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SEPARATION AGREEMENT
between
U S WEST, INC.
(to be renamed MEDIAONE GROUP, INC.)
and
USW-C, INC.
(to be renamed U S WEST, INC.)
Dated as of _________ __, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Terms Defined Elsewhere in the Agreement. . . . . . . . . 15
1.3 Other Definitional Provisions . . . . . . . . . . . . . . 17
1.4 References to Time. . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
2.1 Certificates of Incorporation; Bylaws; Name
Changes . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Stockholders' Meeting . . . . . . . . . . . . . . . . . . 18
2.3 Registration and Listing. . . . . . . . . . . . . . . . . 18
2.4 Boards of Directors . . . . . . . . . . . . . . . . . . . 19
2.5 Rights Agreements . . . . . . . . . . . . . . . . . . . . 20
2.6 The Transaction Documents . . . . . . . . . . . . . . . . 20
2.7 U S WEST Approval of Certain New U S WEST
Actions . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
3.1 Reorganization. . . . . . . . . . . . . . . . . . . . . . 21
3.2 Refinancing of Indebtedness . . . . . . . . . . . . . . . 23
3.3 Contribution. . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Discharge of Liabilities. . . . . . . . . . . . . . . . . 32
3.5 Closing; Delivery; Methods of Transfer and
Assumption . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
THE SEPARATION
4.1 The Separation. . . . . . . . . . . . . . . . . . . . . . 35
4.2 Separation Time . . . . . . . . . . . . . . . . . . . . . 35
4.3 Certain Determinations. . . . . . . . . . . . . . . . . . 36
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4.4 New U S WEST SIP Accounts; Certificates;
Distribution Procedures . . . . . . . . . . . . . . . . . 36
4.5 Conditions to the Separation. . . . . . . . . . . . . . . 41
ARTICLE V
POST-SEPARATION INTERCOMPANY
BUSINESS RELATIONSHIPS
5.1 Pending Litigation. . . . . . . . . . . . . . . . . . . . 43
5.2 Settlements for Cash Collections and
Disbursements After the Separation Time . . . . . . . . . 44
5.3 Transition Services . . . . . . . . . . . . . . . . . . . 45
5.4 U S WEST Name . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . 47
5.6 Intellectual Property . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Employee Benefit Plans and Employee
Arrangements. . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Internal Revenue Service Forms. . . . . . . . . . . . . . 49
ARTICLE VII
INSURANCE MATTERS
7.1 Policies and Rights Included Within AssetS. . . . . . . . 49
7.2 Administration; Other Matters . . . . . . . . . . . . . . 50
7.3 Cooperation; Disagreements. . . . . . . . . . . . . . . . 51
ARTICLE VIII
INDEMNIFICATION
8.1 New U S WEST's Agreement to Indemnify . . . . . . . . . . 52
8.2 U S WEST's Agreement to Indemnify . . . . . . . . . . . . 53
8.3 Procedure for Indemnification . . . . . . . . . . . . . . 54
8.4 Miscellaneous Indemnification Provisions. . . . . . . . . 58
8.5 Contribution. . . . . . . . . . . . . . . . . . . . . . . 59
8.6 Tax Matters; Construction of Agreements . . . . . . . . . 60
8.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . 60
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ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1 Licenses and Permits. . . . . . . . . . . . . . . . . . . 60
9.2 Intercompany Agreements . . . . . . . . . . . . . . . . . 61
9.3 Guarantee Obligations . . . . . . . . . . . . . . . . . . 61
9.4 Further Assurances. . . . . . . . . . . . . . . . . . . . 62
9.5 National Contracts. . . . . . . . . . . . . . . . . . . . 64
9.6 Non-Solicitation of Employees . . . . . . . . . . . . . . 65
9.7 Lock Boxes. . . . . . . . . . . . . . . . . . . . . . . . 65
9.8 Agreements with Respect to Common Stock
Received by Savings Plan/ESOPs. . . . . . . . . . . . . . 66
9.9 AirTouch Transaction. . . . . . . . . . . . . . . . . . . 66
ARTICLE X
ACCESS TO INFORMATION
10.1 Provision of Corporate Records. . . . . . . . . . . . . . 67
10.2 Access to Information . . . . . . . . . . . . . . . . . . 68
10.3 Production of Witnesses . . . . . . . . . . . . . . . . . 70
10.4 Retention of Records. . . . . . . . . . . . . . . . . . . 70
10.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . 71
10.6 Cooperation with Respect to Government
Reports and Filings . . . . . . . . . . . . . . . . . . . 71
10.7 Certain Limitations with Respect to
Information . . . . . . . . . . . . . . . . . . . . . . . 71
10.8 Protective Arrangements . . . . . . . . . . . . . . . . . 72
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
11.1 Mutual Release . . . . . . . . . . . . . . . . . . . . . 73
11.2 No Representations or Warranties . . . . . . . . . . . . 74
ARTICLE XII
GENERAL PROVISIONS
12.1 Merger or Consolidation . . . . . . . . . . . . . . . . . 75
12.2 Separation Committee; Dispute Resolution. . . . . . . . . 75
12.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 77
12.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 78
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12.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . 78
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 79
12.8 Headings; References. . . . . . . . . . . . . . . . . . . 79
12.9 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 79
12.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . 79
12.11 Parties in Interest; Assignment;
Successors. . . . . . . . . . . . . . . . . . . . . . . 79
12.12 Severability; Enforcement . . . . . . . . . . . . . . . 80
12.13 Amendment . . . . . . . . . . . . . . . . . . . . . . . 80
12.14 Termination . . . . . . . . . . . . . . . . . . . . . . 80
EXHIBITS
Exhibit A - Employee Matters Agreement
Exhibit B - Tax Sharing Agreement
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SEPARATION AGREEMENT
SEPARATION AGREEMENT, dated as of _______ __, 1998, between
U S WEST, INC., a Delaware corporation ("U S WEST"), to be renamed "MEDIAONE
GROUP, INC.," and USW-C, INC., a Delaware corporation and indirect wholly
owned subsidiary of U S WEST ("NEW U S WEST"), to be renamed "U S WEST, INC."
W I T N E S S E T H:
WHEREAS, pursuant to the Restated Certificate of Incorporation of
U S WEST (the "RESTATED CERTIFICATE"), U S WEST's assets, liabilities and
businesses are divided between the Communications Group (as defined in the
Restated Certificate) and the Media Group (as defined in the Restated
Certificate);
WHEREAS, pursuant to the Restated Certificate, the domestic
directories business of U S WEST (the "DIRECTORIES BUSINESS") conducted by
U S WEST Dex, Inc., a Colorado corporation ("DEX"), is currently attributed to
the Media Group;
WHEREAS, the Board of Directors of U S WEST has determined that it
is in the best interests of U S WEST and its stockholders to (i) align the
Directories Business with the Communications Group and (ii) separate the
Communications Group and the Media Group into two separately traded public
companies;
WHEREAS, in furtherance of the foregoing, the Board of Directors of
U S WEST and New U S WEST have approved this Agreement, pursuant to which,
among other things, (a) U S WEST shall effect a restructuring of certain of
its assets, liabilities and businesses, as a result of which New U S WEST
shall own the Directories Business and the businesses currently attributed to
the Communications Group and (b) U S WEST shall distribute all of the
outstanding capital stock of New U S WEST to its stockholders, all on the
terms and subject to the conditions described herein;
WHEREAS, it is the intention of the parties hereto that the
transactions contemplated by this Agreement shall be tax-free transactions
under Sections 332, 368(a) and 355 of the Internal Revenue Code of 1986, as
amended (the
"CODE"), and the rules and regulations promulgated thereunder; and
WHEREAS, the parties hereto desire to make certain covenants and
agreements and to allocate certain assets, liabilities and obligations in
connection with the transactions contemplated hereby and to prescribe various
conditions to the transactions contemplated hereby.
NOW, THEREFORE, in furtherance of the foregoing and in
consideration of the mutual promises and undertakings contained herein and in
any other document executed in connection with this Agreement, the parties
agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. For the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"ACTION" shall mean any action, claim (whether or not filed), suit,
arbitration, inquiry, demand proceeding or investigation.
"AFFILIATE" shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by, or under
common control with, such specified Person; PROVIDED, HOWEVER, that for
purposes of this Agreement, no member of either Group shall, after giving
effect to the Separation, be deemed to be an Affiliate of any member of the
other Group.
"AGREEMENT" shall mean this Separation Agreement, together with all
exhibits and schedules hereto, as the same may be amended from time to time
in accordance with the terms hereof.
"AIRTOUCH" shall mean AirTouch Communications, Inc., a Delaware
corporation.
"AIRTOUCH FUNDS" shall mean the portion of the funds received in
the AirTouch Transaction which is not used to repay outstanding indebtedness.
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"AIRTOUCH MERGER AGREEMENT" shall mean Agreement and Plan of
Merger, dated as of January 29, 1998, among U S WEST, MGI, NewVector, PCS
Holdings and AirTouch.
"AIRTOUCH STOCK" shall mean all of the shares of common stock and
preferred stock of AirTouch which MGI receives in connection with the
AirTouch Transaction.
"AIRTOUCH TRANSACTION" shall mean the merger of NewVector and PCS
Holdings with and into AirTouch pursuant to the terms of the AirTouch Merger
Agreement.
"APPLICABLE LAW" shall mean, with respect to any Person, all
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Authority applicable to such Person and its business, properties and assets.
"ASSET" shall mean any and all right, title and interest in and to
all of the rights, properties, assets, claims, Contracts and businesses of
every kind, character and description, whether real, personal or mixed,
whether accrued, contingent or otherwise, and wherever located, including,
without limitation, the following: (i) all Cash Equivalents, notes, prepaid
expenses and accounts receivable (whether current or non-current); (ii) all
capital stock, partnership interests and other equity or ownership interests
or rights, directly or indirectly, in any entity; (iii) debentures, evidences
of indebtedness, certificates of interest or participation, collateral trust
certificates, preorganization certificates or subscriptions, investment
contracts, foreign currency and interest rate contracts (including, without
limitation, forward, option, cap and swap contracts), trust certificates,
puts, calls, straddles, options and other securities or hedging arrangements
of any kind; (iv) all registered and unregistered trademarks, service marks,
service names, trade styles and trade names (including, without limitation,
trade dress and other names, marks and slogans) and all associated goodwill;
all statutory, common law and registered copyrights; all patents; all
applications for any of the foregoing together with all rights to use all of
the foregoing and all other rights in, to and under the foregoing; and all
know-how, inventions, discoveries, improvements, processes, formulae (secret
or otherwise), specifications, trade secrets (whether patentable or not),
licenses and other similar agreements, confidential information, and all
drawings, records, books or other indicia, however evidenced, of the
foregoing; (v) all Contracts and rights existing thereunder
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and under all other business arrangements; (vi) all real estate and all
plants, buildings and other improvements thereon; (vii) all leasehold
improvements and all machinery, tools, dies, equipment (including all
transportation and office equipment), fixtures, trade fixtures and furniture;
(viii) all ingredients, supplies, spare parts, other miscellaneous supplies
and other tangible property of any kind; (ix) all raw materials,
work-in-process, finished goods, consigned goods and other inventories; (x)
all computer hardware, software, computer programs, systems and codes and
documentation relating thereto and all databases and reference and resource
materials; (xi) all prepayments of prepaid expenses; (xii) all claims, causes
of action, choses in action, rights under express or implied warranties,
rights of recovery and rights of set-off of any kind; (xiii) the right to
receive mail, accounts receivable payments and other communications; (xiv)
all customer lists and records pertaining to customers and accounts,
personnel records, all lists and records pertaining to suppliers and agents,
and all books, ledgers, files and business records of every kind; (xv) all
advertising materials and all other printed or written materials; (xvi) all
permits, licenses, approvals and authorizations issued by any Governmental
Authority or third party; (xvii) all goodwill as a going concern and all
other intangible properties; and (xviii) all employee Contracts, including,
without limitation, the right thereunder to restrict the employee from
competing in certain respects.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or
other day on which banks located in New York City are authorized or required
by law to close.
"CAPITAL FUNDING" shall mean U S WEST Capital Funding, Inc., a
Colorado corporation.
"CAPITAL FUNDING INDEBTEDNESS" shall mean the Capital Funding
Private Indebtedness, the Capital Funding Public Indebtedness and the Capital
Funding Trust Indebtedness.
"CAPITAL FUNDING PRIVATE INDEBTEDNESS" shall mean all of the
indebtedness owed by Capital Funding to third parties immediately prior to
the Separation Time other than the Capital Funding Public Indebtedness and
the Capital Funding Trust Indebtedness.
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"CAPITAL FUNDING PUBLIC INDEBTEDNESS" shall mean all of the
indebtedness of Capital Funding listed in Section 1.1(a) of the Separation
Disclosure Schedule.
"CAPITAL FUNDING TRUST INDEBTEDNESS" shall mean all of the
indebtedness owed by Capital Funding to the Trusts (other than a portion of
such indebtedness equal to the liquidation value of the common securities of
the Trusts).
"CASH EQUIVALENTS" shall mean cash on hand, all other cash in any
bank, savings or similar accounts at any financial institution, and checks,
drafts and similar instruments and any bonds or similar marketable
securities, certificates of deposit, commercial paper, eurodollar deposits
and any other cash equivalents, held in the name of or for the account of U S
WEST or any of its Subsidiaries.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. SECTION SECTION 9601 ET SEQ.).
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COMMUNICATIONS EMPLOYEES" shall have the meaning ascribed to such
term in the Employee Matters Agreement.
"COMMUNICATIONS EMPLOYEE ARRANGEMENTS" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"COMMUNICATIONS EMPLOYEE BENEFIT PLANS" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"COMMUNICATIONS STOCK" shall mean the U S WEST Communications Group
Common Stock, par value $.01 per share, of U S WEST.
"CONTRACT" shall mean any contract, agreement, lease, license,
sales order, purchase order, instrument or other commitment, written or oral,
that is binding on any Person or any part of its property under Applicable
Law.
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"COVERED EMPLOYEE" shall mean an employee of the U S WEST Group or
the New U S WEST Group at the grade 5 manager level or above.
"EMPLOYEE ARRANGEMENTS" shall mean all employment or consulting
agreements, and all bonus or other incentive compensation, deferred
compensation, disability, severance, stock award, stock option or stock
purchase agreements, policies or arrangements with respect to the employment
and termination of employment of any employee, officer, director or other
Person employed at any time by U S WEST or any of its Subsidiaries.
"EMPLOYEE BENEFIT PLAN" shall mean (i) each employee benefit plan,
as defined in Section 3(3) of the Employment Retirement Income Security Act
of 1974, as amended ("ERISA"), together with the regulations promulgated
thereunder, and (ii) each international employee benefit plan, whether or not
each plan in (i) and (ii) is covered by ERISA, which U S WEST or any of its
Subsidiaries maintains or to which U S WEST or any of its Subsidiaries has an
obligation to make contributions.
"EMPLOYEE MATTERS AGREEMENT" shall mean the Employee Matters
Agreement, substantially in the form of EXHIBIT A to this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"FINANCIAL SERVICES" shall mean U S WEST Financial Services, Inc.,
a Colorado corporation.
"FINANCIAL SERVICES INDEBTEDNESS" shall mean all of the
indebtedness of Financial Services listed in Section 1.1(b) of the Separation
Disclosure Schedule.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, federal, state or
local government, court, agency or commission or other governmental or
regulatory body or authority.
"GROUP" shall mean either the New U S WEST Group or the U S WEST
Group and "GROUPS" shall mean the New U S WEST Group and the U S WEST Group,
collectively.
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"INDEMNIFIABLE LOSSES" shall mean, with respect to any claim by an
Indemnified Party for indemnification under this Agreement, any and all
damages, losses, deficiencies, Liabilities, obligations, penalties,
judgments, settlements, claims, payments, fines, interest, costs and expenses
(including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements and compromises
relating thereto and the reasonable costs and expenses of attorneys',
accountants', consultants' and other professionals' fees and expenses
incurred in the investigation or defense thereof or the enforcement of rights
thereunder), including direct, consequential, exemplary, special and punitive
damages and lost profits.
"INDEMNIFIED PARTY" shall mean any Person that is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
"INDEMNIFYING PARTY" shall mean any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
this Agreement.
"INFORMATION" shall mean all records, books, Contracts,
instruments, computer data and other data and information.
"INSURANCE ADMINISTRATION" shall mean, with respect to each Joint
Insurance Arrangement, (i) the accounting for premiums, retrospectively rated
premiums, defense costs, indemnity payments, deductibles and retentions, as
appropriate under the terms and conditions of each of the Joint Insurance
Arrangements, (ii) the reporting to Insurers of any losses or claims that may
cause the per-occurrence, per claim or aggregate limits of any Joint
Insurance Arrangement to be exceeded and (iii) the processing of claims made
under the Joint Insurance Arrangements, including, without limitation, the
reporting of claims to the Insurers' management and defense of claims and
providing for appropriate releases upon settlement of claims.
"INSURANCE ARRANGEMENT" shall mean insurance policies and insurance
contracts of any kind (other than insurance policies and insurance contracts
which are Employee Benefit Plans), including, without limitation, primary and
excess policies, commercial general liability policies, automobile policies,
product liability policies, directors' and officers' liability policies,
fiduciary
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liability policies, workers' compensation policies, and self-insurance
programs and captive insurance company arrangements, together with the
rights, benefits and privileges thereunder.
"INSURANCE PROCEEDS" shall mean those monies received by an insured
from an Insurer or paid by an Insurer on behalf of an insured, in either case
net of any applicable premium adjustment, retrospectively rated premium,
deductible, retention or cost of reserve paid or held by or for the benefit
of such insured.
"INSURED CLAIMS" shall mean those Liabilities which, individually
or in the aggregate, are covered within the terms and conditions of any of
the Joint Insurance Arrangements, whether or not subject to deductibles,
co-insurance, uncollectibility or retrospectively rated premium adjustments.
"INSURER" shall mean a third party insurance carrier.
"INTERCOMPANY INDEBTEDNESS" shall mean, with respect to any
Subsidiary of U S WEST, the aggregate principal amount of indebtedness owed
by such Subsidiary to Capital Funding immediately prior to the Reorganization.
"JOINT INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
that are owned or maintained by or on behalf of U S WEST or any of its
predecessors (other than Insurance Arrangements of Western Range) and that
relate to both (a) the MediaOne Business and/or the MediaOne Liabilities and
(b) the New U S WEST Business and/or the New U S WEST Liabilities.
"JOINT OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property of U S WEST and its Subsidiaries that is not either
MediaOne Other Intellectual Property or New U S WEST Other Intellectual
Property, and shall include Other Intellectual Property licensed to or
acquired by U S WEST and its Subsidiaries for use by both the New U S WEST
Business and the MediaOne Business, or which is created by or for both the
New U S WEST Business and the MediaOne Business prior to the Separation Time
(including all Other Intellectual Property which is created by or for U S
WEST prior to the Separation Time).
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"JOINT PATENTS" shall mean the U.S. patents (and any non-U.S.
patents corresponding thereto) listed in Section 1.1(c) of the Separation
Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part (but only to the extent claims are supported by the
specification of the patents listed in Section 1.1(c) of the Separation
Disclosure Schedule), re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.
"LESOP NOTES" shall mean the indebtedness of the U S WEST Savings
Plan/ESOP, all of which is guaranteed by U S WEST.
"LIABILITY" shall mean, with respect to any Person, except as
otherwise expressly provided herein, any direct or indirect liability
(whether absolute, accrued or unaccrued, contingent, liquidated or
unliquidated, matured or unmatured or known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by
such Person (including, without limitation, those arising under any
Applicable Law or Action or under any award of any court, tribunal or
arbitrator of any kind, and those arising under any Contract or undertaking).
"LITIGATION MATTERS" shall mean actual, threatened or future
Actions that have been or may be asserted against, or otherwise adversely
affect, any member of either Group.
"MARKET VALUE" on any Trading Day shall mean the average of the
high and low reported sales prices regular way of a share of Communications
Stock as reported on the NYSE Composite Tape; PROVIDED, HOWEVER, that, for
purposes of determining the market value of a share of Communications Stock
for any period, the high and low sales prices of a share of Communications
Stock on any day prior to any "ex-dividend" date occurring during such period
for any dividend paid or to be paid with respect to the Communications Stock
shall be reduced by the amount of such dividend.
"MEDIA EMPLOYEES" shall have the meaning ascribed to such term in
the Employee Matters Agreement.
"MEDIA EMPLOYEE ARRANGEMENTS" shall have the meaning ascribed to
such term in the Employee Matters Agreement.
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"MEDIA EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to
such term in the Employee Matters Agreements.
"MEDIAONE BUSINESS" shall mean the businesses of U S WEST currently
attributed to the Media Group pursuant to the Restated Certificate other than
the Directories Business (including the domestic wireless business attributed
to the Media Group being transferred to AirTouch pursuant to the AirTouch
Transaction).
"MEDIAONE INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the MediaOne Business and/or the
MediaOne Liabilities (other than Shared Liabilities), including, without
limitation, the Insurance Arrangements provided by Western Range (other than
the Western Range Transferred Insurance Arrangements).
"MEDIAONE PATENTS" shall mean the U.S. patents (and any non-U.S.
patents corresponding thereto) listed in Section 1.1(d) of the Separation
Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.
"MEDIAONE OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property licensed to or acquired by U S WEST and its
Subsidiaries for use only by the MediaOne Business or which is created by or
for only the MediaOne Business prior to the Separation Time.
"MEDIAONE TRADEMARKS" shall mean the Trademarks listed in Section
1.1(e) of the Separation Disclosure Schedule.
"MEDIA SAVINGS PLAN/ESOP" shall have the meaning ascribed to such
term in the Employee Matters Agreement.
"MEDIA STOCK" shall mean the U S WEST Media Group Common Stock, par
value $.01 per share, of U S WEST.
"MGI" shall mean U S WEST Media Group, Inc., a Delaware corporation.
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"NEW TRUST" shall mean a newly formed Delaware statutory business
trust, all of the common securities of which shall be owned by U S WEST.
"NEW U S WEST" shall have the meaning set forth in the preamble to
this Agreement.
"NEW U S WEST BUSINESS" shall mean (i) all of the businesses of U S
WEST currently attributed to the Communications Group pursuant to the
Restated Certificate and (ii) the Directories Business.
"NEW U S WEST GROUP" shall mean, at and after the Separation Time,
New U S WEST and all of its Subsidiaries.
"NEW U S WEST INSURANCE ARRANGEMENTS" shall mean the Insurance
Arrangements of U S WEST existing at the Separation Time and/or prior thereto
which are owned or maintained by or on behalf of U S WEST or any of its
predecessors and which relate only to the New U S WEST Business and/or the
New U S WEST Liabilities (other than Shared Liabilities) including, without
limitation, the Western Range Transferred Insurance Arrangements.
"NEW U S WEST OTHER INTELLECTUAL PROPERTY" shall mean all Other
Intellectual Property licensed to or acquired by U S WEST and its
Subsidiaries for use only by the New U S WEST Business or which is created by
or for only the New U S WEST Business prior to the Separation Time.
"NEW U S WEST PATENTS" shall mean the U.S. patents (and any
non-U.S. patents corresponding thereto) listed in Section 1.1(f) of the
Separation Disclosure Schedule, as well as any divisions, continuations,
continuations-in-part, re-examinations, reissues, extensions or renewals of
such U.S. or non-U.S. patents.
"NEW U S WEST TRADEMARKS" shall mean the Trademarks listed in
Section 1.1(g) of the Separation Disclosure Schedule.
"NEWVECTOR" shall mean U S WEST NewVector Group, Inc., a Colorado
corporation.
"OTHER INTELLECTUAL PROPERTY" shall mean all registered and
unregistered copyrights, all know-how, discoveries, inventions, improvements,
processes, formulae, specifications, trade secrets (whether patentable or
not),
11
business plans, marketing data, software, tools and documentation and all
drawings, records, books or other indicia, however evidenced, of the
foregoing, but excluding patents, patent applications and Trademarks.
"PERSON" or "PERSON" shall mean and include any individual,
partnership, joint venture, corporation, association, joint stock company,
limited liability company, trust, unincorporated organization or similar
entity.
"PCS HOLDINGS" shall mean U S WEST PCS Holdings, Inc., a Delaware
corporation.
"PRIVILEGED INFORMATION" shall mean, with respect to either Group,
Information regarding a member of such Group, or any of its operations,
Assets or Liabilities (whether in documents or stored in any other form or
known to its employees or agents) that is or may be protected from disclosure
pursuant to the attorney-client privilege, the work-product doctrine or other
applicable privileges.
"REPRESENTATIVE" shall mean, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC FILINGS" shall mean the Proxy Statement, the Form S-4, the
Form 8-A and the Form 8-B/A (and all documents incorporated therein by
reference).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SEPARATION DISCLOSURE SCHEDULE" shall mean the Separation
Disclosure Schedule, dated as of the date hereof, as the same may be amended
or supplemented pursuant to this Agreement.
"SHARED CONTINGENT GAIN" shall mean any right of U S WEST and its
Subsidiaries against any Person to the extent such right (i) does not relate
primarily to the New U S WEST Business or the MediaOne Business or (ii)
relates primarily to both the New U S WEST Business and the MediaOne
12
Business, including, without limitation, the rights listed in Section 1.1(h)
of the Separation Disclosure Schedule.
"SHARED LIABILITY" shall mean any Liability of U S WEST or any of
its Subsidiaries (whether arising prior to, at or following the Separation
Time) which (i) arises out of or is in connection with or otherwise relates
to the management or conduct prior to the Separation Time of the businesses
of U S WEST and its Subsidiaries and is not otherwise included in the
definition of "New U S WEST Liabilities" or "MediaOne Liabilities" or
allocated to one of the Groups pursuant to this Agreement or the Tax Sharing
Agreement or (ii) arises out of any Transaction Suit, including, without
limitation, the Liabilities listed in Section 1.1(i) of the Separation
Disclosure Schedule, but excluding Transaction Costs.
"SUBSIDIARY" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership in which such Person or another Subsidiary of such Person is the
general partner or otherwise controls such partnership.
"TAX" or "TAXES" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, customs duties, fees, assessments
and charges of any kind whatsoever, together with any interest and any
penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any transferee
liability in respect of Taxes.
"TAX SHARING AGREEMENT" shall mean the Tax Sharing Agreement,
substantially in the form of EXHIBIT B to this Agreement.
13
"TERMINATED COMMUNICATIONS EMPLOYEES" shall have the meaning
ascribed to such term in the Employee Matters Agreement.
"TERMINATED MEDIA EMPLOYEES" shall have the meaning ascribed to
such term in the Employee Matters Agreement.
"TRADEMARKS" shall mean all registered and unregistered trademarks,
service marks, service names, trade styles and trade names (including,
without limitation, trade dress and other names, marks and slogans) and all
associated goodwill and all applications for any of the foregoing, together
with all rights to use any of the foregoing.
"TRADING DAY" shall mean each weekday other than any day on which
the Communications Stock is not traded on the NYSE.
"TRANSACTION COSTS" shall mean the costs and expenses associated
with the transactions contemplated by this Agreement listed in Section 1.1(j)
of the Separation Disclosure Schedule.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Employee
Matters Agreement and the Tax Sharing Agreement and documents, schedules,
exhibits and annexes attached hereto or thereto or delivered pursuant hereto
or thereto, including, without limitation, the deeds, lease assignments and
assumptions, leases, subleases and sub-subleases, and the supplemental and
other agreements and instruments relative thereto.
"TRANSACTION SUIT" shall mean any Action that (i) is commenced
against any member of the U S WEST Group or any member of the New U S WEST
Group or any of their respective directors, officers or employees challenging
this Agreement or any other Transaction Document or any of the transactions
contemplated hereby or thereby or any of the terms thereof or (ii) arises out
of any untrue statement or alleged untrue statement of a material fact
contained in any of the SEC Filings, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading (but only with respect to information relating to
transactions contemplated by this Agreement or any other Transaction Document
contained in or omitted from the SEC
14
Filings); PROVIDED, HOWEVER, that any Action arising out of or relating to
the transfer of Assets between employee benefits trusts sponsored by the
Groups shall not be a "Transaction Suit" and shall be governed by the
provisions of the Employee Matters Agreement.
"TRUSTS" shall mean U S WEST Financing I, a Delaware statutory
business trust, and U S WEST Financing II, a Delaware statutory business
trust.
"TRUST SECURITIES" shall mean the 7.96% Trust Originated Preferred
Securities of U S WEST Financing I, a Delaware statutory business trust, and
the 8 1/4% Trust Originated Preferred Securities of U S WEST Financing II, a
Delaware statutory business trust.
"U S WEST" shall have the meaning set forth in the
preamble to this Agreement.
"U S WEST GROUP" shall mean, at and after the Separation Time, U S
WEST and all of its Subsidiaries (other than New U S WEST and its
Subsidiaries).
"U S WEST SAVINGS PLAN/ESOP" shall have the meaning ascribed to
such term in the Employee Matters Agreement.
1.2 TERMS DEFINED ELSEWHERE IN THE AGREEMENT. For the purposes of
this Agreement, the following terms have the meanings set forth in the
Sections indicated:
Term Section
---- -------
AAA Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Asserted Liability. . . . . . . . . . . . . . . . . . . . . . . . .8.3(a)
AT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(c)
Beneficial Holder . . . . . . . . . . . . . . . . . . . . . . . . .9.4(c)
Borrower Subsidiaries . . . . . . . . . . . . . . . . . . . . . . .3.2(k)
Charter Amendments. . . . . . . . . . . . . . . . . . . . . . . . .2.1(b)
Claim Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . .8.3(a)
CGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(g)
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Communications. . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(c)
Communications Certificates . . . . . . . . . . . . . . . . . . . .4.4(b)
Communications Group. . . . . . . . . . . . . . . . . . . . . . .recitals
Communications Redemption . . . . . . . . . . . . . . . . . . . . .4.1(a)
Communications Rights . . . . . . . . . . . . . . . . . . . . . 2.6(b)(i)
Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
15
Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Dex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Directories Business. . . . . . . . . . . . . . . . . . . . . . .recitals
Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Distribution Agent. . . . . . . . . . . . . . . . . . . . . . . . .4.4(c)
Dividend Number . . . . . . . . . . . . . . . . . . . . . . . . . .4.3(b)
Domestic Cable. . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(c)
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(l)
Exchange Offers . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Federal Relations . . . . . . . . . . . . . . . . . . . . . . . . .3.2(f)
FinanceCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(a)
Financially Reasonable Terms. . . . . . . . . . . . . . . . . .8.3(c)(i)
Form 8-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)(i)
Form 8-B/A. . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)(ii)
Form S-4. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(a)(ii)
International . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Interactive Services. . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Media Certificates. . . . . . . . . . . . . . . . . . . . . . . . .4.4(b)
Media Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . .4.1(b)
Media Group . . . . . . . . . . . . . . . . . . . . . . . . . . .recitals
Media Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(b)(i)
MediaOne Assets . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(b)
MediaOne Common Stock . . . . . . . . . . . . . . . . . . . . . . .4.1(c)
MediaOne Delaware . . . . . . . . . . . . . . . . . . . . . . . . .3.1(d)
MediaOne Exchange Securities. . . . . . . . . . . . . . . . . . . .3.2(j)
MediaOne Georgia. . . . . . . . . . . . . . . . . . . . . . . . . .3.1(a)
MediaOne Liabilities. . . . . . . . . . . . . . . . . . . . . . . .3.4(b)
MediaOne New Indebtedness . . . . . . . . . . . . . . . . . . . . .3.2(a)
Multimedia. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(b)
National Contract . . . . . . . . . . . . . . . . . . . . . . . . .9.4(e)
New U S WEST . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
New U S WEST Action . . . . . . . . . . . . . . . . . . . . . . . .5.1(a)
New U S WEST Assets . . . . . . . . . . . . . . . . . . . . . . . .3.3(a)
New U S WEST Common Stock . . . . . . . . . . . . . . . . . . . . .2.1(a)
New U S WEST DRS System . . . . . . . . . . . . . . . . . . . . . .4.4(d)
New U S WEST Exchange Securities. . . . . . . . . . . . . . . . . .3.2(j)
New U S WEST Indemnified Parties. . . . . . . . . . . . . . . . 8.2(a)
New U S WEST Liabilities. . . . . . . . . . . . . . . . . . . . . .3.4(a)
New U S WEST New Indebtedness . . . . . . . . . . . . . . . . . . .3.2(h)
New U S WEST Right. . . . . . . . . . . . . . . . . . . . . . . . .2.6(a)
New U S WEST Rights Agreement . . . . . . . . . . . . . . . . . . .2.6(a)
New U S WEST SIP. . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
New U S WEST SIP Account. . . . . . . . . . . . . . . . . . . . . .4.4(a)
Non-Managing Party. . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Non-Receiving Party . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a)
NYSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)
Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
16
Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Pre-Separation Adjustment . . . . . . . . . . . . . . . . . . . . .3.3(d)
Provider. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 5.3
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)(i)
PSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(e)
Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Receiving Party . . . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)(i)
Record Holder . . . . . . . . . . . . . . . . . . . . . . . . . . .9.4(c)
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)(iii)
Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Restated Certificate. . . . . . . . . . . . . . . . . . . . . . .recitals
Separation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Separation Committee. . . . . . . . . . . . . . . . . . . . . . . . .12.2
Separation Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Shared Asserted Liability . . . . . . . . . . . . . . . . . . . . .8.3(b)
Shared Claim Notice . . . . . . . . . . . . . . . . . . . . . . . .8.3(b)
Shared Liability Insurance Proceeds . . . . . . . . . . . . . . . .7.2(c)
SIP Participant . . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Tender Offers . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2(j)
Trust Exchange Securities . . . . . . . . . . . . . . . . . . . . .3.2(j)
U S WEST. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recitals
U S WEST Action . . . . . . . . . . . . . . . . . . . . . . . . . .5.1(b)
U S WEST Indemnified Parties. . . . . . . . . . . . . . . . . . . .8.1(a)
U S WEST Rights Agreement . . . . . . . . . . . . . . . . . . . . .2.6(b)
U S WEST SIP. . . . . . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
U S WEST SIP Account. . . . . . . . . . . . . . . . . . . . . . . .4.4(a)
Western Range . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b)(i)
Western Range Transferred Insurance Arrangements. . . . . . . . . .7.1(a)
1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof",
"herein", and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
1.4 REFERENCES TO TIME. All references in this Agreement to times
of the day shall be to Mountain time.
17
ARTICLE II
CERTAIN PRE-SEPARATION TRANSACTIONS
2.1 CERTIFICATES OF INCORPORATION; BYLAWS; NAME CHANGES. (a)
Prior to the Separation Time, U S WEST shall cause New U S WEST to take all
actions necessary to amend its Certificate of Incorporation and Bylaws in the
manner specified by U S WEST. The Certificate of Incorporation of New U S
WEST shall, among other things, authorize (i) 2,000,000,000 shares of Common
Stock, par value $.01 per share ("NEW U S WEST COMMON STOCK"), of New U S
WEST and (ii) 200,000,000 shares of Preferred Stock, par value $.01 per
share, of New U S WEST.
(b) Prior to the Separation Time, U S WEST shall take all actions
necessary in accordance with Applicable Law and the Restated Certificate to
amend the Restated Certificate (the "CHARTER AMENDMENTS") as specified by U S
WEST to, among other things, (i) permit the redemption of the Communications
Stock in exchange for shares of New U S WEST Common Stock pursuant to Section
4.1 and (ii) following such redemption, delete all references to the
Communications Stock and amend certain terms of the Media Stock set forth
therein.
(c) Prior to the Separation Time, the parties hereto shall take
all actions necessary so that, immediately after the Separation Time, (i) New
U S WEST's name shall be changed to "U S WEST, Inc." and (ii) U S WEST's name
shall be changed to "MediaOne Group, Inc."
2.2 STOCKHOLDERS' MEETING. U S WEST shall take all actions
necessary in accordance with Applicable Law, the Restated Certificate and U S
WEST's Bylaws to call, give notice of, convene and hold a meeting of its
stockholders (the "STOCKHOLDERS' MEETING") as soon as practicable for the
purpose of obtaining (i) the adoption of the Charter Amendments by the
stockholders of U S WEST and (ii) such other approvals as may be determined
by the Board of Directors of U S WEST.
2.3 REGISTRATION AND LISTING. (a) Prior to the Separation Time,
(i) U S WEST shall prepare and file with the SEC a proxy statement under the
Exchange Act relating to the Stockholders' Meeting (the "PROXY STATEMENT")
and (ii) New U S WEST shall prepare and file with the SEC a
18
registration statement on Form S-4 registering under the Securities Act the
shares of New U S WEST Common Stock to be issued to stockholders of U S WEST
pursuant to Section 4.1, in which the Proxy Statement shall be included as a
prospectus (the "FORM S-4"). The parties hereto shall use their reasonable
best efforts to have the Form S-4 declared effective under the Securities Act
as promptly as practicable after the filing thereof. U S WEST shall cause
the Proxy Statement to be mailed to U S WEST's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities
Act. New U S WEST shall use its reasonable best efforts to take all such
actions as may be necessary or appropriate under state securities and "blue
sky" laws in connection with the Separation.
(b) Prior to the Separation Time, (i) New U S WEST shall prepare
and file with the SEC a registration statement on Form 8-A registering under
the Exchange Act the New U S WEST Common Stock (the "FORM 8-A") and (ii) U S
WEST shall prepare and file with the SEC an amendment to U S WEST's existing
registration statement on Form 8-B amending the terms of the Media Stock to
reflect the changes set forth in the Charter Amendments (the "FORM 8-B/A").
New U S WEST shall prepare, file and seek to make effective an application
for the listing of the New U S WEST Common Stock on The New York Stock
Exchange ("NYSE") and the Pacific Stock Exchange (the "PSE"), subject to
official notice of issuance. U S WEST shall prepare, file and seek to make
effective amendments to U S WEST's listing applications with the NYSE and the
PSE to provide for the delisting of the Communications Stock and the
amendment of the terms of the Media Stock to reflect the changes set forth in
the Charter Amendments.
(c) The parties hereto shall cooperate in preparing and filing
with the SEC and causing to be declared effective any registration statements
or amendments thereto that are necessary or appropriate in order to reflect
the establishment of, or amendments to, any employee benefit plans
contemplated by this Agreement or any other Transaction Document requiring
registration under the Securities Act.
2.4 BOARDS OF DIRECTORS. Prior to the Separation Time, the
parties hereto shall take all actions necessary so that, effective
immediately after the Separation Time, the Boards of Directors of U S WEST
and New U S WEST shall be
19
comprised of the individuals so named in the Proxy Statement.
2.5 RIGHTS AGREEMENTS. (a) Prior to the Separation Time, New U S
WEST shall enter into a Rights Agreement (the "NEW U S WEST RIGHTS
AGREEMENT") on terms specified by U S WEST pursuant to which one Preferred
Stock Purchase Right of New U S WEST (a "NEW U S WEST RIGHT") will be
attached to each share of New U S WEST Common Stock issued to U S WEST
pursuant to Section 4.1. All references in this Agreement to New U S WEST
Common Stock shall be deemed to include such New U S WEST Rights.
(b) Prior to the Separation Time, the Amended and Restated Rights
Agreement, dated as of October 31, 1995 (the "U S WEST RIGHTS AGREEMENT"),
between U S WEST and State Street Bank and Trust Company, as rights agent,
shall be amended to provide (i) that the U S WEST Communications Group Rights
(as defined in the U S WEST Rights Agreement) (the "COMMUNICATIONS RIGHTS")
and the U S WEST Media Group Rights (as defined in the U S WEST Rights
Agreement) (the "MEDIA RIGHTS") shall not become exercisable, distributed or
unredeemable as a result of the consummation of the Separation; (ii) that the
Communications Rights will expire at the Separation Time; and (iii) for
certain amendments to the terms of the Media Rights.
2.6 THE TRANSACTION DOCUMENTS. Prior to the Separation Time, each
of U S WEST and New U S WEST shall enter into, or cause the appropriate
members of the Group of which it is a member to enter into, the Transaction
Documents.
2.7 U S WEST APPROVAL OF CERTAIN NEW U S WEST ACTIONS. Prior to
the Separation Time, U S WEST shall take and/or ratify all actions necessary
under Applicable Law, as the sole stockholder of New U S WEST, to effectuate
the transactions contemplated by this Agreement, including, without
limitation, adopting and implementing appropriate plans, agreements and
arrangements for New U S WEST Employees.
20
ARTICLE III
REORGANIZATION; CONTRIBUTION;
REFINANCING OF INDEBTEDNESS
3.1 REORGANIZATION. Subject to the terms and conditions of this
Agreement, at such time as determined by U S WEST in its sole discretion, U S
WEST shall cause the following transactions to occur in the order set forth
below (collectively, the "REORGANIZATION"):
(a) MediaOne, Inc., a Georgia corporation ("MEDIAONE GEORGIA"),
shall cause:
(i) MediaOne Business Services, Inc., a Colorado corporation, to be
merged with and into MediaOne Georgia;
(ii) MediaOne of Xxxxxxx County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(iii) MediaOne of Xxxx County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(iv) MediaOne of Conyers Rockdale, Inc., a Georgia corporation, to
be merged with and into MediaOne Georgia;
(v) MediaOne of Fayette County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(vi) MediaOne of Xxxxxx County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(vii) MediaOne of Georgia, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
(viii) MediaOne of Xxxxx County, Inc., a Georgia corporation, to be
merged with and into MediaOne Georgia;
21
(ix) Peachtree SMATV Corporation, a Georgia corporation, to be
merged with and into MediaOne Georgia; and
(x) Atlanta Home Network, Inc., a Georgia corporation, to be merged
with and into MediaOne Georgia.
(b) U S WEST Multimedia Communications, Inc., a Colorado
corporation ("MULTIMEDIA"), shall cause MediaOne Georgia to be merged with
and into Multimedia.
(c) MGI shall assume from U S WEST Domestic Cable, Inc., a
Delaware corporation ("DOMESTIC CABLE"), all of the Intercompany Indebtedness
of Domestic Cable, in repayment of a corresponding amount of the indebtedness
owed by MGI to Domestic Cable.
(d) MediaOne of Delaware, Inc., a Delaware corporation ("MEDIAONE
DELAWARE"), shall assume from MGI all of the indebtedness owed by MGI to
Domestic Cable (after giving effect to the repayment contemplated by Section
3.1(c)).
(e) MediaOne Delaware shall assume from MGI a portion of the
Intercompany Indebtedness of MGI equal to the difference between (A) the
total amount of Intercompany Indebtedness of MGI (after giving effect to the
assumption contemplated by Section 3.2(c)) and (B) the sum of (1) the
difference between (x) $3.9 billion and (y) the Intercompany Indebtedness of
Dex plus (2) the principal amount of the indebtedness owed by Capital Funding
to U S WEST.
(f) MGI shall contribute as a capital contribution to Multimedia:
(i) all of the issued and outstanding shares of capital stock of:
(A) U S WEST Capital Corporation, a Colorado corporation; (B) U S WEST
Interactive Services, Inc., a Colorado corporation ("INTERACTIVE
SERVICES"); (C) U S WEST International Holdings, Inc., a Delaware
corporation ("INTERNATIONAL"); (D) U S WEST Investments, Inc., a
Colorado corporation; (E) MediaOne Delaware; (F) if the AirTouch
Transaction has not been consummated, NewVector; (G) if the AirTouch
Transaction has not been consummated, PCS Holdings; (H) Far East
Investment Company, a Colorado corporation; (I) Domestic Cable; (J) U S
WEST Cellular Holdings, Inc., a
22
Delaware corporation; and (K) U S WEST PCS Services, Inc., a Delaware
corporation;
(ii) if the AirTouch Transaction has not been consummated, a note,
payable by NewVector to MGI in the aggregate principal amount of
$900,000,000; and
(iii) if the AirTouch Transaction has been consummated, all of the
AirTouch Stock.
(g) MGI shall distribute as a dividend all of the issued and
outstanding capital stock of Multimedia to U S WEST.
(h) U S WEST shall merge U S WEST Communications Group, Inc., a
Colorado corporation ("CGI"), with and into New U S WEST, with New U S WEST
continuing as the surviving corporation. Pursuant to such merger, the issued
and outstanding capital stock of CGI shall be converted into a number of
shares of New U S WEST Common Stock equal to the sum of (i) the number of
shares of Communications Stock that will be issued and outstanding
immediately prior to the Separation Time plus (ii) the aggregate number of
shares of New U S WEST Common Stock to be issued to holders of Media Stock in
connection with the Separation pursuant to Section 4.1. Each share of New U
S WEST Common Stock so issued to U S WEST shall be fully paid, nonassessable
and free of preemptive rights.
3.2 REFINANCING OF INDEBTEDNESS. Following consummation of the
Reorganization, U S WEST shall cause the following actions to be taken with
respect to certain indebtedness of U S WEST and its Subsidiaries (as used in
this Section 3.2, all references to "amounts" or "aggregate principal
amounts" of any indebtedness shall refer to the face amount of such
indebtedness):
(a) A newly formed direct or indirect Subsidiary of U S WEST
("FINANCECO") shall incur an aggregate principal amount of indebtedness equal
to the difference between (i) the sum of (A) the total aggregate principal
amount of the Capital Funding Indebtedness attributed to the Media Group plus
(B) the total aggregate principal amount of the Financial Services
Indebtedness plus (C) an aggregate principal amount of indebtedness
sufficient to fund the costs and expenses payable by the U S WEST Group in
connection with the Separation, as well as any negative Pre-Separation
Adjustment and (ii) the sum of (A) $3.9 billion
23
plus (B) if the AirTouch Transaction is consummated, the amount of the
AirTouch Funds (the "MEDIAONE NEW INDEBTEDNESS"). All of the indebtedness
incurred by FinanceCo shall be guaranteed by U S WEST.
(b) FinanceCo shall lend to Financial Services an amount of funds
equal to the total aggregate principal amount of the Financial Services
Indebtedness.
(c) FinanceCo shall lend to each of (i) PCS Holdings, (ii)
Interactive Services, (iii) Financial Services and (iv) U S WEST Real Estate,
Inc., a Colorado corporation ("REAL ESTATE"), an amount of funds equal to the
Intercompany Indebtedness of such entity. Each such entity shall, in turn,
use the funds so borrowed from FinanceCo to repay its Intercompany
Indebtedness.
(d) FinanceCo shall lend to International an amount of funds equal
to the difference between (i) the Intercompany Indebtedness of International
and (ii) the indebtedness owed by Capital Funding to International.
International shall, in turn, use the funds so borrowed from FinanceCo to
repay a corresponding aggregate principal amount of its Intercompany
Indebtedness. International shall transfer to Capital Funding the
indebtedness owed by Capital Funding to International, thereby cancelling the
remaining Intercompany Indebtedness of International.
(e) FinanceCo shall lend to MediaOne Delaware an amount of funds
equal to the sum of the Intercompany Indebtedness of Multimedia and MediaOne
Delaware (after giving effect to the assumption made pursuant to Section
3.1(c)). MediaOne Delaware shall, in turn, use a portion of the funds so
borrowed from FinanceCo to repay its Intercompany Indebtedness and shall
distribute as a dividend to Multimedia the balance of the funds so borrowed
from FinanceCo. Multimedia shall, in turn, use such balance of funds to
repay its Intercompany Indebtedness.
(f) Capital Funding shall repay a portion of the indebtedness owed
by Capital Funding to U S WEST equal to the aggregate principal amount of the
Intercompany Indebtedness of U S WEST Federal Relations, Inc., a Delaware
corporation ("FEDERAL RELATIONS"), by distributing to U S WEST the
Intercompany Indebtedness of Federal Relations. U S WEST will, in turn,
contribute as a capital contribution to Federal Relations such Intercompany
Indebtedness and
24
Federal Relations shall transfer such capital contribution to Capital Funding
to repay such Intercompany Indebtedness.
(g) U S WEST shall contribute as a capital contribution to MGI all
of the indebtedness owed by Capital Funding to U S WEST. MGI shall use such
indebtedness to repay a corresponding aggregate principal amount of its
Intercompany Indebtedness.
(h) Capital Funding shall incur an aggregate principal amount of
new indebtedness equal to the sum of (i) the total aggregate principal amount
of Capital Funding Indebtedness attributed to the Communications Group plus
(ii) $3.9 billion plus (iii) an aggregate principal amount of new
indebtedness sufficient to fund the costs and expenses payable by the New U S
WEST Group in connection with the Separation, as well as any positive
Pre-Separation Adjustment (the "NEW U S WEST NEW INDEBTEDNESS"). All of the
new indebtedness incurred by Capital Funding shall be guaranteed by New U S
WEST.
(i) FinanceCo shall loan to U S WEST all of the proceeds of the
indebtedness incurred by FinanceCo to fund the costs and expenses payable by
the U S WEST Group in connection with the Separation, as well as any negative
Pre-Separation Adjustment, and U S WEST shall use such funds to pay or cause
to be paid such costs and expenses and/or such negative Pre-Separation
Adjustment. Capital Funding shall loan to New U S WEST all of the proceeds
of the indebtedness incurred by Capital Funding to fund the costs and
expenses payable by the New U S WEST Group in connection with the Separation,
as well as any Positive Pre-Separation Adjustment, and New U S WEST shall use
such funds to pay or cause to be paid such costs and expenses and/or such
positive Pre-Separation Adjustment.
(j) U S WEST shall take all actions necessary to cause the Capital
Funding Public Indebtedness, the Capital Funding Private Indebtedness, the
Trust Securities and the Financial Services Indebtedness to be refinanced
(collectively, the "REFINANCING") through one or more of: (i) offers to
purchase the Capital Funding Public Indebtedness, the Financial Services
Indebtedness and the Trust Securities (the "TENDER OFFERS"); (ii) offers to
exchange (the "EXCHANGE OFFERS") (A) the Capital Funding Public Indebtedness
for new debt securities of Capital Funding guaranteed by New U S WEST (the
"NEW U S WEST EXCHANGE SECURITIES") or new debt securities of FinanceCo
25
guaranteed by U S WEST (the "MEDIAONE EXCHANGE SECURITIES") and (B) the Trust
Securities for new trust securities of New Trusts (the "TRUST EXCHANGE
SECURITIES"); (iii) repayments of the Capital Funding Private Indebtedness;
and (iv) defeasance of the Capital Funding Public Indebtedness, Financial
Services Indebtedness and the Capital Funding Trust Indebtedness.
(k) Capital Funding shall use a portion of the proceeds of the New
U S WEST New Indebtedness, together with the AirTouch Funds, if any, and the
funds it receives from PCS Holdings, Interactive Services, Financial
Services, Real Estate, International, MediaOne Delaware and Multimedia
(collectively, the "BORROWER SUBSIDIARIES") pursuant to Sections 3.2 (d), (e)
and (f) to (i) repay all of the Capital Funding Private Indebtedness, (ii)
repay all of the Capital Funding Public Indebtedness tendered pursuant to the
Tender Offers, (iii) repurchase all of the Trust Securities tendered in the
Tender Offers and the Exchange Offers and (iv) defease all of the Capital
Funding Public Indebtedness and Capital Funding Trust Indebtedness to be
defeased pursuant to the Refinancing. Capital Funding shall use the Trust
Securities which it repurchases pursuant to the Tender Offers to satisfy its
obligations under a corresponding aggregate principal amount of Capital
Funding Trust Indebtedness. Financial Services shall use the funds it
receives from FinanceCo pursuant to Section 3.2(b) to repay all of the
Financial Services Indebtedness tendered pursuant to the Tender Offers.
(l) In the event that holders of Capital Funding Public
Indebtedness offer to exchange such indebtedness for New U S WEST Exchange
Securities pursuant to the Exchange Offers, the amount of New U S WEST New
Indebtedness shall be reduced by an amount equal to the aggregate principal
amount of the New U S WEST Exchange Securities issued. In no event shall New
U S WEST Exchange Securities be issued in an aggregate principal amount which
exceeds the aggregate principal amount of the New U S WEST New Indebtedness.
In the event that holders of Capital Funding Public Indebtedness offer to
exchange such indebtedness for MediaOne Exchange Securities pursuant to the
Exchange Offers, (i) FinanceCo shall distribute to U S WEST such MediaOne
Exchange Securities, U S WEST shall contribute such MediaOne Exchange
Securities to Capital Funding and Capital Funding shall issue such MediaOne
Exchange Securities in exchange for the Capital Funding Public Indebtedness
offered for exchange, (ii) the amount of MediaOne New Indebtedness
26
shall be reduced by an amount equal to the aggregate principal amount of the
MediaOne Exchange Securities issued and (iii) Capital Funding shall transfer
to U S WEST all of its rights under an amount of Intercompany Indebtedness of
the Borrower Subsidiaries equal to the aggregate principal amount of such
MediaOne Exchange Securities and U S WEST may, in turn, transfer such
Intercompany Indebtedness to FinanceCo (in which event the transactions
contemplated by Sections 3.2(d), (e) and (f) shall not be effected with
respect to an amount equal to the amount of such Intercompany Indebtedness).
In the event that holders of Trust Securities offer to exchange such
securities for Trust Exchange Securities pursuant to the Exchange Offers, (i)
Capital Funding shall repurchase such Trust Securities as described in
Section 3.2(l), (ii) the exchange agent for the Exchange Offers (the
"EXCHANGE AGENT") shall use the funds which Capital Funding would otherwise
pay to such holders to purchase, on behalf of such holders, Trust Exchange
Securities from one or more New Trusts with an aggregate liquidation amount
corresponding to the aggregate liquidation amount of the Trust Securities
repurchased by Capital Funding and shall deliver such Trust Exchange
Securities to such holders, (iii) each New Trust shall loan to FinanceCo the
funds received upon issuance of such Trust Exchange Securities and FinanceCo
shall use such funds to repay a portion of the MediaOne New Indebtedness and
(iv) Capital Funding shall use the Trust Securities which it so repurchases
to satisfy its obligations under a corresponding aggregate principal amount
of Capital Funding Trust Indebtedness. In no event shall MediaOne Exchange
Securities and Trust Exchange Securities be issued in an aggregate principal
amount which exceeds the aggregate principal amount of the MediaOne New
Indebtedness.
(m) In the event that less than all of the Capital Funding Public
Indebtedness, Trust Securities and Financial Services Indebtedness are
tendered or exchanged pursuant to the Refinancing and U S WEST does not elect
to defease such indebtedness (or, in the case of the Trust Securities, the
related Capital Funding Trust Indebtedness), (i) U S WEST shall assume (A)
from Capital Funding all of the Capital Funding Public Indebtedness not
tendered or exchanged and an amount of Capital Funding Trust Indebtedness
equal to the liquidation amount of the Trust Securities not tendered or
exchanged and (B) from Financial Services all of the Financial Services
Indebtedness not tendered, (ii) the amount of the MediaOne New Indebtedness
shall be reduced by an amount equal to the principal amount
27
of the indebtedness assumed by U S WEST from Capital Funding and Financial
Services, (iii) to the extent U S WEST assumes a portion of the Capital
Funding Public Indebtedness or Capital Funding Trust Indebtedness, Capital
Funding shall transfer to U S WEST all of its rights under an amount of the
Intercompany Indebtedness of the Borrower Subsidiaries equal to the aggregate
principal amount of the Capital Funding Public Indebtedness and the Capital
Funding Trust Indebtedness assumed by U S WEST and U S WEST may, in turn,
transfer such Intercompany Indebtedness to FinanceCo (in which event the
transactions contemplated by Sections 3.2(d), (e) and (f) shall not be
effected with respect to an amount equal to the amount of such Intercompany
Indebtedness) and (iv) to the extent that U S WEST assumes a portion of the
Financial Services Indebtedness, FinanceCo shall not make the loans
contemplated by Section 3.2(b) with respect to an amount equal to such amount
of Financial Services Indebtedness.
(n) U S WEST shall cause the U S WEST Savings Plan/ESOP to repay
all LESOP Notes outstanding immediately prior to the Separation Time.
3.3 CONTRIBUTION. Subject to the terms and conditions of this
Agreement, following consummation of the Reorganization and the transactions
contemplated by Section 3.2, U S WEST and New U S WEST shall cause the
following transactions to occur in the order set forth below (collectively,
the "Contribution"):
(a) U S WEST shall, as a capital contribution to New U S WEST,
convey, transfer, assign and deliver to New U S WEST all of U S WEST's
right, title and interest in and to all of the following Assets (together
with all of the Assets of New U S WEST and its Subsidiaries prior to such
transfer, the "NEW U S WEST ASSETS"):
(i) all of the issued and outstanding capital stock, together with
all the Assets, of: (A) MGI; (B) Capital Funding; (C) Federal Relations;
(D) U S WEST Investment Management Company, a Colorado corporation; (E)
U S WEST Educational Foundation, a Washington corporation; (F) U S WEST
Foundation, a Colorado corporation; (G) U S WEST SPF Co., a Colorado
corporation; and (H) U S WEST IP Holdings, Inc., a Delaware corporation;
28
(ii) except as set forth in Section 3.3(c), all of the Assets
included on the combined balance sheet of the Communications Group as of
March 31, 1998 and any Assets acquired by U S WEST or any of its
Subsidiaries relating primarily to the businesses attributed to the
Communications Group from April 1, 1998 to the Separation Time
(including, in each case, the proceeds received upon disposition of any
such Assets);
(iii) all of the Assets included on the consolidated balance sheet
of Dex, as of March 31, 1998 and any Assets acquired by U S WEST or any
of its Subsidiaries relating primarily to the Directories Business from
April 1, 1998 to the Separation Time (including, in each case, the
proceeds received upon disposition of any such Assets);
(iv) subject to Section 5.6 and except as otherwise agreed to by
U S WEST and New U S WEST, all of the New U S WEST Trademarks, New U S
WEST Patents and New U S WEST Other Intellectual Property and an equal
and undivided interest in the Joint Patents and the Joint Other
Intellectual Property;
(v) all of the New U S WEST Insurance Arrangements, an equal and
undivided interest in the Joint Insurance Arrangements and all of the
other rights granted, and Assets contemplated to be transferred, to New
U S WEST pursuant to Article VII;
(vi) all of the rights granted, and Assets contemplated to be
transferred, to New U S WEST and the Communications Employee Benefit
Plans and Communications Employee Arrangements pursuant to the Employee
Matters Agreement;
(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(a)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the New U S WEST Business;
(viii) 50% of all Shared Contingent Gains;
(ix) all of the leasehold interests listed in Section 3.3(a)(ix) of
the Separation Disclosure Schedule; and
29
(x) all of the Assets listed in Section 3.3(a)(x) of the Separation
Disclosure Schedule.
(b) U S WEST shall retain and shall not contribute to New U S
WEST, and the New U S WEST Assets shall not include, all of U S WEST's right,
title and interest in all of the Assets of U S WEST other than the New U S
WEST Assets (together with any Assets transferred to U S WEST or any member
of the U S WEST Group pursuant to Section 3.3(c) or the Employee Matters
Agreement, the "MEDIAONE ASSETS"), including, without limitation, the
following Assets:
(i) all of the issued and outstanding capital stock, together with
all of the assets, of (A) Multimedia; (B) MediaOne of Michigan, Inc., a
Michigan corporation; (C) Western Range Insurance Co, a Vermont
corporation ("Western Range"); and (D) if FinanceCo is a Subsidiary of
U S WEST, FinanceCo;
(ii) all of the Assets included on the combined balance sheet of
the Media Group as of March 31, 1998 (other than the Assets of Dex and
its Subsidiaries) and any Assets acquired by U S WEST or any of its
Subsidiaries relating primarily to the MediaOne Business from April 1,
1998 to the Separation Time (including, in each case, the proceeds
received upon disposition of any such Assets);
(iii) all of the shares of Media Stock held as treasury stock by
U S WEST;
(iv) all of the common securities of the Trusts, any New Trusts
and U S WEST Financing III, a Delaware statutory business trust;
(v) subject to Section 5.6 and except as otherwise agreed to by U S
WEST and New U S WEST, all of the MediaOne Trademarks, MediaOne Patents
and MediaOne Other Intellectual Property, and an equal and undivided
interest in the Joint Patents and the Joint Other Intellectual Property;
(vi) all of the MediaOne Insurance Arrangements, an equal and
undivided interest in the Joint Insurance Arrangements and all of the
rights granted to, and Assets contemplated to be retained by, U S WEST
pursuant to Article VII;
30
(vii) all of the rights of U S WEST and its Subsidiaries with
respect to the Actions listed in Section 3.3(b)(vii) of the Separation
Disclosure Schedule and any other rights of U S WEST and its
Subsidiaries against any Person to the extent such rights relate
primarily to the MediaOne Business;
(viii) 50% of all Shared Contingent Gains;
(ix) all of the leasehold interests listed in Section 3.3(b)(ix) of
the Separation Disclosure Schedule; and
(x) all of the Assets listed in Section 3.3(b)(x) of the Separation
Disclosure Schedule.
(c) New U S WEST shall cause the following transfers:
(i) U S WEST Advanced Technologies, Inc., a Colorado corporation
which will be a Subsidiary of New U S WEST upon consummation of the
Reorganization ("AT"), shall convey, transfer, assign and deliver to U S
WEST all of AT's right, title and interest in and to the Assets of AT
listed in Section 3.3(c) of the Separation Disclosure Schedule.
(ii) U S WEST Communications, Inc., a Colorado corporation which
will be a Subsidiary of New U S WEST upon consummation of the
Reorganization ("COMMUNICATIONS") shall convey, transfer, assign and
deliver to U S WEST all of Communications' right, title and interest in
and to the Assets of Communications listed in Section 3.3(c) of the
Separation Disclosure Schedule.
(iii) Federal Relations shall convey, transfer, assign and deliver
to U S WEST all of Federal Relation's right, title and interest in and
to the Assets of Federal Relations listed in Section 3.3(c) of the
Separation Disclosure Schedule.
(d) Prior to the Separation Time, the Chief Financial Officer of
the Communications Group and the Chief Financial Officer of the Media Group
shall agree in writing as to the amount of the Pre-Separation Adjustment (as
determined below). If the Pre-Separation Adjustment is positive, New U S
WEST shall declare as a dividend to U S
31
WEST an amount in cash equal to the Pre-Separation Adjustment. If the
Pre-Separation Adjustment is negative, U S WEST shall contribute as a capital
contribution to New U S WEST an amount in cash equal to the Pre-Separation
Adjustment. The "Pre-Separation Adjustment" shall be determined in the
manner set forth in Section 3.3(d) of the Separation Disclosure Schedule.
3.4 DISCHARGE OF LIABILITIES. (a) From and after the Separation
Time, New U S WEST agrees to (or to cause a member of the New U S WEST Group
to) discharge or perform when due all of the following Liabilities (the "NEW
U S WEST LIABILITIES"):
(i) all Liabilities of U S WEST arising out of or relating
primarily to the New U S WEST Assets or the operation of the New U S
WEST Business, whether arising before or after the Separation Time;
(ii) all of the Liabilities included on the combined balance sheet
of the Communications Group as of March 31, 1998 and any Liabilities
incurred by U S WEST or any of its Subsidiaries relating primarily to
the businesses attributed to the Communications Group from April 1, 1998
to the Separation Time;
(iii) all of the Liabilities included on the consolidated balance
sheet of Dex as of March 31, 1998 and any Liabilities incurred by U S
WEST or any of its Subsidiaries relating primarily to the Directories
Business from April 1, 1998 to the Separation Time;
(iv) all indebtedness incurred by Capital Funding pursuant to
Section 3.2 and all of the indebtedness of U S WEST Communications,
Inc., a Colorado corporation;
(v) all Liabilities identified in Section 2(a) of the Employee
Matters Agreement and all other Liabilities identified in the Employee
Matters Agreement as Liabilities of the New U S WEST Group;
(vi) subject to Section 3.3(d), the Transaction Costs identified in
Section 1.1(j) of the Separation Disclosure Schedule as the
responsibility of New U S WEST;
(vii) for each category of Shared Liabilities listed in Section
1.1(i) of the Separation Disclosure
32
Schedule, the percentage of such category of Shared Liabilities
indicated in such section as the responsibility of New U S WEST;
(viii) the Actions and Liabilities listed in Section 3.4(a)(viii)
of the Separation Disclosure Schedule
(ix) the Liabilities listed in Section 3.4(a)(ix) of the Separation
Disclosure Schedule; and
(x) all Liabilities that are expressly contemplated by any of the
Transaction Documents as Liabilities of any member of the New U S WEST
Group.
(b) U S WEST shall retain and discharge or perform when due, and
New U S WEST shall have no liability with respect to, all Liabilities of U S
WEST other than the New U S WEST Liabilities (the "MEDIAONE LIABILITIES"),
including, without limitation, the following:
(i) all Liabilities arising out of or relating primarily to the
MediaOne Assets or the operation of the MediaOne Business, whether
arising before or after the Separation Time;
(ii) all of the Liabilities included on the combined balance sheet
of the Media Group as of March 31, 1998 (other than (A) the Liabilities
of Dex and its Subsidiaries and (B) $3.9 billion of indebtedness (net of
any indebtedness of Dex and its Subsidiaries)) and any Liabilities
incurred by U S WEST or any of its Subsidiaries relating primarily to
the MediaOne Business from April 1, 1998 to the Separation Time;
(iii) all indebtedness incurred by FinanceCo or assumed by U S
WEST from Capital Funding or Financial Services pursuant to Section 3.2
and all indebtedness of MediaOne Delaware;
(iv) all Liabilities identified in Section 2(b) of the Employee
Matters Agreement and all other Liabilities contemplated by the Employee
Matters Agreement as Liabilities of the U S WEST Group;
(v) subject to Section 3.3(d), the Transaction Costs identified in
Section 1.1(j) of the Separation Disclosure Schedule as the
responsibility of U S WEST;
33
(vi) for each category of Shared Liabilities listed in Section
1.1(i) of the Separation Disclosure Schedule, the percentage of such
category of Shared Liabilities indicated in such section as the
responsibility of U S WEST;
(vii) the Actions and Liabilities listed in Section 3.4(b)(vii) of
the Separation Disclosure Schedule;
(viii) the Liabilities listed in Section 3.4(b)(viii) of the
Separation Disclosure Schedule; and
(ix) all Liabilities that are expressly contemplated by any of the
Transaction Documents as Liabilities of any member of the U S WEST Group.
3.5 CLOSING; DELIVERY; METHODS OF TRANSFER AND ASSUMPTION. (a)
Unless otherwise provided in this Agreement, or in any other Transaction
Document, the closing of the Reorganization, the Refinancing and the
Contribution shall occur immediately prior to the Separation Time at the
offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
(b) In connection with the Reorganization and the Contribution,
(i) U S WEST shall execute and deliver and shall cause its Subsidiaries to
execute and deliver, such deeds, bills of sale, stock powers, certificates of
title, assignments of leases and contracts, assumption agreements and other
instruments of contribution, grant, conveyance, assignment, transfer,
delivery and assumption necessary to evidence the Reorganization and the
Refinancing and (ii) U S WEST and New U S WEST shall (and shall cause their
Subsidiaries, as applicable, to) execute and deliver such deeds, bills of
sale, stock powers, certificates of title, assignments of leases and
contracts, assumption agreements and other instruments of contribution,
grant, conveyance, assignment, transfer, delivery and assumption necessary to
evidence the Contribution and the transactions contemplated by Section 3.4.
All such instruments shall be deemed to have been delivered as of the
Separation Time.
34
ARTICLE IV
THE SEPARATION
4.1 THE SEPARATION. Subject to the terms and conditions of this
Agreement, at the Separation Time, U S WEST shall cause the following
transactions to occur (collectively, the "SEPARATION"):
(a) U S WEST shall, in accordance with the terms of Section 2.4.3
of Article V of the Restated Certificate (as amended by the Charter
Amendments), redeem each share of Communications Stock issued and outstanding
immediately prior to the Separation Time for one share of New U S WEST Common
Stock (the "COMMUNICATIONS REDEMPTION"). Each share of Communications Stock
held as treasury stock by U S WEST shall be cancelled.
(b) U S WEST shall distribute as a dividend (the "MEDIA DIVIDEND")
on each share of Media Stock outstanding as of the close of trading on the
Record Date (other than shares of Media Stock held as treasury stock by U S
WEST) a number of shares of New U S WEST Common Stock equal to the Dividend
Number (as determined in accordance with Section 4.3(b)).
(c) From and after the Separation Time, each outstanding share of
Media Stock shall remain outstanding and shall thereafter represent a share
of common stock, par value $.01 per share, of U S WEST, with the terms set
forth in the Restated Certificate (as amended by the Charter Amendments). As
used herein, such common stock is referred to as "MEDIAONE COMMON STOCK".
(d) From and after the Separation Time, each outstanding share of
Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share, of
U S WEST; Series D Convertible Preferred Stock, par value $1.00 per share, of
U S WEST; and Series E Convertible Preferred Stock, par value $1.00 per
share, of U S WEST, shall remain outstanding.
4.2 SEPARATION TIME. The Board of Directors shall determine the
time at which the Separation shall become effective (the "SEPARATION TIME"),
which time shall be following the satisfaction or waiver of all of the
conditions set forth in Section 4.5 as determined by the Board of Directors
of U S WEST.
35
4.3 CERTAIN DETERMINATIONS. (a) Prior to the Separation Time,
the Board of Directors of U S WEST shall (i) fix the record date for
determining the holders of Media Stock entitled to receive the Media Dividend
(the "RECORD DATE"), (ii) declare the Media Dividend, (iii) fix the date on
which the Communications Stock shall be redeemed pursuant to the
Communications Redemption (the "REDEMPTION DATE") and (iv) give notice to
holders of Communications Stock of the Communications Redemption. The
Redemption Date and the Record Date shall be the date on which the Separation
Time shall occur.
(b) The "DIVIDEND NUMBER" shall equal the quotient of (i)
$850,000,000 divided by (ii) the product of (x) the number of shares of Media
Stock outstanding immediately prior to the Separation Time (other than
shares of Media Stock held by U S WEST) multiplied by (y) the average Market
Value of the Communications Stock over the period of 20 Trading Days ending
on the fifth Trading Day prior to the date of the Separation Time, rounded to
the nearest one-hundred thousandth (or if there shall not be a nearest
one-hundred thousandth, to the next highest one-hundred thousandth).
4.4 NEW U S WEST SIP ACCOUNTS; CERTIFICATES; DISTRIBUTION
PROCEDURES. (a) Prior to the Separation Time, New U S WEST shall establish
a Shareowner Investment Plan (the "NEW U S WEST SIP"). As of the Separation
Time, New U S WEST shall establish an account (a "NEW U S WEST SIP ACCOUNT")
under the New U S WEST SIP for each stockholder of U S WEST (each, a "SIP
PARTICIPANT") which, immediately prior to the Separation Time, maintained an
account (a "U S WEST SIP ACCOUNT") under the U S WEST Shareowner Investment
Plan (the "U S WEST SIP"). As of the Separation Time, the New U S WEST SIP
Account of each SIP Participant shall, without any action on the part of the
SIP Participants, be credited by New U S WEST with that number of shares of
New U S WEST Common Stock that such SIP Participant has the right to receive
pursuant to the provisions of Section 4.1 and all shares of Communications
Stock held in the U S WEST SIP Account of such SIP Participant shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist. SIP Participants shall be mailed the cash in lieu of
fractional shares of New U S WEST Common Stock to which they are entitled
pursuant to Section 4.4(h).
(b) As of the Separation Time, all shares or fractions of a share
of Communications Stock redeemed
36
pursuant to the Communications Redemption shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist. As of
the Separation Time, each certificate that immediately prior to the
Separation Time evidenced shares of Communication Stock ("COMMUNICATIONS
CERTIFICATES") shall be deemed at any time after the Separation Time to
represent only the right to receive the shares of New U S WEST Common Stock
issuable in respect thereof pursuant to Section 4.1 and the unpaid dividends
and distributions payable with respect to such shares pursuant to this
Article IV. As of the Separation Time, each certificate that as of the
Record Date evidenced shares of Media Stock ("MEDIA CERTIFICATES") shall
after the Separation Time represent a corresponding number of shares of
MediaOne Common Stock, the right to receive the shares of New U S WEST Common
Stock issuable in respect thereof pursuant to Section 4.1 and the unpaid
dividends and distributions payable with respect to such shares pursuant to
this Article IV.
(c) Prior to the Separation Time, New U S WEST shall establish a
Direct Registration System which shall enable holders of New U S WEST Common
Stock to hold such shares in uncertificated book-entry form (the "NEW U S
WEST DRS SYSTEM"). As of the Separation Time, U S WEST shall deposit with
Boston Equiserve, as Distribution Agent ("DISTRIBUTION AGENT"), (a) for the
benefit of holders of Communications Certificates, the shares of New U S WEST
Common Stock to which such holders are entitled pursuant to Section 4.1, (b)
for the benefit of holders of Media Certificates, the shares of New U S WEST
Common Stock and certificates evidencing the shares of MediaOne Common Stock
to which such holders are entitled pursuant to Section 4.1 and (c) for the
benefit of SIP Participants, certificates evidencing the shares of MediaOne
Common Stock to which such holders are entitled pursuant to Section 4.1. New
U S WEST shall provide to the Distribution Agent the funds necessary to pay
any cash payable in lieu of fractional shares of New U S WEST Common Stock
pursuant to Section 4.4(h) and the funds or other property necessary to pay
or make any dividends or distributions with respect to shares of New U S WEST
Common Stock pursuant to Section 4.4(g).
(d) As soon as reasonably practicable after the Separation Time,
the Distribution Agent shall mail to each holder of record of Communications
Certificates (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Communications
37
Certificates shall pass, only upon proper delivery of the Communications
Certificates to the Distribution Agent and shall be in such form and have
such other provisions as U S WEST reasonably may specify), (ii) an affidavit
of loss for use by holders whose Communications Certificates are lost,
mutilated or destroyed and (iii) instructions for use in effecting the
surrender of the Communications Certificates or completing such affidavit of
loss. Upon surrender of a Communications Certificate for cancellation to
the Distribution Agent or such affidavit of loss together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Communications
Certificate shall be entitled to receive in exchange therefor that number of
shares of New U S WEST Common Stock that such holder has the right to receive
pursuant to Section 4.1 in respect thereof in uncertificated book-entry form
through the New U S WEST DRS System and any cash payable in lieu of
fractional shares of New U S WEST Common Stock to which such holder is
entitled pursuant to Section 4.4(h) and dividends or other distributions to
which such holder is entitled pursuant to Section 4.4(g) and the
Communications Certificate (if any) so surrendered shall forthwith be
canceled. Notwithstanding the foregoing, a holder of a Communications
Certificate shall have the right to elect to receive a certificate
representing that number of shares of New U S WEST Common Stock that such
holder has the right to receive pursuant to Section 4.1 in respect thereof in
lieu of receiving such shares in uncertificated book-entry form through the
New U S WEST DRS System.
(e) As soon as reasonably practicable after the Separation Time,
the Distribution Agent shall mail to each holder of record of Media
Certificates (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Media Certificates shall
pass, only upon proper delivery of the Media Certificates to the Distribution
Agent and shall be in such form and have such other provisions as U S WEST
reasonably may specify), (ii) an affidavit of loss for use by holders whose
Media Certificates are lost, mutilated or destroyed and (iii) instructions
for use in effecting the surrender of the Media Certificates or completing
such affidavit of loss. Upon surrender of a Media Certificate for
cancellation to the Distribution Agent or such affidavit of loss together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
38
Media Certificate shall be entitled to receive in exchange therefor (x) a new
certificate representing that number of shares of MediaOne Common Stock
represented by such Media Certificate and (y) that number of shares of New
U S WEST Common Stock that such holder has the right to receive pursuant to
Section 4.1 in respect thereof in uncertificated book-entry form through the
New U S WEST DRS System, and any cash payable in lieu of fractional shares of
New U S WEST Common Stock to which such holder is entitled pursuant to
Section 4.4(h) and dividends or other distributions to which such holder is
entitled pursuant to Section 4.4(g) and the Media Certificate (if any) so
surrendered shall forthwith be canceled. Notwithstanding the foregoing, a
holder of a Media Certificate shall have the right to elect to receive a
certificate representing that number of shares of New U S WEST Common Stock
that such holder has the right to receive pursuant to Section 4.1 in respect
thereof in lieu of receiving such shares in uncertificated book-entry form
through the New U S WEST DRS System. As soon as reasonably practicable after
the Separation Time, the Distribution Agent shall mail to each SIP
Participant a certificate representing a number of shares of MediaOne Common
Stock equal to the number of shares of Media Stock held in such SIP
Participant's U S WEST SIP Account. Following such mailing to SIP
Participants, the U S WEST SIP shall be terminated.
(f) In the event of a transfer of ownership of shares of
Communications Stock or Media Stock that is not registered in the transfer
records of U S WEST, certificates evidencing the proper number of shares of
New U S WEST Common Stock and MediaOne Common Stock may be issued in
accordance with this Section 4.4 to a transferee if the Communications
Certificate or Media Certificate evidencing such shares of Communications
Stock or Media Stock is presented to the Distribution Agent, accompanied by
all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid.
(g) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Separation Time shall be
paid with respect to any shares of New U S WEST Common Stock represented by a
Communications Certificate or a Media Certificate until such Communications
Certificate or Media Certificate or an affidavit of loss is surrendered for
exchange as provided herein. Subject to the effect of Applicable Laws,
following
39
surrender of any such Communications Certificate or Media Certificate or
affidavit of loss, there shall be paid to the holder of the shares of New U S
WEST Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Separation Time theretofore payable with respect to
such shares of New U S WEST Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Separation Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of New U S WEST
Common Stock, less the amount of any withholding taxes which may be required
thereon.
(h) No certificates or scrip representing fractional shares of New
U S WEST Common Stock shall be issued pursuant to the Media Dividend and such
fractional share interests will not entitle the holder thereof to vote or to
any rights of a stockholder of New U S WEST. Notwithstanding any provision of
this Agreement, each Person who immediately prior to the Separation Time was
a holder of shares of Media Stock who would otherwise have been entitled to
receive a fraction of a share of New U S WEST Common Stock (after taking into
account all of the shares of Media Stock owned by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of New U S WEST Common Stock multiplied by the
average Market Value of the Communications Stock over the period of 20
Trading Days ending on the fifth Trading Day prior to the date of the
Separation Time, rounded to the nearest cent (or if there shall not be a
nearest cent, to the next highest cent).
(i) None of U S WEST, New U S WEST or the Distribution Agent shall
be liable to any holder of shares of Communications Stock or Media Stock for
shares of New U S WEST Common Stock, cash in lieu of fractional shares of New
U S WEST Common Stock or dividends or distributions with respect to shares of
New U S WEST Common Stock that have been delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(j) U S WEST shall be entitled to, or shall be entitled to cause
the Distribution Agent to, deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Communication
40
Stock or Media Stock such amounts as are required to be deducted and withheld
with respect to the making of such payment under the Code, or any provision
of state, local or foreign Tax law. To the extent that amounts are so
withheld by U S WEST or the Distribution Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Communications Stock or Media Stock in respect of
which such deduction and withholding was made by U S WEST or the Distribution
Agent.
(k) If any Communications Certificates or Media Certificates shall
not have been surrendered prior to seven years after the Separation Time (or
immediately prior to such earlier date on which any shares of New U S WEST
Common Stock, cash in lieu of fractional shares of New U S WEST Common Stock
or unpaid dividends or distributions with respect to shares of New U S WEST
Common Stock in respect of such Communications Certificates or Media
Certificates would otherwise escheat to or become the property of any
Governmental Authority), any undistributed shares of New U S WEST Common
Stock in respect of Communications Certificates or unpaid dividends or
distributions in respect of such shares shall, to the extent permitted by
Applicable Laws, become the property of New U S WEST and any undistributed
shares of New U S WEST Common Stock in respect of Media Certificates or cash
in lieu of fractional shares or unpaid dividends or distributions in respect
of such shares shall, to the extent permitted by Applicable Laws, become the
property of U S WEST.
(l) Notwithstanding any other provision of this Article IV,
stockholders who are entitled to receive shares of New U S WEST Common Stock
pursuant to Section 4.1 with an aggregate value greater than or equal to $15
million will not receive such shares until such stockholders make all
required filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended. Shares of New U S WEST Common Stock issuable to
stockholders required to make such filings shall be held in escrow by the
Distribution Agent until such time as New U S WEST receives evidence from
such stockholders that such filings have been made.
4.5 CONDITIONS TO THE SEPARATION. (a) The undertaking of U S
WEST to effect the Separation is subject to the satisfaction of each of the
following conditions, unless waived by the Board of Directors of U S WEST in
its sole and absolute discretion:
41
(i) All of the transactions contemplated by this Agreement to be
performed on or prior to the consummation of the Separation shall have
been consummated.
(ii) The Form S-4, the Form 8-A and the Form 8-B/A shall each have
been declared effective by the SEC, and no stop order with respect
thereto shall be in effect.
(iii) The Charter Amendments shall have been approved and adopted
by the stockholders of U S WEST.
(iv) The Charter Amendments shall have been executed, acknowledged
and filed with the Secretary of State of the State of Delaware in
accordance with Section 242 of the Delaware General Corporation Law.
(v) The Board of Directors of U S WEST shall have set the
Redemption Date and given notice of the Communications Redemption to the
holders of Communications Stock.
(vi) The Board of Directors of U S WEST shall have fixed the
Record Date and declared the Media Dividend.
(vii) The New U S WEST Common Stock shall have been approved for
listing on the NYSE and the PSE, subject to official notice of issuance.
(viii) No order, injunction or decree shall have been issued by
any Governmental Authority and remain in effect preventing the
consummation of the Separation.
(ix) All consents of, approvals of, notices to and filings with
any Governmental Authority or any other Person necessary to consummate
the Reorganization, the Contribution or the Separation shall have been
obtained and be in full force and effect.
(x) U S WEST shall have provided the NYSE and the PSE with the
prior written notice of the Redemption Date and the Record Date as
required by Rule 10b-17 of the Exchange Act and the rules and
regulations of the NYSE.
42
(xi) U S WEST shall have obtained an advance letter ruling from
the Internal Revenue Service that certain aspects of the Reorganization,
the Contribution and the Separation will qualify as tax-free
transactions within the meaning of Sections 332, 368(a)(1)(D) and 355 of
the Code, and such ruling shall be in full force and effect at the
Separation Time.
(xii) On or prior to the Separation Time, each of U S WEST and New
U S WEST shall have entered into, or caused the appropriate members of
the Group of which it is a member to enter into, each of the Transaction
Documents.
(b) Any determination made by the Board of Directors of U S WEST
on behalf of any of the parties hereto prior to the Separation Time
concerning the satisfaction or waiver of any or all of the conditions set
forth in this Section 4.5 shall be conclusive.
ARTICLE V
POST-SEPARATION INTERCOMPANY
BUSINESS RELATIONSHIPS
5.1 PENDING LITIGATION. Following the Separation Time, subject to
the provisions of Section 8.3, (a) New U S WEST shall have exclusive
authority and control over the investigation, prosecution, defense and appeal
of all pending Actions relating to the New U S WEST Liabilities, including,
but not limited to, the pending Actions listed in Section 3.4(a) of the
Separation Disclosure Schedule (each, a "NEW U S WEST ACTION"), and may
settle or compromise, or consent to the entry of any judgment with respect
to, any such New U S WEST Action without the consent of U S WEST and (b) U S
WEST shall have exclusive authority and control over the investigation,
prosecution, defense and appeal of all pending Actions relating to the
MediaOne Liabilities, including, but not limited to, the pending Actions
listed in Section 3.4(b) of the Separation Disclosure Schedule (each, a "U S
WEST ACTION"), and may settle or compromise, or consent to the entry of any
judgment with respect to, any such U S WEST Action without the consent of New
U S WEST; PROVIDED, HOWEVER, that if any member of the New U S WEST Group or
any of their respective
43
directors, officers or employees is named as a party to a U S WEST Action or
any member of the U S WEST Group or any of their respective directors,
officers or employees is named as a party to a New U S WEST Action, neither
U S WEST nor New U S WEST, as the case may be, may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action without
the prior written consent of such other named party (which consent may not be
unreasonably withheld), unless such settlement (i) includes a complete
release of such other named party and such party's directors, officers or
employees (to the extent such directors, officers or employees are named in
such Action) and (ii) does not require such other named party or such party's
directors, officers or employees (to the extent such directors, officers or
employees are named in such Action) to make or forego any payment or forego
or take any action. Each of U S WEST and New U S WEST shall cooperate fully
with the other and its counsel in the investigation, defense and settlement
of any U S WEST Action or New U S WEST Action.
5.2 SETTLEMENTS FOR CASH COLLECTIONS AND DISBURSEMENTS AFTER THE
SEPARATION TIME. (a) For each calendar month commencing with the month in
which the Separation Time occurs and, unless sooner terminated by agreement
of the parties, continuing for a period of two years thereafter, (i) within
30 Business Days of the end of the month in question, New U S WEST shall
prepare and deliver to U S WEST, and U S WEST shall fully cooperate in
preparing, a statement of transactions that shall reflect a complete analysis
of any cash collections and cash disbursements by the New U S WEST Group on
behalf of the U S WEST Group during the relevant month or for any prior month
that should have been (but was not) included in a prior statement and (ii)
within 30 Business Days of the end of the month in question, U S WEST shall
prepare and deliver to New U S WEST, and New U S WEST shall fully cooperate
in preparing, a statement of transactions that shall reflect a complete
analysis of any cash collections and cash disbursements by the U S WEST Group
on behalf of the New U S WEST Group during the relevant month or for any
prior month that should have been (but was not) included in a prior
statement; PROVIDED, HOWEVER, in each case that, with respect to the first
such monthly period, such statement shall not reflect any cash collections or
disbursements occurring prior to the Separation Time.
(b) Not later than five Business Days (unless otherwise
specifically provided in the relevant Transaction Document) following
delivery of each such monthly statement, New U S WEST shall pay to U S WEST
or U S WEST shall pay to
44
New U S WEST, as the case may be, in cash an amount necessary to eliminate
the account balance as reflected in each such statement (which amounts may be
set off against each other as appropriate). Any disputes relating to such
amounts payable shall be submitted to the Separation Committee for resolution
in accordance with the procedures set forth in Section 12.2.
(c) Following the end of the two-year period referred to in
Section 5.2(a) (or such earlier period as the parties hereto may agree), U S
WEST and New U S WEST shall continue to deliver the statement of transactions
referred to in Section 5.2(a) and pay the amounts necessary to eliminate the
account balance as reflected in such statement in accordance with Section
5.2(b), at such intervals as the parties may agree. Any disputes relating to
such amounts payable shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.
(d) Each of U S WEST and New U S WEST hereby grants the other a
limited irrevocable power-of-attorney to endorse, deposit and negotiate any
check, draft or other form of payment made in respect of any invoice
representing a receivable payable to one of them but which is sent by the
payor to a lock box maintained by the other or is made payable to either of
them or any of their subsidiaries but which is the payment of a receivable
that is a receivable of the other.
5.3 TRANSITION SERVICES. (a) From and after the Separation Time,
each party will provide, or cause one or more of the members of its Group to
provide, to the other Group such services on such terms as may be agreed upon
between U S WEST and New U S WEST from time to time in writing. The party
that is to provide the services (the "PROVIDER") will use its commercially
reasonable efforts to provide such services to the other party (the
"RECIPIENT") in a satisfactory and timely manner and as further specified in
writing by the parties.
(b) All employees and representatives of the Provider providing
services to the Recipient pursuant to this Section 5.3 shall be deemed for
purposes of all compensation and employee benefits matters to be employees or
representatives of the Provider and not employees or representatives of the
Recipient. In performing such services, such employees and representatives
will be under
45
the direction, control and supervision of the Provider (and not the
Recipient) and the Provider will have the sole right to exercise all
authority with respect to the employment (including, without limitation,
termination of employment), assignment and compensation of such employees and
representatives. Any disputes relating to the provision of services under
this Section 5.3 shall be submitted to the Separation Committee for
resolution in accordance with the procedures set forth in Section 12.2.
5.4 U S WEST NAME. (a) U S WEST acknowledges that the name "U S
WEST", whether alone or in combination with one or more words, is an asset
being transferred to New U S WEST pursuant to the Contribution. Promptly
after the Separation Time, U S WEST shall cause each member of the U S WEST
Group whose corporate name includes the name "U S WEST" to change its name to
delete any reference therein to "U S WEST" (for example, without limiting the
generality of the foregoing, the word "U S WEST" shall be removed from the
name of "U S WEST International Holdings, Inc."). Promptly after the
Separation Time, U S WEST shall, and shall cause each member of the U S WEST
Group to, subject to the requirements of Section 7.8 of the AirTouch Merger
Agreement, (i) assign, and does hereby assign, to New U S WEST any license to
use the name U S WEST (including any appurtenant rights and obligations such
as quality control) with all agents, franchisees and licensees of the U S
WEST Group and the MediaOne Business (to the extent permitted by the terms of
such license), including any license granted pursuant to Section 7.8 of the
AirTouch Merger Agreement, (ii) to the extent assignment is not permitted,
terminate any license to use the name U S WEST with all agents, franchisees
and licensees of the U S WEST Group and the MediaOne Business (to the extent
permitted by the terms of such license) and (iii) if neither assignment or
termination is permitted, the U S WEST Group shall cooperate with New U S
WEST, and if appropriate enter into necessary agreements, to preserve New U S
WEST's ownership rights in the U S WEST name. U S WEST further agrees not to
use the name "U S WEST" in connection with the operations of the U S WEST
Group or the MediaOne Business; PROVIDED, HOWEVER, that for a period of six
months after the Separation Time, the U S WEST Group may continue to use the
"U S WEST" name for internal purposes on business forms, business cards (with
the company name manually corrected) and stationery. Nothing herein shall
require U S WEST or any member of the U S WEST Group to retrieve from
customers telephones, accessories or other equipment or materials labeled
with the
46
"U S WEST" name and remove such name from such telephones, accessories or
other equipment or materials.
(b) For a period of two years following the Separation Time, New
U S WEST shall not, and shall cause each member of the New U S WEST Group not
to, use the names "U S WEST Media Group," "U S WEST Media," "U S WEST
Interactive Services," "U S WEST International" or "U S WEST NewVector" in
the operations of the New U S WEST Business; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, the New U S WEST Group shall be permitted to
use the words "Media Group," "Media," "Interactive Services," and
"International" as long as such words do not immediately follow the name "U S
WEST" as referenced above. By way of example, New U S WEST may use as
"taglines" references to "the Media Group of U S WEST," the "International
Division of U S WEST" or similar references in the operation of the New U S
WEST Business. Promptly after the Separation Time, New U S WEST shall cause
MGI to change its corporate name to delete any reference therein to the words
"Media Group".
5.5 TRANSFER TAXES. New U S WEST and U S WEST agree to cooperate
to determine the amount of sales, transfer or other similar taxes or fees
(including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement. U S WEST and New U S WEST agree
to file promptly and timely returns for such taxes and fees with the
appropriate taxing authorities. The amounts payable with respect to such
taxes and fees shall be borne equally by U S WEST and New U S WEST. Any
disputes relating to such amounts payable shall be submitted to the
Separation Committee for resolution in accordance with the procedures set
forth in Section 12.2.
5.6 INTELLECTUAL PROPERTY. (a) At the Separation Time, subject to
Section 5.6(b), (i) the U S WEST Group shall become the sole and exclusive
owner of all right, title and interest in the MediaOne Patents, the MediaOne
Trademarks and the MediaOne Other Intellectual Property, (ii) the New U S
WEST Group shall become the sole and exclusive owner of all right, title and
interest in the New U S WEST Patents, the New U S WEST Trademarks and the New
U S WEST Other Intellectual Property and (iii) the U S WEST Group and the New
U S WEST Group shall each have, as joint owners, an equal and undivided
interest in and to all right, title and interest in both the Joint Patents
and the Joint Other Intellectual Property. The parties agree to file
47
appropriate assignment documents with the U.S. Patent and Trademark Office
(or other appropriate agencies) in order to effect and record the ownership
of the MediaOne Patents, the MediaOne Trademarks, the New U S WEST Patents,
the New U S WEST Trademarks and the Joint Patents as provided under this
Section 5.6(a).
(b) From and after the Separation Time, subject to the protection
of Information required by Section 10.5, (i) the New U S WEST Group shall
have the non-exclusive right to use all MediaOne Other Intellectual Property
and New U S WEST Other Intellectual Property which is in the possession of,
and is used by or for which there are good faith plans for use by, the New U
S WEST Business as of the Separation Time and (ii) the U S WEST Group shall
have the non-exclusive right to use all New U S WEST Other Intellectual
Property and MediaOne Intellectual Property which is in the possession of,
and is used by or for which there are good faith plans for use by, the
MediaOne Business as of the Separation Time.
(c) It is understood that the right of each party to use both the
MediaOne Other Intellectual Property and the New U S WEST Other Intellectual
Property under Section 5.6(b) shall include (but only to the extent necessary
for such use) rights under MediaOne Patents and New U S WEST Patents.
ARTICLE VI
EMPLOYEE MATTERS
6.1 EMPLOYEES. Effective as of the Separation Time, except as
otherwise provided in the Employee Matters Agreement, (a) those Media
Employees who are employed by U S WEST or any of its Subsidiaries immediately
prior to the Separation Time shall remain or become employees of U S WEST or
any Subsidiary thereof and (b) those Communications Employees who are
employed by U S WEST or any of its Subsidiaries immediately prior to the
Separation Time shall become employees of New U S WEST or any Subsidiary
thereof.
6.2 EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS. U S WEST
and New U S WEST shall take all
48
actions necessary to effect the transfer to New U S WEST and the assumption
by New U S WEST of the Employee Benefit Plans and Employee Arrangements and
the Assets and Liabilities thereunder as described in the Employee Matters
Agreement.
6.3 INTERNAL REVENUE SERVICE FORMS. U S WEST and New U S WEST
agree that pursuant to the "Alternative Procedure" provided in Section 5 of
Revenue Procedure 96-60, 1996-53, I.R.B. 24, with respect to preparing,
filing and furnishing the Internal Revenue Service Forms W-2, W-3, 941 and
W-5, (i) U S WEST and New U S WEST shall report on a "predecessor-successor"
basis as set forth therein, (ii) U S WEST shall be relieved from furnishing
Forms W-2 to the New U S WEST Employees and (iii) New U S WEST shall assume
the obligations of U S WEST to furnish such forms to the New U S WEST
Employees for the full 1998 calendar year.
ARTICLE VII
INSURANCE MATTERS
7.1 POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. (a) Immediately
prior to the Separation Time, U S WEST shall cause Western Range to transfer
to an Insurer or to a member of the New U S WEST Group all of the Insurance
Arrangements provided by Western Range (as well as the liabilities and
corresponding reserves) which relate to members of the New U S WEST Group or
the New U S WEST Business or New U S WEST Liabilities (the "WESTERN RANGE
TRANSFERRED INSURANCE ARRANGEMENTS").
(b) The MediaOne Assets shall include (i) all MediaOne Insurance
Arrangements and (ii) subject to the provisions of this Article VII, an equal
and undivided interest in the Joint Insurance Arrangements. The New U S WEST
Assets shall include (i) all New U S WEST Insurance Arrangements (including
the Western Range Transferred Insurance Arrangements) and (ii) subject to the
provisions of this Article VII, an equal and undivided interest in the Joint
Insurance Arrangements.
(c) As of the Separation Time, all of the Joint Insurance
Arrangements shall be discontinued and each of the Groups shall be
responsible for arranging separate Insurance
49
Arrangements with respect to injuries, losses, liabilities, damages and
expenses arising after the Separation Time with respect to such Group and its
businesses. At the Separation Time, all prepaid and unused premiums with
respect to each Joint Insurance Arrangement shall be distributed to U S WEST
and New U S WEST in the same ratio in which such premiums were allocated by
U S WEST to the MediaOne Business and the New U S WEST Business prior to the
Separation Time. Following the Separation Time, any refunds received by U S
WEST or New U S WEST with respect to a Joint Insurance Arrangement shall be
distributed to U S WEST and New U S WEST in the same ratio in which premiums
payable with respect to such Joint Insurance Arrangement were allocated by
U S WEST to the MediaOne Business and the New U S WEST Business prior to the
Separation Time. To the extent U S WEST or New U S WEST receives any such
refund, the party receiving such refund shall promptly transfer to the other
party the portion of such refund to which such other party is entitled.
7.2 ADMINISTRATION; OTHER MATTERS. (a) From and after the
Separation Time, except as set forth in Section 7.2(c), U S WEST shall be
responsible for Insurance Administration under the Joint Insurance
Arrangements with respect to MediaOne Liabilities and New U S WEST shall be
responsible for Insurance Administration under the Joint Insurance
Arrangements with respect to New U S WEST Liabilities. The disbursements,
out-of-pocket expenses and costs of employees or agents of U S WEST or New
U S WEST relating to Insurance Administration contemplated by this Section
7.2(a) shall be borne by the party incurring such expenses or costs.
Insurance Proceeds with respect to claims, costs and expenses under the Joint
Insurance Arrangements shall be paid by the Insurer to the party making the
Insured Claim thereunder. In the event U S WEST or New U S WEST makes an
Insured Claim under a Joint Insurance Arrangement, such party shall deliver
notice to the other party of such Insured Claim and shall keep the other
party periodically updated as to the status of such Insured Claim.
(b) From and after the Separation Time, subject to Section 7.2(c),
each of U S WEST and New U S WEST shall have the right to claim coverage for
Insured Claims under each Joint Insurance Arrangement with respect to any
claim covered by such Joint Insurance Arrangement as and to the extent that
such insurance is available up to the full extent of the applicable limits of
liability, if any, of
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such Joint Insurance Arrangement (and may receive any Insurance Proceeds with
respect thereto); PROVIDED, HOWEVER, that, prior to making any Insured Claim
under a Joint Insurance Arrangement, U S WEST or New U S WEST, as the case
may be, shall be required to have retained a portion of the Liability
underlying such Insured Claim equal to the amount of the self-insured
retention or deductible, if any, of such party with respect to such
Liability. In the event that the total Insurance Proceeds payable to the U S
WEST Group and the New U S WEST Group under a Joint Insurance Arrangement
shall have exhausted the limits of liability, if any, under such Joint
Insurance Arrangement, payment of any future claims which are not reimbursed
under such Joint Insurance Arrangement as a result of such exhaustion of the
limits of liability shall be the sole responsibility of the party having
liability for such claim under Section 3.4. Each of the parties agrees to
use commercially reasonable efforts to maximize available coverage under
those Joint Insurance Arrangements applicable to it, and to take all
commercially reasonable steps to recover from all other responsible parties
in respect of an Insured Claim.
(c) With respect to any Insured Claim in respect of a Shared
Liability, U S WEST and New U S WEST shall share any Insurance Proceeds
received in respect of such Insured Claim in the same proportions in which
such Shared Liability is shared by U S WEST and New U S WEST. In the event
of any such Insured Claim, U S WEST and New U S WEST shall jointly determine
which party shall be responsible for Insurance Administration under the Joint
Insurance Arrangements in respect of such Insured Claim. The disbursements,
out-of-pocket expenses and costs relating to Insurance Administration
contemplated by this Section 7.2(c) shall be borne by the parties in the same
proportions in which the Shared Liability underlying such Insured Claim is
shared by U S WEST and New U S WEST.
7.3 COOPERATION; DISAGREEMENTS. The parties shall use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated
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by this Agreement. Any disagreements between U S WEST and New U S WEST under
this Article VII shall be submitted to the Separation Committee in accordance
with the procedures set forth in Section 12.2.
ARTICLE VIII
INDEMNIFICATION
8.1 NEW U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as
otherwise specifically provided in the other Transaction Documents, subject
to the terms and conditions set forth in this Agreement, from and after the
Separation Time, New U S WEST shall indemnify, defend and hold harmless U S
WEST and its directors, officers, employees, representatives, advisors,
agents and Affiliates (collectively, the "U S WEST INDEMNIFIED PARTIES")
from, against and in respect of any and all Indemnifiable Losses of the U S
WEST Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly:
(i) any and all New U S WEST Liabilities (including any New U S
WEST Liability which could be covered by the terms of the
indemnification provisions contained in the Bylaws of U S WEST prior to
the Separation Time);
(ii) New U S WEST's failure to observe from and after the
Separation Time its obligations under this Agreement or any of the other
Transaction Documents; and
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Filings, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (but, in each
case, only with respect to information relating to the New U S WEST
Business contained in or omitted from the SEC Filings).
(b) Notwithstanding New U S WEST's obligations to indemnify U S
WEST Indemnified Parties pursuant to Section 8.1(a), U S WEST hereby waives,
releases and agrees not to make any claim or bring any contribution, cost
recovery or other action against any member of the New U S WEST Group,
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and, if applicable, their respective directors, officers, employees,
representatives, agents and Affiliates and their heirs, successors and
assigns, under CERCLA or any similar federal, state or local environmental
law or regulation now existing or hereafter enacted that seeks to allocate
liabilities between U S WEST and New U S WEST in a different manner than as
expressly set forth in this Agreement.
8.2 U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as otherwise
specifically provided in the other Transaction Documents, subject to the
terms and conditions set forth in this Agreement, from and after the
Separation Time, U S WEST shall indemnify, defend and hold harmless New U S
WEST and each of its directors, officers, employees, representatives,
advisors, agents and Affiliates (collectively, the "NEW U S WEST INDEMNIFIED
PARTIES") from, against and in respect of any and all Indemnifiable Losses of
the New U S WEST Indemnified Parties arising out of, relating to or resulting
from, directly or indirectly:
(i) any and all MediaOne Liabilities;
(ii) U S WEST's failure to observe from and after the Separation
Time its obligations under this Agreement or any of the other
Transaction Documents; and
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the SEC Filings, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (but, in each
case, only with respect to information relating to the MediaOne Business
contained in or omitted from the SEC Filings).
(b) Notwithstanding U S WEST's obligations to indemnify New U S
WEST Indemnified Parties pursuant to Section 8.2(a), New U S WEST hereby
waives, releases and agrees not to make any claim or bring any contribution,
cost recovery or other action against any member of the U S WEST Group, and,
if applicable, their respective directors, officers, employees,
representatives, agents and Affiliates and their heirs, successors and
assigns, under CERCLA or any similar federal, state or local environmental
law or regulation now existing or hereafter enacted that seeks to allocate
liabilities between New U S WEST and U S WEST in a
53
different manner than as expressly set forth in this Agreement.
8.3 PROCEDURE FOR INDEMNIFICATION. Except as set forth in the
Employee Matters Agreement, all claims for indemnification under this Article
VIII shall be asserted and resolved as follows:
(a) THIRD PARTY CLAIMS (OTHER THAN WITH RESPECT TO SHARED
LIABILITIES). In the event that any claim or demand for which an
Indemnifying Party may be liable to an Indemnified Party hereunder (other
than with respect to Shared Liabilities) is asserted against or sought to be
collected by a third party from an Indemnified Party (an "ASSERTED
LIABILITY"), the Indemnified Party shall as soon as possible notify the
Indemnifying Party in writing of such Asserted Liability, specifying the
nature of such Asserted Liability (the "CLAIM NOTICE"); provided that no
delay on the part of the Indemnified Party in giving any such Claim Notice
shall relieve the Indemnifying Party of any indemnification obligation
hereunder except to the extent that the Indemnifying Party is materially
prejudiced by such delay. The Indemnifying Party shall have 60 days (or less
if the nature of the Asserted Liability requires) from its receipt of the
Claim Notice to notify the Indemnified Party whether or not the Indemnifying
Party desires, at the Indemnifying Party's sole cost and expense and by
counsel of its own choosing, to defend against such Asserted Liability;
PROVIDED, HOWEVER, that if, under applicable standards of professional
conduct a conflict on any significant issue between the Indemnifying Party
and any Indemnified Party exists in respect of such Asserted Liability, then
the Indemnifying Party shall reimburse the Indemnified Party for the
reasonable fees and expenses of one additional counsel (who shall be
reasonably acceptable to the Indemnifying Party).
The Indemnified Party shall have the right to control, pay or
settle any Asserted Liability which the Indemnifying Party shall have
undertaken to defend so long as the Indemnified Party shall also (at the time
it exercises such right to control, pay or settle such Asserted Liability)
waive any right to indemnification therefor by the Indemnifying Party. If
the Indemnifying Party undertakes to defend against such Asserted Liability,
the Indemnified Party shall cooperate fully with the Indemnifying Party and
its counsel in the investigation, defense and settlement thereof, but the
Indemnifying Party
54
shall control the investigation, defense and settlement thereof. If the
Indemnified Party desires to participate in any such defense, it may do so at
its sole cost and expense. If the Indemnifying Party elects not to defend
against such Asserted Liability, then the Indemnifying Party shall have the
right to participate in any such defense at its sole cost and expense, but
the Indemnified Party shall control the investigation, defense and settlement
thereof at the reasonable cost and expense of the Indemnifying Party. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), consent
to any settlement unless such settlement (i) includes a complete release of
the Indemnified Party and (ii) does not require the Indemnified Party to make
or forego any payment or forego or take any action. The Indemnifying Party
shall not be liable for any settlement of any Asserted Liability effected
without its prior written consent (which consent shall not be unreasonably
withheld). In the event a dispute arises as to which party has
responsibility under this Agreement for an Asserted Liability, the
Indemnified Party shall have the right to defend such Asserted Liability
until such dispute is resolved in accordance with the procedures set forth in
Section 12.2; PROVIDED, HOWEVER, that in such circumstances (i) the
Indemnified Party shall not have the right to settle such Asserted Liability
unless the Indemnified Party shall also (at the time it exercises such right
to settle such Asserted Liability) waive any right to indemnification
therefor by the Indemnifying Party and (ii) if it is subsequently determined
pursuant to Section 12.2 that such Asserted Liability is the responsibility
of the Indemnifying Party, the Indemnifying Party shall thereafter have the
right to defend against such Asserted Liability in accordance with this
Section 8.3(a). Any disputes between the Indemnifying Party and the
Indemnified Party under this Section 8.3(a) shall be submitted to the
Separation Committee in accordance with the procedures set forth in Section
12.2.
(b) THIRD PARTY CLAIMS WITH RESPECT TO SHARED LIABILITIES. In the
event that any claim or demand with respect to a Shared Liability is asserted
against or sought to be collected by a third party (a "SHARED ASSERTED
LIABILITY"), the Indemnifying Party receiving notice of such claim (the
"RECEIVING PARTY") shall as soon as practicable notify the other Indemnifying
Party (the "NON-RECEIVING PARTY") in writing of such Shared Asserted
Liability, specifying the nature of such Shared Asserted Liability (the
55
"SHARED CLAIM NOTICE"); PROVIDED, HOWEVER, that no delay on the part of the
Receiving Party in giving any such Shared Claim Notice shall relieve the
Non-Receiving Party of any indemnification obligation hereunder except to the
extent that the Non-Receiving Party is materially prejudiced by such delay.
If one of the Indemnifying Parties has responsibility for greater than 50% of
such Shared Asserted Liability as set forth in Section 1.1(i) of the
Separation Disclosure Schedule, such Indemnifying Party shall have management
and administrative responsibility in respect of such Shared Asserted
Liability (the "MANAGING PARTY"), including responsibility for the defense of
such Shared Asserted Liability, negotiation with claimants and potential
claimants (subject to the limitations in the following paragraph) and other
activities related thereto. If one of the Indemnifying Parties does not have
responsibility for greater than 50% of such Shared Asserted Liability as set
forth in Section 1.1(i) of the Separation Disclosure Schedule, New U S WEST
shall be the Managing Party.
The Managing Party shall assume the defense of the Shared Asserted
Liability with counsel selected by the Managing Party and shall control the
defense of such Shared Asserted Liability, although the Indemnifying Party
that is not the Managing Party (the "NON-MANAGING PARTY") shall have the
right at its own cost to participate in such defense and to employ counsel
separate from the counsel employed by the Managing Party. The Non-Managing
Party shall cooperate with the Managing Party in the defense or prosecution
of such Shared Asserted Liability. In the event a dispute arises as to
whether the Non-Receiving Party has any responsibility under this Agreement
for the Shared Asserted Liability, the Receiving Party shall have the right
to defend such Shared Asserted Liability until such dispute is resolved in
accordance with the procedures set forth in Section 12.2; PROVIDED, HOWEVER,
that in such circumstances (i) the Receiving Party shall not have the right
to settle such Shared Asserted Liability unless the Indemnified Party shall
also (at the time it exercises such right to settle such Shared Asserted
Liability) waive any right to indemnification therefor by the Non-Receiving
Party and (ii) if the Non-Receiving Party becomes the Managing Party, the
Managing Party shall thereafter defend against such Shared Asserted Liability
in accordance with this Section 8.3(b).
In no event will the Managing Party admit any liability with
respect to, or settle, compromise or discharge, any such Shared Asserted
Liability without the
56
prior written consent of the Non-Managing Party; PROVIDED, HOWEVER, that the
Managing Party shall have the right to settle, compromise or discharge, any
such Shared Asserted Liability without the consent of the Non-Managing Party
if the aggregate amount payable by the Indemnifying Parties in respect of
such settlement, compromise or discharge does not exceed $5,000,000 and such
settlement, compromise or discharge does not require the Non-Managing Party
to take any action other than the payment of damages; PROVIDED, FURTHER, that
the Managing Party shall have the right to settle, compromise or discharge
such Shared Asserted Liability without the consent of the Non-Managing Party
if the Managing Party releases in writing the Non-Managing Party from its
indemnification obligation hereunder with respect to such Shared Asserted
Liability and such settlement, compromise or discharge would not otherwise
adversely affect the Non-Managing Party; and PROVIDED, FURTHER, that if the
Managing Party recommends a settlement, compromise or discharge of such
Shared Asserted Liability to the Non-Managing Party that does not require the
Non-Managing Party to take any action other than the payment of damages and
the Non-Managing Party does not consent to such settlement, compromise or
discharge, then the Non-Managing Party shall be required to indemnify the
Managing Party for any amount that the Managing Party may be required to pay
in the future in connection with such Shared Asserted Liability which is in
excess of the amount that would have been paid by or on behalf of the
Managing Party pursuant to such settlement, compromise or discharge. All
amounts payable by the Indemnifying Parties in connection with a Shared
Asserted Liability, including all reasonable legal and other expenses
incurred in connection with such Shared Asserted Liability (including
reasonable legal expenses of the Non-Managing Party), shall be shared by the
parties in the same proportions in which the related Shared Liability is
shared. Any disputes between the parties under this Section 8.3(b) shall be
submitted to the Separation Committee in accordance with the procedures set
forth in Section 12.2.
(C) NON-THIRD PARTY CLAIMS. In the event that an Indemnified
Party should have a claim against the Indemnifying Party hereunder that does
not involve a claim or demand being asserted against or sought to be
collected from it by a third party, the Indemnified Party shall send a notice
with respect to such claim to the Indemnifying Party. The Indemnifying Party
shall have 60 days from the date such notice is delivered during which to
notify the Indemnified Party in writing of any good faith objections it has
to the
57
Indemnified Party's notice or claims for indemnification, setting forth in
reasonable detail each of the Indemnifying Party's objections thereto. If
the Indemnifying party does not deliver such written notice of objection
within such 60-day period, the Indemnifying Party shall be deemed to not have
any objections to such claim. If the Indemnifying Party does deliver such
written notice of objection within such 60-day period, the Indemnifying Party
and the Indemnified Party shall attempt in good faith to resolve any such
dispute within 60 days of the delivery by the Indemnifying Party of such
written notice of objection. If the Indemnifying Party and the Indemnified
Party are unable to resolve any such dispute within such 60-day period, such
dispute shall be submitted to the Separation Committee in accordance with the
procedures set forth in Section 12.2.
8.4 MISCELLANEOUS INDEMNIFICATION PROVISIONS.
(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the
same terms and conditions as the Indemnified Party is indemnified by the
Indemnifying Party under this Article VIII.
(b) The amount that an Indemnifying Party is required to pay to
any Indemnified Party pursuant to this Article VIII shall be reduced
(retroactively or prospectively) by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnified Party in respect of
the related Indemnifiable Loss (including any Insurance Proceeds in respect
of a Shared Liability recovered by or on behalf of such Indemnified Party in
respect of the related Indemnifiable Loss). If an Indemnified Party shall
have received the payment required by this Article VIII in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds
or other amounts in respect of such Indemnifiable Loss, then such Indemnified
Party shall pay to such Indemnifying Party a sum equal to the amount of such
Insurance Proceeds or other amounts actually received, up to the aggregate
amount of any payments received from such Indemnifying Party pursuant to this
Article VIII in respect of such Indemnifiable Loss.
(c) In determining the amount of any indemnity payable under this
Article VIII, such amount shall be reduced by any related Tax benefits if and
when actually realized or received (but only after taking into account any
58
Tax benefits (including, without limitation, any net operating losses or
other deductions) to which the Indemnified Party would be entitled without
regard to such item), except to the extent such Tax benefit has already been
taken into account in determining the amount of any indemnity payable under
this Article VIII in respect of the related Indemnifiable Loss. Any such Tax
benefit shall be promptly repaid by the Indemnified Party to the Indemnifying
Party following the time at which such recovery is realized or received
pursuant to the previous sentence, minus all reasonably allocable costs,
charges and expenses incurred by the Indemnified Party in obtaining such Tax
benefit. Notwithstanding the foregoing, if (x) the amount of Indemnifiable
Losses for which the Indemnifying Party is obligated to indemnify the
Indemnified Party is reduced by any Tax benefit in accordance with the
provisions of the previous sentence and (y) the Indemnified Party
subsequently is required to repay the amount of any such Tax benefit or such
Tax benefit is disallowed, then the obligation of the Indemnifying Party to
indemnify with respect to such amounts shall be reinstated immediately and
such amounts shall be paid promptly to the Indemnified Party in accordance
with the provisions of this Agreement.
(d) No Indemnifying Party shall be liable to an Indemnified Party
under this Article VIII in respect of consequential, exemplary, special or
punitive damages, or lost profits, except to the extent such consequential,
exemplary, special or punitive damages, or lost profits are actually paid to
a third party.
8.5 CONTRIBUTION. (a) If the indemnification provided for in
this Article VIII is not permitted under Applicable Law, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such Indemnifiable Losses (i) any amount that such Indemnified
Party would be entitled to pursuant to Article VIII of this Agreement or the
relevant indemnity provisions of any other Transaction Document or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relevant
benefits of the indemnity provisions described in clause (i) above, but also
the relative ownership of the Assets or responsibility for the Liabilities
associated with such Indemnifiable Losses.
59
(b) The amounts paid or payable by an Indemnified Party as a
result of Indemnifiable Losses referred to in Section 8.5(a) above shall be
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
8.6 TAX MATTERS; CONSTRUCTION OF AGREEMENTS.
(a) Except as set forth in the Tax Sharing Agreement, all
indemnification relating to Taxes shall be governed by the Tax Sharing
Agreement.
(b) Notwithstanding any other provision in this Agreement to the
contrary, except as set forth in Section 8.6(a), in the event and to the
extent that there shall be a conflict between the provisions of this Article
VIII and the provisions of any other part of this Agreement or any exhibit or
schedule hereto, the provisions of this Article VIII shall control, and in
the event and to the extent that there shall be a conflict between the
provisions of this Agreement (including, without limitation, the provisions
of this Article VIII) and the provisions of any other Transaction Document,
the provisions of such other Transaction Document shall control.
8.7 REMEDIES CUMULATIVE. The remedies provided in this Article
VIII shall be cumulative and, subject to the provisions of Section 12.2,
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
ARTICLE IX
CERTAIN ADDITIONAL COVENANTS
9.1 LICENSES AND PERMITS. Each party hereto shall cause the
appropriate members of its Group to prepare and file with the appropriate
licensing and permitting authorities applications for the transfer or
issuance, as may be necessary or advisable in connection with the Separation,
to its Group of all material governmental licenses and permits required for
the members of its Group to operate its business after the Separation. The
members of the New U S WEST Group and the members of the U S WEST Group shall
cooperate and use all reasonable best efforts to
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secure the transfer or issuance of such licenses and permits.
9.2 INTERCOMPANY AGREEMENTS. All contracts, licenses, agreements,
commitments or other arrangements, formal or informal, between any member of
the U S WEST Group, on the one hand, and any member of the New U S WEST
Group, on the other, in existence as of the Separation Time, pursuant to
which any member of either Group provides services to any member of the other
Group (including, without limitation, management, administrative, financial,
accounting, data processing, insurance or technical support), or the use of
any Assets of any member of the other Group, or the secondment of any
employee, or pursuant to which rights, privileges or benefits are afforded to
members of either Group or Affiliates of the other Group, shall terminate as
of the close of business on the day prior to the Separation Time, except (i)
as specifically provided herein or in the Transaction Documents or as
otherwise agreed to by the parties, (ii) for the agreements listed in Section
9.2 of the Separation Disclosure Schedule, which will remain in effect
following the Separation Time and (iii) to the extent required by the terms
of the AirTouch Merger Agreement, for any agreements between a member of the
New U S WEST Group, on the one hand, and NewVector or any of its Subsidiaries
or investments or PCS Holdings, on the other hand. From and after the
Separation Time, no member of either Group shall have any rights under any
contract, license, agreement, commitment or arrangement so terminated.
9.3 GUARANTEE OBLIGATIONS. (a) U S WEST and New U S WEST shall
cooperate, and shall cause their respective Groups to cooperate, to
terminate, or to cause a member of the New U S WEST Group to be substituted
in all respects for any member of the U S WEST Group in respect of, all
obligations of any member of the U S WEST Group under any loan, letter of
credit, financing, lease, contract or other obligation in existence as of the
Separation Time pertaining to the New U S WEST Business for which such member
of the U S WEST Group may be liable, as guarantor, original tenant, primary
obligor or otherwise. If such a termination or substitution is not effected
by the Separation Time, (i) New U S WEST shall indemnify and hold harmless
the U S WEST Indemnified Parties for any Indemnifiable Loss arising from or
relating to any such loan, letter of credit, financing, lease, contract or
other obligation and (ii) without the prior written consent of U S WEST, from
and after the Separation Time, New U S WEST shall not, and shall not
61
permit any member of the New U S WEST Group or any of its Affiliates to,
renew or extend the term of, increase its obligations under, transfer to a
third party, or amend in any manner adverse to the U S WEST Group, any such
loan, letter of credit, financing, lease, contract or other obligation unless
all obligations of the U S WEST Group with respect thereto are thereupon
terminated by documentation reasonably satisfactory in form and substance to
U S WEST.
(b) U S WEST and New U S WEST shall cooperate, and shall cause
their respective Groups to cooperate, to terminate, or to cause a member of
the U S WEST Group to be substituted in all respects for any member of the
New U S WEST Group in respect of, all obligations of any member of the New U
S WEST Group under any loan, financing, letter of credit, lease, contract, or
other obligation in existence as of the Separation Time pertaining to the U S
WEST Business for which such member of the New U S WEST Group may be liable,
as guarantor, original tenant, primary obligor or otherwise. If such a
termination or substitution is not effected by the Separation Time, (i) U S
WEST shall indemnify and hold harmless the New U S WEST Indemnified Parties
for any Indemnifiable Loss arising from or relating to any such loan, letter
of credit, financing, lease, contract or other obligation, and (ii) without
the prior written consent of New U S WEST, from and after the Separation
Time, U S WEST shall not, and shall not permit any member of the U S WEST
Group or any of its Affiliates to, renew or extend the term of, increase its
obligations under, transfer to a third party, or amend in any manner adverse
to the New U S WEST Group, any such loan, letter of credit, financing, lease,
contract or other obligation unless all obligations of the New U S WEST Group
with respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to New U S WEST.
9.4 FURTHER ASSURANCES. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under Applicable Laws, regulations and agreements to
consummate and make effective the transactions contemplated by this
Agreement. Without limiting the foregoing, each party hereto shall cooperate
with the other party, and execute and deliver, or use reasonable best efforts
to cause to be executed and delivered, all instruments, including instruments
of conveyance, assignment
62
and transfer, and to make all filings with, and to obtain all consents,
approvals or authorizations of, any governmental or regulatory authority or
any other Person under any permit, license, agreement, indenture or other
instrument, and take all such other actions as such party may reasonably be
requested to take by the other party hereto from time to time, consistent
with the terms of this Agreement and the Transaction Documents, in order to
effectuate the provisions and purposes of this Agreement and the transfers of
Assets and Liabilities and the other transactions contemplated hereby.
(b) If any such transfer of Assets or Liabilities is not
consummated prior to or at the Separation Time, then the party hereto
retaining such Asset or Liability shall continue to take the actions required
by Section 9.4(a) to consummate and make effective such transfer as soon as
practicable after the Separation Time and, in the case of Assets, shall use
its reasonable best efforts to preserve the value of such Assets until the
time of transfer. If and when any such Asset or Liability becomes
transferable, such transfer shall be effected forthwith. The parties hereto
agree that, as of the Separation Time, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership to all of the Assets,
together with all rights, powers and privileges incident thereto, and shall
be deemed to have assumed in accordance with the terms of this Agreement and
the Transaction Documents all of the Liabilities, and all duties, obligations
and responsibilities incident thereto, that such party is entitled to acquire
or required to assume pursuant to the terms of this Agreement.
(c) Each of the parties hereto agrees to use its respective
reasonable best efforts, at such party's expense, to obtain any consents
required to transfer and assign to (i) New U S WEST all Contracts, licenses
and other rights of any nature whatsoever included in the New U S WEST Assets
and (ii) U S WEST all Contracts, licenses and other rights of any nature
whatsoever included in the MediaOne Assets. In the event and to the extent
that either party hereto is unable to obtain any such required consents, (i)
such party shall continue to be bound thereby (such party in such capacity,
the "RECORD HOLDER") and (ii) the party to which such Asset would otherwise
be transferred pursuant to this Agreement (the "BENEFICIAL HOLDER") shall
pay, perform and discharge fully all of the obligations of the Record Holder
thereunder from and after the Separation Time and indemnify
63
such Record Holder for all losses arising out of such performance by such
Record Holder. The Record Holder shall, without further consideration
therefor, pay, assign and remit to the Beneficial Holder promptly all monies,
rights and other consideration received in respect of such performance. The
Record Holder shall exercise or exploit its rights and options under all such
Contracts, licenses and other rights and commitments referred to in this
Section 9.5(c) only as reasonably directed by the Beneficial Holder and at
the Beneficial Holder's expense. If and when any such consent shall be
obtained or any such Contract, license or other right shall otherwise become
assignable, the Record Holder shall promptly assign all of its rights and
obligations thereunder to the Beneficial Holder without payment of further
consideration and the Beneficial Holder shall, without the payment of any
further consideration therefor, assume such rights and obligations.
(d) In the event that, subsequent to the Separation Time, U S WEST
shall either (i) receive written notice from New U S WEST that certain
specified Assets which properly constitute New U S WEST Assets were not
transferred to it on or prior to the Separation Time or (ii) determine that
certain Assets of U S WEST which constitute New U S WEST Assets were not
transferred to New U S WEST on or prior to the Separation Time, then, as
promptly as practicable thereafter, U S WEST shall use its reasonable best
efforts to transfer and deliver any and all of such Assets to New U S WEST
without the payment by New U S WEST of any consideration therefor. In the
event that, subsequent to the Separation Time, New U S WEST shall either (i)
receive written notice from U S WEST that certain specified Assets were
transferred to New U S WEST which properly constitute MediaOne Assets, or
(ii) determine that certain Assets of New U S WEST which constitute MediaOne
Assets were transferred to New U S WEST, then as promptly as practicable
thereafter, New U S WEST shall use its reasonable best efforts to transfer
and deliver any and all of such Assets to U S WEST without the payment by U S
WEST of any consideration therefor.
9.5 NATIONAL CONTRACTS. Each of the parties hereto agrees to use
its respective reasonable best efforts to permit the other party hereto to
obtain the benefits of certain Contracts with nationally-based vendors and
suppliers existing as of the Separation Time and listed on Section 9.5 of the
Separation Disclosure Schedule (such Contracts, each individually a "NATIONAL
CONTRACT" and
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collectively the "NATIONAL CONTRACTS"). Each of U S WEST and New U S WEST
hereby agrees to cooperate with respect to obtaining favorable prices under
such National Contracts by combining or consolidating orders made under such
National Contracts. Each of U S WEST and New U S WEST hereby agrees that New
U S WEST or a member of the New U S WEST Group shall administer these
National Contracts and that U S WEST shall be responsible for the portions
attributable to U S WEST of any order or delivery of goods and services
received under each National Contract (including costs of administration).
The arrangements of U S WEST and New U S WEST with respect to National
Contracts relating to employee matters shall be governed by the terms of the
Employee Matters Agreement.
9.6 NON-SOLICITATION OF EMPLOYEES. Each of U S WEST and New U S
WEST shall not, and shall cause the other members of the Group of which it is
a member not to, until the first anniversary of the Separation Time, directly
or indirectly, (i) recruit any Covered Employee of the other Group or (ii)
solicit any Covered Employee of the other Group to leave the employment of
the other Group; PROVIDED, HOWEVER, that nothing contained herein shall (A)
prohibit any advertisement or general solicitation (or employment as a result
thereof) by any member of the U S WEST Group or the New U S WEST Group that
is not specifically targeted at employees of the other Group or (B) prohibit
any employee of one Group from initiating employment discussion with the
other Group without any recruitment or solicitation from such other Group.
In the event U S WEST or New U S WEST breaches the provisions of this Section
9.5, the breaching party shall be required to pay to the non-breaching party
as liquidated damages an amount equal to the product of (x) 1.5 multiplied by
(y) the total salary and bonus under the non-breaching party's short-term
compensation plan received by the Covered Employee recruited or solicited
during the most recent 12-month period.
9.7 LOCK BOXES. U S WEST shall take all such actions as may be
necessary or required to deliver to New U S WEST full authority as of the
Separation Time with respect to all lock boxes or similar deposit
arrangements maintained by U S WEST prior to the Separation Time and which
are utilized exclusively by the New U S WEST Business. Effective as of the
Separation Time, U S WEST shall terminate any arrangement whereby funds
directed to such lock boxes or similar arrangements are consolidated with
other funds of U S WEST or otherwise made available to U S
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WEST. U S WEST shall, effective as of the Separation Time, take all
necessary steps to remove all Persons who are not New U S WEST Employees but
who are signatories or holders of powers-of-attorney with respect to such
lock boxes or other arrangements from the list of such signatories and
holders and otherwise extinguish their signing authority with respect thereto.
9.8 AGREEMENTS WITH RESPECT TO COMMON STOCK RECEIVED BY SAVINGS
PLAN/ESOPS. (a) U S WEST and the U S WEST Savings Plan/ESOP and New U S WEST
and the MediaOne Savings Plan/ESOP shall cooperate with each other in
supplying such information as may be necessary for any of such parties to
complete and file any information reporting forms presently or hereafter
required by the SEC or any commissioner or other authority administering the
"blue sky" or securities laws of any applicable jurisdiction which would be
required to be filed as a condition to the availability of an exemption from
registration or qualification of an offer or sale of the shares of the
MediaOne Common Stock owned by the U S WEST Savings Plan/ESOP after the
Separation (the "New U S WEST Savings Plan Shares") and the shares of the New
U S WEST Common Stock received by the MediaOne Savings Plan/ESOP in the
Separation (the "MediaOne Savings Plan Shares") under the Securities Act, or
any such "blue sky" or securities laws.
(b) To the extent required by Applicable Law, (i) until the sale
by the New U S WEST Savings Plan of the New U S WEST Savings Plan Shares, U S
WEST shall file in a timely manner all reports contemplated by Rule 144(c)(1)
under the Securities Act as satisfying the condition that adequate public
information with respect to U S WEST is available and (ii) until the sale by
the MediaOne Savings Plan of the MediaOne Savings Plan Shares, New U S WEST
shall file in a timely manner all reports contemplated by Rule 144(c)(1)
under the Securities Act as satisfying the condition that adequate public
information with respect to New U S WEST is available.
9.9 AIRTOUCH TRANSACTION. (a) Except as set forth in this
Section 9.9 or as otherwise agreed to by the parties, all rights and
obligations of U S WEST and its Subsidiaries under the AirTouch Merger
Agreement shall be retained by U S WEST in connection with the Separation.
(b) At the Separation Time (whether or not the AirTouch
Transaction shall have been consummated), U S WEST
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shall assign to New U S WEST and the New U S WEST Group, pursuant to the
instrument of assignment attached as Exhibit K-2 to the AirTouch Merger
Agreement, the following rights (and related obligations):
(i) all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Section 7.8 of the AirTouch Merger Agreement
(relating to use of the "U S WEST" name by AirTouch and its
Subsidiaries), subject to the limitations set forth therein; and
(ii) an equal and undivided interest (together with the U S WEST
Group) in all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Sections 7.9(b) and 7.9(c) of the AirTouch Merger
Agreement (relating to Intellectual Property), subject to the
limitations set forth therein; and
(iii) an equal and undivided interest (together with the U S WEST
Group) in all of the rights (and related obligations) of U S WEST and
its Subsidiaries under Section 7.11 of the AirTouch Merger Agreement
(relating to Third Party Rights), subject to the limitations set forth
therein.
(c) New U S WEST acknowledges the right of AirTouch pursuant to
Section 7.10 of the AirTouch Merger Agreement to make claims (directly or
through U S WEST) under the Joint Insurance Arrangments and agrees that, for
purposes of Article VII hereof, any such claim shall be deemed to have been
made by the U S WEST Group.
(d) New U S WEST acknowledges the right of AirTouch pursuant to
Section 7.12(c) of the AirTouch Merger Agreement to terminate any
contract, license or other arrangement between NewVector or any of its
Subsidiaries or investments or PCS Holdings, on the one hand, and a
member of the New U S WEST Group, on the other hand, on 30 Business
Days' prior written notice.
ARTICLE X
ACCESS TO INFORMATION
10.1 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as
practicable after the Separation Time, U S WEST shall deliver to New U S WEST
all corporate books and
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records of the New U S WEST Group in its possession and copies of the
relevant portions of all corporate books and records of the U S WEST Group
relating directly and primarily to the New U S WEST Group, the New U S WEST
Assets, the New U S WEST Business, the New U S WEST Liabilities and the New U
S WEST Employees, including, without limitation, original corporate minute
books, stock ledgers and certificates and the corporate seal of each
corporation the capital stock of which is included in the New U S WEST
Assets, copies of portions of the minute books of U S WEST and other members
of the U S WEST Group that are directly and primarily related to the New U S
WEST Business and documentation relating to the New U S WEST Liabilities,
including, in each case, all active agreements, active litigation files and
government filings. From and after the Separation Time, all such books,
records and copies shall be the property of New U S WEST. Prior to or as
promptly as practicable after the Separation Time, New U S WEST shall deliver
to U S WEST all corporate books and records of the U S WEST Group in its
possession and copies of the relevant portions of all corporate books and
records of the New U S WEST Group relating directly and primarily to the U S
WEST Group, the MediaOne Assets, the Media Business, the U S WEST Liabilities
and the MediaOne Employees, including, without limitation, original corporate
minute books, stock ledgers and certificates and the corporate seal of each
corporation the capital stock of which is included in the MediaOne Assets,
copies of portions of the minute books of members of the New U S WEST Group
that are directly and primarily related to the MediaOne Business and
documentation relating to the U S WEST Liabilities, including, in each case,
all active agreements, active litigation files and government filings. From
and after the Separation Time, all such books, records and copies shall be
the property of U S WEST.
10.2 ACCESS TO INFORMATION. From and after the Separation Time,
each of U S WEST and New U S WEST shall afford to the other and to the
other's Representatives reasonable access and duplicating rights, during
normal business hours and upon reasonable advance notice, to all Information
within the possession or control of such party's Group relating to the other
party's Group's pre-Separation business, Assets or Liabilities or relating to
or arising in connection with the relationship between the Groups on or prior
to the Separation Time, insofar as such access is reasonably required for a
reasonable purpose, subject to the provisions below regarding Privileged
Information. Without limiting the foregoing and except as otherwise provided
in
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the Transaction Documents, Information may be requested under this Section
10.2 for audit, accounting, claims, litigation and Tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations.
In furtherance of the foregoing:
(a) Each party hereto acknowledges that: (i) Each of U S WEST and
New U S WEST (and the members of the U S WEST Group and the New U S WEST
Group, respectively) has or may obtain Privileged Information; (ii) there are
a number of Litigation Matters affecting each or both of U S WEST and New U S
WEST; (iii) both U S WEST and New U S WEST have a common legal interest in
Litigation Matters, in the Privileged Information, and in the preservation of
the confidential status of the Privileged Information, in each case relating
to pre-Separation business of the U S WEST Group or the New U S WEST Group or
relating to or arising in connection with the relationship between the Groups
on or prior to the Separation Time; and (iv) both U S WEST and New U S WEST
intend that the transactions contemplated hereby and by the other Transaction
Documents and any transfer of Privileged Information in connection therewith
shall not operate as a waiver of any applicable privilege.
(b) Each of U S WEST and New U S WEST agrees, on behalf of itself
and each member of the Group of which it is a member, not to disclose or
otherwise waive any privilege attaching to any Privileged Information
relating to pre-Separation business of the New U S WEST Group or the U S WEST
Group, respectively, or relating to or arising in connection with the
relationship between the Groups on or prior to the Separation Time, without
providing prompt written notice to and obtaining the prior written consent of
the other, which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that U S WEST and New U S WEST may make such disclosure or waiver
with respect to Privileged Information if such Privileged Information relates
solely to the pre-Separation business of the U S WEST Group, in the case of
U S WEST, or the New U S WEST Group, in the case of New U S WEST. Any
disagreement between any member of the U S WEST Group and any member of the
New U S WEST Group concerning the reasonableness of withholding such consent
shall be submitted to the Separation Committee in accordance with the
procedures set forth in Section 12.2 and no disclosure shall be made prior to
a resolution of such disagreement.
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(c) Upon any member of the U S WEST Group or any member of the New
U S WEST Group receiving any subpoena or other compulsory disclosure notice
from a court, other governmental agency or otherwise that requests disclosure
of Privileged Information, in each case relating to pre-Separation business
of the New U S WEST Group or the U S WEST Group, respectively, or relating to
or arising in connection with the relationship between the Groups on or prior
to the Separation Time, in the event the recipient of such the notice intends
to disclose such Privileged Information, such recipient shall promptly
provide to the other Group (following the notice provisions set forth herein)
a copy of such notice, the intended response, and all materials or
information relating to the other Group that might be disclosed. In the
event of a disagreement as to the intended response or disclosure, unless and
until the disagreement is resolved as provided in subsection (b), the parties
shall cooperate to assert all defenses to disclosure claimed by either
party's Group, and shall not disclose any disputed documents or information
until all legal defenses and claims of privilege have been finally determined.
10.3 PRODUCTION OF WITNESSES. Subject to Section 10.2, after the
Separation Time, each of U S WEST and New U S WEST shall, and shall cause
each member of the U S WEST Group and the New U S WEST Group, respectively,
to, make available to U S WEST or New U S WEST or any member of the U S WEST
Group or of the New U S WEST Group, as the case may be, upon written request
of the other, such Group's directors, officers, employees and agents as
witnesses to the extent that any such Person may reasonably be required in
connection with any Litigation Matters, administrative or other proceedings
in which the requesting party may from time to time be involved and relating
to the pre-Separation business of the U S WEST Group or the New U S WEST
Group or relating to or in connection with the relationship between the
Groups on or prior to the Separation Time; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, neither the U S WEST Group nor the New U S
WEST Group shall be required to make available such Group's directors,
officers, employees or witnesses in response to a subpoena received by any
member of the other Group from a third party.
10.4 RETENTION OF RECORDS. Except as otherwise agreed in writing,
or as otherwise provided in the Transaction Documents, each of U S WEST and
New U S WEST shall, and shall cause the members of the Group of which it is a
member to, comply with the current records retention
70
policy of U S WEST included in Section 10.4 of the Separation Disclosure
Schedule with respect to all Information in such party's Group's possession
or under its control relating directly and primarily to the pre-Separation
business, Assets or Liabilities of the other party's Group.
10.5 CONFIDENTIALITY. Subject to Section 10.2, which shall govern
Privileged Information, from and after the Separation Time, each of New U S
WEST and U S WEST shall, and shall use reasonable best efforts to cause the
members of its Group and Representatives to, preserve the confidentiality of
all Information concerning the other party's Group obtained by it prior to
the Separation Time or furnished to it by such other party's Group pursuant
to this Agreement or the other Transaction Documents with the same degree of
care as it takes to preserve confidentiality for its own similar Information.
10.6 COOPERATION WITH RESPECT TO GOVERNMENT REPORTS AND FILINGS.
U S WEST, on behalf of itself and each member of the U S WEST Group, agrees to
provide any member of the New U S WEST Group, and New U S WEST, on behalf of
itself and each member of the New U S WEST Group, agrees to provide any
member of the U S WEST Group, with such cooperation and Information as may be
reasonably requested by the other in connection with the preparation or
filing of any government report or other government filing contemplated by
this Agreement or the other Transaction Documents or in conducting any other
government proceeding relating to pre-Separation business of the U S WEST
Group or the New U S WEST Group, Assets or Liabilities of either Group or
relating to or in connection with the relationship between the Groups on or
prior to the Separation Time. Such cooperation and Information shall
include, without limitation, promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any
Governmental Authority which relate to the U S WEST Group, in the case of the
New U S WEST Group, or the New U S WEST Group, in the case of the U S WEST
Group. Each party shall make its employees and facilities available during
normal business hours and on reasonable prior notice to provide explanation
of any documents or Information provided hereunder.
10.7 CERTAIN LIMITATIONS WITH RESPECT TO INFORMATION. (a) Any
Information owned by one Group that is provided to a requesting party
pursuant to this Agreement
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or any other Transaction Document shall be deemed to remain the property of
the providing party. Unless specifically set forth herein, nothing contained
in this Agreement shall be construed as granting or conferring rights of
license or otherwise in any such Information.
(b) A party providing Information hereunder or under any other
Transaction Document shall be entitled to receive from the requesting party
the reasonable costs, if any, of creating, gathering and copying such
Information, to the extent that such costs are incurred for the benefit of
the requesting party. Except as may be otherwise specifically provided
elsewhere in this Agreement or in any of the Transaction Documents, such
costs shall be computed solely in accordance with the providing party's
standard methodology and procedures.
(c) No party shall have any liability to any other party in the
event that any Information exchanged or provided pursuant to this Article X
hereof which is an estimate or forecast, or which is based on an estimate or
forecast, is found to be inaccurate, in the absence of willful misconduct by
the party providing such Information. No party shall have any liability to
any other party if any Information is destroyed after reasonable best efforts
by such party to comply with the provisions of Section 10.4.
(d) The rights and obligations granted under this Article X are
subject to any specific limitations, qualifications or additional provisions
on the sharing, exchange or confidential treatment of Information set forth
in any other Transaction Document.
10.8 PROTECTIVE ARRANGEMENTS. In the event that any party or any
member of its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives
any demand under lawful process or from any Governmental Authority to
disclose or provide Information concerning any other party (or any member of
any other party's Group) that is subject to the confidentiality provisions
hereof, such party shall notify the other party prior to disclosing or
providing such Information and shall cooperate at the expense of the
requesting party in seeking any reasonable protective arrangements requested
by such other party. Subject to the foregoing, the Person that received such
request may thereafter disclose or provide Information to
72
the extent required by such law (as so advised by counsel) or by lawful
process or such Governmental Authority.
ARTICLE XI
MUTUAL RELEASE;
NO REPRESENTATIONS OR WARRANTIES
11.1 MUTUAL RELEASE. (a) Effective as of the Separation Time and
except as specifically set forth in this Agreement or any of the other
Transaction Documents, each of New U S WEST, on the one hand, and U S WEST,
on the other hand, on its own behalf and on behalf of each member of its
respective Group, releases and forever discharges the other and the members
of its Group, and its and their respective officers, directors, agents,
Affiliates, record and beneficial security holders (including, without
limitation, trustees and beneficiaries of trusts holding such securities),
advisors and Representatives (in their respective capacities as such) and
their respective heirs, executors, administrators, successors and assigns, of
and from all debts, demands, Actions, causes of action, suits, accounts,
covenants, contracts, agreements, damages, claims and Liabilities whatsoever
of every name and nature, both in law and in equity, which the releasing
party has or ever had, which arise out of or relate to, in whole or in part,
events, circumstances or actions, whether known or unknown, taken by such
other party occurring or failing to occur or any conditions existing on or
prior to the Separation Time; PROVIDED, HOWEVER, that the foregoing general
release shall not apply to (i) any Liabilities assumed, transferred,
assigned, allocated or arising under this Agreement or any of the other
Transaction Documents and shall not affect any party's rights to enforce this
Agreement (including the provisions of Article VIII) or any of the other
Transaction Documents in accordance with their terms; (ii) any Liability
arising under any agreement listed in Section 9.2 of the Separation
Disclosure Schedule (each of which shall remain in effect following the
Separation Time); and (iii) any Liability the release of which would result
in the release of any Person other than a Person released pursuant to this
Section 11.1 (provided that the parties agree not to bring suit or permit any
members of their Group to bring suit against any Person with respect to any
Liability to the extent such Person would be released with respect to such
Liabilities by this Section 11.1 but for this clause (iii)). U S WEST and New
U S WEST acknowledge that the foregoing
73
general release shall not apply to any Liabilities assigned by members of the
U S WEST Group or members of the New U S WEST Group to third parties prior to
the Separation Time.
(b) The parties acknowledge that members of the U S WEST Law
Department and U S WEST's outside counsel currently represent members of both
the U S WEST Group and the New U S WEST Group. Effective as of the
Separation Time, each of New U S WEST, on the one hand, and U S WEST, on the
other hand, on its own behalf and on behalf of each member of its respective
Group, waives any conflict with respect to such common representation before,
at or after the Separation Time (other than, in the case of such common
representation by U S WEST's outside counsel, with respect to any dispute or
Action between a member of the U S WEST Group and a member of the New U S
WEST Group).
11.2 NO REPRESENTATIONS OR WARRANTIES. New U S WEST understands
and agrees that neither U S WEST nor any other member of the U S WEST Group
is, and U S WEST understands and agrees that neither New U S WEST nor any
other member of the New U S WEST Group is, in this Agreement or in any other
agreement or document, representing or warranting to the other in any way as
to such Group's Assets, business or Liabilities or as to any consents or
approvals required in connection with the consummation of the transactions
contemplated by this Agreement, it being agreed and understood that each
member of the Group shall take all of the Assets "AS IS, WHERE IS". Except
as set forth in this Agreement and the other Transaction Documents, both
parties shall bear the economic and legal risk of the Reorganization,
Contribution and Separation that (a) any conveyance of such Group's Assets
shall prove to be insufficient, (b) the title of any member of the New U S
WEST Group or the U S WEST Group to any of their respective Assets shall be
other than good and marketable and free from encumbrances, (c) the title of
any member of the New U S WEST Group or the U S WEST Group to the shares of
any Subsidiary of such Group shall be other than good and marketable and free
from encumbrances or (d) any member of the other Group shall fail to obtain
any consents or approvals relating to its business required in connection
with the consummation of the transactions contemplated by this Agreement.
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ARTICLE XII
GENERAL PROVISIONS
12.1 MERGER OR CONSOLIDATION. Neither New U S WEST nor U S WEST
(in either case, the "TRANSACTION PARTY") shall (a) consolidate with or merge
into any Person or permit any Person to consolidate with or merge into the
Transaction Party (other than a merger or consolidation in which the
Transaction Party is the surviving or continuing corporation) or (b) sell,
assign, transfer, lease or otherwise dispose of, in one transaction or a
series of related transactions, all or substantially all of the assets of the
Transaction Party, unless the resulting, surviving or transferee Person shall
expressly assume, by instrument in form and substance reasonably satisfactory
to the other party, all of the obligations of the Transaction Party under
this Agreement and each of the other Transaction Documents.
12.2 SEPARATION COMMITTEE; DISPUTE RESOLUTION.
(a) As of the Separation Time, New U S WEST and U S WEST shall
form a committee (the "SEPARATION COMMITTEE") comprised of one representative
designated from time to time by the General Counsel of New U S WEST in his
sole discretion and one representative designated from time to time by the
General Counsel of U S WEST in his sole discretion. Until the tenth
anniversary of the Separation Time, the Separation Committee shall be
responsible for resolving any and all disputes between any member of the U S
WEST Group and any member of the New U S WEST Group arising with respect to
any matter, whether based in contract, tort, statute or otherwise
(collectively, "DISPUTES"), including any dispute as to (i) whether any
Action or other Liability is a New U S WEST Liability, a MediaOne Liability
or a Shared Liability, (ii) whether any Asset is a New U S WEST Asset or a
MediaOne Asset, (iii) the interpretation of any provision of this Agreement
or any other Transaction Document and (iv) such other matters as are
contemplated by this Agreement or any other Transaction Document to be
resolved by the Separation Committee. In the event of any such Dispute, each
of New U S WEST and U S WEST shall have the right to refer in writing such
Dispute to the Separation Committee for resolution. The Separation Committee
shall be required to render a written decision with respect to any Dispute
within 30 days of its receipt of the referral. The decision of the
Separation Committee with respect to any Dispute shall be binding on the New
U S WEST Group and the U
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S WEST Group and their respective successors and assigns. In the event that
the Separation Committee is unable to reach a unanimous determination as to
any Dispute to which it is referred within 30 days of such referral, each of
New U S WEST and U S WEST shall have the right to submit such Dispute to
arbitration in accordance with the procedures set forth in Section 12.2(b).
All out-of-pocket expenses and costs incurred by New U S WEST or U S WEST in
connection with the procedures set forth in this Section 12.2(a) shall be
borne by the party incurring such expenses and costs.
(b) In the event that the Separation Committee is unable to reach
a unanimous determination as to any Dispute pursuant to Section 12.2(a), each
of New U S WEST and U S WEST shall have the right to submit such Dispute to
arbitration in accordance with the procedures set forth in this Section
12.2(b). Until the tenth anniversary of the Separation Time, resolution of
any and all such Disputes, including, but not limited to, disputes over
arbitrability, shall be exclusively governed by and settled in accordance
with the provisions of this Section 12.2(b); PROVIDED, HOWEVER, that nothing
contained herein shall preclude either party from seeking or obtaining
injunctive relief or equitable or other judicial relief to enforce this
Section 12.2(b).
U S WEST or New U S WEST (each a "PARTY") may commence proceedings
hereunder by delivering a written notice (the "DEMAND") to the other Party
providing a reasonable description of the Dispute to the other, and expressly
requesting arbitration hereunder. The parties hereby agree to submit all
Disputes to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the parties, their successors and assigns.
The arbitration shall be conducted in Denver, Colorado by three arbitrators
acting by majority vote (the "PANEL"). Of the three arbitrators comprising
the Panel, one arbitrator shall be selected by U S WEST, one arbitrator shall
be selected by New U S WEST and one arbitrator shall be jointly selected by
the arbitrators selected by U S WEST and New U S WEST. If either U S WEST or
New U S WEST fail to select an arbitrator within 15 days after delivery of
the Demand, the arbitrator which is to be selected by such Party shall be
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA RULES"). If
an arbitrator so selected or appointed becomes unable to serve, his or her
successors shall be similarly selected or appointed. Notwithstanding
76
the foregoing, at the agreement of the Parties, the Panel shall consist of
one arbitrator selected by agreement of the Parties for appropriate Disputes.
The arbitration shall be conducted pursuant to the Federal
Arbitration Act and such procedures as the Parties may agree, or, in the
absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing, the Panel, taking into consideration the
desires of the Parties for expedited resolution of the Dispute, shall have
discretion to order discovery, including, in appropriate circumstances,
depositions. All hearings shall be conducted on an expedited schedule, and
all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof, which shall then be shared with the other
Party. Hearings with respect to a Dispute shall commence not later than 60
days after selection or appointment of the Panel, and shall no be more than
30 days in length. The Panel shall be required to make a final award within
30 days of the conclusion of the hearings. The award shall be in writing and
shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees
and expenses, fees and expenses of experts and reasonable attorneys fees,
between the prevailing and non-prevailing Party as the Panel deems fair and
reasonable. The Parties agree that monetary damages may be inadequate and
that either Party shall be entitled to seek, and that the Panel shall be
empowered to enter, equitable and injunctive relief, including preliminary
and temporary injunctive relief, in addition to any other appropriate relief
or remedy. The Parties consent to the jurisdiction of the Panel to award
such relief and to the binding nature of any such relief awarded by the
Panel. In no event may the Panel award consequential, exemplary, special or
punitive damages, or lost profits, except to the extent such consequential,
exemplary, special or punitive damages, or lost profits are actually paid by
a Party or a member of that Party's Group to a third party. Any arbitration
award shall be binding and enforceable against the Parties and each member of
their respective Groups and judgment may be entered thereon in any court of
competent jurisdiction.
12.3 SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such
party
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or by any entity that is contemplated to be a Subsidiary of such party on or
after the Separation Time.
12.4 EXPENSES. Except as set forth in Sections 3.4(a) and 3.4(b)
of the Separation Disclosure Schedule, all out-of-pocket costs with respect
to the transfer of the New U S WEST Assets and the transactions contemplated
hereby and by the other Transaction Documents shall be borne equally by U S
WEST and New U S WEST.
12.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of Colorado, without reference to
choice of law principles, including matters of construction, validity and
performance.
12.6 NOTICES. Notices, requests, permissions, waivers, referrals
and all other communications hereunder shall be in writing and shall be
deemed to have been duly given if signed by the respective persons giving
them (in the case of any corporation the signature shall be by an officer
thereof) and delivered by hand or by telecopy or on the date of receipt
indicated on the return receipt if mailed (registered or certified, return
receipt requested, properly addressed and postage prepaid):
If to U S WEST, to:
U S WEST, INC.
(to be renamed "MEDIAONE GROUP, INC.")
000 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
If to New U S WEST, to:
USW-C, INC.
(to be renamed "U S WEST, INC.")
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Such names and addresses may be changed by notice given in accordance with
this Section 12.6. Copies of all notices, requests, permissions, waivers,
referrals and all other communications hereunder shall be given to:
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Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Block, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
12.7 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents, together with all schedules, exhibits, annexes, certificates,
instruments and agreements delivered pursuant hereto and thereto, contain the
entire understanding of the parties hereto and thereto with respect to the
subject matter contained herein and therein, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting such subject
matter.
12.8 HEADINGS; REFERENCES. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Articles", "Sections" or "Exhibits" shall be deemed
to be references to Articles or Sections hereof or Exhibits hereto unless
otherwise indicated. All references herein to "Sections" of the Separation
Disclosure Schedule shall be deemed to be references to the Separation
Disclosure Schedule unless otherwise indicated.
12.9 SCHEDULES. The Separation Disclosure Schedule referenced in
this Agreement and attached hereto is incorporated into this Agreement by
reference and made a part hereof.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all
of which shall constitute one and the same original.
12.11 PARTIES IN INTEREST; ASSIGNMENT; SUCCESSORS. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall
inure to the benefit of and be binding upon U S WEST and New U S WEST and
their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies under or by reason of this Agreement.
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12.12 SEVERABILITY; ENFORCEMENT. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too
broad to permit enforcement of such restriction to its fullest extent, each
party agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.
12.13 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto.
12.14 TERMINATION. This Agreement may be terminated and the
Separation abandoned at any time prior to the Separation Time by and in the
sole discretion of the Board of Directors of U S WEST without the approval of
any other party hereto or of U S WEST's stockholders. In the event of such
termination, no party hereto or to any other Transaction Document shall have
any Liability to any Person by reason of this Agreement or any other
Transaction Document, except as otherwise expressly provided herein or
therein.
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IN WITNESS WHEREOF, each of the parties has caused this Separation
Agreement to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
U S WEST, INC.
By:
---------------------------------------------
Name:
Title:
USW-C, INC.
By:
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Name:
Title:
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