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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): JUNE 24, 1998
MEDIAONE GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
A DELAWARE CORPORATION COMMISSION FILE NUMBER IRS EMPLOYER IDENTIFICATION NO.
(STATE OF INCORPORATION) 1-8611 84-0926774
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188 INVERNESS DRIVE WEST
ENGLEWOOD, COLORADO 80112
(Address of principal executive offices)
(303) 858-3000
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 12, 1998, MediaOne Group, Inc. (formerly U S WEST, Inc. and herein
"MediaOne Group") separated into two independent companies (the "Separation"),
all in accordance with the terms of the Separation Agreement dated as June 5,
1998 (the "Separation Agreement"), between MediaOne Group and USW-C, Inc. (which
was renamed "U S WEST, Inc." and is referred to herein as "New U S WEST"). Until
the Separation, MediaOne Group conducted its businesses through two groups, the
U S WEST Communications Group (the "Communications Group") and the U S WEST
Media Group (the "Media Group"). MediaOne Group had two classes of common stock
outstanding prior to the Separation: U S WEST Communications Group Common Stock
(the "Communications Stock"), which was intended to reflect separately the
performance of the Communications Group, and U S WEST Media Group Common Stock
(the "Media Stock"), which was intended to reflect separately the performance of
the Media Group.
Pursuant to the Separation Agreement, MediaOne Group (i) contributed the
businesses of the Communications Group and the domestic directories business of
the Media Group ("Dex") to New U S WEST and (ii) redeemed each outstanding share
of Communications Stock (and related preferred stock purchase rights) 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 Media 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 Media 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.
ITEM 5. OTHER EVENTS
DESCRIPTION OF MEDIAONE GROUP
MediaOne Group is a diversified global media and broadband communications
company. MediaOne Group has operations and investments in two principal areas:
(i) domestic broadband communications and (ii) international broadband and
wireless communications. MediaOne Group is the third largest cable television
system operator in the United States with large clusters in Atlanta, Georgia,
Eastern Massachusetts, Southern California, Southern Florida, Detroit, Michigan
and Minneapolis/St. Paul, Minnesota. As of March 31, 1998, MediaOne Group's
domestic cable television systems passed approximately 8.4 million homes and
provided services to approximately 4.9 million basic cable subscribers. MediaOne
Group also owns a 25.51% priority capital and residual interest in Time Warner
Entertainment Company, L.P., a provider of cable programming, filmed
entertainment and broadband communications services and the second largest cable
television system operator in the United States. Outside of the United States,
MediaOne Group owns interests in various providers of broadband and wireless
communications services in markets in continental Europe, the United Kingdom and
Asia, including a 26.8% interest in Telewest communications plc, the second
largest provide of combined cable and telecommunications services in the United
Kingdom, and a 50% interest in One 2 One, a provider of personal communications
services in the United Kingdom.
CAPITAL STOCK OF MEDIAONE GROUP
As part of the Separation, the Media Stock and related preferred stock
purchase rights were recharacterized as common stock of MediaOne Group and
related preferred stock purchased rights. The terms of the capital stock of
MediaOne Group are more fully described in "Chapter 8: Capital Stock-- MediaOne
Capital Stock" and "--Comparison of Rights of Stockholders" in the definitive
Proxy Statement contained in the Registration Statement on Form S-4 filed by New
U S WEST with the Securities and Exchange Commission and declared effective by
the Commission on April 10, 1998 (the "Proxy Statement").
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In connection with the Separation, MediaOne Group further amended its
Amended and Restated Rights Agreement with State Street Bank and Trust Company,
as rights agent, as described more fully in the Proxy Statement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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EXHIBIT DESCRIPTION
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Exhibit 3(ii ) Bylaws of MediaOne Group, Inc., effective as of June 12, 1998
Exhibit 4 Form of Amended and Restated Rights Agreement between MediaOne Group, Inc. and State Street
Bank and Trust Company, as Rights Agent.
Exhibit 99.1 Separation Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc.
(renamed "U S WEST, Inc."), dated as of 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 as of 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 as of 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.
By: /s/ STEPHEN E. BRILZ
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Stephen E. Brilz
ASSISTANT SECRETARY
Dated: June 24, 1998
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BYLAWS
OF
MEDIAONE GROUP, INC.
(FORMERLY U S WEST, INC.)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of MEDIAONE
GROUP, INC. (formerly U S WEST, 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
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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 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.
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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, 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
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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
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(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
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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
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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
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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
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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 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
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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
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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, 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 Chairman of the Board or
11
<PAGE>
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 be the chief executive officer of the Corporation.
Subject to the control of the Board, the Chairman of the Board shall
supervise and direct generally all the business and affairs of the
Corporation. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board. Any document may be signed by the Chairman of
the Board or any other person who may be thereunto authorized by the Board or
the Chairman of the Board. The Chairman of the Board may appoint such
assistant officers as are deemed necessary.
SECTION 6. 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 Chairman of the Board. In case of the absence or
disability of the Chairman of the Board or a vacancy in the office, the
President, an Executive Vice President, a Senior Vice President, or a Vice
President designated by the Chairman of the Board or the Board shall exercise
all the powers and perform all the duties of the Chairman of the Board.
SECTION 7. 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 Chairman of the Board or the Board.
12
<PAGE>
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 Chairman of the Board or by the
Secretary, if the office is not vacant, shall perform the duties of the
Secretary.
SECTION 8. 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 Chairman of the Board or the Board.
SECTION 9. 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
Chairman of the Board 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 Chairman of the Board or by the
Treasurer, if the office is not vacant, shall perform the duties of the
Treasurer.
SECTION 10. 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
Chairman of the Board or the Board.
SECTION 11. CONTROLLER AND ASSISTANT CONTROLLERS; POWERS AND
DUTIES. The Controller shall be the chief accounting
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<PAGE>
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 Chairman
of the Board 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 Chairman of the Board or the
Controller, if the office is not vacant, shall perform the duties of the
Controller.
SECTION 12. 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 Chairman of the Board may be fixed by the Chairman of the Board 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
14
<PAGE>
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
15
<PAGE>
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
16
<PAGE>
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 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
17
<PAGE>
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
18
<PAGE>
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
certificates representing 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.
19
<PAGE>
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.
20
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
dated as of June 12, 1998
by and between
MEDIAONE GROUP, INC.
and
STATE STREET BANK AND TRUST COMPANY
as Rights Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Issuance of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . . . . . 10
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates. . . . . . . . . . . . 11
7. Exercise of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. Cancellation and Destruction of Right Certificates . . . . . . . . . . . . . . 14
9. Reservation and Availability of Capital Stock. . . . . . . . . . . . . . . . . 15
10. Securities Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. Adjustment of Exercise Price, Number of Shares
Issuable upon Exercise of Rights or Number
of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. Certificate of Adjusted Exercise Price or Number of Shares Issuable
upon Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power. . . . . 24
14. Fractional Rights and Fractional Shares. . . . . . . . . . . . . . . . . . . . 27
15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 28
17. Right Holder and Right Certificate Holder Not Deemed a Stockholder . . . . . . 29
18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 29
19. Merger or Consolidation or Change of Name of Rights Agent. . . . . . . . . . . 30
20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
<PAGE>
TABLE OF CONTENTS
(continued)
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
22. Issuance of New Right Certificates. . . . . . . . . . . . . . . . . . . . . . 34
23. Redemption of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 39
28. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
29. Determinations and Actions by the Board of Directors, etc . . . . . . . . . . 41
30. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
31. Benefits of This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 41
32. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
33. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
34. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
35. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
36. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
(ii)
<PAGE>
TABLE OF EXHIBITS
Exhibit A -- Form of Right Certificate
(iii)
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM DEFINED PAGE SECTION
- ------------ ---- -------
<S> <C> <C>
15% Ownership Date 7 1.(y)
15% Stockholder 7 1.(z)
Adjustment Shares 18 11.(a)(ii)
Affiliate 2 1.(a)
Agreement 1 Introduction
Associate 2 1.(a)
Beneficial Owner 2 1.(b)
Beneficially Own 2 1.(b)
Board of Directors 1 Recital
Business Day 3 1.(c)
Close of Business 3 1.(d)
Closing Price 3 1.(e)
Common Stock 4 1.(f)
Company 1, 25 Introduction,
13.(a)(iii)
Continuing Director 4 1.(g)
Current Market Price 5, 20 1.(h), 11.(d)
Distribution Date 5, 8 1.(i), 3.(a)
Effective Time 5 1.(j)
Exchange Act 5 1.(k)
Exchange Ratio 36 24.(a)
Exercise Price 5, 13 1.(l), 7.(c)
(iv)
<PAGE>
TABLE OF DEFINED TERMS
(continued)
<CAPTION>
TERM DEFINED PAGE SECTION
- ------------ ---- -------
<S> <C> <C>
Expiration Date 5 1.(m)
NASDAQ 4 1.(e)
New U S WEST 1 Recital
Original Agreement 1 Recital
Person 6 1.(n)
Preferred Share 6 1.(o)
Preferred Share Equivalents 19 11.(b)
Redemption Date 6 1.(p)
Redemption Price 6, 35 1.(q), 23.(a)
Restated Certificate
of Incorporation 1 Recital
Right 2, 6 Recital, 1.(r)
Right Certificates 9 3.(c)
Rights Agent 1 Introduction
Rights Agreement 9 3.(d)
Section 11(a)(ii) Event 6, 17 1.(s), 11.(a)(ii)
Section 13(a) Event 6, 24 1.(t), 13.(a)
Securities Act 6 1.(u)
Separation Agreement 1 Recital
Subsidiary 6 1.(v)
Surviving Person 24 13.(a)
Trading Day 6 1.(w)
Unavailable Adjustment Shares 18 11.(a)(iii)
Voting Share 7 1.(x)
</TABLE>
(v)
<PAGE>
AMENDED AND RESTATED
RIGHTS AGREEMENT
This Amended and Restated Rights Agreement ("Agreement") is made
and entered into as of the 12th day of June, 1998 by and between MEDIAONE
GROUP, INC., a Delaware corporation (formerly U S WEST, Inc.) (the
"Company"), and STATE STREET BANK AND TRUST COMPANY (the "Rights Agent"), and
shall become effective as of the Effective Time (as defined herein).
WHEREAS, the Company and the Rights Agent are parties to a rights
agreement, dated as of April 7, 1989 (as amended on July 15, 1992 and on
October 31, 1995, the "Original Agreement") pursuant to which the Company
distributed Communication Rights and Media Rights (as defined in the Original
Agreement);
WHEREAS, pursuant to the Separation Agreement, dated as of June 5,
1998, (the "Separation Agreement") between the Company and USW-C, Inc., a
Delaware corporation and wholly owned subsidiary of the Company ("New U S
WEST"), among other things, (a) the Company shall redeem each share of
Communications Stock issued and outstanding immediately prior to the
Separation Time (as defined in the Separation Agreement), together with the
Communications Rights, for one share of New U S WEST Common Stock (as defined
in the Separation Agreement) and cancel each share of Communications Stock
held as treasury stock by the Company, (b) the Company shall distribute as a
dividend on each share of Media Stock (other than shares of Media Stock held
as treasury stock by the Company) certain shares of New U S WEST Common
Stock, and (c) from and after the Separation Time, all shares of
Communications Stock and all Communications Rights shall cease to exist and
each outstanding share of Media Stock shall remain outstanding and shall
thereafter represent one share of Common Stock, par value $.01 per share, of
the Company, with the terms set forth in the Restated Certificate of
Incorporation of the Company (as amended by the Charter Amendments (as
defined in the Separation Agreement)) (the "Restated Certificate of
Incorporation");
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has determined that, effective as of the Separation Time, the
Original Agreement shall be
<PAGE>
amended and restated in its entirety as provided herein and that, from and
after the Separation Time, the Communication Rights will expire and will
cease to exist and each Media Right shall thereafter represent one right (a
"Right") which shall initially represent the right to purchase one
one-hundredth of a share of Series A Junior Participating Cumulative
Preferred Stock, par value $1.00 per share, of the Company having the rights,
powers and preferences set forth in the Restated Certificate of
Incorporation, upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements set forth herein, the parties hereto hereby agree as
follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act, as
in effect on the date hereof.
(b) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "Beneficially Own":
(i) any securities that such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Rule 13d-3 promulgated
under the Exchange Act, in each case as in effect on the date hereof;
(ii) any securities that such Person or any of such Person's
Affiliates or Associates has the right to acquire (whether such right is
exercisable immediately, or only after the passage of time, compliance with
regulatory requirements, the fulfillment of a condition, or otherwise)
pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights (as defined herein)), warrants or options, or otherwise, provided
that a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own, securities tendered pursuant to a tender offer or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until
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such tendered securities are accepted for purchase or exchange;
(iii) any securities that such Person or any such Person's
Affiliates or Associates has the right to vote, alone or in concert with
others, pursuant to any agreement, arrangement or understanding; PROVIDED,
HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own, any security if the agreement, arrangement or
understanding to vote such security (A) arises solely from a revocable
proxy given to such Person or any of such Person's Affiliates or Associates
in response to a public proxy solicitation made pursuant to and in
accordance with the applicable rules and regulations of the Exchange Act,
and (B) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report);
(iv) any securities that are Beneficially Owned, directly or
indirectly, by any other Person with which such Person or any of such
Person's Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (other than
voting pursuant to a revocable proxy as described in the proviso to Section
1(b)(iii) hereof) or disposing of any securities of the Company; and
(v) on any day on or after the Distribution Date, all Rights
that prior to such date were represented by certificates for shares of
Common Stock that such Person Beneficially Owns on such day.
(c) "Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the States of New York or Colorado are
authorized or obligated by law or executive order to close.
(d) "Close of Business" on any given date shall mean 5:00 p.m.,
Massachusetts time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day, it shall mean 5:00 p.m., Massachusetts time, on the next
succeeding Business Day.
(e) "Closing Price" of a stock or other security on any day shall be
the last sale price, regular way, per share of such stock or unit of such other
security on such
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day or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if such stock or other security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which such stock or other security
is listed or admitted to trading or, if such stock or other security is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use or, if on any such date such
stock or other security is not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market
maker that makes a market in such stock or other security and that is
selected by the Board of Directors of the Company.
(f) "Common Stock" when used with reference to the Company shall
collectively mean the Common Stock, par value $.01 per share of the Company.
"Common Stock" when used with reference to any Person other than the Company
which shall be organized in corporate form shall mean the capital stock or
other equity security with the greatest per share voting power of such
Person. "Common Stock" when used with reference to any Person other than the
Company which shall not be organized in corporate form shall mean units of
beneficial interest which shall represent the right to participate in
profits, losses, deductions and credits of such Person and which shall be
entitled to exercise the greatest voting power per unit of such Person.
(g) "Continuing Director" shall mean any member of the Board of
Directors, while such person is a member of the Board of Directors, who is
not a 15% Stockholder, or an Affiliate or Associate of a 15% Stockholder, or
a representative or nominee of a 15% Stockholder or of any such Affiliate or
Associate, and who either (i) was a member of the Board of Directors prior to
the time that any Person became an 15% Stockholder or (ii) subsequently
became a member of the Board of Directors, and whose nomination for election
or election to the Board of Directors was recom-
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mended or approved by a majority of the Continuing Directors then on the
Board of Directors.
(h) "Current Market Price" per share of a stock or unit of any other
security on any date shall mean the average of the daily Closing Prices of such
stock or other security for the 30 consecutive Trading Days through and
including the Trading Day immediately preceding the date in question; PROVIDED,
HOWEVER, that if any event shall have caused the Closing Price on any Trading
Day during such 30-day period not to be fully comparable with the Closing Price
on the date in question (or, if no Closing Price is available on the date in
question, on the Trading Day immediately preceding the date in question), then
each such noncomparable Closing Price so used shall be appropriately adjusted by
the Board of Directors in order to make the Closing Price on each Trading Day
during the period used for the determination of the Current Market Price fully
comparable with the Closing Price on such date in question (or, if applicable,
the immediately preceding Trading Day); and PROVIDED FURTHER, HOWEVER, that if
such stock or other security is not publicly held or so listed or traded,
"Current Market Price" per share of such stock or unit of such other security
shall mean the fair value per share of such stock or unit of such other security
as determined in good faith by the Board of Directors of the Company based upon
such appraisals or valuation reports of such independent experts as the Board of
Directors shall in good faith determine appropriate, which determination shall
be described in a statement filed by the Company with the Rights Agent.
(i) "Distribution Date" shall have the meaning ascribed to it in
Section 3(a) hereof.
(j) "Effective Time" shall mean the Separation Time, as set forth in
the second recital of this Agreement.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" shall have the meaning ascribed to it in Section
7(c) hereof.
(m) "Expiration Date" shall mean April 6, 1999.
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(n) "Person" shall mean any individual, firm, partnership,
corporation, association, group (as such term is used in Rule 13d-5 promulgated
under the Exchange Act as in effect on the date hereof) or other entity, and
shall include any successor (by merger or otherwise) of such entity.
(o) "Preferred Share" shall mean a share of the Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, of the
Company, which shall have the rights, powers and preferences set forth in
Restated Certificate of Incorporation.
(p) "Redemption Date" shall mean the date of the action of the Board
of Directors of the Company directing the Company to redeem the Rights pursuant
to Section 23(a) hereof, or such time and date thereafter as the Board of
Directors may specify for redemption of the Rights.
(q) "Redemption Price" shall have the meaning ascribed to it in
Section 23(a) hereof.
(r) "Right" shall have the meaning set forth in the third recital of
this Agreement.
(s) "Section 11(a)(ii) Event" shall have the meaning ascribed to it
in Section 11(a)(ii) hereof.
(t) "Section 13(a) Event" shall have the meaning ascribed to it in
Section 13(a) hereof.
(u) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(v) "Subsidiary" of any Person shall mean any corporation or other
Person of which equity securities or equity interests representing a majority of
the voting power are owned, directly or indirectly, or which is effectively
controlled, by such Person.
(w) "Trading Day" shall mean, as to any stock or other security, a
day on which the principal national securities exchange on which such stock or
other security is listed or admitted to trading is open for the transaction of
business or, if such stock or other security is not listed or admitted to
trading on any national securities exchange, a Business Day.
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(x) "Voting Share" shall mean (i) a share Common Stock of the Company
and (ii) any other share of capital stock of the Company entitled to vote
generally in the election of directors or entitled to vote together with the
shares of Common Stock in respect of any merger, consolidation, sale of all or
substantially all of the Company's assets, liquidation, dissolution or winding
up. Any reference in this Agreement to a percentage or portion of the
outstanding Voting Shares shall be deemed to be a reference to the percentage or
portion of the total votes entitled to be cast by the holders of the outstanding
Voting Shares.
(y) "15% Ownership Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or a 15% Stockholder containing the facts by virtue of which a Person
has become a 15% Stockholder.
(z) "15% Stockholder" shall mean any Person that, together with all
Affiliates and Associates of such Person, hereafter acquires Beneficial
Ownership of, in the aggregate, a number of Voting Shares of the Company equal
to 1% or more of the Voting Shares then outstanding and thereupon or thereafter
Beneficially Owns 15% or more of the Voting Shares of the Company then
outstanding; PROVIDED, HOWEVER, that the term "15% Stockholder" shall not
include: (i) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of a Subsidiary of the Company, or any Person holding
Voting Shares for or pursuant to the terms of any such employee benefit plan; or
(ii) any Person if such Person would not otherwise be a 15% Stockholder but for
a reduction in the number of outstanding Voting Shares resulting from a stock
repurchase program or other similar plan of the Company or from a self-tender
offer of the Company, which plan or tender offer commenced on or after the date
hereof; PROVIDED, HOWEVER, that the term "15% Stockholder" shall include such
Person from and after the first date upon which (A) such Person, since the date
of the commencement of such plan or tender offer, shall have acquired Beneficial
Ownership of, in the aggregate, a number of Voting Shares of the Company equal
to 1% or more of the Voting Shares of the Company then outstanding and (B) such
Person, together with all Affiliates and Associates of such Person, shall
Beneficially Own 15% or more of the Voting Shares of the Company then
outstanding. In calculating the percentage of the outstanding Voting Shares
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<PAGE>
that are Beneficially Owned by a Person for purposes of this subsection (z),
Voting Shares that are Beneficially Owned by such Person shall be deemed
outstanding, and Voting Shares that are not Beneficially Owned by such Person
and that are subject to issuance upon the exercise or conversion of outstanding
conversion rights, rights (other than Rights), warrants or options shall not be
deemed outstanding. Any determination made by the Board of Directors of the
Company as to whether any Person is or is not a 15% Stockholder shall be
conclusive and binding upon all holders of Rights.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and in no event be
liable for, the acts or omissions of any such co-Rights Agent.
Section 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) "Distribution Date" shall mean the date, after the date hereof,
that is the earlier of (i) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes a 15% Stockholder) following the date of the commencement of, or the
first public announcement of the intent of any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person holding Common Stock for or
pursuant to the terms of any such employee benefit plan) to commence a tender
offer or exchange offer, the consummation of which would cause any Person to
become a 15% Stockholder, or (ii) the date of the first Section 11(a)(ii) Event.
(b) Until the Distribution Date, (i) the Rights shall be represented
by certificates for shares of Common Stock, and not by separate certificates,
(ii) the record holder of the shares of Common Stock represented by each of such
certificates shall be the record holder of the Rights represented thereby, and
(iii) the Rights shall be transferable only in connection with the transfer of
the shares of Common Stock. Until the earliest of the Distribution Date, the
Redemption Date or the Expiration
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Date, the surrender for transfer of such certificates for shares of Common
Stock shall also constitute the surrender for transfer of the Rights
represented thereby.
(c) As soon as practicable after the Distribution Date, and after
notification by the Company, the Rights Agent shall send by first-class,
postage-prepaid mail to each record holder of shares of Common Stock, as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, a certificate substantially in the form of
Exhibit A hereto (the "Right Certificates") representing one Right for each
share of Common Stock so held. Notwithstanding the foregoing, the Rights Agent
shall not send any Right Certificate to any 15% Stockholder or any of its
Affiliates or Associates or to any Person if the Rights held by such Person are
Beneficially Owned by a 15% Stockholder or any of its Affiliates or Associates.
From and after the Distribution Date, the Rights shall be represented solely by
such Right Certificates and may be transferred only by the transfer of such
Right Certificates, and the holders of such Right Certificates, as listed in the
records of the Company or any transfer agent or registrar for such Rights, shall
be the record holders of such Rights. Any determination made by a majority of
the Board of Directors of the Company as to whether any shares of Common Stock
are or were Beneficially Owned at any time by a 15% Stockholder or an Affiliate
or Associate of a 15% Stockholder shall be conclusive and binding upon all
holders of Rights.
(d) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Effective Time but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date. Certificates representing such shares
of Common Stock shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also represents Rights that entitle the holder
hereof to certain rights as set forth in a Rights Agreement dated
as of April 7, 1989, as amended, by and between the Company and
State Street Bank and Trust Company, as Rights Agent (the "Rights
Agreement"), the terms and conditions of which are hereby
incorporated herein by reference and a copy of which is on file
at
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the principal executive offices of the Company. Under certain
circumstances specified in the Rights Agreement, such Rights will
be represented by separate certificates and will no longer be
represented by this certificate. Under certain circumstances
specified in the Rights Agreement, Rights beneficially owned by
certain persons may become null and void. The Company will mail
to the record holder of this certificate a copy of the Rights
Agreement without charge promptly following receipt of a written
request therefor.
Certificates for all other shares of Common Stock shall have impressed
on, printed on, written on or otherwise affixed to them the following legend:
This certificate does not represent any Right issued
pursuant to the terms of a Rights Agreement dated as of
April 7, 1989, as amended, by and between the Company and
State Street Bank and Trust Company, as Rights Agent.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates and
the form of assignment, including certificate, and the form of election to
purchase, including certificate, printed on the reverse thereof, when, as and if
issued, shall be substantially the same as Exhibit A hereto, and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange upon which the
Rights or the securities of the Company issuable upon exercise of the Rights may
from time to time be listed, or to conform to usage. Subject to Section 22
hereof, Right Certificates, whenever issued, that are issued in respect of
shares of Common Stock that were issued and outstanding as of the Close of
Business on the Distribution Date, shall be dated as of the Distribution Date.
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Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Vice Chairman of the Board, its
President or any Vice President, either manually or by facsimile signature,
and may have affixed thereto the Company's seal or a facsimile thereof
attested by its Secretary or any Assistant Secretary, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless so
countersigned; PROVIDED, HOWEVER, that the Company will use its best efforts
to obtain approvals of stock exchanges and any other approvals required for
use of a facsimile signature of the Rights Agent in lieu of a manual
signature and if such approvals are obtained the Right Certificates shall be
valid if countersigned by facsimile signature. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates may
nevertheless be countersigned by the Rights Agent and issued and delivered by
the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company.
Any Right Certificate may be signed on behalf of the Company by any person
who at the actual date of such execution shall be a proper officer of the
Company to sign such Right Certificate, even though such person was not such
an officer at the date of the execution of this Agreement.
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept at its principal offices books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of Right Certificates, the number of Rights
represented on its face by each Right Certificate and the date of each Right
Certificate.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to the provisions of Sections 6(c), 7(d) and 14 hereof,
at any time after the Close of Business on the Distribution Date, and so long as
the Rights represented thereby remain outstanding, any one or more
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Right Certificates may be transferred, split up, combined or exchanged for
one or more Right Certificates representing the same aggregate number of
Rights as the Right Certificates surrendered. Any registered holder desiring
to transfer, split up, combine or exchange one or more Right Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent with the form of assignment,
including certificate, on the reverse side thereof completed and duly
executed, with signature guaranteed. Thereupon, the Rights Agent shall
countersign and deliver to the person entitled thereto one or more Right
Certificates, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
such Right Certificate if mutilated, the Company shall issue and deliver to the
Rights Agent for delivery to the record holder of such Right Certificate a new
Right Certificate of like tenor in lieu of such lost, stolen, destroyed or
mutilated Right Certificate.
(c) Notwithstanding anything to the contrary in this Section 6, the
Rights Agent shall not countersign and deliver a Right Certificate to any Person
if such Right Certificate represents, or would represent when held by such
Person, Rights that had become or would become null and void pursuant to Section
7(d) hereof.
Section 7. EXERCISE OF RIGHTS.
(a) Until the Distribution Date, no Right may be exercised.
(b) Subject to Section 7(d) and 7(g) hereof and the other provisions
of this Agreement including Section 23(a), at any time after the Close of
Business on the Distribution Date and prior to the Close of Business on the
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earlier of the Redemption Date or the Expiration Date, the registered holder of
any Right Certificate may exercise the Rights represented thereby in whole or in
part upon surrender of such Right Certificate, with the form of election to
purchase, including certificate, on the reverse side thereof completed and duly
executed, with signature guaranteed, to the Rights Agent at the office of the
Rights Agent in Boston, Massachusetts or the office of the Rights Agent's
service agent in Canton, Massachusetts, together with payment of the Exercise
Price for each Right exercised. Upon the exercise of an exercisable Right and
payment of the Exercise Price in accordance with the provisions of this
Agreement, the holder of such Right shall be entitled to receive, subject to
adjustment as provided herein, one one-hundredth of a Preferred Share.
(c) The exercise price for the exercise of each Right (the "Exercise
Price") shall initially be $80 and shall be payable in lawful money of the
United States of America in accordance with Section 7(f) hereof. The Exercise
Price and the number of Preferred Shares (or, following the occurrence of a
Section 11(a)(ii) Event or a Section 13(a) Event, Common Stock and/or other
securities) to be acquired upon exercise of a Right shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and the
other provisions of this Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event or a Section 13(a)
Event, any Rights that are or were Beneficially Owned by a 15% Stockholder or
any Affiliate or Associate of a 15% Stockholder at any time on or after the
Distribution Date shall be null and void, and any holder of such Rights (whether
or not such holder is a 15% Stockholder or an Affiliate or Associate of a 15%
Stockholder) shall thereafter have no right to exercise such Rights.
(e) In case the registered holder of any Right Certificate shall
exercise less than all of the Rights represented thereby, a new Right
Certificate representing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder's duly authorized assigns, subject to the
provisions of Section 14 hereof.
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(f) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase, including certificate, completed
and duly executed, with signature guaranteed, accompanied by payment of the
Exercise Price for each Right to be exercised and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof in cash, or by certified check
or cashier's check payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) requisition from the transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent)
certificates for the number of Preferred Shares to be purchased, and the Company
hereby irrevocably authorizes such transfer agent to comply with all such
requests, and/or, as provided in Section 14 hereof, requisition from the
depositary agent described therein depositary receipts representing such number
of one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with such depositary agent) and the Company
hereby directs such depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional Preferred Shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates, depositary receipts or cash, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate.
(g) Notwithstanding the foregoing provisions of this Section 7, the
exercisability of the Rights shall be suspended for such period as shall
reasonably be necessary for the Company to register under the Securities Act and
any applicable securities law of any jurisdiction the Preferred Shares to be
issued pursuant to the exercise of the Rights; PROVIDED, HOWEVER, that nothing
contained in this Section 7 shall relieve the Company of its obligations under
Section 9(c) hereof.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for
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<PAGE>
cancellation or in canceled form, or, if surrendered to the Rights Agent,
shall be canceled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the Company or shall,
at the written request of the Company, destroy such canceled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company shall cause to be reserved and kept available out of
its authorized and unissued equity securities (or out of its authorized and
issued equity securities held in its treasury) the number of such equity
securities that will from time to time be sufficient to permit the exercise in
full of all outstanding Rights.
(b) In the event that any securities issuable upon exercise of the
Rights are listed on any national securities exchange, the Company shall use its
best efforts, from and after such time as the Rights become exercisable, to
cause all such securities issued or reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) If necessary to permit the issuance of securities upon exercise
of the Rights, the Company shall use its best efforts, from and after the
Distribution Date, to register such securities under the Securities Act and any
applicable securities laws and to keep such registration effective until the
earlier of the Redemption Date or the Expiration Date.
(d) The Company shall take all such action as may be necessary to
ensure that all securities delivered upon exercise of the Rights shall, at the
time of delivery of the certificates for such securities (subject to payment of
the Exercise Price), be duly and validly authorized and issued and fully paid
and nonassessable securities.
(e) The Company shall pay when due and payable any and all federal
and state transfer taxes and charges
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<PAGE>
that may be payable in respect of the issuance or delivery of the Right
Certificates or of any securities upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax that may be payable
in respect of any transfer or delivery of a Right Certificate to a Person
other than, or the issuance or delivery of a certificate for securities in
respect of a name other than that of, the registered holder of the Right
Certificate representing Rights surrendered for exercise, or to issue or
deliver any certificate for securities upon the exercise of any Right until
any such tax shall have been paid (any such tax being payable by the holder
of such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
(f) With respect to the Common Stock and/or other securities issuable
pursuant to Sections 11(a)(ii) and 11(a)(iii) hereof, the foregoing covenants
shall be applicable only upon and following the occurrence of a Section
11(a)(ii) Event.
Section 10. SECURITIES RECORD DATE. Each person in whose name any
certificate for securities of the Company is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
securities represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate representing such Rights was duly surrendered
and payment of the Exercise Price (and any applicable transfer taxes) was made;
PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon
which the securities transfer books of the Company are closed, such person shall
be deemed to have become the record holder of such securities on, and such
certificate shall be dated, the next succeeding Business Day on which the
securities transfer books of the Company are open.
Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES ISSUABLE
UPON EXERCISE OF RIGHTS OR NUMBER OF RIGHTS. The Exercise Price, the number and
kind of securities that may be purchased upon exercise of a Right and the number
of Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
(a)(i) In the event that the Company shall at any time after the
Effective Time and prior to the Close of Business on the earlier of the
Redemption Date or the Expiration Date (A) declare or pay any dividend on
the
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Preferred Shares payable in Preferred Shares or Voting Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares, or (D) issue
Preferred Shares or Voting Shares in a reclassification of the Preferred
Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then and in each such event, the number and kind
of Preferred Shares or other securities issuable upon the exercise of a
Right on such date shall be proportionately adjusted so that the holder
of any Right exercised on or after such date shall be entitled to
receive, upon the exercise thereof and payment of the Exercise Price,
the aggregate number and kind of Preferred Shares or other securities or
other property, as the case may be, that, if such Right had been
exercised immediately prior to such date and at a time when such Right
was exercisable and the transfer books of the Company were open, such
holder would have owned upon such exercise and would have been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event (a "Section 11(a)(ii) Event") that a 15%
Ownership Date shall have occurred and neither the Redemption Date nor the
Expiration Date shall have occurred prior to the Close of Business on the
tenth Business Day following such 15% Ownership Date, then, and upon each
such event, proper provision shall be made so that, except as provided in
Section 7(d) hereof, each holder of a Right shall thereafter have the right
to receive, upon the exercise thereof in accordance with the terms of this
Agreement and payment of the then current Exercise Price, such number of
shares of Common Stock as shall equal the result obtained by multiplying
the then current Exercise Price by the then number of one-hundredths of a
Preferred Share for which a Right was exercisable (or, if the Distribution
Date shall not have occurred prior to the date of such Section 11(a)(ii)
Event, the number of one-hundredths of a Preferred Share for which a Right
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would have been exercisable if the Distribution Date had occurred on the
Business Day immediately preceding the date of such Section 11(a)(ii)
Event) immediately prior to such Section 11(a)(ii) Event, and dividing that
product by 50% of the Current Market Price (determined pursuant to Section
11(d) hereof) of a share of Common Stock on the date of occurrence of the
relevant Section 11(a)(ii) Event (such number of shares of Common Stock
being hereinafter referred to as the "Adjustment Shares"). Successive
adjustments shall be made pursuant to this paragraph each time a Section
11(a)(ii) Event occurs.
(iii) In the event that on the date of a Section 11(a)(ii) Event
the aggregate number of shares of Common Stock that are authorized by the
Company's Restated Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights
is less than the aggregate number of Adjustment Shares thereafter issuable
upon the exercise in full of the Rights, as the case may be, in accordance
with Section 11(a)(ii) hereof (the excess of such number of Adjustment
Shares over and above such number of shares of Common Stock being
hereinafter referred to as the "Unavailable Adjustment Shares"), the
Company shall substitute for the pro rata portion of the Unavailable
Adjustment Shares that would otherwise be issuable thereafter upon the
exercise of each Right, and payment of the Exercise Price, as applicable,
(A) cash, (B) other equity securities of the Company (including, without
limitation, shares of preferred stock of the Company or units of such
shares having the same value as one share of Common Stock, as applicable,
(C) debt securities of the Company, (D) other assets, or (E) any
combination of the foregoing, in each case having an aggregate value equal
to the aggregate value of the Unavailable Adjustment Shares, as applicable,
for which substitution is made. Subject to Section 7(d) hereof, in the
event that the Company takes any action pursuant to this Section
11(a)(iii), such action shall apply uniformly to all outstanding Rights.
(b) In the event that the Company shall, at any time after the
Effective Time and prior to the Close of Business on the earlier of the
Redemption Date or the Expiration Date, fix a record date prior to the earlier
of the Redemption Date or the Expiration Date for the issuance
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of rights, options or warrants to all holders of Preferred Shares entitling
them initially to subscribe for or purchase Preferred Shares (or shares
having the same rights, privileges and preferences as Preferred Shares
("Preferred Share Equivalents")) or securities convertible into Preferred
Shares or Preferred Share Equivalents, at a price per Preferred Share or
Preferred Share Equivalent (or having a conversion price per share, if a
security convertible into Preferred Shares or Preferred Share Equivalents)
less than the Current Market Price per Preferred Share on such record date,
then the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be equal to the
sum of the number of Preferred Shares outstanding on such record date plus
the number of Preferred Shares that the aggregate offering price of the total
number of Preferred Shares and/or Preferred Share Equivalents to be so
offered (and/or the aggregate initial conversion price of the convertible
securities to be so offered) would purchase at such Current Market Price, and
the denominator of which shall be equal to the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred
Shares and/or Preferred Share Equivalents to be offered for subscription or
purchase (or into which the convertible securities to be so offered are
initially convertible); PROVIDED, HOWEVER, that if such rights, options or
warrants are not exercisable immediately upon issuance but become exercisable
only upon the occurrence of a specified event or the passage of a specified
period of time, then the adjustment to the Exercise Price shall be made and
become effective only upon the occurrence of such event or such passage of
time, and such adjustment shall be made as if the record date for the
issuance of such rights, options or warrants had been the business day
immediately preceding the date upon which such rights, options or warrants
became exercisable. Preferred Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment to the Exercise Price shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Exercise Price shall be adjusted to
be the Exercise Price that would then be in effect if such record date had
not been fixed.
(c) In the event that the Company shall, at any time after the
Effective Time and prior to the Close of Business on the earlier of the
Redemption Date or the
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Expiration Date, fix a record date for the making of a distribution to all
holders of the Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the
surviving corporation) of securities or assets (other than a distribution of
securities for which an adjustment is required under Section 11(a)(i) or (b)
hereof or a regular quarterly cash dividend), the Exercise Price to be in
effect after such record date shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be equal to the excess of the Current Market Price
per Preferred Share on such record date over and above the fair market value
of the portion of the securities or assets to be so distributed with respect
to one Preferred Share, and the denominator of which shall be equal to such
Current Market Price per Preferred Share. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
a distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price that would then be in effect if such record date had not been
fixed.
(d) For the purpose of any computation under this Section 11, if the
Preferred Shares are not publicly held or so listed and traded, the "Current
Market Price" per Preferred Share shall be conclusively deemed to be an amount
equal to the product of 100 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the Effective Time) times the Current Market
Price of the Common Stock. If none of the shares of Common Stock are publicly
held or so listed and traded, the "Current Market Price" per Preferred Share
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed by the Company with the Rights Agent and shall be conclusive for all
purposes.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Exercise
Price; PROVIDED, HOWEVER, that any adjustments that by reason of this Section
11(e) are not required to be made shall be cumulated and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a Share or
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other share or one-millionth of a Preferred Share, as the case may be.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any securities of the Company other than Preferred Shares, the number of
such other securities so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Preferred Shares contained in this
Section 11, and the other provisions of this Agreement with respect to Preferred
Shares shall apply on like terms to any such other securities.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall represent the right to
purchase, at the adjusted Exercise Price, the number of one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i) below, upon each adjustment of the Exercise Price as a result
of the calculations made in Sections 11(b) and 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
represent the right to purchase, at the adjusted Exercise Price, that number of
one-hundredths of a Preferred Share (calculated to the nearest one-millionth of
a Preferred Share) obtained by multiplying (i) the number of one-hundredths of a
Preferred Share purchasable upon the exercise of one Right immediately prior to
such adjustment of the Exercise Price by (ii) the Exercise Price in effect
immediately prior to such adjustment, and dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment.
(i) The Company may elect, on or after the date of any adjustment of
the Exercise Price, to adjust the number of Rights instead of making any
adjustment in the number of Preferred Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to such
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adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Exercise Price in effect immediately
prior to the adjustment of the Exercise Price by the Exercise Price in effect
immediately after such adjustment of the Exercise Price. The Company shall
make a public announcement of its election to adjust the number of Rights
pursuant to this Section 11(i), indicating the record date for the adjustment
and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Exercise Price is adjusted or any
day thereafter, but, if separate Right Certificates have been issued, it
shall be at least 10 days after the date of such public announcement. If
separate Right Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates representing,
subject to Section 14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment or, at the option of the
Company, cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of such adjustment, and upon surrender thereof if required by the
Company, new Right Certificates representing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates to be so
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record
of Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of one-hundredths of a Preferred Share issuable upon the exercise of
one Right, the Right Certificates theretofore and thereafter issued may continue
to express the Exercise Price per one one-hundredth of a Preferred Share and the
number of Preferred Shares issuable upon the exercise of one Right that were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Exercise Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company
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<PAGE>
shall take any corporate action that may, on the advice or in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable one one-hundredths of a Preferred Share at
such adjusted Exercise Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, the issuance to the holder of any Right exercised after such record date
of the number of one-hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Company shall deliver to such holder a due bill or other appropriate
instrument representing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such further adjustments in the number
of one-hundredths of a Preferred Share that may be purchased upon exercise of
one Right, and such further adjustments in the Exercise Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that it, in its sole discretion, shall determine to be advisable in order
that any (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the Current
Market Price thereof, (iii) issuance wholly for cash of Preferred Shares or
securities that by their terms are convertible into or exchangeable for
Preferred Shares, (iv) dividends on Preferred Shares payable in Preferred
Shares, or (v) issuance of rights, options or warrants referred to in Section
11(b) hereof, hereafter made by the Company to holders of its Preferred
Shares, shall not be taxable to such holders.
Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF
SHARES ISSUABLE UPON EXERCISE OF RIGHTS. Whenever an adjustment is made as
provided in Section 11 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment and a brief statement of the facts
giving rise to such adjustment, (b) file with the
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Rights Agent and with each transfer agent for the securities issuable upon
exercise of the Rights a copy of such certificate, and (c) mail a brief
summary thereof to each holder of Rights in accordance with Section 26
hereof. Notwithstanding the foregoing sentence, the failure of the Company
to make such certification or to give such notice shall not affect the
validity or the force and effect of such adjustment. Any adjustment to be
made pursuant to Sections 11 or 13 hereof shall be effective as of the date
of the event giving rise to such adjustment.
Section 13. CONSOLIDATION, MERGER, OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event (a "Section 13(a) Event") that, at any time on or
after the 15% Ownership Date and prior to the earlier of the Redemption Date or
the Expiration Date, (x) the Company shall, directly or indirectly, consolidate
with or merge with and into any other Person (other than any employee benefit
plan of the Company, or any Person holding shares of Common Stock for or
pursuant to the terms of any such employee benefit plan) and the Company shall
not be the continuing or surviving corporation in such consolidation or merger,
(y) any Person (other than any employee benefit plan of the Company, or any
Person holding shares of Common Stock for or pursuant to the terms of any such
employee benefit plan) shall, directly or indirectly, consolidate with or merge
with and into the Company and the Company shall be the continuing or surviving
corporation in such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any Person or cash or any other property, or (z) the Company
and/or any one or more of its Subsidiaries shall, directly or indirectly, sell
or otherwise transfer, in one or more transactions (other than transactions in
the ordinary course of business), assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons other than the Company or one or more of its
wholly owned Subsidiaries (such Persons, together with the Persons described in
clauses (x) and (y) above shall be collectively referred to in this Section 13
as the "Surviving Person"), then, and in each such case, proper provision shall
be made so that:
(i) except as provided in Section 7(d) hereof, (x) each holder
of a Right shall thereafter have the right to receive, upon the exercise
thereof in
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accordance with the terms of this Agreement and payment of the then
current Exercise Price, such number of validly authorized and issued,
fully paid and nonassessable shares of Common Stock of the Surviving
Person as shall be equal to a fraction, the numerator of which is the
product of the then current Exercise Price multiplied by the number of
one-hundredths of a Preferred Share purchasable upon the exercise of one
Right immediately prior to the first Section 13(a) Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first Section 13(a)
Event, the product of the number of one-hundredths of a Preferred Share
purchasable upon the exercise of a Right (or, if the Distribution Date
shall not have occurred prior to the date of such Section 11(a)(ii)
Event, the number of one-hundredths of a Preferred Share that would have
been so purchasable if the Distribution Date had occurred on the
Business Day immediately preceding the date of such Section 11(a)(ii)
Event) immediately prior to such Section 11(a)(ii) Event, multiplied by
the Exercise Price in effect immediately prior to such Section 11(a)(ii)
Event), and the denominator of which is 50% of the Current Market Price
per share of Common Stock of the Surviving Person on the date of
consummation of such Section 13(a) Event;
(ii) the Surviving Person shall thereafter be liable for and
shall assume, by virtue of such consolidation, merger, sale or transfer,
all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to
the Surviving Person; and
(iv) the Surviving Person shall take such steps (including, but
not limited to, the reservation of a sufficient number of its shares of
Common Stock in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to ensure that the provisions hereof shall
thereafter be applicable to its shares of Common Stock thereafter
deliverable upon the exercise of Rights.
(b) Notwithstanding the foregoing, if the Section 13(a) Event is the
sale or transfer in one or more transactions of assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
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its Subsidiaries (taken as a whole), but less than 100% thereof, then each
Person acquiring all or a portion thereof shall assume the obligations of the
Company as to a fraction of each of the Rights equal to the fraction of the
assets of the Company and its Subsidiaries (taken as a whole) acquired by
such Person, and the obligations of the Company as to the remaining fraction
of each of the Rights shall continue to be the obligations of the Company.
(c) The Company shall not consummate a Section 13(a) Event unless
prior thereto the Company and the Surviving Person shall have executed and
delivered to the Rights Agent a supplemental agreement confirming that such
Surviving Person shall, upon consummation of such Section 13(a) Event, assume
this Agreement in accordance with Section 13 hereof, that all rights of first
refusal or preemptive rights in respect of the issuance of shares of Common
Stock of such Surviving Person upon exercise of outstanding Rights have been
waived and that such Section 13(a) Event shall not result in a default by
such Surviving Person under this Agreement, and further providing that, as
soon as practicable after the date of consummation of such Section 13(a)
Event, such Surviving Person shall:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts
to cause such registration statement to become effective as soon as
practicable after such filing, use its best efforts to cause such
registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the
Expiration Date, and similarly comply with all applicable state
securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the shares of Common Stock of the Surviving Person
purchasable upon exercise of the Rights on a national securities
exchange, or use its best efforts to cause the Rights and such shares of
Common Stock to meet the eligibility requirements for quotation on
NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for such Surviving Person that comply in all respects with the
requirements for
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registration on Form 10 (or any successor form) under the Exchange Act.
(d) In the event that at any time after the occurrence of a
Section 11(a)(ii) Event some or all of the Rights shall not have been
exercised pursuant to Section 11 hereof prior to the date of a Section 13(a)
Event, such Rights shall thereafter be exercisable only in the manner
described in Section 13(a) hereof (without taking into account any prior
adjustment required by Section 11(a)). In the event that a Section 11(a)(ii)
Event occurs on or after the date of a Section 13(a) Event, Rights shall not
be exercisable pursuant to Section 11 hereof but shall instead be exercisable
pursuant to, and only pursuant to, this Section 13.
(e) The provisions of this Section 13 shall apply to each
successive merger, consolidation, sale or other transfer constituting a
Section 13(a) Event.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates that represent fractional Rights. If the
Company shall determine not to issue such fractional Rights, the Company
shall pay to the registered holders of the Right Certificates with respect to
which such fractional Rights would otherwise be issuable, at the time such
Rights are exercised as provided herein, an amount in cash equal to the same
fraction of the Current Market Price of a whole Right. For the purposes of
this Section 14(a), the Current Market Price of a whole Right shall be the
Closing Price per Right for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of shares
of Common Stock or Preferred Shares (other than fractions that are integral
multiples of one one-hundredth of a Preferred Share) upon exercise of Rights,
or to distribute certificates that represent fractional shares of Common
Stock or Preferred Shares (other than fractions that are integral multiples
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Company, be represented by depositary receipts, pursuant to
an appropriate agreement
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between the Company and a depositary selected by it, provided that such
agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of Preferred Shares. If the Company shall determine not to
issue fractional shares of Common Stock or Preferred Shares (or depositary
receipts in lieu of Preferred Shares), the Company shall pay to the
registered holders of Right Certificates with respect to which such
fractional shares of Common Stock or Preferred Shares would otherwise be
issuable, at the time such Rights are exercised as provided herein, an amount
in cash equal to the same fraction of the Current Market Price of a whole
share of Common Stock or Preferred Share, as the case may be. For purposes
of this Section 14(b), the Current Market Price of a whole share of Common
Stock or Preferred Share shall be the Closing Price per share for the Trading
Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of such Right,
expressly waives such holder's right to receive any fractional Rights or any
fractional shares of Common Stock or Preferred Shares upon exercise of such
Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, except the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Right Certificates and certificates for shares of Common Stock representing
Rights, and any registered holder of any Right Certificate and of such
certificate for shares of Common Stock, without the consent of the Rights
Agent or of the holder of any other Right Certificate or any other
certificate for shares of Common Stock may, on such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, such holder's right to exercise the Rights represented by such
Right Certificate or by such certificate for shares of Common Stock in the
manner provided in such Certificate and in this Agreement. Without limiting
the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and shall be entitled
to specific performance, and injunctive relief against actual or threatened
violations, of the obligations of any Person under this Agreement.
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Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights
Agent and every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be
represented by certificates for shares of Common Stock registered in the name
of the holders of such shares of Common Stock (which certificates for shares
of Common Stock shall also constitute certificates for Rights), and each such
Right shall be transferable only in connection with the transfer of such
shares of Common Stock;
(b) after the Distribution Date, the Right Certificates shall only
be transferable on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate is registered as the absolute owner
thereof and of the Rights represented thereby (notwithstanding any notations
of ownership or writing on the Right Certificate by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. RIGHT HOLDER AND RIGHT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Right or Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder
of the securities of the Company that may at any time be issuable upon the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right or Right Certificate, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, to give or withhold
consent to any corporate action, to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or
to receive dividends or subscription rights, or otherwise, in each case until
such Right or the Rights represented by such Right Certificate shall have
been exercised in accordance with the provisions hereof.
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Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent as compensation
for all services rendered by it hereunder reasonable and customary fees and
expenses. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with
the acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or shares of Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon
the advice of its counsel as set forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. If, at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of
the Right Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver
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such Right Certificates so countersigned; and if at that time any of the
Right Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
such Right Certificates, and in this Agreement.
(b) If at any time the name of the Rights Agent shall be changed,
and at such time any of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver the Right Certificates so countersigned; and if at
that time any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either in its prior
name or in its changed name; and in all such cases such Right Certificates
shall have the full force provided in such Right Certificates and in this
Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance of the Rights, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel
shall constitute full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman of
the Board, the President, any Vice President, the Treasurer or the Secretary
of the Company and delivered to the Rights Agent; and such certificate shall
constitute full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
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(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement, or in the
Right Certificates (except its countersignature thereof), or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void pursuant to Section 7(d) or any adjustment in
the terms of the Rights including the manner, method or amount thereof)
provided for in Sections 7, 11, 13 and 23 hereof, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights represented by Right Certificates
after actual notice that such change or adjustment is required); nor shall it
by any act hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Preferred Shares or shares of Common
Stock or other securities to be issued pursuant to this Agreement or any
Right Certificate, or as to whether any Preferred Shares or shares of Common
Stock or other securities will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the
32
<PAGE>
performance of its duties hereunder from any one of the Chairman of the
Board, the President, any Vice President, the Secretary, any Assistant
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not the Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided that reasonable care was
exercised in the selection and continued employment thereof.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under
this Agreement upon thirty (30) days' notice in writing mailed to the Company
and to each transfer agent of shares of Common Stock and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer
agent of shares of Common Stock and Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting as such, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within
a period of thirty (30) days after giving notice of such removal or
33
<PAGE>
after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit such holder's Right
Certificate for inspection by the Company), then the Company shall become the
Rights Agent and the registered holder of any Right Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the
laws of the United States or of the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business
as a banking institution in the State of New York, in good standing, having a
principal office in New York, that is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000. After its appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose of
this Agreement and so that the successor Rights Agent may appropriately act
as Rights Agent hereunder. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of shares of Common Stock
and Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding
any of the provisions of this Agreement or of the Right Certificates to the
contrary, the Company may, at its option, issue new Right Certificates in
such form as may be approved by the Board of Directors in order to reflect
any adjustment or change in the Exercise Price and the number or kind or
class of shares or other securities or
34
<PAGE>
property purchasable upon exercise of the Rights in accordance with the
provisions of this Agreement.
Section 23. REDEMPTION OF RIGHTS.
(a) The Company may, at its option, but only by the vote of a
majority of the Board of Directors, redeem all but not less than all of the
then outstanding Rights, at any time prior to the Close of Business on the
earlier of (i) the tenth day following the 15% Ownership Date (subject to
extension by the Company as provided in Section 26 hereof) or (ii) the
Expiration Date, at a redemption price of $.005 per Right, subject to
adjustments as provided in subsection (c) below (the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the
Rights shall not be exercisable pursuant to Section 11(a)(ii) prior to the
expiration of the Company's right of redemption hereunder.
(b) Without any further action and without any notice, the right
to exercise the Rights will terminate effective at the time so designated by
action of the Board of Directors ordering the redemption of the Rights and
the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 days after the effective time of the action of
the Board of Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each notice of
redemption will state the method by which the payment of the Redemption Price
will be made. At the option of the Board of Directors, the Redemption Price
may be paid in cash to each Rights holder or by the issuance of shares (and,
at the Company's election pursuant to Section 14(b) hereof, cash or
depositary receipts in lieu of fractions of shares other than fractions which
are integral multiples of one one-hundredth (1/100) of a share) of Preferred
Stock or Common Stock having a Fair Market Value equal to such cash payment.
(c) In the event the Company shall at any time after the date of
this Rights Agreement (A) pay any dividend on Common Stock in shares of
Common Stock, (B) subdivide or
35
<PAGE>
split the outstanding shares of Common Stock into a greater number of shares,
or (C) combine or consolidate the outstanding shares of Common Stock into a
smaller number of shares or effect a reverse split of the outstanding shares
of Common Stock, then, and in each such event, the Redemption Price shall be
appropriately adjusted to reflect the foregoing.
Section 24. EXCHANGE.
(a) The Board of Directors may, at its option, at any time after any
Person becomes a 15% Stockholder, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(d) hereof) for Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock divided or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the
Company shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Company. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common
36
<PAGE>
Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(d) hereof) held by each
holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Preferred Share Equivalent, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredths of a share of
Preferred Stock (or Preferred Share Equivalent) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends or other
similar transactions effected after the date hereof.
(d) In the event that there shall not be sufficient Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market price of a whole share of
Common Stock. For the purposes of this subsection (e), the current market price
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In the event that the Company shall propose (i) to declare or pay
any dividend payable on or make any distribution with respect to its Common
Stock or Preferred Shares (other than a regular quarterly cash dividend), (ii)
to offer to the holders of its Common Stock or Preferred Shares options, rights
or warrants to subscribe for or to
37
<PAGE>
purchase any additional shares thereof or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
its Common Stock or Preferred Shares (other than a reclassification involving
only the subdivision of outstanding shares), (iv) to effect any consolidation
or merger with or into, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
or more transactions, of more than fifty percent (50%) of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, or (v) to effect the liquidation, dissolution or
winding up of the Company, then and in each such case, the Company shall give
to each holder of a Right Certificate, in accordance with Section 26 hereof,
a notice of such proposed action that shall specify the record date for the
purpose of such dividend or distribution, or the date upon which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of record of the Common Stock or Preferred Shares, if
any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Common
Stock or Preferred Shares for purposes of such action and, in the case of any
such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders
of the shares of Common Stock or Preferred Shares, whichever date shall be
the earlier. The failure to give the notice required by this Section 25 or
any defect therein shall not affect the legality or validity of the action
taken by the Company or the vote upon any such action.
(b) Upon the occurrence of each Section 11(a)(ii) Event and each
Section 13(a) Event, the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, specifying the event and the
consequences of the event to holders of Rights under Sections 11 and 13 hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until
38
<PAGE>
another address is filed in writing with the Rights Agent) as follows:
MEDIAONE GROUP, INC.
188 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel and Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) to the principal office of the Rights
Agent as follows:
STATE STREET BANK AND TRUST COMPANY
c/o Boston EquiServe Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Charles V. Rossi
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. For as long as the Rights
are then redeemable and except as provided in the last sentence of this Section
27, the Company may in its sole and absolute discretion, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights. At any time when
the Rights are not then redeemable and except as provided in the last sentence
of this Section 27, the Company may, and the Rights Agent shall if the Company
so directs, supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or (iii) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable,
provided that no such supplement or amendment pursuant to this clause (iii)
shall materially adversely affect the interest of the holders of Right
Certificates.
39
<PAGE>
Upon the delivery of a certificate from an appropriate officer of the Company
which states that the proposed supplement or amendment is in compliance with
the terms of this Section 27, the Rights Agent shall execute such supplement
or amendment. This Agreement may be amended or supplemented at any time with
the approval of a majority of the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Stock).
Notwithstanding anything contained in this Rights Agreement to the contrary,
no supplement or amendment shall be made which changes the Redemption Price
or the Final Expiration Date and supplements or amendments may be made after
the time that any Person becomes a 15% Stockholder only if at the time of the
action of the Board of Directors approving such supplement or amendment there
are then in office not less than two Continuing Directors and such supplement
or amendment is approved by a majority of the Continuing Directors then in
office.
Section 28. CERTAIN COVENANTS. Subject to Section 27 and the other
provisions of this Agreement:
(a) no adjustment to the Exercise Price, the number of Preferred
Shares or shares of Common Stock or other securities (or fractions of a share of
any of them), as the case may be, for which a Right is exercisable or the number
of Rights outstanding shall be made or be effective if such adjustment would
have the effect of reducing or limiting the benefits that the holders of Rights
would have had absent such adjustment, including, without limitation, the
benefits under Sections 7, 11 and 13 hereof, unless the terms of this Agreement
are amended so as to preserve such benefits; and
(b) from and after the earlier of the date of the first Section
11(a)(ii) Event or the date of the first Section 13(a) Event and prior to the
earlier of the Redemption Date or the Expiration Date, the Company shall not (i)
issue or sell, or permit any Subsidiary to issue or sell, to a 15% Stockholder
or a Surviving Person, or any Affiliate or Associate of a 15% Stockholder or a
Surviving Person, or any Person holding Voting Shares of the Company that are
Beneficially Owned by a 15% Stockholder or a Surviving Person, (A) any rights,
options, warrants or convertible securities on terms similar to, or that
materially adversely affect the value of, the Rights or (B) Preferred Shares,
shares of Common Stock or shares of any other class of capital stock, if such
sale is intended to or
40
<PAGE>
would materially adversely affect the value of the Rights, or (ii) take any
action that is intended to or would materially adversely affect the value of
the Rights.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board of Directors to any liability to the holders of the
Rights.
Section 30. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 31. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent, the registered holders of the Right Certificates (other than those
representing Rights that have become null and void) and the certificates for
shares of Common Stock representing Rights (other than those Rights that have
become null and void) any legal or equitable right, remedy or claim under this
Agreement, and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent, such registered holders of Right Certificates and
such certificates for shares of Common Stock representing Rights.
Section 32. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
41
<PAGE>
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
Section 33. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts made and
performed entirely within such state.
Section 34. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each such counterpart shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
Section 35. DESCRIPTIVE HEADINGS. Descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 36. EFFECTIVENESS. This Agreement shall become effective at
the Separation Time. In the event the Separation does not occur or become
effective for any reason, this Agreement shall be deemed null and void.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
Attest: MEDIAONE GROUP, INC.
By By
----------------------- -----------------------
Name: Name:
Title: Title:
Attest: STATE STREET BANK AND
TRUST COMPANY
By By
----------------------- -----------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT A
FORM OF
RIGHT CERTIFICATE
Certificate No. CR-____ _____ Rights
NOT EXERCISABLE AFTER APRIL 6, 1999 OR EARLIER IF REDEEMED. THE
RIGHTS ARE SUBJECT TO REDEMPTION AT $.005 PER RIGHT ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY
CERTAIN PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.
Right Certificate
MEDIAONE GROUP, INC.
This certifies that _____________________________, or registered
assigns, is the registered owner of the number of Rights set forth above,
each of which entitles the owner thereof, subject to the terms and conditions
of the Amended and Restated Rights Agreement (the "Rights Agreement") dated
as of June 12, 1998 by and between MEDIAONE GROUP, INC., a Delaware
corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY (the
"Rights Agent"), to purchase from the Company at any time prior to five
o'clock (5:00) p.m., Massachusetts time, on the earlier of the Redemption
Date (as such term is defined in the Rights Agreement) or April 6, 1999, at
the office or agency of the Rights Agent in Boston, Massachusetts or Canton,
Massachusetts, or at the office of its successor as Rights Agent, one
one-hundredth of a fully paid and nonassessable share of Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, of the
Company (a "Preferred Share") or, in certain circumstances, other securities
or other property, at a purchase price of $80 per one one-hundredth of a
Preferred Share (the "Exercise Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase, including
Certificate, on the reverse side hereof completed and duly executed, with
signature guaranteed.
The number of Rights represented by this Right Certificate and the
Exercise Price set forth above are the number of Rights and the Exercise
Price as of ________ __, 1998, based upon the Preferred Shares as constituted
on such
A-1
<PAGE>
date. As provided in the Rights Agreement, the Exercise Price and the number of
Preferred Shares or other securities or other property that may be purchased
upon the exercise of the Rights represented by this Right Certificate are
subject to modification and adjustment upon the occurrence of certain events.
The Rights Agreement contains a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights
Agent, the Company and the holders of Right Certificates. This Right
Certificate is subject to all the terms and conditions of the Rights
Agreement, which terms and conditions are hereby incorporated herein by
reference and made a part hereof. Copies of the Rights Agreement are on file
at the principal executive offices of the Company and the above-mentioned
offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates,
upon presentation and surrender at the above-mentioned offices of the Rights
Agent, with the Form of Assignment, including Certificate, on the reverse
side hereof completed and duly executed, with signature guaranteed, may be
exchanged for another Right Certificate or Right Certificates of like tenor
and date representing Rights entitling the holder thereof to purchase a like
aggregate number of Preferred Shares or, in certain circumstances, other
securities or other property, as the Rights represented by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive, upon the surrender hereof with the Form
of Election to Purchase, including Certificate, on the reverse side hereof
completed and duly executed, with signature guaranteed, another Right
Certificate or Right Certificates for the number of whole Rights not
exercised. Subject to the provisions of the Rights Agreement, the Rights
represented by this Right Certificate may be redeemed by the Company, at its
option, at a redemption price of $.005 per Right.
No fractional securities shall be issued upon the exercise of any
Right or Rights represented hereby (other than fractions of Preferred Shares
that are integral multiples of one one-hundredth of a Preferred Share, that may,
at the option of the Company, be represented by depositary receipts), but in
lieu thereof, a cash payment shall be made, as provided in the Rights Agreement.
A-2
<PAGE>
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, until the
Right or Rights represented by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ___________, 199_.
Attest: MEDIAONE GROUP, INC.
By By
---------------------- ----------------------
Name: Name:
Title: Title:
Countersigned:
STATE STREET BANK AND TRUST
COMPANY
By By
---------------------- ----------------------
Name: Name:
Title: Title:
A-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer any or all of the Rights
represented by this Right Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------,
(Name, address and social security or other
identifying number of transferee)
________________________________ (___________) of the Rights represented by this
Right Certificate, together with all right, title and interest in and to said
Rights, and hereby irrevocably constitutes and appoints attorney to transfer
said Rights on the books of MEDIAONE GROUP, INC., with full power of
substitution.
Dated: __________________, 199_
-------------------------
(Signature)
Signature Guaranteed:
CERTIFICATE
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this
Right Certificate are not Beneficially Owned by a 15% Stockholder or an
Affiliate or Associate of a 15% Stockholder (as such capitalized terms are
defined in the Rights Agreement).
Dated: _________________, 199_
----------------------------
(Signature)
Signature Guaranteed:
A-4
<PAGE>
NOTICE
The signatures to the foregoing Assignment and the foregoing
Certificate, if applicable, must correspond to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever, and must be guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or
Associate of a 15% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.
A-5
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise any or all of the Rights
represented by this Right Certificate)
To MEDIAONE GROUP, INC.:
The undersigned hereby irrevocably elects to exercise
______________________________________ (________) of the Rights represented by
this Right Certificate to purchase the following:
(Check one of the following boxes)
/ / the Preferred Shares or other securities or property issuable upon the
exercise of said number of Rights pursuant to Section 7(c) of the Rights
Agreement.
/ / the shares of Common Stock, par value $0.01 per share, of the Company, or
other securities or property issuable upon the exercise of said number of
Rights pursuant to Section 11(a)(ii) of the Rights Agreement.
/ / the securities issuable upon the exercise of said number of Rights pursuant
to Section 14(a) of the Rights Agreement.
The undersigned hereby requests that any such property and a
certificate for any such securities be issued in the name of and delivered to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
The undersigned hereby further requests that if said number of Rights
shall not be all the Rights represented by this Right Certificate, a new Right
Certificate for the remaining balance of such Rights be issued in the name of
and delivered to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
Dated: _____________, 199_
----------------------------
(Signature)
Signature Guaranteed:
A-6
<PAGE>
CERTIFICATE
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this
Right Certificate are not Beneficially Owned by a 15% Stockholder or an
Affiliate or Associate of a 15% Stockholder (as such capitalized terms are
defined in the Rights Agreement).
Dated: __________________, 199_
--------------------------
(Signature)
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and the foregoing
Certificate, if applicable, must correspond to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever, and must be guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or
Associate of a 15% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any property or certificate for securities upon
the exercise of this Right Certificate or issue any new Right Certificate for
any remaining balance of unexercised Rights represented by this Right
Certificate.
A-7
<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>
ARTICLE I
DEFINITIONS
<TABLE>
<C> <S> <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
</TABLE>
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
<TABLE>
<C> <S> <C>
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
</TABLE>
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
<TABLE>
<C> <S> <C>
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
</TABLE>
ARTICLE IV
THE SEPARATION
<TABLE>
<C> <S> <C>
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
i
<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
</TABLE>
ARTICLE VI
EMPLOYEE MATTERS
<TABLE>
<C> <S> <C>
6.1 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2 Employee Benefit Plans and Employee Arrangements . . . . . . . . . 49
6.3 Internal Revenue Service Forms . . . . . . . . . . . . . . . . . . 49
</TABLE>
ARTICLE VII
INSURANCE MATTERS
<TABLE>
<C> <S> <C>
7.1 Policies and Rights Included Within Assets . . . . . . . . . . . . 49
7.2 Administration; Other Matters. . . . . . . . . . . . . . . . . . . 50
7.3 Cooperation; Disagreements . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
ARTICLE VIII
INDEMNIFICATION
<TABLE>
<C> <S> <C>
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
</TABLE>
ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
<TABLE>
<C> <S> <C>
9.1 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . 61
9.2 Intercompany Agreements. . . . . . . . . . . . . . . . . . . . . . 61
9.3 Guarantee Obligations. . . . . . . . . . . . . . . . . . . . . . . 62
9.4 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . 64
ii
<PAGE>
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
</TABLE>
ARTICLE X
ACCESS TO INFORMATION
<TABLE>
<C> <S> <C>
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
</TABLE>
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
<TABLE>
<C> <S> <C>
11.1 Mutual Release. . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.2 No Representations or Warranties. . . . . . . . . . . . . . . . . 77
</TABLE>
ARTICLE XII
GENERAL PROVISIONS
<TABLE>
<C> <S> <C>
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;
iii
<PAGE>
Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.12 Severability; Enforcement. . . . . . . . . . . . . . . . . . . . 83
12.13 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.14 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
EXHIBITS
Exhibit A - Employee Matters Agreement
Exhibit B - Tax Sharing Agreement
iv
<PAGE>
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.
2
<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
3
<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.
4
<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. Sections 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
5
<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-
6
<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 per-occurrence, 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
7
<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
8
<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.
9
<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.
10
<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),
11
<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
12
<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.
13
<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
14
<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 81/4% 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>
TERM SECTION
- ---- -------
<S> <C>
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
15
<PAGE>
Communications Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Communications Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.6(b)(i)
Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Dex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals
Directories Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals
Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
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)
16
<PAGE>
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.
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(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
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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.
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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.
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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;
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(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
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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
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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
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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
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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
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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)
FinanceCo 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
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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)
FinanceCo 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
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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;
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(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;
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(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.
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(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;
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(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
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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,
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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".
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(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
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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
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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
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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
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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
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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
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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,
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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
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(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
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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
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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
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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
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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
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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
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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
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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
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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,
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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;
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(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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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;
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(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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.)
By: /s/ Charles M. Lillis
-------------------------------------
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.)
By: /s/ Solomon D. Trujillo
-------------------------------------
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
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EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
<PAGE>
TABLE OF CONTENTS
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
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(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
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EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
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.
"AirTouch Transfers" 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
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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.
"Deferred Benefits" 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.
"Deferred Plans" 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,
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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.
"Existing U S WEST" shall mean U S WEST, Inc., a Delaware corporation,
prior to the Separation Time.
"Existing U 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
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<PAGE>
(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.
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<PAGE>
"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
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<PAGE>
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,
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<PAGE>
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.
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<PAGE>
(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
8
<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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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.
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(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
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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
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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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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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
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<PAGE>
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
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<PAGE>
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
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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) Communications 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
24
<PAGE>
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.
(c) 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
25
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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
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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 Maximum 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
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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").
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(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)
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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
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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.)
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(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
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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
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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
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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.
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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.
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(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-
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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
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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,
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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
40
<PAGE>
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.
41
<PAGE>
(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.
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<PAGE>
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
43
<PAGE>
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.
44
<PAGE>
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.
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<PAGE>
(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
46
<PAGE>
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.
47
<PAGE>
(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.
48
<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.
By: /s/ Charles M. Lillis
-------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and Chief Executive
Officer--U S WEST Media Group
USW-C, Inc.
By: /s/ Solomon D. Trujillo
-------------------------------------
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
By: /s/ Charles M. Lillis
-------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and Chief Executive
Officer--U S WEST Media Group
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
By: /s/ Solomon D. Trujillo
-------------------------------------
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
49
<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
________________________________________________________________________________
50
<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 dependent and supplemental
benefits
________________________________________________________________________________
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
________________________________________________________________________________
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
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
51
<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 OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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>
<PAGE>
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.
2
<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.
3
<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.
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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
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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
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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
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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,
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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
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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
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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
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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
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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.
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(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
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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.
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(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
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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.
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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.
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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
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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.)
By: /s/ Charles M. Lillis
-------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President
USW-C, INC.
(to be renamed U S WEST, INC.)
By: /s/ Solomon D. Trujillo
-------------------------------------
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
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