EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. GENERAL PRINCIPLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) New U S WEST Liabilities . . . . . . . . . . . . . . . . . . . . . 7
(b) MediaOne Liabilities . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Shared Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Class Action Liabilities . . . . . . . . . . . . . . . . . . . . . 9
(e) Appeal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Funded Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Control of litigation. . . . . . . . . . . . . . . . . . . . . . . 9
(h) Election to Assume Liability . . . . . . . . . . . . . . . . . . . 10
3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE
ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. EMPLOYEE SAVINGS PLANS. . . . . . . . . . . . . . . . . . . . . . . . . 12
5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES. . . . . . . . 16
6. OTHER TAX-QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . 24
7. WELFARE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Communications Plans . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Media Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Joint Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Continuing Treatment . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Continuance of Elections . . . . . . . . . . . . . . . . . . . . . 27
(f) Co-Payments and Maximum Benefits . . . . . . . . . . . . . . . . . 27
(g) Pre-existing conditions. . . . . . . . . . . . . . . . . . . . . . 28
(h) COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Long-Term Disability . . . . . . . . . . . . . . . . . . . . . . . 29
8. VEBA's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) LTIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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(d) ESTIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) Phantom Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10. OTHER BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Top-hat plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Employment contracts . . . . . . . . . . . . . . . . . . . . . . . 40
(c) Split-dollar contracts . . . . . . . . . . . . . . . . . . . . . . 40
(d) Ex-Pat Employees . . . . . . . . . . . . . . . . . . . . . . . . . 41
(e) Vail Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(f) Leaves of Absence. . . . . . . . . . . . . . . . . . . . . . . . . 41
(g) Non-Employee Director Plans. . . . . . . . . . . . . . . . . . . . 42
(h) Non-Employee State Executive Board Plan. . . . . . . . . . . . . . 42
11. PORTABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12. FURTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13. COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES . . . . . . 45
15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Payment of 1998 Administrative Costs and Expenses. . . . . . . . . 46
(b) Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(1) Information Provided. . . . . . . . . . . . . . . . . . . . . 47
(2) Vendor Contracts. . . . . . . . . . . . . . . . . . . . . . . 47
(c) Beneficiary Designations . . . . . . . . . . . . . . . . . . . . . 48
(d) Effect If Separation Does Not Occur. . . . . . . . . . . . . . . . 48
(e) Provisions of Separation Agreement . . . . . . . . . . . . . . . . 48
(f) U S WEST Benefits Handbook . . . . . . . . . . . . . . . . . . . . 48
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EMPLOYEE MATTERS AGREEMENT
TRANSFER, ASSUMPTION AND/OR DIVISION
OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS
1. DEFINITIONS.
(a) All capitalized terms used in this EM Agreement shall have the
meanings set forth below or , if not set forth below, the meaning
given in the Separation Agreement.
"AirTouch Transfers" shall mean Terminated Employees whose employment
is transferred to AirTouch Communications, Inc. or any of its
affiliates prior to the Separation Time as a result of the merger
agreement among Existing U S WEST, certain subsidiaries thereof
and AirTouch Communications, Inc. and who either: (i) are
eligible for retiree medical coverage or retiree life insurance
as of the date of transfer of employment; or (ii) have an account
balance in the Media Savings Plan/ESOP immediately after the
Separation Time.
"Average Value" shall mean the average Market Value of the
Communications Stock or Media Stock, as applicable, over the
period of 20 Trading Days ending on the fifth Trading Day prior
to the date of the Separation Time, rounded to the nearest
one-hundred thousandth (or if there shall not be a nearest
one-hundred thousandth, to the next highest one-hundred
thousandth).
"Cable Companies" shall mean MediaOne of Delaware, Inc. (f/k/a
Continental Cablevision, Inc.), MediaOne, Inc. and/or MediaOne of
Michigan, Inc. (f/k/a Booth Communications), or their
predecessors.
"COBRA" shall mean the continuation coverage requirements for group
health plans under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and as codified in Code
Section 4980B and ERISA Sections 601 through 608.
"Communications Employees" shall mean all persons who are Employees of
the New U S WEST Group at the Separation Time, including without
limitation (1) Employees who worked for Existing U S WEST prior
to the Separation Time that are designated as Communications
Employees by Existing U S WEST as of the Separation Time,
(2) Employees who, prior to the Separation Time, worked for an
entity that is a member of the MediaOne Group that are designated
as Communications Employees as
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of the Separation Time, and (3) Employees who, prior to the
Separation Time, worked for Dex that are designated as
Communications Employees as of the Separation Time.
"Communications Employee Arrangements" shall mean all Employee
Arrangements sponsored by members of the New U S WEST Group after
the Separation Time.
"Communications Employee Benefit Plans" shall mean all Employee
Benefit Plans sponsored by members of the New U S WEST Group
after the Separation Time.
"Deferred Benefits" shall mean the entitlement of a Terminated
Employee, based solely on the records of the Existing U S WEST
Group at the Separation Time, to future benefits under one or
more of the Deferred Plans. Except as provided in the definition
of Terminated Media Employee and Terminated Inc. Employee, a
Terminated Employee who, according to such records, is not
entitled to any benefits under the Deferred Plans or who has
already received all of such benefits prior to the Separation
Time does not have any Deferred Benefits.
"Deferred Plans" shall mean the U S WEST Employee Savings Plan/ESOP
(except accounts attributable to AirTouch Transfers); the U S
WEST Pension Plan (including the disability pensions provided
thereunder); retiree medical benefits under any medical plan
maintained by the Existing U S WEST Group (but excluding COBRA);
and long-term disability benefits under a long-term disability
plan maintained by the Existing U S WEST Group.
"EBC" shall mean the Employee Benefits Committee of Existing U S WEST
as constituted prior to the Separation Time.
"EM Agreement" shall mean this Employee Matters Agreement, which is
Exhibit A to the Separation Agreement.
"Employee" means a person who is an employee of the Existing U S WEST
Group at the Separation Time, including an employee who is not
actively performing services because such employee is on an
approved leave of absence, short-term disability, illness or
other similar reasons. Employee shall include: (i) a person who
is a former employee of the Existing U S WEST Group; and/or (ii)
a person who has been transferred to Time Warner Communications
pursuant to the agreement of Existing U S WEST and Time Warner
Communications; and/or (iii) a person who is an employee of Time
Warner Communications at the Separation Time,
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including an employee who is not actively performing services
because such employee is on an approved leave of absence,
short-term disability, illness or other similar reasons. In
addition, an individual who is described in either of the
preceding sentences (whether he works for the Existing U S
WEST Group or Time Warner Communications) immediately prior to
the Separation Time who does not report for work to the New U
S WEST Group, MediaOne Group or Time Warner Communications
(depending upon his applicable assignment) immediately after
the Separation Time shall be considered an Employee (for
purposes of this EM Agreement only) unless (1) prior to the
Separation Time, he notifies the Existing U S WEST Group or
Time Warner Communications, as applicable, that he is
terminating, effective on or before the Separation Time or (2)
prior to the Separation Time, the Existing U S WEST Group or
Time Warner Communications, as applicable, notifies him that
he is terminated, effective on or before the Separation Time.
All Employees shall be either Communications Employees or
Media Employees. A former employee who is on lay-off is a
Terminated Employee, not an Employee.
"Employment Related Liabilities" shall mean all Liabilities, including
litigation costs, which relate to an Employee, a Terminated
Employee or their respective dependents and beneficiaries, in
each case relating to, arising out of or resulting from
employment by the Existing U S WEST Group or predecessor prior to
the Separation Time, including Liabilities under Employee Benefit
Plans and Employee Arrangements. Notwithstanding the preceding
sentence, the following Liabilities are not Employment Related
Liabilities: (1) any Liability which is specifically addressed in
a provision other than Section 2 of this EM Agreement, (2)
Liabilities arising under or relating to the severance agreements
between Existing U S WEST and members of the Executive Group
(which Liabilities are addressed in Schedules 3.4(a) and 3.4(b)
of the Separation Agreement) and (3) any other Liability
scheduled in the Separation Agreement.
"Executive Group" shall mean Richard D. McMormick, Charles P. Russ
III, Michael P. Glinsky, Robert W. Gras, and James T. Anderson.
"Existing U S WEST" shall mean U S WEST, Inc., a Delaware corporation,
prior to the Separation Time.
"Existing U S WEST Group" shall mean, prior to the Separation Time,
Existing U S WEST and all of its Subsidiaries.
"Media Employees" shall mean all persons who are Employees of the
MediaOne Group at the Separation Time, including without
limitation
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(1) Employees who worked for Existing U S WEST prior to the
Separation Time that are designated as Media Employees by
Existing U S WEST as of the Separation Time (including, without
limitation, Employees who are employed by Time Warner
Communications), (2) Employees who, prior to the Separation Time,
worked for an entity that is a member of the New U S WEST Group
that are designated as Media Employees as of the Separation Time
and (3) Employees who, prior to the Separation Time, worked for
MGI that are designated as Media Employees as of the Separation
Time.
"Media Employee Arrangements" shall mean the Employee Arrangements
sponsored by members of the MediaOne Group after the Separation
Time.
"Media Employee Benefit Plans" shall mean the Employee Benefit Plans
sponsored by members of the MediaOne Group after the Separation
Time.
"MediaOne" shall mean MediaOne Group, Inc., a Delaware corporation, at
and after the Separation Time. MediaOne was known as U S WEST,
Inc. prior to the Separation Time.
"MediaOne Employee Benefits Committee" shall mean, effective on and
after the Separation Time, the committee of MediaOne Group, Inc.
designated to administer various Media Employee Benefit Plans and
Media Employee Arrangements.
"MediaOne Group" shall mean, at and after the Separation Time,
MediaOne Group, Inc. and all of its Subsidiaries.
"New U S WEST Employee Benefits Committee" shall mean, effective on
and after the Separation Time, the committee of New U S WEST
designated to administer various Communications Employee Benefit
Plans and Communications Employee Arrangements.
"Non-Employee Directors" shall mean those members of the Board of
Directors of the respective corporation who are or were not
employees of that entity during their term of office. "Retired
Non-Employee Directors" shall mean those Non-Employee Directors
who have completed their term on the respective Board of
Directors prior to the Separation Time.
"Non-Employee Director Plans" shall mean the U S WEST, Inc. Deferred
Compensation Plan for Non-Employee Directors and the U S WEST,
Inc. Retirement Plan for Non-Employee Directors.
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"Separation Agreement" shall mean the Separation Agreement, dated as
of June 5, 1998, between U S WEST, Inc. and USW-C, Inc.
"Terminated Communications Employees" shall mean all persons who are
Terminated Employees and who are not Terminated Media Employees
or Terminated Inc. Employees. Terminated Communications
Employees shall include (1) all Terminated Employees (other than
AirTouch Transfers) with Deferred Benefits (unless they were
actively employed by one of the Cable Companies on their last day
of active employment with the Existing U S WEST Group); (2) all
Terminated Employees who were last actively employed before
November 1, 1995 (unless they were actively employed by one of
the Cable Companies on their last day of active employment with
the Existing U S WEST Group) and are not entitled to Deferred
Benefits at the Separation Time; and (3) all Terminated Employees
who were last actively employed (on or after November 1, 1995 and
before the Separation Time) by an entity that is a member of the
New U S WEST Group (excluding MGI, but including Dex and its
subsidiaries) after the Separation Time and are not entitled to
Deferred Benefits at the Separation Time.
"Terminated Employee" means a person who formerly was actively
employed by the Existing U S WEST Group and who is not an
Employee. An individual who is employed by the Existing U S WEST
Group immediately prior to the Separation Time who does not
report for work to the New U S WEST Group or MediaOne Group
(depending upon his applicable assignment) immediately after the
Separation Time shall be considered a Terminated Employee if
(1) prior to the Separation Time, he notifies Existing U S WEST
or its Subsidiaries that he is terminating, effective on or
before the Separation Time or (2) prior to the Separation Time,
Existing U S WEST or its Subsidiaries notify him that he is
terminated, effective on or before the Separation Time. All
members of the Executive Group shall be Terminated Employees.
Each Terminated Employee shall be either (a) a Terminated
Communications Employee, (b) a Terminated Inc. Employee or (c) a
Terminated Media Employee, provided that, to the extent set forth
in this EM Agreement, a Terminated Employee may be classified
differently for different purposes.
"Terminated Inc. Employees" shall mean all Terminated Employees who
were last actively employed (on or after November 1, 1995 and
before the Separation Time) by Existing U S WEST (but not its
Subsidiaries) and are not entitled to Deferred Benefits at the
Separation Time. If, after the Separation Time, it is determined
by a final decision of a court of competent jurisdiction or an
agreement of MediaOne and New U S
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WEST that a Terminated Inc. Employee is entitled to benefits
under one or more Deferred Plans (other than as a result of
future employment with the MediaOne Group or New U S WEST Group),
such Terminated Employee shall be considered to have Deferred
Benefits solely with respect to those Deferred Plans that owe
him additional benefits (and shall therefore be a Terminated
Communications Employee solely with respect to such Deferred
Plans).
"Terminated Media Employees" shall mean (1) all Terminated Employees
(whether or not they have Deferred Benefits) who were actively
employed by one of the Cable Companies on their last day of
active employment with the Existing U S WEST Group; (2) all
Terminated Employees who were last actively employed (on or after
November 1, 1995 and before the Separation Time) by an entity
that is a member of the MediaOne Group after the Separation Time
(unless such last employer was Existing U S WEST) and are not
entitled to Deferred Benefits at the Separation Time; (3) all
Terminated Employees who were last actively employed (on or after
November 1, 1995 and before the Separation Time) by MGI and are
not entitled to Deferred Benefits at the Separation Time; and (4)
all AirTouch Transfers, regardless of their last day of
employment. Notwithstanding the foregoing, if, after the
Separation Time, it is determined by a final decision of a court
of competent jurisdiction or an agreement of MediaOne and New U S
WEST that a Terminated Media Employee described in clause (2) or
(3) above is entitled to benefits under one or more Deferred
Plans (other than as a result of future employment with the
MediaOne Group or New U S WEST Group), such Terminated Employee
shall be considered to have Deferred Benefits solely with respect
to those Deferred Plans that owe him additional benefits (and
shall therefore be a Terminated Communications Employee solely
with respect to such Deferred Plans.
"Welfare Plan" shall mean an Employee Benefit Plan which is a health
benefit, life insurance or other employee welfare benefit plan,
within the meaning of Section 3(1) of ERISA, which is maintained
by Existing U S WEST, New U S WEST, MediaOne or a Subsidiary of
any of them.
(b) All determinations under this Section 1 with respect to status as an
Employee, Terminated Employee, Media Employee, Communications
Employee, Terminated Media Employee, Terminated Inc. Employee or
Terminated Communications Employee shall be made as of the
Separation Time, unless otherwise specifically set forth in this
Section 1.
(c) Notwithstanding the foregoing definitions, in the event it is unclear
as to whether a Terminated Employee is a Terminated
Communications Employee,
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Terminated Inc. Employee or a Terminated Media Employee, or in
the event that a Terminated Employee was last actively employed
at a time the individual was on a temporary transfer from one
member of the Existing U S WEST Group to another for less than
12 months, MediaOne and New U S WEST shall agree on an equitable
classification of such employee or employees (and the assumption
of any liability attributable thereto).
2. GENERAL PRINCIPLES.
(a) New U S WEST Liabilities. Except as otherwise provided in this
EM Agreement, New U S WEST and its Subsidiaries hereby assume and
agree to pay, perform, fulfill and discharge:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Communications Employees and
Terminated Communications Employees;
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the New U S WEST Business (other than MGI) prior to
the Separation Time by an independent contractor, leased employee
or similar individual or by any person who alleges that he was an
employee of the New U S WEST Business (other than MGI) prior to
the Separation Time or the dependent or beneficiary of any such
independent contractor or alleged employee;
(3) All Liabilities, including litigation costs, which
relate to a Communications Employee or his dependents and
beneficiaries, in each case relating to, arising out of or
resulting from employment by the New U S WEST Group on or after
the Separation Time (including Liabilities under Communications
Employee Benefit Plans and Communications Employee Arrangements);
and
(4) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the New U S WEST Group on or after the Separation
Time by an independent contractor, leased employee or similar
individual or by any person who alleges that he was an employee
of the New U S WEST Group on or after the Separation Time or the
dependent or beneficiary of any such independent contractor or
alleged employee.
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(b) MediaOne Liabilities. Except as otherwise provided in this EM
Agreement, MediaOne and its Subsidiaries hereby assume and
agree to pay, perform, fulfill and discharge:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Media Employees and Terminated Media
Employees;
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the MediaOne Business (other than Existing U S WEST)
or MGI prior to the Separation Time by an independent contractor,
leased employee or similar individual or by any person who
alleges that he was an employee of the MediaOne Business (other
than Existing U S WEST) or MGI prior to the Separation Time or
the dependent or beneficiary of any such independent contractor
or alleged employee;
(3) All Liabilities, including litigation costs, which
relate to a Media Employee or his dependents and beneficiaries,
in each case relating to, arising out of or resulting from
employment by the MediaOne Group on or after the Separation Time
(including Liabilities under Media Employee Benefit Plans or
Media Employee Arrangements); and
(4) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to the MediaOne Group on or after the Separation Time by
an independent contractor, leased employee or similar individual
or by any person who alleges that he was an employee of the
MediaOne Group on or after the Separation Time or the dependent
or beneficiary of any such independent contractor or alleged
employee.
(c) Shared Liabilities. New U S WEST and MediaOne hereby agree to
share equally:
(1) All Employment Related Liabilities (regardless of where
such Employment Related Liabilities arose or arise or were or are
incurred) to or relating to Terminated Inc. Employees; and
(2) All Liabilities, including litigation costs, relating
to, or arising out of or resulting from the performance of
services to Existing U S WEST (but not its Subsidiaries) prior to
the Separation Time by an independent contractor, leased employee
or similar individual or by any person who alleges that he was an
employee of Existing U S WEST prior
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to the Separation Time or the dependent or beneficiary of any
such independent contractor or alleged employee.
(d) Class Action Liabilities. For purposes of determining whether
the New U S WEST Group or Media Group is responsible for
Liabilities involving or arising out of actions relating to
more than one Employee or Terminated Employee, the portion
of Employment Related Liabilities relating to any single
Employee or Terminated Employee shall be in proportion to
the total number of Employees and Terminated Employees to
which the action relates, whether or not all such Employees
or Terminated Employees submit claims.
(e) Appeal Rights. If either New U S WEST or MediaOne believes that
the result arising from the application of the foregoing
provisions of this Section 2 will result in an inequitable
allocation of liability, it may refer the matter to the
Separation Committee and the procedures set forth in Section
12.2 of the Separation Agreement shall apply. Any such
referral must be made in writing within sixty days after the
referring party becomes aware of the Employment Related
Liability to which the referral relates.
(f) Funded Benefits. Notwithstanding the foregoing provisions of
this Section 2, neither the New U S WEST Group nor the
MediaOne Group shall be liable to the extent that any
Liability is payable from a trust or insurance contract
which funds the benefits under an Employee Benefit Plan or
Employee Arrangement maintained by the New U S WEST Group or
MediaOne Group after the Separation Date.
(g) Control of litigation. Except as set forth in sub-section (h)
below, if any litigation is brought by an Employee or
Terminated Employee over Liabilities addressed in this EM
Agreement, the MediaOne Group shall control the litigation
if it is responsible for the Liabilities and the New U S
WEST Group shall control the litigation if it is responsible
for the Liabilities, irrespective of which party is the
defendant, provided that if the party (or its Subsidiaries)
entitled to control the litigation is not sued, it shall not
control the litigation unless it agrees in writing that it
will be responsible for any resulting Liability. In the
case of a shared liability described in subsection (c) above
or an action described in subsection (d) above, the parties
agree to cooperate to jointly control the litigation, unless
one of the parties agrees to assume all Liabilities arising
out of the litigation.
(h) Election to Assume Liability. In the event that any Employee or
Terminated Employee makes a claim or commences litigation
which, if
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successful, would result in Liability that is allocated under
this EM Agreement (other than under this paragraph (h))
exclusively to either MediaOne or New U S WEST (the "Allocated
Liability Party"), but which Liability, if any, arises from
alleged actions taken by an Employee or Terminated Employee of
the business of the other party (the "Other Party"), then the
Allocated Liability Party shall give written notice of such
claim or litigation (the "Claim Notice") to the Other Party
within thirty days of becoming aware that such claim or
litigation involves an Employee or Terminated Employee of the
business of the Other Party. The Other Party may then elect,
by giving written notice (the "Election Notice") to the
Allocated Liability Party within thirty days after receiving
the Claim Notice, to take control of the defense of the claim
and/or litigation and to assume all Liability, including
litigation costs, associated with such claim or litigation
(other than a Liability described in subsection (f) above).
If the Election Notice is given, the Allocated Liability Party
shall cease to have any Liability with respect to the claim or
litigation which is the subject of the Election Notice and all
such Liability (other than a Liability described in subsection
(f) above) shall be assumed by the Other Party.
(i) The provisions of this Section 2 are designed solely to allocate
Liabilities between the New U S WEST Group and the MediaOne
Group. Notwithstanding any provision of this EM Agreement,
except to the extent required by the preceding sentence,
this EM Agreement shall not impose any Liability relating to
an Employee or Terminated Employee on any entity or
Subsidiary other than the entity or Subsidiary that incurred
the Liability. For example, if a Communications Employee
worked solely for one Subsidiary of New U S WEST, that
Subsidiary (but not New U S WEST or any other Subsidiary)
shall be responsible for any unfunded Liabilities owed to
that individual.
3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE
ARRANGEMENTS.
(a) At or prior to the Separation Time, all Communications Employee
Benefit Plans and Communications Employee Arrangements that are
not already sponsored by a member of the New U S WEST Group shall
be transferred to and assumed by New U S WEST in accordance with
the terms of this EM Agreement. Each of such Communications
Employee Benefit Plans and Communications Employee Arrangements
is hereby amended (such
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amendments to be self-effectuating), effective as of the
Separation Time, to provide transfer of sponsorship to New U S
WEST. In addition, each Communications Employee Benefit Plan
and Communications Employee Arrangement is hereby amended
(such amendments to be self-effectuating), effective as of the
Separation Time, to provide that the Liabilities to be assumed
by a corresponding Media Employee Benefit Plan or Media
Employee Arrangement shall cease to be Liabilities under such
Communications Employee Benefit Plan or Communications
Employee Arrangement. New U S WEST, MediaOne and their
Subsidiaries shall take all action reasonably appropriate
prior to the Separation Time (or as soon as practicable
thereafter) to effectuate such assumptions, including
amendments of the applicable Employee Benefit Plans and
Employee Arrangements where desirable.
To the extent that any of the Communications Employee Benefit Plans or
Communications Employee Arrangements is administered by the EBC
prior to the Separation Time, such plan or arrangement shall be
administered by the New U S WEST Employee Benefits Committee on
and after the earlier of the Separation Time or the date
sponsorship of the applicable plan or arrangement is assumed by
New U S WEST. In addition, any functions or responsibilities of
the Treasurer of Existing U S WEST with respect to such plans or
arrangements prior to the Separation Time shall become duties and
responsibilities of either the Investment Committee of New U S
WEST or U S WEST Investment Management Company (such duties and
responsibilities to be allocated in accordance with the rules set
forth in the U S WEST Pension Plan after the Separation Time) on
the date set forth in the preceding sentence.
(b) To the extent that a Media Employee Benefit Plan or Media Employee
Arrangement (or, in the case of any newly adopted Media Employee
Benefit Plan or Media Employee Arrangement, the Employee Benefit
Plan or Employee Arrangement that is replaced by such newly
adopted Media plan or arrangement) is administered by the EBC
prior to the Separation Time, such plan or arrangement shall be
administered by the MediaOne Employee Benefits Committee on and
after the Separation Time. In addition, any functions or
responsibilities of the Treasurer of Existing U S WEST with
respect to such plans or arrangements prior to the Separation
Time shall become duties and responsibilities of the Treasurer of
MediaOne (or such other officer or committee as MediaOne or the
MediaOne Employee Benefits Committee shall designate) on and
after the Separation Time.
11
4. EMPLOYEE SAVINGS PLANS.
(a) On or before the Separation Time, sponsorship of the U S WEST
Savings Plan/ESOP (consisting of the "U S WEST Savings Plan"
and the "U S WEST ESOP") shall be transferred from Existing
U S WEST to New U S WEST. Prior to the Separation Time,
MediaOne shall establish a new defined contribution plan or
plans consisting of a profit-sharing plan and a stock bonus
plan which shall be an employee stock ownership plan (the
"Media Savings Plan/ESOP", consisting of the "Media Savings
Plan" and the "Media ESOP"), effective immediately after the
Separation Time, for the benefit of Media Employees and
Terminated Media Employees (excluding persons described in
clauses (2) or (3) of the definition of Terminated Media
Employee) covered by the existing U S WEST Savings
Plan/ESOP. The Media Savings Plan/ESOP shall initially
contain terms and conditions that are similar to those of
the existing U S WEST Savings Plan/ESOP, including without
limitation (1) provisions required by Section 411(d)(6) of
the Code for account balances to be transferred from the U S
WEST Savings Plan/ESOP, and (2) provisions granting credit
for past service with the Existing U S WEST Group for
purposes of eligibility, vesting, distributions and
withdrawals. Each Media Employee and Terminated Media
Employee who was a participant in the U S WEST Savings
Plan/ESOP as of the Separation Time shall become a
participant in the Media Savings Plan/ESOP as of the
Separation Time.
(b) As soon as reasonably practicable after the Separation Time, New
U S WEST shall cause to be transferred from the U S WEST
Savings Plan to the Media Savings Plan assets having a fair
market value equal to the aggregate value of the account
balances in the U S WEST Savings Plan (but not the ESOP), as
of the date of the transfer, applicable to Media Employees
and Terminated Media Employees, and MediaOne shall cause the
Media Savings Plan to accept such transfers and to assume
all Savings Plan liabilities relating to Media Employees and
Terminated Media Employees (excluding persons described in
clauses (2) or (3) of the definition of Terminated Media
Employee). All such liabilities shall cease to be
liabilities of the U S WEST Savings Plan. Such transfer
shall be in (i) shares of MediaOne Common Stock and New U S
WEST Common Stock to the extent such shares are allocated in
the U S WEST Savings Plan to accounts of Media Employees or
Terminated Media Employees, (ii) notes evidencing loans to
Media Employees or Terminated Media Employees, and
(iii) with the balance in cash or, to the extent that the
parties mutually agree, other securities held by the U S
WEST Savings Plan.
12
(c) As soon as reasonably practicable after the Separation Time, New
U S WEST shall cause to be transferred from the U S WEST
ESOP to the Media ESOP assets having a fair market value
equal to the aggregate value of the account balances in the
U S WEST ESOP (but not the Savings Plan), as of the date of
the transfer, applicable to Media Employees and Terminated
Media Employees, and MediaOne shall cause the Media ESOP to
accept such transfers and to assume all ESOP liabilities
relating to Media Employees and Terminated Media Employees
(excluding persons described in clauses (2) or (3) of the
definition of Terminated Media Employee). All such
liabilities shall cease to be liabilities of the U S WEST
ESOP. Such transfer shall be in shares of MediaOne Common
Stock and of New U S WEST Common Stock. To the greatest
extent possible and consistent with fiduciary duties under
Sections 404 and 406 of ERISA, the shares of Common Stock
shall be transferred so that, immediately following the
transfer, the U S WEST ESOP will have at least 60% of its
assets invested in New U S WEST Common Stock and the Media
ESOP will have at least 60% of its assets invested in
MediaOne Common Stock.
(d) U S WEST Savings Plan/ESOP shall transfer to the Media Savings
Plan/ESOP all qualified domestic relations orders (within
the meaning of Section 414(p) of the Code) ("QDROs") held by
the U S WEST Savings Plan/ESOP with respect to Media
Employees and Terminated Media Employees. New U S WEST
shall cause to be transferred from the U S WEST Savings
Plan/ESOP assets having a fair market value equal to the
aggregate account values relating to such QDROs in
accordance with paragraphs (b) and (c) above, and the Media
Savings Plan ESOP shall assume all liabilities relating to
such QDROs.
(e) The U S WEST ESOP will repay all "acquisition loans" (as defined
in the U S WEST Savings Plan/ESOP) prior to the Separation
Time. If, as of the Separation Time, the U S WEST ESOP
holds shares of common stock that have not been allocated to
participants' accounts, the U S WEST ESOP will transfer to
the Media ESOP unallocated shares of stock having a fair
market value equal to (x) the total market value of all
unallocated shares held by the U S WEST ESOP as of the
Separation Time, multiplied by (y) the aggregate dollar
value of the Employing Company Contributions made under the
U S WEST ESOP during the first calendar quarter of 1998 as
matched allotments to Media Employees and Terminated Media
Employees, divided by (z) the aggregate dollar value of the
Employing Company Contributions made under the U S WEST ESOP
during the first calendar quarter of 1998 as matched
allotments to all Employees and Terminated Employees. To
the greatest
13
extent possible, the unallocated shares transferred to the
Media ESOP pursuant to this paragraph shall be shares of
MediaOne Common Stock.
(f) If required by law, New U S WEST and MediaOne shall cause to be
filed with the IRS all applicable Forms 5310A and any other
required forms with the appropriate governmental agency in
order for the Media Savings Plan/ESOP to receive a transfer
of assets from the U S WEST Savings Plan/ESOP on or
following the Separation Time in accordance with paragraphs
(b), (c), (d) and (e) above. Within nine months after the
Separation Time, MediaOne shall cause to be filed with the
IRS a request for a determination that the Media Savings
Plan/ESOP is qualified under Section 401(a) of the Code.
MediaOne agrees to make all reasonable amendments requested
by the IRS to obtain such determination letter.
(g) Subject to paragraph (h), and in accordance with applicable law
and to the extent consistent with fiduciary duties under
Sections 404 and 406 of ERISA, the U S WEST Savings Plan and
the U S WEST ESOP will maintain a MediaOne Common Stock Fund
for participants who retain such investment of their account
balances after the Separation Time. No new investments in
the MediaOne Common Stock Fund of the U S WEST Savings Plan
or in the MediaOne Common Stock Fund of the U S WEST ESOP
will be permitted after the Separation Time. Subject to
paragraph (h), and in accordance with applicable law and to
the extent consistent with fiduciary duties under Sections
404 and 406 of ERISA, the Media Savings Plan and the Media
ESOP will maintain a New U S WEST Common Stock Fund for
participants who retain such investment of their account
balances after the Separation Time. No new investments in
the New U S WEST Common Stock Fund of the Media Savings Plan
or in the New U S WEST Common Stock Fund of the Media ESOP
will be permitted after the Separation Time. The U S WEST
Savings Plan (but not the ESOP) will maintain the MediaOne
Common Stock Fund, and the Media Savings Plan (but not the
ESOP) will maintain the New U S WEST Common Stock Fund, for
at least five years after the Separation Time; as soon as
practicable after either plan sponsor decides to eliminate
such stock fund, it shall inform the issuer of the stock to
be sold so that the issuer may arrange a facility to
exercise the right of first refusal described below. When
the trustee of the U S WEST Savings Plan intends to sell
MediaOne Common Stock because the MediaOne Common Stock Fund
will no longer be maintained or the trustee of the Media
Savings Plan intends to sell New U S WEST Common Stock
because the New U S WEST Common Stock Fund will no longer be
maintained, such trustee shall first offer such stock to the
issuer prior to offering such stock for sale on the open
market. After the close of business, the issuer shall then
have the right to purchase such stock at the
14
closing price of the stock on that day. If the issuer
does not exercise such right to purchase, the trustee shall be
free to sell the stock on the open market the next day,
provided that,subject to fiduciary duties under Sections 404
and 406 of ERISA, the trustee shall not sell in any one day
more than 20% of the average daily trading volume of the
relevant stock. (For this purpose, the average daily trading
volume is the arithmetic mean of the reported daily trading
volumes of the relevant stock on the New York Stock Exchange
(or, if not traded on the New York Stock Exchange, the
principal exchange on which the stock is traded) in the two
calendar months preceding any such sale.)
(h) Within two years after the Separation Time, the U S WEST ESOP
(but not the Savings Plan) will dispose of all investment in
MediaOne Common Stock and the Media ESOP (but not the
Savings Plan) will dispose of all investment in New U S WEST
Common Stock (each, a "Non-Employer Common Stock"). Subject
to fiduciary duties under Sections 404 and 406 of ERISA, the
U S WEST ESOP shall exchange shares of MediaOne Common Stock
it holds for shares of New U S WEST Common Stock held by the
Media ESOP, and VICE VERSA, at the Common Stocks' relative
fair market values. To the extent such exchanges are not
practicable for some or all of the Non-Employer Common Stock
held by either ESOP, the U S WEST ESOP and the Media ESOP
will sell shares of Non-Employer Common Stock. As soon as
practicable after either plan sponsor decides to sell such
Non-Employer Common Stock, it shall inform the issuer of the
stock to be sold so that the issuer may arrange a facility
to exercise the right of first refusal described below.
When the trustee of the U S WEST ESOP intends to sell
MediaOne Common Stock or the trustee of the Media ESOP
intends to sell New U S WEST Common Stock (other than
because of a sale by, or distribution to, plan
participants), such trustee shall first offer such stock to
the issuer prior to offering such stock for sale on the open
market. After the close of business, the issuer shall then
have the right to purchase such stock at the closing price
of the stock on that day. If the issuer does not exercise
such right to purchase, the trustee shall be free to sell
the stock on the open market the next day. Subject to
fiduciary duties under Sections 404 and 406 of ERISA, from
the Separation Time to and including the second anniversary
of the Separation Time, neither the U S WEST ESOP nor the
Media ESOP will sell in any one day more than 20% of the
average daily trading volume of the relevant Non-Employer
Common Stock. (For this purpose, the average daily trading
volume is the arithmetic mean of the reported daily trading
volumes of the relevant stock on the New York Stock Exchange
(or, if not traded on the New York Stock Exchange, the
principal
15
exchange on which the stock is traded) in the two calendar
months preceding any such sale.)
(i) MediaOne and New U S WEST shall take such action as necessary to
ensure that participants in the U S WEST Savings Plan/ESOP
and the Media Savings Plan/ESOP are notified that a quiet
period will occur beginning on or about the Separation Time,
during which changes in investment direction with respect to
participants' accounts generally will not be permitted.
(j) The Media Savings Plan/ESOP and the assets and liabilities with
respect thereto shall be considered a Media Employee Benefit
Plan. The U S WEST Savings Plan/ESOP and the assets and
liabilities with respect thereto shall be considered a
Communications Employee Benefit Plan.
16
5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES.
(a) On or prior to the Separation Time, sponsorship of the U S WEST
Pension Plan shall be transferred from Existing U S WEST to
New U S WEST. Prior to the Separation Time, MediaOne shall
establish a defined benefit pension plan (the "Media Pension
Plan"), effective immediately after the Separation Time, for
the benefit of the Media Employees and Terminated Media
Employees (excluding persons described in clauses (2) or (3)
of the definition of Terminated Media Employee) covered by
the existing U S WEST Pension Plan. The Media Pension Plan
shall contain terms and conditions that are substantially
similar to those of the existing U S WEST Pension Plan,
including credit for past service with the Existing U S WEST
Group for eligibility, vesting, early retirement, and,
contingent upon the transfer of assets set forth in
paragraph (b) below, benefit accrual and compensation earned
with the Existing U S WEST Group. Notwithstanding the
preceding sentence, the Media Pension Plan shall contain two
benefit structures. In general, (1) the benefits for all
Media Employees who are employed immediately after the
Separation Time and who earned benefits under Articles V-B
or V-D of such Pension Plan prior to the Separation Time
shall continue in such benefit structure and (2) all other
Media Employees, as well as all future employees of the
MediaOne Group shall participate in a benefit structure
substantially similar to the benefit structure currently
contained in the Appendix I of the U S WEST Pension Plan,
provided that this EM Agreement does not obligate MediaOne
to continue to maintain such benefit formulas for any
particular period of time. In addition, the U S WEST
Pension Plan currently contains two subsidies relating to
service pensions: (i) the early retirement pension under the
grandfathered formula in Article V-B (but not the DLS
formula in Article V-D) is unreduced (or provides for a
lower reduction) for Participants that are service pension
eligible and (ii) if a lump sum service pension is elected,
a 0% interest rate applies prior to age 65. The Media
Pension Plan shall include, for all Media Employees
described in clause (2) of the second preceding sentence
(but not any future employees of the MediaOne Group or any
Terminated Media Employees) whose combined age and service
(in each case rounded up to the next integer), as of
January 1, 1999, equals or exceeds 55, both of the foregoing
subsidies with respect to both the DLS formula set forth in
Article 6, and the grandfathered formula in Article 7 of
Appendix I, of the Pension Plan; such provisions shall be
referred to as the "Service Pension Amendments."
Immediately after the Separation Time, all Liabilities under the U S
WEST Pension Plan to, or relating to, Media Employees or
Terminated Media Employees (excluding persons described in
clauses (2) or (3) of the
17
definition of Terminated Media Employee) shall be assumed by
the Media Pension Plan and shall cease to be Liabilities of
the U S WEST Pension Plans. Such Liabilities shall include
all accrued benefits, within the meaning of Section 411(d)(6)
of the Code, all ancillary benefits (such as the death
benefits set forth in Article VII of the U S WEST Pension Plan
and disability benefits set forth in Appendix J thereof) and
any other benefits. The Media Pension Plan shall comply with
Section 411(d)(6) of the Code with respect to such assumed
Liabilities. Each Media Employee and Terminated Media
Employee who was a participant in the U S WEST Pension Plan as
of the Separation Time shall become a participant in the Media
Pension Plan as of the Separation Time.
Notwithstanding the foregoing, the following rules shall apply to any
Terminated Employee who is not vested in the U S WEST Pension
Plan at the Separation Time who returns to employment with either
the MediaOne Group or the New U S WEST Group after the Separation
Time. To the extent required by law, any such Terminated
Employee who becomes entitled to credit, for benefit accrual
purposes, for his service with the Old U S WEST Group prior to
the Separation Time as a result of returning to employment after
the Separation Time, then (1) any benefits attributable to such
prior service shall be payable from the Media Pension Plan if the
individual returns to employment with the MediaOne Group and (2)
any benefits attributable to such prior service shall be payable
from the U S WEST Pension Plan if the individual returned to
employment with the New U S WEST Group.
(b) New U S WEST shall cause a "spin-off" transfer within the meaning
of Section 414(1) of the Code, from the U S WEST Pension
Plan to the Media Pension Plan in the manner and at the
times specified in paragraph (e) below. For purposes of
this Section 5, the following definitions shall apply:
(1) "Actuaries" refer to the enrolled actuaries for the U S WEST
Pension Plan at the Separation Time.
(2) "Contingent Amount" equals the difference between the amount
that the Final Determination provides that should have
been transferred from the U S WEST Pension Plan to the
Media Pension Plan in connection with the spinoff and
the Media Asset Share. If the difference is positive,
that is, the Final Determination provides that
additional assets should have been transferred to the
Media Pension Plan, the difference shall be referred to
as a "Positive Contingent Amount." If the difference
is negative, that is, the Final Determination provides
that the
18
amount that should have been transferred is less than the
Media Asset Share, the difference shall be referred to as a
"Negative Contingent Amount."
(3) "Final Determination" means a final nonappealable
determination by a court, or a final settlement of
litigation or a dispute among MediaOne, New U S WEST,
the U S WEST Pension Plan and the Media Pension Plan
and any other parties to the litigation or dispute,
that provides that the amount of assets to be
transferred from U S WEST Pension Plan to the Media
Pension Plan in connection with the spinoff should be
more than or less than the Media Asset Share.
(4) "Media Asset Share" shall mean the product of: (i) the fair
market value of the assets of the U S WEST Pension Plan
as of June 30, 1998, and (ii) the Media Fraction. For
this purpose, (i) the value of any publicly traded
security and cash shall be determined based on the
audited reports of the trustee of the U S WEST Pension
Plan and (ii) the value of any other securities or
property shall be determined by one or more third
parties selected by MediaOne and New U S WEST, based on
the most recent appraisal or valuation of the
particular security or property adjusted, if necessary,
as determined by the third party.
(5) "Media Economic PBO" for the U S WEST Pension Plan shall
mean the portion of the Total Economic PBO as of June
30, 1998 attributable to the Media Employees and
Terminated Media Employees, as calculated by the
Actuaries. For this purpose, the U S WEST Pension Plan
shall be deemed amended to include the Service Pension
Amendments.
(6) "Media Fraction" for the U S WEST Pension Plan shall mean
(i) the Media Economic PBO, divided by (ii) the Total
Economic PBO.
(7) "Premium Amount" shall equal the estimated PBGC premiums
initially paid to the PBGC by the Media Pension Plan
for plan year 1998, without regard to any adjustment
required as a result of an audit.
(8) "Total Economic PBO" shall be the projected benefit
obligation, as defined in SFAS No. 87, of the U S WEST
Pension Plan, as calculated by the Actuaries as of
June 30, 1998 using the actuarial methods and
assumptions set forth in Schedule 1
19
hereto and any others mutually agreeable to the parties.
For this purpose, the U S WEST Pension Plan shall be deemed
amended to include the Service Pension Amendments.
(9) "Transfer Amount" shall equal the Media Asset Share plus the
Premium Amount plus the Positive Contingent Amount and
minus the Negative Contingent Amount.
(c) In order to determine the Media Asset Share, MediaOne and New U S
WEST shall determine in good faith the Media Employees,
Terminated Media Employees, Communications Employees,
Terminated Communications Employees and Terminated Inc.
Employees as of June 30, 1998. Such determinations shall be
updated as soon as practicable but no later than January 1,
1999, to take into account the reclassification of Employees
as of the Separation Time as Media Employees or
Communications Employees.
(d) If required by law, MediaOne and New U S WEST shall cause to be
filed all applicable Forms 5310A and any other required IRS
or PBGC forms with the appropriate governmental agency in
order for the Media Pension Plan to receive a transfer of
assets from the U S WEST Pension Plan on or following the
Separation Time, in accordance with paragraph (e) below.
Within nine months after the Separation Time, MediaOne shall
cause to be filed with the IRS a request for a determination
that the Media Pension Plan is qualified under Section
401(a) of the Code. MediaOne agrees to make all reasonable
amendments requested by the IRS to obtain such determination
letter.
(e) New U S WEST shall cause the U S WEST Pension Plan to transfer
assets in an amount equal to the Transfer Amount (plus
interest to the extent set forth below) to the Media Pension
Plan and MediaOne shall cause the Media Pension Plan to
accept such assets equal to such Transfer Amount (and
interest), as follows:
(1) On July 1, 1998, an amount equal to 98% of the Media Asset
Share, as estimated by the Actuaries (immediately prior
to July 1, 1998) and provided to MediaOne and New U S
WEST in writing. Such estimate shall be calculated by
assuming the Media Fraction was calculated as of
May 31, 1998 and by using the fair market value of the
assets, as reported by the trustee of the U S WEST
Pension Plan, on May 31, 1998.
(2) As soon as practicable after the value of the plan assets as
of June 30, 1998 is determined and the Media Asset Share is
20
determined by the Actuaries and provided in writing to
MediaOne and New U S WEST (but not later than 30 days
after such writing is provided), the excess of the
Media Asset Share over the sum of (i) the interim
transfer effected under (1) above, and (ii) any
benefit payments paid to Terminated Media Employees or
Media Employees by the U S WEST Pension Plan after
June 30, 1998. (If such amount is a negative number,
such amount shall be transferred from the Media Pension
Plan to the U S WEST Pension Plan.)
(3) In addition, if there is a Final Determination that sets
forth a Contingent Amount, New U S WEST, the U S WEST
Pension Plan, MediaOne, and the Media Pension Plan
agree as follows:
(A) If there is a Positive Contingent Amount, as soon as
practicable after the Final Determination, the U S WEST
Pension Plan shall transfer the assets equal to the
Positive Contingent Amount to the Media Pension Plan,
and the Media Pension Plan shall accept such transfers;
and
(B) If there is a Negative Contingent Amount, as soon as
practicable after the Final Determination, the Media
Pension Plan shall transfer the assets equal to the
Negative Contingent Amount to the U S WEST Pension
Plan, and the U S WEST Pension Plan shall accept such
transfers.
(4) As soon as practicable after the Premium Amount is
determined and paid by the Media Pension Plan, an amount
equal to the Premium Amount.
To the extent any of the foregoing amounts set forth in paragraphs (1)
through (4) of this subsection (e) are paid after July 1, 1998,
such amount shall be increased or decreased by interest from
July 1, 1998 to the date of payment (to the extent not paid or
previously advanced) at a rate equal to the average monthly rate
on the Mellon Trust Short Term Interest Fund (STIF), compounded
monthly, in which the U S WEST Pension Plan and the Media Pension
Plan hold certain temporary cash funds from time to time (such
rate to be provided by the trustee of the plan making the
payment), during the period commencing on July 1, 1998 and ending
with the date of payment; provided that (i) no interest shall be
paid with respect to the Contingent Amount if the Final
Determination already
21
provides for an adjustment reflecting interest or plan earnings
and (ii) no interest shall be paid with respect to the Premium
Amount.
With respect to all of the foregoing transfers between the U S WEST
Pension Plan and the Media Pension Plan, the specific assets to
be transferred shall be cash and other liquid assets, as agreed
upon by New U S WEST and MediaOne in good faith so as to not
treat the Media Pension Plan and the U S WEST Pension Plan
unfairly in any material respect.
(f) Notwithstanding subsections (a) through (e) above, the value of
assets to be transferred to and liabilities to be assumed by
the Media Pension Plan shall be no less than that necessary
to satisfy the requirements of Section 414(1) of the Code,
as determined by the Actuaries, based on the assumptions
used by the PBGC in the case of a termination of a trusteed
pension plan.
(g) MediaOne, New U S WEST, the U S WEST Pension Plan and the Media
Pension Plan (collectively, the "Pension Parties") all agree
that, if there is a Final Determination that provides for a
Contingent Amount, such Final Determination shall be
satisfied to the maximum extent permitted by law by making
the transfers among the U S WEST Pension Plan and the Media
Pension Plan as set forth above, as opposed to requiring any
additional contributions or payments (a "Corporate
Liability") from either MediaOne, New U S WEST or any of
their Subsidiaries. The Pension Parties agree to cooperate
to the maximum extent to ensure that no such Corporate
Liability ensues as a result of any Final Determination or
claims relating to the allocation of plan assets between the
two plans. If any litigation is brought against one of the
Pension Parties claiming that the amount of assets
transferred from the U S WEST Pension Plan to the Media
Pension Plan should have been higher or lower, the other
Pension Parties shall, at the request of the Pension Party
that was sued, agree to be joined in any such litigation and
to use their best efforts to ensure that any potential
Contingent Amount be satisfied by plan-to-plan transfers, as
opposed to Corporate Liability.
In addition, the Pension Parties agree that, to the extent permitted
by law, any costs of defending any claims that a Contingent
Amount is payable and any Liabilities arising out of such claims
shall be borne by the U S WEST Pension Plan and the Media Pension
Plan.
The following rules shall apply if there is any Corporate Liability
for a Contingent Amount or arising out of any claims that a
Contingent Amount is payable. Any Corporate Liability that is an
out-of-pocket cost of defending any such claims (whether or not
the claims result in
22
litigation), such as attorneys or consultant fees (but
excluding any fees for plaintiffs' attorneys) and travel
expenses, shall be borne equally by New U S WEST and MediaOne;
provided that each party shall bear all expenses for salaries
and benefits of its employees. Any other Corporate Liability,
such as the payment of a Contingent Amount, any direct
payments to claimants in lieu of a Contingent Amount or fees
for plaintiffs' attorneys, shall be borne by (1) New U S WEST,
if the claimants asserted that the amount of plan assets
transferred to the Media Pension Plan should have been greater
than the amount actually transferred and (2) MediaOne, if the
claimants asserted that the amount of plan assets transferred
to the Media Pension Plan should have been less than the
amount actually transferred.
(h) The U S WEST Pension Plan shall transfer to the Media Pension
Plan all qualified domestic relations orders (within the
meaning of Section 414(p) of the Code) ("QDROs") held by the
U S WEST Pension Plan with respect to Media Employees and
Terminated Media Employees.
(i) Qualified transfers. This subsection (i) applies if a qualified
transfer, within the meaning of Code Section 420 (a
"Qualified Transfer"), is made within either the U S WEST
Pension Plan or the Media Pension Plan during the calendar
year in which the Separation Time occurs.
(1) If the Internal Revenue Service, a court of competent
jurisdiction or the sponsor of the plan in which the
Qualified Transfer is made determines that any
Terminated Employees who terminated employment during
the period commencing twelve months prior to the
Qualified Transfer and ending on the Separation Time
are entitled to vested pension benefits solely because
of the Qualified Transfer, then, notwithstanding any
other provision of this EM Agreement, the plan in which
the Qualified Transfer is made shall provide such
vested pension benefits to such Terminated Employee.
(2) If (i) the Internal Revenue Service declines to issue a
favorable determination letter with respect to the
provisions of either the U S WEST Pension Plan or the
Media Pension Plan (the "420 Plan") setting forth the
terms of a Qualified Transfer unless Employees or other
employees who terminate employment after the Separation
Time from the business of the sponsor of the other
pension plan (the "Other Plan") are provided vested
pension benefits on account of the Qualified Transfer
or (ii) a court of competent jurisdiction determines
that such Employees or employees are entitled to such
benefits on account of the
23
Qualified Transfer, then the Other Plan shall provide such
Employees or employees with the required vested pension
benefits. In addition, the sponsor of the 420 Plan shall
cause the 420 Plan to transfer assets in an amount equal to
the Vesting Amount to the Other Plan and the Other Plan
shall accept such assets equal to such Vesting Amount as
follows. The Vesting Amount shall equal the [excess, if
any, of the Media Share (calculated for this purpose on the
assumption that all participants in the U S WEST Pension
Plan were vested at the Separation Time) over the actual
Media Share], as determined by the Actuaries and provided to
MediaOne and New U S WEST in writing, increased with
interest in accordance with subsection (e) above.
(j) The Media Pension Plan and the assets and liabilities with
respect thereto shall be considered a Media Employee Benefit
Plan. The U S WEST Pension Plan and the assets and
liabilities with respect thereto shall be considered a
Communications Employee Benefit Plan.
6. OTHER TAX-QUALIFIED PLANS.
Any other plan that is qualified under Section 401 of the Code and is not
described in Section 4 or 5 above shall be retained by the entity that
sponsors it before the Separation Time.
7. WELFARE PLANS.
(a) Communications Plans. As of the Separation Time, any Welfare
Plan, including all insurance or amounts held in trust and
associated therewith to the extent attributable solely to
such plan, which exclusively covers Communications
Employees, Terminated Communications Employees and/or
Terminated Inc. Employees and their eligible spouses and
dependents shall be transferred to and assumed by New U S
WEST and shall be deemed to be amended to provide for such
transfer and assumption. New U S WEST or its Subsidiaries
shall assume and pay the Liability with respect thereto
(whether accrued or arising before or after the Separation
Time). All such plans shall be considered Communications
Employee Benefit Plans.
(b) Media Plans. As of the Separation Time, any Welfare Plan,
including all insurance or amounts held in trust and
associated therewith to the extent attributable solely to
such plan, which exclusively covers Media Employees and/or
Terminated Media Employees and their eligible spouses and
dependents shall be retained by the MediaOne Group and, if
24
necessary, are hereby amended to provide for such retention
(without the need for any further action). MediaOne or its
Subsidiaries shall assume and pay the Liability with respect
thereto (whether accrued or arising before or after the
Separation Time). All such plans shall be considered Media
Employee Benefit Plans.
(c) Joint Plans. This subsection (c) addresses the treatment of any
Welfare Plan (including, without limitation, any retiree
medical plan or retiree life insurance plan) which, as of
the Separation Time, covers both: (1) Communications
Employees, Terminated Communications Employees and/or
Terminated Inc. Employees; and (2) Media Employees and/or
Terminated Media Employees (a "Joint Welfare Plan").
(1) As of the Separation Time, each Joint Welfare Plan shall be
transferred to and assumed by New U S WEST or one of its
Subsidiaries. Each of such Joint Welfare Plans is hereby
amended as set forth in Section 3 of this EM Agreement. At
and immediately following the Separation Time, New U S WEST
or its Subsidiaries shall maintain as a separate plan and
assume and pay the Liabilities and expenses (whether accrued
or arising before or after the Separation Time) with respect
to that portion of the Joint Welfare Plans as relates to
obligations to Communications Employees, Terminated
Communications Employees and Terminated Inc. Employees; in
addition, any such retiree medical plan shall assume any
retiree medical Liabilities or expenses of persons described
in clauses (2) or (3) of the definition of Terminated Media
Employee. This EM Agreement does not obligate New U S WEST
to continue to maintain such plans or their terms for any
particular period of time. All such plans shall be
considered Communications Employee Benefit Plans.
(2) As soon as practicable, MediaOne or its Subsidiaries shall
establish and maintain one or more separate plans
corresponding to each of the Joint Welfare Plans. Such
Plans shall be effective as of the Separation Time and shall
contain such benefits as desired by MediaOne. However, such
plans shall assume and pay the Liabilities and expenses
(whether accrued or arising before or after the Separation
Time) under the Joint Welfare Plans with respect to Media
Employees and Terminated Media Employees, provided that any
new Media retiree medical plan shall not assume any retiree
medical Liabilities or expenses of persons described in
clauses (2) or (3) of the definition of Terminated Media
Employee. All Liabilities and expenses assumed by such
25
Media Employee Benefit Plans shall cease to be Liabilities
of the Communications Employee Benefit Plans described in
the preceding paragraph. The Liabilities of each such Joint
Welfare Plan so assumed by MediaOne or its Subsidiaries
together with each such separate plan established by
MediaOne, shall be considered a Media Employee Benefit Plan.
Unless MediaOne or its Subsidiaries adopts a plan with
respect to a Joint Welfare Plan prior to the Separation
Time, MediaOne is hereby deemed to have adopted (without the
requirement of any additional action), effective as of the
Separation Time, a separate Media Welfare Plan that is
substantially identical in all respects to the Joint Welfare
Plan it replaces, provided that this EM Agreement does not
obligate MediaOne to continue to maintain such terms for any
particular period of time.
(3) MediaOne and New U S WEST shall use commercially reasonable
efforts to obtain, effective as of the Separation Time,
separate coverages or to split the coverages between
MediaOne and New U S WEST under the Joint Welfare Plans that
provided benefits through Provider Contracts prior to the
Separation Time. Such coverage shall be on substantially
the same terms and conditions as applied immediately before
the Separation Time, or such other terms and conditions as
are acceptable to MediaOne and New U S WEST. To the extent
practicable, such coverages shall be obtained by entering
into a separate contract between MediaOne and the third
party. For purposes of this paragraph, the term "Provider
Contract" shall mean a contract to provide benefits with an
insurance company, health maintenance organization,
preferred provider organization or similar provider of
benefits, as well as third party administrative services
contracts. To the extent such efforts are not successful
with respect to any Provider Contract, then New U S WEST
shall administer such Provider Contract on an equitable
basis for the benefit of both MediaOne and New U S WEST
until the expiration of the applicable contract. For any
period after the Separation Time when MediaOne is
participating in any such Provider Contract administered by
New U S WEST, MediaOne shall pay an allocable share of the
cost of such contract based upon the actual experience
attributable to Media Employees and Terminated Media
Employees thereunder, or if actual experience is not readily
determinable, based upon the relative headcount of Media
Employees and Terminated Media Employees to all individuals
covered by such Provider Contract. Such payments shall
include interest on any funds advanced by
26
New U S WEST at a rate to be agreed upon in a services
agreement to be effective as of the Separation Time.
(d) Continuing Treatment. Notwithstanding the foregoing provisions
of this Section 7, all treatments which have been
precertified or are being provided as of the Separation Time
shall be provided without interruption under the appropriate
Welfare Plan until such treatment is concluded or
discontinued pursuant to applicable plan rules and
limitations, but New U S WEST, in the case of a
Communications Employee or Terminated Communications
Employee, or MediaOne, in the case of a Media Employee or
Terminated Media Employee, shall be responsible for all
expenses relating to, arising out of or resulting from such
on-going treatments after the Separation Time.
(e) Continuance of Elections. MediaOne and New U S WEST shall cause
the Welfare Plans which they or their Subsidiaries maintain
after the Separation Time to recognize and maintain all
coverage and contribution elections made by Employees under
the Welfare Plans maintained by the Existing U S WEST Group
prior to the Separation Time and shall apply such elections
under the Welfare Plans maintained by MediaOne and New U S
WEST or their Subsidiaries, whichever is applicable, for the
remainder of the period or periods for which such elections
are by their terms applicable. Neither the transfer or
other movement of employment from one member of the Existing
U S WEST Group to another member on or before the Separation
Time nor the transfer and assignment to the New U S WEST
Group or the MediaOne Group in connection with the
Reorganization, Contribution and Separation shall constitute
or be treated as a "status change" under the Welfare Plans
maintained by either Existing U S WEST, New U S WEST,
MediaOne or their Subsidiaries.
(f) Co-Payments and Maximum Benefits. MediaOne and New U S WEST
shall cause the Welfare Plans which they or their
Subsidiaries maintain after the Separation Time to recognize
and give credit for:
(1) All amounts applied to deductibles, out-of-pocket maximums,
and other applicable benefit coverage limits with
respect to Employees covered by Welfare Plans
maintained by the Existing U S WEST Group prior to the
Separation Time for the remainder of the year in which
the Separation Time occurs; and
(2) All benefits paid to Employees under the Welfare Plans
maintained by the Existing U S WEST Group prior to the
Separation Time for purposes of determining when such
persons have reached their lifetime maximum benefits
under the Welfare
27
Plans maintained by MediaOne and New U S WEST or their
Subsidiaries, whichever is applicable, after the Separation
Time.
(g) Pre-existing conditions. After the Separation Time, any group
health plan maintained by MediaOne and New U S WEST or their
Subsidiaries shall be prohibited from making exceptions from
the coverage of individuals who were Employees or Terminated
Employees prior to the Separation Time and their eligible
spouses and dependents for pre-existing conditions except to
the extent such exception is applicable under the plan in
effect immediately prior to the Separation Time.
(h) COBRA. Notwithstanding the foregoing provisions of this Section
7:
(1) New U S WEST or its Subsidiaries shall be responsible for
providing coverage required under COBRA, including the
administration of such coverage, to (A) all Employees
and Terminated Employees (and their eligible spouses
and dependents) whose entitlement to benefits under
COBRA is attributable to a "qualifying event," as
defined in COBRA, which occurred before the Separation
Time under any group health plan other than a group
health plan maintained by the Cable Companies and (B)
all Communications Employees, Terminated Communications
Employees and Terminated Inc. Employees if such
individual's entitlement to benefits under COBRA is
attributable to a "qualifying event" which occurs on or
after the Separation Time.
(2) MediaOne or its Subsidiaries shall be responsible for
providing coverage required under COBRA, including the
administration of such coverage, to (A) all Employees
and Terminated Employees (and their eligible spouses
and dependents) whose entitlement to benefits under
COBRA is attributable to a "qualifying event," as
defined in COBRA, which occurred before the Separation
Time under any group health plan maintained by the
Cable Companies and (B) all Media Employees and
Terminated Media Employees if such individual's
entitlement to benefits under COBRA is attributable to
a "qualifying event" which occurs on or after the
Separation Time.
(i) Long-Term Disability. Notwithstanding the foregoing provisions
of this Section 7, this subsection (i) applies to long-term
disability benefits provided to Terminated Employees other
than through the U S WEST Pension Plan ("LTD").
28
(1) New U S WEST shall be responsible for providing LTD,
including the administration of such coverage, to
Terminated Communications Employees, Terminated Inc.
Employees and Terminated Media Employees who were
employed immediately prior to commencing LTD by an
employer other than one of the Cable Companies.
(2) MediaOne shall be responsible for providing LTD, including
the administration of such coverage, to Terminated
Media Employees who were employed immediately prior to
commencing LTD by one of the Cable Companies.
8. VEBA'S.
(a) As of the Separation Time, sponsorship of the U S WEST Benefit
Assurance Trust ("BAT"), the U S WEST Management Benefit
Assurance Trust ("MBAT") and U S WEST Life Insurance Welfare
Trust ("Life Insurance Trust") shall be transferred from
Existing U S WEST to New U S WEST. In addition, each of the
BAT, MBAT and Life Insurance Trust are hereby amended (such
amendments to be self-effectuating), effective as of the
Separation Time, to provide that the "Company" (as well as
the sponsor, settlor and all other similar terms) under such
trusts shall be New U S WEST and that the trust shall be
administered by New U S WEST.
(b) Sponsorship of the U S WEST VEBA Trust shall be retained by
MediaOne or, at its option, transferred to Multimedia.
(c) Effective as of the Separation Time, MediaOne shall adopt one or
more new voluntary employee benefit associations or modify
the U S WEST VEBA Trust (the "Media VEBA") to assume,
immediately after the Separation Time, all Liabilities under
the MBAT and Life Insurance Trust to, or relating to, Media
Employees or Terminated Media Employees (excluding persons
described in clauses (2) or (3) of the definition of
Terminated Media Employee); all such Liabilities shall cease
to be Liabilities of the MBAT and Life Insurance Trust. The
Media VEBA shall comply with Code Sections 419, 419A, 501(a)
and 501(c)(9).
(d) As soon as practicable after the Separation Time, New U S WEST
shall cause a transfer of assets from the MBAT and Life
Insurance Trust to the Media VEBA in the manner and at the
times specified in paragraph (f)
29
below. For purposes of this Section, the following definitions
shall apply:
(i) "Total Economic APBO" shall be the accumulated
postretirement benefit obligation (as defined in
SFAS No. 106) of the MBAT and Life Insurance Trust
(excluding liabilities for supplemental and
dependent life insurance), as calculated by the
Actuaries, as of June 30, 1998 using actuarial
methods and assumptions set forth in Schedule 2
hereto and any others mutually agreeable to the
parties.
(ii) "Actuaries" refer to the actuaries for the MBAT and
Life Insurance Trust at the Separation Time.
(iii) "Media Economic APBO" shall mean the portion of
the Total Economic APBO attributable to the Media
Employees and Terminated Media Employees, as
calculated by the Actuaries.
(iv) "Media Fraction" shall mean (1) the Media Economic
APBO, divided by (2) the Total Economic APBO.
(v) "Media Asset Share" shall mean the product of: (1) the
fair market value as of June 30, 1998 and (2) the
Media Fraction. For this purpose, (i) the value
of any publicly traded security and cash shall be
determined based on the audited reports of the
trustee of the applicable trust and (ii) the value
of any other securities or property shall be
determined by one or more third parties selected
by MediaOne and New U S WEST, based on the most
recent appraisal or valuation of the particular
security or property adjusted, if necessary, as
determined by the third party.
(vi) "Supplemental and Dependent Life Assets" shall mean
any assets which are segregated for the purpose of
providing supplemental and dependent life
insurance.
Notwithstanding the above, the Total Economic APBO, the Media
Economic APBO and the Media Asset Share shall be determined
separately for the MBAT and the Life Insurance
30
Trust. In addition, in order to determine the Media Asset
Share, the provisions of Section 5(c) shall apply.
(e) Within nine months after the Separation Time, MediaOne shall
cause to be filed with the IRS a request for a determination
that the Media VEBA is tax-exempt under Section 501(c)(9) of
the Code (unless the New VEBA is the existing U S WEST VEBA
Trust and New U S WEST agrees no such filing is required).
MediaOne agrees to make all reasonable amendments requested
by the IRS to obtain such letter. New U S WEST and MediaOne
agree to cooperate with each other to fulfill any filing
and/or regulatory reporting obligations with respect to such
transfers.
(f) New U S WEST shall cause the following asset transfers from the
MBAT and Life Insurance Trust to the Media VEBA and MediaOne
shall cause the Media VEBA to accept such asset transfers:
(1) On July 1, 1998, an amount equal to 98% of the Media Asset
Share, as estimated by the Actuaries in writing
(immediately prior to July 1, 1998) to MediaOne and New
U S WEST. Such estimate shall be calculated by
assuming the Media Fraction was calculated as of
May 31, 1998 and by using the fair market value of the
assets, as reported by the trustee of the applicable
trust, on May 31, 1998.
(2) On July 1, 1998, an amount equal to the Supplemental and
Dependent Life Assets multiplied by a fraction, the
numerator of which is the amount of premiums paid by
Media Employees and Terminated Media Employees for
supplemental and dependent life insurance during the
last full calendar year prior to the Separation Time
and the denominator of which is the total premiums for
such coverage paid by all Employees and Terminated
Employees during that year.
(3) As soon as practicable after the value of the assets as of
June 30, 1998 is determined and the Media Asset Share
is determined by the Actuaries in writing to MediaOne
and New U S WEST (but not later than 30 days after such
writing is provided), the excess of the Media Asset
Share over the sum of the interim transfer under
(1) above and any benefit payments to Terminated Media
Employees by the MBAT and Life Insurance Trust after
June 30, 1998. (If such amount is a negative number,
such amount shall be transferred from the Media VEBA to
the MBAT and Life Insurance Trust.)
31
(4) In the event there is any litigation or claims that the
amount transferred from the MBAT and Life Insurance
Trusts to the Media VEBA should be larger or smaller,
the amount transferred shall be adjusted in accordance
with all of the provisions set forth in Section 5 of
this EM Agreement relating to a Contingent Amount and
claims over the amount of the transfer. In addition,
the parties agree that, to the extent permitted by law,
any costs of defending any such claims and any
Liabilities arising out of such claims shall be borne
by the MBAT, Life Insurance Trust and the Media VEBA.
Any such Liability for a transfer or arising out of any
claims that a transfer is payable which cannot be borne
by the MBAT, Life Insurance Trust or the Media VEBA
shall be borne by New U S WEST or MediaOne in
accordance with the last paragraph of Section 5(g) of
this EM Agreement.
To the extent any of the foregoing amounts is paid after July 1, 1998,
such amount shall be increased or decreased by interest from
July 1, 1998 to the date of payment (to the extent not paid or
previously advanced) at a rate equal to the average monthly rate
on the Mellon Trust Short Term Interest Fund (STIF), compounded
monthly, in which the MBAT and Life Insurance Trust and the Media
VEBA hold certain temporary cash funds from time to time (such
rate to be provided by the trustee of the plan making the
payment), during the period commencing on July 1, 1998 and ending
with the date of payment; provided that no interest shall be paid
with respect to the amounts in clause (4) above if the Final
Determination already provides for an adjustment reflecting
interest or plan earnings.
With respect to all of the foregoing transfers and any transfer
required by subsection (g) below, the specific assets to be
transferred shall be cash and other liquid assets, as agreed upon
by New U S WEST and MediaOne in good faith so as to not treat the
MBAT, Life Insurance Trust and Media VEBA unfairly in any
material respect.
(g) As soon as practicable after July 1, 1998, MediaOne shall cause a
transfer of assets from the U S WEST VEBA Trust to the MBAT
in an amount equal to the balance in the U S WEST VEBA Trust
immediately prior to July 1, 1998 (and before any transfers
described in paragraph (f) above) multiplied by a fraction,
the numerator of which is the amount of contributions made
to that trust for calendar year 1998 (up through June 30,
1998) on behalf of the New U S WEST Group and the denominator of
which is the total amount of all contributions made to that
trust for
32
1998 (up through June 30, 1998), increased by interest on the
unpaid amount due from July 1, 1998 to the date of payment at the
rate of (8%) per annum. In lieu of these transfers, the parties
may agree to offset the amount to be transferred against the
transfers required in subsection (f) above.
9. INCENTIVE COMPENSATION.
(a) Stock Options. Options to purchase shares of Communications
Stock ("Communications Options") and shares of Media Stock
("Media Options") which are unexercised as of the Separation
Time and which were issued pursuant to the terms of the
Amended U S WEST 1994 Stock Plan, the U S WEST Media Group
1996 Stock Option Plan, the U S WEST Media Group 1997 Stock
Option Plan and the U S WEST Communications Group 1997 Stock
Option Plan (collectively the "Option Plans") shall be
treated as follows:
(1) New U S WEST shall assume the U S WEST Communications Group
1997 Stock Option Plan and all obligations under such
plan.
(2) MediaOne shall retain the U S WEST Media Group 1996 Stock
Option Plan and the U S WEST Media Group 1997 Stock
Option Plan and all obligations under such plans.
(3) MediaOne shall retain the Amended U S WEST 1994 Stock Plan
and all obligations with respect to Media Options under
such plan.
(4) New U S West shall establish a new stock plan to be
effective as of the Separation Time and shall assume,
under such plan, all obligations with respect to
Communications Options issued under the Amended U S
WEST 1994 Stock Plan.
(5) Unexercised options issued under any of the Option Plans
shall continue in effect for their original term
subject to paragraph (6) below and the following
adjustments to reflect the transactions contemplated by
the Separation Agreement.
(i) No Media Dividend shall be distributed with respect to any
Media Options. However, in accordance with the following
sentence, the number of Media Options held by any person
shall be converted into a higher number of options to
purchase shares of MediaOne Common Stock and the exercise
price of each such
33
option shall be decreased. The number of options shall be
increased and the exercise price of each share under each
option shall be decreased to reflect the Media Dividend in
a manner consistent with Accounting Rule EITF 90-9 in order
to preserve the economic value of the options.
(ii) The Communications Options shall be converted to options to
purchase shares of New U S WEST Common Stock on a one for
one basis; the exercise price shall not change.
(6) Vested options under any of the Option Plans shall be
exercised on and after the Separation Time by an
Employee by contacting the stock plan administrator for
his or her employer or former employer. New U S WEST
and MediaOne each agrees to act as agent (the
"crossover agent") for the other (the "other company")
in the case of an exercise of an option by an Employee
of the crossover agent under an Option Plan of the
other company. In addition, New U S WEST agrees to act
as crossover agent in the case of an exercise of an
option by a Terminated Communications Employee or
Terminated Inc. Employee under an Option Plan of
MediaOne; MediaOne agrees to act as crossover agent in
the case to an exercise of an option by a Terminated
Media Employee under an Option Plan of New U S WEST.
The crossover agent for the other company shall, by
itself and/or through its own third-party arrangements
(i) effect an option exercise of the applicable shares;
(ii) report such exercise to the other company on a
timely basis, not to exceed 30 days after the exercise;
(iii) collect from the Employee, and remit and/or
report to the Employee and/or the appropriate tax
authorities, as applicable, all taxes incurred by the
crossover agent (as the employing company) resulting
from the exercise of an option under the other
company's Option Plan, and all taxes required to be
withheld from the Employee's proceeds as a result of
the exercise of an option under the other company's
Option Plan; (iv) deliver the stock to the Employee or
pay the Employee the excess of the sales proceeds of
the applicable shares over the sum of the exercise
price and all taxes required to be withheld from the
Employee's proceeds as a result of the exercise; and
(v) pay the other company an amount equal to the
exercise price of such option on a timely basis, not to
exceed 30 days after the exercise. In addition, the
other company agrees to honor the separation policies
of the crossover agent (or its subsidiaries) in effect
at the Separation Time for purposes of determining if a
separated Employee is
35
eligible to exercise an option under the other company's
Option Plan. Written approval of the other company shall be
required before any changes adopted after the Separation
Time in the crossover agent's separation policies may apply
with respect to the crossover agent's Employees' exercise of
options under the other company's Option Plan.
(b) Restricted Stock. Communications Stock and Media Stock issued
to Employees or Terminated Employees under the Amended U S WEST
1994 Stock Plan which has not become vested under the terms
of that plan as of the Separation Time ("Restricted
Communications Stock" and "Restricted Media Stock"
respectively) shall be treated as follows:
(1) Immediately prior to the Separation Time, Media Employees
and Terminated Media Employees shall surrender any
Restricted Communications Stock they hold and receive
Restricted Media Stock in exchange. The number of
shares of Restricted Media Stock received by each such
individual shall equal the number of shares of
Restricted Communications Stock surrendered by such
individual multiplied by 1.0645 and further multiplied
by the ratio of the Average Value of the Communications
Stock to the Average Value of the Media Stock.
(2) Immediately prior to the Separation Time, Communications
Employees, Terminated Communications Employees and
Terminated Inc. Employees shall surrender any
Restricted Media Stock they hold as of the Separation
Time and receive Restricted Communications Stock in
exchange. The number of shares of Restricted
Communications Stock received by each such individual
shall equal that number of shares of Restricted Media
Stock surrendered by such individual multiplied by
1.0645 and further multiplied by the ratio of the
Average Value of the Media Stock to the Average Value
of the Communications Stock.
(3) Following the adjustments in paragraphs (1) and (2) above,
MediaOne shall retain the Amended U S WEST 1994 Stock
Plan and all obligations under such plan with respect
to Media Restricted Stock and shall amend such plan to
provide for restricted stock ("Restricted MediaOne
Common Stock") after the Separation Time. In order to
reflect the transactions contemplated by the Separation
Agreement, the Restricted Media Stock shall be subject
to the following adjustments.
35
Following the adjustments in paragraphs (1) and (2)
above, (i) the Restricted Media Stock shall be converted
to Restricted MediaOne Common Stock on a one for one
basis and (ii) each share of Restricted Media Stock,
including shares described in paragraph (1) above but not
those described in paragraph (2) above, shall receive the
Media Dividend, provided that such Media Dividend shall
be free of all restrictions under the plan.
(4) Following the adjustments in paragraphs (1) and (2) above,
New U S WEST shall assume, under the new stock plan
adopted pursuant to subsection (a)(4) above, all
obligations under the Amended U S WEST 1994 Stock Plan
with respect to Restricted Communications Stock and
shall amend such plan to provide for restricted stock
("Restricted New U S WEST Common Stock") after the
Separation Time. In order to reflect the transactions
contemplated by the Separation Agreement, following the
adjustments in paragraphs (1) and (2) above, the
Restricted Communications Stock shall be converted to
Restricted New U S WEST Common Stock on a one for one
basis.
(5) Except for the Media Dividend set forth in paragraph (3)
above, each share of Restricted New U S WEST Common Stock
and Restricted MediaOne Common Stock outstanding after
the application of the foregoing paragraphs of this
subsection (b) ("Post-Separation Restricted Stock") shall
vest in accordance with the vesting period applicable to
the grant of restricted stock to which each share of
Post-Separation Restricted Stock is attributable.
(c) LTIP. The U S WEST Communications Long-Term Incentive Plan
("LTIP") shall be terminated as of the Separation Time and a
new long-term incentive plan (the "Communications LTIP") shall
be established by New U S WEST. Awards under the LTIP to
Communications Employees shall be assumed by the
Communications LTIP and shall continue under their original
terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease
to have any Liability with respect to such awards. The
measurement period for awards under the LTIP to Media
Employees shall terminate as of the Separation Time and the
awards shall be calculated and paid out in Restricted MediaOne
Group Common Stock as of that time.
36
(d) ESTIP. The U S WEST, Inc. Executive Short Term Incentive Plan
("ESTIP") shall be retained by MediaOne and a new executive
incentive plan (the "Communications ESTIP") shall be
established by New U S WEST. Awards under the ESTIP to
Communications Employees shall be assumed by the
Communications ESTIP and shall continue under their original
terms subject to adjustment to reflect the transactions
contemplated by the Separation Agreement; MediaOne shall cease
to have any Liability with respect to such awards.
(e) Phantom Stock. The units issued under the Amended U S WEST
1994 Stock Plan or any Top-hat Plan (as defined in Section
10(a)(1)) of Existing U S WEST which are valued in accordance
with Communications Stock ("Phantom Communications Stock") and
the units issued under the Amended U S WEST 1994 Stock Plan or
any Top-hat Plan of Existing U S WEST which are valued in
accordance with Media Stock ("Phantom Media Stock") shall be
treated as follows:
(1) The Phantom Communications Stock of a Media Employee, a
Media Director (as defined in Section 10(g) below), or in
the case of a Top-hat Plan, a Terminated Media Employee
prior to the Separation Time shall be converted into
Phantom Media Stock immediately prior to the Separation
Time. The number of units of Phantom Media Stock received
by each such individual shall equal the number of units
of Phantom Communications Stock surrendered by such
individual multiplied by the ratio of the Average Value
of the Communications Stock to the Average Value of the
Media Stock.
(2) The Phantom Media Stock of a Communications Employee,
Communications Director (as defined in Section 10(g)
below) or in the case of a Top-hat Plan, a Terminated
Communications Employee or Terminated Inc. Employee prior
to the Separation Time shall be converted into Phantom
Communications Stock immediately prior to the Separation
Time. The number of units of Phantom Communications
Stock received by each such individual shall equal the
number of units of Phantom Media Stock surrendered by
such individual multiplied by the ratio of the Average
Value of the Media Stock to the Average Value of the
Communications Stock.
(3) Following the adjustments in paragraphs (1) and (2)
above, MediaOne shall retain the Amended U S WEST 1994
Stock Plan and all obligations under such plan with
respect to Phantom Media Stock. MediaOne shall also
establish new Top-
37
hat Plans as set forth in Section 10(a)(2). MediaOne
shall amend such plans to provide for units which are
valued in accordance with MediaOne Common Stock ("Phantom
MediaOne Common Stock") after the Separation Time. In
order to reflect the transactions contemplated by the
Separation Agreement, following the adjustments in
paragraphs (1) and (2) above, the Phantom Media Stock,
including units described in paragraph (1) above but not
those described in paragraph (2) above, shall be
converted to Phantom MediaOne Common Stock on the
following basis. The number of units of Phantom MediaOne
Common Stock credited shall equal the number of units of
Phantom Media Stock surrendered by such individual
multiplied by the ratio of the Average Value of the Media
Stock to the excess of the Average Value of the Media
Stock over the product of the Dividend Number multiplied
by the Average Value of the Communications Stock.
(4) Following the adjustments in paragraphs (1) and (2)
above, New U S WEST shall assume, under the new stock
plan adopted pursuant to subsection (a)(4) above, all
obligations under the Amended U S WEST 1994 Stock Plan
with respect to Phantom Communications Stock. New U S
WEST shall also retain certain Top-hat Plans as set forth
in Section 10(a)(1). New U S WEST shall amend such plans
to provide for units which are valued in accordance with
New U S WEST Common Stock ("Phantom New U S WEST Common
Stock") after the Separation Time. In order to reflect
the transactions contemplated by the Separation
Agreement, following the adjustments in paragraphs (1)
and (2) above, the Phantom Communications Stock shall be
converted to Phantom New U S WEST Common Stock on a one
for one basis.
(5) MediaOne and New U S WEST shall cause all plans referred
to in this subsection (e) to be amended, as appropriate,
to effect the changes described herein as of the
Separation Time.
10. OTHER BENEFITS.
(a) Top-hat plans. As of the Separation Time:
(1) New U S WEST or a Subsidiary shall assume all plans
maintained by the Existing U S WEST Group prior to the
Separation Time which are intended to be described in
Section 201(2) of ERISA ("Top-hat Plans") and all
Liabilities and
38
obligations with respect to Communications Employees,
Terminated Communications Employees and Terminated Inc.
Employees under such plans. Such Top-hat Plans shall
include, without limitation, the U S WEST Nonqualified
Pension Plan and the U S WEST Deferred Compensation Plan.
All such plans shall be Communications Employee Benefit
Plans. The MediaOne Group shall have no Liabilities with
respect to such plans.
(2) MediaOne or a Subsidiary shall establish new Top-hat
Plans corresponding to the Top-hat Plans maintained by
the Existing U S WEST Group before the Separation Time
and shall assume, under such plans, all Liabilities and
obligations with respect to Media Employees and
Terminated Media Employees under the Top-hat Plans
maintained by the Existing U S WEST Group prior to the
Separation Time. All such plans shall be Media Employee
Benefit Plans. All such Liabilities and obligations
shall cease to be Liabilities or obligations of the
Top-hat Plans assumed by New U S WEST pursuant to the
preceding paragraph (1).
(3) Subject to paragraph (4) below, any trusts maintained by
Existing U S WEST or its Subsidiaries for the purpose of
providing benefits under a Top-hat Plan (the "Existing U
S WEST Rabbi Trusts") shall be transferred to and assumed
by New U S WEST.
(4) MediaOne or a Subsidiary shall establish prior to the
Separation Time one or more trusts (the "MediaOne Rabbi
Trusts") for the purpose of providing benefits under its
Top-hat Plans which correspond to the Existing U S WEST
Rabbi Trusts. As of the Separation Time, Existing U S
West shall cause the trustee or trustees of the Existing
U S WEST Rabbi Trusts to transfer to the trustee or
trustees of the MediaOne Rabbi Trusts any amounts held in
the Existing U S WEST Rabbi Trusts attributable to the
benefits of Terminated Media Employees.
(5) See Section 9(e) for additional rules that apply to
Phantom Communications Stock and Phantom Media Stock
under the Top-hat Plans.
(b) Employment contracts. Except for the severance agreements
with members of the Executive Group, all individual employment
contracts, including but not limited to severance agreements,
retention agreements,
39
change-of-control agreements and letter agreements, entered
into by a member of the Existing U S WEST Group and a single
Communications Employee or a Terminated Communications
Employee shall be retained by, or assigned to and assumed by,
as applicable, the New U S WEST Group, provided they do not
expire by their own terms as of the Separation Time. The
MediaOne Group shall have no Liabilities with respect to such
agreements. Any such employment contracts, other than
agreements described in paragraph (d) below, entered into by
any member of the Existing U S WEST Group and a single Media
Employee or a Terminated Media Employee shall be retained by,
or assigned to and assumed by, as applicable, the MediaOne
Group, provided they do not expire by their own terms as of
the Separation Time. The New U S WEST Group shall have no
Liabilities with respect to such agreements. Any Liability
under such employment contracts, other than the severance
agreements with members of the Executive Group, entered into
by any member of the Existing U S WEST Group and a single
Terminated Inc. Employee shall be borne in accordance with
Section 2(c) and (f) of this EM Agreement.
(c) Split-dollar contracts. All split-dollar insurance contracts
entered into by the Existing U S WEST Group for the benefit of
a Communications Employee or a Terminated Communications
Employee shall be retained by, or assigned to and assumed by,
as applicable, New U S WEST; the MediaOne Group shall have no
interest in, or Liabilities with respect to, such contracts.
Any such split-dollar insurance contracts entered into by the
Existing U S WEST Group for the benefit of a Media Employee or
a Terminated Media Employee shall be retained by, or assigned
to and assumed by, as applicable, MediaOne; the New U S WEST
Group shall have no interest in, or Liabilities with respect
to, such contracts. In order to assign and assume any such
split dollar life policies, the parties agree to accept any
collateral assignments, policy endorsements or such other
documentation executed by or on behalf of the applicable
employees or terminated employees, or any trustee of any trust
to which such policy rights or incidents of ownership under
the policies have been assigned, as well as entering into any
such agreements as may be necessary to fulfill obligations to
any insurance company or insurance agent or broker under the
policies to be assigned.
(d) Ex-Pat Employees. This sub-section applies to Employees
("Ex-Pat Employees") currently employed by International who
have entered into agreements with Existing U S WEST or a
Subsidiary which give such Employees re-employment rights with
Existing U S WEST or a domestic Subsidiary thereof. If an
Ex-Pat Employee notifies Existing U S WEST in writing prior to
May 1, 1998 that he wishes to exercise his right to
40
return to domestic employment prior to the Separation Time,
the Communications Business will either: (1) re-employ the
Ex-Pat Employee in accordance with his re-employment right; or
(2) enter into a new agreement with the Ex-Pat Employee
terminating his re-employment right. Any costs associated
with re-employing the Ex-Pat Employee or terminating his
re-employment right in accordance with the prior sentence
shall be borne by the Communications Business. If an Ex-Pat
Employee does not notify Existing U S WEST in writing prior to
May 1, 1998 that he wishes to exercise his right to return to
domestic employment prior to the Separation Time, all
obligations under the agreement which provides the re-employment
right shall be assumed by MediaOne. Any costs associated with
assuming the re-employment right of the Ex-Pat Employee in
accordance with the prior sentence shall be borne by New U S
WEST and/or MediaOne as determined by the parties through good
faith negotiations to be completed prior to the Separation
Time.
(e) Vail Trust. The Theodore N. Vail Memorial Fund shall be
transferred to and assumed by New U S WEST as of the
Separation Time.
(f) Leaves of Absence. Each member of the MediaOne Group and the
New U S WEST Group shall honor all terms and conditions of
leaves of absence that have been granted to any Employee
before the Separation Time, including such leaves that are
commenced after the Separation Time, to the extent that such
Employees are assigned to that entity. Each such entity shall
be solely responsible for administering such leaves of absence
and compliance with all applicable laws relating to leaves of
absence, including the Family Medical Leave Act. Unless
members of the New U S WEST Group or MediaOne Group adopt
other policies prior to the Separation Time, each shall be
considered to have adopted leave of absence programs,
effective as of the Separation Time, which are substantially
identical in all material respects to the leave of absence
programs in effect at the respective entities at the
Separation Time.
(g) Non-Employee Director Plans.
(1) As of the Separation Time, New U S WEST shall assume the
Non-Employee Director Plans and all Liabilities and
obligations under such plans with respect to individuals
who will be directors of New U S WEST immediately after the
Separation Time and Retired Non-Employee Directors
(collectively referred to as "Communications Directors").
The MediaOne Group shall have no Liabilities with respect to
such agreements.
41
(2) As of the Separation Time, MediaOne shall establish new
plans for its non-employee directors ("Media Non-Employee
Director Plans") corresponding to the Non-Employee
Director Plans maintained by U S WEST before the
Separation Time and shall assume, under such plans, all
Liabilities and obligations under the Non-Employee
Director Plans with respect to individuals who will be
directors of MediaOne ("Media Directors") immediately
after the Separation Time. All such Liabilities and
obligations shall cease to be Liabilities or obligations
of the Non-Employee Director Plans assumed by New U S
WEST pursuant to paragraph (1) above. The New U S WEST
Group shall have no Liabilities with respect to such
agreements.
(3) MediaOne and New U S WEST shall cause all plans referred
to in this sub-section (g) to be amended, as appropriate,
to effect the changes described herein as of the
Separation Time.
(h) Non-Employee State Executive Board Plan. As of the Separation
Time, New U S WEST shall assume the U S WEST Communications,
Inc. Non-Employee State Executive Board Deferred Compensation
Plan (and any predecessor plan) and be solely responsible for
all Liabilities thereunder. New U S WEST shall cause such
plan to be amended, as appropriate, to effect the changes
described herein as of the Separation Time.
11. PORTABILITY.
Existing U S WEST and, if necessary after the Separation Time, MediaOne and
New U S WEST shall use reasonable best efforts to seek an amendment of
the Mandatory Portability Agreement established as of January 1, 1985,
as referenced in the U S WEST Pension Plan (the "MPA"), to allow New U
S WEST to become a "Tier II Signatory Company" under the MPA with the
same rights and obligations as have been granted to AirTouch
Communications, Inc. as a Tier II Signatory Company. MediaOne and New
U S WEST may mutually agree to additional situations where service
credit would be granted for employees transferring between one another
(or their Subsidiaries) with associated trust asset transfers after
the Separation Time.
42
12. FURTHER AGREEMENTS.
(a) From and after the Separation Time, MediaOne shall, and shall
cause its Subsidiaries and successors to, provide credit under
all Media Employee Arrangements and Media Employee Benefit
Plans to Media Employees and Terminated Media Employees for
service with the Existing U S WEST Group prior to the
Separation Time for purposes of eligibility to participate,
vesting and eligibility to retire, and for purposes of
calculating any severance benefits, to the same extent such
credit was provided under Employee Arrangements and Employee
Benefit Plans prior to the Separation Time.
(b) From and after the Separation Time, New U S WEST shall, and
shall cause its Subsidiaries and successors to, provide credit
under all Communications Employee Arrangements and
Communications Employee Benefit Plans to Communications
Employees, Terminated Communications Employees and Terminated
Inc. Employees for service with the Existing U S WEST Group
prior to the Separation Time for purposes of eligibility to
participate, vesting and eligibility to retire, and for
purposes of calculating any severance benefits, to the same
extent such credit was provided under Employee Arrangements
and Employee Benefit Plans prior to the Separation Time.
(c) MediaOne and New U S WEST shall promptly reimburse each other
for all valid liability and expenses addressed in this EM
Agreement which are paid by the other and that constitutes a
liability of MediaOne or New U S WEST, as the case may be,
upon presentation of an invoice thereon. In the event that
payment in full is not received within 45 days from the date
of the invoice, interest shall accrue at the rate of 7% per
annum from the date of the invoice.
13. COOPERATION.
(a) MediaOne, New U S WEST and their Subsidiaries shall cooperate
with each other in carrying out, implementing and defending
the terms of this EM Agreement, including cooperating with
each other with respect to any claims or litigation
challenging the terms of the EM Agreement.
(b) Each party shall exchange such information with the other
party and their respective agents and vendors (without
obtaining releases), as may be reasonably requested by the
other party, with respect thereto. MediaOne and New U S WEST
and their respective authorized agents shall, subject to
applicable laws on confidentiality, be given reasonable and
timely
43
access to, and may make copies of, all information relating to
the subjects of this EM Agreement in the custody of the other
party, to the extent reasonably requested by the other party.
If any provision of this Agreement is dependent on the consent
of any third party (such as a vendor or a union) and such
consent is withheld, MediaOne and New U S WEST shall use their
reasonable best efforts to implement the applicable provisions
of this Agreement to the full extent practicable. If any
provision of this Agreement cannot be implemented due to the
failure of such third party to consent, MediaOne and New U S
WEST shall negotiate in good faith to implement the provision
in a mutually satisfactory manner. The phrase "reasonable
best efforts" as used herein shall not be construed to require
the incurrence of any non-routine or unreasonable expense or
liability or the waiver of any right of MediaOne and New U S
WEST (and their respective Subsidiaries).
(c) MediaOne and New U S WEST agree to good faith mutual
cooperation in any investigation, inquiry or litigation which
jointly involves them or in which either party makes a
reasonable request for such cooperation. Each party will make
its Employees available on a reasonable basis to give
testimony and assistance in connection with any lawsuit,
dispute, investigation or proceeding involving the other party
and arising out of activities for which the Employee had
responsibility prior to the Separation Time. The party
requesting such availability (the "Requesting Party") shall
reimburse the Employee for all reasonable out-of-pocket travel
and other expenses incurred in so cooperating, including
without limitation airplane fare, hotel accommodations, meal
charges and other similar expenses, as well as reasonable fees
and disbursements for independent counsel for the Employee, if
the matter requires that the Employee have independent
representation. Such expenses will be reimbursed promptly
after Employee's submission to the Requesting Party of
statements and such reasonable detail as the Requesting Party
may require. Any request for cooperation, and the degree of
cooperation provided, pursuant to this paragraph will take
into account (1) the significance of the matters at issue in
the lawsuit, dispute, investigation or proceeding, and (ii)
the Employee's other personal and business commitments. In
any case in which either MediaOne or New U S WEST becomes
aware that one of its Employees is called (except by the other
party) as a witness to testify in any discovery or court
proceeding relating to the other party, the party employing
such individual will notify the other party immediately in
order to give the other party a reasonable opportunity to
appear and/or assert any privilege to which it may be entitled.
44
14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES.
(a) No provision of this EM Agreement or the Separation Agreement shall be
construed to create any right, or accelerate entitlement, to any
compensation or benefit whatsoever on the part of any Employee or
Terminated Employee or other future, present or former employee
of MediaOne, New U S WEST, or their respective Subsidiaries under
any Employee Benefit Plan or Employee Arrangement maintained by
any of such entities or otherwise.
(b) Without limiting the generality of the foregoing provisions of
subsection 14(a) above, except for the severance agreements
applicable to the Executive Group, neither (1) the transactions
described in the Separation Agreement including without
limitation the Reorganization, Contribution and Separation,
(2) the termination of the Participating Company status of New U
S WEST or a New U S WEST Subsidiary, (3) the transfer of
sponsorship of any Employee Benefit Plans or Employee
Arrangements to New U S WEST, (4) the transfer of an Employee
from one member of the Existing U S WEST Group to another member
in connection with or in anticipation of the Reorganization,
Contribution or Separation at any time on or before the
Separation Time nor (5) the assignment and transfer of an
Employee to the New U S WEST Group or MediaOne Group, shall cause
any Employee to be deemed to have incurred a termination of
employment which entitles such individual to the commencement of
benefits under any Employee Benefit Plan or Employee Arrangement
maintained by MediaOne, New U S WEST, or their respective
Subsidiaries; nor shall any of the events set forth in clauses
(1) through (5) of this subsection 14(b) be treated as, or result
in, a change in control under any such Employee Benefit Plan or
Employee Arrangement.
(c) To the extent applicable, each Employee Benefit Plan and Employee
Arrangement is hereby amended (without the need for further
action) to incorporate the provisions stated in subsection 14(b).
(d) Except as expressly provided in this Agreement, nothing in this
Agreement shall preclude New U S WEST or MediaOne or their
respective Subsidiaries, at any time after the Separation Time,
from amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Employee
Benefit Plan or Employee Arrangement maintained by such party,
any benefit under any such plan or arrangement, or any trust,
insurance policy or funding vehicle related to any such plan or
arrangement.
45
(e) No provision in this EM Agreement or in the Separation Agreement shall
confer upon any person other than the signatories hereto any
rights or remedies with respect to the employment, compensation,
benefits, or other terms and conditions of employment of any
persons.
15. MISCELLANEOUS.
(a) Payment of 1998 Administrative Costs and Expenses. Each member of the
Existing U S WEST Group shall be responsible for their allocable
share of the budgeted costs for benefits in 1998 until the
Separation Time, as well as their allocable share of
unanticipated expenses incurred prior to the Separation Time. In
addition, MediaOne shall pay New U S WEST for all expenses and
costs relating to benefits incurred after the Separation Time to
the extent that the additional expenses are (i) reasonable and
necessary and (ii) incurred as a result of, and for the purpose
of, the normal administration of the Media Employee Benefit Plans
or Employee Arrangements after the Separation Time. If any
expenses are incurred at the request of MediaOne, they shall be
the sole responsibility of MediaOne.
(b) Audit Rights.
(1) Information Provided. Each of MediaOne and New U S WEST, and
their duly authorized representatives, shall have the right to
conduct audits with respect to all information provided to it by
the other party. The party conducting the audit (the "Auditing
Party") shall have the sole discretion to determine the
procedures and guidelines for conducting audits and the selection
of audit representatives under this paragraph (1); provided, that
no audits shall be permitted with respect to the allocation or
transfer of plan assets and liabilities. The Auditing Party
shall have the right to make copies of any records at its
expense, subject to the confidentiality provisions set forth in
the Separation Agreement, which are incorporated by reference
herein. The party being audited shall provide the Auditing
Party's representatives with reasonable access during normal
business hours to its operations, computer systems and paper and
electronic files, and provide workspace to its representatives.
After any audit is completed, the party being audited shall have
the right to review a draft of the audit findings and to comment
on those findings in writing within five business days after
receiving such draft.
The Auditing Party's audit rights under this paragraph (1) shall
include the right to audit, or participate in an audit
facilitated by the party being audited, of any Subsidiaries and
Affiliates of the party being audited and of any
46
benefit providers and third parties with whom the party being
audited has a relationship, or agents of such party, to the
extent any such persons are affected by or addressed in this
Agreement (collectively, the "Non-parties"). The party being
audited shall, upon written request from the Auditing Party,
provide an individual (at the Auditing Party's expense) to
supervise any audit of a Non-party. The Auditing Party shall
be responsible for supplying, at the Auditing Party's expense,
additional personnel sufficient to complete the audit in a
reasonably timely manner. The responsibility of the party
being audited shall be limited to providing, at the Auditing
Party's expense, a single individual at each audited site for
purposes of facilitating the audit.
(2) Vendor Contracts. After the Separation Time, MediaOne and
New U S WEST and their duly authorized representatives shall have
the right to conduct joint audits with respect to any Provider
Contracts that relate to both the MediaOne Welfare Plans and the
New U S WEST Welfare Plans. The scope of such audits shall
encompass the review of all correspondence, account records,
claim forms, cancelled drafts (unless retained by the bank),
provider bills, medical records submitted with claims, billing
corrections, vendor's internal corrections of previous errors and
any other documents or instruments relating to the services
performed by the vendor under the applicable vendor contracts.
MediaOne and New U S WEST shall agree on the performance
standards, audit methodology, auditing policy and quality
measures and reporting requirements relating to the audits
described in this paragraph (2) and the manner in which costs
incurred in connection with such audits will be shared.
(c) Beneficiary Designations. All beneficiary designations made under the
Employee Benefit Plans or Employee Arrangements prior to the
Separation Time shall be transferred to and be in full force and
effect under the corresponding new Communications or Media
Employee Benefit Plans or Employee Arrangements until such
beneficiary designations are replaced or revoked by the
individual who made the beneficiary designation.
(d) Effect If Separation Does Not Occur. If the Separation does not
occur, then all actions and events that are, under this EM
Agreement, to be taken or occur effective as of the Separation
Time, immediately after the Separation Time, or otherwise
contingent upon or in connection with the Separation, shall not
be taken or occur. In addition, to the extent actions are taken
or events occur prior to the Separation Time in connection with
the Reorganization or Contribution or in anticipation of the
Separation, then such events or actions shall be reversed or
deemed null and void.
47
(e) Provisions of Separation Agreement. The provisions of Articles X -
XII of the Separation Agreement shall, to the extent applicable
and not inconsistent with this EM Agreement, shall also apply to
this EM Agreement.
(f) U S WEST Benefits Handbook. Notwithstanding any provision of the
Separation Agreement regarding the use of the U S WEST name or
otherwise, MediaOne may use and refer to the booklet entitled
"Your U S WEST Benefits Handbook" (as in effect at the Separation
Time) for the purposes of explaining benefits to its employees.
48
IN WITNESS WHEREOF, each of the parties has caused this EM Agreement
to be duly executed on its behalf by its officers thereunto duly authorized, all
as of the day and year first written in the Separation Agreement.
U S WEST, Inc.
By: /s/ Charles M. Lillis
-------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and Chief Executive
Officer--U S WEST Media Group
USW-C, Inc.
By: /s/ Solomon D. Trujillo
-------------------------------------
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
U S WEST, Inc., plan sponsor of the:
Media Pension Plan
Media Savings Plan
Media VEBA
Other Media Employee Benefit Plans
By: /s/ Charles M. Lillis
-------------------------------------
Name: Charles M. Lillis
Title: Executive Vice President;
President and Chief Executive
Officer--U S WEST Media Group
USW-C, Inc., plan sponsor of the:
U S WEST Pension Plan
U S WEST Savings Plan
MBAT and Life Insurance Trust
Other Communications Employee Benefit Plans
By: /s/ Solomon D. Trujillo
-------------------------------------
Name: Solomon D. Trujillo
Title: President and Chief Executive
Officer
49
SCHEDULE 1
U S WEST, INC. PENSION SPIN-OFF ASSUMPTIONS
________________________________________________________________________________
ECONOMIC
Investment return and discount rate 8.0%
GATT lump sum rate 6.5%
Salary increase Current U S WEST tables
DEMOGRAPHIC
Mortality UP 94
Retirement Current U S WEST tables
Turnover U S WEST Current U S WEST tables
MediaOne Two times current U S WEST management tables
MediaOne Group Current U S WEST management table
Lump sum take rate DVP: 95%
SPE: 70%
ASSETS
Method Fair market value
LIABILITIES
Method FAS 87 projected unit credit
attribution based on lump sum
accrual pattern
________________________________________________________________________________
50
SCHEDULE 2
U S WEST, INC. RETIREE HEALTH AND LIFE SPIN-OFF ASSUMPTIONS
________________________________________________________________________________
ECONOMIC
Investment return and discount rate 8.0%
Salary increase Current U S WEST tables
DEMOGRAPHIC
Mortality UP 94
Retirement Current U S WEST tables
Turnover U S WEST Current U S WEST tables
MediaOne Group Current U S WEST management table
MediaOne Two times current U S WEST management table
ASSETS
Method FAS 106 projected unit credit
attribution.
Life benefits limited to $50,000 and
exclude dependent and supplemental
benefits
________________________________________________________________________________
ANNUAL MEDICAL TREND ANNUAL DENTAL TREND
Health care trend rates: 1998 to 2,000 8.0% 1997 to 1998 6.0%
1998 to 1999 5.8
1999 to 2000 5.7
2000 to 2001 5.5
2001 to 2005 7.0 2001 to 2002 5.3
2002 to 2003 5.2
2006 to 2010 6.0 2003 and beyond 5.0
2011 and beyond 5.5
________________________________________________________________________________
HMOS HMOS DENTAL
1997 per capita costs 55 $2,701 $3,423 $251
60 3,265 4,138 251
65 600 1,709 251
70 600 1,741 251
Percentage electing HMOs 1997 and 1998 50%
1999 and 2000 60
2001 and 2002 70
2003 and 2004 80
2005 and 2006 90
2007 and later 100
51