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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
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ARTICLE I
DEFINITIONS
1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Terms Defined Elsewhere in the Agreement . . . . . . . . . . . . . 15
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 17
1.4 References to Time . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
2.1 Certificates of Incorporation; Bylaws; Name Changes. . . . . . . . 18
2.2 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Registration and Listing . . . . . . . . . . . . . . . . . . . . . 19
2.4 Boards of Directors. . . . . . . . . . . . . . . . . . . . . . . . 20
2.5 Rights Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 20
2.6 The Transaction Documents. . . . . . . . . . . . . . . . . . . . . 20
2.7 U S WEST Approval of Certain New U S WEST Actions. . . . . . . . . 20
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
3.1 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Refinancing of Indebtedness. . . . . . . . . . . . . . . . . . . . 23
3.3 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Discharge of Liabilities . . . . . . . . . . . . . . . . . . . . . 32
3.5 Closing; Delivery; Methods of Transfer and Assumption. . . . . . . 34
ARTICLE IV
THE SEPARATION
4.1 The Separation . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.2 Separation Time. . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3 Certain Determinations . . . . . . . . . . . . . . . . . . . . . . 36
4.4 New U S WEST SIP Accounts; Certificates; Distribution Procedures . 36
4.5 Conditions to the Separation . . . . . . . . . . . . . . . . . . . 41
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5.1 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Settlements for Cash Collections and Disbursements After the
Separation Time. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Transition Services. . . . . . . . . . . . . . . . . . . . . . . . 45
5.4 U S WEST Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2 Employee Benefit Plans and Employee Arrangements . . . . . . . . . 49
6.3 Internal Revenue Service Forms . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
INSURANCE MATTERS
7.1 Policies and Rights Included Within Assets . . . . . . . . . . . . 49
7.2 Administration; Other Matters. . . . . . . . . . . . . . . . . . . 50
7.3 Cooperation; Disagreements . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
INDEMNIFICATION
8.1 New U S WEST's Agreement to Indemnify. . . . . . . . . . . . . . . 52
8.2 U S WEST's Agreement to Indemnify. . . . . . . . . . . . . . . . . 53
8.3 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . 54
8.4 Miscellaneous Indemnification Provisions . . . . . . . . . . . . . 59
8.5 Contribution.. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.6 Tax Matters; Construction of Agreements. . . . . . . . . . . . . . 60
8.7 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . 61
9.2 Intercompany Agreements. . . . . . . . . . . . . . . . . . . . . . 61
9.3 Guarantee Obligations. . . . . . . . . . . . . . . . . . . . . . . 62
9.4 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . 64
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9.5 National Contracts . . . . . . . . . . . . . . . . . . . . . . . . 66
9.6 Non-Solicitation of Employees. . . . . . . . . . . . . . . . . . . 66
9.7 Lock Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.8 Agreements with Respect to Common Stock Received by Savings
Plan/ESOPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.9 AirTouch Transaction . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE X
ACCESS TO INFORMATION
10.1 Allocation of Corporate Records. . . . . . . . . . . . . . . . . . 70
10.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 71
10.3 Production of Witnesses. . . . . . . . . . . . . . . . . . . . . . 73
10.4 Certain Procedures Relating to Access to Archived Joint Books and
Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.6 Cooperation with Respect to Government Reports and Filings . . . . 74
10.7 Certain Limitations with Respect to Information. . . . . . . . . . 75
10.8 Protective Arrangements. . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
11.1 Mutual Release. . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.2 No Representations or Warranties. . . . . . . . . . . . . . . . . 77
ARTICLE XII
GENERAL PROVISIONS
12.1 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . . . 78
12.2 Separation Committee; Dispute Resolution . . . . . . . . . . . . . 78
12.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.8 Headings; References . . . . . . . . . . . . . . . . . . . . . . . 82
12.9 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.11 Parties in Interest; Assignment;
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Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.12 Severability; Enforcement. . . . . . . . . . . . . . . . . . . . 83
12.13 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.14 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EXHIBITS
Exhibit A - Employee Matters Agreement
Exhibit B - Tax Sharing Agreement
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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
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.
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"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
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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.
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"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
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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
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
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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
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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.
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"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.
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"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
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
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
"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
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:
TERM SECTION
- ---- -------
AAA Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Archive Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.1(d)
Archived Joint Books and Records . . . . . . . . . . . . . . . . . . . . . . .10.1(d)
Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a)
AT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Beneficial Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4(c)
Borrower Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2
Charter Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a)
CGI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(g)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Communications Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(b)
Communications Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals
15
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
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)
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.
17
(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
18
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.
19
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
23
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
24
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
25
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
26
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
27
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
28
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;
29
(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;
30
(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.
31
(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;
32
(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
33
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,
34
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".
35
(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
36
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
37
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
38
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
39
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
40
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
41
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,
42
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
43
(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
44
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
45
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
46
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
47
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
48
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
49
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
50
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
51
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,
52
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;
53
(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
54
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
55
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
56
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
57
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.
58
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
59
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
60
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
61
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
65
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
66
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
67
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;
68
(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
70
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
71
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
72
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
73
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
74
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
75
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
76
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
77
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
78
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
79
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
80
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
81
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
82
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
84