thereto are eliminated by documentation reasonably satisfactory in
form and substance to U S WEST; provided, however, that, notwithstanding the
foregoing, New U S WEST shall be permitted, without the prior written consent of
U S WEST, to renew or extend the term of any of the New U S WEST Obligations so
identified in Section 9.3(a) of the Separation Disclosure Schedule whether or
not such a termination or elimination is effected. Following any renewal or
extension permitted by the foregoing proviso, New U S WEST shall promptly
deliver to U S WEST notice of such renewal or extension.
(b) U S WEST and New U S WEST shall cooperate, and shall cause
their respective Groups to cooperate, (i) to terminate, or to cause a member of
the U S WEST Group to be substituted in all respects for any member of the New U
S WEST Group in respect of, all obligations of any member of the New U S WEST
Group under any MediaOne Obligation for which such member of the New U S WEST
Group may be liable as guarantor, original tenant, primary obligor or otherwise,
including, without limitation, the lease listed in Section 9.3(b) of the
Separation Disclosure Schedule, and (ii) to eliminate any cross-default
provision contained in any New U S WEST Obligation which would be triggered by a
default by a member of the U S WEST Group under any MediaOne Obligation,
including, without limitation, the cross-default provisions listed in Section
9.3(b) of the Separation Disclosure Schedule. If such a termination,
substitution or elimination is not effected by the Separation Time, without the
prior written consent of New U S WEST, from and after the Separation Time, U S
WEST shall not, and shall not permit any member of the U S WEST Group or any of
its Affiliates to, renew or extend the term of, increase in any material respect
its obligations under (which, in the case of a lease, shall mean an increase in
the rent for the property by more than 10% annually), transfer to a third party
(other than Affiliates), or amend in any manner materially adverse to the New U
S WEST Group (which, in the case of a lease, shall mean an increase in the rent
for the property by more than 10% annually), any such MediaOne Obligation unless
all obligations of the New U S WEST Group with respect thereto are thereupon
terminated and all such cross-default provisions with respect thereto are
eliminated by documentation reasonably satisfactory in form and substance to New
U S WEST; provided, however, that, notwithstanding the foregoing, U S WEST shall
be permitted, without the prior written consent of New U S WEST, to renew
<PAGE>
or extend the term of any of the MediaOne Obligations so identified in Section
9.3(b) of the Separation Disclosure Schedule whether or not such a termination
or elimination is effected. Following any renewal or extension permitted by the
foregoing proviso, U S WEST shall promptly deliver to New U S WEST notice of
such renewal or extension.
9.4 Further Assurances. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary, proper
or advisable under Applicable Laws, regulations and agreements to consummate and
make effective the transactions contemplated by this Agreement. Without limiting
the foregoing, each party hereto shall cooperate with the other party, and
execute and deliver, or use reasonable best efforts to cause to be executed and
delivered, all instruments, including instruments of conveyance, assignment and
transfer, and to make all filings with, and to obtain all consents, approvals or
authorizations of, any governmental or regulatory authority or any other Person
under any permit, license, agreement, indenture or other instrument, and take
all such other actions as such party may reasonably be requested to take by the
other party hereto from time to time, consistent with the terms of this
Agreement and the Transaction Documents, in order to effectuate the provisions
and purposes of this Agreement and the transfers of Assets and Liabilities and
the other transactions contemplated hereby.
(b) If any such transfer of Assets or Liabilities is not
consummated prior to or at the Separation Time, then the party hereto retaining
such Asset or Liability shall continue to take the actions required by Section
9.4(a) to consummate and make effective such transfer as soon as practicable
after the Separation Time and, in the case of Assets, shall use its reasonable
best efforts to preserve the value of such Assets until the time of transfer. If
and when any such Asset or Liability becomes transferable, such transfer shall
be effected forthwith. The parties hereto agree that, as of the Separation Time,
each party hereto shall be deemed to have acquired complete and sole beneficial
ownership to all of the Assets, together with all rights, powers and privileges
incident thereto, and shall be deemed to have assumed in accordance with the
terms of this Agreement and the Transaction Documents all of the Liabilities,
and all duties, obligations and
<PAGE>
responsibilities incident thereto, that such party is entitled to acquire or
required to assume pursuant to the terms of this Agreement.
(c) Each of the parties hereto agrees to use its respective
reasonable best efforts, at such party's expense, to obtain any consents
required to transfer and assign to (i) New U S WEST all Contracts, licenses and
other rights of any nature whatsoever included in the New U S WEST Assets and
(ii) U S WEST all Contracts, licenses and other rights of any nature whatsoever
included in the MediaOne Assets. In the event and to the extent that either
party hereto is unable to obtain any such required consents, (i) such party
shall continue to be bound thereby (such party in such capacity, the "Record
Holder") and (ii) the party to which such Asset would otherwise be transferred
pursuant to this Agreement (the "Beneficial Holder") shall pay, perform and
discharge fully all of the obligations of the Record Holder thereunder from and
after the Separation Time and indemnify such Record Holder for all losses
arising out of such performance by such Record Holder. The Record Holder shall,
without further consideration therefor, pay, assign and remit to the Beneficial
Holder promptly all monies, rights and other consideration received in respect
of such performance. The Record Holder shall exercise or exploit its rights and
options under all such Contracts, licenses and other rights and commitments
referred to in this Section 9.5(c) only as reasonably directed by the Beneficial
Holder and at the Beneficial Holder's expense. If and when any such consent
shall be obtained or any such Contract, license or other right shall otherwise
become assignable, the Record Holder shall promptly assign all of its rights and
obligations thereunder to the Beneficial Holder without payment of further
consideration and the Beneficial Holder shall, without the payment of any
further consideration therefor, assume such rights and obligations.
(d) In the event that, subsequent to the Separation Time, U S
WEST shall either (i) receive written notice from New U S WEST that certain
specified Assets which properly constitute New U S WEST Assets were not
transferred to it on or prior to the Separation Time or (ii) determine that
certain Assets of U S WEST which constitute New U S WEST Assets were not
transferred to New U S WEST on or prior to the Separation Time, then, as
promptly as practicable thereafter, U S WEST shall use its reasonable best
efforts to transfer and deliver any and all of such Assets to New U S WEST
without the payment by New U S WEST of any
<PAGE>
consideration therefor. In the event that, subsequent to the Separation Time,
New U S WEST shall either (i) receive written notice from U S WEST that certain
specified Assets were transferred to New U S WEST which properly constitute
MediaOne Assets, or (ii) determine that certain Assets of New U S WEST which
constitute MediaOne Assets were transferred to New U S WEST, then as promptly as
practicable thereafter, New U S WEST shall use its reasonable best efforts to
transfer and deliver any and all of such Assets to U S WEST without the payment
by U S WEST of any consideration therefor.
(e) In the event that, subsequent to the Separation Time, U S
WEST or New U S WEST identifies an Asset that is not included in either the New
U S WEST Assets or the MediaOne Assets (including without limitation, a Contract
that was entered into by U S WEST on behalf of both the MediaOne Business and
the New U S WEST Business and does not relate primarily to either the MediaOne
Business or the New U S WEST Business), U S WEST and New U S WEST agree to act
in a manner to reasonably preserve the interests of both Groups in such Asset.
9.5 National Contracts. Each of the parties hereto agrees to
use its respective reasonable best efforts to permit the other party hereto to
obtain the benefits of certain Contracts with nationally-based vendors and
suppliers existing as of the Separation Time and listed on Section 9.5 of the
Separation Disclosure Schedule (such Contracts, each individually a "National
Contract" and collectively the "National Contracts"). Each of U S WEST and New U
S WEST hereby agrees to cooperate with respect to obtaining favorable prices
under such National Contracts by combining or consolidating orders made under
such National Contracts. Each of U S WEST and New U S WEST hereby agrees that
New U S WEST or a member of the New U S WEST Group shall administer these
National Contracts and that U S WEST shall be responsible for the portions
attributable to U S WEST of any order or delivery of goods and services received
under each National Contract (including costs of administration). The
arrangements of U S WEST and New U S WEST with respect to National Contracts
relating to employee matters shall be governed by the terms of the Employee
Matters Agreement.
9.6 Non-Solicitation of Employees. Each of U S WEST and New U
S WEST shall not, and shall cause the other members of the Group of which it is
a member not to, until
<PAGE>
the first anniversary of the Separation Time, directly or indirectly, (i)
recruit any Covered Employee of the other Group or (ii) solicit any Covered
Employee of the other Group to leave the employment of the other Group;
provided, however, that nothing contained herein shall (A) prohibit any
advertisement or general solicitation (or employment as a result thereof) by any
member of the U S WEST Group or the New U S WEST Group that is not specifically
targeted at employees of the other Group or (B) prohibit any employee of one
Group from initiating employment discussion with the other Group without any
recruitment or solicitation from such other Group. In the event U S WEST or New
U S WEST breaches the provisions of this Section 9.5, the breaching party shall
be required to pay to the non-breaching party as liquidated damages an amount
equal to the product of (x) 1.5 multiplied by (y) the total salary and bonus
under the non- breaching party's short-term compensation plan received by the
Covered Employee recruited or solicited during the most recent 12-month period.
9.7 Lock Boxes. U S WEST shall take all such actions as may be
necessary or required to deliver to New U S WEST full authority as of the
Separation Time with respect to all lock boxes or similar deposit arrangements
maintained by U S WEST prior to the Separation Time and which are utilized
exclusively by the New U S WEST Business. Effective as of the Separation Time, U
S WEST shall terminate any arrangement whereby funds directed to such lock boxes
or similar arrangements are consolidated with other funds of U S WEST or
otherwise made available to U S WEST. U S WEST shall, effective as of the
Separation Time, take all necessary steps to remove all Persons who are not New
U S WEST Employees but who are signatories or holders of powers-of-attorney with
respect to such lock boxes or other arrangements from the list of such
signatories and holders and otherwise extinguish their signing authority with
respect thereto.
9.8 Agreements with Respect to Common Stock Received by
Savings Plan/ESOPs. (a) U S WEST and the U S WEST Savings Plan/ESOP and New U S
WEST and the MediaOne Savings Plan/ESOP shall cooperate with each other in
supplying such information as may be necessary for any of such parties to
complete and file any information reporting forms presently or hereafter
required by the SEC or any commissioner or other authority administering the
"blue sky" or securities laws of any applicable jurisdiction which would be
required to be filed as a condition to the
<PAGE>
availability of an exemption from registration or qualification of an offer or
sale of the shares of the MediaOne Common Stock owned by the U S WEST Savings
Plan/ESOP after the Separation (the "New U S WEST Savings Plan Shares") and the
shares of the New U S WEST Common Stock received by the MediaOne Savings
Plan/ESOP in the Separation (the "MediaOne Savings Plan Shares") under the
Securities Act, or any such "blue sky" or securities laws.
(b) To the extent required by Applicable Law, (i) until the
sale by the New U S WEST Savings Plan of the New U S WEST Savings Plan Shares, U
S WEST shall file in a timely manner all reports contemplated by Rule 144(c)(1)
under the Securities Act as satisfying the condition that adequate public
information with respect to U S WEST is available and (ii) until the sale by the
MediaOne Savings Plan of the MediaOne Savings Plan Shares, New U S WEST shall
file in a timely manner all reports contemplated by Rule 144(c)(1) under the
Securities Act as satisfying the condition that adequate public information with
respect to New U S WEST is available.
9.9 AirTouch Transaction. (a) Except as set forth in this
Section 9.9 or as otherwise agreed to by the parties, all rights and obligations
of U S WEST and its Subsidiaries under the AirTouch Merger Agreement shall be
retained by U S WEST in connection with the Separation.
(b) At the Separation Time, U S WEST shall assign to New U S
WEST and the New U S WEST Group, pursuant to the instrument of assignment
attached as Exhibit K-2 to the AirTouch Merger Agreement, the following rights
(and related obligations):
(i) all of the rights (and related obligations) of U S WEST
and its Subsidiaries under Section 7.8 of the AirTouch Merger Agreement
(relating to use of the "U S WEST" name by AirTouch and its
Subsidiaries), subject to the limitations set forth therein; and
(ii) an equal and undivided interest (together with the U S
WEST Group) in all of the rights (and related obligations) of U S WEST
and its Subsidiaries under Sections 7.9(b) and 7.9(c) of the AirTouch
Merger Agreement (relating to Intellectual Property), subject to the
limitations set forth therein;
<PAGE>
(iii) an equal and undivided interest (together with the U S
WEST Group) in all of the rights (and related obligations) of U S WEST
and its Subsidiaries under Section 7.11 of the AirTouch Merger
Agreement (relating to Third Party Rights), subject to the limitations
set forth therein; and
(iv) an equal and undivided interest (together with the U S
WEST Group) in all of the rights (and related obligations) of U S WEST
and its Subsidiaries under the Software License Agreement (as defined
in the AirTouch Merger Agreement), subject to the limitations set forth
therein
(c) At the Separation Time, U S WEST shall assign to New U S
WEST the obligations (and related rights) of U S WEST under the Patent License
Agreement (as defined in the AirTouch Merger Agreement) with respect to licenses
granted by U S WEST to AirTouch under certain of the New U S WEST Patents.
(d) New U S WEST acknowledges the rights of AirTouch pursuant
to Section 7.10 of the AirTouch Merger Agreement to make claims (directly or
through U S WEST) under the Joint Insurance Arrangements and agrees that, for
purposes of Article VII hereof, any such claim shall be deemed to have been made
by the U S WEST Group.
(e) New U S WEST acknowledges the right of AirTouch pursuant
to Section 7.12(c) of the AirTouch Merger Agreement to terminate any contract,
license or other arrangement between NewVector or any of its Subsidiaries or
investments or PCS Holdings, on the one hand, and a member of the New U S WEST
Group, on the other hand, on 30 Business Days' prior written notice.
(f) New U S WEST agrees to be subject to the restrictions set
forth in Section 8.3(l) of the AirTouch Merger Agreement. It is acknowledged and
agreed that the exceptions to such restrictions listed in Exhibit J to the
AirTouch Merger Agreement shall only be for the benefit of the U S WEST Group.
<PAGE>
ARTICLE X
ACCESS TO INFORMATION
10.1 Allocation of Corporate Records. (a) All corporate
books and records of U S WEST and its Subsidiaries relating solely to the New
U S WEST Group, the New U S WEST Assets, the New U S WEST Business, the New
U S WEST Liabilities and the Communications Employees, including, without
limitation, original corporate minute books, stock ledgers and certificates and
the corporate seal of each corporation the capital stock of which is included in
the New U S WEST Assets and documentation relating to the New U S WEST
Liabilities, including, in each case, all active agreements, active litigation
files and government filings, shall be the property of the New U S WEST Group.
Prior to or as promptly as practicable after the Separation Time, U S WEST shall
deliver to New U S WEST all such corporate books and records in its possession
or in the possession of any member of the U S WEST Group.
(b) All corporate books and records of U S WEST and its
Subsidiaries relating solely to the U S WEST Group, the MediaOne Assets, the
MediaOne Business, the MediaOne Liabilities and the Media Employees, including,
without limitation, original corporate minute books, stock ledgers and
certificates and the corporate seal of each corporation the capital stock of
which is included in the MediaOne Assets and documentation relating to the
MediaOne Liabilities, including, in each case, all active agreements, active
litigation files and government filings, shall be the property of the U S WEST
Group. Prior to or as promptly as practicable after the Separation Time, New U S
WEST shall deliver to U S WEST all such corporate books and records in its
possession or in the possession of any member of the New U S WEST Group.
(c) All corporate books and records of U S WEST and its
Subsidiaries relating to both (A) the New U S WEST Group, the New U S WEST
Assets, the New U S WEST Business, the New U S WEST Liabilities and the
Communications Employees and (B) the U S WEST Group, the MediaOne Assets, the
MediaOne Business, the MediaOne Liabilities and the Media Employees, including
without limitation, tax documents, records related to issuance or purchase of
stock, contracts, agreements, leases, deeds, articles and certificates of
incorporation, insurance policies, by-laws, Shareholder and Board of Director
meeting minutes, employee
<PAGE>
service histories, records related to the Environmental Protection Agency
requirements and audit reports (collectively, the "Joint Books and Records"),
shall be shared by the U S WEST Group and the New U S WEST Group.
(d) Prior to or as promptly as practicable after the
Separation Time, all Joint Books and Records which are used on a day-to-day
basis by members of the U S WEST Group and the New U S WEST Group and their
respective employees shall be duplicated such that each of the U S WEST Group
and the New U S WEST Group shall have a copy of all such Joint Books and Records
in its possession. Prior to or as promptly as practicable after the Separation
Time, all Joint Books and Records which are not used on a day-to-day basis by
members of the U S WEST Group and the New U S WEST Group and their respective
employees ("Archived Joint Books and Records") shall be deposited by the U S
WEST Group and the New U S WEST Group with an independent archive vendor. U S
WEST and New U S WEST shall establish a contractual arrangement with an archive
vendor (the "Archive Vendor") on behalf of each party for the purpose of storage
and management of the Archived Joint Books and Records. Prior to or as promptly
as practicable after the Separation Time, U S WEST and New U S WEST agree to
gather, inventory and input into a common database all Archived Joint Books and
Records to facilitate their retrieval at a later date. Each of U S WEST and New
U S WEST agree that any additional Archived Joint Books and Records that are
discovered by a member of either Group after the Separation Time will be
inventoried, input into the database and delivered as mutually agreed to the
Archive Vendor by the applicable party. Notification on an as needed basis by
e-mail of records added to the database will be the responsibility of the party
initiating the change so as to maintain the integrity of the process described
in this Section 10.1 (d). U S WEST and New U S WEST agree to cooperate to
facilitate the foregoing arrangements with respect to Archived Joint Books and
Records.
10.2 Access to Information. From and after the Separation
Time, each of U S WEST and New U S WEST shall have access to all of the Joint
Books and Records.
In furtherance of the foregoing:
(a) Each party hereto acknowledges that: (i) Each of U S WEST
and New U S WEST (and the members of the U S WEST Group and the New U S WEST
Group, respectively) has
<PAGE>
or may obtain, and that the Joint Books and Records will include, Privileged
Information; (ii) there are a number of Litigation Matters affecting each or
both of U S WEST and New U S WEST; (iii) both U S WEST and New U S WEST have a
common legal interest in Litigation Matters, in the Privileged Information, and
in the preservation of the confidential status of the Privileged Information, in
each case relating to pre-Separation business of the U S WEST Group or the New U
S WEST Group or relating to or arising in connection with the relationship
between the Groups on or prior to the Separation Time; and (iv) both U S WEST
and New U S WEST intend that the transactions contemplated hereby and by the
other Transaction Documents and any transfer of Privileged Information in
connection therewith shall not operate as a waiver of any applicable privilege.
(b) Each of U S WEST and New U S WEST agrees, on behalf of
itself and each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information relating
to pre- Separation business of the New U S WEST Group or the U S WEST Group,
respectively, or relating to or arising in connection with the relationship
between the Groups on or prior to the Separation Time, without providing prompt
written notice to and obtaining the prior written consent of the other, which
consent shall not be unreasonably withheld; provided, however, that U S WEST and
New U S WEST may make such disclosure or waiver with respect to Privileged
Information if such Privileged Information relates solely to the pre-Separation
business of the U S WEST Group, in the case of U S WEST, or the New U S WEST
Group, in the case of New U S WEST. Any disagreement between any member of the U
S WEST Group and any member of the New U S WEST Group concerning the
reasonableness of withholding such consent shall be submitted to the Separation
Committee in accordance with the procedures set forth in Section 12.2 and no
disclosure shall be made prior to a resolution of such disagreement.
(c) Upon any member of the U S WEST Group or any member of the
New U S WEST Group receiving any subpoena or other compulsory disclosure notice
from a court, other governmental agency or otherwise that requests disclosure of
Privileged Information, in each case relating to pre- Separation business of the
New U S WEST Group or the U S WEST Group, respectively, or relating to or
arising in connection with the relationship between the Groups on or prior to
the Separation Time, in the event the recipient of
<PAGE>
such the notice intends to disclose such Privileged Information, such recipient
shall promptly provide to the other Group (following the notice provisions set
forth herein) a copy of such notice, the intended response, and all materials or
information relating to the other Group that might be disclosed. In the event of
a disagreement as to the intended response or disclosure, unless and until the
disagreement is resolved as provided in subsection (b), the parties shall
cooperate to assert all defenses to disclosure claimed by either party's Group,
and shall not disclose any disputed documents or information until all legal
defenses and claims of privilege have been finally determined.
10.3 Production of Witnesses. Subject to Section 10.2, after
the Separation Time, each of U S WEST and New U S WEST shall, and shall cause
each member of the U S WEST Group and the New U S WEST Group, respectively, to,
make available to U S WEST or New U S WEST or any member of the U S WEST Group
or of the New U S WEST Group, as the case may be, upon written request of the
other, such Group's directors, officers, employees and agents as witnesses to
the extent that any such Person may reasonably be required in connection with
any Litigation Matters, administrative or other proceedings in which the
requesting party may from time to time be involved and relating to the
pre-Separation business of the U S WEST Group or the New U S WEST Group or
relating to or in connection with the relationship between the Groups on or
prior to the Separation Time; provided, however, that, notwithstanding the
foregoing, neither the U S WEST Group nor the New U S WEST Group shall be
required to make available such Group's directors, officers, employees or
witnesses in response to a subpoena received by any member of the other Group
from a third party.
10.4 Certain Procedures Relating to Access to Archived Joint
Books and Records. (a) In the event that New U S WEST or a member of the New U S
WEST Group requests retrieval from the Archive Vendor of a document included in
the Archived Joint Books and Records: (i) the person making the request will be
required to notify The New U S WEST Records Management Group ("USWRM"); (ii)
USWRM will query the database for the applicable record and request retrieval of
the relevant box from the Archive Vendor; (iii) USWRM will notify MediaOne Group
Records Management ("MGRM") of such request; (iv) the Archive Vendor will
deliver the applicable box or file to USWRM and and such box or file will be
duplicated by USWRM; (v) the duplicate of the applicable record will be
delivered to the person making the
<PAGE>
request; and (vi) the original box or file will be returned to the Archive
Vendor within 24 hours.
(b) In the event that U S WEST or a member of the U S WEST
Group requests retrieval from the Archive Vendor of a document included in the
Archived Joint Books and Records: (i) the person making the request will be
required to notify MGRM; (ii) MGRM will query the database for the applicable
record and request retrieval of the relevant box from the Archive Vendor; (iii)
MGRM will notify USWRM of such request; (iv) the Archive Vendor will deliver the
applicable box or file to MGRM and and such box or file will be duplicated by
MGRM; (v) the duplicate of the applicable record will be delivered to the person
making the request; and (vi) the original box or file will be returned to the
Archive Vendor within 24 hours.
(c) Any Archived Joint Books and Records retrieved by U S WEST
or New U S WEST pursuant to the procedures described herein shall not be altered
from their original form. All Archived Joint Books and Records will be destroyed
by the Archive Vendor in accordance with the terms and conditions of the
December 19, 1997 Records Retention Compliance Plan of U S WEST only after both
U S WEST and New U S WEST review the eligible documents and come to an
agreement.
10.5 Confidentiality. Subject to Section 10.2, which shall
govern Privileged Information, and except as otherwise provided in a Transaction
Document or any other agreement between U S WEST and New U S WEST, from and
after the Separation Time, each of New U S WEST and U S WEST shall, and shall
use reasonable best efforts to cause the members of its Group and
Representatives to, preserve the confidentiality of all Information concerning
or related to the other party's Group obtained by it prior to the Separation
Time or furnished to it by such other party's Group pursuant to this Agreement
or the other Transaction Documents, including any Joint Books and Records, with
the same degree of care as it takes to preserve confidentiality for its own
similar Information.
10.6 Cooperation with Respect to Government Reports and
Filings. U S WEST, on behalf of itself and each member of the U S WEST Group,
agrees to provide any member of the New U S WEST Group, and New U S WEST, on
behalf of itself and each member of the New U S WEST Group, agrees to provide
any member of the U S WEST Group, with such
<PAGE>
cooperation and Information as may be reasonably requested by the other in
connection with the preparation or filing of any government report or other
government filing contemplated by this Agreement or the other Transaction
Documents or in conducting any other government proceeding relating to
pre-Separation business of the U S WEST Group or the New U S WEST Group, Assets
or Liabilities of either Group or relating to or in connection with the
relationship between the Groups on or prior to the Separation Time. Such
cooperation and Information shall include, without limitation, promptly
forwarding copies of appropriate notices and forms or other communications
received from or sent to any Governmental Authority which relate to the U S WEST
Group, in the case of the New U S WEST Group, or the New U S WEST Group, in the
case of the U S WEST Group. Each party shall make its employees and facilities
available during normal business hours and on reasonable prior notice to provide
explanation of any documents or Information provided hereunder.
10.7 Certain Limitations with Respect to Information. (a) All
costs incurred in connection with the retention of the Archive Vendor and the
storage of the Archived Joint Books and Records in accordance with this Article
X will be shared equally by U S WEST and New U S WEST. Costs incurred in
connection with the retrieval of Archived Joint Books and Records, including
costs of transportation, refiles, duplication and supplies, will be the
responsibility of the entity incurring the cost.
(c) No party shall have any liability to any other party in
the event that any Information exchanged or provided pursuant to this Article X
hereof which is an estimate or forecast, or which is based on an estimate or
forecast, is found to be inaccurate, in the absence of willful misconduct by the
party providing such Information. No party shall have any liability to any other
party if any Information is destroyed after reasonable best efforts by such
party to comply with the provisions of Section 10.4.
(d) The rights and obligations granted under this Article X
are subject to any specific limitations, qualifications or additional provisions
on the sharing, exchange or confidential treatment of Information set forth in
any other Transaction Document.
10.8 Protective Arrangements. In the event that
any party or any member of its Group either determines on
<PAGE>
the advice of its counsel that it is required to disclose any Information
pursuant to applicable law or receives any demand under lawful process or from
any Governmental Authority to disclose or provide Information concerning any
other party (or any member of any other party's Group) that is subject to the
confidentiality provisions hereof, such party shall notify the other party prior
to disclosing or providing such Information and shall cooperate at the expense
of the requesting party in seeking any reasonable protective arrangements
requested by such other party. Subject to the foregoing, the Person that
received such request may thereafter disclose or provide Information to the
extent required by such law (as so advised by counsel) or by lawful process or
such Governmental Authority.
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
11.1 Mutual Release. (a) Effective as of the Separation Time
and except as specifically set forth in this Agreement or any of the other
Transaction Documents, each of New U S WEST, on the one hand, and U S WEST, on
the other hand, on its own behalf and on behalf of each member of its respective
Group, releases and forever discharges the other and the members of its Group,
and its and their respective officers, directors, agents, Affiliates, record and
beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands, Actions,
causes of action, suits, accounts, covenants, contracts, agreements, damages,
claims and Liabilities whatsoever of every name and nature, both in law and in
equity, which the releasing party has or ever had, which arise out of or relate
to, in whole or in part, events, circumstances or actions, whether known or
unknown, taken by such other party occurring or failing to occur or any
conditions existing on or prior to the Separation Time; provided, however, that
the foregoing general release shall not apply to (i) any Liabilities assumed,
transferred, assigned, allocated or arising under this Agreement or any of the
other Transaction Documents and shall not affect any party's rights to enforce
this Agreement (including the provisions of Article VIII) or any of the other
Transaction
<PAGE>
Documents in accordance with their terms; (ii) any Liability arising under any
agreement listed in Section 9.2 of the Separation Disclosure Schedule (each of
which shall remain in effect following the Separation Time); and (iii) any
Liability the release of which would result in the release of any Person other
than a Person released pursuant to this Section 11.1 (provided that the parties
agree not to bring suit or permit any members of their Group to bring suit
against any Person with respect to any Liability to the extent such Person would
be released with respect to such Liabilities by this Section 11.1 but for this
clause (iii)). U S WEST and New U S WEST acknowledge that the foregoing general
release shall not apply to any Liabilities assigned by members of the U S WEST
Group or members of the New U S WEST Group to third parties prior to the
Separation Time.
(b) The parties acknowledge that members of the U S WEST Law
Department and U S WEST's outside counsel currently represent members of both
the U S WEST Group and the New U S WEST Group. Effective as of the Separation
Time, each of New U S WEST, on the one hand, and U S WEST, on the other hand, on
its own behalf and on behalf of each member of its respective Group, waives any
conflict with respect to such common representation before, at or after the
Separation Time (other than, in the case of such common representation by U S
WEST's outside counsel, with respect to any dispute or Action between a member
of the U S WEST Group and a member of the New U S WEST Group).
11.2 No Representations or Warranties. New U S WEST
understands and agrees that neither U S WEST nor any
other member of the U S WEST Group is, and U S WEST
understands and agrees that neither New U S WEST nor any
other member of the New U S WEST Group is, in this Agreement
or in any other agreement or document, representing or
warranting to the other in any way as to such Group's
Assets, business or Liabilities or as to any consents or
approvals required in connection with the consummation of
the transactions contemplated by this Agreement, it being
agreed and understood that each member of the Group shall
take all of the Assets "AS IS, WHERE IS". Except as set
forth in this Agreement and the other Transaction Documents,
both parties shall bear the economic and legal risk of the
Reorganization, Contribution and Separation that (a) any
conveyance of such Group's Assets shall prove to be
insufficient, (b) the title of any member of the New U S
WEST Group or the U S WEST Group to any of their respective
Assets shall be other than good and marketable and free from
<PAGE>
encumbrances, (c) the title of any member of the New U S WEST Group or the U S
WEST Group to the shares of any Subsidiary of such Group shall be other than
good and marketable and free from encumbrances or (d) any member of the other
Group shall fail to obtain any consents or approvals relating to its business
required in connection with the consummation of the transactions contemplated by
this Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 Merger or Consolidation. Neither New U S WEST nor U S
WEST (in either case, the "Transaction Party") shall (a) consolidate with or
merge into any Person or permit any Person to consolidate with or merge into the
Transaction Party (other than a merger or consolidation in which the Transaction
Party is the surviving or continuing corporation) or (b) sell, assign, transfer,
lease or otherwise dispose of, in one transaction or a series of related
transactions, all or substantially all of the assets of the Transaction Party,
unless the resulting, surviving or transferee Person shall expressly assume, by
instrument in form and substance reasonably satisfactory to the other party, all
of the obligations of the Transaction Party under this Agreement and each of the
other Transaction Documents.
12.2 Separation Committee; Dispute Resolution.
(a) As of the Separation Time, New U S WEST and U S WEST shall
form a committee (the "Separation Committee") comprised of one representative
designated from time to time by the General Counsel of New U S WEST in his sole
discretion and one representative designated from time to time by the General
Counsel of U S WEST in his sole discretion. Until the tenth anniversary of the
Separation Time, the Separation Committee shall be responsible for resolving any
and all disputes between any member of the U S WEST Group and any member of the
New U S WEST Group arising with respect to any matter, whether based in
contract, tort, statute or otherwise (collectively, "Disputes"), including any
dispute as to (i) whether any Action or other Liability is a New U S WEST
Liability, a MediaOne Liability or a Shared Liability, (ii) whether any Asset is
a New U S WEST Asset or a MediaOne Asset, (iii) the interpretation of any
provision of this Agreement or any other Transaction
<PAGE>
Document and (iv) such other matters as are contemplated by this Agreement or
any other Transaction Document to be resolved by the Separation Committee. In
the event of any such Dispute, each of New U S WEST and U S WEST shall have the
right to refer in writing such Dispute to the Separation Committee for
resolution. The Separation Committee shall be required to render a written
decision with respect to any Dispute within 30 days of its receipt of the
referral. The decision of the Separation Committee with respect to any Dispute
shall be binding on the New U S WEST Group and the U S WEST Group and their
respective successors and assigns. In the event that the Separation Committee is
unable to reach a unanimous determination as to any Dispute to which it is
referred within 30 days of such referral, each of New U S WEST and U S WEST
shall have the right to submit such Dispute to arbitration in accordance with
the procedures set forth in Section 12.2(b). All out-of-pocket expenses and
costs incurred by New U S WEST or U S WEST in connection with the procedures set
forth in this Section 12.2(a) shall be borne by the party incurring such
expenses and costs.
(b) In the event that the Separation Committee is unable to
reach a unanimous determination as to any Dispute pursuant to Section 12.2(a),
each of New U S WEST and U S WEST shall have the right to submit such Dispute to
arbitration in accordance with the procedures set forth in this Section 12.2(b).
Until the tenth anniversary of the Separation Time, resolution of any and all
such Disputes, including, but not limited to, disputes over arbitrability, shall
be exclusively governed by and settled in accordance with the provisions of this
Section 12.2(b); provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining injunctive relief or equitable or other
judicial relief to enforce this Section 12.2(b).
U S WEST or New U S WEST (each a "Party") may commence
proceedings hereunder by delivering a written notice (the "Demand") to the other
Party providing a reasonable description of the Dispute to the other, and
expressly requesting arbitration hereunder. The parties hereby agree to submit
all Disputes to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the parties, their successors and assigns.
The arbitration shall be conducted in Denver, Colorado by three arbitrators
acting by majority vote (the "Panel"). Of the three arbitrators comprising the
Panel, one arbitrator shall be selected by U S WEST, one arbitrator shall be
<PAGE>
selected by New U S WEST and one arbitrator shall be jointly selected by the
arbitrators selected by U S WEST and New U S WEST. If either U S WEST or New U S
WEST fail to select an arbitrator within 15 days after delivery of the Demand,
the arbitrator which is to be selected by such Party shall be appointed pursuant
to the commercial arbitration rules of the American Arbitration Association, as
amended from time to time (the "AAA Rules"). If an arbitrator so selected or
appointed becomes unable to serve, his or her successors shall be similarly
selected or appointed. Notwithstanding the foregoing, at the agreement of the
Parties, the Panel shall consist of one arbitrator selected by agreement of the
Parties for appropriate Disputes.
The arbitration shall be conducted pursuant to the Federal
Arbitration Act and such procedures as the Parties may agree, or, in the absence
of or failing such agreement, pursuant to the AAA Rules. Notwithstanding the
foregoing, the Panel, taking into consideration the desires of the Parties for
expedited resolution of the Dispute, shall have discretion to order discovery,
including, in appropriate circumstances, depositions. All hearings shall be
conducted on an expedited schedule, and all proceedings shall be confidential.
Either Party may at its expense make a stenographic record thereof, which shall
then be shared with the other Party. Hearings with respect to a Dispute shall
commence not later than 60 days after selection or appointment of the Panel, and
shall not be more than 30 days in length. The Panel shall be required to make a
final award within 30 days of the conclusion of the hearings. The award shall be
in writing and shall specify the factual and legal basis for the award. The
Panel shall apportion all costs and expenses of arbitration, including the
Panel's fees and expenses, fees and expenses of experts and reasonable attorneys
fees, between the prevailing and non-prevailing Party as the Panel deems fair
and reasonable. The Parties agree that monetary damages may be inadequate and
that either Party shall be entitled to seek, and that the Panel shall be
empowered to enter, equitable and injunctive relief, including preliminary and
temporary injunctive relief, in addition to any other appropriate relief or
remedy. The Parties consent to the jurisdiction of the Panel to award such
relief and to the binding nature of any such relief awarded by the Panel. In no
event may the Panel award consequential, exemplary, special or punitive damages,
or lost profits, except to the extent such consequential, exemplary, special or
punitive damages, or lost profits are actually paid by a Party or a member of
<PAGE>
that Party's Group to a third party. Any arbitration award shall be binding and
enforceable against the Parties and each member of their respective Groups and
judgment may be entered thereon in any court of competent jurisdiction.
12.3 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any entity that is contemplated to be a Subsidiary of such party on or
after the Separation Time.
12.4 Expenses. Except as set forth in this Agreement or in the
Separation Disclosure Schedule, all out-of-pocket costs with respect to the
transfer of the New U S WEST Assets and the transactions contemplated hereby and
by the other Transaction Documents shall be borne equally by U S WEST and New U
S WEST.
12.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado, without reference to choice
of law principles, including matters of construction, validity and performance.
12.6 Notices. Notices, requests, permissions, waivers,
referrals and all other communications hereunder shall be in writing and shall
be deemed to have been duly given if signed by the respective persons giving
them (in the case of any corporation the signature shall be by an officer
thereof) and delivered by hand or by telecopy or on the date of receipt
indicated on the return receipt if mailed (registered or certified, return
receipt requested, properly addressed and postage prepaid):
If to U S WEST, to:
U S WEST, INC.
(to be renamed "MEDIAONE GROUP, INC.")
188 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel
Telephone: (303) 858-5800
<PAGE>
If to New U S WEST, to:
USW-C, INC.
(to be renamed "U S WEST, INC.")
1801 California Street
Denver, Colorado 80202
Attention: General Counsel
Telephone: (303) 896-2020
Such names and addresses may be changed by notice given in accordance with this
Section 12.6. Copies of all notices, requests, permissions, waivers, referrals
and all other communications hereunder shall be given to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
12.7 Entire Agreement. This Agreement and the other
Transaction Documents, together with all schedules, exhibits, annexes,
certificates, instruments and agreements delivered pursuant hereto and thereto,
contain the entire understanding of the parties hereto and thereto with respect
to the subject matter contained herein and therein, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings and communications
of the parties, oral or written, respecting such subject matter.
12.8 Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles", "Sections" or "Exhibits" shall be deemed to be
references to Articles or Sections hereof or Exhibits hereto unless otherwise
indicated. All references herein to "Sections" of the Separation Disclosure
Schedule shall be deemed to be references to the Separation Disclosure Schedule
unless otherwise indicated.
12.9 Schedules. The Separation Disclosure Schedule referenced
in this Agreement and attached hereto is incorporated into this Agreement by
reference and made a part hereof. U S WEST and New U S WEST agree that the
<PAGE>
Separation Disclosure Schedule shall be updated immediately prior to the
Separation Time.
12.10 Counterparts. This Agreement may be executed in one or
more counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
12.11 Parties in Interest; Assignment; Successors. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall inure
to the benefit of and be binding upon U S WEST and New U S WEST and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
under or by reason of this Agreement.
12.12 Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
12.13 Amendment. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto.
12.14 Termination. This Agreement may be terminated and the
Separation abandoned at any time prior to the Separation Time by and in the sole
discretion of the Board of Directors of U S WEST without the approval of any
other party hereto or of U S WEST's stockholders. In the event of such
termination, no party hereto or to any other Transaction Document shall have any
Liability to any Person by reason of this Agreement or any other Transaction
Document, except as otherwise expressly provided herein or therein.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Separation Agreement to be duly executed on its behalf by its officers thereunto
duly authorized, all as of the day and year first above written.
U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)
/s/ Charles M. Lillis
By:
Name: Charles M. Lillis
Title: Executive Vice President;
President and Chief Executive
Officer-U S WEST Media Group
USW-C, INC.
(to be renamed U S WEST, INC.)
/s/ Solomon D. Trujillo
By:
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
<PAGE>
SEPARATION AGREEMENT
between
U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)
and
USW-C, INC.
(to be renamed U S WEST, INC.)
Dated as of June 5, 1998
<PAGE>
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 General..................................................................... 2
1.2 Terms Defined Elsewhere in the Agreement.................................... 15
1.3 Other Definitional Provisions............................................... 17
1.4 References to Time.......................................................... 18
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
2.1 Certificates of Incorporation; Bylaws; Name
Changes................................................................... 18
2.2 Stockholders' Meeting....................................................... 18
2.3 Registration and Listing.................................................... 19
2.4 Boards of Directors......................................................... 20
2.5 Rights Agreements........................................................... 20
2.6 The Transaction Documents................................................... 20
2.7 U S WEST Approval of Certain New U S WEST
Actions.................................................................... 20
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
3.1 Reorganization.............................................................. 21
3.2 Refinancing of Indebtedness................................................. 23
3.3 Contribution................................................................ 28
3.4 Discharge of Liabilities.................................................... 32
3.5 Closing; Delivery; Methods of Transfer and
Assumption................................................................. 34
ARTICLE IV
THE SEPARATION
4.1 The Separation.............................................................. 35
4.2 Separation Time............................................................. 36
4.3 Certain Determinations...................................................... 36
4.4 New U S WEST SIP Accounts; Certificates;
Distribution Procedures................................................... 36
4.5 Conditions to the Separation................................................ 41
<PAGE>
5.1 Pending Litigation.......................................................... 43
5.2 Settlements for Cash Collections and
Disbursements After the Separation Time................................... 44
5.3 Transition Services......................................................... 45
5.4 U S WEST Name............................................................... 46
5.5 Transfer Taxes.............................................................. 47
5.6 Intellectual Property....................................................... 47
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employees................................................................... 49
6.2 Employee Benefit Plans and Employee
Arrangements.............................................................. 49
6.3 Internal Revenue Service Forms.............................................. 49
ARTICLE VII
INSURANCE MATTERS
7.1 Policies and Rights Included Within Assets.................................. 49
7.2 Administration; Other Matters............................................... 50
7.3 Cooperation; Disagreements.................................................. 52
ARTICLE VIII
INDEMNIFICATION
8.1 New U S WEST's Agreement to Indemnify....................................... 52
8.2 U S WEST's Agreement to Indemnify........................................... 53
8.3 Procedure for Indemnification............................................... 54
8.4 Miscellaneous Indemnification Provisions.................................... 59
8.5 Contribution................................................................ 60
8.6 Tax Matters; Construction of Agreements..................................... 60
8.7 Remedies Cumulative......................................................... 61
ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1 Licenses and Permits........................................................ 61
9.2 Intercompany Agreements..................................................... 61
9.3 Guarantee Obligations....................................................... 62
9.4 Further Assurances.......................................................... 64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
9.5 National Contracts.......................................................... 66
9.6 Non-Solicitation of Employees............................................... 66
9.7 Lock Boxes.................................................................. 67
9.8 Agreements with Respect to Common Stock
Received by Savings Plan/ESOPs............................................. 67
9.9 AirTouch Transaction........................................................ 68
ARTICLE X
ACCESS TO INFORMATION
10.1 Allocation of Corporate Records............................................. 70
10.2 Access to Information....................................................... 71
10.3 Production of Witnesses..................................................... 73
10.4 Certain Procedures Relating to Access to
Archived Joint Books and Records.......................................... 73
10.5 Confidentiality............................................................. 74
10.6 Cooperation with Respect to Government
Reports and Filings....................................................... 74
10.7 Certain Limitations with Respect to
Information............................................................... 75
10.8 Protective Arrangements..................................................... 75
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
11.1 Mutual Release............................................................. 76
11.2 No Representations or Warranties........................................... 77
ARTICLE XII
GENERAL PROVISIONS
12.1 Merger or Consolidation..................................................... 78
12.2 Separation Committee; Dispute Resolution.................................... 78
12.3 Subsidiaries................................................................ 81
12.4 Expenses.................................................................... 81
12.5 Governing Law............................................................... 81
12.6 Notices..................................................................... 81
12.7 Entire Agreement............................................................ 82
12.8 Headings; References........................................................ 82
12.9 Schedules................................................................... 82
12.10 Counterparts................................................................ 83
12.11 Parties in Interest; Assignment;
Successors................................................................ 83
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
12.12 Severability; Enforcement..................................................... 83
12.13 Amendment..................................................................... 83
12.14 Termination................................................................... 83
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A - Employee Matters Agreement
Exhibit B - Tax Sharing Agreement
</TABLE>
EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
1. DEFINITIONS................................................................................... 1
2. GENERAL PRINCIPLES............................................................................ 7
(a) New U S WEST Liabilities............................................................. 7
(b) MediaOne Liabilities................................................................. 8
(c) Shared Liabilities................................................................... 8
(d) Class Action Liabilities............................................................. 9
(e) Appeal Rights........................................................................ 9
(f) Funded Benefits...................................................................... 9
(g) Control of litigation................................................................ 9
(h) Election to Assume Liability......................................................... 10
3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS............ 11
4. EMPLOYEE SAVINGS PLANS........................................................................ 12
5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES...................................... 16
6. OTHER TAX-QUALIFIED PLANS..................................................................... 24
7. WELFARE PLANS................................................................................. 24
(a) Communications Plans................................................................. 24
(b) Media Plans.......................................................................... 24
(c) Joint Plans.......................................................................... 25
(d) Continuing Treatment................................................................. 27
(e) Continuance of Elections............................................................. 27
(f) Co-Payments and Maximum Benefits..................................................... 27
(g) Pre-existing conditions.............................................................. 28
(h) COBRA................................................................................ 28
(i) Long-Term Disability................................................................. 29
8. VEBA's........................................................................................ 29
9. INCENTIVE COMPENSATION........................................................................ 33
(a) Stock Options........................................................................ 33
(b) Restricted Stock..................................................................... 35
(c) LTIP................................................................................. 37
(d) ESTIP................................................................................ 37
(e) Phantom Stock........................................................................ 37
10. OTHER BENEFITS................................................................................ 39
(a) Top-hat plans........................................................................ 39
(b) Employment contracts................................................................. 40
(c) Split-dollar contracts............................................................... 40
(d) Ex-Pat Employees..................................................................... 41
(e) Vail Trust........................................................................... 41
(f) Leaves of Absence.................................................................... 41
(g) Non-Employee Director Plans.......................................................... 42
(h) Non-Employee State Executive Board Plan.............................................. 42
11. PORTABILITY................................................................................... 43
12. FURTHER AGREEMENTS............................................................................ 43
13. COOPERATION................................................................................... 44
14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES................................... 45
15. MISCELLANEOUS................................................................................. 46
(a) Payment of 1998 Administrative Costs and Expenses.................................... 46
(b) Audit Rights......................................................................... 47
(1) Information Provided............................................................ 47
(2) Vendor Contracts................................................................ 47
(c) Beneficiary Designations............................................................. 48
(d) Effect If Separation Does Not Occur.................................................. 48
(e) Provisions of Separation Agreement................................................... 48
(f) U S WEST Benefits Handbook........................................................... 48
</TABLE>
<PAGE>
EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
<PAGE>
1. DEFINITIONS
(a) All capitalized terms used in this EM Agreement shall have
the meanings set forth below or , if not set forth below,
the meaning given in the Separation Agreement.
"AirTouchTransfers" shall mean Terminated Employees whose employment is
transferred to AirTouch Communications, Inc. or any of its affiliates
prior to the Separation Time as a result of the merger agreement among
Existing U S WEST, certain subsidiaries thereof and AirTouch
Communications, Inc. and who either: (i) are eligible for retiree
medical coverage or retiree life insurance as of the date of transfer
of employment; or (ii) have an account balance in the Media Savings
Plan/ESOP immediately after the Separation Time. "Average Value" shall
mean the average Market Value of the Communications Stock or Media
Stock, as applicable, over the period of 20 Trading Days ending on the
fifth Trading Day prior to the date of the Separation Time, rounded to
the nearest one-hundred thousandth (or if there shall not be a nearest
one-hundred thousandth, to the next highest one-hundred thousandth).
"Cable Companies" shall mean MediaOne of Delaware, Inc. (f/k/a Continental
Cablevision, Inc.), MediaOne, Inc. and/or MediaOne of Michigan, Inc.
(f/k/a Booth Communications), or their predecessors.
"COBRA" shall mean the continuation coverage requirements for group health
plans under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code Section 4980B and
ERISA Sections 601 through 608.
"Communications Employees" shall mean all persons who are Employees of the
New U S WEST Group at the Separation Time, including without
limitation (1) Employees who worked for Existing U S WEST prior to the
Separation Time that are designated as Communications Employees by
Existing U S WEST as of the Separation Time, (2) Employees who, prior
to the Separation Time, worked for an entity that is a member of the
MediaOne Group that are designated as Communications Employees as of
the Separation Time, and (3) Employees who, prior to the Separation
Time, worked for Dex that are designated as Communications Employees
as of the Separation Time.
"Communications Employee Arrangements" shall mean all Employee
Arrangements sponsored by members of the New U S WEST Group after
the Separation Time.
"Communications Employee Benefit Plans" shall mean all Employee
Benefit Plans sponsored by members of the New U S WEST Group
after the Separation Time.
"DeferredBenefits" shall mean the entitlement of a Terminated
Employee, based solely on the records of the Existing U S WEST
Group at the Separation Time, to future benefits under one or
more of the Deferred Plans. Except as provided in the definition
of Terminated Media Employee and Terminated Inc. Employee, a
Terminated Employee who, according to such records, is not
entitled to any benefits under the Deferred Plans or who has
already received all of such benefits prior to the Separation
Time does not have any Deferred Benefits.
"DeferredPlans" shall mean the U S WEST Employee Savings Plan/ESOP
(except accounts attributable to AirTouch Transfers); the U S
WEST Pension Plan (including the disability pensions provided
thereunder); retiree medical benefits under any medical plan
maintained by the Existing U S WEST Group (but excluding COBRA);
and long-term disability benefits under a long-term disability
plan maintained by the Existing U S WEST Group.
"EBC" shall mean the Employee Benefits Committee of Existing U S
WEST as constituted prior to the Separation Time.
"EM Agreement" shall mean this Employee Matters Agreement,
which is Exhibit A to the Separation Agreement.
"Employee" means a person who is an employee of the Existing U S WEST
Group at the Separation Time, including an employee who is not
actively performing services because such employee is on an
approved leave of absence, short-term disability, illness or
other similar reasons. Employee shall include: (i) a person who
is a former employee of the Existing U S WEST Group; and/or (ii)
a person who has been transferred to Time Warner Communications
pursuant to the agreement of Existing U S WEST and Time Warner
Communications; and/or (iii) a person who is an employee of Time
Warner Communications at the Separation Time, including an
employee who is not actively performing services because such
employee is on an approved leave of absence, short-term
disability, illness or other similar reasons. In addition, an
individual who is described in either of the preceding sentences
(whether he works for the Existing U S WEST Group or Time Warner
Communications) immediately prior to the Separation Time who does
not report for work to the New U S WEST Group, MediaOne Group or
Time Warner Communications (depending upon his applicable
assignment) immediately after the Separation Time shall be
considered an Employee (for purposes of this EM Agreement only)
unless (1) prior to the Separation Time, he notifies the Existing
U S WEST Group or Time Warner Communications, as applicable, that
he is terminating, effective on or before the Separation Time or
(2) prior to the Separation Time, the Existing U S WEST Group or
Time Warner Communications, as applicable, notifies him that he
is terminated, effective on or before the Separation Time. All
Employees shall be either Communications Employees or Media
Employees. A former employee who is on lay-off is a Terminated
Employee, not an Employee.
"Employment Related Liabilities" shall mean all Liabilities, including
litigation costs, which relate to an Employee, a Terminated
Employee or their respective dependents and beneficiaries, in
each case relating to, arising out of or resulting from
employment by the Existing U S WEST Group or predecessor prior to
the Separation Time, including Liabilities under Employee Benefit
Plans and Employee Arrangements. Notwithstanding the preceding
sentence, the following Liabilities are not Employment Related
Liabilities: (1) any Liability which is specifically addressed in
a provision other than Section 2 of this EM Agreement, (2)
Liabilities arising under or relating to the severance agreements
between Existing U S WEST and members of the Executive Group
(which Liabilities are addressed in Schedules 3.4(a) and 3.4(b)
of the Separation Agreement) and (3) any other Liability
scheduled in the Separation Agreement.
"Executive Group" shall mean Richard D. McMormick, Charles P. Russ
III, Michael P. Glinsky, Robert W. Gras, and James T. Anderson.
"ExistingU S WEST" shall mean U S WEST, Inc., a Delaware corporation,
prior to the Separation Time.
"ExistingU S WEST Group" shall mean, prior to the Separation Time,
Existing U S WEST and all of its Subsidiaries.
"Media Employees" shall mean all persons who are Employees of the MediaOne
Group at the Separation Time, including without limitation (1)
Employees who worked for Existing U S WEST prior to the Separation
Time that are designated as Media Employees by Existing U S WEST as of
the Separation Time (including, without limitation, Employees who are
employed by Time Warner Communications), (2) Employees who, prior to
the Separation Time, worked for an entity that is a member of the New
U S WEST Group that are designated as Media Employees as of the
Separation Time and (3) Employees who, prior to the Separation Time,
worked for MGI that are designated as Media Employees as of the
Separation Time.
"Media Employee Arrangements" shall mean the Employee Arrangements
sponsored by members of the MediaOne Group after the Separation
Time.
"Media Employee Benefit Plans" shall mean the Employee Benefit Plans
sponsored by members of the MediaOne Group after the Separation
Time.
"MediaOne" shall mean MediaOne Group, Inc., a Delaware corporation, at and
after the Separation Time. MediaOne was known as U S WEST, Inc. prior
to the Separation Time.
"MediaOne Employee Benefits Committee" shall mean, effective on and after
the Separation Time, the committee of MediaOne Group, Inc. designated
to administer various Media Employee Benefit Plans and Media Employee
Arrangements.
"MediaOne Group" shall mean, at and after the Separation Time, MediaOne
Group, Inc. and all of its Subsidiaries.
"New U S WEST Employee Benefits Committee" shall mean,
effective on and after the Separation Time, the committee
of New U S WEST designated to administer various
Communications Employee Benefit Plans and Communications
Employee Arrangements.
"Non-Employee Directors" shall mean those members of the Board of
Directors of the respective corporation who are or were not
employees of that entity during their term of office. "Retired
Non-Employee Directors" shall mean those Non-Employee Directors
who have completed their term on the respective Board of
Directors prior to the Separation Time.
"Non-Employee Director Plans" shall mean the U S WEST, Inc. Deferred
Compensation Plan for Non-Employee Directors and the U S WEST, Inc.
Retirement Plan for Non-Employee Directors.
"Separation Agreement" shall mean the Separation Agreement, dated as of
June 5, 1998, between U S WEST, Inc. and USW-C, Inc.
"Terminated Communications Employees" shall mean all persons who are
Terminated Employees and who are not Terminated Media Employees or
Terminated Inc. Employees. Terminated Communications Employees shall
include (1) all Terminated Employees (other than AirTouch Transfers)
with Deferred Benefits (unless they were actively employed by one of
the Cable Companies on their last day of active employment with the
Existing U S WEST Group); (2) all Terminated Employees who were last
actively employed before November 1, 1995 (unless they were actively
employed by one of the Cable Companies on their last day of active
employment with the Existing U S WEST Group) and are not entitled to
Deferred Benefits at the Separation Time; and (3) all Terminated
Employees who were last actively employed (on or after November 1,
1995 and before the Separation Time) by an entity that is a member of
the New U S WEST Group (excluding MGI, but including Dex and its
subsidiaries) after the Separation Time and are not entitled to
Deferred Benefits at the Separation Time.
"Terminated Employee" means a person who formerly was actively
employed by the Existing U S WEST Group and who is not an
Employee. An individual who is employed by the Existing U S WEST
Group immediately prior to the Separation Time who does not
report for work to the New U S WEST Group or MediaOne Group
(depending upon his applicable assignment) immediately after the
Separation Time shall be considered a Terminated Employee if (1)
prior to the Separation Time, he notifies Existing U S WEST or
its Subsidiaries that he is terminating, effective on or before
the Separation Time or (2) prior to the Separation Time, Existing
U S WEST or its Subsidiaries notify him that he is terminated,
effective on or before the Separation Time. All members of the
Executive Group shall be Terminated Employees. Each Terminated
Employee shall be either (a) a Terminated Communications
Employee, (b) a Terminated Inc. Employee or (c) a Terminated
Media Employee, provided that, to the extent set forth in this EM
Agreement, a Terminated Employee may be classified differently
for different purposes.
"Terminated Inc. Employees" shall mean all Terminated Employees who
were last actively employed (on or after November 1, 1995 and
before the Separation Time) by Existing U S WEST (but not its
Subsidiaries) and are not entitled to Deferred Benefits at the
Separation Time. If, after the Separation Time, it is determined
by a final decision of a court of competent jurisdiction or an
agreement of MediaOne and New U S WEST that a Terminated Inc.
Employee is entitled to benefits under one or more Deferred Plans
(other than as a result of future employment with the MediaOne
Group or New U S WEST Group), such Terminated Employee shall be
considered to have Deferred Benefits solely with respect to those
Deferred Plans that owe him additional benefits (and shall
therefore be a Terminated Communications Employee solely with
respect to such Deferred Plans).
"Terminated Media Employees" shall mean (1) all Terminated Employees
(whether or not they have Deferred Benefits) who were actively
employed by one of the Cable Companies on their last day of
active employment with the Existing U S WEST Group; (2) all
Terminated Employees who were last actively employed (on or after
November 1, 1995 and before the Separation Time) by an entity
that is a member of the MediaOne Group after the Separation Time
(unless such last employer was Existing U S WEST) and are not
entitled to Deferred Benefits at the Separation Time; (3) all
Terminated Employees who were last actively employed (on or after
November 1, 1995 and before the Separation Time) by MGI and are
not entitled to Deferred Benefits at the Separation Time; and (4)
all AirTouch Transfers, regardless of their last day of
employment. Notwithstanding the foregoing, if, after the
Separation Time, it is determined by a final decision of a court
of competent jurisdiction or an agreement of MediaOne and New U S
WEST that a Terminated Media Employee described in clause (2) or
(3) above is entitled to benefits under one or more Deferred
Plans (other than as a result of future employment with the
MediaOne Group or New U S WEST Group), such Terminated Employee
shall be considered to have Deferred Benefits solely with respect
to those Deferred Plans that owe him additional benefits (and
shall therefore be a Terminated Communications Employee solely
with respect to such Deferred Plans.
"Welfare Plan" shall mean an Employee Benefit Plan which is a health
benefit, life insurance or other employee welfare benefit plan,
within the meaning of Section 3(1) of ERISA, which is maintained
by Existing U S WEST, New U S WEST, MediaOne or a Subsidiary of
any of them.
(b) All determinations under this Section 1 with respect to status as
an Employee, Terminated Employee, Media Employee, Communications
Employee, Terminated Media Employee, Terminated Inc. Employee or
Terminated Communications Employee shall be made as of the
Separation Time, unless otherwise specifically set forth in this
Section 1.
(c) Notwithstanding the foregoing definitions, in the event it is
unclear as to whether a Terminated Employee is a Terminated
Communications Employee, Terminated Inc. Employee or a Terminated
Media Employee, or in the event that a Terminated Employee was
last actively employed at a time the individual was on a
temporary transfer from one member of the Existing U S WEST Group
to another for less than 12 months, MediaOne and New U S WEST
shall agree on an equitable classification of such employee or
employees (and the assumption of any liability attributable
thereto).
2. GENERAL PRINCIPLES
(a) New U S WEST Liabilities. Except as otherwise provided in this EM
Agreement, New U S WEST and its Subsidiaries hereby assume and agree to
pay, perform, fulfill and discharge:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Communications Employees and
Terminated Communications Employees;
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the New U S WEST Business (other than MGI) prior to
the Separation Time by an independent contractor, leased employee
or similar individual or by any person who alleges that he was an
employee of the New U S WEST Business (other than MGI) prior to
the Separation Time or the dependent or beneficiary of any such
independent contractor or alleged employee;
(3) All Liabilities, including litigation costs, which
relate to a Communications Employee or his dependents and
beneficiaries, in each case relating to, arising out of or
resulting from employment by the New U S WEST Group on or after
the Separation Time (including Liabilities under Communications
Employee Benefit Plans and Communications Employee Arrangements);
and
(4) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the New U S WEST Group on or after the Separation
Time by an independent contractor, leased employee or similar
individual or by any person who alleges that he was an employee
of the New U S WEST Group on or after the Separation Time or the
dependent or beneficiary of any such independent contractor or
alleged employee.
(b) MediaOne Liabilities. Except as otherwise provided in this EM Agreement,
MediaOne and its Subsidiaries hereby assume and agree to pay, perform,
fulfill and discharge:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Media Employees and Terminated Media
Employees;
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the MediaOne Business (other than Existing U S WEST)
or MGI prior to the Separation Time by an independent contractor,
leased employee or similar individual or by any person who
alleges that he was an employee of the MediaOne Business (other
than Existing U S WEST) or MGI prior to the Separation Time or
the dependent or beneficiary of any such independent contractor
or alleged employee;
(3) All Liabilities, including litigation costs, which
relate to a Media Employee or his dependents and beneficiaries,
in each case relating to, arising out of or resulting from
employment by the MediaOne Group on or after the Separation Time
(including Liabilities under Media Employee Benefit Plans or
Media Employee Arrangements); and
(4) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the MediaOne Group on or after the Separation Time by
an independent contractor, leased employee or similar individual
or by any person who alleges that he was an employee of the
MediaOne Group on or after the Separation Time or the dependent
or beneficiary of any such independent contractor or alleged
employee.
(c) Shared Liabilities. New U S WEST and MediaOne hereby agree to share
equally:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Terminated Inc. Employees; and
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to Existing U S WEST (but not its Subsidiaries) prior to
the Separation Time by an independent contractor, leased employee
or similar individual or by any person who alleges that he was an
employee of Existing U S WEST prior to the Separation Time or the
dependent or beneficiary of any such independent contractor or
alleged employee.
(d) Class Action Liabilities. For purposes of determining whether the New U S
WEST Group or Media Group is responsible for Liabilities involving or
arising out of actions relating to more than one Employee or Terminated
Employee, the portion of Employment Related Liabilities relating to any
single Employee or Terminated Employee shall be in proportion to the total
number of Employees and Terminated Employees to which the action relates,
whether or not all such Employees or Terminated Employees submit claims.
(e) Appeal Rights. If either New U S WEST or MediaOne believes that the result
arising from the application of the foregoing provisions of this Section 2
will result in an inequitable allocation of liability, it may refer the
matter to the Separation Committee and the procedures set forth in Section
12.2 of the Separation Agreement shall apply. Any such referral must be
made in writing within sixty days after the referring party becomes aware
of the Employment Related Liability to which the referral relates.
(f) Funded Benefits. Notwithstanding the foregoing provisions of this Section
2, neither the New U S WEST Group nor the MediaOne Group shall be liable to
the extent that any Liability is payable from a trust or insurance contract
which funds the benefits under an Employee Benefit Plan or Employee
Arrangement maintained by the New U S WEST Group or MediaOne Group after
the Separation Date.
(g) Control of litigation. Except as set forth in sub-section (h) below, if any
litigation is brought by an Employee or Terminated Employee over
Liabilities addressed in this EM Agreement, the MediaOne Group shall
control the litigation if it is responsible for the Liabilities and the New
U S WEST Group shall control the litigation if it is responsible for the
Liabilities, irrespective of which party is the defendant, provided that if
the party (or its Subsidiaries) entitled to control the litigation is not
sued, it shall not control the litigation unless it agrees in writing that
it will be responsible for any resulting Liability. In the case of a shared
liability described in subsection (c) above or an action described in
subsection (d) above, the parties agree to cooperate to jointly control the
litigation, unless one of the parties agrees to assume all Liabilities
arising out of the litigation.
(h) Election to Assume Liability. In the event that any Employee or Terminated
Employee makes a claim or commences litigation which, if successful, would
result in Liability that is allocated under this EM Agreement (other than
under this paragraph (h)) exclusively to either MediaOne or New U S WEST
(the "Allocated Liability Party"), but which Liability, if any, arises from
alleged actions taken by an Employee or Terminated Employee of the business
of the other party (the "Other Party"), then the Allocated Liability Party
shall give written notice of such claim or litigation (the "Claim Notice")
to the Other Party within thirty days of becoming aware that such claim or
litigation involves an Employee or Terminated Employee of the business of
the Other Party. The Other Party may then elect, by giving written notice
(the "Election Notice") to the Allocated Liability Party within thirty days
after receiving the Claim Notice, to take control of the defense of the
claim and/or litigation and to assume all Liability, including litigation
costs, associated with such claim or litigation (other than a Liability
described in subsection (f) above). If the Election Notice is given, the
Allocated Liability Party shall cease to have any Liability with respect to
the claim or litigation which is the subject of the Election Notice and all
such Liability (other than a Liability described in subsection (f) above)
shall be assumed by the Other Party.
(i) The provisions of this Section 2 are designed solely to
allocate Liabilities between the New U S WEST Group and the
MediaOne Group. Notwithstanding any provision of this EM
Agreement, except to the extent required by the preceding
sentence, this EM Agreement shall not impose any Liability
relating to an Employee or Terminated Employee on any entity or
Subsidiary other than the entity or Subsidiary that incurred the
Liability. For example, if a Communications Employee worked
solely for one Subsidiary of New U S WEST, that Subsidiary (but
not New U S WEST or any other Subsidiary) shall be responsible
for any unfunded Liabilities owed to that individual.
3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND
EMPLOYEE ARRANGEMENTS
(a) At or prior to the Separation Time, all Communications Employee
Benefit Plans and Communications Employee Arrangements that are
not already sponsored by a member of the New U S WEST Group shall
be transferred to and assumed by New U S WEST in accordance with
the terms of this EM Agreement. Each of such Communications
Employee Benefit Plans and Communications Employee Arrangements
is hereby amended (such amendments to be self-effectuating),
effective as of the Separation Time, to provide transfer of
sponsorship to New U S WEST. In addition, each Communications
Employee Benefit Plan and Communications Employee Arrangement is
hereby amended (such amendments to be self-effectuating),
effective as of the Separation Time, to provide that the
Liabilities to be assumed by a corresponding Media Employee
Benefit Plan or Media Employee Arrangement shall cease to be
Liabilities under such Communications Employee Benefit Plan or
Communications Employee Arrangement. New U S WEST, MediaOne and
their Subsidiaries shall take all action reasonably appropriate
prior to the Separation Time (or as soon as practicable
thereafter) to effectuate such assumptions, including amendments
of the applicable Employee Benefit Plans and Employee
Arrangements where desirable.
To the extent that any of the Communications Employee Benefit Plans or
Communications Employee Arrangements is administered by the EBC prior
to the Separation Time, such plan or arrangement shall be administered
by the New U S WEST Employee Benefits Committee on and after the
earlier of the Separation Time or the date sponsorship of the
applicable plan or arrangement is assumed by New U S WEST. In
addition, any functions or responsibilities of the Treasurer of
Existing U S WEST with respect to such plans or arrangements prior to
the Separation Time shall become duties and responsibilities of either
the Investment Committee of New U S WEST or U S WEST Investment
Management Company (such duties and responsibilities to be allocated
in accordance with the rules set forth in the U S WEST Pension Plan
after the Separation Time) on the date set forth in the preceding
sentence.
(b) To the extent that a Media Employee Benefit Plan or Media
Employee Arrangement (or, in the case of any newly adopted Media
Employee Benefit Plan or Media Employee Arrangement, the Employee
Benefit Plan or Employee Arrangement that is replaced by such
newly adopted Media plan or arrangement) is administered by the
EBC prior to the Separation Time, such plan or arrangement shall
be administered by the MediaOne Employee Benefits Committee on
and after the Separation Time. In addition, any functions or
responsibilities of the Treasurer of Existing U S WEST with
respect to such plans or arrangements prior to the Separation
Time shall become duties and responsibilities of the Treasurer of
MediaOne (or such other officer or committee as MediaOne or the
MediaOne Employee Benefits Committee shall designate) on and
after the Separation Time.
4. EMPLOYEE SAVINGS PLANS
(a) On or before the Separation Time, sponsorship of the U S WEST
Savings Plan/ESOP (consisting of the "U S WEST Savings Plan" and
the "U S WEST ESOP") shall be transferred from Existing U S WEST
to New U S WEST. Prior to the Separation Time, MediaOne shall
establish a new defined contribution plan or plans consisting of
a profit-sharing plan and a stock bonus plan which shall be an
employee stock ownership plan (the "Media Savings Plan/ESOP",
consisting of the "Media Savings Plan" and the "Media ESOP"),
effective immediately after the Separation Time, for the benefit
of Media Employees and Terminated Media Employees (excluding
persons described in clauses (2) or (3) of the definition of
Terminated Media Employee) covered by the existing U S WEST
Savings Plan/ESOP. The Media Savings Plan/ESOP shall initially
contain terms and conditions that are similar to those of the
existing U S WEST Savings Plan/ESOP, including without limitation
(1) provisions required by Section 411(d)(6) of the Code for
account balances to be transferred from the U S WEST Savings
Plan/ESOP, and (2) provisions granting credit for past service
with the Existing U S WEST Group for purposes of eligibility,
vesting, distributions and withdrawals. Each Media Employee and
Terminated Media Employee who was a participant in the U S WEST
Savings Plan/ESOP as of the Separation Time shall become a
participant in the Media Savings Plan/ESOP as of the Separation
Time.
(b) As soon as reasonably practicable after the Separation Time, New
U S WEST shall cause to be transferred from the U S WEST Savings
Plan to the Media Savings Plan assets having a fair market value
equal to the aggregate value of the account balances in the U S
WEST Savings Plan (but not the ESOP), as of the date of the
transfer, applicable to Media Employees and Terminated Media
Employees, and MediaOne shall cause the Media Savings Plan to
accept such transfers and to assume all Savings Plan liabilities
relating to Media Employees and Terminated Media Employees
(excluding persons described in clauses (2) or (3) of the
definition of Terminated Media Employee). All such liabilities
shall cease to be liabilities of the U S WEST Savings Plan. Such
transfer shall be in (i) shares of MediaOne Common Stock and New
U S WEST Common Stock to the extent such shares are allocated in
the U S WEST Savings Plan to accounts of Media Employees or
Terminated Media Employees, (ii) notes evidencing loans to Media
Employees or Terminated Media Employees, and (iii) with the
balance in cash or, to the extent that the parties mutually
agree, other securities held by the U S WEST Savings Plan.
(c) As soon as reasonably practicable after the Separation Time, New
U S WEST shall cause to be transferred from the U S WEST ESOP to
the Media ESOP assets having a fair market value equal to the
aggregate value of the account balances in the U S WEST ESOP (but
not the Savings Plan), as of the date of the transfer, applicable
to Media Employees and Terminated Media Employees, and MediaOne
shall cause the Media ESOP to accept such transfers and to assume
all ESOP liabilities relating to Media Employees and Terminated
Media Employees (excluding persons described in clauses (2) or
(3) of the definition of Terminated Media Employee). All such
liabilities shall cease to be liabilities of the U S WEST ESOP.
Such transfer shall be in shares of MediaOne Common Stock and of
New U S WEST Common Stock. To the greatest extent possible and
consistent with fiduciary duties under Sections 404 and 406 of
ERISA, the shares of Common Stock shall be transferred so that,
immediately following the transfer, the U S WEST ESOP will have
at least 60% of its assets invested in New U S WEST Common Stock
and the Media ESOP will have at least 60% of its assets invested
in MediaOne Common Stock.
(d) U S WEST Savings Plan/ESOP shall transfer to the Media Savings
Plan/ESOP all qualified domestic relations orders (within the
meaning of Section 414(p) of the Code) ("QDROs") held by the U S
WEST Savings Plan/ESOP with respect to Media Employees and
Terminated Media Employees. New U S WEST shall cause to be
transferred from the U S WEST Savings Plan/ESOP assets having a
fair market value equal to the aggregate account values relating
to such QDROs in accordance with paragraphs (b) and (c) above,
and the Media Savings Plan ESOP shall assume all liabilities
relating to such QDROs.
(e) The U S WEST ESOP will repay all "acquisition loans" (as defined
in the U S WEST Savings Plan/ESOP) prior to the Separation Time.
If, as of the Separation Time, the U S WEST ESOP holds shares of
common stock that have not been allocated to participants'
accounts, the U S WEST ESOP will transfer to the Media ESOP
unallocated shares of stock having a fair market value equal to
(x) the total market value of all unallocated shares held by the
U S WEST ESOP as of the Separation Time, multiplied by (y) the
aggregate dollar value of the Employing Company Contributions
made under the U S WEST ESOP during the first calendar quarter of
1998 as matched allotments to Media Employees and Terminated
Media Employees, divided by (z) the aggregate dollar value of the
Employing Company Contributions made under the U S WEST ESOP
during the first calendar quarter of 1998 as matched allotments
to all Employees and Terminated Employees. To the greatest extent
possible, the unallocated shares transferred to the Media ESOP
pursuant to this paragraph shall be shares of MediaOne Common
Stock.
(f) If required by law, New U S WEST and MediaOne shall cause to be
filed with the IRS all applicable Forms 5310A and any other
required forms with the appropriate governmental agency in order
for the Media Savings Plan/ESOP to receive a transfer of assets
from the U S WEST Savings Plan/ESOP on or following the
Separation Time in accordance with paragraphs (b), (c), (d) and
(e) above. Within nine months after the Separation Time, MediaOne
shall cause to be filed with the IRS a request for a
determination that the Media Savings Plan/ESOP is qualified under
Section 401(a) of the Code. MediaOne agrees to make all
reasonable amendments requested by the IRS to obtain such
determination letter.
(g) Subject to paragraph (h), and in accordance with applicable law
and to the extent consistent with fiduciary duties under Sections
404 and 406 of ERISA, the U S WEST Savings Plan and the U S WEST
ESOP will maintain a MediaOne Common Stock Fund for participants
who retain such investment of their account balances after the
Separation Time. No new investments in the MediaOne Common Stock
Fund of the U S WEST Savings Plan or in the MediaOne Common Stock
Fund of the U S WEST ESOP will be permitted after the Separation
Time. Subject to paragraph (h), and in accordance with applicable
law and to the extent consistent with fiduciary duties under
Sections 404 and 406 of ERISA, the Media Savings Plan and the
Media ESOP will maintain a New U S WEST Common Stock Fund for
participants who retain such investment of their account balances
after the Separation Time. No new investments in the New U S WEST
Common Stock Fund of the Media Savings Plan or in the New U S
WEST Common Stock Fund of the Media ESOP will be permitted after
the Separation Time. The U S WEST Savings Plan (but not the ESOP)
will maintain the MediaOne Common Stock Fund, and the Media
Savings Plan (but not the ESOP) will maintain the New U S WEST
Common Stock Fund, for at least five years after the Separation
Time; as soon as practicable after either plan sponsor decides to
eliminate such stock fund, it shall inform the issuer of the
stock to be sold so that the issuer may arrange a facility to
exercise the right of first refusal described below. When the
trustee of the U S WEST Savings Plan intends to sell MediaOne
Common Stock because the MediaOne Common Stock Fund will no
longer be maintained or the trustee of the Media Savings Plan
intends to sell New U S WEST Common Stock because the New U S
WEST Common Stock Fund will no longer be maintained, such trustee
shall first offer such stock to the issuer prior to offering such
stock for sale on the open market. After the close of business,
the issuer shall then have the right to purchase such stock at
the closing price of the stock on that day. If the issuer does
not exercise such right to purchase, the trustee shall be free to
sell the stock on the open market the next day, provided
that,subject to fiduciary duties under Sections 404 and 406 of
ERISA, the trustee shall not sell in any one day more than 20% of
the average daily trading volume of the relevant stock. (For this
purpose, the average daily trading volume is the arithmetic mean
of the reported daily trading volumes of the relevant stock on
the New York Stock Exchange (or, if not traded on the New York
Stock Exchange, the principal exchange on which the stock is
traded) in the two calendar months preceding any such sale.)
(h) Within two years after the Separation Time, the U S WEST ESOP
(but not the Savings Plan) will dispose of all investment in
MediaOne Common Stock and the Media ESOP (but not the Savings
Plan) will dispose of all investment in New U S WEST Common Stock
(each, a "Non-Employer Common Stock"). Subject to fiduciary
duties under Sections 404 and 406 of ERISA, the U S WEST ESOP
shall exchange shares of MediaOne Common Stock it holds for
shares of New U S WEST Common Stock held by the Media ESOP, and
vice versa, at the Common Stocks' relative fair market values. To
the extent such exchanges are not practicable for some or all of
the Non-Employer Common Stock held by either ESOP, the U S WEST
ESOP and the Media ESOP will sell shares of Non-Employer Common
Stock. As soon as practicable after either plan sponsor decides
to sell such Non-Employer Common Stock, it shall inform the
issuer of the stock to be sold so that the issuer may arrange a
facility to exercise the right of first refusal described below.
When the trustee of the U S WEST ESOP intends to sell MediaOne
Common Stock or the trustee of the Media ESOP intends to sell New
U S WEST Common Stock (other than because of a sale by, or
distribution to, plan participants), such trustee shall first
offer such stock to the issuer prior to offering such stock for
sale on the open market. After the close of business, the issuer
shall then have the right to purchase such stock at the closing
price of the stock on that day. If the issuer does not exercise
such right to purchase, the trustee shall be free to sell the
stock on the open market the next day. Subject to fiduciary
duties under Sections 404 and 406 of ERISA, from the Separation
Time to and including the second anniversary of the Separation
Time, neither the U S WEST ESOP nor the Media ESOP will sell in
any one day more than 20% of the average daily trading volume of
the relevant Non-Employer Common Stock. (For this purpose, the
average daily trading volume is the arithmetic mean of the
reported daily trading volumes of the relevant stock on the New
York Stock Exchange (or, if not traded on the New York Stock
Exchange, the principal exchange on which the stock is traded) in
the two calendar months preceding any such sale.)
(i) MediaOne and New U S WEST shall take such action as necessary to
ensure that participants in the U S WEST Savings Plan/ESOP and
the Media Savings Plan/ESOP are notified that a quiet period will
occur beginning on or about the Separation Time, during which
changes in investment direction with respect to participants'
accounts generally will not be permitted.
(j) The Media Savings Plan/ESOP and the assets and liabilities with
respect thereto shall be considered a Media Employee Benefit
Plan. The U S WEST Savings Plan/ESOP and the assets and
liabilities with respect thereto shall be considered a
Communications Employee Benefit Plan.
5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES
(a) On or prior to the Separation Time, sponsorship of the U S WEST
Pension Plan shall be transferred from Existing U S WEST to New U
S WEST. Prior to the Separation Time, MediaOne shall establish a
defined benefit pension plan (the "Media Pension Plan"),
effective immediately after the Separation Time, for the benefit
of the Media Employees and Terminated Media Employees (excluding
persons described in clauses (2) or (3) of the definition of
Terminated Media Employee) covered by the existing U S WEST
Pension Plan. The Media Pension Plan shall contain terms and
conditions that are substantially similar to those of the
existing U S WEST Pension Plan, including credit for past service
with the Existing U S WEST Group for eligibility, vesting, early
retirement, and, contingent upon the transfer of assets set forth
in paragraph (b) below, benefit accrual and compensation earned
with the Existing U S WEST Group. Notwithstanding the preceding
sentence, the Media Pension Plan shall contain two benefit
structures. In general, (1) the benefits for all Media Employees
who are employed immediately after the Separation Time and who
earned benefits under Articles V-B or V-D of such Pension Plan
prior to the Separation Time shall continue in such benefit
structure and (2) all other Media Employees, as well as all
future employees of the MediaOne Group shall participate in a
benefit structure substantially similar to the benefit structure
currently contained in the Appendix I of the U S WEST Pension
Plan, provided that this EM Agreement does not obligate MediaOne
to continue to maintain such benefit formulas for any particular
period of time. In addition, the U S WEST Pension Plan currently
contains two subsidies relating to service pensions: (i) the
early retirement pension under the grandfathered formula in
Article V-B (but not the DLS formula in Article V-D) is unreduced
(or provides for a lower reduction) for Participants that are
service pension eligible and (ii) if a lump sum service pension
is elected, a 0% interest rate applies prior to age 65. The Media
Pension Plan shall include, for all Media Employees described in
clause (2) of the second preceding sentence (but not any future
employees of the MediaOne Group or any Terminated Media
Employees) whose combined age and service (in each case rounded
up to the next integer), as of January 1, 1999, equals or exceeds
55, both of the foregoing subsidies with respect to both the DLS
formula set forth in Article 6, and the grandfathered formula in
Article 7 of Appendix I, of the Pension Plan; such provisions
shall be referred to as the "Service Pension Amendments."
Immediately after the Separation Time, all Liabilities under the U
S WEST Pension Plan to, or relating to, Media Employees or
Terminated Media Employees (excluding persons described in
clauses (2) or (3) of the definition of Terminated Media
Employee) shall be assumed by the Media Pension Plan and
shall cease to be Liabilities of the U S WEST Pension
Plans. Such Liabilities shall include all accrued
benefits, within the meaning of Section 411(d)(6) of the
Code, all ancillary benefits (such as the death benefits
set forth in Article VII of the U S WEST Pension Plan and
disability benefits set forth in Appendix J thereof) and
any other benefits. The Media Pension Plan shall comply
with Section 411(d)(6) of the Code with respect to such
assumed Liabilities. Each Media Employee and Terminated
Media Employee who was a participant in the U S WEST
Pension Plan as of the Separation Time shall become a
participant in the Media Pension Plan as of the Separation
Time.
Notwithstanding the foregoing, the following rules shall apply to
any Terminated Employee who is not vested in the U S WEST
Pension Plan at the Separation Time who returns to
employment with either the MediaOne Group or the New U S
WEST Group after the Separation Time. To the extent
required by law, any such Terminated Employee who becomes
entitled to credit, for benefit accrual purposes, for his
service with the Old U S WEST Group prior to the
Separation Time as a result of returning to employment
after the Separation Time, then (1) any benefits
attributable to such prior service shall be payable from
the Media Pension Plan if the individual returns to
employment with the MediaOne Group and (2) any benefits
attributable to such prior service shall be payable from
the U S WEST Pension Plan if the individual returned to
employment with the New U S WEST Group.
(b) New U S WEST shall cause a "spin-off" transfer within the
meaning of Section 414(1) of the Code, from the U S WEST
Pension Plan to the Media Pension Plan in the manner and
at the times specified in paragraph (e) below. For
purposes of this Section 5, the following definitions
shall apply:
(1) "Actuaries" refer to the enrolled actuaries for
the U S WEST Pension Plan at the Separation
Time.
(2) "Contingent Amount" equals the difference
between the amount that the Final Determination
provides that should have been transferred from
the U S WEST Pension Plan to the Media Pension
Plan in connection with the spinoff and the
Media Asset Share. If the difference is
positive, that is, the Final Determination
provides that additional assets should have been
transferred to the Media Pension Plan, the
difference shall be referred to as a "Positive
Contingent Amount." If the difference is
negative, that is, the Final Determination
provides that the amount that should have been
transferred is less than the Media Asset Share,
the difference shall be referred to as a
"Negative Contingent Amount."
(3) "Final Determination" means a final
nonappealable determination by a court, or a
final settlement of litigation or a dispute
among MediaOne, New U S WEST, the U S WEST
Pension Plan and the Media Pension Plan and any
other parties to the litigation or dispute, that
provides that the amount of assets to be
transferred from U S WEST Pension Plan to the
Media Pension Plan in connection with the
spinoff should be more than or less than the
Media Asset Share.
(4) "Media Asset Share" shall mean the product of:
(i) the fair market value of the assets of the U
S WEST Pension Plan as of June 30, 1998, and
(ii) the Media Fraction. For this purpose, (i)
the value of any publicly traded security and
cash shall be determined based on the audited
reports of the trustee of the U S WEST Pension
Plan and (ii) the value of any other securities
or property shall be determined by one or more
third parties selected by MediaOne and New U S
WEST, based on the most recent appraisal or
valuation of the particular security or property
adjusted, if necessary, as determined by the
third party.
(5) "Media Economic PBO" for the U S WEST Pension
Plan shall mean the portion of the Total
Economic PBO as of June 30, 1998 attributable to
the Media Employees and Terminated Media
Employees, as calculated by the Actuaries. For
this purpose, the U S WEST Pension Plan shall be
deemed amended to include the Service Pension
Amendments.
(6) "Media Fraction" for the U S WEST Pension Plan
shall mean (i) the Media Economic PBO, divided
by (ii) the Total Economic PBO.
(7) "Premium Amount" shall equal the estimated PBGC
premiums initially paid to the PBGC by the Media
Pension Plan for plan year 1998, without regard
to any adjustment required as a result of an
audit.
(8) "Total Economic PBO" shall be the projected
benefit obligation, as defined in SFAS No. 87,
of the U S WEST Pension Plan, as calculated by
the Actuaries as of June 30, 1998 using the
actuarial methods and assumptions set forth in
Schedule 1 hereto and any others mutually
agreeable to the parties. For this purpose, the
U S WEST Pension Plan shall be deemed amended to
include the Service Pension Amendments.
(9) "Transfer Amount" shall equal the Media Asset
Share plus the Premium Amount plus the Positive
Contingent Amount and minus the Negative
Contingent Amount.
(c) In order to determine the Media Asset Share, MediaOne and
New U S WEST shall determine in good faith the Media
Employees, Terminated Media Employees, Communications
Employees, Terminated Communications Employees and
Terminated Inc. Employees as of June 30, 1998. Such
determinations shall be updated as soon as practicable but
no later than January 1, 1999, to take into account the
reclassification of Employees as of the Separation Time as
Media Employees or Communications Employees.
(d) If required by law, MediaOne and New U S WEST shall cause to be
filed all applicable Forms 5310A and any other required IRS or
PBGC forms with the appropriate governmental agency in order for
the Media Pension Plan to receive a transfer of assets from the U
S WEST Pension Plan on or following the Separation Time, in
accordance with paragraph (e) below. Within nine months after the
Separation Time, MediaOne shall cause to be filed with the IRS a
request for a determination that the Media Pension Plan is
qualified under Section 401(a) of the Code. MediaOne agrees to
make all reasonable amendments requested by the IRS to obtain
such determination letter.
(e) New U S WEST shall cause the U S WEST Pension Plan to
transfer assets in an amount equal to the Transfer Amount
(plus interest to the extent set forth below) to the Media
Pension Plan and MediaOne shall cause the Media Pension
Plan to accept such assets equal to such Transfer Amount
(and interest), as follows:
(1) On July 1, 1998, an amount equal to 98% of the
Media Asset Share, as estimated by the Actuaries
(immediately prior to July 1, 1998) and provided
to MediaOne and New U S WEST in writing. Such
estimate shall be calculated by assuming the
Media Fraction was calculated as of May 31, 1998
and by using the fair market value of the
assets, as reported by the trustee of the U S
WEST Pension Plan, on May 31, 1998.
(2) As soon as practicable after the value of the
plan assets as of June 30, 1998 is determined
and the Media Asset Share is determined by the
Actuaries and provided in writing to MediaOne
and New U S WEST (but not later than 30 days
after such writing is provided), the excess of
the Media Asset Share over the sum of (i) the
interim transfer effected under (1) above, and
(ii) any benefit payments paid to Terminated
Media Employees or Media Employees by the U S
WEST Pension Plan after June 30, 1998. (If such
amount is a negative number, such amount shall
be transferred from the Media Pension Plan to
the U S WEST Pension Plan.)
(3) In addition, if there is a Final Determination
that sets forth a Contingent Amount, New U S
WEST, the U S WEST Pension Plan, MediaOne, and
the Media Pension Plan agree as follows:
(A) If there is a Positive Contingent Amount, as soon as practicable after
the Final Determination, the U S WEST Pension Plan shall transfer the
assets equal to the Positive Contingent Amount to the Media Pension
Plan, and the Media Pension Plan shall accept such transfers; and
(B) If there is a Negative Contingent Amount, as soon as practicable after
the Final Determination, the Media Pension Plan shall transfer the
assets equal to the Negative Contingent Amount to the U S WEST Pension
Plan, and the U S WEST Pension Plan shall accept such transfers.
(4) As soon as practicable after the Premium Amount
is determined and paid by the Media Pension
Plan, an amount equal to the Premium Amount.
To the extent any of the foregoing amounts set forth in
paragraphs (1) through (4) of this subsection (e) are paid
after July 1, 1998, such amount shall be increased or
decreased by interest from July 1, 1998 to the date of
payment (to the extent not paid or previously advanced) at
a rate equal to the average monthly rate on the Mellon
Trust Short Term Interest Fund (STIF), compounded monthly,
in which the U S WEST Pension Plan and the Media Pension
Plan hold certain temporary cash funds from time to time
(such rate to be provided by the trustee of the plan
making the payment), during the period commencing on July
1, 1998 and ending with the date of payment; provided that
(i) no interest shall be paid with respect to the
Contingent Amount if the Final Determination already
provides for an adjustment reflecting interest or plan
earnings and (ii) no interest shall be paid with respect
to the Premium Amount.
With respect to all of the foregoing transfers between the U S
WEST Pension Plan and the Media Pension Plan, the specific
assets to be transferred shall be cash and other liquid
assets, as agreed upon by New U S WEST and MediaOne in
good faith so as to not treat the Media Pension Plan and
the U S WEST Pension Plan unfairly in any material
respect.
(f) Notwithstanding subsections (a) through (e) above, the
value of assets to be transferred to and liabilities to be
assumed by the Media Pension Plan shall be no less than
that necessary to satisfy the requirements of Section
414(1) of the Code, as determined by the Actuaries, based
on the assumptions used by the PBGC in the case of a
termination of a trusteed pension plan.
(g) MediaOne, New U S WEST, the U S WEST Pension Plan and the Media
Pension Plan (collectively, the "Pension Parties") all agree
that, if there is a Final Determination that provides for a
Contingent Amount, such Final Determination shall be satisfied to
the maximum extent permitted by law by making the transfers among
the U S WEST Pension Plan and the Media Pension Plan as set forth
above, as opposed to requiring any additional contributions or
payments (a "Corporate Liability") from either MediaOne, New U S
WEST or any of their Subsidiaries. The Pension Parties agree to
cooperate to the maximum extent to ensure that no such Corporate
Liability ensues as a result of any Final Determination or claims
relating to the allocation of plan assets between the two plans.
If any litigation is brought against one of the Pension Parties
claiming that the amount of assets transferred from the U S WEST
Pension Plan to the Media Pension Plan should have been higher or
lower, the other Pension Parties shall, at the request of the
Pension Party that was sued, agree to be joined in any such
litigation and to use their best efforts to ensure that any
potential Contingent Amount be satisfied by plan-to-plan
transfers, as opposed to Corporate Liability.
In addition, the Pension Parties agree that, to the extent permitted
by law, any costs of defending any claims that a Contingent
Amount is payable and any Liabilities arising out of such claims
shall be borne by the U S WEST Pension Plan and the Media Pension
Plan.
The following rules shall apply if there is any Corporate Liability
for a Contingent Amount or arising out of any claims that a
Contingent Amount is payable. Any Corporate Liability that is an
out-of-pocket cost of defending any such claims (whether or not
the claims result in litigation), such as attorneys or consultant
fees (but excluding any fees for plaintiffs' attorneys) and
travel expenses, shall be borne equally by New U S WEST and
MediaOne; provided that each party shall bear all expenses for
salaries and benefits of its employees. Any other Corporate
Liability, such as the payment of a Contingent Amount, any direct
payments to claimants in lieu of a Contingent Amount or fees for
plaintiffs' attorneys, shall be borne by (1) New U S WEST, if the
claimants asserted that the amount of plan assets transferred to
the Media Pension Plan should have been greater than the amount
actually transferred and (2) MediaOne, if the claimants asserted
that the amount of plan assets transferred to the Media Pension
Plan should have been less than the amount actually transferred.
(h) The U S WEST Pension Plan shall transfer to the Media
Pension Plan all qualified domestic relations orders
(within the meaning of Section 414(p) of the Code)
("QDROs") held by the U S WEST Pension Plan with respect
to Media Employees and Terminated Media Employees.
(i) Qualified transfers. This subsection (i) applies if a
qualified transfer, within the meaning of Code Section 420
(a "Qualified Transfer"), is made within either the U S
WEST Pension Plan or the Media Pension Plan during the
calendar year in which the Separation Time occurs.
(1) If the Internal Revenue Service, a court of
competent jurisdiction or the sponsor of the
plan in which the Qualified Transfer is made
determines that any Terminated Employees who
terminated employment during the period
commencing twelve months prior to the Qualified
Transfer and ending on the Separation Time are
entitled to vested pension benefits solely
because of the Qualified Transfer, then,
notwithstanding any other provision of this EM
Agreement, the plan in which the Qualified
Transfer is made shall provide such vested
pension benefits to such Terminated Employee.
(2) If (i) the Internal Revenue Service declines to
issue a favorable determination letter with
respect to the provisions of either the U S WEST
Pension Plan or the Media Pension Plan (the "420
Plan") setting forth the terms of a Qualified
Transfer unless Employees or other employees who
terminate employment after the Separation Time
from the business of the sponsor of the other
pension plan (the "Other Plan") are provided
vested pension benefits on account of the
Qualified Transfer or (ii) a court of competent
jurisdiction determines that such Employees or
employees are entitled to such benefits on
account of the Qualified Transfer, then the
Other Plan shall provide such Employees or
employees with the required vested pension
benefits. In addition, the sponsor of the 420
Plan shall cause the 420 Plan to transfer assets
in an amount equal to the Vesting Amount to the
Other Plan and the Other Plan shall accept such
assets equal to such Vesting Amount as follows.
The Vesting Amount shall equal the [excess, if
any, of the Media Share (calculated for this
purpose on the assumption that all participants
in the U S WEST Pension Plan were vested at the
Separation Time) over the actual Media Share],
as determined by the Actuaries and provided to
MediaOne and New U S WEST in writing, increased
with interest in accordance with subsection (e)
above.
(j) The Media Pension Plan and the assets and liabilities with
respect thereto shall be considered a Media Employee
Benefit Plan. The U S WEST Pension Plan and the assets and
liabilities with respect thereto shall be considered a
Communications Employee Benefit Plan.
6. OTHER TAX-QUALIFIED PLANS
Any other plan that is qualified under Section 401 of the Code and is
not described in Section 4 or 5 above shall be retained by the
entity that sponsors it before the Separation Time.
7. WELFARE PLANS
(a) Communication Plans. As of the Separation Time, any Welfare Plan,
including all insurance or amounts held in trust and associated
therewith to the extent attributable solely to such plan, which
exclusively covers Communications Employees, Terminated Communications
Employees and/or Terminated Inc. Employees and their eligible spouses
and dependents shall be transferred to and assumed by New U S WEST and
shall be deemed to be amended to provide for such transfer and
assumption. New U S WEST or its Subsidiaries shall assume and pay the
Liability with respect thereto (whether accrued or arising before or
after the Separation Time). All such plans shall be considered
Communications Employee Benefit Plans.
(b) Media Plans. As of the Separation Time, any Welfare Plan, including
all insurance or amounts held in trust and associated therewith to the
extent attributable solely to such plan, which exclusively covers
Media Employees and/or Terminated Media Employees and their eligible
spouses and dependents shall be retained by the MediaOne Group and, if
necessary, are hereby amended to provide for such retention (without
the need for any further action). MediaOne or its Subsidiaries shall
assume and pay the Liability with respect thereto (whether accrued or
arising before or after the Separation Time). All such plans shall be
considered Media Employee Benefit Plans.
(b) Joint Plans. This subsection (c) addresses the treatment of any
Welfare Plan (including, without limitation, any retiree medical plan
or retiree life insurance plan) which, as of the Separation Time,
covers both: (1) Communications Employees, Terminated Communications
Employees and/or Terminated Inc. Employees; and (2) Media Employees
and/or Terminated Media Employees (a "Joint Welfare Plan").
(1) As of the Separation Time, each Joint Welfare Plan shall be
transferred to and assumed by New U S WEST or one of its
Subsidiaries. Each of such Joint Welfare Plans is hereby amended
as set forth in Section 3 of this EM Agreement. At and
immediately following the Separation Time, New U S WEST or its
Subsidiaries shall maintain as a separate plan and assume and pay
the Liabilities and expenses (whether accrued or arising before
or after the Separation Time) with respect to that portion of the
Joint Welfare Plans as relates to obligations to Communications
Employees, Terminated Communications Employees and Terminated
Inc. Employees; in addition, any such retiree medical plan shall
assume any retiree medical Liabilities or expenses of persons
described in clauses (2) or (3) of the definition of Terminated
Media Employee. This EM Agreement does not obligate New U S WEST
to continue to maintain such plans or their terms for any
particular period of time. All such plans shall be considered
Communications Employee Benefit Plans.
(2) As soon as practicable, MediaOne or its Subsidiaries shall
establish and maintain one or more separate plans corresponding
to each of the Joint Welfare Plans. Such Plans shall be effective
as of the Separation Time and shall contain such benefits as
desired by MediaOne. However, such plans shall assume and pay the
Liabilities and expenses (whether accrued or arising before or
after the Separation Time) under the Joint Welfare Plans with
respect to Media Employees and Terminated Media Employees,
provided that any new Media retiree medical plan shall not assume
any retiree medical Liabilities or expenses of persons described
in clauses (2) or (3) of the definition of Terminated Media
Employee. All Liabilities and expenses assumed by such Media
Employee Benefit Plans shall cease to be Liabilities of the
Communications Employee Benefit Plans described in the preceding
paragraph. The Liabilities of each such Joint Welfare Plan so
assumed by MediaOne or its Subsidiaries together with each such
separate plan established by MediaOne, shall be considered a
Media Employee Benefit Plan. Unless MediaOne or its Subsidiaries
adopts a plan with respect to a Joint Welfare Plan prior to the
Separation Time, MediaOne is hereby deemed to have adopted
(without the requirement of any additional action), effective as
of the Separation Time, a separate Media Welfare Plan that is
substantially identical in all respects to the Joint Welfare Plan
it replaces, provided that this EM Agreement does not obligate
MediaOne to continue to maintain such terms for any particular
period of time.
(3) MediaOne and New U S WEST shall use commercially reasonable
efforts to obtain, effective as of the Separation Time, separate
coverages or to split the coverages between MediaOne and New U S
WEST under the Joint Welfare Plans that provided benefits through
Provider Contracts prior to the Separation Time. Such coverage
shall be on substantially the same terms and conditions as
applied immediately before the Separation Time, or such other
terms and conditions as are acceptable to MediaOne and New U S
WEST. To the extent practicable, such coverages shall be obtained
by entering into a separate contract between MediaOne and the
third party. For purposes of this paragraph, the term "Provider
Contract" shall mean a contract to provide benefits with an
insurance company, health maintenance organization, preferred
provider organization or similar provider of benefits, as well as
third party administrative services contracts. To the extent such
efforts are not successful with respect to any Provider Contract,
then New U S WEST shall administer such Provider Contract on an
equitable basis for the benefit of both MediaOne and New U S WEST
until the expiration of the applicable contract. For any period
after the Separation Time when MediaOne is participating in any
such Provider Contract administered by New U S WEST, MediaOne
shall pay an allocable share of the cost of such contract based
upon the actual experience attributable to Media Employees and
Terminated Media Employees thereunder, or if actual experience is
not readily determinable, based upon the relative headcount of
Media Employees and Terminated Media Employees to all individuals
covered by such Provider Contract. Such payments shall include
interest on any funds advanced by New U S WEST at a rate to be
agreed upon in a services agreement to be effective as of the
Separation Time.
(d) Continuing Treatment. Notwithstanding the foregoing provisions of this
Section 7, all treatments which have been precertified or are being
provided as of the Separation Time shall be provided without
interruption under the appropriate Welfare Plan until such treatment
is concluded or discontinued pursuant to applicable plan rules and
limitations, but New U S WEST, in the case of a Communications
Employee or Terminated Communications Employee, or MediaOne, in the
case of a Media Employee or Terminated Media Employee, shall be
responsible for all expenses relating to, arising out of or resulting
from such on-going treatments after the Separation Time.
(e) Continuance of Elections. MediaOne and New U S WEST shall cause the
Welfare Plans which they or their Subsidiaries maintain after the
Separation Time to recognize and maintain all coverage and
contribution elections made by Employees under the Welfare Plans
maintained by the Existing U S WEST Group prior to the Separation Time
and shall apply such elections under the Welfare Plans maintained by
MediaOne and New U S WEST or their Subsidiaries, whichever is
applicable, for the remainder of the period or periods for which such
elections are by their terms applicable. Neither the transfer or other
movement of employment from one member of the Existing U S WEST Group
to another member on or before the Separation Time nor the transfer
and assignment to the New U S WEST Group or the MediaOne Group in
connection with the Reorganization, Contribution and Separation shall
constitute or be treated as a "status change" under the Welfare Plans
maintained by either Existing U S WEST, New U S WEST, MediaOne or
their Subsidiaries.
(f) Co-Payments and Meximum Benefits. MediaOne and New U S WEST shall
cause the Welfare Plans which they or their Subsidiaries maintain
after the Separation Time to recognize and give credit for:
(1) All amounts applied to deductibles,
out-of-pocket maximums, and other applicable
benefit coverage limits with respect to
Employees covered by Welfare Plans maintained by
the Existing U S WEST Group prior to the
Separation Time for the remainder of the year in
which the Separation Time occurs; and
(2) All benefits paid to Employees under the Welfare
Plans maintained by the Existing U S WEST Group
prior to the Separation Time for purposes of
determining when such persons have reached their
lifetime maximum benefits under the Welfare
Plans maintained by MediaOne and New U S WEST or
their Subsidiaries, whichever is applicable,
after the Separation Time.
(g) Pre-existing conditions. After the Separation Time, any group health
plan maintained by MediaOne and New U S WEST or their Subsidiaries
shall be prohibited from making exceptions from the coverage of
individuals who were Employees or Terminated Employees prior to the
Separation Time and their eligible spouses and dependents for
pre-existing conditions except to the extent such exception is
applicable under the plan in effect immediately prior to the
Separation Time.
(h) COBRA. Notwithstanding the foregoing provisions of this Section 7:
(1) New U S WEST or its Subsidiaries shall be
responsible for providing coverage required
under COBRA, including the administration of
such coverage, to (A) all Employees and
Terminated Employees (and their eligible spouses
and dependents) whose entitlement to benefits
under COBRA is attributable to a "qualifying
event," as defined in COBRA, which occurred
before the Separation Time under any group
health plan other than a group health plan
maintained by the Cable Companies and (B) all
Communications Employees, Terminated
Communications Employees and Terminated Inc.
Employees if such individual's entitlement to
benefits under COBRA is attributable to a
"qualifying event" which occurs on or after the
Separation Time.
(2) MediaOne or its Subsidiaries shall be
responsible for providing coverage required
under COBRA, including the administration of
such coverage, to (A) all Employees and
Terminated Employees (and their eligible spouses
and dependents) whose entitlement to benefits
under COBRA is attributable to a "qualifying
event," as defined in COBRA, which occurred
before the Separation Time under any group
health plan maintained by the Cable Companies
and (B) all Media Employees and Terminated Media
Employees if such individual's entitlement to
benefits under COBRA is attributable to a
"qualifying event" which occurs on or after the
Separation Time.
(i) Long-Term Disability. Notwithstanding the foregoing provisions of this
Section 7, this subsection (i) applies to long-term disability
benefits provided to Terminated Employees other than through the U S
WEST Pension Plan ("LTD").
(1) New U S WEST shall be responsible for providing
LTD, including the administration of such
coverage, to Terminated Communications
Employees, Terminated Inc. Employees and
Terminated Media Employees who were employed
immediately prior to commencing LTD by an
employer other than one of the Cable Companies.
(2) MediaOne shall be responsible for providing LTD,
including the administration of such coverage,
to Terminated Media Employees who were employed
immediately prior to commencing LTD by one of
the Cable Companies.
8. VEBA's
(a) As of the Separation Time, sponsorship of the U S WEST
Benefit Assurance Trust ("BAT"), the U S WEST Management
Benefit Assurance Trust ("MBAT") and U S WEST Life Insurance
Welfare Trust ("Life Insurance Trust") shall be transferred
from Existing U S WEST to New U S WEST. In addition, each of
the BAT, MBAT and Life Insurance Trust are hereby amended
(such amendments to be self-effectuating), effective as of
the Separation Time, to provide that the "Company" (as well
as the sponsor, settlor and all other similar terms) under
such trusts shall be New U S WEST and that the trust shall
be administered by New U S WEST.
(b) Sponsorship of the U S WEST VEBA Trust shall be retained by
MediaOne or, at its option, transferred to Multimedia.
(c) Effective as of the Separation Time, MediaOne shall adopt
one or more new voluntary employee benefit associations or
modify the U S WEST VEBA Trust (the "Media VEBA") to assume,
immediately after the Separation Time, all Liabilities under
the MBAT and Life Insurance Trust to, or relating to, Media
Employees or Terminated Media Employees (excluding persons
described in clauses (2) or (3) of the definition of
Terminated Media Employee); all such Liabilities shall cease
to be Liabilities of the MBAT and Life Insurance Trust. The
Media VEBA shall comply with Code Sections 419, 419A, 501(a)
and 501(c)(9).
(d) As soon as practicable after the Separation Time, New U S
WEST shall cause a transfer of assets from the MBAT and Life
Insurance Trust to the Media VEBA in the manner and at the
times specified in paragraph (f) below. For purposes of this
Section, the following definitions shall apply:
(i) "Total Economic APBO" shall be the accumulated
postretirement benefit obligation (as defined in SFAS No.
106) of the MBAT and Life Insurance Trust (excluding
liabilities for supplemental and dependent life insurance),
as calculated by the Actuaries, as of June 30, 1998 using
actuarial methods and assumptions set forth in Schedule 2
hereto and any others mutually agreeable to the parties.
(ii) "Actuaries" refer to the actuaries for the MBAT and Life
Insurance Trust at the Separation Time.
(iii)"Media Economic APBO" shall mean the portion of the Total
Economic APBO attributable to the Media Employees and
Terminated Media Employees, as calculated by the Actuaries.
(iv) "Media Fraction" shall mean (1) the Media Economic APBO,
divided by (2) the Total Economic APBO.
(v) "Media Asset Share" shall mean the product of: (1) the fair
market value as of June 30, 1998 and (2) the Media Fraction.
For this purpose, (i) the value of any publicly traded
security and cash shall be determined based on the audited
reports of the trustee of the applicable trust and (ii) the
value of any other securities or property shall be
determined by one or more third parties selected by MediaOne
and New U S WEST, based on the most recent appraisal or
valuation of the particular security or property adjusted,
if necessary, as determined by the third party.
(vi) "Supplemental and Dependent Life Assets" shall mean any
assets which are segregated for the purpose of
providing supplemental and dependent life insurance.
Notwithstanding the above, the Total Economic APBO, the Media Economic
APBO and the Media Asset Share shall be determined separately for the
MBAT and the Life Insurance Trust. In addition, in order to determine
the Media Asset Share, the provisions of Section 5(c) shall apply.
(e) Within nine months after the Separation Time, MediaOne
shall cause to be filed with the IRS a request for a
determination that the Media VEBA is tax-exempt under
Section 501(c)(9) of the Code (unless the New VEBA is
the existing U S WEST VEBA Trust and New U S WEST
agrees no such filing is required). MediaOne agrees to
make all reasonable amendments requested by the IRS to
obtain such letter. New U S WEST and MediaOne agree to
cooperate with each other to fulfill any filing and/or
regulatory reporting obligations with respect to such
transfers.
(f) New U S WEST shall cause the following asset transfers
from the MBAT and Life Insurance Trust to the Media
VEBA and MediaOne shall cause the Media VEBA to accept
such asset transfers:
(1) On July 1, 1998, an amount equal to 98% of the Media
Asset Share, as estimated by the Actuaries in writing
(immediately prior to July 1, 1998) to MediaOne and New
U S WEST. Such estimate shall be calculated by assuming
the Media Fraction was calculated as of May 31, 1998
and by using the fair market value of the assets, as
reported by the trustee of the applicable trust, on May
31, 1998.
(2) On July 1, 1998, an amount equal to the Supplemental
and Dependent Life Assets multiplied by a fraction, the
numerator of which is the amount of premiums paid by
Media Employees and Terminated Media Employees for
supplemental and dependent life insurance during the
last full calendar year prior to the Separation Time
and the denominator of which is the total premiums for
such coverage paid by all Employees and Terminated
Employees during that year.
(3) As soon as practicable after the value of the assets as
of June 30, 1998 is determined and the Media Asset
Share is determined by the Actuaries in writing to
MediaOne and New U S WEST (but not later than 30 days
after such writing is provided), the excess of the
Media Asset Share over the sum of the interim transfer
under (1) above and any benefit payments to Terminated
Media Employees by the MBAT and Life Insurance Trust
after June 30, 1998. (If such amount is a negative
number, such amount shall be transferred from the Media
VEBA to the MBAT and Life Insurance Trust.)
(4) In the event there is any litigation or claims that the
amount transferred from the MBAT and Life Insurance
Trusts to the Media VEBA should be larger or smaller,
the amount transferred shall be adjusted in accordance
with all of the provisions set forth in Section 5 of
this EM Agreement relating to a Contingent Amount and
claims over the amount of the transfer. In addition,
the parties agree that, to the extent permitted by law,
any costs of defending any such claims and any
Liabilities arising out of such claims shall be borne
by the MBAT, Life Insurance Trust and the Media VEBA.
Any such Liability for a transfer or arising out of any
claims that a transfer is payable which cannot be borne
by the MBAT, Life Insurance Trust or the Media VEBA
shall be borne by New U S WEST or MediaOne in
accordance with the last paragraph of Section 5(g) of
this EM Agreement.
To the extent any of the foregoing amounts is paid after
July 1, 1998, such amount shall be increased or
decreased by interest from July 1, 1998 to the date of
payment (to the extent not paid or previously advanced)
at a rate equal to the average monthly rate on the
Mellon Trust Short Term Interest Fund (STIF),
compounded monthly, in which the MBAT and Life
Insurance Trust and the Media VEBA hold certain
temporary cash funds from time to time (such rate to be
provided by the trustee of the plan making the
payment), during the period commencing on July 1, 1998
and ending with the date of payment; provided that no
interest shall be paid with respect to the amounts in
clause (4) above if the Final Determination already
provides for an adjustment reflecting interest or plan
earnings.
With respect to all of the foregoing transfers and any
transfer required by subsection (g) below, the specific
assets to be transferred shall be cash and other liquid
assets, as agreed upon by New U S WEST and MediaOne in
good faith so as to not treat the MBAT, Life Insurance
Trust and Media VEBA unfairly in any material respect.
(g) As soon as practicable after July 1, 1998, MediaOne
shall cause a transfer of assets from the U S WEST VEBA
Trust to the MBAT in an amount equal to the balance in
the U S WEST VEBA Trust immediately prior to July 1,
1998 (and before any transfers described in paragraph
(f) above) multiplied by a fraction, the numerator of
which is the amount of contributions made to that trust
for calendar year 1998 (up through June 30, 1998) on
behalf of the New U S WEST Group and the denominator of
which is the total amount of all contributions made to
that trust for 1998 (up through June 30, 1998),
increased by interest on the unpaid amount due from
July 1, 1998 to the date of payment at the rate of (8%)
per annum. In lieu of these transfers, the parties may
agree to offset the amount to be transferred against
the transfers required in subsection (f) above.
9. INCENTIVE COMPENSATION
(a) Stock Options. Options to purchase shares of Communications Stock
("Communications Options") and shares of Media Stock ("Media Options")
which are unexercised as of the Separation Time and which were issued
pursuant to the terms of the Amended U S WEST 1994 Stock Plan, the U S
WEST Media Group 1996 Stock Option Plan, the U S WEST Media Group 1997
Stock Option Plan and the U S WEST Communications Group 1997 Stock
Option Plan (collectively the "Option Plans") shall be treated as
follows:
(1) New U S WEST shall assume the U S WEST
Communications Group 1997 Stock Option Plan and
all obligations under such plan.
(2) MediaOne shall retain the U S WEST Media Group
1996 Stock Option Plan and the U S WEST Media
Group 1997 Stock Option Plan and all obligations
under such plans.
(3) MediaOne shall retain the Amended U S WEST 1994
Stock Plan and all obligations with respect to
Media Options under such plan.
(4) New U S West shall establish a new stock plan to
be effective as of the Separation Time and shall
assume, under such plan, all obligations with
respect to Communications Options issued under
the Amended U S WEST 1994 Stock Plan.
(5) Unexercised options issued under any of the
Option Plans shall continue in effect for their
original term subject to paragraph (6) below and
the following adjustments to reflect the
transactions contemplated by the Separation
Agreement.
(i) No Media Dividend shall be distributed with
respect to any Media Options. However, in
accordance with the following sentence, the
number of Media Options held by any person shall
be converted into a higher number of options to
purchase shares of MediaOne Common Stock and the
exercise price of each such option shall be
decreased. The number of options shall be
increased and the exercise price of each share
under each option shall be decreased to reflect
the Media Dividend in a manner consistent with
Accounting Rule EITF 90-9 in order to preserve
the economic value of the options.
(ii) The Communications Options shall be converted to
options to purchase shares of New U S WEST
Common Stock on a one for one basis; the
exercise price shall not change.
(6) Vested options under any of the Option Plans
shall be exercised on and after the Separation
Time by an Employee by contacting the stock plan
administrator for his or her employer or former
employer. New U S WEST and MediaOne each agrees
to act as agent (the "crossover agent") for the
other (the "other company") in the case of an
exercise of an option by an Employee of the
crossover agent under an Option Plan of the
other company. In addition, New U S WEST agrees
to act as crossover agent in the case of an
exercise of an option by a Terminated
Communications Employee or Terminated Inc.
Employee under an Option Plan of MediaOne;
MediaOne agrees to act as crossover agent in the
case to an exercise of an option by a Terminated
Media Employee under an Option Plan of New U S
WEST. The crossover agent for the other company
shall, by itself and/or through its own
third-party arrangements (i) effect an option
exercise of the applicable shares; (ii) report
such exercise to the other company on a timely
basis, not to exceed 30 days after the exercise;
(iii) collect from the Employee, and remit
and/or report to the Employee and/or the
appropriate tax authorities, as applicable, all
taxes incurred by the crossover agent (as the
employing company) resulting from the exercise
of an option under the other company's Option
Plan, and all taxes required to be withheld from
the Employee's proceeds as a result of the
exercise of an option under the other company's
Option Plan; (iv) deliver the stock to the
Employee or pay the Employee the excess of the
sales proceeds of the applicable shares over the
sum of the exercise price and all taxes required
to be withheld from the Employee's proceeds as a
result of the exercise; and (v) pay the other
company an amount equal to the exercise price of
such option on a timely basis, not to exceed 30
days after the exercise. In addition, the other
company agrees to honor the separation policies
of the crossover agent (or its subsidiaries) in
effect at the Separation Time for purposes of
determining if a separated Employee is eligible
to exercise an option under the other company's
Option Plan. Written approval of the other
company shall be required before any changes
adopted after the Separation Time in the
crossover agent's separation policies may apply
with respect to the crossover agent's Employees'
exercise of options under the other company's
Option Plan.
(b) Restricted Stock. Communications Stock and Media Stock issued to
Employees or Terminated Employees under the Amended U S WEST 1994
Stock Plan which has not become vested under the terms of that plan as
of the Separation Time ("Restricted Communications Stock" and
"Restricted Media Stock" respectively) shall be treated as follows:
(1) Immediately prior to the Separation Time, Media
Employees and Terminated Media Employees shall
surrender any Restricted Communications Stock
they hold and receive Restricted Media Stock in
exchange. The number of shares of Restricted
Media Stock received by each such individual
shall equal the number of shares of Restricted
Communications Stock surrendered by such
individual multiplied by 1.0645 and further
multiplied by the ratio of the Average Value of
the Communications Stock to the Average Value of
the Media Stock.
(2) Immediately prior to the Separation Time,
Communications Employees, Terminated
Communications Employees and Terminated Inc.
Employees shall surrender any Restricted Media
Stock they hold as of the Separation Time and
receive Restricted Communications Stock in
exchange. The number of shares of Restricted
Communications Stock received by each such
individual shall equal that number of shares of
Restricted Media Stock surrendered by such
individual multiplied by 1.0645 and further
multiplied by the ratio of the Average Value of
the Media Stock to the Average Value of the
Communications Stock.
(3) Following the adjustments in paragraphs (1) and
(2) above, MediaOne shall retain the Amended U S
WEST 1994 Stock Plan and all obligations under
such plan with respect to Media Restricted Stock
and shall amend such plan to provide for
restricted stock ("Restricted MediaOne Common
Stock") after the Separation Time. In order to
reflect the transactions contemplated by the
Separation Agreement, the Restricted Media Stock
shall be subject to the following adjustments.
Following the adjustments in paragraphs (1) and
(2) above, (i) the Restricted Media Stock shall
be converted to Restricted MediaOne Common Stock
on a one for one basis and (ii) each share of
Restricted Media Stock, including shares
described in paragraph (1) above but not those
described in paragraph (2) above, shall receive
the Media Dividend, provided that such Media
Dividend shall be free of all restrictions under
the plan.
(4) Following the adjustments in paragraphs (1) and
(2) above, New U S WEST shall assume, under the
new stock plan adopted pursuant to subsection
(a)(4) above, all obligations under the Amended
U S WEST 1994 Stock Plan with respect to
Restricted Communications Stock and shall amend
such plan to provide for restricted stock
("Restricted New U S WEST Common Stock") after
the Separation Time. In order to reflect the
transactions contemplated by the Separation
Agreement, following the adjustments in
paragraphs (1) and (2) above, the Restricted
Communications Stock shall be converted to
Restricted New U S WEST Common Stock on a one
for one basis.
(5) Except for the Media Dividend set forth in
paragraph (3) above, each share of Restricted
New U S WEST Common Stock and Restricted
MediaOne Common Stock outstanding after the
application of the foregoing paragraphs of this
subsection (b) ("Post-Separation Restricted
Stock") shall vest in accordance with the
vesting period applicable to the grant of
restricted stock to which each share of
Post-Separation Restricted Stock is
attributable.
(c) LTIP. The U S WEST Communications Long-Term Incentive Plan ("LTIP")
shall be terminated as of the Separation Time and a new long-term
incentive plan (the "Communications LTIP") shall be established by New
U S WEST. Awards under the LTIP to Communications Employees shall be
assumed by the Communications LTIP and shall continue under their
original terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease to have
any Liability with respect to such awards. The measurement period for
awards under the LTIP to Media Employees shall terminate as of the
Separation Time and the awards shall be calculated and paid out in
Restricted MediaOne Group Common Stock as of that time.
(d) ESTIP. The U S WEST, Inc. Executive Short Term Incentive Plan
("ESTIP") shall be retained by MediaOne and a new executive incentive
plan (the "Communications ESTIP") shall be established by New U S
WEST. Awards under the ESTIP to Communications Employees shall be
assumed by the Communications ESTIP and shall continue under their
original terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease to have
any Liability with respect to such awards.
(e) Phantom Stock. The units issued under the Amended U S WEST 1994 Stock
Plan or any Top-hat Plan (as defined in Section 10(a)(1)) of Existing
U S WEST which are valued in accordance with Communications Stock
("Phantom Communications Stock") and the units issued under the
Amended U S WEST 1994 Stock Plan or any Top-hat Plan of Existing U S
WEST which are valued in accordance with Media Stock ("Phantom Media
Stock") shall be treated as follows:
(1) The Phantom Communications Stock of a Media Employee, a Media Director
(as defined in Section 10(g) below), or in the case of a Top-hat Plan,
a Terminated Media Employee prior to the Separation Time shall be
converted into Phantom Media Stock immediately prior to the Separation
Time. The number of units of Phantom Media Stock received by each such
individual shall equal the number of units of Phantom Communications
Stock surrendered by such individual multiplied by the ratio of the
Average Value of the Communications Stock to the Average Value of the
Media Stock.
(2) The Phantom Media Stock of a Communications Employee, Communications
Director (as defined in Section 10(g) below) or in the case of a
Top-hat Plan, a Terminated Communications Employee or Terminated Inc.
Employee prior to the Separation Time shall be converted into Phantom
Communications Stock immediately prior to the Separation Time. The
number of units of Phantom Communications Stock received by each such
individual shall equal the number of units of Phantom Media Stock
surrendered by such individual multiplied by the ratio of the Average
Value of the Media Stock to the Average Value of the Communications
Stock.
(3) Following the adjustments in paragraphs (1) and (2) above, MediaOne
shall retain the Amended U S WEST 1994 Stock Plan and all obligations
under such plan with respect to Phantom Media Stock. MediaOne shall
also establish new Top-hat Plans as set forth in Section 10(a)(2).
MediaOne shall amend such plans to provide for units which are valued
in accordance with MediaOne Common Stock ("Phantom MediaOne Common
Stock") after the Separation Time. In order to reflect the
transactions contemplated by the Separation Agreement, following the
adjustments in paragraphs (1) and (2) above, the Phantom Media Stock,
including units described in paragraph (1) above but not those
described in paragraph (2) above, shall be converted to Phantom
MediaOne Common Stock on the following basis. The number of units of
Phantom MediaOne Common Stock credited shall equal the number of units
of Phantom Media Stock surrendered by such individual multiplied by
the ratio of the Average Value of the Media Stock to the excess of the
Average Value of the Media Stock over the product of the Dividend
Number multiplied by the Average Value of the Communications Stock.
(4) Following the adjustments in paragraphs (1) and (2) above, New U S
WEST shall assume, under the new stock plan adopted pursuant to
subsection (a)(4) above, all obligations under the Amended U S WEST
1994 Stock Plan with respect to Phantom Communications Stock. New U S
WEST shall also retain certain Top-hat Plans as set forth in Section
10(a)(1). New U S WEST shall amend such plans to provide for units
which are valued in accordance with New U S WEST Common Stock
("Phantom New U S WEST Common Stock") after the Separation Time. In
order to reflect the transactions contemplated by the Separation
Agreement, following the adjustments in paragraphs (1) and (2) above,
the Phantom Communications Stock shall be converted to Phantom New U S
WEST Common Stock on a one for one basis.
(5) MediaOne and New U S WEST shall cause all plans referred to in this
subsection (e) to be amended, as appropriate, to effect the changes
described herein as of the Separation Time.
10. OTHER BENEFITS
(a) Top-hat plans. As of the Separation Time:
(1) New U S WEST or a Subsidiary shall assume all plans maintained by
the Existing U S WEST Group prior to the Separation Time which
are intended to be described in Section 201(2) of ERISA ("Top-hat
Plans") and all Liabilities and obligations with respect to
Communications Employees, Terminated Communications Employees and
Terminated Inc. Employees under such plans. Such Top-hat Plans
shall include, without limitation, the U S WEST Nonqualified
Pension Plan and the U S WEST Deferred Compensation Plan. All
such plans shall be Communications Employee Benefit Plans. The
MediaOne Group shall have no Liabilities with respect to such
plans.
(2) MediaOne or a Subsidiary shall establish new Top-hat Plans
corresponding to the Top-hat Plans maintained by the Existing U S
WEST Group before the Separation Time and shall assume, under
such plans, all Liabilities and obligations with respect to Media
Employees and Terminated Media Employees under the Top-hat Plans
maintained by the Existing U S WEST Group prior to the Separation
Time. All such plans shall be Media Employee Benefit Plans. All
such Liabilities and obligations shall cease to be Liabilities or
obligations of the Top-hat Plans assumed by New U S WEST pursuant
to the preceding paragraph (1).
(3) Subject to paragraph (4) below, any trusts maintained by Existing
U S WEST or its Subsidiaries for the purpose of providing
benefits under a Top-hat Plan (the "Existing U S WEST Rabbi
Trusts") shall be transferred to and assumed by New U S WEST.
(4) MediaOne or a Subsidiary shall establish prior to the Separation
Time one or more trusts (the "MediaOne Rabbi Trusts") for the
purpose of providing benefits under its Top-hat Plans which
correspond to the Existing U S WEST Rabbi Trusts. As of the
Separation Time, Existing U S West shall cause the trustee or
trustees of the Existing U S WEST Rabbi Trusts to transfer to the
trustee or trustees of the MediaOne Rabbi Trusts any amounts held
in the Existing U S WEST Rabbi Trusts attributable to the
benefits of Terminated Media Employees.
(5) See Section 9(e) for additional rules that apply to Phantom
Communications Stock and Phantom Media Stock under the Top-hat
Plans.
(b) Employment contracts. Except for the severance agreements with members
of the Executive Group, all individual employment contracts, including
but not limited to severance agreements, retention agreements,
change-of-control agreements and letter agreements, entered into by a
member of the Existing U S WEST Group and a single Communications
Employee or a Terminated Communications Employee shall be retained by,
or assigned to and assumed by, as applicable, the New U S WEST Group,
provided they do not expire by their own terms as of the Separation
Time. The MediaOne Group shall have no Liabilities with respect to
such agreements. Any such employment contracts, other than agreements
described in paragraph (d) below, entered into by any member of the
Existing U S WEST Group and a single Media Employee or a Terminated
Media Employee shall be retained by, or assigned to and assumed by, as
applicable, the MediaOne Group, provided they do not expire by their
own terms as of the Separation Time. The New U S WEST Group shall have
no Liabilities with respect to such agreements. Any Liability under
such employment contracts, other than the severance agreements with
members of the Executive Group, entered into by any member of the
Existing U S WEST Group and a single Terminated Inc. Employee shall be
borne in accordance with Section 2(c) and (f) of this EM Agreement.
(c) Split-dollar contracts. All split-dollar insurance contracts entered
into by the Existing U S WEST Group for the benefit of a
Communications Employee or a Terminated Communications Employee shall
be retained by, or assigned to and assumed by, as applicable, New U S
WEST; the MediaOne Group shall have no interest in, or Liabilities
with respect to, such contracts. Any such split-dollar insurance
contracts entered into by the Existing U S WEST Group for the benefit
of a Media Employee or a Terminated Media Employee shall be retained
by, or assigned to and assumed by, as applicable, MediaOne; the New U
S WEST Group shall have no interest in, or Liabilities with respect
to, such contracts. In order to assign and assume any such split
dollar life policies, the parties agree to accept any collateral
assignments, policy endorsements or such other documentation executed
by or on behalf of the applicable employees or terminated employees,
or any trustee of any trust to which such policy rights or incidents
of ownership under the policies have been assigned, as well as
entering into any such agreements as may be necessary to fulfill
obligations to any insurance company or insurance agent or broker
under the policies to be assigned.
(d) Ex-Pat Employees. This sub-section applies to Employees ("Ex-Pat
Employees") currently employed by International who have entered into
agreements with Existing U S WEST or a Subsidiary which give such
Employees re-employment rights with Existing U S WEST or a domestic
Subsidiary thereof. If an Ex-Pat Employee notifies Existing U S WEST
in writing prior to May 1, 1998 that he wishes to exercise his right
to return to domestic employment prior to the Separation Time, the
Communications Business will either: (1) re-employ the Ex-Pat Employee
in accordance with his re-employment right; or (2) enter into a new
agreement with the Ex-Pat Employee terminating his re-employment
right. Any costs associated with re-employing the Ex-Pat Employee or
terminating his re-employment right in accordance with the prior
sentence shall be borne by the Communications Business. If an Ex-Pat
Employee does not notify Existing U S WEST in writing prior to May 1,
1998 that he wishes to exercise his right to return to domestic
employment prior to the Separation Time, all obligations under the
agreement which provides the re-employment right shall be assumed by
MediaOne. Any costs associated with assuming the re-employment right
of the Ex-Pat Employee in accordance with the prior sentence shall be
borne by New U S WEST and/or MediaOne as determined by the parties
through good faith negotiations to be completed prior to the
Separation Time.
(e) Vail Trust. The Theodore N. Vail Memorial Fund shall be transferred to
and assumed by New U S WEST as of the Separation Time.
(f) Leaves of Absence. Each member of the MediaOne Group and the New U S
WEST Group shall honor all terms and conditions of leaves of absence
that have been granted to any Employee before the Separation Time,
including such leaves that are commenced after the Separation Time, to
the extent that such Employees are assigned to that entity. Each such
entity shall be solely responsible for administering such leaves of
absence and compliance with all applicable laws relating to leaves of
absence, including the Family Medical Leave Act. Unless members of the
New U S WEST Group or MediaOne Group adopt other policies prior to the
Separation Time, each shall be considered to have adopted leave of
absence programs, effective as of the Separation Time, which are
substantially identical in all material respects to the leave of
absence programs in effect at the respective entities at the
Separation Time.
(g) Non-Employee Director Plans.
(1) As of the Separation Time, New U S WEST shall assume the
Non-Employee Director Plans and all Liabilities and obligations
under such plans with respect to individuals who will be
directors of New U S WEST immediately after the Separation Time
and Retired Non-Employee Directors (collectively referred to as
"Communications Directors"). The MediaOne Group shall have no
Liabilities with respect to such agreements.
(2) As of the Separation Time, MediaOne shall establish new plans for
its non-employee directors ("Media Non-Employee Director Plans")
corresponding to the Non-Employee Director Plans maintained by U
S WEST before the Separation Time and shall assume, under such
plans, all Liabilities and obligations under the Non-Employee
Director Plans with respect to individuals who will be directors
of MediaOne ("Media Directors") immediately after the Separation
Time. All such Liabilities and obligations shall cease to be
Liabilities or obligations of the Non-Employee Director Plans
assumed by New U S WEST pursuant to paragraph (1) above. The New
U S WEST Group shall have no Liabilities with respect to such
agreements. (3) MediaOne and New U S WEST shall cause all plans
referred to in this sub-section (g) to be amended, as
appropriate, to effect the changes described herein as of the
Separation Time.
(h) Non-Employee State Executive Board Plan. As of the Separation Time,
New U S WEST shall assume the U S WEST Communications, Inc.
Non-Employee State Executive Board Deferred Compensation Plan (and any
predecessor plan) and be solely responsible for all Liabilities
thereunder. New U S WEST shall cause such plan to be amended, as
appropriate, to effect the changes described herein as of the
Separation Time.
11. PORTABILITY
Existing U S WEST and, if necessary after the Separation Time, MediaOne and
New U S WEST shall use reasonable best efforts to seek an amendment
of the Mandatory Portability Agreement established as of January 1,
1985, as referenced in the U S WEST Pension Plan (the "MPA"), to
allow New U S WEST to become a "Tier II Signatory Company" under the
MPA with the same rights and obligations as have been granted to
AirTouch Communications, Inc. as a Tier II Signatory Company.
MediaOne and New U S WEST may mutually agree to additional situations
where service credit would be granted for employees transferring
between one another (or their Subsidiaries) with associated trust
asset transfers after the Separation Time.
12. FURTHER AGREEMENTS
(a) From and after the Separation Time, MediaOne shall, and shall cause its
Subsidiaries and successors to, provide credit under all Media Employee
Arrangements and Media Employee Benefit Plans to Media Employees and
Terminated Media Employees for service with the Existing U S WEST Group
prior to the Separation Time for purposes of eligibility to participate,
vesting and eligibility to retire, and for purposes of calculating any
severance benefits, to the same extent such credit was provided under
Employee Arrangements and Employee Benefit Plans prior to the Separation
Time.
(b) From and after the Separation Time, New U S WEST shall, and shall cause its
Subsidiaries and successors to, provide credit under all Communications
Employee Arrangements and Communications Employee Benefit Plans to
Communications Employees, Terminated Communications Employees and
Terminated Inc. Employees for service with the Existing U S WEST Group
prior to the Separation Time for purposes of eligibility to participate,
vesting and eligibility to retire, and for purposes of calculating any
severance benefits, to the same extent such credit was provided under
Employee Arrangements and Employee Benefit Plans prior to the Separation
Time.
(c) MediaOne and New U S WEST shall promptly reimburse each other for all valid
liability and expenses addressed in this EM Agreement which are paid by the
other and that constitutes a liability of MediaOne or New U S WEST, as the
case may be, upon presentation of an invoice thereon. In the event that
payment in full is not received within 45 days from the date of the
invoice, interest shall accrue at the rate of 7% per annum from the date of
the invoice.
13. COOPERATION
(a) MediaOne, New U S WEST and their Subsidiaries shall cooperate with each
other in carrying out, implementing and defending the terms of this EM
Agreement, including cooperating with each other with respect to any claims
or litigation challenging the terms of the EM Agreement.
(b) Each party shall exchange such information with the other party and their
respective agents and vendors (without obtaining releases), as may be
reasonably requested by the other party, with respect thereto. MediaOne and
New U S WEST 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 EM Agreement in the custody of the other party, to the extent
reasonably requested by the other party. 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, MediaOne and New U S WEST 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, MediaOne and New U S WEST shall negotiate in good faith to
implement the provision in a mutually satisfactory manner. The phrase
"reasonable best efforts" as used herein shall not be construed to require
the incurrence of any non-routine or unreasonable expense or liability or
the waiver of any right of MediaOne and New U S WEST (and their respective
Subsidiaries).
(c) MediaOne and New U S WEST agree to good faith mutual cooperation in any
investigation, inquiry or litigation which jointly involves them or in
which either party makes a reasonable request for such cooperation. Each
party will make its Employees available on a reasonable basis to give
testimony and assistance in connection with any lawsuit, dispute,
investigation or proceeding involving the other party and arising out of
activities for which the Employee had responsibility prior to the
Separation Time. The party requesting such availability (the "Requesting
Party") shall reimburse the Employee for all reasonable out-of-pocket
travel and other expenses incurred in so cooperating, including without
limitation airplane fare, hotel accommodations, meal charges and other
similar expenses, as well as reasonable fees and disbursements for
independent counsel for the Employee, if the matter requires that the
Employee have independent representation. Such expenses will be reimbursed
promptly after Employee's submission to the Requesting Party of statements
and such reasonable detail as the Requesting Party may require. Any request
for cooperation, and the degree of cooperation provided, pursuant to this
paragraph will take into account (1) the significance of the matters at
issue in the lawsuit, dispute, investigation or proceeding, and (ii) the
Employee's other personal and business commitments. In any case in which
either MediaOne or New U S WEST becomes aware that one of its Employees is
called (except by the other party) as a witness to testify in any discovery
or court proceeding relating to the other party, the party employing such
individual will notify the other party immediately in order to give the
other party a reasonable opportunity to appear and/or assert any privilege
to which it may be entitled.
14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES
(a) No provision of this EM Agreement or the Separation Agreement shall be
construed to create any right, or accelerate entitlement, to any
compensation or benefit whatsoever on the part of any Employee or
Terminated Employee or other future, present or former employee of
MediaOne, New U S WEST, or their respective Subsidiaries under any Employee
Benefit Plan or Employee Arrangement maintained by any of such entities or
otherwise.
(b) Without limiting the generality of the foregoing provisions of subsection
14(a) above, except for the severance agreements applicable to the
Executive Group, neither (1) the transactions described in the Separation
Agreement including without limitation the Reorganization, Contribution and
Separation, (2) the termination of the Participating Company status of New
U S WEST or a New U S WEST Subsidiary, (3) the transfer of sponsorship of
any Employee Benefit Plans or Employee Arrangements to New U S WEST, (4)
the transfer of an Employee from one member of the Existing U S WEST Group
to another member in connection with or in anticipation of the
Reorganization, Contribution or Separation at any time on or before the
Separation Time nor (5) the assignment and transfer of an Employee to the
New U S WEST Group or MediaOne Group, shall cause any Employee to be deemed
to have incurred a termination of employment which entitles such individual
to the commencement of benefits under any Employee Benefit Plan or Employee
Arrangement maintained by MediaOne, New U S WEST, or their respective
Subsidiaries; nor shall any of the events set forth in clauses (1) through
(5) of this subsection 14(b) be treated as, or result in, a change in
control under any such Employee Benefit Plan or Employee Arrangement.
(c) To the extent applicable, each Employee Benefit Plan and Employee
Arrangement is hereby amended (without the need for further action) to
incorporate the provisions stated in subsection 14(b).
(d) Except as expressly provided in this Agreement, nothing in this Agreement
shall preclude New U S WEST or MediaOne or their respective Subsidiaries,
at any time after the Separation Time, from amending, merging, modifying,
terminating, eliminating, reducing, or otherwise altering in any respect
any Employee Benefit Plan or Employee Arrangement maintained by such party,
any benefit under any such plan or arrangement, or any trust, insurance
policy or funding vehicle related to any such plan or arrangement.
(e) No provision in this EM Agreement or in the Separation Agreement shall
confer upon any person other than the signatories hereto any rights or
remedies with respect to the employment, compensation, benefits, or other
terms and conditions of employment of any persons.
15. MISCELLANEOUS
(a) Payment of 1998 Administrative Costs and Expenses. Each member of the
Existing U S WEST Group shall be responsible for their allocable share of
the budgeted costs for benefits in 1998 until the Separation Time, as well
as their allocable share of unanticipated expenses incurred prior to the
Separation Time. In addition, MediaOne shall pay New U S WEST for all
expenses and costs relating to benefits incurred after the Separation Time
to the extent that the additional expenses are (i) reasonable and necessary
and (ii) incurred as a result of, and for the purpose of, the normal
administration of the Media Employee Benefit Plans or Employee Arrangements
after the Separation Time. If any expenses are incurred at the request of
MediaOne, they shall be the sole responsibility of MediaOne.
(b) Audit Rights.
(1) Information Provided. Each of MediaOne and New U S WEST, and their
duly authorized representatives, shall have the right to conduct
audits with respect to all information provided to it by the other
party. The party conducting the audit (the "Auditing Party") shall
have the sole discretion to determine the procedures and guidelines
for conducting audits and the selection of audit representatives under
this paragraph (1); provided, that no audits shall be permitted with
respect to the allocation or transfer of plan assets and liabilities.
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 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 five business days after receiving such draft.
The Auditing Party's audit rights under this paragraph (1) shall
include the right to audit, or participate in an audit facilitated by
the party being audited, of any Subsidiaries and Affiliates of the
party being audited and of any benefit providers and third parties
with whom the party being audited has a relationship, or agents of
such party, to the extent any such persons are affected by or
addressed in this Agreement (collectively, the "Non-parties"). The
party being audited shall, upon written request from the Auditing
Party, provide an individual (at the Auditing Party's expense) to
supervise any audit of a Non-party. The Auditing Party shall be
responsible for supplying, at the Auditing Party's expense, additional
personnel sufficient to complete the audit in a reasonably timely
manner. The responsibility of the party being audited shall be limited
to providing, at the Auditing Party's expense, a single individual at
each audited site for purposes of facilitating the audit.
(2) Vendor Contracts. After the Separation Time, MediaOne and New U S WEST
and their duly authorized representatives shall have the right to
conduct joint audits with respect to any Provider Contracts that
relate to both the MediaOne Welfare Plans and the New U S WEST Welfare
Plans. The scope of such audits shall encompass the review of all
correspondence, account records, claim forms, cancelled drafts (unless
retained by the bank), provider bills, medical records submitted with
claims, billing corrections, vendor's internal corrections of previous
errors and any other documents or instruments relating to the services
performed by the vendor under the applicable vendor contracts.
MediaOne and New U S WEST shall agree on the performance standards,
audit methodology, auditing policy and quality measures and reporting
requirements relating to the audits described in this paragraph (2)
and the manner in which costs incurred in connection with such audits
will be shared.
(c) Beneficiary Designations. All beneficiary designations made under
the Employee Benefit Plans or Employee Arrangements prior to the
Separation Time shall be transferred to and be in full force and
effect under the corresponding new Communications or Media
Employee Benefit Plans or Employee Arrangements until such
beneficiary designations are replaced or revoked by the
individual who made the beneficiary designation.
(d) Effect If Separation Does Not Occur. If the Separation does not
occur, then all actions and events that are, under this EM
Agreement, to be taken or occur effective as of the Separation
Time, immediately after the Separation Time, or otherwise
contingent upon or in connection with the Separation, shall not
be taken or occur. In addition, to the extent actions are taken
or events occur prior to the Separation Time in connection with
the Reorganization or Contribution or in anticipation of the
Separation, then such events or actions shall be reversed or
deemed null and void.
(e) Provisions of Separation Agreement. The provisions of Articles X
- XII of the Separation Agreement shall, to the extent applicable
and not inconsistent with this EM Agreement, shall also apply to
this EM Agreement.
(f) U S WEST Benefits Handbook. Notwithstanding any provision of the
Separation Agreement regarding the use of the U S WEST name or
otherwise, MediaOne may use and refer to the booklet entitled
"Your U S WEST Benefits Handbook" (as in effect at the Separation
Time) for the purposes of explaining benefits to its employees.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this EM
Agreement to be duly executed on its behalf by its officers
thereunto duly authorized, all as of the day and year first
written in the Separation Agreement.
U S WEST, Inc.
/s/ Charles M. Lillis
By:_____________________________________
Name: Charles M. Lillis
Title: Executive Vice President
USW-C, Inc.
/s/ Solomon D. Trujillo
By:_____________________________________
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
U S WEST, Inc., plan sponsor of the:
Media Pension Plan
Media Savings Plan
Media VEBA
Other Media Employee Benefit Plans
/s/ Charles M. Lillis
By:_____________________________________
Name: Charles M. Lillis
Title: Executive Vice President
USW-C, Inc., plan sponsor of the:
U S WEST Pension Plan
U S WEST Savings Plan
MBAT and Life Insurance Trust
Other Communications Employee Benefit Plans
/s/ Solomon D. Trujillo
By:_____________________________________
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
<PAGE>
SCHEDULE 1
U S WEST, Inc. Pension Spin-Off Assumptions
- - -------------------------------------------------------------------------------
Economic
Investment return and discount rate 8.0%
GATT lump sum rate 6.5%
Salary increase Current U S WEST tables
Demographic
Mortality UP 94
Retirement Current U S WEST tables
Turnover U S WEST Current U S WEST tables
MediaOne Two times current U S WEST management tables
MediaOne Group Current U S WEST management table
Lump sum take rate DVP: 95%
SPE: 70%
Assets
Method Fair market value
Liabilities
Method FAS 87 projected unit credit attribution
based on lump sum accrual pattern
- - -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 2
U S WEST, Inc. Retiree Health and Life Spin-Off Assumptions
- - -------------------------------------------------------------------------------
Economic
Investment return and discount rate 8.0%
Salary increase Current U S WEST tables
Demographic
Mortality UP 94
Retirement Current U S WEST tables
Turnover U S WEST Current U S WEST tables
MediaOne Group Current U S WEST management table
MediaOne Two times current U S WEST management table
Assets
Method FAS 106 projected unit credit attribution.
Life benefits limited to $50,000 and exclude dependen
amd supplemental benefits
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Medical Trend Annual Dental Trend
Health care trend rates: 1998 to 2,000 8.0% 1997 to 1998 6.0%
1998 to 1999 5.8
1999 to 2000 5.7
2000 to 2001 5.5
2001 to 2005 7.0 2001 to 2002 5.3
2002 to 2003 5.2
2006 to 2010 6.0 2003 and beyond 5.0
2011 and beyond 5.5
- - -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
HMOs HMOs Dental
1997 per capita costs 55 $2,701 $3,423 $251
60 3,265 4,138 251
65 600 1,709 251
70 600 1,741 251
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Percentage electing HMOs 1997 and 1998 50%
1999 and 2000 60
2001 and 2002 70
2003 and 2004 80
2005 and 2006 90
2007 and later 100
</TABLE>
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, dated as of June 5, 1998, by and
between U S WEST, Inc., a Delaware corporation ("U S WEST") to be renamed
MediaOne Group, Inc. and USW-C, Inc., a Delaware corporation and wholly owned
subsidiary of U S WEST ("New U S WEST") to be renamed U S WEST, Inc.
W I T N E S S E T H
WHEREAS, New U S WEST and its subsidiaries are currently
members of the U S WEST Consolidated Group (as defined herein);
WHEREAS, pursuant to the Separation Agreement entered into
between U S WEST and New U S WEST dated June 5, 1998 (the "Separation
Agreement"), (a) U S WEST shall effect a restructuring of certain of its assets,
liabilities and businesses, as a result of which New U S WEST shall own the
Directories Business and the businesses currently attributed to the
Communications Group (each as defined in the Separation Agreement) (the
"Reorganization") and (b) U S WEST shall distribute all of the outstanding
capital stock of New U S WEST to its stockholders (the "Separation");
WHEREAS, the parties intend that for United States federal
income tax purposes the Reorganization and the Separation shall qualify as
tax-free transactions pursuant to Sections 332, 368(a) and 355 of the Code (as
defined herein);
WHEREAS, the parties wish to (a) provide for the payment of
tax liabilities and entitlement to refunds thereof, allocate responsibility for,
and cooperation in, the filing of tax returns and provide for certain other
matters relating to taxes and (b) set forth certain covenants and indemnities
relating to the preservation of the tax-free status of the Reorganization and
the Separation.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings contained herein and in any other document executed in connection
with this Agreement, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS; CERTAIN OPERATING CONVENTIONS
1.1 For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
Adjustments shall mean any proposed or final change in the Tax
Liability of a taxpayer.
Code shall mean the Internal Revenue Code of 1986, as amended.
Combined Return shall mean any combined, unitary, or
consolidated State Income Tax return that includes one or more members of the
MediaOne Group and one or more members of the New U S WEST Group (as hereinafter
defined).
Combined Return Tax Savings shall mean, with respect to a
Taxable Year in which one or more Combined Returns were filed or required to be
filed in the Communications Group Region, the excess of the State Income Tax
that would have been payable to all Tax Authorities in the Communications Group
Region if the MediaOne Group had not been included in such Combined Returns for
such Taxable Year over the actual State Income Tax paid to such Tax Authorities
in respect of such Combined Returns.
Communications Group Region shall mean the 14-state region
comprised of the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana,
Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and
Wyoming.
Contributed Media Group Subsidiaries shall mean each of U S
WEST Media Group, Inc. and U S WEST Capital Funding, Inc., and each of their
respective subsidiaries.
Contributed Subsidiaries shall mean each of U S WEST
Foundation, U S WEST Educational Foundation, U S WEST Investment Management
Company, U S WEST SPF, Co., U S WEST Federal Relations, Inc., and U S WEST IP
Holdings, Inc., and each of their respective subsidiaries.
Federal Income Tax shall mean federal Taxes determined on the
basis of net income or profits (including, but not limited to, any alternative
minimum tax, capital gains and any Tax on items of Tax preferences) but
excluding non-income Taxes such as federal payroll and excise Taxes.
<PAGE>
Indemnifying Party shall mean any Person from which an
Indemnified Party is seeking indemnification pursuant to the provisions of this
Agreement.
Indemnified Party shall mean any Person which is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
IRS shall mean the United States Internal Revenue Service.
MediaOne Group shall mean, individually and collectively, as
the case may be, each member of the U S WEST Consolidated Group, other than any
member of the New U S WEST Group.
New U S WEST Group shall mean, individually and collectively,
as the case may be, New U S WEST and its present and future direct and indirect
subsidiaries; provided, however, that on or prior to the Separation Date, none
of the Contributed Subsidiaries or the Contributed Media Group Subsidiaries
shall be included as a member of the New U S WEST Group.
Person shall mean and includes any individual, corporation,
company, association, partnership, joint venture, limited liability company,
joint stock company, trust, unincorporated organization, or other entity.
Post-Separation Taxable Period shall mean a taxable period
that begins after the Separation Date.
Pre-Separation Taxable Period shall mean a taxable period that
ends on or before the Separation Date.
Present Value Benefit shall mean the present value (based on a
discount rate equal to the short-term applicable federal rate as determined
under Section 1274(d) of the Code at the time of determination, and assuming
that the Indemnified Party will be liable for Taxes at all relevant times at the
maximum marginal rates) of any income tax benefit.
Proceeding shall mean any audit or other examination, or any
judicial or administrative proceeding, relating to liability for or refunds or
Adjustments with respect to Taxes.
Refund shall mean any refund of Taxes, including any reduction
in liability for such Taxes by means of a credit, offset or otherwise.
<PAGE>
Ruling Request shall mean the request by U S WEST for an
advance letter ruling from the IRS with respect to certain Tax aspects of the
Reorganization and the Separation.
Separate Return shall mean any Tax Return, including any
consolidated, combined or unitary Tax Return, filed by either the New U S WEST
Group or the MediaOne Group but excluding any Tax Return filed which includes
one or more members of both groups.
Separation Date shall mean the date the Separation is
effected.
State Income Tax shall mean any state or local jurisdiction
Taxes imposed on or measured by gross or net income, value added, net worth or
capital stock. State Income Taxes do not include business and occupation taxes,
gross receipts taxes, excise, sales or use taxes, real property gains, real or
personal property, transfer or similar taxes.
Straddle Period shall mean a taxable period that includes, but
does not end on, the Separation Date.
Tax or Taxes shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, gains, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, custom duties, fees, assessments and charges of
any kind whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) and shall include any transferee liability in respect of Taxes.
Tax Authority shall mean the IRS and any other domestic or
foreign governmental authority responsible for the administration and collection
of Taxes.
Tax Liabilities shall mean all liabilities for Taxes.
Tax Returns shall mean all reports, returns, declaration forms
and statements filed or required to be filed with respect to Taxes.
Tax-timing Adjustment shall mean any Adjustment in one Taxable
Year which will result in an offsetting Adjustment or Adjustments (including an
Adjustment to the basis of an asset not eligible for depreciation or
amortization) in another Taxable Year.
<PAGE>
Taxable Year shall mean the year on the basis of which taxable
income is computed.
Treasury shall mean the United States Department of the
Treasury.
U S WEST Consolidated Group shall mean the affiliated group of
corporations, within the meaning of Section 1504(a) of the Code, of which U S
WEST is the common parent, and any member of such group.
1.2 Other Definitional Provisions. (a) Capitalized terms not
otherwise defined in this Agreement shall have the meaning ascribed to them in
the Separation Agreement.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(c) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
1.3 Termination of Taxable Years. For Federal Income Tax
purposes, the Taxable Year of each member of the New U S WEST Group (including
the Contributed Subsidiaries and the Contributed Media Group Subsidiaries) shall
end as of the close of the Separation Date. New U S WEST and U S WEST shall,
unless prohibited by applicable law, take all action necessary or appropriate to
close the taxable period of each member of the New U S WEST Group for all Tax
purposes as of the close of the Separation Date.
ARTICLE II
ALLOCATION AND PAYMENT
2.1 Allocation of Taxes. U S WEST and New U S WEST each
agrees, on its own behalf and on behalf of the MediaOne Group and the New U S
WEST Group, respectively, to allocate and pay its respective share of Taxes as
provided in this Agreement.
(a) Except as provided in Section 2.1(e), the Federal Income
Tax liability (including Refunds and deficiencies) of the U S WEST Consolidated
Group for any Pre- Separation Taxable Period and any Straddle Period shall be
allocated between the New U S WEST Group and the MediaOne Group in accordance
with Treasury Regulations Sections
<PAGE>
1.1552-1(a)(3) and 1.1502-33(d)(3). The fixed percentage under Treasury
Regulations Section 1.1502-33(d)(3) shall be 100 percent.
(b) Except as provided in Section 2.1(e), the State Income Tax
liability of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable Period and any Straddle Period in any state included in
the Communications Group Region in which a Combined Return is or is required to
be filed shall be allocated between the New U S WEST Group and the MediaOne
Group in proportion to the state taxable income (positive or negative) of each
member of each group included in such Combined Return, or, where the basis is
other than net income, in proportion to each member's respective Tax base. Each
group shall appropriately compensate the other group for any reduction in State
Income Tax liability resulting from the other group's having negative state
taxable income.
(c) Except as provided in Section 2.1(e), the State Income Tax
liability of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable Period and any Straddle Period in any state not included
in the Communications Group Region in which a Combined Return is or is required
to be filed shall be allocated between the New U S WEST Group and the MediaOne
Group as follows:
(i) For the Taxable Years ended December 31, 1996,
December 31, 1997 and on the Separation Date, all such State Income Tax
liability for each such Taxable Year shall be allocated to the New U S
WEST Group to the extent such State Income Tax liability does not
exceed the Combined Return Tax Savings actually realized by the New U S
WEST Group for each such Taxable Year. Any excess State Income Tax
liability shall be allocated 66.6% to the New U S WEST Group and 33.4%
to the MediaOne Group.
(ii) For Taxable Years ended on or prior to December
31, 1995, all such State Income Tax liability shall be allocated 66.6%
to the New U S WEST Group and 33.4% to the MediaOne Group.
(iii) Notwithstanding the foregoing, any liability
arising solely out of the inclusion of the New U S WEST Group in a Tax
Return which was originally filed as a Separate Return by a member of
the affiliated group (as defined in Section 1504(a) of the Code) of
which Continental Cablevision, Inc. was the common parent corporation
for the Taxable Year ended December 31, 1996 shall be allocated 50% to
the New U S WEST Group and 50% to the MediaOne Group.
(d) Except as provided in Sections 2.1(c)(iii) and 2.1(e), all
Tax Liabilities of the New U S WEST Group and the MediaOne Group for any
Pre-Separation Taxable
<PAGE>
Period and any Straddle Period arising out of the filing of a Separate Return
shall be allocated to the member to which such Tax Liabilities relate.
(e) Any Tax Liability of U S WEST arising out of operations
conducted directly by it and any Tax Liability of the Contributed Subsidiaries
for any Pre-Separation Taxable Period or any Straddle Period shall be allocated
58% to the New U S WEST Group and 42% to the MediaOne Group.
(f) Any Tax Liability arising out of Transaction Costs (as
defined in the Separation Agreement) shall be allocated as the underlying costs
are allocated pursuant to Section 1.1(l) of the Separation Disclosure Schedule.
2.2 Tax Attributes. Tax attributes for Pre-Separation Taxable
Periods and any Straddle Period shall be allocated to the New U S WEST Group and
the MediaOne Group in accordance with the Code and Treasury Regulations (and any
applicable state, local and foreign laws or regulations). U S WEST and New U S
WEST shall jointly determine the amounts of such attributes as of the Separation
Date, or shall jointly estimate such amounts which are not determinable as of
the Separation Date, and hereby agree to compute all Tax Liabilities for Taxable
Years ending after the Separation Date consistently with that determination. The
principles of this paragraph shall apply with respect to any adjustments to the
Tax Liabilities of either the New U S WEST Group or the MediaOne Group resulting
from an election made under Treasury Regulation Section 1.1502-76(b)(2)(ii).
2.3 Tax-Timing Adjustments. To the extent that any portion of
any Tax Liability (or Tax benefit) allocated under Section 2.1 relates to a
Tax-timing Adjustment, that portion of such Tax Liability (or Tax benefit) shall
be allocated to the entity that will receive the benefit (or detriment) of that
Tax-timing Adjustment. For purposes of this Agreement, the fact that the period
or periods in which offsetting Adjustments will arise is unknown or not
determinable shall not be taken into account.
2.4 Penalties, Additions to Tax and Interest. Penalties,
additions to Tax and interest on any Tax deficiencies or overpayments will be
allocated as the underlying deficiencies or overpayments are allocated under
this Agreement.
2.5 Payment of Taxes. U S WEST and New U S WEST each agrees to
pay or cause to be paid their respective shares of Taxes as allocated and
provided in this Agreement.
(a) For the Taxable Year ended December 31, 1997 and any
Straddle Period, New U S WEST shall timely pay to U S WEST an amount equal to
the allocable
<PAGE>
Federal Income Tax liability of the New U S WEST Group determined under Section
2.1(a), (e), and (f), including the New U S WEST Group's share of estimated
Federal Income Taxes. U S WEST shall be responsible for the payment to the IRS
of the Federal Income Tax liability of the U S WEST Consolidated Group for such
Taxable Years.
(b) For the Taxable Year ended December 31, 1997 and any
Straddle Period, New U S WEST shall timely pay to U S WEST an amount equal to
the allocable State Income Tax liability of the New U S WEST Group determined
under Sections 2.1(b), (c), (e) and (f), including the New U S WEST Group's
share of estimated State Income Taxes. U S WEST shall be responsible for the
payment to the applicable Tax Authority of such State Income Tax liabilities.
2.6 Characterization of Payments. For all Tax purposes, the
New U S WEST Group and the MediaOne Group agree to treat (i) any payment
required by this Agreement as either a contribution by U S WEST to New U S WEST
or a distribution by New U S WEST to U S WEST, as the case may be, occurring
immediately prior to the Separation Date and (ii) any payment of interest or
non-federal Taxes by or to a Tax Authority as taxable or deductible, as the case
may be, to the party entitled under this Agreement to retain such payment or
required under this Agreement to make such payment, in either case except as
otherwise mandated by applicable law.
ARTICLE III
INDEMNIFICATION
3.1 Indemnification by U S WEST. U S WEST shall pay, and shall
indemnify and hold the New U S WEST Group and their respective shareholders,
directors, officers, employees, affiliates, agents and successors harmless from
and against, without duplication, (i) all Tax Liabilities allocable to the
MediaOne Group under Article II, (ii) all Tax Liabilities attributable to Tax
Returns required to be filed by the MediaOne Group for any Post-Separation
Taxable Period, (iii) all Tax Liabilities incurred by the New U S WEST Group by
reason of the breach by U S WEST of any of its covenants hereunder, and (iv) any
costs and expenses related to the foregoing (including, without limitation,
reasonable attorneys' fees and expenses).
3.2 Liability of MediaOne Group for Undertaking Certain
Transactions. Notwithstanding any other provision of this Agreement to the
contrary, if, as a result of any event, action, or failure to act wholly or
partially within the control of the MediaOne Group (including, without
limitation, any event, action, or failure to act that results in a breach of any
representation or in the inaccuracy of any statement made to the IRS in
connection with,
<PAGE>
the Ruling Request), or any other event related to the acquisition of U S WEST
stock, any Taxes are imposed on the New U S WEST Group with respect to any
action taken pursuant to the Separation and the Reorganization, including,
without limitation, the transactions that were intended to be tax-free under
Sections 332, 355 and 368 of the Code, then U S WEST shall indemnify and hold
harmless the New U S WEST Group with respect to any such Taxes on an after-tax
basis.
3.3 Indemnification by New U S WEST. New U S WEST shall pay,
and shall indemnify and hold the MediaOne Group and their respective
shareholders, directors, officers, employees, affiliates, agents and successors
harmless from and against, without duplication, (i) all Tax Liabilities
allocable to the New U S WEST Group under Article II, (ii) all Tax Liabilities
attributable to Tax Returns required to be filed by the New U S WEST Group for
any Post-Separation Taxable Period, (iii) all Tax Liabilities incurred by the
MediaOne Group by reason of the breach by New U S WEST of any of its covenants
hereunder and (iv) any costs and expenses related to the foregoing (including,
without limitation, reasonable attorneys' fees and expenses).
3.4 Liability of New U S WEST Group for Undertaking Certain
Transactions. Notwithstanding any other provision of this Agreement to the
contrary, if, as a result of any event, action, or failure to act wholly or
partially within the control of the New U S WEST Group (including, without
limitation, any event, action or failure to act that results in a breach of any
representation or in the inaccuracy of any statement made to the IRS in
connection with, the Ruling Request), or any other event related to the
acquisition of New U S WEST stock, any Taxes are imposed on the MediaOne Group
with respect to any action taken pursuant to the Separation and the
Reorganization, including, without limitation, the transactions that were
intended to be tax-free under Sections 332, 355 and 368 of the Code, then New U
S WEST shall indemnify and hold harmless the MediaOne Group with respect to any
such Taxes on an after-tax basis.
3.5 Payment. If the Indemnifying Party is required to
indemnify the Indemnified Party pursuant to this Article III, the Indemnified
Party shall submit its calculations of the amount required to be paid pursuant
to this Article IV (which shall be net of the Present Value Benefit realized or
realizable by the Indemnified Party), showing such calculations in sufficient
detail so as to permit the Indemnifying Party to understand the calculations.
Subject to the following sentence, the Indemnifying Party shall pay to the
Indemnified Party, no later than ten (10) business days after the Indemnifying
Party receives the Indemnified Party's calculations, the amount that the
Indemnifying Party is required to pay the Indemnified Party under this Article
III. If the Indemnifying Party disagrees with such calculations, it must notify
the Indemnified Party of its disagreement in writing within
<PAGE>
ten (10) business days of receiving such calculations. Any dispute regarding
such calculations shall be resolved in accordance with Section 6.13 of this
Agreement.
3.6 Time Limits. Any claim under this Article III with respect
to a Tax Liability must be made no later than thirty (30) days after the
expiration of the applicable statute of limitations for assessment of such Tax
Liability.
ARTICLE IV
PREPARATION AND FILING OF TAX RETURNS, COOPERATION
AND RECORD RETENTION
4.1 Federal Tax Returns. New U S WEST and U S WEST hereby
agree to cooperate fully with each other to meet filing requirements for the U S
WEST Consolidated Group Tax Returns for any Pre-Separation Taxable Period and
any Straddle Period. New U S WEST, as agent for the U S WEST Consolidated Group,
will be responsible for the filing of such Tax Returns for the Taxable Years
ended December 31, 1997 and ending December 31, 1998, and, at the request of U S
WEST, shall use its best efforts to file the Tax Return for the Taxable Year
ending December 31, 1998 by its original due date. For purposes of this Section
4.1, cooperation includes making available all instructions, workpapers,
research, data and notes of any kind required for the completion of the Tax
Return, as well as making available personnel to assist in the consolidation
effort. Personnel requirements, including the use of third party contractors,
will be negotiated and agreed upon between U S WEST and New U S WEST.
Interviewing and hiring of third-party contractors will be done jointly, and
costs of these contractors will be shared equally. Any software license costs
specifically related to a separate entity shall be borne by that entity. Where
software license costs are not discernible as separate entity costs, such
software license costs will be shared equally. Due dates for information
required for the U S WEST Consolidated Group Tax Returns will be negotiated
between U S WEST and New U S WEST and good faith efforts will be made to meet
those dates.
4.2 Combined Returns. New U S WEST and U S WEST hereby agree
to cooperate fully with each other to meet filing requirements for Combined
Returns for any Pre-Separation Taxable Period and any Straddle Period. New U S
WEST, as agent for U S WEST, will be responsible for the filing of the Combined
Returns for the Taxable Years ended December 31, 1997 and ending December 31,
1998 and, at the request of U S WEST, shall use its best efforts to file any
Combined Returns for the Taxable Year ending December 31, 1998 by their original
due date. For purposes of this Section 4.2, cooperation includes making
available all instructions, workpapers, research, data and notes of any kind
required for the completion of the Combined Return, as well as making available
personnel to assist in
<PAGE>
the combination effort. Personnel requirements, including the use of third party
contractors, will be negotiated and agreed upon between U S WEST and New U S
WEST. Interviewing and hiring of third-party contractors will be done jointly,
and costs of these contractors will be shared equally. Any software license
costs specifically related to a separate entity shall be borne by that entity.
Where software license costs are not discernible as separate entity costs, such
software license costs will be shared equally. Due dates for information
required for Combined Returns will be negotiated between U S WEST and New U S
WEST and good faith efforts will be made to meet those dates.
4.3 Separate Returns. Any Separate Return shall be prepared
and caused to be filed by the entity required by law to file such Separate
Return.
4.4 Cooperation; Maintenance and Retention of Records. U S
WEST and New U S WEST shall, and shall cause the MediaOne Group and the New U S
WEST Group respectively to, provide the requesting party with such assistance
and documents as may be reasonably requested by such party in connection with
(i) the preparation of any Tax Return, (ii) the conduct of any Proceeding, (iii)
any matter relating to Taxes of any member of the U S WEST Consolidated Group,
the New U S WEST Group or the MediaOne Group and (iv) any other matter that is a
subject of this Agreement. New U S WEST and U S WEST shall retain or cause to be
retained all Tax Returns, schedules and workpapers, and all material records or
other documents relating thereto, until the expiration of the statute of
limitations (including any waivers or extensions thereof) of the Taxable Years
to which such Tax Returns and other documents relate or until the expiration of
any additional period that any party reasonably requests, in writing, with
respect to specific material records or documents. A party intending to destroy
any material records or documents shall provide the other party with reasonable
advance notice and the opportunity to copy or take possession of such records
and documents. The parties hereto will notify each other in writing of any
waivers or extensions of the applicable statute of limitations that may affect
the period for which the foregoing records or other documents must be retained.
ARTICLE V
REFUNDS, AUDITS AND ADJUSTMENTS
5.1 Refunds of Taxes. Except as provided in Section 5.2 below,
New U S WEST shall be entitled to all Refunds relating to Taxes (plus any
interest thereon received with respect thereto from the applicable Tax
Authority) for which New U S WEST is or may be liable pursuant to Articles II
and III of this Agreement, and U S WEST shall be entitled to all Refunds
relating to Taxes (plus any interest thereon received with respect thereto from
the applicable Tax Authority) for which U S WEST is or may be liable pursuant to
the
<PAGE>
provisions of Articles II and III of this Agreement. A party receiving a Refund
to which another party is entitled pursuant to this Agreement shall pay the
amount to which such other party is entitled (plus any interest thereon received
with respect thereto from the applicable Tax Authority) within ten (10) days
after the receipt of the Refund.
5.2 Carrybacks. (a) The carryback of any loss, credit or other
Tax attribute in any Post-Separation Taxable Period shall be in accordance with
the provisions of the Code and Treasury Regulations (and any applicable state,
local or foreign laws or regulations).
(b) In the event that the New U S WEST Group realizes any
loss, credit or other Tax attribute in any Post-Separation Taxable Period, such
group may elect to carry back such loss, credit or Tax attribute to a
Pre-Separation Taxable Period. U S WEST shall cooperate with New U S WEST in
seeking from the appropriate Tax Authority any Refund that reasonably would
result from such carryback. New U S WEST shall be entitled to any Refund (or
other Tax benefit) realized by the MediaOne Group (including any interest
thereon received from such Tax Authority) attributable to such carryback, within
ten (10) business days after such Refund (or other Tax benefit) is received;
provided, however, that U S WEST shall be entitled to any Refund (or other Tax
benefit) that results from the carryback of a loss, credit or other Tax
attribute by the MediaOne Group from a Post- Separation Taxable Period to a
Pre-Separation Taxable Period.
(c) Except as otherwise provided by applicable law, if the
MediaOne Group and the New U S WEST Group both may carry back a loss, credit or
other Tax attribute to the same Pre-Separation Taxable Period, any Refund (or
other Tax benefit) resulting therefrom shall be allocated between U S WEST and
New U S WEST proportionately based on the relative amounts of the Refunds (or
other Tax benefits) to which the MediaOne Group and the New U S WEST Group,
respectively, would have been entitled had its carrybacks been the only
carrybacks to such Taxable Year.
(d) To the extent that the amount of a Refund to which a party
is entitled under this Section 5.2 is reduced by the applicable Tax Authority as
a result of the offset of such amount against a Tax Liability of the other
party, as allocated under this Agreement, the party which receives the benefit
of such offset shall appropriately compensate the other party within ten (10)
days of receipt of such benefit.
5.3 Federal Audits and Adjustments.
(a) Notification of Audit. Each of U S WEST and New U S WEST
shall give written notice to the other party of any audit of the U S WEST
Consolidated Group Tax Return for any Pre-Separation Taxable Period or Straddle
Period within ten (10) business
<PAGE>
days after receipt of written notification of such audit from the IRS. Such
notice shall include a copy of the notification received from the IRS.
(b) Statute of Limitations. Any extension of the statute of
limitations for any Pre-Separation Taxable Period or Straddle Period shall be
with the mutual agreement of U S WEST and New U S WEST. Any dispute regarding
the extension of the statute of limitations shall be resolved in accordance with
Section 6.13 of this Agreement.
(c) Audit Activity. Each of U S WEST and New U S WEST will
coordinate its respective efforts with respect to audits of any Pre-Separation
Taxable Period and any Straddle Period and will furnish the other with all
necessary workpapers and records to respond to audit inquiries. New U S WEST
will be responsible as agent for the U S WEST Consolidated Group for day-to-day
contact with IRS agents assigned to such audits. U S WEST will be responsible
for responding to audit inquiries regarding issues primarily affecting Tax
Liabilities of the MediaOne Group, but will act through New U S WEST, rather
than directly contacting the IRS with respect to such matters.
(d) Notification. New U S WEST will provide timely reports to
U S WEST detailing significant activities, information requests, issues raised
or resolved, and any other relevant information, such reports to be no less
frequent than quarterly.
(e) Proposed Adjustments. New U S WEST shall notify U S WEST
of any Adjustment to the U S WEST Consolidated Group Tax Returns within ten (10)
business days after receipt of notification of such Adjustment from the IRS. New
U S WEST shall include in its notice to U S WEST a copy of the notification
received from the IRS.
(i) Agreed Issues. New U S WEST will not enter into any
agreement with the IRS as agent for the U S WEST Consolidated
Group with respect to any Adjustment without the written consent
of U S WEST, in those cases where the MediaOne Group would be
liable for more than 50% of the proposed Tax Liability (as
allocated under this Agreement) attributable to such Adjustment.
For purposes of this paragraph, all determinations shall be made
separately for each Adjustment.
(ii) Unagreed Issues. In the event U S WEST and New U S
WEST, as the case may be, do not agree to all Adjustments for a
Taxable Year, decisions regarding the procedures and preferred
forum for contesting Adjustments on unagreed issues shall be made
by whichever of the MediaOne Group or the New U S WEST Group is
responsible for more than 50% of the cumulative Tax Liability
attributable to such Adjustments. The party making the decision
shall consult in good faith with the other party and shall
promptly notify the other party of its decision.
<PAGE>
(iii) Consent Not Required. Notwithstanding any other
provision of this Agreement, if the IRS notifies U S WEST that
the IRS will deal directly with the MediaOne Group with respect
to its Tax Liability, U S WEST shall have full authority to act
for the MediaOne Group and resolve any issue affecting its Tax
Liability without the consent of New U S WEST. U S WEST will
provide New U S WEST with a timely report summarizing any such
audit activity, such report to be no less frequent than
quarterly.
(f) Federal Refund Claims. If the New U S WEST Group desires
to file a claim for Refund with respect to a Taxable Year for which it was a
member of the U S WEST Consolidated Group, it shall prepare and submit to U S
WEST the claim for Refund and a statement specifying the date on which the
statute of limitations for filing the Refund claim will expire. U S WEST will
file the Refund claim prior to the date specified as the last day to claim the
Refund if such a filing is commercially reasonable, and will take any other
appropriate action at New U S WEST's request necessary to secure the Refund.
(g) Litigation. Subject to the balance of this Section 5.3(g),
U S WEST and New U S WEST jointly shall conduct all Proceedings relating to
Adjustments of the MediaOne Group and the U S WEST Group as allocated under this
Agreement. U S WEST shall have the ability to control the conduct of such
Proceedings with respect to issues relating to an Adjustment for which the
MediaOne Group would be liable for more than 50% of the proposed Tax Liability
(as allocated under this Agreement) attributable to such Adjustment. New U S
WEST shall have the ability to control the conduct of such Proceedings with
respect to issues relating to an Adjustment for which the New U S WEST Group
would be liable for more than 50% of the proposed Tax Liability (as allocated
under this Agreement) attributable to such Adjustment. The party with the
ability to control the conduct of all or a portion of the Proceedings pursuant
to this Section 5.3(g) shall consult in good faith with the other party, which
other party shall be entitled to participate in all conferences, meetings, and
other matters related to the resolution of such Proceedings.
5.4 Audits and Adjustments Related to Combined Returns.
(a) Notification of Audit. Each of U S WEST and New U S WEST
shall give written notice to the other party of any audit of a Combined Return
for any Pre-Separation Taxable Period or Straddle Period within ten (10)
business days after receipt of written notification of such audit from a Tax
Authority. Such notice shall include a copy of the notification received from
the relevant Tax Authority.
(b) Statute of Limitations. Any extension of the statute of
limitations for any Pre-Separation Taxable Period or Straddle Period shall be
with the mutual agreement of
<PAGE>
U S WEST and New U S WEST. Any dispute regarding the extension of the statute of
limitations shall be resolved in accordance with Section 6.13 of this Agreement.
(c) Audit Activity. Each of U S WEST and New U S WEST will
coordinate its respective efforts with respect to audits of Combined Returns of
any Pre-Separation Taxable Period and any Straddle Period and will furnish the
other with all necessary workpapers and records to respond to audit inquiries.
New U S WEST will be responsible as agent for any Combined Return for day-to-day
contact with state Tax Authorities regarding such audits. U S WEST will be
responsible for responding to audit inquiries regarding issues primarily
affecting Tax Liabilities of the MediaOne Group, but will act through New U S
WEST, rather than directly contacting the appropriate Tax Authorities with
respect to such matters.
(d) Notification. With respect to a Combined Return, New U S
WEST will provide timely reports to U S WEST detailing significant activities,
information requests, issues raised or resolved, and any other relevant
information, such reports to be no less frequent than quarterly.
(e) Proposed Adjustments. New U S WEST shall notify U S WEST
of any Adjustment to a Combined Return within ten (10) business days after
receipt of notification of such Adjustment from the applicable state Tax
Authority. New U S WEST shall include in its notice to U S WEST a copy of the
notification received from such Tax Authority.
(i) Agreed Issues. New U S WEST will not enter into any
agreement with a state Tax Authority as agent for U S WEST with respect to any
Adjustment in connection with a Combined Return without the written consent of U
S WEST in such cases where the MediaOne Group would be liable for more than 50%
of the proposed Tax Liability (as allocated under this Agreement) at issue. For
purposes of this paragraph, all determinations shall be made separately for each
Adjustment.
(ii) Unagreed Issues. In the event U S WEST and New U S
WEST, as the case may be, do not agree to all Adjustments with respect to a
Combined Return for a Taxable Year, decisions regarding the procedures and
preferred forum for contesting Adjustments on unagreed issues shall be made by
whichever of the MediaOne Group or the New U S WEST Group is responsible for
more than 50% of the cumulative Tax Liability attributable to such Adjustments.
The party making the decision shall consult in good faith with the other party
and shall promptly notify the other party of its decision.
<PAGE>
(f) State Refund Claims. If the New U S WEST Group desires to
file a claim for Refund with respect to a Taxable Year for which it filed a
Combined Return, it shall prepare and submit to U S WEST the claim for Refund
and a statement specifying the date on which the statute of limitations for
filing the Refund claim will expire. U S WEST will file the Refund claim prior
to the date specified if such filing is commercially reasonable and will take
any other appropriate action at New U S WEST's request necessary to secure the
Refund.
(g) State Tax Litigation. Subject to the balance of this
Section 5.4(g), U S WEST and New U S WEST jointly shall conduct all Proceedings
relating to Adjustments of the MediaOne Group and the New U S WEST Group
allocated under this Agreement in connection with a Combined Return. U S WEST
shall have the ability to control the conduct of such Proceedings with respect
to issues relating to an Adjustment for which the MediaOne Group would be liable
for more than 50% of the proposed Tax Liability (as allocated under this
Agreement) attributable to such Adjustment. New U S WEST shall have the ability
to control the conduct of such Proceedings with respect to issues relating to an
Adjustment for which the New U S WEST Group would be liable for more than 50% of
the proposed Tax Liability (as allocated under this Agreement) attributable to
such Adjustment. The party with the ability to control the conduct of all or a
portion of the Proceedings pursuant to this Section 5.4(g) shall consult in good
faith with the other party, which other party shall be entitled to participate
in all conferences, meetings, and other matters related to the resolution of
such Proceedings.
5.5 Separate Return Matters. The New U S WEST Group and the
MediaOne Group will be responsible for and manage their respective
Separate Return Proceedings.
5.6 Payment of Costs. All costs incurred, whether external or
internal (such as in-house tax and legal department salaries and other
personnel), with respect to a Proceeding shall be borne by the party with
respect to which the costs relate. All other costs relating to Tax Returns or
Proceedings not otherwise provided for in this Agreement shall be allocated 50%
to the New U S WEST Group and 50% to the MediaOne Group.
ARTICLE VI
MISCELLANEOUS
6.1 Covenants Relating to Ruling Request.
(a) U S WEST and the MediaOne Group. (i) U S WEST shall
comply and shall cause the MediaOne Group to comply with and
otherwise not take any action
<PAGE>
inconsistent with each representation and statement made to the IRS in
connection with the Ruling Request and (ii) until two (2) years after the
Separation Date, U S WEST will remain engaged in the active conduct of a trade
or business, as defined in Section 355(b) of the Code.
(b) New U S WEST and the New U S WEST Group. (i) New U S WEST
shall comply and shall cause the New U S WEST Group to comply with and otherwise
not take any action inconsistent with each representation and statement made to
the IRS in connection with the Ruling Request and (ii) until two (2) years after
the Separation Date, New U S WEST will remain engaged in the active conduct of a
trade or business, as defined in Section 355(b) of the Code.
6.2 Termination of Prior Tax Sharing Agreements. This
Agreement shall take effect on the Separation Date and shall replace all other
agreements, whether or not written, in respect of any Taxes between or among the
MediaOne Group on the one hand and the New U S WEST Group on the other. All such
replaced agreements shall be canceled as of the Separation Date to the extent
they relate to the New U S WEST Group, and any rights or obligations of the
MediaOne Group or the New U S WEST Group existing thereunder thereby shall be
fully and finally settled without any payment by any party thereto.
6.3 Merger or Consolidation. Neither New U S WEST nor U S WEST
(in either case, the "Transaction Party") shall (i) consolidate with or merge
into any Person or permit any Person to consolidate with or merge into the
Transaction Party (other than a merger or consolidation in which the Transaction
Party is the surviving or continuing corporation) or (ii) sell, assign,
transfer, lease or otherwise dispose of, in one transaction or a series of
related transactions, all or substantially all of the assets of the Transaction
Party, unless the resulting, surviving or transferee Person shall expressly
assume, by instrument in form and substance reasonably satisfactory to the other
party, all of the obligations of the Transaction Party under this Agreement.
6.4 Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party or
by any entity that is contemplated to be a Subsidiary (as defined in the
Separation Agreement) of such party on or after the Separation Date.
6.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado, without reference to choice
of law principles, including matters of construction, validity and performance.
<PAGE>
6.6 Amendment. This Agreement may be amended, modified or
supplemented only by a written Agreement signed by all of the parties hereto.
6.7 Notices. Notices, requests, permissions, waivers,
referrals and all other communications hereunder shall be in writing and shall
be deemed to have been duly given if signed by the respective persons giving
them (in the case of any corporation, the signature shall be by an officer
thereof) and delivered by hand or by telecopy or on the date of receipt
indicated on the return receipt if mailed (registered or certified, return
receipt requested, properly addressed and postage prepaid):
If to U S WEST, to:
U S WEST, Inc.
(to be renamed "MEDIAONE
GROUP, INC.")
188 Inverness Drive West
Englewood, Colorado 80112
Attention: Director of Taxes
Telephone: 303-858-5800
If to New U S WEST, to:
USW-C, Inc.
(to be renamed "U S WEST, INC.")
6300 South Syracuse Way
Suite 700 North
Englewood, Colorado 80111
Attention: Director of Taxes
Telephone: 303-850-3900
Such names and addresses may be changed by notice given in accordance with this
Section 6.7.
6.8 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein, and supersedes and cancels all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter.
<PAGE>
6.9 Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles" or "Sections" shall be deemed to be references
to Articles or Sections hereof unless otherwise indicated.
6.10 Counterparts. This Agreement may be executed in one or
more counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
6.11 Parties in Interest; Assignment; Successor. Neither this
Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement shall inure to
the benefit of and be binding upon U S WEST and New U S WEST and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
under or by reason of this Agreement.
6.12 Confidentiality. Each of New U S WEST and U S WEST shall
hold, and each of the New U S WEST Group and the MediaOne Group shall use its
reasonable best efforts to hold, in strict confidence all information concerning
the other party obtained by it prior to the Separation Date or furnished to it
by such other party pursuant to this Agreement pursuant to and in accordance
with the terms of Section 10.5 of the Separation Agreement.
6.13 Arbitration. Resolution of any and all disputes arising
from or in connection with this Agreement, whether based on contract, tort,
statute or otherwise, including, but not limited to, disputes over arbitrability
and disputes in connection with claims by third parties shall be exclusively
governed by and settled in accordance with the provisions of Section 12.2 of the
Separation Agreement, provided, however, that nothing contained in Section 12.2
of the Separation Agreement shall preclude either party from seeking or
obtaining injunctive relief or equitable or other judicial relief to enforce
such Section 12.2, or, pending resolution of Disputes (as defined in the
Separation Agreement) under such Section, to preserve the status quo or to
enforce an arbitral award rendered pursuant to such Section.
6.14 Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction
<PAGE>
to the maximum extent permitted by law, and each party hereby consents and
agrees that such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction.
6.16 Effective Date. This Agreement shall become effective
only upon the occurrence of the Separation.
IN WITNESS WHEREOF, each of the Parties has caused this Tax
Sharing Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first written above.
U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)
/s/ Charles M. Lillis
By:
Name: Charles M. Lillis
Title: Executive Vice President
USW-C, INC.
(to be renamed U S WEST, INC.)
/s/ Solomon D. Trujillo
By:
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
<PAGE>
TAX SHARING AGREEMENT
between
U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)
and
USW-C, Inc.
(to be renamed U S WEST, INC.)
Dated as of June 5, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
ARTICLE I
Definitions; Certain Operating Conventions........................................... 2
ARTICLE II
Allocation and Payment............................................................... 5
ARTICLE III
Indemnification...................................................................... 8
ARTICLE IV
Preparation and Filing of Tax Returns,
Cooperation and Record Retention..................................................... 10
ARTICLE V
Refunds, Audits and Adjustments...................................................... 11
ARTICLE VI
Miscellaneous........................................................................ 16
</TABLE>
