-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NuVv6zs3PC9AEvpNhNCBTZKSCA67402k4q8WTzymHW2MjD/gtCcYYQEnFbQYy0eN AhD/NCbsarvMSgIR3rQTwg== 0001047469-98-025163.txt : 19980625 0001047469-98-025163.hdr.sgml : 19980625 ACCESSION NUMBER: 0001047469-98-025163 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980624 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980624 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIA ONE GROUP INC CENTRAL INDEX KEY: 0000732718 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840926774 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08611 FILM NUMBER: 98653364 BUSINESS ADDRESS: STREET 1: 188 INVERNESS DR WEST CITY: ENGLEWOOD STATE: CO ZIP: 80112 MAIL ADDRESS: STREET 1: 188 INVERNESS DRIVE WEST CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: US WEST INC DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of earliest event reported): JUNE 24, 1998 MEDIAONE GROUP, INC. (Exact name of registrant as specified in its charter) A DELAWARE CORPORATION COMMISSION FILE NUMBER IRS EMPLOYER IDENTIFICATION NO. (STATE OF INCORPORATION) 1-8611 84-0926774
188 INVERNESS DRIVE WEST ENGLEWOOD, COLORADO 80112 (Address of principal executive offices) (303) 858-3000 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On June 12, 1998, MediaOne Group, Inc. (formerly U S WEST, Inc. and herein "MediaOne Group") separated into two independent companies (the "Separation"), all in accordance with the terms of the Separation Agreement dated as June 5, 1998 (the "Separation Agreement"), between MediaOne Group and USW-C, Inc. (which was renamed "U S WEST, Inc." and is referred to herein as "New U S WEST"). Until the Separation, MediaOne Group conducted its businesses through two groups, the U S WEST Communications Group (the "Communications Group") and the U S WEST Media Group (the "Media Group"). MediaOne Group had two classes of common stock outstanding prior to the Separation: U S WEST Communications Group Common Stock (the "Communications Stock"), which was intended to reflect separately the performance of the Communications Group, and U S WEST Media Group Common Stock (the "Media Stock"), which was intended to reflect separately the performance of the Media Group. Pursuant to the Separation Agreement, MediaOne Group (i) contributed the businesses of the Communications Group and the domestic directories business of the Media Group ("Dex") to New U S WEST and (ii) redeemed each outstanding share of Communications Stock (and related preferred stock purchase rights) for one share of common stock of New U S WEST and distributed $850 million in value of New U S WEST common stock (the "Dex Dividend") to holders of Media Stock in connection with the alignment of Dex with New U S WEST. The number of shares of New U S WEST common stock distributed per share of Media Stock pursuant to the Dex Dividend was 0.02731, which was calculated in accordance with Section 4.3(b) of the Separation Agreement. The conformed execution copy of the Separation Agreement, the Employee Matters Agreement, and the Tax Sharing Agreement are filed as Exhibits to this Current Report on Form 8-K. ITEM 5. OTHER EVENTS DESCRIPTION OF MEDIAONE GROUP MediaOne Group is a diversified global media and broadband communications company. MediaOne Group has operations and investments in two principal areas: (i) domestic broadband communications and (ii) international broadband and wireless communications. MediaOne Group is the third largest cable television system operator in the United States with large clusters in Atlanta, Georgia, Eastern Massachusetts, Southern California, Southern Florida, Detroit, Michigan and Minneapolis/St. Paul, Minnesota. As of March 31, 1998, MediaOne Group's domestic cable television systems passed approximately 8.4 million homes and provided services to approximately 4.9 million basic cable subscribers. MediaOne Group also owns a 25.51% priority capital and residual interest in Time Warner Entertainment Company, L.P., a provider of cable programming, filmed entertainment and broadband communications services and the second largest cable television system operator in the United States. Outside of the United States, MediaOne Group owns interests in various providers of broadband and wireless communications services in markets in continental Europe, the United Kingdom and Asia, including a 26.8% interest in Telewest communications plc, the second largest provide of combined cable and telecommunications services in the United Kingdom, and a 50% interest in One 2 One, a provider of personal communications services in the United Kingdom. CAPITAL STOCK OF MEDIAONE GROUP As part of the Separation, the Media Stock and related preferred stock purchase rights were recharacterized as common stock of MediaOne Group and related preferred stock purchased rights. The terms of the capital stock of MediaOne Group are more fully described in "Chapter 8: Capital Stock-- MediaOne Capital Stock" and "--Comparison of Rights of Stockholders" in the definitive Proxy Statement contained in the Registration Statement on Form S-4 filed by New U S WEST with the Securities and Exchange Commission and declared effective by the Commission on April 10, 1998 (the "Proxy Statement"). In connection with the Separation, MediaOne Group further amended its Amended and Restated Rights Agreement with State Street Bank and Trust Company, as rights agent, as described more fully in the Proxy Statement. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
EXHIBIT DESCRIPTION - ------------- ---------------------------------------------------------------------------------------------- Exhibit 3(ii ) Bylaws of MediaOne Group, Inc., effective as of June 12, 1998 Exhibit 4 Form of Amended and Restated Rights Agreement between MediaOne Group, Inc. and State Street Bank and Trust Company, as Rights Agent. Exhibit 99.1 Separation Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated as of June 5, 1998. Exhibit 99.2 Employee Matters Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated as of June 5, 1998. Exhibit 99.3 Tax Sharing Agreement between U S WEST, Inc. (renamed "MediaOne Group, Inc.") and USW-C, Inc. (renamed "U S WEST, Inc."), dated as of June 5, 1998.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. U S WEST, INC. By: /s/ STEPHEN E. BRILZ ----------------------------------------- Stephen E. Brilz ASSISTANT SECRETARY Dated: June 24, 1998 EX-3.(II) 2 EXHIBIT 3(II) BYLAWS OF MEDIAONE GROUP, INC. (FORMERLY U S WEST, INC.) ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of MEDIAONE GROUP, INC. (formerly U S WEST, Inc.) (the "Corporation") in the State of Delaware shall be at 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801 and its registered agent at such address shall be The Corporation Trust Company, or such other office or agent as the Board of Directors of the Corporation (the "Board") shall from time to time select. SECTION 2. OTHER OFFICES. The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETING. All meetings of the stockholders of the Corporation shall be held at the office of the Corporation or at such other places, within or without the State of Delaware, as may from time to time be fixed by the Board. SECTION 2. ANNUAL MEETINGS. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the first Friday of June in each year, at an hour to be named in the notice of the meeting, unless such day should fall on a legal holiday in the State of Colorado, in which event the meeting shall be held on the next succeeding business day that is not a legal holiday, or on such date and at such hour as shall from time to time be fixed by the Board. Any previously scheduled annual meeting of the stockholders may be postponed by action of the Board taken prior to the time previously scheduled for such annual meeting of stockholders. SECTION 3. SPECIAL MEETINGS. Except as otherwise required by law or the Certificate of Incorporation of the Corporation (the "Certificate"), special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board or a majority of the entire Board. Only such business as is specified in the notice of any special meeting of the stockholders shall come before such meeting. SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of the stockholders, whether annual or special, shall be given, either by personal delivery or by mail, not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to notice of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Each such notice shall state the place, date and hour of the meeting, and the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy without protesting, prior to or at the commencement of the meeting, the lack of proper notice to such stockholder, or who shall sign a written waiver of notice thereof, whether before or after such meeting. Notice of adjournment of a meeting of stockholders need not be given if the time and place to which it is adjourned are announced at such meeting, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjourned meeting. SECTION 5. QUORUM. Except as otherwise provided by law or by the Certificate, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote generally, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders; PROVIDED, HOWEVER, that in the case of any vote to be taken by classes, the holders of a majority of the votes entitled to be cast by the stockholders of a particular class shall constitute a quorum for the transaction of business by such class. SECTION 6. ADJOURNMENTS. The chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders who are present in person or by proxy may adjourn the meeting from time to time whether or not a quorum is present. 2 In the event that a quorum does not exist with respect to any vote to be taken by a particular class, the chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders of such class who are present in person or by proxy may adjourn the meeting with respect to the vote(s) to be taken by such class. At such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 7. ORDER OF BUSINESS. (a) At each meeting of the stockholders, the Chairman of the Board or, in the absence of the Chairman of the Board, such person as shall be selected by the Board shall act as chairman of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the opening and closing of the voting polls. (b) At any annual meeting of stockholders, only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the meeting, (ii) pursuant to the notice provided for in Section 4 of this Article II or (iii) by any stockholder who is a holder of record at the time of the giving of such notice provided for in this Section 7, who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 7. (c) For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation (the "Secretary"). To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days prior to the date of an annual meeting of stockholders. To be in proper written form, a stockholder's notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of the stockholder proposing such business and all persons or entities acting in concert with the stockholder; (iii) the class and number of shares 3 of the Corporation which are beneficially owned by the stockholder and all persons or entities acting in concert with such stockholder; and (iv) any material interest of the stockholder in such business. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such stockholder's proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; PROVIDED, HOWEVER, that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Notwithstanding anything in the bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 7. The chairman of an annual meeting shall, if the facts warrant, determine that business was not properly brought before the annual meeting in accordance with the provisions of this Section 7 and, if the chairman should so determine, the chairman shall so declare to the annual meeting and any such business not properly brought before the annual meeting shall not be transacted. SECTION 8. LIST OF STOCKHOLDERS. It shall be the duty of the Secretary or other officer who has charge of the stock ledger to prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in such stockholder's name. Such list shall be produced and kept available at the times and places required by law. SECTION 9. VOTING. (a) Except as otherwise provided by law or by the Certificate, each stockholder of record of any class or series of capital stock of the Corporation shall be entitled at each meeting of stockholders to such number of votes for each share of such stock as may be fixed in the Certificate or in the resolution or resolutions adopted by the Board providing for the issuance of such stock, registered in such stockholder's name on the books of the Corporation: (1) on the date fixed pursuant to Section 6 of Article VII of these bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or 4 (2) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) Each stockholder entitled to vote at any meeting of stockholders may authorize not in excess of three persons to act for such stockholder by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. (c) At each meeting of the stockholders, all corporate actions to be taken by vote of the stockholders (except as otherwise required by law and except as otherwise provided in the Certificate or these bylaws) shall be authorized by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy, and where a separate vote by class is required, a majority of the votes cast by the stockholders of such class who are present in person or represented by proxy shall be the act of such class. (d) Unless required by law or determined by the chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. In the case of a vote by written ballot, each ballot shall be signed by the stockholder voting, or by such stockholder's proxy. SECTION 10. INSPECTORS. The chairman of the meeting shall appoint one or more inspectors to act at any meeting of stockholders. Such inspectors shall perform such duties as shall be specified by the chairman of the meeting. Inspectors need not be stockholders. No director or nominee for the office of director shall be appointed such inspector. ARTICLE III BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the 5 Certificate directed or required to be exercised or done by the stockholders. SECTION 2. NUMBER, QUALIFICATION AND ELECTION. (a) Except as otherwise fixed by or pursuant to the provisions of Article V of the Certificate relating to the rights of the holders of any class or series of stock having preference over the common stock of the corporation as to dividends or upon liquidation, the number of directors of the Corporation shall be determined from time to time by the Board by the affirmative vote of directors constituting at least a majority of the entire Board; provided that the number thereof may not be less than six nor more than seventeen. (b) The directors, other than those who may be elected by the holders of shares of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation pursuant to the terms of Article V of the Certificate or any resolution or resolutions providing for the issuance of such stock adopted by the Board, shall be classified, with respect to the time for which they severally hold office, into three classes as nearly equal in number as possible, with each class to hold office until its successors are elected and qualified. Subject to the rights of the holders of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation, at each such annual meeting of the stockholders, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. (c) Each director shall be at least 21 years of age. Directors need not be stockholders of the Corporation. (d) In any election of directors held at a meeting of stockholders, the persons receiving a plurality of the votes cast by the stockholders entitled to vote thereon at such meeting who are present or represented by proxy, up to the number of directors to be elected in such election, shall be deemed elected. SECTION 3. NOTIFICATION OF NOMINATION. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board or by any stockholder who is a stockholder of record at the time of giving of the notice of nomination provided for in this Section 3 of this Article III and who is entitled to vote for 6 the election of directors. Any stockholder of record entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice of such stockholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days prior to the date of such annual meeting and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, within 15 days following the public announcement of the date of such special meeting. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination, of all persons or entities acting in concert with the stockholder, and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or entities acting in concert with the stockholder (naming such person or entities) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by the stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board; (e) the class and number of shares of the Corporation that are beneficially owned by the stockholder and all persons or entities acting in concert with the stockholder; and (f) the consent of each nominee to being named in a proxy statement as nominee and to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made after compliance with the foregoing procedure. Only such persons who are nominated in accordance with the procedures set forth in this Section 3 of this Article III shall be eligible to serve as directors of the Corporation. SECTION 4. QUORUM AND MANNER OF ACTING. Except as otherwise provided by law, the Certificate or these bylaws, a majority of the entire Board shall constitute a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. The chairman of the meeting or a majority of the directors 7 present may adjourn the meeting to another time and place whether or not a quorum is present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. PLACE OF MEETING. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notice or waivers of notice thereof. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board shall be held at such times and places as the Chairman of the Board or the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday under the laws of the place where the meeting is to be held, the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board shall be held whenever called by the Chairman of the Board or by a majority of the directors. SECTION 8. NOTICE OF MEETINGS. Notice of regular meetings of the Board or of any adjourned meeting thereof need not be given. Notice of each special meeting of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such director's residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telegraph or telecopy or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. Every such notice shall state the time and place but need not state the purpose of the meeting. SECTION 9. RULES AND REGULATIONS. The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate or these bylaws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper. SECTION 10. PARTICIPATION IN MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of the Board or 8 any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 11. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in writing and the writing or writings are filed with the minutes or proceedings of the Board or of such committee. SECTION 12. RESIGNATIONS. Any director of the Corporation may at any time resign by giving written notice to the Board, the Chairman of the Board, the President or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified therein, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 13. REMOVAL OF DIRECTORS. Directors may be removed only as provided in Section 5 of Article VI of the Certificate. SECTION 14. VACANCIES. Subject to the rights of the holders of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation, any vacancies on the Board resulting from death, resignation, removal or other cause shall only be filled by the Board by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board, or by a sole remaining director, and newly created directorships resulting from any increase in the number of directors shall be filled by the Board, or if not so filled, by the stockholders at the next annual meeting thereof or at a special meeting called for that purpose in accordance with Section 3 of Article II of these bylaws. Any director elected in accordance with the preceding sentence of this Section 14 of this Article III shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. SECTION 15. COMPENSATION. Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and 9 such fees for attendance at meetings of the Board or of committees of the Board, or both, as the Board shall from time to time determine. In addition, each director shall be entitled to receive from the Corporation reimbursement for the reasonable expenses incurred by such person in connection with the performance of such person's duties as a director. Nothing contained in this Section 15 of this Article III shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving proper compensation therefor. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. ESTABLISHMENT OF COMMITTEES OF THE BOARD OF DIRECTORS; ELECTION OF MEMBERS OF COMMITTEES OF THE BOARD OF DIRECTORS; FUNCTIONS OF COMMITTEES OF THE BOARD OF DIRECTORS. The Board may, in accordance with and subject to the General Corporation Law of the State of Delaware, from time to time establish committees of the Board to exercise such powers and authorities of the Board, and to perform such other functions, as the Board may from time to time determine. SECTION 2. PROCEDURE; MEETINGS; QUORUM. Regular meetings of committees of the Board, of which no notice shall be necessary, may be held at such times and places as shall be fixed by resolution adopted by a majority of the members thereof. Special meetings of any committee of the Board shall be called at the request of a majority of the members thereof. Notice of each special meeting of any committee of the Board shall be given by overnight delivery service or mailed to each member, in either case addressed to such member at such member's residence or normal place of business, at least two days before the day on which the meeting is to be held or shall be sent to such members at such place by telegraph or telecopy or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any member who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to it or at its commencement, the lack of such notice to such member. Any special meeting of any committee of the Board shall be a legal meeting without any notice thereof having been given, if all the members thereof shall be present thereat. Notice of any adjourned meeting of any committee of the Board need not be given. Any committee of the Board may adopt such rules and regulations not 10 inconsistent with the provisions of law, the Certificate or these bylaws for the conduct of its meetings as such committee of the Board may deem proper. A majority of the members of any committee of the Board shall constitute a quorum for the transaction of business at any meeting, and the vote of a majority of the members thereof present at any meeting at which a quorum is present shall be the act of such committee. Each committee of the Board shall keep written minutes of its proceedings and shall report on such proceedings to the Board. ARTICLE V OFFICERS SECTION 1. NUMBER; TERM OF OFFICE. The officers of the Corporation shall be such officers, which may include a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, General Counsel and one or more Vice Presidents (including, without limitation, Assistant, Executive and Senior Vice Presidents) and a Treasurer, Secretary and Controller and such other officers or agents with such titles and such duties as the Board may from time to time determine, each to have such authority, functions or duties as provided in these bylaws or as the Board may from time to time determine, and each to hold office for such term as may be prescribed by the Board and until such person's successor shall have been chosen and shall qualify, or until such person's death or resignation, or until such person's removal in the manner hereinafter provided. One person may hold the offices and perform the duties of any two or more of said officers; PROVIDED, HOWEVER, that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Certificate or these bylaws to be executed, acknowledged or verified by two or more officers. The Board may from time to time authorize any officer to appoint and remove any such other officers and agents and to prescribe their powers and duties. The Board may require any officer or agent to give security for the faithful performance of such person's duties. SECTION 2. REMOVAL. Any officer may be removed, either with or without cause, by the Board at any meeting thereof or, except in the case of any officer elected by the Board, by any superior officer upon whom such power may be conferred by the Board. SECTION 3. RESIGNATION. Any officer may resign at any time by giving notice to the Board, the Chairman of the Board or 11 the Secretary. Any such resignation shall take effect at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal or any other cause may be filled for the unexpired portion of the term in the manner prescribed in these bylaws for election to such office. SECTION 5. CHAIRMAN OF THE BOARD; POWERS AND DUTIES. The Chairman of the Board shall be the chief executive officer of the Corporation. Subject to the control of the Board, the Chairman of the Board shall supervise and direct generally all the business and affairs of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and the Board. Any document may be signed by the Chairman of the Board or any other person who may be thereunto authorized by the Board or the Chairman of the Board. The Chairman of the Board may appoint such assistant officers as are deemed necessary. SECTION 6. PRESIDENT, EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE PRESIDENTS; POWERS AND DUTIES. The President shall be the chief operating officer of the Corporation. The President and each Executive Vice President, each Senior Vice President, and each Vice President shall have such powers and perform such duties as may be assigned by the Board of Directors or the Chairman of the Board. In case of the absence or disability of the Chairman of the Board or a vacancy in the office, the President, an Executive Vice President, a Senior Vice President, or a Vice President designated by the Chairman of the Board or the Board shall exercise all the powers and perform all the duties of the Chairman of the Board. SECTION 7. SECRETARY AND ASSISTANT SECRETARIES; POWERS AND DUTIES. The Secretary shall attend all meetings of the stockholders and the Board and shall keep the minutes for such meetings in one or more books provided for that purpose. The Secretary shall be custodian of the corporate records, except those required to be in the custody of the Treasurer or the Controller, shall keep the seal of the Corporation, and shall execute and affix the seal of the Corporation to all documents duly authorized for execution under seal on behalf of the Corporation, and shall perform all of the duties incident to the office of Secretary, as well as such other duties as may be assigned by the Chairman of the Board or the Board. 12 The Assistant Secretaries shall perform such of the Secretary's duties as the Secretary shall from time to time direct. In case of the absence or disability of the Secretary or a vacancy in the office, an Assistant Secretary designated by the Chairman of the Board or by the Secretary, if the office is not vacant, shall perform the duties of the Secretary. SECTION 8. CHIEF FINANCIAL OFFICER; POWERS AND DUTIES. The Chief Financial Officer shall be responsible for maintaining the financial integrity of the Corporation, shall prepare the financial plans for the Corporation, and shall monitor the financial performance of the Corporation and its subsidiaries, as well as performing such other duties as may be assigned by the Chairman of the Board or the Board. SECTION 9. TREASURER AND ASSISTANT TREASURERS; POWERS AND DUTIES. The Treasurer shall have care and custody of the funds and securities of the Corporation, shall deposit such funds in the name and to the credit of the Corporation with such depositories as the Treasurer shall approve, shall disburse the funds of the Corporation for proper expenses and dividends, and as may be ordered by the Board, taking proper vouchers for such disbursements. The Treasurer shall perform all of the duties incident to the office of Treasurer, as well as such other duties as may be assigned by the Chairman of the Board or the Board. The Assistant Treasurers shall perform such of the Treasurer's duties as the Treasurer shall from time to time direct. In case of the absence or disability of the Treasurer or a vacancy in the office, an Assistant Treasurer designated by the Chairman of the Board or by the Treasurer, if the office is not vacant, shall perform the duties of the Treasurer. SECTION 10. GENERAL COUNSEL; POWERS AND DUTIES. The General Counsel shall be a licensed attorney at law and shall be the chief legal officer of the Corporation. The General Counsel shall have such power and exercise such authority and provide such counsel to the Corporation as deemed necessary or desirable to enforce the rights and protect the property and integrity of the Corporation, shall also have the power, authority, and responsibility for securing for the Corporation all legal advice, service, and counseling, and shall perform all of the duties incident to the office of General Counsel, as well as such other duties as may be assigned by the Chairman of the Board or the Board. SECTION 11. CONTROLLER AND ASSISTANT CONTROLLERS; POWERS AND DUTIES. The Controller shall be the chief accounting 13 officer of the Corporation and shall keep and maintain in good and lawful order all accounts required by law and shall have sole control over, and ultimate responsibility for, the accounts and accounting methods of the Corporation and the compliance of the Corporation with all systems of accounts and accounting regulations prescribed by law. The Controller shall audit, to such extent and at such times as may be required by law or as the Controller may think necessary, all accounts and records of corporate funds or property, by whomsoever kept, and for such purposes shall have access to all such accounts and records. The Controller shall make and sign all necessary and proper accounting statements and financial reports of the Corporation, and shall perform all of the duties incident to the office of Controller, as well as such other duties as may be assigned by the Chairman of the Board or the Board. The Assistant Controllers shall perform such of the Controller's duties as the Controller shall from time to time direct. In case of the absence or disability of the Controller or a vacancy in the office, an Assistant Controller designated by the Chairman of the Board or the Controller, if the office is not vacant, shall perform the duties of the Controller. SECTION 12. SALARIES. The salaries of all officers of the Corporation shall be fixed by or in the manner provided by the Board. If authorized by a resolution of the Board, the salary of any officer other than the Chairman of the Board may be fixed by the Chairman of the Board or a Committee of the Board. No officer shall be disqualified from receiving a salary by reason of also being a director of the Corporation. ARTICLE VI INDEMNIFICATION SECTION 1. SCOPE OF INDEMNIFICATION. (a) The Corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise, by reason of the fact that such person is or was serving in an indemnified capacity, except to the extent that any such indemnification against a particular liability is expressly prohibited by applicable law or where a judgment or other final adjudication adverse to the indemnified representative establishes, or where the Corporation determines, that his or her acts or omissions (i) were in breach of such person's duty of loyalty to the Corporation or its stockholders, (ii) were not in 14 good faith or involved intentional misconduct or a knowing violation of law, or (iii) resulted in receipt by such person of an improper personal benefit. The rights granted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification, contribution, or advancement of expenses may be entitled under any statute, certificate of incorporation, agreement, contract of insurance, vote of stockholders or disinterested directors, or otherwise. The rights of indemnification and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. (b) If an indemnified representative is not entitled to indemnification with respect to a portion of any liabilities to which such person may be subject, the Corporation shall nonetheless indemnify such indemnified representative to the maximum extent for the remaining portion of the liabilities. (c) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the indemnified representative is not entitled to indemnification. (d) To the extent permitted by law, the payment of indemnification provided for by this Article, including the advancement of expenses pursuant to Section 2 of this Article VI, with respect to proceedings other than those brought by or in the right of the Corporation, shall be subject to the conditions that the indemnified representative shall give the Corporation prompt notice of any proceeding, that the Corporation shall have complete charge of the defense of such proceeding and the right to select counsel for the indemnified representative, and that the indemnified representative shall assist and cooperate fully in all matters respecting the proceeding and its defense or settlement. The Corporation may waive any or all of the conditions set forth in the preceding sentence. Any such waiver shall be applicable only to the specific payment for which the waiver is made and shall not in any way obligate the Corporation to grant such waiver at any future time. In the event of a conflict of interest between the indemnified representative and the Corporation that would disqualify the Corporation's counsel from representing the indemnified representative under the rules of professional conduct applicable to attorneys, it shall be the policy of the Corporation to waive any or all of the foregoing conditions subject to such 15 limitations or conditions as the Corporation shall deem to be reasonable in the circumstances. (e) For purposes of this Article: (1) "indemnified capacity" means any and all past, present, or future services by an indemnified representative in one or more capacities as a director, officer, employee, or agent of the Corporation or, at the request of the Corporation, as a director, officer, employee, agent, fiduciary, or trustee of another corporation, partnership, joint venture, trust, employee benefit plan, or other entity or enterprise; any indemnified representative serving an affiliate of the Corporation in any capacity shall be deemed to be doing so at the request of the Corporation; (2) an "affiliate of the Corporation" means an entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation; (3) "indemnified representative" means any and all directors, officers, and employees of the Corporation and any other person designated as an indemnified representative by the Board; (4) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damage, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, expert witness fees, costs of investigation, litigation and appeal costs, attorneys' fees, and disbursements); and (5) "proceeding" means any threatened, pending, or completed action, suit, appeal, or other proceeding of any nature, whether civil, criminal, administrative, or investigative, whether formal or informal, whether external or internal to the Corporation, and whether brought by or in the right of the Corporation, a class of its security holders or otherwise. SECTION 2. ADVANCING EXPENSES. All reasonable expenses incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 1 of this Article VI shall be advanced to the indemnified representative by the Corporation. Before making any such advance payment of expenses, the Corporation shall receive an undertaking by or on behalf of the indemnified representative to repay such amount if it shall ultimately be determined that such indemnified 16 representative is not entitled to be indemnified by the Corporation pursuant to this Article VI. No advance shall be made by the Corporation if a determination is reasonably and promptly made by a majority vote of disinterested directors, even if the disinterested directors constitute less than a quorum, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, the indemnified representative has acted in such a manner as to permit or require the denial of indemnification pursuant to the provisions of Section 1 of this Article VI. ARTICLE VII CAPITAL STOCK SECTION 1. SHARE OWNERSHIP. (a) Holders of shares of stock of each class of the Corporation shall be recorded on the books of the Corporation and ownership of such stock shall be evidenced by a certificate or other form as shall be approved by the Board. Certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman of the Board or the President, any Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be facsimiles if countersigned by a transfer agent or registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue. (b)The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board. SECTION 2. TRANSFER OF SHARES. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by such holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and on surrender of the certificate or certificates, if any, for such shares properly endorsed or 17 accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; PROVIDED, HOWEVER, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. The person in whose name shares are registered on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; PROVIDED, HOWEVER, that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. SECTION 3. REGISTERED STOCKHOLDERS AND ADDRESSES OF STOCKHOLDERS. (a) The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (b) Each stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be delivered or mailed to such person, and, if any stockholder shall fail to designate such address, corporate notices may be delivered to such person by mail directed to such person at such person's post office address, if any, as the same appears on the stock record books of the Corporation or at such person's last known post office address. SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The Corporation may issue to any holder of shares of stock the certificate for which has been lost, stolen, destroyed or mutilated a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction. The Board, or a committee designated thereby, or the transfer agents and registrars for the 18 stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 5. REGULATIONS. The Board may make such additional rules and regulations as it may deem expedient concerning the issue and transfer of certificates representing shares of stock of each class of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated. SECTION 6. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment or any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board may fix a new record date for the adjourned meeting. SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars. ARTICLE VIII SEAL The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the words and figures of "Corporate Seal Delaware", or such other words or figures as the Board may approve and adopt. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 19 ARTICLE IX FISCAL YEAR The fiscal year of the Corporation shall end on the 31st day of December in each year. ARTICLE X AMENDMENTS Any bylaw may be adopted, repealed, altered or amended by two-thirds of the entire Board at any meeting thereof. The stockholders of the Corporation shall have the power to amend, alter or repeal any provision of these bylaws only to the extent and in the manner provided in the Certificate. 20 EX-4 3 EXHIBIT 4 AMENDED AND RESTATED RIGHTS AGREEMENT dated as of June 12, 1998 by and between MEDIAONE GROUP, INC. and STATE STREET BANK AND TRUST COMPANY as Rights Agent TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3. Issuance of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . 8 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . . . . . 10 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. . . . . . . . . . . . 11 7. Exercise of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 8. Cancellation and Destruction of Right Certificates . . . . . . . . . . . . . . 14 9. Reservation and Availability of Capital Stock. . . . . . . . . . . . . . . . . 15 10. Securities Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 11. Adjustment of Exercise Price, Number of Shares Issuable upon Exercise of Rights or Number of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 12. Certificate of Adjusted Exercise Price or Number of Shares Issuable upon Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 13. Consolidation, Merger, or Sale or Transfer of Assets or Earning Power. . . . . 24 14. Fractional Rights and Fractional Shares. . . . . . . . . . . . . . . . . . . . 27 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 28 17. Right Holder and Right Certificate Holder Not Deemed a Stockholder . . . . . . 29 18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 29 19. Merger or Consolidation or Change of Name of Rights Agent. . . . . . . . . . . 30 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 TABLE OF CONTENTS (continued) SECTION PAGE - ------- ---- 22. Issuance of New Right Certificates. . . . . . . . . . . . . . . . . . . . . . 34 23. Redemption of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 24. Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 25. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . 37 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 27. Supplements and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 39 28. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 29. Determinations and Actions by the Board of Directors, etc . . . . . . . . . . 41 30. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 31. Benefits of This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 41 32. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 33. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 34. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 35. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 36. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(ii) TABLE OF EXHIBITS Exhibit A -- Form of Right Certificate (iii) TABLE OF DEFINED TERMS
TERM DEFINED PAGE SECTION - ------------ ---- ------- 15% Ownership Date 7 1.(y) 15% Stockholder 7 1.(z) Adjustment Shares 18 11.(a)(ii) Affiliate 2 1.(a) Agreement 1 Introduction Associate 2 1.(a) Beneficial Owner 2 1.(b) Beneficially Own 2 1.(b) Board of Directors 1 Recital Business Day 3 1.(c) Close of Business 3 1.(d) Closing Price 3 1.(e) Common Stock 4 1.(f) Company 1, 25 Introduction, 13.(a)(iii) Continuing Director 4 1.(g) Current Market Price 5, 20 1.(h), 11.(d) Distribution Date 5, 8 1.(i), 3.(a) Effective Time 5 1.(j) Exchange Act 5 1.(k) Exchange Ratio 36 24.(a) Exercise Price 5, 13 1.(l), 7.(c) (iv) TABLE OF DEFINED TERMS (continued) TERM DEFINED PAGE SECTION - ------------ ---- ------- Expiration Date 5 1.(m) NASDAQ 4 1.(e) New U S WEST 1 Recital Original Agreement 1 Recital Person 6 1.(n) Preferred Share 6 1.(o) Preferred Share Equivalents 19 11.(b) Redemption Date 6 1.(p) Redemption Price 6, 35 1.(q), 23.(a) Restated Certificate of Incorporation 1 Recital Right 2, 6 Recital, 1.(r) Right Certificates 9 3.(c) Rights Agent 1 Introduction Rights Agreement 9 3.(d) Section 11(a)(ii) Event 6, 17 1.(s), 11.(a)(ii) Section 13(a) Event 6, 24 1.(t), 13.(a) Securities Act 6 1.(u) Separation Agreement 1 Recital Subsidiary 6 1.(v) Surviving Person 24 13.(a) Trading Day 6 1.(w) Unavailable Adjustment Shares 18 11.(a)(iii) Voting Share 7 1.(x)
(v) AMENDED AND RESTATED RIGHTS AGREEMENT This Amended and Restated Rights Agreement ("Agreement") is made and entered into as of the 12th day of June, 1998 by and between MEDIAONE GROUP, INC., a Delaware corporation (formerly U S WEST, Inc.) (the "Company"), and STATE STREET BANK AND TRUST COMPANY (the "Rights Agent"), and shall become effective as of the Effective Time (as defined herein). WHEREAS, the Company and the Rights Agent are parties to a rights agreement, dated as of April 7, 1989 (as amended on July 15, 1992 and on October 31, 1995, the "Original Agreement") pursuant to which the Company distributed Communication Rights and Media Rights (as defined in the Original Agreement); WHEREAS, pursuant to the Separation Agreement, dated as of June 5, 1998, (the "Separation Agreement") between the Company and USW-C, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("New U S WEST"), among other things, (a) the Company shall redeem each share of Communications Stock issued and outstanding immediately prior to the Separation Time (as defined in the Separation Agreement), together with the Communications Rights, for one share of New U S WEST Common Stock (as defined in the Separation Agreement) and cancel each share of Communications Stock held as treasury stock by the Company, (b) the Company shall distribute as a dividend on each share of Media Stock (other than shares of Media Stock held as treasury stock by the Company) certain shares of New U S WEST Common Stock, and (c) from and after the Separation Time, all shares of Communications Stock and all Communications Rights shall cease to exist and each outstanding share of Media Stock shall remain outstanding and shall thereafter represent one share of Common Stock, par value $.01 per share, of the Company, with the terms set forth in the Restated Certificate of Incorporation of the Company (as amended by the Charter Amendments (as defined in the Separation Agreement)) (the "Restated Certificate of Incorporation"); WHEREAS, the Board of Directors of the Company (the "Board of Directors") has determined that, effective as of the Separation Time, the Original Agreement shall be amended and restated in its entirety as provided herein and that, from and after the Separation Time, the Communication Rights will expire and will cease to exist and each Media Right shall thereafter represent one right (a "Right") which shall initially represent the right to purchase one one-hundredth of a share of Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share, of the Company having the rights, powers and preferences set forth in the Restated Certificate of Incorporation, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements set forth herein, the parties hereto hereby agree as follows: Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof. (b) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "Beneficially Own": (i) any securities that such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 promulgated under the Exchange Act, in each case as in effect on the date hereof; (ii) any securities that such Person or any of such Person's Affiliates or Associates has the right to acquire (whether such right is exercisable immediately, or only after the passage of time, compliance with regulatory requirements, the fulfillment of a condition, or otherwise) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights (as defined herein)), warrants or options, or otherwise, provided that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own, securities tendered pursuant to a tender offer or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until 2 such tendered securities are accepted for purchase or exchange; (iii) any securities that such Person or any such Person's Affiliates or Associates has the right to vote, alone or in concert with others, pursuant to any agreement, arrangement or understanding; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own, any security if the agreement, arrangement or understanding to vote such security (A) arises solely from a revocable proxy given to such Person or any of such Person's Affiliates or Associates in response to a public proxy solicitation made pursuant to and in accordance with the applicable rules and regulations of the Exchange Act, and (B) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); (iv) any securities that are Beneficially Owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than voting pursuant to a revocable proxy as described in the proviso to Section 1(b)(iii) hereof) or disposing of any securities of the Company; and (v) on any day on or after the Distribution Date, all Rights that prior to such date were represented by certificates for shares of Common Stock that such Person Beneficially Owns on such day. (c) "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the States of New York or Colorado are authorized or obligated by law or executive order to close. (d) "Close of Business" on any given date shall mean 5:00 p.m., Massachusetts time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day, it shall mean 5:00 p.m., Massachusetts time, on the next succeeding Business Day. (e) "Closing Price" of a stock or other security on any day shall be the last sale price, regular way, per share of such stock or unit of such other security on such 3 day or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if such stock or other security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such stock or other security is listed or admitted to trading or, if such stock or other security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use or, if on any such date such stock or other security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker that makes a market in such stock or other security and that is selected by the Board of Directors of the Company. (f) "Common Stock" when used with reference to the Company shall collectively mean the Common Stock, par value $.01 per share of the Company. "Common Stock" when used with reference to any Person other than the Company which shall be organized in corporate form shall mean the capital stock or other equity security with the greatest per share voting power of such Person. "Common Stock" when used with reference to any Person other than the Company which shall not be organized in corporate form shall mean units of beneficial interest which shall represent the right to participate in profits, losses, deductions and credits of such Person and which shall be entitled to exercise the greatest voting power per unit of such Person. (g) "Continuing Director" shall mean any member of the Board of Directors, while such person is a member of the Board of Directors, who is not a 15% Stockholder, or an Affiliate or Associate of a 15% Stockholder, or a representative or nominee of a 15% Stockholder or of any such Affiliate or Associate, and who either (i) was a member of the Board of Directors prior to the time that any Person became an 15% Stockholder or (ii) subsequently became a member of the Board of Directors, and whose nomination for election or election to the Board of Directors was recom- 4 mended or approved by a majority of the Continuing Directors then on the Board of Directors. (h) "Current Market Price" per share of a stock or unit of any other security on any date shall mean the average of the daily Closing Prices of such stock or other security for the 30 consecutive Trading Days through and including the Trading Day immediately preceding the date in question; PROVIDED, HOWEVER, that if any event shall have caused the Closing Price on any Trading Day during such 30-day period not to be fully comparable with the Closing Price on the date in question (or, if no Closing Price is available on the date in question, on the Trading Day immediately preceding the date in question), then each such noncomparable Closing Price so used shall be appropriately adjusted by the Board of Directors in order to make the Closing Price on each Trading Day during the period used for the determination of the Current Market Price fully comparable with the Closing Price on such date in question (or, if applicable, the immediately preceding Trading Day); and PROVIDED FURTHER, HOWEVER, that if such stock or other security is not publicly held or so listed or traded, "Current Market Price" per share of such stock or unit of such other security shall mean the fair value per share of such stock or unit of such other security as determined in good faith by the Board of Directors of the Company based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine appropriate, which determination shall be described in a statement filed by the Company with the Rights Agent. (i) "Distribution Date" shall have the meaning ascribed to it in Section 3(a) hereof. (j) "Effective Time" shall mean the Separation Time, as set forth in the second recital of this Agreement. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (l) "Exercise Price" shall have the meaning ascribed to it in Section 7(c) hereof. (m) "Expiration Date" shall mean April 6, 1999. 5 (n) "Person" shall mean any individual, firm, partnership, corporation, association, group (as such term is used in Rule 13d-5 promulgated under the Exchange Act as in effect on the date hereof) or other entity, and shall include any successor (by merger or otherwise) of such entity. (o) "Preferred Share" shall mean a share of the Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share, of the Company, which shall have the rights, powers and preferences set forth in Restated Certificate of Incorporation. (p) "Redemption Date" shall mean the date of the action of the Board of Directors of the Company directing the Company to redeem the Rights pursuant to Section 23(a) hereof, or such time and date thereafter as the Board of Directors may specify for redemption of the Rights. (q) "Redemption Price" shall have the meaning ascribed to it in Section 23(a) hereof. (r) "Right" shall have the meaning set forth in the third recital of this Agreement. (s) "Section 11(a)(ii) Event" shall have the meaning ascribed to it in Section 11(a)(ii) hereof. (t) "Section 13(a) Event" shall have the meaning ascribed to it in Section 13(a) hereof. (u) "Securities Act" shall mean the Securities Act of 1933, as amended. (v) "Subsidiary" of any Person shall mean any corporation or other Person of which equity securities or equity interests representing a majority of the voting power are owned, directly or indirectly, or which is effectively controlled, by such Person. (w) "Trading Day" shall mean, as to any stock or other security, a day on which the principal national securities exchange on which such stock or other security is listed or admitted to trading is open for the transaction of business or, if such stock or other security is not listed or admitted to trading on any national securities exchange, a Business Day. 6 (x) "Voting Share" shall mean (i) a share Common Stock of the Company and (ii) any other share of capital stock of the Company entitled to vote generally in the election of directors or entitled to vote together with the shares of Common Stock in respect of any merger, consolidation, sale of all or substantially all of the Company's assets, liquidation, dissolution or winding up. Any reference in this Agreement to a percentage or portion of the outstanding Voting Shares shall be deemed to be a reference to the percentage or portion of the total votes entitled to be cast by the holders of the outstanding Voting Shares. (y) "15% Ownership Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or a 15% Stockholder containing the facts by virtue of which a Person has become a 15% Stockholder. (z) "15% Stockholder" shall mean any Person that, together with all Affiliates and Associates of such Person, hereafter acquires Beneficial Ownership of, in the aggregate, a number of Voting Shares of the Company equal to 1% or more of the Voting Shares then outstanding and thereupon or thereafter Beneficially Owns 15% or more of the Voting Shares of the Company then outstanding; PROVIDED, HOWEVER, that the term "15% Stockholder" shall not include: (i) the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of a Subsidiary of the Company, or any Person holding Voting Shares for or pursuant to the terms of any such employee benefit plan; or (ii) any Person if such Person would not otherwise be a 15% Stockholder but for a reduction in the number of outstanding Voting Shares resulting from a stock repurchase program or other similar plan of the Company or from a self-tender offer of the Company, which plan or tender offer commenced on or after the date hereof; PROVIDED, HOWEVER, that the term "15% Stockholder" shall include such Person from and after the first date upon which (A) such Person, since the date of the commencement of such plan or tender offer, shall have acquired Beneficial Ownership of, in the aggregate, a number of Voting Shares of the Company equal to 1% or more of the Voting Shares of the Company then outstanding and (B) such Person, together with all Affiliates and Associates of such Person, shall Beneficially Own 15% or more of the Voting Shares of the Company then outstanding. In calculating the percentage of the outstanding Voting Shares 7 that are Beneficially Owned by a Person for purposes of this subsection (z), Voting Shares that are Beneficially Owned by such Person shall be deemed outstanding, and Voting Shares that are not Beneficially Owned by such Person and that are subject to issuance upon the exercise or conversion of outstanding conversion rights, rights (other than Rights), warrants or options shall not be deemed outstanding. Any determination made by the Board of Directors of the Company as to whether any Person is or is not a 15% Stockholder shall be conclusive and binding upon all holders of Rights. Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable, upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and in no event be liable for, the acts or omissions of any such co-Rights Agent. Section 3. ISSUANCE OF RIGHT CERTIFICATES. (a) "Distribution Date" shall mean the date, after the date hereof, that is the earlier of (i) the tenth Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes a 15% Stockholder) following the date of the commencement of, or the first public announcement of the intent of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person holding Common Stock for or pursuant to the terms of any such employee benefit plan) to commence a tender offer or exchange offer, the consummation of which would cause any Person to become a 15% Stockholder, or (ii) the date of the first Section 11(a)(ii) Event. (b) Until the Distribution Date, (i) the Rights shall be represented by certificates for shares of Common Stock, and not by separate certificates, (ii) the record holder of the shares of Common Stock represented by each of such certificates shall be the record holder of the Rights represented thereby, and (iii) the Rights shall be transferable only in connection with the transfer of the shares of Common Stock. Until the earliest of the Distribution Date, the Redemption Date or the Expiration 8 Date, the surrender for transfer of such certificates for shares of Common Stock shall also constitute the surrender for transfer of the Rights represented thereby. (c) As soon as practicable after the Distribution Date, and after notification by the Company, the Rights Agent shall send by first-class, postage-prepaid mail to each record holder of shares of Common Stock, as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a certificate substantially in the form of Exhibit A hereto (the "Right Certificates") representing one Right for each share of Common Stock so held. Notwithstanding the foregoing, the Rights Agent shall not send any Right Certificate to any 15% Stockholder or any of its Affiliates or Associates or to any Person if the Rights held by such Person are Beneficially Owned by a 15% Stockholder or any of its Affiliates or Associates. From and after the Distribution Date, the Rights shall be represented solely by such Right Certificates and may be transferred only by the transfer of such Right Certificates, and the holders of such Right Certificates, as listed in the records of the Company or any transfer agent or registrar for such Rights, shall be the record holders of such Rights. Any determination made by a majority of the Board of Directors of the Company as to whether any shares of Common Stock are or were Beneficially Owned at any time by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder shall be conclusive and binding upon all holders of Rights. (d) Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company's treasury) after the Effective Time but prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date. Certificates representing such shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also represents Rights that entitle the holder hereof to certain rights as set forth in a Rights Agreement dated as of April 7, 1989, as amended, by and between the Company and State Street Bank and Trust Company, as Rights Agent (the "Rights Agreement"), the terms and conditions of which are hereby incorporated herein by reference and a copy of which is on file at 9 the principal executive offices of the Company. Under certain circumstances specified in the Rights Agreement, such Rights will be represented by separate certificates and will no longer be represented by this certificate. Under certain circumstances specified in the Rights Agreement, Rights beneficially owned by certain persons may become null and void. The Company will mail to the record holder of this certificate a copy of the Rights Agreement without charge promptly following receipt of a written request therefor. Certificates for all other shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate does not represent any Right issued pursuant to the terms of a Rights Agreement dated as of April 7, 1989, as amended, by and between the Company and State Street Bank and Trust Company, as Rights Agent. Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates and the form of assignment, including certificate, and the form of election to purchase, including certificate, printed on the reverse thereof, when, as and if issued, shall be substantially the same as Exhibit A hereto, and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange upon which the Rights or the securities of the Company issuable upon exercise of the Rights may from time to time be listed, or to conform to usage. Subject to Section 22 hereof, Right Certificates, whenever issued, that are issued in respect of shares of Common Stock that were issued and outstanding as of the Close of Business on the Distribution Date, shall be dated as of the Distribution Date. 10 Section 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and may have affixed thereto the Company's seal or a facsimile thereof attested by its Secretary or any Assistant Secretary, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned; PROVIDED, HOWEVER, that the Company will use its best efforts to obtain approvals of stock exchanges and any other approvals required for use of a facsimile signature of the Rights Agent in lieu of a manual signature and if such approvals are obtained the Right Certificates shall be valid if countersigned by facsimile signature. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any person who at the actual date of such execution shall be a proper officer of the Company to sign such Right Certificate, even though such person was not such an officer at the date of the execution of this Agreement. (b) Following the Distribution Date, the Rights Agent shall keep or cause to be kept at its principal offices books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of Right Certificates, the number of Rights represented on its face by each Right Certificate and the date of each Right Certificate. Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a) Subject to the provisions of Sections 6(c), 7(d) and 14 hereof, at any time after the Close of Business on the Distribution Date, and so long as the Rights represented thereby remain outstanding, any one or more 11 Right Certificates may be transferred, split up, combined or exchanged for one or more Right Certificates representing the same aggregate number of Rights as the Right Certificates surrendered. Any registered holder desiring to transfer, split up, combine or exchange one or more Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent with the form of assignment, including certificate, on the reverse side thereof completed and duly executed, with signature guaranteed. Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto one or more Right Certificates, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of such Right Certificate if mutilated, the Company shall issue and deliver to the Rights Agent for delivery to the record holder of such Right Certificate a new Right Certificate of like tenor in lieu of such lost, stolen, destroyed or mutilated Right Certificate. (c) Notwithstanding anything to the contrary in this Section 6, the Rights Agent shall not countersign and deliver a Right Certificate to any Person if such Right Certificate represents, or would represent when held by such Person, Rights that had become or would become null and void pursuant to Section 7(d) hereof. Section 7. EXERCISE OF RIGHTS. (a) Until the Distribution Date, no Right may be exercised. (b) Subject to Section 7(d) and 7(g) hereof and the other provisions of this Agreement including Section 23(a), at any time after the Close of Business on the Distribution Date and prior to the Close of Business on the 12 earlier of the Redemption Date or the Expiration Date, the registered holder of any Right Certificate may exercise the Rights represented thereby in whole or in part upon surrender of such Right Certificate, with the form of election to purchase, including certificate, on the reverse side thereof completed and duly executed, with signature guaranteed, to the Rights Agent at the office of the Rights Agent in Boston, Massachusetts or the office of the Rights Agent's service agent in Canton, Massachusetts, together with payment of the Exercise Price for each Right exercised. Upon the exercise of an exercisable Right and payment of the Exercise Price in accordance with the provisions of this Agreement, the holder of such Right shall be entitled to receive, subject to adjustment as provided herein, one one-hundredth of a Preferred Share. (c) The exercise price for the exercise of each Right (the "Exercise Price") shall initially be $80 and shall be payable in lawful money of the United States of America in accordance with Section 7(f) hereof. The Exercise Price and the number of Preferred Shares (or, following the occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event, Common Stock and/or other securities) to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and the other provisions of this Agreement. (d) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event, any Rights that are or were Beneficially Owned by a 15% Stockholder or any Affiliate or Associate of a 15% Stockholder at any time on or after the Distribution Date shall be null and void, and any holder of such Rights (whether or not such holder is a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder) shall thereafter have no right to exercise such Rights. (e) In case the registered holder of any Right Certificate shall exercise less than all of the Rights represented thereby, a new Right Certificate representing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to such holder's duly authorized assigns, subject to the provisions of Section 14 hereof. 13 (f) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase, including certificate, completed and duly executed, with signature guaranteed, accompanied by payment of the Exercise Price for each Right to be exercised and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof in cash, or by certified check or cashier's check payable to the order of the Company, the Rights Agent shall thereupon promptly (i) requisition from the transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent) certificates for the number of Preferred Shares to be purchased, and the Company hereby irrevocably authorizes such transfer agent to comply with all such requests, and/or, as provided in Section 14 hereof, requisition from the depositary agent described therein depositary receipts representing such number of one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with such depositary agent) and the Company hereby directs such depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional Preferred Shares in accordance with Section 14 hereof, (iii) after receipt of such certificates, depositary receipts or cash, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Right Certificate. (g) Notwithstanding the foregoing provisions of this Section 7, the exercisability of the Rights shall be suspended for such period as shall reasonably be necessary for the Company to register under the Securities Act and any applicable securities law of any jurisdiction the Preferred Shares to be issued pursuant to the exercise of the Rights; PROVIDED, HOWEVER, that nothing contained in this Section 7 shall relieve the Company of its obligations under Section 9(c) hereof. Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for 14 cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The Company shall cause to be reserved and kept available out of its authorized and unissued equity securities (or out of its authorized and issued equity securities held in its treasury) the number of such equity securities that will from time to time be sufficient to permit the exercise in full of all outstanding Rights. (b) In the event that any securities issuable upon exercise of the Rights are listed on any national securities exchange, the Company shall use its best efforts, from and after such time as the Rights become exercisable, to cause all such securities issued or reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) If necessary to permit the issuance of securities upon exercise of the Rights, the Company shall use its best efforts, from and after the Distribution Date, to register such securities under the Securities Act and any applicable securities laws and to keep such registration effective until the earlier of the Redemption Date or the Expiration Date. (d) The Company shall take all such action as may be necessary to ensure that all securities delivered upon exercise of the Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Exercise Price), be duly and validly authorized and issued and fully paid and nonassessable securities. (e) The Company shall pay when due and payable any and all federal and state transfer taxes and charges 15 that may be payable in respect of the issuance or delivery of the Right Certificates or of any securities upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax that may be payable in respect of any transfer or delivery of a Right Certificate to a Person other than, or the issuance or delivery of a certificate for securities in respect of a name other than that of, the registered holder of the Right Certificate representing Rights surrendered for exercise, or to issue or deliver any certificate for securities upon the exercise of any Right until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. (f) With respect to the Common Stock and/or other securities issuable pursuant to Sections 11(a)(ii) and 11(a)(iii) hereof, the foregoing covenants shall be applicable only upon and following the occurrence of a Section 11(a)(ii) Event. Section 10. SECURITIES RECORD DATE. Each person in whose name any certificate for securities of the Company is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the securities represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate representing such Rights was duly surrendered and payment of the Exercise Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon which the securities transfer books of the Company are closed, such person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the securities transfer books of the Company are open. Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES ISSUABLE UPON EXERCISE OF RIGHTS OR NUMBER OF RIGHTS. The Exercise Price, the number and kind of securities that may be purchased upon exercise of a Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event that the Company shall at any time after the Effective Time and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date (A) declare or pay any dividend on the 16 Preferred Shares payable in Preferred Shares or Voting Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares, or (D) issue Preferred Shares or Voting Shares in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then and in each such event, the number and kind of Preferred Shares or other securities issuable upon the exercise of a Right on such date shall be proportionately adjusted so that the holder of any Right exercised on or after such date shall be entitled to receive, upon the exercise thereof and payment of the Exercise Price, the aggregate number and kind of Preferred Shares or other securities or other property, as the case may be, that, if such Right had been exercised immediately prior to such date and at a time when such Right was exercisable and the transfer books of the Company were open, such holder would have owned upon such exercise and would have been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event (a "Section 11(a)(ii) Event") that a 15% Ownership Date shall have occurred and neither the Redemption Date nor the Expiration Date shall have occurred prior to the Close of Business on the tenth Business Day following such 15% Ownership Date, then, and upon each such event, proper provision shall be made so that, except as provided in Section 7(d) hereof, each holder of a Right shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement and payment of the then current Exercise Price, such number of shares of Common Stock as shall equal the result obtained by multiplying the then current Exercise Price by the then number of one-hundredths of a Preferred Share for which a Right was exercisable (or, if the Distribution Date shall not have occurred prior to the date of such Section 11(a)(ii) Event, the number of one-hundredths of a Preferred Share for which a Right 17 would have been exercisable if the Distribution Date had occurred on the Business Day immediately preceding the date of such Section 11(a)(ii) Event) immediately prior to such Section 11(a)(ii) Event, and dividing that product by 50% of the Current Market Price (determined pursuant to Section 11(d) hereof) of a share of Common Stock on the date of occurrence of the relevant Section 11(a)(ii) Event (such number of shares of Common Stock being hereinafter referred to as the "Adjustment Shares"). Successive adjustments shall be made pursuant to this paragraph each time a Section 11(a)(ii) Event occurs. (iii) In the event that on the date of a Section 11(a)(ii) Event the aggregate number of shares of Common Stock that are authorized by the Company's Restated Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is less than the aggregate number of Adjustment Shares thereafter issuable upon the exercise in full of the Rights, as the case may be, in accordance with Section 11(a)(ii) hereof (the excess of such number of Adjustment Shares over and above such number of shares of Common Stock being hereinafter referred to as the "Unavailable Adjustment Shares"), the Company shall substitute for the pro rata portion of the Unavailable Adjustment Shares that would otherwise be issuable thereafter upon the exercise of each Right, and payment of the Exercise Price, as applicable, (A) cash, (B) other equity securities of the Company (including, without limitation, shares of preferred stock of the Company or units of such shares having the same value as one share of Common Stock, as applicable, (C) debt securities of the Company, (D) other assets, or (E) any combination of the foregoing, in each case having an aggregate value equal to the aggregate value of the Unavailable Adjustment Shares, as applicable, for which substitution is made. Subject to Section 7(d) hereof, in the event that the Company takes any action pursuant to this Section 11(a)(iii), such action shall apply uniformly to all outstanding Rights. (b) In the event that the Company shall, at any time after the Effective Time and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, fix a record date prior to the earlier of the Redemption Date or the Expiration Date for the issuance 18 of rights, options or warrants to all holders of Preferred Shares entitling them initially to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as Preferred Shares ("Preferred Share Equivalents")) or securities convertible into Preferred Shares or Preferred Share Equivalents, at a price per Preferred Share or Preferred Share Equivalent (or having a conversion price per share, if a security convertible into Preferred Shares or Preferred Share Equivalents) less than the Current Market Price per Preferred Share on such record date, then the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be equal to the sum of the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares that the aggregate offering price of the total number of Preferred Shares and/or Preferred Share Equivalents to be so offered (and/or the aggregate initial conversion price of the convertible securities to be so offered) would purchase at such Current Market Price, and the denominator of which shall be equal to the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or Preferred Share Equivalents to be offered for subscription or purchase (or into which the convertible securities to be so offered are initially convertible); PROVIDED, HOWEVER, that if such rights, options or warrants are not exercisable immediately upon issuance but become exercisable only upon the occurrence of a specified event or the passage of a specified period of time, then the adjustment to the Exercise Price shall be made and become effective only upon the occurrence of such event or such passage of time, and such adjustment shall be made as if the record date for the issuance of such rights, options or warrants had been the business day immediately preceding the date upon which such rights, options or warrants became exercisable. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment to the Exercise Price shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed. (c) In the event that the Company shall, at any time after the Effective Time and prior to the Close of Business on the earlier of the Redemption Date or the 19 Expiration Date, fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of securities or assets (other than a distribution of securities for which an adjustment is required under Section 11(a)(i) or (b) hereof or a regular quarterly cash dividend), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be equal to the excess of the Current Market Price per Preferred Share on such record date over and above the fair market value of the portion of the securities or assets to be so distributed with respect to one Preferred Share, and the denominator of which shall be equal to such Current Market Price per Preferred Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such a distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed. (d) For the purpose of any computation under this Section 11, if the Preferred Shares are not publicly held or so listed and traded, the "Current Market Price" per Preferred Share shall be conclusively deemed to be an amount equal to the product of 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the Effective Time) times the Current Market Price of the Common Stock. If none of the shares of Common Stock are publicly held or so listed and traded, the "Current Market Price" per Preferred Share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed by the Company with the Rights Agent and shall be conclusive for all purposes. (e) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; PROVIDED, HOWEVER, that any adjustments that by reason of this Section 11(e) are not required to be made shall be cumulated and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Share or 20 other share or one-millionth of a Preferred Share, as the case may be. (f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any securities of the Company other than Preferred Shares, the number of such other securities so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Preferred Shares contained in this Section 11, and the other provisions of this Agreement with respect to Preferred Shares shall apply on like terms to any such other securities. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall represent the right to purchase, at the adjusted Exercise Price, the number of one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i) below, upon each adjustment of the Exercise Price as a result of the calculations made in Sections 11(b) and 11(c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter represent the right to purchase, at the adjusted Exercise Price, that number of one-hundredths of a Preferred Share (calculated to the nearest one-millionth of a Preferred Share) obtained by multiplying (i) the number of one-hundredths of a Preferred Share purchasable upon the exercise of one Right immediately prior to such adjustment of the Exercise Price by (ii) the Exercise Price in effect immediately prior to such adjustment, and dividing the product so obtained by the Exercise Price in effect immediately after such adjustment. (i) The Company may elect, on or after the date of any adjustment of the Exercise Price, to adjust the number of Rights instead of making any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such 21 adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Exercise Price in effect immediately prior to the adjustment of the Exercise Price by the Exercise Price in effect immediately after such adjustment of the Exercise Price. The Company shall make a public announcement of its election to adjust the number of Rights pursuant to this Section 11(i), indicating the record date for the adjustment and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter, but, if separate Right Certificates have been issued, it shall be at least 10 days after the date of such public announcement. If separate Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates representing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of such adjustment, and upon surrender thereof if required by the Company, new Right Certificates representing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Exercise Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Exercise Price or the number of one-hundredths of a Preferred Share issuable upon the exercise of one Right, the Right Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-hundredth of a Preferred Share and the number of Preferred Shares issuable upon the exercise of one Right that were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Exercise Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company 22 shall take any corporate action that may, on the advice or in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable one one-hundredths of a Preferred Share at such adjusted Exercise Price. (l) In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, the issuance to the holder of any Right exercised after such record date of the number of one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument representing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such further adjustments in the number of one-hundredths of a Preferred Share that may be purchased upon exercise of one Right, and such further adjustments in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the Current Market Price thereof, (iii) issuance wholly for cash of Preferred Shares or securities that by their terms are convertible into or exchangeable for Preferred Shares, (iv) dividends on Preferred Shares payable in Preferred Shares, or (v) issuance of rights, options or warrants referred to in Section 11(b) hereof, hereafter made by the Company to holders of its Preferred Shares, shall not be taxable to such holders. Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES ISSUABLE UPON EXERCISE OF RIGHTS. Whenever an adjustment is made as provided in Section 11 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts giving rise to such adjustment, (b) file with the 23 Rights Agent and with each transfer agent for the securities issuable upon exercise of the Rights a copy of such certificate, and (c) mail a brief summary thereof to each holder of Rights in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or to give such notice shall not affect the validity or the force and effect of such adjustment. Any adjustment to be made pursuant to Sections 11 or 13 hereof shall be effective as of the date of the event giving rise to such adjustment. Section 13. CONSOLIDATION, MERGER, OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. (a) In the event (a "Section 13(a) Event") that, at any time on or after the 15% Ownership Date and prior to the earlier of the Redemption Date or the Expiration Date, (x) the Company shall, directly or indirectly, consolidate with or merge with and into any other Person (other than any employee benefit plan of the Company, or any Person holding shares of Common Stock for or pursuant to the terms of any such employee benefit plan) and the Company shall not be the continuing or surviving corporation in such consolidation or merger, (y) any Person (other than any employee benefit plan of the Company, or any Person holding shares of Common Stock for or pursuant to the terms of any such employee benefit plan) shall, directly or indirectly, consolidate with or merge with and into the Company and the Company shall be the continuing or surviving corporation in such merger and, in connection with such merger, all or part of the Common Stock shall be changed into or exchanged for stock or other securities of any Person or cash or any other property, or (z) the Company and/or any one or more of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer, in one or more transactions (other than transactions in the ordinary course of business), assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons other than the Company or one or more of its wholly owned Subsidiaries (such Persons, together with the Persons described in clauses (x) and (y) above shall be collectively referred to in this Section 13 as the "Surviving Person"), then, and in each such case, proper provision shall be made so that: (i) except as provided in Section 7(d) hereof, (x) each holder of a Right shall thereafter have the right to receive, upon the exercise thereof in 24 accordance with the terms of this Agreement and payment of the then current Exercise Price, such number of validly authorized and issued, fully paid and nonassessable shares of Common Stock of the Surviving Person as shall be equal to a fraction, the numerator of which is the product of the then current Exercise Price multiplied by the number of one-hundredths of a Preferred Share purchasable upon the exercise of one Right immediately prior to the first Section 13(a) Event (or, if a Section 11(a)(ii) Event has occurred prior to the first Section 13(a) Event, the product of the number of one-hundredths of a Preferred Share purchasable upon the exercise of a Right (or, if the Distribution Date shall not have occurred prior to the date of such Section 11(a)(ii) Event, the number of one-hundredths of a Preferred Share that would have been so purchasable if the Distribution Date had occurred on the Business Day immediately preceding the date of such Section 11(a)(ii) Event) immediately prior to such Section 11(a)(ii) Event, multiplied by the Exercise Price in effect immediately prior to such Section 11(a)(ii) Event), and the denominator of which is 50% of the Current Market Price per share of Common Stock of the Surviving Person on the date of consummation of such Section 13(a) Event; (ii) the Surviving Person shall thereafter be liable for and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to the Surviving Person; and (iv) the Surviving Person shall take such steps (including, but not limited to, the reservation of a sufficient number of its shares of Common Stock in accordance with Section 9 hereof) in connection with such consummation as may be necessary to ensure that the provisions hereof shall thereafter be applicable to its shares of Common Stock thereafter deliverable upon the exercise of Rights. (b) Notwithstanding the foregoing, if the Section 13(a) Event is the sale or transfer in one or more transactions of assets or earning power aggregating more than 50% of the assets or earning power of the Company and 25 its Subsidiaries (taken as a whole), but less than 100% thereof, then each Person acquiring all or a portion thereof shall assume the obligations of the Company as to a fraction of each of the Rights equal to the fraction of the assets of the Company and its Subsidiaries (taken as a whole) acquired by such Person, and the obligations of the Company as to the remaining fraction of each of the Rights shall continue to be the obligations of the Company. (c) The Company shall not consummate a Section 13(a) Event unless prior thereto the Company and the Surviving Person shall have executed and delivered to the Rights Agent a supplemental agreement confirming that such Surviving Person shall, upon consummation of such Section 13(a) Event, assume this Agreement in accordance with Section 13 hereof, that all rights of first refusal or preemptive rights in respect of the issuance of shares of Common Stock of such Surviving Person upon exercise of outstanding Rights have been waived and that such Section 13(a) Event shall not result in a default by such Surviving Person under this Agreement, and further providing that, as soon as practicable after the date of consummation of such Section 13(a) Event, such Surviving Person shall: (i) prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing, use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with all applicable state securities laws; (ii) use its best efforts to list (or continue the listing of) the Rights and the shares of Common Stock of the Surviving Person purchasable upon exercise of the Rights on a national securities exchange, or use its best efforts to cause the Rights and such shares of Common Stock to meet the eligibility requirements for quotation on NASDAQ; and (iii) deliver to holders of the Rights historical financial statements for such Surviving Person that comply in all respects with the requirements for 26 registration on Form 10 (or any successor form) under the Exchange Act. (d) In the event that at any time after the occurrence of a Section 11(a)(ii) Event some or all of the Rights shall not have been exercised pursuant to Section 11 hereof prior to the date of a Section 13(a) Event, such Rights shall thereafter be exercisable only in the manner described in Section 13(a) hereof (without taking into account any prior adjustment required by Section 11(a)). In the event that a Section 11(a)(ii) Event occurs on or after the date of a Section 13(a) Event, Rights shall not be exercisable pursuant to Section 11 hereof but shall instead be exercisable pursuant to, and only pursuant to, this Section 13. (e) The provisions of this Section 13 shall apply to each successive merger, consolidation, sale or other transfer constituting a Section 13(a) Event. Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates that represent fractional Rights. If the Company shall determine not to issue such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with respect to which such fractional Rights would otherwise be issuable, at the time such Rights are exercised as provided herein, an amount in cash equal to the same fraction of the Current Market Price of a whole Right. For the purposes of this Section 14(a), the Current Market Price of a whole Right shall be the Closing Price per Right for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. (b) The Company shall not be required to issue fractions of shares of Common Stock or Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share) upon exercise of Rights, or to distribute certificates that represent fractional shares of Common Stock or Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be represented by depositary receipts, pursuant to an appropriate agreement 27 between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of Preferred Shares. If the Company shall determine not to issue fractional shares of Common Stock or Preferred Shares (or depositary receipts in lieu of Preferred Shares), the Company shall pay to the registered holders of Right Certificates with respect to which such fractional shares of Common Stock or Preferred Shares would otherwise be issuable, at the time such Rights are exercised as provided herein, an amount in cash equal to the same fraction of the Current Market Price of a whole share of Common Stock or Preferred Share, as the case may be. For purposes of this Section 14(b), the Current Market Price of a whole share of Common Stock or Preferred Share shall be the Closing Price per share for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right, by the acceptance of such Right, expressly waives such holder's right to receive any fractional Rights or any fractional shares of Common Stock or Preferred Shares upon exercise of such Right, except as permitted by this Section 14. Section 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, except the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates and certificates for shares of Common Stock representing Rights, and any registered holder of any Right Certificate and of such certificate for shares of Common Stock, without the consent of the Rights Agent or of the holder of any other Right Certificate or any other certificate for shares of Common Stock may, on such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights represented by such Right Certificate or by such certificate for shares of Common Stock in the manner provided in such Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance, and injunctive relief against actual or threatened violations, of the obligations of any Person under this Agreement. 28 Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and every other holder of a Right that: (a) prior to the Distribution Date, the Rights shall be represented by certificates for shares of Common Stock registered in the name of the holders of such shares of Common Stock (which certificates for shares of Common Stock shall also constitute certificates for Rights), and each such Right shall be transferable only in connection with the transfer of such shares of Common Stock; (b) after the Distribution Date, the Right Certificates shall only be transferable on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate is registered as the absolute owner thereof and of the Rights represented thereby (notwithstanding any notations of ownership or writing on the Right Certificate by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. RIGHT HOLDER AND RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right or Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the securities of the Company that may at any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right or Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, to give or withhold consent to any corporate action, to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, in each case until such Right or the Rights represented by such Right Certificate shall have been exercised in accordance with the provisions hereof. 29 Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent as compensation for all services rendered by it hereunder reasonable and customary fees and expenses. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or shares of Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of its counsel as set forth in Section 20 hereof. Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. If, at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver 30 such Right Certificates so countersigned; and if at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in such Right Certificates, and in this Agreement. (b) If at any time the name of the Rights Agent shall be changed, and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver the Right Certificates so countersigned; and if at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in such Right Certificates and in this Agreement. Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance of the Rights, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall constitute full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such advice or opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall constitute full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. 31 (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement, or in the Right Certificates (except its countersignature thereof), or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(d) or any adjustment in the terms of the Rights including the manner, method or amount thereof) provided for in Sections 7, 11, 13 and 23 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights represented by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or shares of Common Stock or other securities to be issued pursuant to this Agreement or any Right Certificate, or as to whether any Preferred Shares or shares of Common Stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the 32 performance of its duties hereunder from any one of the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof. Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of shares of Common Stock and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of shares of Common Stock and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting as such, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or 33 after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit such holder's Right Certificate for inspection by the Company), then the Company shall become the Rights Agent and the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York, in good standing, having a principal office in New York, that is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and that has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000. After its appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose of this Agreement and so that the successor Rights Agent may appropriately act as Rights Agent hereunder. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of shares of Common Stock and Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Right Certificates to the contrary, the Company may, at its option, issue new Right Certificates in such form as may be approved by the Board of Directors in order to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares or other securities or 34 property purchasable upon exercise of the Rights in accordance with the provisions of this Agreement. Section 23. REDEMPTION OF RIGHTS. (a) The Company may, at its option, but only by the vote of a majority of the Board of Directors, redeem all but not less than all of the then outstanding Rights, at any time prior to the Close of Business on the earlier of (i) the tenth day following the 15% Ownership Date (subject to extension by the Company as provided in Section 26 hereof) or (ii) the Expiration Date, at a redemption price of $.005 per Right, subject to adjustments as provided in subsection (c) below (the "Redemption Price"). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable pursuant to Section 11(a)(ii) prior to the expiration of the Company's right of redemption hereunder. (b) Without any further action and without any notice, the right to exercise the Rights will terminate effective at the time so designated by action of the Board of Directors ordering the redemption of the Rights and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within 10 days after the effective time of the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each notice of redemption will state the method by which the payment of the Redemption Price will be made. At the option of the Board of Directors, the Redemption Price may be paid in cash to each Rights holder or by the issuance of shares (and, at the Company's election pursuant to Section 14(b) hereof, cash or depositary receipts in lieu of fractions of shares other than fractions which are integral multiples of one one-hundredth (1/100) of a share) of Preferred Stock or Common Stock having a Fair Market Value equal to such cash payment. (c) In the event the Company shall at any time after the date of this Rights Agreement (A) pay any dividend on Common Stock in shares of Common Stock, (B) subdivide or 35 split the outstanding shares of Common Stock into a greater number of shares, or (C) combine or consolidate the outstanding shares of Common Stock into a smaller number of shares or effect a reverse split of the outstanding shares of Common Stock, then, and in each such event, the Redemption Price shall be appropriately adjusted to reflect the foregoing. Section 24. EXCHANGE. (a) The Board of Directors may, at its option, at any time after any Person becomes a 15% Stockholder, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(d) hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock divided or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common 36 Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(d) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or Preferred Share Equivalent, as such term is defined in paragraph (b) of Section 11 hereof) for Common Stock exchangeable for Rights, at the initial rate of one one-hundredths of a share of Preferred Stock (or Preferred Share Equivalent) for each share of Common Stock, as appropriately adjusted to reflect stock splits, stock dividends or other similar transactions effected after the date hereof. (d) In the event that there shall not be sufficient Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market price of a whole share of Common Stock. For the purposes of this subsection (e), the current market price of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. NOTICE OF CERTAIN EVENTS. (a) In the event that the Company shall propose (i) to declare or pay any dividend payable on or make any distribution with respect to its Common Stock or Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Common Stock or Preferred Shares options, rights or warrants to subscribe for or to 37 purchase any additional shares thereof or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Common Stock or Preferred Shares (other than a reclassification involving only the subdivision of outstanding shares), (iv) to effect any consolidation or merger with or into, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to effect the liquidation, dissolution or winding up of the Company, then and in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action that shall specify the record date for the purpose of such dividend or distribution, or the date upon which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of record of the Common Stock or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Common Stock or Preferred Shares for purposes of such action and, in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock or Preferred Shares, whichever date shall be the earlier. The failure to give the notice required by this Section 25 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. (b) Upon the occurrence of each Section 11(a)(ii) Event and each Section 13(a) Event, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, specifying the event and the consequences of the event to holders of Rights under Sections 11 and 13 hereof. Section 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until 38 another address is filed in writing with the Rights Agent) as follows: MEDIAONE GROUP, INC. 188 Inverness Drive West Englewood, Colorado 80112 Attention: General Counsel and Secretary Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) to the principal office of the Rights Agent as follows: STATE STREET BANK AND TRUST COMPANY c/o Boston EquiServe Limited Partnership 150 Royall Street Canton, Massachusetts 02021 Attention: Charles V. Rossi Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. SUPPLEMENTS AND AMENDMENTS. For as long as the Rights are then redeemable and except as provided in the last sentence of this Section 27, the Company may in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of the Rights. At any time when the Rights are not then redeemable and except as provided in the last sentence of this Section 27, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend this Rights Agreement without the approval of any holders of Right Certificates (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or (iii) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable, provided that no such supplement or amendment pursuant to this clause (iii) shall materially adversely affect the interest of the holders of Right Certificates. 39 Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. This Agreement may be amended or supplemented at any time with the approval of a majority of the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock). Notwithstanding anything contained in this Rights Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price or the Final Expiration Date and supplements or amendments may be made after the time that any Person becomes a 15% Stockholder only if at the time of the action of the Board of Directors approving such supplement or amendment there are then in office not less than two Continuing Directors and such supplement or amendment is approved by a majority of the Continuing Directors then in office. Section 28. CERTAIN COVENANTS. Subject to Section 27 and the other provisions of this Agreement: (a) no adjustment to the Exercise Price, the number of Preferred Shares or shares of Common Stock or other securities (or fractions of a share of any of them), as the case may be, for which a Right is exercisable or the number of Rights outstanding shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits that the holders of Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 7, 11 and 13 hereof, unless the terms of this Agreement are amended so as to preserve such benefits; and (b) from and after the earlier of the date of the first Section 11(a)(ii) Event or the date of the first Section 13(a) Event and prior to the earlier of the Redemption Date or the Expiration Date, the Company shall not (i) issue or sell, or permit any Subsidiary to issue or sell, to a 15% Stockholder or a Surviving Person, or any Affiliate or Associate of a 15% Stockholder or a Surviving Person, or any Person holding Voting Shares of the Company that are Beneficially Owned by a 15% Stockholder or a Surviving Person, (A) any rights, options, warrants or convertible securities on terms similar to, or that materially adversely affect the value of, the Rights or (B) Preferred Shares, shares of Common Stock or shares of any other class of capital stock, if such sale is intended to or 40 would materially adversely affect the value of the Rights, or (ii) take any action that is intended to or would materially adversely affect the value of the Rights. Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors to any liability to the holders of the Rights. Section 30. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 31. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent, the registered holders of the Right Certificates (other than those representing Rights that have become null and void) and the certificates for shares of Common Stock representing Rights (other than those Rights that have become null and void) any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent, such registered holders of Right Certificates and such certificates for shares of Common Stock representing Rights. Section 32. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the 41 terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 33. GOVERNING LAW. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts made and performed entirely within such state. Section 34. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each such counterpart shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument. Section 35. DESCRIPTIVE HEADINGS. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 36. EFFECTIVENESS. This Agreement shall become effective at the Separation Time. In the event the Separation does not occur or become effective for any reason, this Agreement shall be deemed null and void. 42 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. Attest: MEDIAONE GROUP, INC. By By ----------------------- ----------------------- Name: Name: Title: Title: Attest: STATE STREET BANK AND TRUST COMPANY By By ----------------------- ----------------------- Name: Name: Title: Title: EXHIBIT A FORM OF RIGHT CERTIFICATE Certificate No. CR-____ _____ Rights NOT EXERCISABLE AFTER APRIL 6, 1999 OR EARLIER IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.005 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY CERTAIN PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. Right Certificate MEDIAONE GROUP, INC. This certifies that _____________________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms and conditions of the Amended and Restated Rights Agreement (the "Rights Agreement") dated as of June 12, 1998 by and between MEDIAONE GROUP, INC., a Delaware corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY (the "Rights Agent"), to purchase from the Company at any time prior to five o'clock (5:00) p.m., Massachusetts time, on the earlier of the Redemption Date (as such term is defined in the Rights Agreement) or April 6, 1999, at the office or agency of the Rights Agent in Boston, Massachusetts or Canton, Massachusetts, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid and nonassessable share of Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share, of the Company (a "Preferred Share") or, in certain circumstances, other securities or other property, at a purchase price of $80 per one one-hundredth of a Preferred Share (the "Exercise Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed. The number of Rights represented by this Right Certificate and the Exercise Price set forth above are the number of Rights and the Exercise Price as of ________ __, 1998, based upon the Preferred Shares as constituted on such A-1 date. As provided in the Rights Agreement, the Exercise Price and the number of Preferred Shares or other securities or other property that may be purchased upon the exercise of the Rights represented by this Right Certificate are subject to modification and adjustment upon the occurrence of certain events. The Rights Agreement contains a full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of Right Certificates. This Right Certificate is subject to all the terms and conditions of the Rights Agreement, which terms and conditions are hereby incorporated herein by reference and made a part hereof. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon presentation and surrender at the above-mentioned offices of the Rights Agent, with the Form of Assignment, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed, may be exchanged for another Right Certificate or Right Certificates of like tenor and date representing Rights entitling the holder thereof to purchase a like aggregate number of Preferred Shares or, in certain circumstances, other securities or other property, as the Rights represented by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive, upon the surrender hereof with the Form of Election to Purchase, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed, another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights represented by this Right Certificate may be redeemed by the Company, at its option, at a redemption price of $.005 per Right. No fractional securities shall be issued upon the exercise of any Right or Rights represented hereby (other than fractions of Preferred Shares that are integral multiples of one one-hundredth of a Preferred Share, that may, at the option of the Company, be represented by depositary receipts), but in lieu thereof, a cash payment shall be made, as provided in the Rights Agreement. A-2 No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, until the Right or Rights represented by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ___________, 199_. Attest: MEDIAONE GROUP, INC. By By ---------------------- ---------------------- Name: Name: Title: Title: Countersigned: STATE STREET BANK AND TRUST COMPANY By By ---------------------- ---------------------- Name: Name: Title: Title: A-3 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer any or all of the Rights represented by this Right Certificate) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto - ----------------------------------------------------------------------------- - -----------------------------------------------------------------------------, (Name, address and social security or other identifying number of transferee) ________________________________ (___________) of the Rights represented by this Right Certificate, together with all right, title and interest in and to said Rights, and hereby irrevocably constitutes and appoints attorney to transfer said Rights on the books of MEDIAONE GROUP, INC., with full power of substitution. Dated: __________________, 199_ ------------------------- (Signature) Signature Guaranteed: CERTIFICATE (to be completed, if true) The undersigned hereby certifies that the Rights represented by this Right Certificate are not Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement). Dated: _________________, 199_ ---------------------------- (Signature) Signature Guaranteed: A-4 NOTICE The signatures to the foregoing Assignment and the foregoing Certificate, if applicable, must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. In the event that the foregoing Certificate is not duly executed, with signature guaranteed, the Company may deem the Rights represented by this Right Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement), and not issue any Right Certificate or Right Certificates in exchange for this Right Certificate. A-5 FORM OF ELECTION TO PURCHASE (To be executed by the registered holder if such holder desires to exercise any or all of the Rights represented by this Right Certificate) To MEDIAONE GROUP, INC.: The undersigned hereby irrevocably elects to exercise ______________________________________ (________) of the Rights represented by this Right Certificate to purchase the following: (Check one of the following boxes) / / the Preferred Shares or other securities or property issuable upon the exercise of said number of Rights pursuant to Section 7(c) of the Rights Agreement. / / the shares of Common Stock, par value $0.01 per share, of the Company, or other securities or property issuable upon the exercise of said number of Rights pursuant to Section 11(a)(ii) of the Rights Agreement. / / the securities issuable upon the exercise of said number of Rights pursuant to Section 14(a) of the Rights Agreement. The undersigned hereby requests that any such property and a certificate for any such securities be issued in the name of and delivered to: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Name, address and social security or other identifying number of issuee) The undersigned hereby further requests that if said number of Rights shall not be all the Rights represented by this Right Certificate, a new Right Certificate for the remaining balance of such Rights be issued in the name of and delivered to: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Name, address and social security or other identifying number of issuee) Dated: _____________, 199_ ---------------------------- (Signature) Signature Guaranteed: A-6 CERTIFICATE (to be completed, if true) The undersigned hereby certifies that the Rights represented by this Right Certificate are not Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement). Dated: __________________, 199_ -------------------------- (Signature) Signature Guaranteed: NOTICE The signatures to the foregoing Assignment and the foregoing Certificate, if applicable, must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. In the event that the foregoing Certificate is not duly executed, with signature guaranteed, the Company may deem the Rights represented by this Right Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement), and not issue any property or certificate for securities upon the exercise of this Right Certificate or issue any new Right Certificate for any remaining balance of unexercised Rights represented by this Right Certificate. A-7 EX-99.1 4 EXHIBIT 99.1 - ------------------------------------------------------------------------------ SEPARATION AGREEMENT between U S WEST, INC. (to be renamed MEDIAONE GROUP, INC.) and USW-C, INC. (to be renamed U S WEST, INC.) Dated as of June 5, 1998 - ------------------------------------------------------------------------------ ARTICLE I DEFINITIONS 1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Terms Defined Elsewhere in the Agreement . . . . . . . . . . . . . 15 1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 17 1.4 References to Time . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II CERTAIN PRE-SEPARATION TRANSACTIONS 2.1 Certificates of Incorporation; Bylaws; Name Changes. . . . . . . . 18 2.2 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . 18 2.3 Registration and Listing . . . . . . . . . . . . . . . . . . . . . 19 2.4 Boards of Directors. . . . . . . . . . . . . . . . . . . . . . . . 20 2.5 Rights Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 20 2.6 The Transaction Documents. . . . . . . . . . . . . . . . . . . . . 20 2.7 U S WEST Approval of Certain New U S WEST Actions. . . . . . . . . 20
ARTICLE III REORGANIZATION; CONTRIBUTION; REFINANCING OF INDEBTEDNESS 3.1 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.2 Refinancing of Indebtedness. . . . . . . . . . . . . . . . . . . . 23 3.3 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.4 Discharge of Liabilities . . . . . . . . . . . . . . . . . . . . . 32 3.5 Closing; Delivery; Methods of Transfer and Assumption. . . . . . . 34
ARTICLE IV THE SEPARATION 4.1 The Separation . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.2 Separation Time. . . . . . . . . . . . . . . . . . . . . . . . . . 36 4.3 Certain Determinations . . . . . . . . . . . . . . . . . . . . . . 36 4.4 New U S WEST SIP Accounts; Certificates; Distribution Procedures . 36 4.5 Conditions to the Separation . . . . . . . . . . . . . . . . . . . 41 i 5.1 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . 43 5.2 Settlements for Cash Collections and Disbursements After the Separation Time. . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.3 Transition Services. . . . . . . . . . . . . . . . . . . . . . . . 45 5.4 U S WEST Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 46 5.5 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI EMPLOYEE MATTERS 6.1 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 6.2 Employee Benefit Plans and Employee Arrangements . . . . . . . . . 49 6.3 Internal Revenue Service Forms . . . . . . . . . . . . . . . . . . 49
ARTICLE VII INSURANCE MATTERS 7.1 Policies and Rights Included Within Assets . . . . . . . . . . . . 49 7.2 Administration; Other Matters. . . . . . . . . . . . . . . . . . . 50 7.3 Cooperation; Disagreements . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII INDEMNIFICATION 8.1 New U S WEST's Agreement to Indemnify. . . . . . . . . . . . . . . 52 8.2 U S WEST's Agreement to Indemnify. . . . . . . . . . . . . . . . . 53 8.3 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . 54 8.4 Miscellaneous Indemnification Provisions . . . . . . . . . . . . . 59 8.5 Contribution.. . . . . . . . . . . . . . . . . . . . . . . . . . . 60 8.6 Tax Matters; Construction of Agreements. . . . . . . . . . . . . . 60 8.7 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX CERTAIN ADDITIONAL COVENANTS 9.1 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . 61 9.2 Intercompany Agreements. . . . . . . . . . . . . . . . . . . . . . 61 9.3 Guarantee Obligations. . . . . . . . . . . . . . . . . . . . . . . 62 9.4 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . 64 ii 9.5 National Contracts . . . . . . . . . . . . . . . . . . . . . . . . 66 9.6 Non-Solicitation of Employees. . . . . . . . . . . . . . . . . . . 66 9.7 Lock Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.8 Agreements with Respect to Common Stock Received by Savings Plan/ESOPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.9 AirTouch Transaction . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE X ACCESS TO INFORMATION 10.1 Allocation of Corporate Records. . . . . . . . . . . . . . . . . . 70 10.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 71 10.3 Production of Witnesses. . . . . . . . . . . . . . . . . . . . . . 73 10.4 Certain Procedures Relating to Access to Archived Joint Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.6 Cooperation with Respect to Government Reports and Filings . . . . 74 10.7 Certain Limitations with Respect to Information. . . . . . . . . . 75 10.8 Protective Arrangements. . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XI MUTUAL RELEASE; NO REPRESENTATIONS OR WARRANTIES 11.1 Mutual Release. . . . . . . . . . . . . . . . . . . . . . . . . . 76 11.2 No Representations or Warranties. . . . . . . . . . . . . . . . . 77
ARTICLE XII GENERAL PROVISIONS 12.1 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . . . 78 12.2 Separation Committee; Dispute Resolution . . . . . . . . . . . . . 78 12.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 82 12.8 Headings; References . . . . . . . . . . . . . . . . . . . . . . . 82 12.9 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 83 12.11 Parties in Interest; Assignment; iii Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 12.12 Severability; Enforcement. . . . . . . . . . . . . . . . . . . . 83 12.13 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 12.14 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EXHIBITS Exhibit A - Employee Matters Agreement Exhibit B - Tax Sharing Agreement iv SEPARATION AGREEMENT SEPARATION AGREEMENT, dated as of June 5, 1998, between U S WEST, INC., a Delaware corporation ("U S WEST"), to be renamed "MEDIAONE GROUP, INC.," and USW-C, INC., a Delaware corporation and indirect wholly owned subsidiary of U S WEST ("NEW U S WEST"), to be renamed "U S WEST, INC." W I T N E S S E T H: WHEREAS, pursuant to the Restated Certificate of Incorporation of U S WEST (the "RESTATED CERTIFICATE"), U S WEST's assets, liabilities and businesses are divided between the Communications Group (as defined in the Restated Certificate) and the Media Group (as defined in the Restated Certificate); WHEREAS, pursuant to the Restated Certificate, the domestic directories business of U S WEST (the "DIRECTORIES BUSINESS") conducted by U S WEST Dex, Inc., a Colorado corporation ("DEX"), is currently attributed to the Media Group; WHEREAS, the Board of Directors of U S WEST has determined that it is in the best interests of U S WEST and its stockholders to (i) align the Directories Business with the Communications Group and (ii) separate the Communications Group and the Media Group into two separately traded public companies; WHEREAS, in furtherance of the foregoing, the Board of Directors of U S WEST and New U S WEST have approved this Agreement, pursuant to which, among other things, (a) U S WEST shall effect a restructuring of certain of its assets, liabilities and businesses, as a result of which New U S WEST shall own the Directories Business and the businesses currently attributed to the Communications Group and (b) U S WEST shall distribute all of the outstanding capital stock of New U S WEST to its stockholders, all on the terms and subject to the conditions described herein; WHEREAS, it is the intention of the parties hereto that the transactions contemplated by this Agreement shall be tax-free transactions under Sections 332, 368(a) and 355 of the Internal Revenue Code of 1986, as amended (the "CODE"), and the rules and regulations promulgated thereunder; and WHEREAS, the parties hereto desire to make certain covenants and agreements and to allocate certain assets, liabilities and obligations in connection with the transactions contemplated hereby and to prescribe various conditions to the transactions contemplated hereby. NOW, THEREFORE, in furtherance of the foregoing and in consideration of the mutual promises and undertakings contained herein and in any other document executed in connection with this Agreement, the parties agree as follows: ARTICLE I DEFINITIONS 1.1 GENERAL. For the purposes of this Agreement, the following terms shall have the meanings set forth below: "ACTION" shall mean any action, claim (whether or not filed), suit, arbitration, inquiry, demand proceeding or investigation. "AFFILIATE" shall mean, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such specified Person; PROVIDED, HOWEVER, that for purposes of this Agreement, no member of either Group shall, after giving effect to the Separation, be deemed to be an Affiliate of any member of the other Group. "AGREEMENT" shall mean this Separation Agreement, together with all exhibits and schedules hereto, as the same may be amended from time to time in accordance with the terms hereof. "AIRTOUCH" shall mean AirTouch Communications, Inc., a Delaware corporation. "AIRTOUCH FUNDS" shall mean the portion of the funds received in the AirTouch Transaction which is not used to repay outstanding indebtedness. "AIRTOUCH MERGER AGREEMENT" shall mean Agreement and Plan of Merger, dated as of January 29, 1998, among U S WEST, MGI, NewVector, PCS Holdings and AirTouch. 2 "AIRTOUCH STOCK" shall mean all of the shares of common stock and preferred stock of AirTouch which MGI receives in connection with the AirTouch Transaction. "AIRTOUCH TRANSACTION" shall mean the merger of NewVector and PCS Holdings with and into AirTouch pursuant to the terms of the AirTouch Merger Agreement. "APPLICABLE LAW" shall mean, with respect to any Person, all statutes, laws, ordinances, rules, orders and regulations of any Governmental Authority applicable to such Person and its business, properties and assets. "ASSET" shall mean any and all right, title and interest in and to all of the rights, properties, assets, claims, Contracts and businesses of every kind, character and description, whether real, personal or mixed, whether accrued, contingent or otherwise, and wherever located, including, without limitation, the following: (i) all Cash Equivalents, notes, prepaid expenses and accounts receivable (whether current or non-current); (ii) all capital stock, partnership interests and other equity or ownership interests or rights, directly or indirectly, in any entity; (iii)debentures, evidences of indebtedness, certificates of interest or participation, collateral trust certificates, preorganization certificates or subscriptions, investment contracts, foreign currency and interest rate contracts (including, without limitation, forward, option, cap and swap contracts), trust certificates, puts, calls, straddles, options and other securities or hedging arrangements of any kind;(iv) all registered and unregistered trademarks, service marks, service names, trade styles and trade names (including, without limitation, trade dress and other names, marks and slogans) and all associated goodwill; all statutory, common law and registered copyrights; all patents; all applications for any of the foregoing together with all rights to use all of the foregoing and all other rights in, to and under the foregoing; and all know-how, inventions, discoveries, improvements, processes, formulae (secret or otherwise), specifications, trade secrets (whether patentable or not), licenses and other similar agreements, confidential information, and all drawings, records, books or other indicia, however evidenced, of the foregoing;(v) all Contracts and rights existing thereunder and under all other business arrangements;(vi) all real estate and all plants, buildings and other improvements thereon;(vii) all leasehold improvements and all machinery, tools, dies, equipment (including all transportation and 3 office equipment), fixtures, trade fixtures and furniture; (viii)all ingredients, supplies, spare parts, other miscellaneous supplies and other tangible property of any kind; (ix)all raw materials, work-in-process, finished goods, consigned goods and other inventories;(x) all computer hardware, software, computer programs, systems and codes and documentation relating thereto and all databases and reference and resource materials;(xi) all prepayments of prepaid expenses;(xii) all claims, causes of action, choses in action, rights under express or implied warranties, rights of recovery and rights of set-off of any kind; (xiii) the right to receive mail, accounts receivable payments and other communications;(xiv) all customer lists and records pertaining to customers and accounts, personnel records, all lists and records pertaining to suppliers and agents, and all books, ledgers, files and business records of every kind;(xv) all advertising materials and all other printed or written materials;(xvi) all permits, licenses, approvals and authorizations issued by any Governmental Authority or third party;(xvii) all goodwill as a going concern and all other intangible properties; and (xviii) all employee Contracts, including, without limitation, the right thereunder to restrict the employee from competing in certain respects. "BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other day on which banks located in New York City are authorized or required by law to close. "CAPITAL FUNDING" shall mean U S WEST Capital Funding, Inc., a Colorado corporation. "CAPITAL FUNDING INDEBTEDNESS" shall mean the Capital Funding Private Indebtedness, the Capital Funding Public Indebtedness and the Capital Funding Trust Indebtedness. "CAPITAL FUNDING PRIVATE INDEBTEDNESS" shall mean all of the indebtedness owed by Capital Funding to third parties immediately prior to the Separation Time other than the Capital Funding Public Indebtedness and the Capital Funding Trust Indebtedness. "CAPITAL FUNDING PUBLIC INDEBTEDNESS" shall mean all of the indebtedness of Capital Funding listed in Section 1.1(a) of the Separation Disclosure Schedule. 4 "CAPITAL FUNDING TRUST INDEBTEDNESS" shall mean all of the indebtedness owed by Capital Funding to the Trusts (other than a portion of such indebtedness equal to the liquidation value of the common securities of the Trusts). "CASH EQUIVALENTS" shall mean cash on hand, all other cash in any bank, savings or similar accounts at any financial institution, and checks, drafts and similar instruments and any bonds or similar marketable securities, certificates of deposit, commercial paper, eurodollar deposits and any other cash equivalents, held in the name of or for the account of U S WEST or any of its Subsidiaries. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sections 9601 ET SEQ.). "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "COMMUNICATIONS EMPLOYEES" shall have the meaning ascribed to such term in the Employee Matters Agreement. "COMMUNICATIONS EMPLOYEE ARRANGEMENTS" shall have the meaning ascribed to such term in the Employee Matters Agreement. "COMMUNICATIONS EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to such term in the Employee Matters Agreement. "COMMUNICATIONS STOCK" shall mean the U S WEST Communications Group Common Stock, par value $.01 per share, of U S WEST. "CONTRACT" shall mean any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment, written or oral, that is binding on any Person or any part of its property under Applicable Law. "COVERED EMPLOYEE" shall mean an employee of the U S WEST Group or the New U S WEST Group at the grade 5 manager level or above. "EMPLOYEE ARRANGEMENTS" shall mean all employment or consulting agreements, and all bonus or other incentive 5 compensation, deferred compensation, disability, severance, stock award, stock option or stock purchase agreements, policies or arrangements with respect to the employment and termination of employment of any employee, officer, director or other Person employed at any time by U S WEST or any of its Subsidiaries. "EMPLOYEE BENEFIT PLAN" shall mean (i) each employee benefit plan, as defined in Section 3(3) of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), together with the regulations promulgated thereunder, and (ii) each international employee benefit plan, whether or not each plan in (i) and (ii) is covered by ERISA, which U S WEST or any of its Subsidiaries maintains or to which U S WEST or any of its Subsidiaries has an obligation to make contributions. "EMPLOYEE MATTERS AGREEMENT" shall mean the Employee Matters Agreement, substantially in the form of EXHIBIT A to this Agreement. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. "FINANCIAL SERVICES" shall mean U S WEST Financial Services, Inc., a Colorado corporation. "FINANCIAL SERVICES INDEBTEDNESS" shall mean all of the indebtedness of Financial Services listed in Section 1.1(b) of the Separation Disclosure Schedule. "GOVERNMENTAL AUTHORITY" shall mean any foreign, federal, state or local government, court, agency or commission or other governmental or regulatory body or authority. "GROUP" shall mean either the New U S WEST Group or the U S WEST Group and "GROUPS" shall mean the New U S WEST Group and the U S WEST Group, collectively. "INDEMNIFIABLE LOSSES" shall mean, with respect to any claim by an Indemnified Party for indemnification under this Agreement, any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including, without limitation, the costs and expenses of any and all Actions, demands, assessments, judgments,settle- 6 ments and compromises relating thereto and the reasonable costs and expenses of attorneys', accountants', consultants' and other professionals' fees and expenses incurred in the investigation or defense thereof or the enforcement of rights thereunder), including (i) direct, consequential, exemplary, special and punitive damages and lost profits and (ii) (A) with respect to the matters described in Section 8.1(a)(iv), any funds expended by a member of the U S WEST Group to remedy the triggering of a cross-default provision in a MediaOne Obligation as a result of a default by a member of the New U S WEST Group under a New U S WEST Obligation and (B) with respect to the matters described in Section 8.2(a)(iv), any funds expended by a member of the New U S WEST Group to remedy the triggering of a cross-default provision in a New U S WEST Obligation as a result of a default by a member of the U S WEST Group under a MediaOne Obligation. "INDEMNIFIED PARTY" shall mean any Person that is seeking indemnification from an Indemnifying Party pursuant to the provisions of this Agreement. "INDEMNIFYING PARTY" shall mean any party hereto from which any Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement. "INFORMATION" shall mean all records, books, Contracts, instruments, computer data and other data, technology and information. "INSURANCE ADMINISTRATION" shall mean, with respect to each Joint Insurance Arrangement, (i) the accounting for premiums, retrospectively rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate under the terms and conditions of each of the Joint Insurance Arrangements, (ii) the reporting to Insurers of any losses or claims that may cause the per-occurrence, per claim or aggregate limits of any Joint Insurance Arrangement to be exceeded and (iii) the processing of claims made under the Joint Insurance Arrangements, including, without limitation, the reporting of claims to the Insurers' management and defense of claims and providing for appropriate releases upon settlement of claims. "INSURANCE ARRANGEMENT" shall mean insurance policies and insurance contracts of any kind (other than insurance policies and insurance contracts which are 7 Employee Benefit Plans), including, without limitation, primary and excess policies, commercial general liability policies, automobile policies, product liability policies, directors' and officers' liability policies, fiduciary liability policies, workers' compensation policies, and self-insurance programs and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. "INSURANCE PROCEEDS" shall mean those monies received by an insured from an Insurer or paid by an Insurer on behalf of an insured, in either case net of any applicable premium adjustment, retrospectively rated premium, deductible, retention or cost of reserve paid or held by or for the benefit of such insured. "INSURED CLAIMS" shall mean those Liabilities which, individually or in the aggregate, are covered within the terms and conditions of any of the Joint Insurance Arrangements, whether or not subject to deductibles, co-insurance, uncollectibility or retrospectively rated premium adjustments. "INSURER" shall mean a third party insurance carrier. "INTERCOMPANY INDEBTEDNESS" shall mean, with respect to any Subsidiary of U S WEST, the aggregate principal amount of indebtedness owed by such Subsidiary to Capital Funding immediately prior to the Reorganization. "JOINT INSURANCE ARRANGEMENTS" shall mean the Insurance Arrangements of U S WEST existing at the Separation Time and/or prior thereto that are owned or maintained by or on behalf of U S WEST or any of its predecessors (other than Insurance Arrangements of Western Range) and that relate to both (a) the MediaOne Business and/or the MediaOne Liabilities and (b) the New U S WEST Business and/or the New U S WEST Liabilities. "JOINT OTHER INTELLECTUAL PROPERTY" shall mean all Other Intellectual Property of U S WEST and its Subsidiaries that is not either MediaOne Other Intellectual Property or New U S WEST Other Intellectual Property, and shall include Other Intellectual Property licensed to or acquired by U S WEST and its Subsidiaries for use by both the New U S WEST Business and the MediaOne Business, or which is created by 8 or for both the New U S WEST Business and the MediaOne Business prior to the Separation Time. "JOINT PATENTS" shall mean the U.S. patents (and any non-U.S. patents corresponding thereto) listed in Section 1.1(c) of the Separation Disclosure Schedule, as well as any divisions, continuations, continuations-in-part (but only to the extent claims are supported by the specification of the patents listed in Section 1.1(c) of the Separation Disclosure Schedule), re-examinations, reissues, extensions or renewals of such U.S. or non-U.S. patents. "LESOP NOTES" shall mean the indebtedness of the U S WEST Savings Plan/ESOP, all of which is guaranteed by U S WEST. "LIABILITY" shall mean, with respect to any Person, except as otherwise expressly provided herein, any direct or indirect liability (whether absolute, accrued or unaccrued, contingent, liquidated or unliquidated, matured or unmatured or known or unknown), indebtedness, obligation, expense, claim, deficiency, guarantee or endorsement of or by such Person (including, without limitation, those arising under any Applicable Law or Action or under any award of any court, tribunal or arbitrator of any kind, and those arising under any Contract or undertaking). "LITIGATION MATTERS" shall mean actual, threatened or future Actions that have been or may be asserted against, or otherwise adversely affect, any member of either Group. "MARKET VALUE" on any Trading Day shall mean the average of the high and low reported sales prices regular way of a share of Communications Stock as reported on the NYSE Composite Tape; PROVIDED, HOWEVER, that, for purposes of determining the market value of a share of Communications Stock for any period, the high and low sales prices of a share of Communications Stock on any day prior to any "ex-dividend" date occurring during such period for any dividend paid or to be paid with respect to the Communications Stock shall be reduced by the amount of such dividend. "MEDIA EMPLOYEES" shall have the meaning ascribed to such term in the Employee Matters Agreement. "MEDIA EMPLOYEE ARRANGEMENTS" shall have the meaning ascribed to such term in the Employee Matters Agreement. 9 "MEDIA EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to such term in the Employee Matters Agreements. "MEDIAONE BUSINESS" shall mean the businesses of U S WEST currently attributed to the Media Group pursuant to the Restated Certificate other than the Directories Business (including the domestic wireless business attributed to the Media Group transferred to AirTouch pursuant to the AirTouch Transaction). "MEDIAONE INSURANCE ARRANGEMENTS" shall mean the Insurance Arrangements of U S WEST existing at the Separation Time and/or prior thereto which are owned or maintained by or on behalf of U S WEST or any of its predecessors and which relate only to the MediaOne Business and/or the MediaOne Liabilities (other than Shared Liabilities), including, without limitation, the Insurance Arrangements provided by Western Range (other than the Western Range Transferred Insurance Arrangements). "MEDIAONE PATENTS" shall mean the U.S. patents (and any non-U.S. patents corresponding thereto) listed in Section 1.1(d) of the Separation Disclosure Schedule, as well as any divisions, continuations, continuations-in-part, re-examinations, reissues, extensions or renewals of such U.S. or non-U.S. patents. "MEDIAONE OTHER INTELLECTUAL PROPERTY" shall mean all Other Intellectual Property licensed to or acquired by U S WEST and its Subsidiaries for use only by the MediaOne Business or which is created by or for only the MediaOne Business prior to the Separation Time. "MEDIAONE TRADEMARKS" shall mean the Trademarks listed in Section 1.1(e) of the Separation Disclosure Schedule. "MEDIA SAVINGS PLAN/ESOP" shall have the meaning ascribed to such term in the Employee Matters Agreement. "MEDIA STOCK" shall mean the U S WEST Media Group Common Stock, par value $.01 per share, of U S WEST. "MGI" shall mean U S WEST Media Group, Inc., a Delaware corporation. 10 "NEW TRUST" shall mean a newly formed Delaware statutory business trust, all of the common securities of which shall be owned by U S WEST. "NEW U S WEST" shall have the meaning set forth in the preamble to this Agreement. "NEW U S WEST BUSINESS" shall mean (i) all of the businesses of U S WEST currently attributed to the Communications Group pursuant to the Restated Certificate and (ii) the Directories Business. "NEW U S WEST GROUP" shall mean, at and after the Separation Time, New U S WEST and all of its Subsidiaries. "NEW U S WEST INSURANCE ARRANGEMENTS" shall mean the Insurance Arrangements of U S WEST existing at the Separation Time and/or prior thereto which are owned or maintained by or on behalf of U S WEST or any of its predecessors and which relate only to the New U S WEST Business and/or the New U S WEST Liabilities (other than Shared Liabilities) including, without limitation, the Western Range Transferred Insurance Arrangements. "NEW U S WEST OTHER INTELLECTUAL PROPERTY" shall mean all Other Intellectual Property licensed to or acquired by U S WEST and its Subsidiaries for use only by the New U S WEST Business or which is created by or for only the New U S WEST Business prior to the Separation Time. "NEW U S WEST PATENTS" shall mean the U.S. patents (and any non-U.S. patents corresponding thereto) listed in Section 1.1(f) of the Separation Disclosure Schedule, as well as any divisions, continuations, continuations-in-part, re-examinations, reissues, extensions or renewals of such U.S. or non-U.S. patents. "NEW U S WEST TRADEMARKS" shall mean the Trademarks listed in Section 1.1(g) of the Separation Disclosure Schedule. "NEWVECTOR" shall mean U S WEST NewVector Group, Inc., a Colorado corporation. "OTHER INTELLECTUAL PROPERTY" shall mean all registered and unregistered copyrights, all know-how, discoveries, inventions, improvements, processes, formulae, specifications, trade secrets (whether patentable or not), 11 business plans, marketing data, software, tools and documentation and all drawings, records, books or other indicia, however evidenced, of the foregoing, but excluding patents, patent applications and Trademarks. "PERSON" or "PERSON" shall mean and include any individual, partnership, joint venture, corporation, association, joint stock company, limited liability company, trust, unincorporated organization or similar entity. "PCS HOLDINGS" shall mean U S WEST PCS Holdings, Inc., a Delaware corporation. "PRIVILEGED INFORMATION" shall mean, with respect to either Group, Information regarding a member of such Group, or any of its operations, Assets or Liabilities (whether in documents or stored in any other form or known to its employees or agents) that is or may be protected from disclosure pursuant to the attorney-client privilege, the work-product doctrine or other applicable privileges. "REPRESENTATIVE" shall mean, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives. "SEC" shall mean the United States Securities and Exchange Commission. "SEC DOCUMENTATION" shall mean the Proxy Statement, the Form S-4, the Form 8-A, the Form 8-B/A, any filings required in connection with the Exchange Offers and any offers to purchase prepared in connection with the Tender Offers (and all documents incorporated therein by reference). "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SEPARATION DISCLOSURE SCHEDULE" shall mean the Separation Disclosure Schedule, dated as of the date hereof, as the same may be amended or supplemented pursuant to this Agreement. "SHARED CONTINGENT GAIN" shall mean any right of U S WEST and its Subsidiaries against any Person to the extent such right (i) does not relate primarily to the New 12 U S WEST Business or the MediaOne Business or (ii) relates primarily to both the New U S WEST Business and the MediaOne Business, including, without limitation, the rights listed in Section 1.1(h) of the Separation Disclosure Schedule. "SHARED LIABILITY" shall mean any Liability of U S WEST or any of its Subsidiaries (whether arising prior to, at or following the Separation Time) which (i) arises out of or is in connection with or otherwise relates to the management or conduct prior to the Separation Time of the businesses of U S WEST and its Subsidiaries and is not otherwise included in the definition of "New U S WEST Liabilities" or "MediaOne Liabilities" or allocated to one of the Groups pursuant to this Agreement or the Tax Sharing Agreement or (ii) arises out of any Transaction Suit, including, without limitation, the Liabilities listed in Section 1.1(i) of the Separation Disclosure Schedule, but excluding Transaction Costs. "SUBSIDIARY" shall mean, with respect to any Person, (i) each corporation, partnership, joint venture or other legal entity of which such Person owns, either directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or similar governing body of such corporation, partnership, joint venture or other legal entity and (ii) each partnership in which such Person or another Subsidiary of such Person is the general partner or otherwise controls such partnership. "TAX" or "TAXES" shall mean all taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, together with any interest and any penalties, fines, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) and shall include any transferee liability in respect of Taxes. "TAX SHARING AGREEMENT" shall mean the Tax Sharing Agreement, substantially in the form of EXHIBIT B to this Agreement. 13 "TERMINATED COMMUNICATIONS EMPLOYEES" shall have the meaning ascribed to such term in the Employee Matters Agreement. "TERMINATED MEDIA EMPLOYEES" shall have the meaning ascribed to such term in the Employee Matters Agreement. "TRADEMARKS" shall mean all registered and unregistered trademarks, service marks, service names, trade styles and trade names (including, without limitation, trade dress and other names, marks and slogans) and all associated goodwill and all applications for any of the foregoing, together with all rights to use any of the foregoing. "TRADING DAY" shall mean each weekday other than any day on which the Communications Stock is not traded on the NYSE. "TRANSACTION COSTS" shall mean the costs and expenses associated with the transactions contemplated by this Agreement listed in Section 1.1(j) of the Separation Disclosure Schedule. "TRANSACTION DOCUMENTS" shall mean this Agreement, the Employee Matters Agreement and the Tax Sharing Agreement and documents, schedules, exhibits and annexes attached hereto or thereto or delivered pursuant hereto or thereto, including, without limitation, the deeds, lease assignments and assumptions, leases, subleases and sub-subleases, and the supplemental and other agreements and instruments relative thereto. "TRANSACTION SUIT" shall mean (i) any Action that is commenced against any member of the U S WEST Group or any member of the New U S WEST Group or any of their respective directors, officers or employees challenging this Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby or any of the terms thereof or (ii) arises out of any untrue statement or alleged untrue statement of a material fact contained in any of the SEC Documentation, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (but only with respect to information relating to transactions contemplated by this Agreement or any other Transaction Document contained in or omitted from the SEC 14 Documentation); PROVIDED, HOWEVER, that any Action arising out of or relating to the transfer of Assets between employee benefits trusts sponsored by the Groups shall not be a "Transaction Suit" and shall be governed by the provisions of the Employee Matters Agreement. "TRUSTS" shall mean U S WEST Financing I, a Delaware statutory business trust, and U S WEST Financing II, a Delaware statutory business trust. "TRUST SECURITIES" shall mean the 7.96% Trust Originated Preferred Securities of U S WEST Financing I, a Delaware statutory business trust, and the 81/4% Trust Originated Preferred Securities of U S WEST Financing II, a Delaware statutory business trust. "U S WEST" shall have the meaning set forth in the preamble to this Agreement. "U S WEST GROUP" shall mean, at and after the Separation Time, U S WEST and all of its Subsidiaries (other than New U S WEST and its Subsidiaries). "U S WEST SAVINGS PLAN/ESOP" shall have the meaning ascribed to such term in the Employee Matters Agreement. 1.2 TERMS DEFINED ELSEWHERE IN THE AGREEMENT. For the purposes of this Agreement, the following terms have the meanings set forth in the Sections indicated:
TERM SECTION - ---- ------- AAA Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Archive Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.1(d) Archived Joint Books and Records . . . . . . . . . . . . . . . . . . . . . . .10.1(d) Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a) AT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c) AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a) Beneficial Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4(c) Borrower Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.2 Charter Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b) Claim Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a) CGI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(g) Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c) Communications Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(b) Communications Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals 15 Communications Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a) Communications Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.6(b)(i) Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3 Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Dex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals Directories Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Distribution Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(c) Dividend Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(b) Domestic Cable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l) Exchange Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) Federal Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e) FinanceCo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a) Financially Reasonable Terms . . . . . . . . . . . . . . . . . . . . . . . .8.3(c)(i) Form 8-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(b)(i) Form 8-B/A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)(ii) Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)(ii) International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e) Interactive Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e) Joint Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . .10.1(c) Media Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(b) Media Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(b) Media Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals Media Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.6(b)(i) MediaOne Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b) MediaOne Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c) MediaOne Delaware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d) MediaOne Exchange Securities . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) MediaOne Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a) MediaOne Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(b) MediaOne New Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a) MediaOne Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3(a) MGRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.4(a) Multimedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b) National Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4(e) New U S WEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals New U S WEST Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a) New U S WEST Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a) New U S WEST Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a) New U S WEST DRS System. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(d) New U S WEST Exchange Securities . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) New U S WEST Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . 8.2(a) New U S WEST Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a) New U S WEST New Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 3.2(h) New U S WEST Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3(a) New U S WEST Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(a) New U S WEST Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 2.6(a) 16 New U S WEST SIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a) New U S WEST SIP Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a) Non-Managing Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(b) Non-Receiving Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(b) Notice Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(a) NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b) Panel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Pre-Separation Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(d) Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3(a)(i) PSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b) Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e) Recipient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3 Receiving Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(b) Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.3(a)(i) Record Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4(c) Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.3(a)(iii) Refinancing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1 Restated Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . recitals Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.1 Separation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Separation Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.2 Shared Asserted Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(b) Shared Claim Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3(b) Shared Liability Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . 7.2(c) SIP Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a) Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2 Tender Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) Trust Exchange Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j) U S WEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals U S WEST Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b) U S WEST Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a) U S WEST Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(b) U S WEST SIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a) U S WEST SIP Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4(a) USWRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.4(a) Western Range. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3(b)(i) Western Range Transferred Insurance Arrangements . . . . . . . . . . . . . . . 7.1(a)
1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. 17 (b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) The terms "dollars" and "$" shall mean United States dollars. 1.4 REFERENCES TO TIME. All references in this Agreement to times of the day shall be to Mountain time. ARTICLE II CERTAIN PRE-SEPARATION TRANSACTIONS 2.1 CERTIFICATES OF INCORPORATION; BYLAWS; NAME CHANGES. (a) Prior to the Separation Time, U S WEST shall cause New U S WEST to take all actions necessary to amend its Certificate of Incorporation and Bylaws in the manner specified by U S WEST. The Certificate of Incorporation of New U S WEST shall, among other things, authorize (i) 2,000,000,000 shares of Common Stock, par value $.01 per share ("NEW U S WEST COMMON STOCK"), of New U S WEST and (ii) 200,000,000 shares of Preferred Stock, par value $.01 per share, of New U S WEST. (b) Prior to the Separation Time, U S WEST shall take all actions necessary in accordance with Applicable Law and the Restated Certificate to amend the Restated Certificate (the "CHARTER AMENDMENTS") as specified by U S WEST to, among other things, (i) permit the redemption of the Communications Stock in exchange for shares of New U S WEST Common Stock pursuant to Section 4.1 and (ii) following such redemption, delete all references to the Communications Stock and amend certain terms of the Media Stock set forth therein. (c) Prior to the Separation Time, the parties hereto shall take all actions necessary so that, immediately after the Separation Time, (i) New U S WEST's name shall be changed to "U S WEST, Inc." and (ii) U S WEST's name shall be changed to "MediaOne Group, Inc." 2.2 STOCKHOLDERS' MEETING. U S WEST shall take all actions necessary in accordance with Applicable Law, the Restated Certificate and U S WEST's Bylaws to call, give notice of, convene and hold a meeting of its stockholders (the "STOCKHOLDERS' MEETING") as soon as practicable for the 18 purpose of obtaining (i) the adoption of the Charter Amendments by the stockholders of U S WEST and (ii) such other approvals as may be determined by the Board of Directors of U S WEST. 2.3 REGISTRATION AND LISTING. (a) Prior to the Separation Time, (i) U S WEST shall prepare and file with the SEC a proxy statement under the Exchange Act relating to the Stockholders' Meeting (the "PROXY STATEMENT") and (ii) New U S WEST shall prepare and file with the SEC a registration statement on Form S-4 registering under the Securities Act the shares of New U S WEST Common Stock to be issued to stockholders of U S WEST pursuant to Section 4.1, in which the Proxy Statement shall be included as a prospectus (the "FORM S-4"). The parties hereto shall use their reasonable best efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after the filing thereof. U S WEST shall cause the Proxy Statement to be mailed to U S WEST's stockholders as promptly as practicable after the Form S-4 is declared effective under the Securities Act. New U S WEST shall use its reasonable best efforts to take all such actions as may be necessary or appropriate under state securities and "blue sky" laws in connection with the Separation. (b) Prior to the Separation Time, (i) New U S WEST shall prepare and file with the SEC a registration statement on Form 8-A registering under the Exchange Act the New U S WEST Common Stock (the "FORM 8-A") and (ii) U S WEST shall prepare and file with the SEC an amendment on Form 8-K to U S WEST's existing registration statement on Form 8-B amending the terms of the Media Stock to reflect the changes set forth in the Charter Amendments (the "FORM 8-B/A"). New U S WEST shall take all actions necessary to list the New U S WEST Common Stock on The New York Stock Exchange ("NYSE") and the Pacific Stock Exchange (the "PSE"), subject to official notice of issuance. U S WEST shall take all actions necessary to list the MediaOne Common Stock on the NYSE and the PSE. (c) The parties hereto shall cooperate in preparing and filing with the SEC and causing to be declared effective any registration statements or amendments thereto that are necessary or appropriate in order to reflect the establishment of, or amendments to, any employee benefit plans contemplated by this Agreement or any other Transaction Document requiring registration under the Securities Act. 19 2.4 BOARDS OF DIRECTORS. Prior to the Separation Time, the parties hereto shall take all actions necessary so that, effective immediately after the Separation Time, the Boards of Directors of U S WEST and New U S WEST shall be comprised of the individuals so named in the Proxy Statement. 2.5 RIGHTS AGREEMENTS. (a) Prior to the Separation Time, New U S WEST shall enter into a Rights Agreement (the "NEW U S WEST RIGHTS AGREEMENT") on terms specified by U S WEST pursuant to which one Preferred Stock Purchase Right of New U S WEST (a "NEW U S WEST RIGHT") will be attached to each share of New U S WEST Common Stock issued to U S WEST pursuant to Section 4.1. All references in this Agreement to New U S WEST Common Stock shall be deemed to include such New U S WEST Rights. (b) Prior to the Separation Time, the Amended and Restated Rights Agreement, dated as of October 31, 1995 (the "U S WEST RIGHTS AGREEMENT"), between U S WEST and State Street Bank and Trust Company, as rights agent, shall be amended to provide (i) that the U S WEST Communications Group Rights (as defined in the U S WEST Rights Agreement) (the "COMMUNICATIONS RIGHTS") and the U S WEST Media Group Rights (as defined in the U S WEST Rights Agreement) (the "MEDIA RIGHTS") shall not become exercisable, distributed or unredeemable as a result of the consummation of the Separation; (ii) that the Communications Rights will expire at the Separation Time; and (iii) for certain amendments to the terms of the Media Rights. 2.6 THE TRANSACTION DOCUMENTS. Prior to the Separation Time, each of U S WEST and New U S WEST shall enter into, or cause the appropriate members of the Group of which it is a member to enter into, the Transaction Documents. 2.7 U S WEST APPROVAL OF CERTAIN NEW U S WEST ACTIONS. Prior to the Separation Time, U S WEST shall take and/or ratify all actions necessary under Applicable Law, as the sole stockholder of New U S WEST, to effectuate the transactions contemplated by this Agreement, including, without limitation, adopting and implementing appropriate plans, agreements and arrangements for New U S WEST Employees. 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 Clayton County, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (iii) MediaOne of Cobb County, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (iv) MediaOne of Conyers Rockdale, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (v) MediaOne of Fayette County, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (vi) MediaOne of Fulton County, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (vii) MediaOne of Georgia, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; (viii) MediaOne of Henry County, Inc., a Georgia corporation, to be merged with and into MediaOne Georgia; 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) MediaOne Group, Inc. (formerly U S WEST Multimedia Communications, Inc.), a Colorado corporation ("MULTIMEDIA"), shall cause MediaOne Georgia to be merged with and into Multimedia. (c) MGI shall assume from Domestic Cable, Inc. (formerly U S WEST Domestic Cable, Inc.), a Colorado corporation ("DOMESTIC CABLE"), all of the Intercompany Indebtedness of Domestic Cable, in repayment of a corresponding amount of the indebtedness owed by MGI to Domestic Cable. (d) MediaOne of Delaware, Inc., a Delaware corporation ("MEDIAONE DELAWARE"), shall assume from MGI all of the indebtedness owed by MGI to Domestic Cable (after giving effect to the repayment contemplated by Section 3.1(c)). (e) MediaOne Delaware shall assume from MGI a portion of the Intercompany Indebtedness of MGI equal to the difference between (A) the total amount of Intercompany Indebtedness of MGI (after giving effect to the assumption contemplated by Section 3.1(c)) and (B) the sum of (1) the difference between (x) $3.9 billion and (y) the Intercompany Indebtedness of Dex plus (2) the difference between (x) the principal amount of the indebtedness owed by Capital Funding to U S WEST and (y) the principal amount of the Intercompany Indebtedness of U S WEST Federal Relations, Inc., a Delaware corporation ("FEDERAL RELATIONS"). (f) MGI shall contribute as a capital contribution to Multimedia: (i) all of the issued and outstanding shares of capital stock of: (A) MediaOne Capital Corporation (formerly U S WEST Capital Corporation), a Colorado corporation; (B) MediaOne Interactive Services, Inc. (formerly U S WEST Interactive Services, Inc.), a Colorado corporation ("INTERACTIVE SERVICES"); (C) MediaOne International Holdings, Inc. (formerly U S 22 WEST International Holdings, Inc.), a Delaware corporation ("INTERNATIONAL"); (D) MediaOne Investments Holdings, Inc. (formerly U S WEST Investments, Inc.), a Colorado corporation; (E) MediaOne Delaware; (F) Far East Investment Company, a Colorado corporation; (G) Domestic Cable; (H) MediaOne Cellular Holdings, Inc. (formerly U S WEST Cellular Holdings, Inc.), a Delaware corporation; and (I) MediaOne PCS Services, Inc. (formerly U S WEST PCS Services, Inc.), a Colorado corporation; and (ii) all of the AirTouch Stock. (g) MGI shall distribute as a dividend all of the issued and outstanding capital stock of Multimedia to U S WEST. (h) U S WEST shall merge U S WEST Communications Group, Inc., a Colorado corporation ("CGI"), with and into New U S WEST, with New U S WEST continuing as the surviving corporation. Pursuant to such merger, the issued and outstanding capital stock of CGI shall be converted into a number of shares of New U S WEST Common Stock equal to the sum of (i) the number of shares of Communications Stock that will be issued and outstanding immediately prior to the Separation Time plus (ii) the aggregate number of shares of New U S WEST Common Stock to be issued to holders of Media Stock in connection with the Separation pursuant to Section 4.1. Each share of New U S WEST Common Stock so issued to U S WEST shall be fully paid, nonassessable and free of preemptive rights. 3.2 REFINANCING OF INDEBTEDNESS. Following consummation of the Reorganization, U S WEST shall cause the following actions to be taken with respect to certain indebtedness of U S WEST and its Subsidiaries (as used in this Section 3.2, all references to "amounts" or "aggregate principal amounts" of any indebtedness shall refer to the face amount of such indebtedness): (a) A newly formed direct or indirect Subsidiary of U S WEST ("FINANCECO") shall incur an aggregate principal amount of indebtedness equal to the difference between (i) the sum of (A) the total aggregate principal amount of the Capital Funding Indebtedness attributed to the Media Group plus (B) the total aggregate principal amount of the Financial Services Indebtedness plus (C) an aggregate principal amount of indebtedness sufficient to fund the 23 costs and expenses which are the responsibility of the U S WEST Group in connection with the Separation and (ii) the sum of (A) $3.9 billion plus (B) the amount of the AirTouch Funds (the "MEDIAONE NEW INDEBTEDNESS"). All of the indebtedness incurred by FinanceCo shall be guaranteed by U S WEST. (b) FinanceCo shall lend to Financial Services an amount of funds equal to the total aggregate principal amount of the Financial Services Indebtedness. (c) FinanceCo shall lend to each of (i) PCS Holdings, (ii) Interactive Services, (iii) Financial Services, (iv) International and (v) MediaOne Real Estate, Inc. (formerly U S WEST Real Estate, Inc.), a Colorado corporation ("REAL ESTATE"), an amount of funds equal to the Intercompany Indebtedness of such entity. Each such entity shall, in turn, use the funds so borrowed from FinanceCo to repay its Intercompany Indebtedness. (d) U S WEST shall assume from Capital Funding the indebtedness owed by Capital Funding to International. U S WEST shall, in turn, contribute such indebtedness to FinanceCo. (e) FinanceCo shall lend to MediaOne Delaware an amount of funds equal to the sum of the Intercompany Indebtedness of Multimedia and MediaOne Delaware (after giving effect to the assumption made pursuant to Section 3.1(c)). MediaOne Delaware shall, in turn, use a portion of the funds so borrowed from FinanceCo to repay its Intercompany Indebtedness and shall distribute as a dividend to Multimedia the balance of the funds so borrowed from FinanceCo. Multimedia shall, in turn, use such balance of funds to repay its Intercompany Indebtedness. (f) Capital Funding shall repay a portion of the indebtedness owed by Capital Funding to U S WEST equal to the aggregate principal amount of the Intercompany Indebtedness of Federal Relations by distributing to U S WEST the Intercompany Indebtedness of Federal Relations. U S WEST will, in turn, contribute as a capital contribution to Federal Relations such Intercompany Indebtedness and Federal Relations shall transfer such capital contribution to Capital Funding to repay such Intercompany Indebtedness. (g) U S WEST shall contribute as a capital contribution to MGI all of the indebtedness owed by Capital 24 Funding to U S WEST. MGI shall use such indebtedness to repay a corresponding aggregate principal amount of its Intercompany Indebtedness. (h) Capital Funding shall incur an aggregate principal amount of new indebtedness equal to the sum of (i) the total aggregate principal amount of Capital Funding Indebtedness attributed to the Communications Group plus (ii) $3.9 billion plus (iii) an aggregate principal amount of new indebtedness sufficient to fund the costs and expenses which are the responsibility the New U S WEST Group in connection with the Separation, as well as the Pre-Separation Adjustment (the "NEW U S WEST NEW INDEBTEDNESS"). All of the new indebtedness incurred by Capital Funding shall be guaranteed by New U S WEST. (i) FinanceCo shall loan to U S WEST all of the proceeds of the indebtedness incurred by FinanceCo to fund the costs and expenses which are the responsibility of the U S WEST Group in connection with the Separation and U S WEST shall use such funds to pay or cause to be paid such costs and expenses (including by contributing funds to Capital Funding to fund the costs and expenses of the Refinancing as described below). Capital Funding shall loan to New U S WEST all of the proceeds of the indebtedness incurred by Capital Funding to fund the costs and expenses which are the responsibility of the New U S WEST Group in connection with the Separation (other than costs and expenses included in the Pre-Separation Adjustment) and New U S WEST shall use such funds to pay or cause to be paid such costs and expenses. Capital Funding shall loan to U S WEST an amount of funds equal to the Pre-Separation Adjustment and New U S WEST shall, in turn, assume from U S WEST all of the obligations of U S WEST under such indebtedness. U S WEST shall contribute, as a capital contribution, to Capital Funding the amount of funds necessary for Capital Funding to fund all of the costs and expenses of the Refinancing payable by Capital Funding and Capital Funding shall use such funds to pay such costs and expenses. (j) U S WEST shall take all actions necessary to cause the Capital Funding Public Indebtedness, the Capital Funding Private Indebtedness, the Trust Securities and the Financial Services Indebtedness to be refinanced (collectively, the "REFINANCING") through one or more of: (i) offers to purchase the Capital Funding Public Indebtedness, the Financial Services Indebtedness and the 25 Trust Securities (the "TENDER OFFERS"); (ii) offers to exchange (the "EXCHANGE OFFERS") (A) the Capital Funding Public Indebtedness for new debt securities of Capital Funding guaranteed by New U S WEST (the "NEW U S WEST EXCHANGE SECURITIES") or new debt securities of FinanceCo guaranteed by U S WEST (the "MEDIAONE EXCHANGE SECURITIES") and (B) the Trust Securities for new trust securities of New Trusts (the "TRUST EXCHANGE SECURITIES"); (iii) repayments of the Capital Funding Private Indebtedness; and (iv) defeasance of the Capital Funding Public Indebtedness, Financial Services Indebtedness and the Capital Funding Trust Indebtedness. (k) Capital Funding shall use a portion of the proceeds of the New U S WEST New Indebtedness, together with the AirTouch Funds, if any, and the funds it receives from Interactive Services, Financial Services, Real Estate, International, MediaOne Delaware and Multimedia (collectively, the "BORROWER SUBSIDIARIES") pursuant to Sections 3.2 (c) and (e) to (i) repay all of the Capital Funding Private Indebtedness, (ii) repay all of the Capital Funding Public Indebtedness tendered pursuant to the Tender Offers, (iii) repurchase all of the Trust Securities tendered in the Tender Offers and the Exchange Offers and (iv) defease all of the Capital Funding Public Indebtedness and Capital Funding Trust Indebtedness to be defeased pursuant to the Refinancing. Capital Funding shall use the Trust Securities which it repurchases pursuant to the Tender Offers to satisfy its obligations under a corresponding aggregate principal amount of Capital Funding Trust Indebtedness. Financial Services shall use the funds it receives from FinanceCo pursuant to Section 3.2(b) to repay all of the Financial Services Indebtedness tendered pursuant to the Tender Offers. (l) In the event that holders of Capital Funding Public Indebtedness offer to exchange such indebtedness for New U S WEST Exchange Securities pursuant to the Exchange Offers, the amount of New U S WEST New Indebtedness shall be reduced by an amount equal to the aggregate principal amount of the New U S WEST Exchange Securities issued. In no event shall New U S WEST Exchange Securities be issued in an aggregate principal amount which exceeds the aggregate principal amount of the New U S WEST New Indebtedness. In the event that holders of Capital Funding Public Indebtedness offer to exchange such indebtedness for MediaOne Exchange Securities pursuant to the Exchange Offers, (i) FinanceCo shall distribute to U S WEST such 26 MediaOne Exchange Securities, U S WEST shall contribute such MediaOne Exchange Securities to Capital Funding and Capital Funding shall issue such MediaOne Exchange Securities in exchange for the Capital Funding Public Indebtedness offered for exchange, (ii) the amount of MediaOne New Indebtedness shall be reduced by an amount equal to the aggregate principal amount of the MediaOne Exchange Securities issued, (iii) Capital Funding shall transfer to U S WEST all of its rights under an amount of Intercompany Indebtedness of the Borrower Subsidiaries equal to the aggregate principal amount of such MediaOne Exchange Securities (in which event the transactions contemplated by Sections 3.2(c) and 3.2(e) shall not be effected with respect to an amount equal to the amount of such Intercompany Indebtedness) and (iv) FinanceCo shall declare as a dividend to U S WEST a note in an amount equal to the aggregate principal amount of such MediaOne Exchange Securities. In the event that holders of Trust Securities offer to exchange such securities for Trust Exchange Securities pursuant to the Exchange Offers, (i) Capital Funding shall repurchase such Trust Securities as described in Section 3.2(k), (ii) the exchange agent for the Exchange Offers (the "EXCHANGE AGENT") shall use the funds which Capital Funding would otherwise pay to such holders to purchase, on behalf of such holders, Trust Exchange Securities from one or more New Trusts with an aggregate liquidation amount corresponding to the aggregate liquidation amount of the Trust Securities repurchased by Capital Funding and shall deliver such Trust Exchange Securities to such holders, (iii) each New Trust shall loan to FinanceCo the funds received upon issuance of such Trust Exchange Securities and FinanceCo shall use such funds to repay a portion of the MediaOne New Indebtedness and (iv) Capital Funding shall use the Trust Securities which it so repurchases to satisfy its obligations under a corresponding aggregate principal amount of Capital Funding Trust Indebtedness. In no event shall MediaOne Exchange Securities and Trust Exchange Securities be issued in an aggregate principal amount which exceeds the aggregate principal amount of the MediaOne New Indebtedness. (m) In the event that less than all of the Capital Funding Public Indebtedness, Trust Securities and Financial Services Indebtedness are tendered or exchanged pursuant to the Refinancing and U S WEST does not elect to defease such indebtedness (or, in the case of the Trust Securities, the related Capital Funding Trust Indebtedness), (i) U S WEST shall assume from Capital Funding all of the Capital Funding Public Indebtedness not tendered or 27 exchanged and an amount of Capital Funding Trust Indebtedness equal to the liquidation amount of the Trust Securities not tendered or exchanged, (ii) the amount of the MediaOne New Indebtedness shall be reduced by an amount equal to the principal amount of the indebtedness assumed by U S WEST from Capital Funding, (iii) Capital Funding shall transfer to U S WEST all of its rights under an amount of Intercompany Indebtedness of the Borrower Subsidiaries equal to the aggregate principal amount of the indebtedness assumed by U S WEST from Capital Funding (in which event the transactions contemplated by Sections 3.2(c) and 3.2(e) shall not be effected with respect to an amount equal to the amount of such Intercompany Indebtedness), (iv) FinanceCo shall declare as a dividend to U S WEST a note in an amount equal to the aggregate principal amount of the indebtedness assumed by U S WEST from Capital Funding and (v) FinanceCo shall not make the loans contemplated by Section 3.2(b) with respect to an amount equal to the amount of Financial Services Indebtedness not tendered. (n) U S WEST shall cause the U S WEST Savings Plan/ESOP to repay all LESOP Notes outstanding immediately prior to the Separation Time. 3.3 CONTRIBUTION. Subject to the terms and conditions of this Agreement, following consummation of the Reorganization and the transactions contemplated by Section 3.2, U S WEST and New U S WEST shall cause the following transactions to occur in the order set forth below (collectively, the "CONTRIBUTION"): (a) U S WEST shall, as a capital contribution to New U S WEST, convey, transfer, assign and deliver to New U S WEST all of U S WEST's right, title and interest in and to all of the following Assets (together with all of the Assets of New U S WEST and its Subsidiaries prior to such transfer, the "NEW U S WEST ASSETS"): (i) all of the issued and outstanding capital stock, together with all the Assets, of: (A) MGI; (B) Capital Funding; (C) Federal Relations; (D) U S WEST Investment Management Company, a Colorado corporation; (E) U S WEST SPF Co., a Colorado corporation; and (F) U S WEST IP Holdings, Inc., a Delaware corporation; (ii) except as set forth in Section 3.3(c), all of the Assets included on the combined balance sheet of the Communications Group as of March 31, 1998 and any 28 Assets acquired by U S WEST or any of its Subsidiaries relating primarily to the businesses attributed to the Communications Group from April 1, 1998 to the Separation Time (including, in each case, the proceeds received upon disposition of any such Assets); (iii) all of the Assets included on the consolidated balance sheet of Dex, as of March 31, 1998 and any Assets acquired by U S WEST or any of its Subsidiaries relating primarily to the Directories Business from April 1, 1998 to the Separation Time (including, in each case, the proceeds received upon disposition of any such Assets); (iv) subject to Section 5.6 and except as otherwise agreed to by U S WEST and New U S WEST, all of the New U S WEST Trademarks, New U S WEST Patents and New U S WEST Other Intellectual Property and an equal and undivided interest in the Joint Patents and the Joint Other Intellectual Property; (v) all of the New U S WEST Insurance Arrangements, an equal and undivided interest in the Joint Insurance Arrangements and all of the other rights granted, and Assets contemplated to be transferred, to New U S WEST pursuant to Article VII; (vi) all of the rights granted, and Assets contemplated to be transferred, to New U S WEST and the Communications Employee Benefit Plans and Communications Employee Arrangements pursuant to the Employee Matters Agreement; (vii) all of the rights of U S WEST and its Subsidiaries with respect to the Actions listed in Section 3.3(a)(vii) of the Separation Disclosure Schedule and any other rights of U S WEST and its Subsidiaries against any Person to the extent such rights relate primarily to the New U S WEST Business; (viii) 50% of all Shared Contingent Gains; (ix) all of the leasehold interests listed in Section 3.3(a)(ix) of the Separation Disclosure Schedule; (x) all of the Assets listed in Section 3.3(a)(x) of the Separation Disclosure Schedule; 29 (xi) all Contracts entered into by or for U S WEST on behalf of, or which relate primarily to, the New U S WEST Business, including, without limitation, agreements between U S WEST and Amerian Telephone and Telegraph Company ("AT&T") pursuant to the Modification of Final Judgment (and the subsequent approved Plan of Reorganization) by the United States District Court for the District of Columbia (Civil Action 82-0192), and any follow-on agreements or rights such as the right of U S WEST to elect a license under AT&T patents pursuant to the agreement, effective January 1, 1989, between AT&T and Bell Communications Research, Inc.; and (xii) U S WEST Education Foundation, a Washington nonprofit corporation, and U S WEST Foundation, a Colorado nonprofit corporation; (b) U S WEST shall retain and shall not contribute to New U S WEST, and the New U S WEST Assets shall not include, all of U S WEST's right, title and interest in all of the Assets of U S WEST other than the New U S WEST Assets (together with any Assets transferred to U S WEST or any member of the U S WEST Group pursuant to Section 3.3(c) or the Employee Matters Agreement, the "MEDIAONE ASSETS"), including, without limitation, the following Assets: (i) all of the issued and outstanding capital stock, together with all of the assets, of (A) Multimedia; (B) MediaOne of Michigan, Inc., a Michigan corporation; (C) Western Range Insurance Co, a Vermont corporation ("WESTERN RANGE"); and (D) if FinanceCo is a Subsidiary of U S WEST, FinanceCo; (ii) all of the Assets included on the combined balance sheet of the Media Group as of March 31, 1998 (other than the Assets of Dex and its Subsidiaries) and any Assets acquired by U S WEST or any of its Subsidiaries relating primarily to the MediaOne Business from April 1, 1998 to the Separation Time (including, in each case, the proceeds received upon disposition of any such Assets); (iii) all of the shares of Media Stock held as treasury stock by U S WEST; 30 (iv) all of the common securities of the Trusts, any New Trusts and U S WEST Financing III, a Delaware statutory business trust; (v) subject to Section 5.6 and except as otherwise agreed to by U S WEST and New U S WEST, all of the MediaOne Trademarks, MediaOne Patents and MediaOne Other Intellectual Property, and an equal and undivided interest in the Joint Patents and the Joint Other Intellectual Property; (vi) all of the MediaOne Insurance Arrangements, an equal and undivided interest in the Joint Insurance Arrangements and all of the rights granted to, and Assets contemplated to be retained by, U S WEST pursuant to Article VII; (vii) all of the rights of U S WEST and its Subsidiaries with respect to the Actions listed in Section 3.3(b)(vii) of the Separation Disclosure Schedule and any other rights of U S WEST and its Subsidiaries against any Person to the extent such rights relate primarily to the MediaOne Business; (viii) 50% of all Shared Contingent Gains; (ix) all of the leasehold interests listed in Section 3.3(b)(ix) of the Separation Disclosure Schedule; (x) all of the Assets listed in Section 3.3(b)(x) of the Separation Disclosure Schedule; and (xi) all Contracts entered into by or for U S WEST on behalf of, or which relate primarily to, the MediaOne Business. (c) New U S WEST shall cause the following transfers: (i) U S WEST Advanced Technologies, Inc., a Colorado corporation which will be a Subsidiary of New U S WEST upon consummation of the Reorganization ("AT"), shall convey, transfer, assign and deliver to U S WEST all of AT's right, title and interest in and to the Assets of AT listed in Section 3.3(c) of the Separation Disclosure Schedule. 31 (ii) U S WEST Communications, Inc., a Colorado corporation which will be a Subsidiary of New U S WEST upon consummation of the Reorganization ("COMMUNICATIONS") shall convey, transfer, assign and deliver to U S WEST all of Communications' right, title and interest in and to the Assets of Communications listed in Section 3.3(c) of the Separation Disclosure Schedule. (iii) Federal Relations shall convey, transfer, assign and deliver to U S WEST all of Federal Relation's right, title and interest in and to the Assets of Federal Relations listed in Section 3.3(c) of the Separation Disclosure Schedule. (d) Prior to the Separation Time, the Chief Financial Officer of the Communications Group and the Chief Financial Officer of the Media Group shall agree in writing as to the amount of the Pre-Separation Adjustment (as determined below). The "Pre-Separation Adjustment" shall be determined in the manner set forth in Section 3.3(d) of the Separation Disclosure Schedule. The Pre-Separation Adjustment shall be satisfied in the manner contemplated by Section 3.2(i). 3.4 DISCHARGE OF LIABILITIES. (a) From and after the Separation Time, New U S WEST agrees to (or to cause a member of the New U S WEST Group to) discharge or perform when due all of the following Liabilities (the "NEW U S WEST LIABILITIES"): (i) all Liabilities of U S WEST arising out of or relating primarily to the New U S WEST Assets or the operation of the New U S WEST Business, whether arising before or after the Separation Time; (ii) all of the Liabilities included on the combined balance sheet of the Communications Group as of March 31, 1998 and any Liabilities incurred by U S WEST or any of its Subsidiaries relating primarily to the businesses attributed to the Communications Group from April 1, 1998 to the Separation Time; (iii) all of the Liabilities included on the consolidated balance sheet of Dex as of March 31, 1998 and any Liabilities incurred by U S WEST or any of its Subsidiaries relating primarily to the Directories Business from April 1, 1998 to the Separation Time; 32 (iv) all indebtedness incurred by Capital Funding pursuant to Section 3.2 and all of the indebtedness of U S WEST Communications, Inc., a Colorado corporation; (v) all Liabilities identified in Section 2(a) of the Employee Matters Agreement and all other Liabilities identified in the Employee Matters Agreement as Liabilities of the New U S WEST Group; (vi) subject to Section 3.3(d), the Transaction Costs identified in Section 1.1(j) of the Separation Disclosure Schedule as the responsibility of New U S WEST; (vii) for each category of Shared Liabilities listed in Section 1.1(i) of the Separation Disclosure Schedule, the percentage of such category of Shared Liabilities indicated in such section as the responsibility of New U S WEST; (viii) the Actions and Liabilities listed in Section 3.4(a)(viii) of the Separation Disclosure Schedule (ix) the Liabilities listed in Section 3.4(a)(ix) of the Separation Disclosure Schedule; and (x) all Liabilities that are expressly contemplated by any of the Transaction Documents as Liabilities of any member of the New U S WEST Group. (b) U S WEST shall retain and discharge or perform when due, and New U S WEST shall have no liability with respect to, all Liabilities of U S WEST other than the New U S WEST Liabilities (the "MEDIAONE LIABILITIES"), including, without limitation, the following: (i) all Liabilities arising out of or relating primarily to the MediaOne Assets or the operation of the MediaOne Business, whether arising before or after the Separation Time; (ii) all of the Liabilities included on the combined balance sheet of the Media Group as of March 31, 1998 (other than (A) the Liabilities of Dex and its Subsidiaries and (B) $3.9 billion of indebtedness (net of any indebtedness of Dex and its Subsidiaries)) and any Liabilities incurred by U S WEST or any of its 33 Subsidiaries relating primarily to the MediaOne Business from April 1, 1998 to the Separation Time; (iii) all indebtedness incurred by FinanceCo or assumed by U S WEST from Capital Funding or Financial Services pursuant to Section 3.2 and all indebtedness of MediaOne Delaware; (iv) all Liabilities identified in Section 2(b) of the Employee Matters Agreement and all other Liabilities contemplated by the Employee Matters Agreement as Liabilities of the U S WEST Group; (v) subject to Section 3.3(d), the Transaction Costs identified in Section 1.1(j) of the Separation Disclosure Schedule as the responsibility of U S WEST; (vi) for each category of Shared Liabilities listed in Section 1.1(i) of the Separation Disclosure Schedule, the percentage of such category of Shared Liabilities indicated in such section as the responsibility of U S WEST; (vii) the Actions and Liabilities listed in Section 3.4(b)(vii) of the Separation Disclosure Schedule; (viii) the Liabilities listed in Section 3.4(b)(viii) of the Separation Disclosure Schedule; and (ix) all Liabilities that are expressly contemplated by any of the Transaction Documents as Liabilities of any member of the U S WEST Group. 3.5 CLOSING; DELIVERY; METHODS OF TRANSFER AND ASSUMPTION. (a) Unless otherwise provided in this Agreement, or in any other Transaction Document, the closing of the Reorganization, the Refinancing and the Contribution shall occur immediately prior to the Separation Time at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. (b) In connection with the Reorganization and the Contribution, (i) U S WEST shall execute and deliver and shall cause its Subsidiaries to execute and deliver, such deeds, bills of sale, stock powers, certificates of title, assignments of leases and contracts, assumption agreements and other instruments of contribution, grant, conveyance, 34 assignment, transfer, delivery and assumption necessary to evidence the Reorganization and the Refinancing and (ii) U S WEST and New U S WEST shall (and shall cause their Subsidiaries, as applicable, to) execute and deliver such deeds, bills of sale, stock powers, certificates of title, assignments of leases and contracts, assumption agreements and other instruments of contribution, grant, conveyance, assignment, transfer, delivery and assumption necessary to evidence the Contribution and the transactions contemplated by Section 3.4. All such instruments shall be deemed to have been delivered as of the Separation Time. ARTICLE IV THE SEPARATION 4.1 THE SEPARATION. Subject to the terms and conditions of this Agreement, at the Separation Time, U S WEST shall cause the following transactions to occur (collectively, the "SEPARATION"): (a) U S WEST shall, in accordance with the terms of Section 2.4.3 of Article V of the Restated Certificate (as amended by the Charter Amendments), redeem each share of Communications Stock issued and outstanding immediately prior to the Separation Time for one share of New U S WEST Common Stock (the "COMMUNICATIONS REDEMPTION"). Each share of Communications Stock held as treasury stock by U S WEST shall be cancelled. (b) U S WEST shall distribute as a dividend (the "MEDIA DIVIDEND") on each share of Media Stock outstanding as of the close of trading on the Record Date (other than shares of Media Stock held as treasury stock by U S WEST) a number of shares of New U S WEST Common Stock equal to the Dividend Number (as determined in accordance with Section 4.3(b)). (c) From and after the Separation Time, each outstanding share of Media Stock shall remain outstanding and shall thereafter represent a share of common stock, par value $.01 per share, of U S WEST, with the terms set forth in the Restated Certificate (as amended by the Charter Amendments). As used herein, such common stock is referred to as "MEDIAONE COMMON STOCK". 35 (d) From and after the Separation Time, each outstanding share of Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share, of U S WEST; Series D Convertible Preferred Stock, par value $1.00 per share, of U S WEST; and Series E Convertible Preferred Stock, par value $1.00 per share, of U S WEST, shall remain outstanding. 4.2 SEPARATION TIME. The Board of Directors shall determine the time at which the Separation shall become effective (the "SEPARATION TIME"), which time shall be following the satisfaction or waiver of all of the conditions set forth in Section 4.5 as determined by the Board of Directors of U S WEST. 4.3 CERTAIN DETERMINATIONS. (a) Prior to the Separation Time, the Board of Directors of U S WEST shall (i) fix the record date for determining the holders of Media Stock entitled to receive the Media Dividend (the "RECORD DATE"), (ii) declare the Media Dividend, (iii) fix the date on which the Communications Stock shall be redeemed pursuant to the Communications Redemption (the "REDEMPTION DATE") and (iv) give notice to holders of Communications Stock of the Communications Redemption. The Redemption Date and the Record Date shall be the date on which the Separation Time shall occur. (b) The "DIVIDEND NUMBER" shall equal the quotient of (i) $850,000,000 divided by (ii) the product of (x) the number of shares of Media Stock outstanding immediately prior to the Separation Time (other than shares of Media Stock held by U S WEST) multiplied by (y) the average Market Value of the Communications Stock over the period of 20 Trading Days ending on the fifth Trading Day prior to the date of the Separation Time, rounded to the nearest one-hundred thousandth (or if there shall not be a nearest one-hundred thousandth, to the next highest one-hundred thousandth). 4.4 NEW U S WEST SIP ACCOUNTS; CERTIFICATES; DISTRIBUTION PROCEDURES. (a) Prior to the Separation Time, New U S WEST shall establish a Shareowner Investment Plan (the "NEW U S WEST SIP"). As of the Separation Time, New U S WEST shall establish an account (a "NEW U S WEST SIP ACCOUNT") under the New U S WEST SIP for each stockholder of U S WEST (each, a "SIP PARTICIPANT") which, immediately prior to the Separation Time, maintained an account (a "U S WEST SIP ACCOUNT") under the U S WEST Shareowner Investment 36 Plan (the "U S WEST SIP"). As of the Separation Time, the New U S WEST SIP Account of each SIP Participant shall, without any action on the part of the SIP Participants, be credited by New U S WEST with that number of shares of New U S WEST Common Stock that such SIP Participant has the right to receive pursuant to the provisions of Section 4.1 and all shares of Communications Stock held in the U S WEST SIP Account of such SIP Participant shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist. SIP Participants shall be mailed the cash in lieu of fractional shares of New U S WEST Common Stock to which they are entitled pursuant to Section 4.4(h). (b) As of the Separation Time, all shares or fractions of a share of Communications Stock redeemed pursuant to the Communications Redemption shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist. As of the Separation Time, each certificate that immediately prior to the Separation Time evidenced shares of Communication Stock ("COMMUNICATIONS CERTIFICATES") shall be deemed at any time after the Separation Time to represent only the right to receive the shares of New U S WEST Common Stock issuable in respect thereof pursuant to Section 4.1 and the unpaid dividends and distributions payable with respect to such shares pursuant to this Article IV. As of the Separation Time, each certificate that as of the Record Date evidenced shares of Media Stock ("MEDIA CERTIFICATES") shall after the Separation Time represent a corresponding number of shares of MediaOne Common Stock, the right to receive the shares of New U S WEST Common Stock issuable in respect thereof pursuant to Section 4.1 and the unpaid dividends and distributions payable with respect to such shares pursuant to this Article IV. (c) Prior to the Separation Time, New U S WEST shall establish a Direct Registration System which shall enable holders of New U S WEST Common Stock to hold such shares in uncertificated book-entry form (the "NEW U S WEST DRS SYSTEM"). As of the Separation Time, U S WEST shall deposit with Boston Equiserve, as Distribution Agent ("DISTRIBUTION AGENT"), (a) for the benefit of holders of Communications Certificates, the shares of New U S WEST Common Stock to which such holders are entitled pursuant to Section 4.1, (b) for the benefit of holders of Media Certificates, the shares of New U S WEST Common Stock and certificates evidencing the shares of MediaOne Common Stock to which such holders are entitled pursuant to Section 4.1 37 and (c) for the benefit of SIP Participants, certificates evidencing the shares of MediaOne Common Stock to which such holders are entitled pursuant to Section 4.1. New U S WEST shall provide to the Distribution Agent the funds necessary to pay any cash payable in lieu of fractional shares of New U S WEST Common Stock pursuant to Section 4.4(h) and the funds or other property necessary to pay or make any dividends or distributions with respect to shares of New U S WEST Common Stock pursuant to Section 4.4(g). (d) As soon as reasonably practicable after the Separation Time, the Distribution Agent shall mail to each holder of record of Communications Certificates (i) a letter of transmittal (which shall be in such form and have such provisions as U S WEST reasonably may specify), (ii) an affidavit of loss for use by holders whose Communications Certificates are lost, mutilated or destroyed and (iii) instructions for use in effecting the surrender of the Communications Certificates or completing such affidavit of loss. Upon surrender of a Communications Certificate for cancellation to the Distribution Agent or such affidavit of loss together with such letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, the holder of such Communications Certificate shall be entitled to receive in exchange therefor that number of shares of New U S WEST Common Stock that such holder has the right to receive pursuant to Section 4.1 in respect thereof in uncertificated book-entry form through the New U S WEST DRS System and the Communications Certificate (if any) so surrendered shall forthwith be canceled. (e) As soon as reasonably practicable after the Separation Time, the Distribution Agent shall mail to each holder of record of Media Certificates (i) a letter of transmittal (which shall be in such form and have such provisions as U S WEST reasonably may specify), (ii) an affidavit of loss for use by holders whose Media Certificates are lost, mutilated or destroyed and (iii) instructions for use in effecting the surrender of the Media Certificates or completing such affidavit of loss. Upon surrender of a Media Certificate for cancellation to the Distribution Agent or such affidavit of loss together with such letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, the holder of such Media Certificate shall be entitled to receive in exchange therefor a new certificate representing that number of shares of MediaOne 38 Common Stock represented by such Media Certificate and the Media Certificate (if any) so surrendered shall forthwith be canceled. As soon as reasonably practicable after the Separation Time, the Distribution Agent shall mail to each holder of record of Media Certificates information indicating the number of shares of New U S WEST Common Stock that such holder has the right to receive pursuant to Section 4.1 in respect thereof in uncertificated book-entry form through the New U S WEST DRS System and the amount of cash payable in lieu of fractional shares of New U S WEST Common Stock to which such holder is entitled pursuant to Section 4.4(h). As soon as reasonably practicable after the Separation Time, the Distribution Agent shall mail to each SIP Participant a certificate representing a number of shares of MediaOne Common Stock equal to the number of shares of Media Stock held in such SIP Participant's U S WEST SIP Account. Following such mailing to SIP Participants, the U S WEST SIP shall be terminated. (f) In the event of a transfer of ownership of shares of Communications Stock or Media Stock that is not registered in the transfer records of U S WEST, certificates evidencing the proper number of shares of New U S WEST Common Stock and MediaOne Common Stock may be issued in accordance with this Section 4.4 to a transferee if the Communications Certificate or Media Certificate evidencing such shares of Communications Stock or Media Stock is presented to the Distribution Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. (g) Notwithstanding any other provisions of this Agreement, no dividends or other distributions declared after the Separation Time shall be paid with respect to any shares of New U S WEST Common Stock represented by a Communications Certificate until such Communications Certificate or an affidavit of loss is surrendered for exchange as provided herein. Subject to the effect of Applicable Laws, following surrender of any such Communications Certificate or affidavit of loss, there shall be paid to the holder of the shares of New U S WEST Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Separation Time theretofore payable with respect to such shares of New U S WEST Common Stock and not paid, less the amount of any withholding taxes which may be required thereon, and (ii) at 39 the appropriate payment date, the amount of dividends or other distributions with a record date after the Separation Time but prior to surrender and a payment date subsequent to surrender payable with respect to such shares of New U S WEST Common Stock, less the amount of any withholding taxes which may be required thereon. (h) No certificates or scrip representing fractional shares of New U S WEST Common Stock shall be issued pursuant to the Media Dividend and such fractional share interests will not entitle the holder thereof to vote or to any rights of a stockholder of New U S WEST. Notwithstanding any provision of this Agreement, each Person who immediately prior to the Separation Time was a holder of shares of Media Stock who would otherwise have been entitled to receive a fraction of a share of New U S WEST Common Stock (after taking into account all of the shares of Media Stock owned by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of New U S WEST Common Stock multiplied by the average Market Value of the Communications Stock over the period of 20 Trading Days ending on the fifth Trading Day prior to the date of the Separation Time, rounded to the nearest cent (or if there shall not be a nearest cent, to the next highest cent). (i) None of U S WEST, New U S WEST or the Distribution Agent shall be liable to any holder of shares of Communications Stock or Media Stock for shares of New U S WEST Common Stock, cash in lieu of fractional shares of New U S WEST Common Stock or dividends or distributions with respect to shares of New U S WEST Common Stock that have been delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (j) U S WEST shall be entitled to, or shall be entitled to cause the Distribution Agent to, deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Communication Stock or Media Stock such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by U S WEST or the Distribution Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Communications Stock or Media Stock in respect of which such 40 deduction and withholding was made by U S WEST or the Distribution Agent. (k) If any Communications Certificates or Media Certificates shall not have been surrendered prior to seven years after the Separation Time (or immediately prior to such earlier date on which any shares of New U S WEST Common Stock, cash in lieu of fractional shares of New U S WEST Common Stock or unpaid dividends or distributions with respect to shares of New U S WEST Common Stock in respect of such Communications Certificates or Media Certificates would otherwise escheat to or become the property of any Governmental Authority), any undistributed shares of New U S WEST Common Stock in respect of Communications Certificates or unpaid dividends or distributions in respect of such shares shall, to the extent permitted by Applicable Laws, become the property of New U S WEST and any undistributed shares of New U S WEST Common Stock in respect of Media Certificates or cash in lieu of fractional shares or unpaid dividends or distributions in respect of such shares shall, to the extent permitted by Applicable Laws, become the property of U S WEST. (l) Notwithstanding any other provision of this Article IV, stockholders who are entitled to receive shares of New U S WEST Common Stock pursuant to Section 4.1 with an aggregate value greater than or equal to $15 million will not receive such shares until such stockholders make all required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Shares of New U S WEST Common Stock issuable to stockholders required to make such filings shall be held in escrow by the Distribution Agent until such time as New U S WEST receives evidence from such stockholders that such filings have been made. 4.5 CONDITIONS TO THE SEPARATION. (a) The undertaking of U S WEST to effect the Separation is subject to the satisfaction of each of the following conditions, unless waived by the Board of Directors of U S WEST in its sole and absolute discretion: (i) All of the transactions contemplated by this Agreement to be performed on or prior to the consummation of the Separation shall have been consummated. (ii) The Form S-4, the Form 8-A and the Form 41 8-B/A shall each have been declared effective by the SEC, and no stop order with respect thereto shall be in effect. (iii) The Charter Amendments shall have been approved and adopted by the stockholders of U S WEST. (iv) The Charter Amendments shall have been executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with Section 242 of the Delaware General Corporation Law. (v) The Board of Directors of U S WEST shall have set the Redemption Date and given notice of the Communications Redemption to the holders of Communications Stock. (vi) The Board of Directors of U S WEST shall have fixed the Record Date and declared the Media Dividend. (vii) The New U S WEST Common Stock shall have been approved for listing on the NYSE and the PSE, subject to official notice of issuance. (viii) No order, injunction or decree shall have been issued by any Governmental Authority and remain in effect preventing the consummation of the Separation. (ix) All consents of, approvals of, notices to and filings with any Governmental Authority or any other Person necessary to consummate the Reorganization, the Contribution or the Separation shall have been obtained and be in full force and effect. (x) U S WEST shall have provided the NYSE and the PSE with the prior written notice of the Redemption Date and the Record Date as required by Rule 10b-17 of the Exchange Act and the rules and regulations of the NYSE. (xi) U S WEST shall have obtained an advance letter ruling from the Internal Revenue Service that certain aspects of the Reorganization, the Contribution and the Separation will qualify as tax-free transactions within the meaning of Sections 332, 42 368(a)(1)(D) and 355 of the Code, and such ruling shall be in full force and effect at the Separation Time. (xii) On or prior to the Separation Time, each of U S WEST and New U S WEST shall have entered into, or caused the appropriate members of the Group of which it is a member to enter into, each of the Transaction Documents. (b) Any determination made by the Board of Directors of U S WEST on behalf of any of the parties hereto prior to the Separation Time concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 4.5 shall be conclusive. ARTICLE V POST-SEPARATION INTERCOMPANY BUSINESS RELATIONSHIPS 5.1 PENDING LITIGATION. Following the Separation Time, subject to the provisions of Section 8.3, (a) New U S WEST shall have exclusive authority and control over the investigation, prosecution, defense and appeal of all pending Actions relating to the New U S WEST Liabilities, including, but not limited to, the pending Actions listed in Section 3.4(a) of the Separation Disclosure Schedule (each, a "NEW U S WEST ACTION"), and may settle or compromise, or consent to the entry of any judgment with respect to, any such New U S WEST Action without the consent of U S WEST and (b) U S WEST shall have exclusive authority and control over the investigation, prosecution, defense and appeal of all pending Actions relating to the MediaOne Liabilities, including, but not limited to, the pending Actions listed in Section 3.4(b) of the Separation Disclosure Schedule (each, a "U S WEST ACTION"), and may settle or compromise, or consent to the entry of any judgment with respect to, any such U S WEST Action without the consent of New U S WEST; PROVIDED, HOWEVER, that if any member of the New U S WEST Group or any of their respective directors, officers or employees is named as a party to a U S WEST Action or any member of the U S WEST Group or any of their respective directors, officers or employees is named as a party to a New U S WEST Action, neither U S WEST nor New U S WEST, as the case may be, may settle or compromise, or consent to the entry of any judgment with respect to, any such Action without the prior written consent of such other named party 43 (which consent may not be unreasonably withheld), unless such settlement (i) includes a complete release of such other named party and such party's directors, officers or employees (to the extent such directors, officers or employees are named in such Action) and (ii) does not require such other named party or such party's directors, officers or employees (to the extent such directors, officers or employees are named in such Action) to make or forego any payment or forego or take any action. Each of U S WEST and New U S WEST shall cooperate fully with the other and its counsel in the investigation, defense and settlement of any U S WEST Action or New U S WEST Action. 5.2 SETTLEMENTS FOR CASH COLLECTIONS AND DISBURSEMENTS AFTER THE SEPARATION TIME. (a) For each calendar month commencing with the month in which the Separation Time occurs and, unless sooner terminated by agreement of the parties, continuing for a period of two years thereafter, (i) within 30 Business Days of the end of the month in question, New U S WEST shall prepare and deliver to U S WEST, and U S WEST shall fully cooperate in preparing, a statement of transactions that shall reflect a complete analysis of any cash collections and cash disbursements by the New U S WEST Group on behalf of the U S WEST Group during the relevant month or for any prior month that should have been (but was not) included in a prior statement and (ii) within 30 Business Days of the end of the month in question, U S WEST shall prepare and deliver to New U S WEST, and New U S WEST shall fully cooperate in preparing, a statement of transactions that shall reflect a complete analysis of any cash collections and cash disbursements by the U S WEST Group on behalf of the New U S WEST Group during the relevant month or for any prior month that should have been (but was not) included in a prior statement; PROVIDED, HOWEVER, in each case that, with respect to the first such monthly period, such statement shall not reflect any cash collections or disbursements occurring prior to the Separation Time. (b) Not later than five Business Days (unless otherwise specifically provided in the relevant Transaction Document) following delivery of each such monthly statement, New U S WEST shall pay to U S WEST or U S WEST shall pay to New U S WEST, as the case may be, in cash an amount necessary to eliminate the account balance as reflected in each such statement (which amounts may be set off against each other as appropriate). Any disputes relating to such amounts payable shall be submitted to the Separation 44 Committee for resolution in accordance with the procedures set forth in Section 12.2. (c) Following the end of the two-year period referred to in Section 5.2(a) (or such earlier period as the parties hereto may agree), U S WEST and New U S WEST shall continue to deliver the statement of transactions referred to in Section 5.2(a) and pay the amounts necessary to eliminate the account balance as reflected in such statement in accordance with Section 5.2(b), at such intervals as the parties may agree. Any disputes relating to such amounts payable shall be submitted to the Separation Committee for resolution in accordance with the procedures set forth in Section 12.2. (d) Each of U S WEST and New U S WEST hereby grants the other a limited irrevocable power-of-attorney to endorse, deposit and negotiate any check, draft or other form of payment made in respect of any invoice representing a receivable payable to one of them but which is sent by the payor to a lock box maintained by the other or is made payable to either of them or any of their subsidiaries but which is the payment of a receivable that is a receivable of the other. 5.3 TRANSITION SERVICES.(a) From and after the Separation Time, each party will provide, or cause one or more of the members of its Group to provide, to the other Group such services on such terms as may be agreed upon between U S WEST and New U S WEST from time to time in writing. The party that is to provide the services (the "PROVIDER") will use its commercially reasonable efforts to provide such services to the other party (the "RECIPIENT") in a satisfactory and timely manner and as further specified in writing by the parties. (b) All employees and representatives of the Provider providing services to the Recipient pursuant to this Section 5.3 shall be deemed for purposes of all compensation and employee benefits matters to be employees or representatives of the Provider and not employees or representatives of the Recipient. In performing such services, such employees and representatives will be under the direction, control and supervision of the Provider (and not the Recipient) and the Provider will have the sole right to exercise all authority with respect to the employment (including, without limitation, termination of employment), assignment and compensation of such employees and 45 representatives. Any disputes relating to the provision of services under this Section 5.3 shall be submitted to the Separation Committee for resolution in accordance with the procedures set forth in Section 12.2. 5.4 U S WEST NAME. (a) U S WEST acknowledges that the name "U S WEST", whether alone or in combination with one or more words, is an asset being transferred to New U S WEST pursuant to the Contribution. U S WEST agrees to provide all necessary cooperation to New U S WEST in order to transfer the name and the rights thereto as well as to enforce and protect the same against third parties. Promptly after the Separation Time, U S WEST shall cause each member of the U S WEST Group whose corporate name includes the name "U S WEST" to change its name to delete any reference therein to "U S WEST" (for example, without limiting the generality of the foregoing, the word "U S WEST" shall be removed from the name of "U S WEST International Holdings, Inc."). Promptly after the Separation Time, U S WEST shall, and shall cause each member of the U S WEST Group to, subject to the requirements of Section 7.8 of the AirTouch Merger Agreement, (i) assign, and does hereby assign, to New U S WEST any license to use the name U S WEST (including any appurtenant rights and obligations such as quality control) with all agents, franchisees and licensees of the U S WEST Group and the MediaOne Business (to the extent permitted by the terms of such license), including any license granted pursuant to Section 7.8 of the AirTouch Merger Agreement, (ii) to the extent assignment is not permitted, terminate any license to use the name U S WEST with all agents, franchisees and licensees of the U S WEST Group and the MediaOne Business (to the extent permitted by the terms of such license) and (iii) if neither assignment or termination is permitted, the U S WEST Group shall cooperate with New U S WEST, and if appropriate enter into necessary agreements, to preserve New U S WEST's ownership rights in the U S WEST name. U S WEST further agrees not to use the name "U S WEST" in connection with the operations of the U S WEST Group or the MediaOne Business, or otherwise interfere in any way with New U S WEST's ownership rights in the U S WEST name; PROVIDED, HOWEVER, that for a period of six months after the Separation Time, the U S WEST Group may continue to use the "U S WEST" name for internal purposes on business forms, business cards (with the company name manually corrected) and stationery. Nothing herein shall require U S WEST or any member of the U S WEST Group to retrieve from customers telephones, accessories or other equipment or materials 46 labeled with the "U S WEST" name and remove such name from such telephones, accessories or other equipment or materials. (b) For a period of two years following the Separation Time, New U S WEST shall not, and shall cause each member of the New U S WEST Group not to, use the names "U S WEST Media Group," "U S WEST Media," "U S WEST Interactive Services," "U S WEST International" or "U S WEST NewVector" in the operations of the New U S WEST Business; PROVIDED, HOWEVER, that, notwithstanding the foregoing, the New U S WEST Group shall be permitted to use the words "Media Group," "Media," "Interactive Services," and "International" as long as such words do not immediately follow the name "U S WEST" as referenced above. By way of example, New U S WEST may use as "taglines" references to "the Media Group of U S WEST," the "International Division of U S WEST" or similar references in the operation of the New U S WEST Business. Promptly after the Separation Time, New U S WEST shall cause MGI to change its corporate name to delete any reference therein to the words "Media Group". 5.5 TRANSFER TAXES. New U S WEST and U S WEST agree to cooperate to determine the amount of sales, transfer or other similar taxes or fees (including, without limitation, all real estate, patent, copyright and trademark transfer taxes and recording fees) payable in connection with the transactions contemplated by this Agreement. U S WEST and New U S WEST agree to file promptly and timely returns for such taxes and fees with the appropriate taxing authorities. The amounts payable with respect to such taxes and fees shall be borne equally by U S WEST and New U S WEST. Any disputes relating to such amounts payable shall be submitted to the Separation Committee for resolution in accordance with the procedures set forth in Section 12.2. 5.6 INTELLECTUAL PROPERTY. (a) At the Separation Time, subject to Section 5.6(b), (i) the U S WEST Group shall become the sole and exclusive owner of all right, title and interest in the MediaOne Patents, the MediaOne Trademarks and the MediaOne Other Intellectual Property, (ii) the New U S WEST Group shall become the sole and exclusive owner of all right, title and interest in the New U S WEST Patents, the New U S WEST Trademarks and the New U S WEST Other Intellectual Property and (iii) the U S WEST Group and the New U S WEST Group shall each have, as joint owners, an equal and undivided interest in and to all right, title and interest in both the Joint Patents and the Joint 47 Other Intellectual Property. The parties agree to file appropriate assignment documents with the U.S. Patent and Trademark Office (or other appropriate agencies) in order to effect and record the ownership of the MediaOne Patents, the MediaOne Trademarks, the New U S WEST Patents, the New U S WEST Trademarks and the Joint Patents as provided under this Section 5.6(a). (b) From and after the Separation Time, subject to the protection of Information required by Section 10.5, (i) the New U S WEST Group shall have the non-exclusive right to use (both for internal purposes and, if reasonably expected by its nature, by copying, modifying and incorporating during the course of providing products and services to others) all MediaOne Other Intellectual Property which is in the legitimate possession of, and is used by or for which there are good faith plans for use by, the New U S WEST Group as of the Separation Time and (ii) the U S WEST Group shall have the non-exclusive right to use (both for internal purposes and, if reasonably expected by its nature, by copying, modifying and incorporating during the course of providing products and services to others) all New U S WEST Other Intellectual Property which is in the legitimate possession of, and is used by or for which there are good faith plans for use by, the U S WEST Group as of the Separation Time. (c) It is understood that (i) the right of the New U S WEST Group to use MediaOne Other Intellectual Property under Section 5.6(b) (and the right of the New U S WEST Group to use New U S WEST Other Intellectual Property which is in its possession and which is used, or for which there are good faith plans to use, as of the Separation Time) shall include (but only to the extent necessary for such use) rights under MediaOne Patents and (ii) the right of the U S WEST Group to use New U S WEST Other Intellectual Property under Section 5.6(b) (and the right of the U S WEST Group to use MediaOne Other Intellectual Property which is in its possession and which is used, or for which there are good faith plans to use, as of the Separation Time) shall include (but only to the extent necessary for such use) rights under New U S WEST Patents. (d) Subject to the protection of Information required by Section 10.5 and any third party rights, Joint Other Intellectual Property may be used, copied, modified and provided or licensed to others (and exploited in any 48 other manner) by either Group without accounting to the other Group. ARTICLE VI EMPLOYEE MATTERS 6.1 EMPLOYEES. Effective as of the Separation Time, except as otherwise provided in the Employee Matters Agreement, (a) those Media Employees who are employed by U S WEST or any of its Subsidiaries immediately prior to the Separation Time shall remain or become employees of U S WEST or any Subsidiary thereof and (b) those Communications Employees who are employed by U S WEST or any of its Subsidiaries immediately prior to the Separation Time shall become employees of New U S WEST or any Subsidiary thereof. 6.2 EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS. U S WEST and New U S WEST shall take all actions necessary to effect the transfer to New U S WEST and the assumption by New U S WEST of the Employee Benefit Plans and Employee Arrangements and the Assets and Liabilities thereunder as described in the Employee Matters Agreement. 6.3 INTERNAL REVENUE SERVICE FORMS. U S WEST and New U S WEST agree that pursuant to the "Alternative Procedure" provided in Section 5 of Revenue Procedure 96-60, 1996-53, I.R.B. 24, with respect to preparing, filing and furnishing the Internal Revenue Service Forms W-2, W-3, 941 and W-5, (i) U S WEST and New U S WEST shall report on a "predecessor-successor" basis as set forth therein, (ii) U S WEST shall be relieved from furnishing Forms W-2 to the New U S WEST Employees and (iii) New U S WEST shall assume the obligations of U S WEST to furnish such forms to the New U S WEST Employees for the full 1998 calendar year. ARTICLE VII INSURANCE MATTERS 7.1 POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. (a) At such time as the parties agree, U S WEST shall cause Western Range to transfer to an Insurer or to a member of the New U S WEST Group all of the Insurance Arrangements provided by Western Range (as well as the liabilities and corresponding reserves) which relate to members of the New 49 U S WEST Group or the New U S WEST Business or New U S WEST Liabilities (the "WESTERN RANGE TRANSFERRED INSURANCE ARRANGEMENTS"). (b) The MediaOne Assets shall include (i) all MediaOne Insurance Arrangements, (ii) all of the workers' compensation Assets of U S WEST in Western Range and (iii) subject to the provisions of this Article VII, an equal and undivided interest in the Joint Insurance Arrangements. The New U S WEST Assets shall include (i) all New U S WEST Insurance Arrangements (including the Western Range Transferred Insurance Arrangements) and (ii) subject to the provisions of this Article VII, an equal and undivided interest in the Joint Insurance Arrangements. (c) As of the Separation Time, all of the Joint Insurance Arrangements shall be discontinued and each of the Groups shall be responsible for arranging separate Insurance Arrangements with respect to injuries, losses, liabilities, damages and expenses arising after the Separation Time with respect to such Group and its businesses. At the Separation Time, all prepaid and unused premiums with respect to each Joint Insurance Arrangement shall be distributed to U S WEST and New U S WEST in the same ratio in which such premiums were allocated by U S WEST to the MediaOne Business and the New U S WEST Business prior to the Separation Time. Following the Separation Time, any refunds received by U S WEST or New U S WEST with respect to a Joint Insurance Arrangement shall be distributed to U S WEST and New U S WEST in the same ratio in which premiums payable with respect to such Joint Insurance Arrangement were allocated by U S WEST to the MediaOne Business and the New U S WEST Business prior to the Separation Time. To the extent U S WEST or New U S WEST receives any such refund, the party receiving such refund shall promptly transfer to the other party the portion of such refund to which such other party is entitled. 7.2 ADMINISTRATION; OTHER MATTERS. (a) From and after the Separation Time, except as set forth in Section 7.2(c), U S WEST shall be responsible for Insurance Administration under the Joint Insurance Arrangements with respect to MediaOne Liabilities and New U S WEST shall be responsible for Insurance Administration under the Joint Insurance Arrangements with respect to New U S WEST Liabilities. The disbursements, out-of-pocket expenses and costs of employees or agents of U S WEST or New U S WEST relating to Insurance Administration contemplated by this 50 Section 7.2(a) shall be borne by the party incurring such expenses or costs. Insurance Proceeds with respect to claims, costs and expenses under the Joint Insurance Arrangements shall be paid by the Insurer to the party making the Insured Claim thereunder. In the event U S WEST or New U S WEST makes an Insured Claim under a Joint Insurance Arrangement, such party shall deliver notice to the other party of such Insured Claim and shall keep the other party periodically updated as to the status of such Insured Claim. (b) From and after the Separation Time, subject to Section 7.2(c), each of U S WEST and New U S WEST shall have the right to claim coverage for Insured Claims under each Joint Insurance Arrangement with respect to any claim covered by such Joint Insurance Arrangement as and to the extent that such insurance is available up to the full extent of the applicable limits of liability, if any, of such Joint Insurance Arrangement (and may receive any Insurance Proceeds with respect thereto); PROVIDED, HOWEVER, that, prior to receiving any payment under a Joint Insurance Arrangement, U S WEST or New U S WEST, as the case may be, shall be required to have retained a portion of the Liability underlying such Insured Claim equal to the amount of the self-insured retention or deductible, if any, of such party with respect to such Liability. In the event that the total Insurance Proceeds payable to the U S WEST Group and the New U S WEST Group under a Joint Insurance Arrangement shall have exhausted the limits of liability, if any, under such Joint Insurance Arrangement, payment of any future claims which are not reimbursed under such Joint Insurance Arrangement as a result of such exhaustion of the limits of liability shall be the sole responsibility of the party having liability for such claim under Section 3.4. Each of the parties agrees to use commercially reasonable efforts to maximize available coverage under those Joint Insurance Arrangements applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim. (c) With respect to any Insured Claim in respect of a Shared Liability, U S WEST and New U S WEST shall share any Insurance Proceeds received in respect of such Insured Claim in the same proportions in which such Shared Liability is shared by U S WEST and New U S WEST. In the event of any such Insured Claim, U S WEST and New U S WEST shall jointly determine which party shall be responsible for Insurance Administration under the Joint Insurance Arrangements in 51 respect of such Insured Claim. The disbursements, out-of-pocket expenses and costs relating to Insurance Administration contemplated by this Section 7.2(c) shall be borne by the parties in the same proportions in which the Shared Liability underlying such Insured Claim is shared by U S WEST and New U S WEST. 7.3 COOPERATION; DISAGREEMENTS. The parties shall use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement. Any disagreements between U S WEST and New U S WEST under this Article VII shall be submitted to the Separation Committee in accordance with the procedures set forth in Section 12.2. ARTICLE VIII INDEMNIFICATION 8.1 NEW U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as otherwise specifically provided in the other Transaction Documents, subject to the terms and conditions set forth in this Agreement, from and after the Separation Time, New U S WEST shall indemnify, defend and hold harmless U S WEST and its directors, officers, employees, representatives, advisors, agents and Affiliates (collectively, the "U S WEST INDEMNIFIED PARTIES") from, against and in respect of any and all Indemnifiable Losses of the U S WEST Indemnified Parties arising out of, relating to or resulting from, directly or indirectly: (i) any and all New U S WEST Liabilities (including any New U S WEST Liability which could be covered by the terms of the indemnification provisions contained in the Bylaws of U S WEST prior to the Separation Time); (ii) New U S WEST's failure to observe from and after the Separation Time its obligations under this Agreement or any of the other Transaction Documents; (iii) any untrue statement or alleged untrue statement of a material fact contained in any of the SEC Documentation, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, 52 not misleading (but, in each case, only with respect to information relating to the New U S WEST Business contained in or omitted from the SEC Documentation); and (iv) (A) any obligation for which any member of the U S WEST Group may be liable as guarantor, original tenant, primary obligor or otherwise under any New U S WEST Obligation or (B) the triggering of any cross-default provision contained in any MediaOne Obligation as a result of a default by a member of the New U S WEST Group under any New U S WEST Obligation (other than, in each case, to the extent any Indemnifiable Losses arise out of, relate to or result from actions taken by a member of the U S WEST Group). (b) Notwithstanding New U S WEST's obligations to indemnify U S WEST Indemnified Parties pursuant to Section 8.1(a), U S WEST hereby waives, releases and agrees not to make any claim or bring any contribution, cost recovery or other action against any member of the New U S WEST Group, and, if applicable, their respective directors, officers, employees, representatives, agents and Affiliates and their heirs, successors and assigns, under CERCLA or any similar federal, state or local environmental law or regulation now existing or hereafter enacted that seeks to allocate liabilities between U S WEST and New U S WEST in a different manner than as expressly set forth in this Agreement. 8.2 U S WEST'S AGREEMENT TO INDEMNIFY. (a) Except as otherwise specifically provided in the other Transaction Documents, subject to the terms and conditions set forth in this Agreement, from and after the Separation Time, U S WEST shall indemnify, defend and hold harmless New U S WEST and each of its directors, officers, employees, representatives, advisors, agents and Affiliates (collectively, the "NEW U S WEST INDEMNIFIED PARTIES") from, against and in respect of any and all Indemnifiable Losses of the New U S WEST Indemnified Parties arising out of, relating to or resulting from, directly or indirectly: (i) any and all MediaOne Liabilities; (ii) U S WEST's failure to observe from and after the Separation Time its obligations under this Agreement or any of the other Transaction Documents; 53 (iii) any untrue statement or alleged untrue statement of a material fact contained in any of the SEC Documentation, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (but, in each case, only with respect to information relating to the MediaOne Business contained in or omitted from the SEC Documentation); and (iv) (A) any obligation for which any member of the New U S WEST Group may be liable as guarantor, original tenant, primary obligor or otherwise under any MediaOne Obligation or (B) the triggering of any cross-default provision contained in any New U S WEST Obligation as a result of a default by a member of the U S WEST Group under any MediaOne Obligation (other than, in each case, to the extent any Indemnifiable Losses arise out of, relate to or result from actions taken by a member of the New U S WEST Group). (b) Notwithstanding U S WEST's obligations to indemnify New U S WEST Indemnified Parties pursuant to Section 8.2(a), New U S WEST hereby waives, releases and agrees not to make any claim or bring any contribution, cost recovery or other action against any member of the U S WEST Group, and, if applicable, their respective directors, officers, employees, representatives, agents and Affiliates and their heirs, successors and assigns, under CERCLA or any similar federal, state or local environmental law or regulation now existing or hereafter enacted that seeks to allocate liabilities between New U S WEST and U S WEST in a different manner than as expressly set forth in this Agreement. 8.3 PROCEDURE FOR INDEMNIFICATION. Except as set forth in the Employee Matters Agreement, all claims for indemnification under this Article VIII shall be asserted and resolved as follows: (a) THIRD PARTY CLAIMS (OTHER THAN WITH RESPECT TO SHARED LIABILITIES). In the event that any claim or demand for which an Indemnifying Party may be liable to an Indemnified Party hereunder (other than with respect to Shared Liabilities) is asserted against or sought to be collected by a third party from an Indemnified Party (an "ASSERTED LIABILITY"), the Indemnified Party shall as soon as possible notify the Indemnifying Party in writing of such 54 Asserted Liability, specifying the nature of such Asserted Liability (the "CLAIM NOTICE"); provided that no delay on the part of the Indemnified Party in giving any such Claim Notice shall relieve the Indemnifying Party of any indemnification obligation hereunder except to the extent that the Indemnifying Party is materially prejudiced by such delay. The Indemnifying Party shall have 60 days (or less if the nature of the Asserted Liability requires) from its receipt of the Claim Notice to notify the Indemnified Party whether or not the Indemnifying Party desires, at the Indemnifying Party's sole cost and expense and by counsel of its own choosing, to defend against such Asserted Liability; PROVIDED, HOWEVER, that if, under applicable standards of professional conduct a conflict on any significant issue between the Indemnifying Party and any Indemnified Party exists in respect of such Asserted Liability, then the Indemnifying Party shall reimburse the Indemnified Party for the reasonable fees and expenses of one additional counsel (who shall be reasonably acceptable to the Indemnifying Party). The Indemnified Party shall have the right to control, pay or settle any Asserted Liability which the Indemnifying Party shall have undertaken to defend so long as the Indemnified Party shall also (at the time it exercises such right to control, pay or settle such Asserted Liability) waive any right to indemnification therefor by the Indemnifying Party. If the Indemnifying Party undertakes to defend against such Asserted Liability, the Indemnified Party shall cooperate fully with the Indemnifying Party and its counsel in the investigation, defense and settlement thereof, but the Indemnifying Party shall control the investigation, defense and settlement thereof. If the Indemnified Party desires to participate in any such defense, it may do so at its sole cost and expense. If the Indemnifying Party elects not to defend against such Asserted Liability, then the Indemnifying Party shall have the right to participate in any such defense at its sole cost and expense, but the Indemnified Party shall control the investigation, defense and settlement thereof at the reasonable cost and expense of the Indemnifying Party. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld), consent to any settlement unless such settlement (i) includes a complete release of the Indemnified Party and (ii) does not require the Indemnified Party to make or forego any payment or forego or take any action. The Indemnifying Party shall not be liable for any 55 settlement of any Asserted Liability effected without its prior written consent (which consent shall not be unreasonably withheld). In the event a dispute arises as to which party has responsibility under this Agreement for an Asserted Liability, the Indemnified Party shall have the right to defend such Asserted Liability until such dispute is resolved in accordance with the procedures set forth in Section 12.2; PROVIDED, HOWEVER, that in such circumstances (i) the Indemnified Party shall not have the right to settle such Asserted Liability unless the Indemnified Party shall also (at the time it exercises such right to settle such Asserted Liability) waive any right to indemnification therefor by the Indemnifying Party and (ii) if it is subsequently determined pursuant to Section 12.2 that such Asserted Liability is the responsibility of the Indemnifying Party, the Indemnifying Party shall thereafter have the right to defend against such Asserted Liability in accordance with this Section 8.3(a). Any disputes between the Indemnifying Party and the Indemnified Party under this Section 8.3(a) shall be submitted to the Separation Committee in accordance with the procedures set forth in Section 12.2. (b) THIRD PARTY CLAIMS WITH RESPECT TO SHARED LIABILITIES. In the event that any claim or demand with respect to a Shared Liability is asserted against or sought to be collected by a third party (a "SHARED ASSERTED LIABILITY"), the Indemnifying Party receiving notice of such claim (the "RECEIVING PARTY") shall as soon as practicable notify the other Indemnifying Party (the "NON-RECEIVING PARTY") in writing of such Shared Asserted Liability, specifying the nature of such Shared Asserted Liability (the "SHARED CLAIM NOTICE"); PROVIDED, HOWEVER, that no delay on the part of the Receiving Party in giving any such Shared Claim Notice shall relieve the Non-Receiving Party of any indemnification obligation hereunder except to the extent that the Non-Receiving Party is materially prejudiced by such delay. If one of the Indemnifying Parties has responsibility for greater than 50% of such Shared Asserted Liability as set forth in Section 1.1(i) of the Separation Disclosure Schedule, such Indemnifying Party shall have management and administrative responsibility in respect of such Shared Asserted Liability (the "MANAGING PARTY"), including responsibility for the defense of such Shared Asserted Liability, negotiation with claimants and potential claimants (subject to the limitations in the following paragraph) and other activities related thereto. If one of the Indemnifying Parties does not have responsibility for 56 greater than 50% of such Shared Asserted Liability as set forth in Section 1.1(i) of the Separation Disclosure Schedule, New U S WEST shall be the Managing Party. The Managing Party shall assume the defense of the Shared Asserted Liability with counsel selected by the Managing Party and shall control the defense of such Shared Asserted Liability, although the Indemnifying Party that is not the Managing Party (the "NON-MANAGING PARTY") shall have the right at its own cost to participate in such defense and to employ counsel separate from the counsel employed by the Managing Party. The Non-Managing Party shall cooperate with the Managing Party in the defense or prosecution of such Shared Asserted Liability. In the event a dispute arises as to whether the Non-Receiving Party has any responsibility under this Agreement for the Shared Asserted Liability, the Receiving Party shall have the right to defend such Shared Asserted Liability until such dispute is resolved in accordance with the procedures set forth in Section 12.2; PROVIDED, HOWEVER, that in such circumstances (i) the Receiving Party shall not have the right to settle such Shared Asserted Liability unless the Indemnified Party shall also (at the time it exercises such right to settle such Shared Asserted Liability) waive any right to indemnification therefor by the Non-Receiving Party and (ii) if the Non-Receiving Party becomes the Managing Party, the Managing Party shall thereafter defend against such Shared Asserted Liability in accordance with this Section 8.3(b). In no event will the Managing Party admit any liability with respect to, or settle, compromise or discharge, any such Shared Asserted Liability without the prior written consent of the Non-Managing Party; PROVIDED, HOWEVER, that the Managing Party shall have the right to settle, compromise or discharge, any such Shared Asserted Liability without the consent of the Non-Managing Party if the aggregate amount payable by the Indemnifying Parties in respect of such settlement, compromise or discharge does not exceed $5,000,000 and such settlement, compromise or discharge does not require the Non-Managing Party to take any action other than the payment of damages; PROVIDED, FURTHER, that the Managing Party shall have the right to settle, compromise or discharge such Shared Asserted Liability without the consent of the Non-Managing Party if the Managing Party releases in writing the Non-Managing Party from its indemnification obligation hereunder with respect to such Shared Asserted Liability and such settlement, compromise or discharge would not otherwise 57 adversely affect the Non-Managing Party; and PROVIDED, FURTHER, that if the Managing Party recommends a settlement, compromise or discharge of such Shared Asserted Liability to the Non-Managing Party that does not require the Non-Managing Party to take any action other than the payment of damages and the Non-Managing Party does not consent to such settlement, compromise or discharge, then the Non-Managing Party shall be required to indemnify the Managing Party for any amount that the Managing Party may be required to pay in the future in connection with such Shared Asserted Liability which is in excess of the amount that would have been paid by or on behalf of the Managing Party pursuant to such settlement, compromise or discharge. All amounts payable by the Indemnifying Parties in connection with a Shared Asserted Liability, including all reasonable legal and other expenses incurred in connection with such Shared Asserted Liability (including reasonable legal expenses of the Non-Managing Party), shall be shared by the parties in the same proportions in which the related Shared Liability is shared. Any disputes between the parties under this Section 8.3(b) shall be submitted to the Separation Committee in accordance with the procedures set forth in Section 12.2. (c) NON-THIRD PARTY CLAIMS. In the event that an Indemnified Party should have a claim against the Indemnifying Party hereunder that does not involve a claim or demand being asserted against or sought to be collected from it by a third party, the Indemnified Party shall send a notice with respect to such claim to the Indemnifying Party. The Indemnifying Party shall have 60 days from the date such notice is delivered during which to notify the Indemnified Party in writing of any good faith objections it has to the Indemnified Party's notice or claims for indemnification, setting forth in reasonable detail each of the Indemnifying Party's objections thereto. If the Indemnifying party does not deliver such written notice of objection within such 60-day period, the Indemnifying Party shall be deemed to not have any objections to such claim. If the Indemnifying Party does deliver such written notice of objection within such 60-day period, the Indemnifying Party and the Indemnified Party shall attempt in good faith to resolve any such dispute within 60 days of the delivery by the Indemnifying Party of such written notice of objection. If the Indemnifying Party and the Indemnified Party are unable to resolve any such dispute within such 60-day period, such dispute shall be submitted to the Separation Committee in accordance with the procedures set forth in Section 12.2. 58 8.4 MISCELLANEOUS INDEMNIFICATION PROVISIONS. (a) The Indemnifying Party agrees to indemnify any successors of the Indemnified Party to the same extent and in the same manner and on the same terms and conditions as the Indemnified Party is indemnified by the Indemnifying Party under this Article VIII. (b) The amount that an Indemnifying Party is required to pay to any Indemnified Party pursuant to this Article VIII shall be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnified Party in respect of the related Indemnifiable Loss (including any Insurance Proceeds in respect of a Shared Liability recovered by or on behalf of such Indemnified Party in respect of the related Indemnifiable Loss). If an Indemnified Party shall have received the payment required by this Article VIII in respect of an Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnified Party shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Article VIII in respect of such Indemnifiable Loss. (c) In determining the amount of any indemnity payable under this Article VIII, such amount shall be reduced by any related Tax benefits if and when actually realized or received (but only after taking into account any Tax benefits (including, without limitation, any net operating losses or other deductions) to which the Indemnified Party would be entitled without regard to such item), except to the extent such Tax benefit has already been taken into account in determining the amount of any indemnity payable under this Article VIII in respect of the related Indemnifiable Loss. Any such Tax benefit shall be promptly repaid by the Indemnified Party to the Indemnifying Party following the time at which such recovery is realized or received pursuant to the previous sentence, minus all reasonably allocable costs, charges and expenses incurred by the Indemnified Party in obtaining such Tax benefit. Notwithstanding the foregoing, if (x) the amount of Indemnifiable Losses for which the Indemnifying Party is obligated to indemnify the Indemnified Party is reduced by any Tax benefit in accordance with the provisions of the 59 previous sentence and (y) the Indemnified Party subsequently is required to repay the amount of any such Tax benefit or such Tax benefit is disallowed, then the obligation of the Indemnifying Party to indemnify with respect to such amounts shall be reinstated immediately and such amounts shall be paid promptly to the Indemnified Party in accordance with the provisions of this Agreement. (d) No Indemnifying Party shall be liable to an Indemnified Party under this Article VIII in respect of consequential, exemplary, special or punitive damages, or lost profits, except to the extent such consequential, exemplary, special or punitive damages, or lost profits are actually paid to a third party. 8.5 CONTRIBUTION. (a) If the indemnification provided for in this Article VIII is not permitted under Applicable Law, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Indemnifiable Losses (i) any amount that such Indemnified Party would be entitled to pursuant to Article VIII of this Agreement or the relevant indemnity provisions of any other Transaction Document or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relevant benefits of the indemnity provisions described in clause (i) above, but also the relative ownership of the Assets or responsibility for the Liabilities associated with such Indemnifiable Losses. (b) The amounts paid or payable by an Indemnified Party as a result of Indemnifiable Losses referred to in Section 8.5(a) above shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. 8.6 TAX MATTERS; CONSTRUCTION OF AGREEMENTS. (a) Except as set forth in the Tax Sharing Agreement, all indemnification relating to Taxes shall be governed by the Tax Sharing Agreement. (b) Notwithstanding any other provision in this Agreement to the contrary, except as set forth in Section 8.6(a), in the event and to the extent that there shall be a 60 conflict between the provisions of this Article VIII and the provisions of any other part of this Agreement or any exhibit or schedule hereto, the provisions of this Article VIII shall control, and in the event and to the extent that there shall be a conflict between the provisions of this Agreement (including, without limitation, the provisions of this Article VIII) and the provisions of any other Transaction Document, the provisions of such other Transaction Document shall control. 8.7 REMEDIES CUMULATIVE. The remedies provided in this Article VIII shall be cumulative and, subject to the provisions of Section 12.2, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. ARTICLE IX CERTAIN ADDITIONAL COVENANTS 9.1 LICENSES AND PERMITS. Each party hereto shall cause the appropriate members of its Group to prepare and file with the appropriate licensing and permitting authorities applications for the transfer or issuance, as may be necessary or advisable in connection with the Separation, to its Group of all material governmental licenses and permits required for the members of its Group to operate its business after the Separation. The members of the New U S WEST Group and the members of the U S WEST Group shall cooperate and use all reasonable best efforts to secure the transfer or issuance of such licenses and permits. 9.2 INTERCOMPANY AGREEMENTS. All contracts, licenses, agreements, commitments or other arrangements, formal or informal, between any member of the U S WEST Group, on the one hand, and any member of the New U S WEST Group, on the other, in existence as of the Separation Time, pursuant to which any member of either Group provides services to any member of the other Group (including, without limitation, management, administrative, financial, accounting, data processing, insurance or technical support), or the use of any Assets of any member of the other Group, or the secondment of any employee, or pursuant to which rights, privileges or benefits are afforded to members of either Group or Affiliates of the other Group, shall terminate as of the close of business on the day prior 61 to the Separation Time, except (i) as specifically provided herein or in the Transaction Documents or as otherwise agreed to by the parties, (ii) for the agreements listed in Section 9.2 of the Separation Disclosure Schedule, which will remain in effect following the Separation Time and (iii) to the extent required by the terms of the AirTouch Merger Agreement, for any agreements between a member of the New U S WEST Group, on the one hand, and NewVector or any of its Subsidiaries or investments or PCS Holdings, on the other hand. From and after the Separation Time, no member of either Group shall have any rights under any contract, license, agreement, commitment or arrangement so terminated. 9.3 GUARANTEE OBLIGATIONS. (a) U S WEST and New U S WEST shall cooperate, and shall cause their respective Groups to cooperate, (i) to terminate, or to cause a member of the New U S WEST Group to be substituted in all respects for any member of the U S WEST Group in respect of, all obligations of any member of the U S WEST Group under any loan, letter of credit, financing, lease, contract or other obligation in existence as of the Separation Time pertaining to the New U S WEST Business (each, a "NEW U S WEST OBLIGATION") for which such member of the U S WEST Group may be liable as guarantor, original tenant, primary obligor or otherwise, including, without limitation, the leases listed in Section 9.3(a) of the Separation Disclosure Schedule, and (ii) to eliminate any cross-default provision contained in any loan, letter of credit, financing, lease, contract or other obligation in existence as of the Separation Time pertaining to the MediaOne Business (each, a "MEDIAONE OBLIGATION") which would be triggered by a default by a member of the New U S WEST Group under any New U S WEST Obligation, including, without limitation, the cross-default provisions listed in Section 9.3(a) of the Separation Disclosure Schedule. If such a termination, substitution or elimination is not effected by the Separation Time, without the prior written consent of U S WEST, from and after the Separation Time, New U S WEST shall not, and shall not permit any member of the New U S WEST Group or any of its Affiliates to, renew or extend the term of, increase in any material respect its obligations under (which, in the case of a lease, shall mean an increase in the rent for the property by more than 10% annually), transfer to a third party (other than Affiliates), or amend in any manner materially adverse to the U S WEST Group (which, in the case of a lease, shall mean an increase in the rent for the property by more than 10% annually), any such New U S WEST Obligation unless all obligations of the U S WEST Group with 62 respect thereto are thereupon terminated and all such cross-default provisions with respect thereto are eliminated by documentation reasonably satisfactory in form and substance to U S WEST; PROVIDED, HOWEVER, that, notwithstanding the foregoing, New U S WEST shall be permitted, without the prior written consent of U S WEST, to renew or extend the term of any of the New U S WEST Obligations so identified in Section 9.3(a) of the Separation Disclosure Schedule whether or not such a termination or elimination is effected. Following any renewal or extension permitted by the foregoing proviso, New U S WEST shall promptly deliver to U S WEST notice of such renewal or extension. (b) U S WEST and New U S WEST shall cooperate, and shall cause their respective Groups to cooperate, (i) to terminate, or to cause a member of the U S WEST Group to be substituted in all respects for any member of the New U S WEST Group in respect of, all obligations of any member of the New U S WEST Group under any MediaOne Obligation for which such member of the New U S WEST Group may be liable as guarantor, original tenant, primary obligor or otherwise, including, without limitation, the lease listed in Section 9.3(b) of the Separation Disclosure Schedule, and (ii) to eliminate any cross-default provision contained in any New U S WEST Obligation which would be triggered by a default by a member of the U S WEST Group under any MediaOne Obligation, including, without limitation, the cross-default provisions listed in Section 9.3(b) of the Separation Disclosure Schedule. If such a termination, substitution or elimination is not effected by the Separation Time, without the prior written consent of New U S WEST, from and after the Separation Time, U S WEST shall not, and shall not permit any member of the U S WEST Group or any of its Affiliates to, renew or extend the term of, increase in any material respect its obligations under (which, in the case of a lease, shall mean an increase in the rent for the property by more than 10% annually), transfer to a third party (other than Affiliates), or amend in any manner materially adverse to the New U S WEST Group (which, in the case of a lease, shall mean an increase in the rent for the property by more than 10% annually), any such MediaOne Obligation unless all obligations of the New U S WEST Group with respect thereto are thereupon terminated and all such cross-default provisions with respect thereto are eliminated by documentation reasonably satisfactory in form and substance to New U S WEST; PROVIDED, HOWEVER, that, notwithstanding the foregoing, U S WEST shall be permitted, without the prior written consent of New U S WEST, to renew 63 or extend the term of any of the MediaOne Obligations so identified in Section 9.3(b) of the Separation Disclosure Schedule whether or not such a termination or elimination is effected. Following any renewal or extension permitted by the foregoing proviso, U S WEST shall promptly deliver to New U S WEST notice of such renewal or extension. 9.4 FURTHER ASSURANCES. (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under Applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto shall cooperate with the other party, and execute and deliver, or use reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any governmental or regulatory authority or any other Person under any permit, license, agreement, indenture or other instrument, and take all such other actions as such party may reasonably be requested to take by the other party hereto from time to time, consistent with the terms of this Agreement and the Transaction Documents, in order to effectuate the provisions and purposes of this Agreement and the transfers of Assets and Liabilities and the other transactions contemplated hereby. (b) If any such transfer of Assets or Liabilities is not consummated prior to or at the Separation Time, then the party hereto retaining such Asset or Liability shall continue to take the actions required by Section 9.4(a) to consummate and make effective such transfer as soon as practicable after the Separation Time and, in the case of Assets, shall use its reasonable best efforts to preserve the value of such Assets until the time of transfer. If and when any such Asset or Liability becomes transferable, such transfer shall be effected forthwith. The parties hereto agree that, as of the Separation Time, each party hereto shall be deemed to have acquired complete and sole beneficial ownership to all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement and the Transaction Documents all of the Liabilities, and all duties, obligations and 64 responsibilities incident thereto, that such party is entitled to acquire or required to assume pursuant to the terms of this Agreement. (c) Each of the parties hereto agrees to use its respective reasonable best efforts, at such party's expense, to obtain any consents required to transfer and assign to (i) New U S WEST all Contracts, licenses and other rights of any nature whatsoever included in the New U S WEST Assets and (ii) U S WEST all Contracts, licenses and other rights of any nature whatsoever included in the MediaOne Assets. In the event and to the extent that either party hereto is unable to obtain any such required consents, (i) such party shall continue to be bound thereby (such party in such capacity, the "RECORD HOLDER") and (ii) the party to which such Asset would otherwise be transferred pursuant to this Agreement (the "BENEFICIAL HOLDER") shall pay, perform and discharge fully all of the obligations of the Record Holder thereunder from and after the Separation Time and indemnify such Record Holder for all losses arising out of such performance by such Record Holder. The Record Holder shall, without further consideration therefor, pay, assign and remit to the Beneficial Holder promptly all monies, rights and other consideration received in respect of such performance. The Record Holder shall exercise or exploit its rights and options under all such Contracts, licenses and other rights and commitments referred to in this Section 9.5(c) only as reasonably directed by the Beneficial Holder and at the Beneficial Holder's expense. If and when any such consent shall be obtained or any such Contract, license or other right shall otherwise become assignable, the Record Holder shall promptly assign all of its rights and obligations thereunder to the Beneficial Holder without payment of further consideration and the Beneficial Holder shall, without the payment of any further consideration therefor, assume such rights and obligations. (d) In the event that, subsequent to the Separation Time, U S WEST shall either (i) receive written notice from New U S WEST that certain specified Assets which properly constitute New U S WEST Assets were not transferred to it on or prior to the Separation Time or (ii) determine that certain Assets of U S WEST which constitute New U S WEST Assets were not transferred to New U S WEST on or prior to the Separation Time, then, as promptly as practicable thereafter, U S WEST shall use its reasonable best efforts to transfer and deliver any and all of such Assets to New U S WEST without the payment by New U S WEST of any 65 consideration therefor. In the event that, subsequent to the Separation Time, New U S WEST shall either (i) receive written notice from U S WEST that certain specified Assets were transferred to New U S WEST which properly constitute MediaOne Assets, or (ii) determine that certain Assets of New U S WEST which constitute MediaOne Assets were transferred to New U S WEST, then as promptly as practicable thereafter, New U S WEST shall use its reasonable best efforts to transfer and deliver any and all of such Assets to U S WEST without the payment by U S WEST of any consideration therefor. (e) In the event that, subsequent to the Separation Time, U S WEST or New U S WEST identifies an Asset that is not included in either the New U S WEST Assets or the MediaOne Assets (including without limitation, a Contract that was entered into by U S WEST on behalf of both the MediaOne Business and the New U S WEST Business and does not relate primarily to either the MediaOne Business or the New U S WEST Business), U S WEST and New U S WEST agree to act in a manner to reasonably preserve the interests of both Groups in such Asset. 9.5 NATIONAL CONTRACTS. Each of the parties hereto agrees to use its respective reasonable best efforts to permit the other party hereto to obtain the benefits of certain Contracts with nationally-based vendors and suppliers existing as of the Separation Time and listed on Section 9.5 of the Separation Disclosure Schedule (such Contracts, each individually a "NATIONAL CONTRACT" and collectively the "NATIONAL CONTRACTS"). Each of U S WEST and New U S WEST hereby agrees to cooperate with respect to obtaining favorable prices under such National Contracts by combining or consolidating orders made under such National Contracts. Each of U S WEST and New U S WEST hereby agrees that New U S WEST or a member of the New U S WEST Group shall administer these National Contracts and that U S WEST shall be responsible for the portions attributable to U S WEST of any order or delivery of goods and services received under each National Contract (including costs of administration). The arrangements of U S WEST and New U S WEST with respect to National Contracts relating to employee matters shall be governed by the terms of the Employee Matters Agreement. 9.6 NON-SOLICITATION OF EMPLOYEES. Each of U S WEST and New U S WEST shall not, and shall cause the other members of the Group of which it is a member not to, until 66 the first anniversary of the Separation Time, directly or indirectly, (i) recruit any Covered Employee of the other Group or (ii) solicit any Covered Employee of the other Group to leave the employment of the other Group; PROVIDED, HOWEVER, that nothing contained herein shall (A) prohibit any advertisement or general solicitation (or employment as a result thereof) by any member of the U S WEST Group or the New U S WEST Group that is not specifically targeted at employees of the other Group or (B) prohibit any employee of one Group from initiating employment discussion with the other Group without any recruitment or solicitation from such other Group. In the event U S WEST or New U S WEST breaches the provisions of this Section 9.5, the breaching party shall be required to pay to the non-breaching party as liquidated damages an amount equal to the product of (x) 1.5 multiplied by (y) the total salary and bonus under the non-breaching party's short-term compensation plan received by the Covered Employee recruited or solicited during the most recent 12-month period. 9.7 LOCK BOXES. U S WEST shall take all such actions as may be necessary or required to deliver to New U S WEST full authority as of the Separation Time with respect to all lock boxes or similar deposit arrangements maintained by U S WEST prior to the Separation Time and which are utilized exclusively by the New U S WEST Business. Effective as of the Separation Time, U S WEST shall terminate any arrangement whereby funds directed to such lock boxes or similar arrangements are consolidated with other funds of U S WEST or otherwise made available to U S WEST. U S WEST shall, effective as of the Separation Time, take all necessary steps to remove all Persons who are not New U S WEST Employees but who are signatories or holders of powers-of-attorney with respect to such lock boxes or other arrangements from the list of such signatories and holders and otherwise extinguish their signing authority with respect thereto. 9.8 AGREEMENTS WITH RESPECT TO COMMON STOCK RECEIVED BY SAVINGS PLAN/ESOPS. (a) U S WEST and the U S WEST Savings Plan/ESOP and New U S WEST and the MediaOne Savings Plan/ESOP shall cooperate with each other in supplying such information as may be necessary for any of such parties to complete and file any information reporting forms presently or hereafter required by the SEC or any commissioner or other authority administering the "blue sky" or securities laws of any applicable jurisdiction which would be required to be filed as a condition to the 67 availability of an exemption from registration or qualification of an offer or sale of the shares of the MediaOne Common Stock owned by the U S WEST Savings Plan/ESOP after the Separation (the "New U S WEST Savings Plan Shares") and the shares of the New U S WEST Common Stock received by the MediaOne Savings Plan/ESOP in the Separation (the "MediaOne Savings Plan Shares") under the Securities Act, or any such "blue sky" or securities laws. (b) To the extent required by Applicable Law, (i) until the sale by the New U S WEST Savings Plan of the New U S WEST Savings Plan Shares, U S WEST shall file in a timely manner all reports contemplated by Rule 144(c)(1) under the Securities Act as satisfying the condition that adequate public information with respect to U S WEST is available and (ii) until the sale by the MediaOne Savings Plan of the MediaOne Savings Plan Shares, New U S WEST shall file in a timely manner all reports contemplated by Rule 144(c)(1) under the Securities Act as satisfying the condition that adequate public information with respect to New U S WEST is available. 9.9 AIRTOUCH TRANSACTION. (a) Except as set forth in this Section 9.9 or as otherwise agreed to by the parties, all rights and obligations of U S WEST and its Subsidiaries under the AirTouch Merger Agreement shall be retained by U S WEST in connection with the Separation. (b) At the Separation Time, U S WEST shall assign to New U S WEST and the New U S WEST Group, pursuant to the instrument of assignment attached as Exhibit K-2 to the AirTouch Merger Agreement, the following rights (and related obligations): (i) all of the rights (and related obligations) of U S WEST and its Subsidiaries under Section 7.8 of the AirTouch Merger Agreement (relating to use of the "U S WEST" name by AirTouch and its Subsidiaries), subject to the limitations set forth therein; and (ii) an equal and undivided interest (together with the U S WEST Group) in all of the rights (and related obligations) of U S WEST and its Subsidiaries under Sections 7.9(b) and 7.9(c) of the AirTouch Merger Agreement (relating to Intellectual Property), subject to the limitations set forth therein; 68 (iii) an equal and undivided interest (together with the U S WEST Group) in all of the rights (and related obligations) of U S WEST and its Subsidiaries under Section 7.11 of the AirTouch Merger Agreement (relating to Third Party Rights), subject to the limitations set forth therein; and (iv) an equal and undivided interest (together with the U S WEST Group) in all of the rights (and related obligations) of U S WEST and its Subsidiaries under the Software License Agreement (as defined in the AirTouch Merger Agreement), subject to the limitations set forth therein (c) At the Separation Time, U S WEST shall assign to New U S WEST the obligations (and related rights) of U S WEST under the Patent License Agreement (as defined in the AirTouch Merger Agreement) with respect to licenses granted by U S WEST to AirTouch under certain of the New U S WEST Patents. (d) New U S WEST acknowledges the rights of AirTouch pursuant to Section 7.10 of the AirTouch Merger Agreement to make claims (directly or through U S WEST) under the Joint Insurance Arrangements and agrees that, for purposes of Article VII hereof, any such claim shall be deemed to have been made by the U S WEST Group. (e) New U S WEST acknowledges the right of AirTouch pursuant to Section 7.12(c) of the AirTouch Merger Agreement to terminate any contract, license or other arrangement between NewVector or any of its Subsidiaries or investments or PCS Holdings, on the one hand, and a member of the New U S WEST Group, on the other hand, on 30 Business Days' prior written notice. (f) New U S WEST agrees to be subject to the restrictions set forth in Section 8.3(l) of the AirTouch Merger Agreement. It is acknowledged and agreed that the exceptions to such restrictions listed in Exhibit J to the AirTouch Merger Agreement shall only be for the benefit of the U S WEST Group. 69 ARTICLE X ACCESS TO INFORMATION 10.1 ALLOCATION OF CORPORATE RECORDS. (a) All corporate books and records of U S WEST and its Subsidiaries relating solely to the New U S WEST Group, the New U S WEST Assets, the New U S WEST Business, the New U S WEST Liabilities and the Communications Employees, including, without limitation, original corporate minute books, stock ledgers and certificates and the corporate seal of each corporation the capital stock of which is included in the New U S WEST Assets and documentation relating to the New U S WEST Liabilities, including, in each case, all active agreements, active litigation files and government filings, shall be the property of the New U S WEST Group. Prior to or as promptly as practicable after the Separation Time, U S WEST shall deliver to New U S WEST all such corporate books and records in its possession or in the possession of any member of the U S WEST Group. (b) All corporate books and records of U S WEST and its Subsidiaries relating solely to the U S WEST Group, the MediaOne Assets, the MediaOne Business, the MediaOne Liabilities and the Media Employees, including, without limitation, original corporate minute books, stock ledgers and certificates and the corporate seal of each corporation the capital stock of which is included in the MediaOne Assets and documentation relating to the MediaOne Liabilities, including, in each case, all active agreements, active litigation files and government filings, shall be the property of the U S WEST Group. Prior to or as promptly as practicable after the Separation Time, New U S WEST shall deliver to U S WEST all such corporate books and records in its possession or in the possession of any member of the New U S WEST Group. (c) All corporate books and records of U S WEST and its Subsidiaries relating to both (A) the New U S WEST Group, the New U S WEST Assets, the New U S WEST Business, the New U S WEST Liabilities and the Communications Employees and (B) the U S WEST Group, the MediaOne Assets, the MediaOne Business, the MediaOne Liabilities and the Media Employees, including without limitation, tax documents, records related to issuance or purchase of stock, contracts, agreements, leases, deeds, articles and certificates of incorporation, insurance policies, by-laws, Shareholder and Board of Director meeting minutes, employee 70 service histories, records related to the Environmental Protection Agency requirements and audit reports (collectively, the "JOINT BOOKS AND RECORDS"), shall be shared by the U S WEST Group and the New U S WEST Group. (d) Prior to or as promptly as practicable after the Separation Time, all Joint Books and Records which are used on a day-to-day basis by members of the U S WEST Group and the New U S WEST Group and their respective employees shall be duplicated such that each of the U S WEST Group and the New U S WEST Group shall have a copy of all such Joint Books and Records in its possession. Prior to or as promptly as practicable after the Separation Time, all Joint Books and Records which are not used on a day-to-day basis by members of the U S WEST Group and the New U S WEST Group and their respective employees ("ARCHIVED JOINT BOOKS AND RECORDS") shall be deposited by the U S WEST Group and the New U S WEST Group with an independent archive vendor. U S WEST and New U S WEST shall establish a contractual arrangement with an archive vendor (the "ARCHIVE VENDOR") on behalf of each party for the purpose of storage and management of the Archived Joint Books and Records. Prior to or as promptly as practicable after the Separation Time, U S WEST and New U S WEST agree to gather, inventory and input into a common database all Archived Joint Books and Records to facilitate their retrieval at a later date. Each of U S WEST and New U S WEST agree that any additional Archived Joint Books and Records that are discovered by a member of either Group after the Separation Time will be inventoried, input into the database and delivered as mutually agreed to the Archive Vendor by the applicable party. Notification on an as needed basis by e-mail of records added to the database will be the responsibility of the party initiating the change so as to maintain the integrity of the process described in this Section 10.1 (d). U S WEST and New U S WEST agree to cooperate to facilitate the foregoing arrangements with respect to Archived Joint Books and Records. 10.2 ACCESS TO INFORMATION. From and after the Separation Time, each of U S WEST and New U S WEST shall have access to all of the Joint Books and Records. In furtherance of the foregoing: (a) Each party hereto acknowledges that: (i) Each of U S WEST and New U S WEST (and the members of the U S WEST Group and the New U S WEST Group, respectively) has 71 or may obtain, and that the Joint Books and Records will include, Privileged Information; (ii) there are a number of Litigation Matters affecting each or both of U S WEST and New U S WEST; (iii) both U S WEST and New U S WEST have a common legal interest in Litigation Matters, in the Privileged Information, and in the preservation of the confidential status of the Privileged Information, in each case relating to pre-Separation business of the U S WEST Group or the New U S WEST Group or relating to or arising in connection with the relationship between the Groups on or prior to the Separation Time; and (iv) both U S WEST and New U S WEST intend that the transactions contemplated hereby and by the other Transaction Documents and any transfer of Privileged Information in connection therewith shall not operate as a waiver of any applicable privilege. (b) Each of U S WEST and New U S WEST agrees, on behalf of itself and each member of the Group of which it is a member, not to disclose or otherwise waive any privilege attaching to any Privileged Information relating to pre-Separation business of the New U S WEST Group or the U S WEST Group, respectively, or relating to or arising in connection with the relationship between the Groups on or prior to the Separation Time, without providing prompt written notice to and obtaining the prior written consent of the other, which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that U S WEST and New U S WEST may make such disclosure or waiver with respect to Privileged Information if such Privileged Information relates solely to the pre-Separation business of the U S WEST Group, in the case of U S WEST, or the New U S WEST Group, in the case of New U S WEST. Any disagreement between any member of the U S WEST Group and any member of the New U S WEST Group concerning the reasonableness of withholding such consent shall be submitted to the Separation Committee in accordance with the procedures set forth in Section 12.2 and no disclosure shall be made prior to a resolution of such disagreement. (c) Upon any member of the U S WEST Group or any member of the New U S WEST Group receiving any subpoena or other compulsory disclosure notice from a court, other governmental agency or otherwise that requests disclosure of Privileged Information, in each case relating to pre-Separation business of the New U S WEST Group or the U S WEST Group, respectively, or relating to or arising in connection with the relationship between the Groups on or prior to the Separation Time, in the event the recipient of 72 such the notice intends to disclose such Privileged Information, such recipient shall promptly provide to the other Group (following the notice provisions set forth herein) a copy of such notice, the intended response, and all materials or information relating to the other Group that might be disclosed. In the event of a disagreement as to the intended response or disclosure, unless and until the disagreement is resolved as provided in subsection (b), the parties shall cooperate to assert all defenses to disclosure claimed by either party's Group, and shall not disclose any disputed documents or information until all legal defenses and claims of privilege have been finally determined. 10.3 PRODUCTION OF WITNESSES. Subject to Section 10.2, after the Separation Time, each of U S WEST and New U S WEST shall, and shall cause each member of the U S WEST Group and the New U S WEST Group, respectively, to, make available to U S WEST or New U S WEST or any member of the U S WEST Group or of the New U S WEST Group, as the case may be, upon written request of the other, such Group's directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be required in connection with any Litigation Matters, administrative or other proceedings in which the requesting party may from time to time be involved and relating to the pre-Separation business of the U S WEST Group or the New U S WEST Group or relating to or in connection with the relationship between the Groups on or prior to the Separation Time; PROVIDED, HOWEVER, that, notwithstanding the foregoing, neither the U S WEST Group nor the New U S WEST Group shall be required to make available such Group's directors, officers, employees or witnesses in response to a subpoena received by any member of the other Group from a third party. 10.4 CERTAIN PROCEDURES RELATING TO ACCESS TO ARCHIVED JOINT BOOKS AND RECORDS. (a) In the event that New U S WEST or a member of the New U S WEST Group requests retrieval from the Archive Vendor of a document included in the Archived Joint Books and Records: (i) the person making the request will be required to notify The New U S WEST Records Management Group ("USWRM"); (ii) USWRM will query the database for the applicable record and request retrieval of the relevant box from the Archive Vendor; (iii) USWRM will notify MediaOne Group Records Management ("MGRM") of such request; (iv) the Archive Vendor will deliver the applicable box or file to USWRM and and such box or file will be duplicated by USWRM; (v) the duplicate of the applicable record will be delivered to the person making the 73 request; and (vi) the original box or file will be returned to the Archive Vendor within 24 hours. (b) In the event that U S WEST or a member of the U S WEST Group requests retrieval from the Archive Vendor of a document included in the Archived Joint Books and Records: (i) the person making the request will be required to notify MGRM; (ii) MGRM will query the database for the applicable record and request retrieval of the relevant box from the Archive Vendor; (iii) MGRM will notify USWRM of such request; (iv) the Archive Vendor will deliver the applicable box or file to MGRM and and such box or file will be duplicated by MGRM; (v) the duplicate of the applicable record will be delivered to the person making the request; and (vi) the original box or file will be returned to the Archive Vendor within 24 hours. (c) Any Archived Joint Books and Records retrieved by U S WEST or New U S WEST pursuant to the procedures described herein shall not be altered from their original form. All Archived Joint Books and Records will be destroyed by the Archive Vendor in accordance with the terms and conditions of the December 19, 1997 Records Retention Compliance Plan of U S WEST only after both U S WEST and New U S WEST review the eligible documents and come to an agreement. 10.5 CONFIDENTIALITY. Subject to Section 10.2, which shall govern Privileged Information, and except as otherwise provided in a Transaction Document or any other agreement between U S WEST and New U S WEST, from and after the Separation Time, each of New U S WEST and U S WEST shall, and shall use reasonable best efforts to cause the members of its Group and Representatives to, preserve the confidentiality of all Information concerning or related to the other party's Group obtained by it prior to the Separation Time or furnished to it by such other party's Group pursuant to this Agreement or the other Transaction Documents, including any Joint Books and Records, with the same degree of care as it takes to preserve confidentiality for its own similar Information. 10.6 COOPERATION WITH RESPECT TO GOVERNMENT REPORTS AND FILINGS. U S WEST, on behalf of itself and each member of the U S WEST Group, agrees to provide any member of the New U S WEST Group, and New U S WEST, on behalf of itself and each member of the New U S WEST Group, agrees to provide any member of the U S WEST Group, with such 74 cooperation and Information as may be reasonably requested by the other in connection with the preparation or filing of any government report or other government filing contemplated by this Agreement or the other Transaction Documents or in conducting any other government proceeding relating to pre-Separation business of the U S WEST Group or the New U S WEST Group, Assets or Liabilities of either Group or relating to or in connection with the relationship between the Groups on or prior to the Separation Time. Such cooperation and Information shall include, without limitation, promptly forwarding copies of appropriate notices and forms or other communications received from or sent to any Governmental Authority which relate to the U S WEST Group, in the case of the New U S WEST Group, or the New U S WEST Group, in the case of the U S WEST Group. Each party shall make its employees and facilities available during normal business hours and on reasonable prior notice to provide explanation of any documents or Information provided hereunder. 10.7 CERTAIN LIMITATIONS WITH RESPECT TO INFORMATION. (a) All costs incurred in connection with the retention of the Archive Vendor and the storage of the Archived Joint Books and Records in accordance with this Article X will be shared equally by U S WEST and New U S WEST. Costs incurred in connection with the retrieval of Archived Joint Books and Records, including costs of transportation, refiles, duplication and supplies, will be the responsibility of the entity incurring the cost. (c) No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Article X hereof which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate, in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed after reasonable best efforts by such party to comply with the provisions of Section 10.4. (d) The rights and obligations granted under this Article X are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in any other Transaction Document. 10.8 PROTECTIVE ARRANGEMENTS. In the event that any party or any member of its Group either determines on 75 the advice of its counsel that it is required to disclose any Information pursuant to applicable law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Information concerning any other party (or any member of any other party's Group) that is subject to the confidentiality provisions hereof, such party shall notify the other party prior to disclosing or providing such Information and shall cooperate at the expense of the requesting party in seeking any reasonable protective arrangements requested by such other party. Subject to the foregoing, the Person that received such request may thereafter disclose or provide Information to the extent required by such law (as so advised by counsel) or by lawful process or such Governmental Authority. ARTICLE XI MUTUAL RELEASE; NO REPRESENTATIONS OR WARRANTIES 11.1 MUTUAL RELEASE. (a) Effective as of the Separation Time and except as specifically set forth in this Agreement or any of the other Transaction Documents, each of New U S WEST, on the one hand, and U S WEST, on the other hand, on its own behalf and on behalf of each member of its respective Group, releases and forever discharges the other and the members of its Group, and its and their respective officers, directors, agents, Affiliates, record and beneficial security holders (including, without limitation, trustees and beneficiaries of trusts holding such securities), advisors and Representatives (in their respective capacities as such) and their respective heirs, executors, administrators, successors and assigns, of and from all debts, demands, Actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, claims and Liabilities whatsoever of every name and nature, both in law and in equity, which the releasing party has or ever had, which arise out of or relate to, in whole or in part, events, circumstances or actions, whether known or unknown, taken by such other party occurring or failing to occur or any conditions existing on or prior to the Separation Time; PROVIDED, HOWEVER, that the foregoing general release shall not apply to (i) any Liabilities assumed, transferred, assigned, allocated or arising under this Agreement or any of the other Transaction Documents and shall not affect any party's rights to enforce this Agreement (including the provisions of Article VIII) or any of the other Transaction 76 Documents in accordance with their terms; (ii) any Liability arising under any agreement listed in Section 9.2 of the Separation Disclosure Schedule (each of which shall remain in effect following the Separation Time); and (iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 11.1 (provided that the parties agree not to bring suit or permit any members of their Group to bring suit against any Person with respect to any Liability to the extent such Person would be released with respect to such Liabilities by this Section 11.1 but for this clause (iii)). U S WEST and New U S WEST acknowledge that the foregoing general release shall not apply to any Liabilities assigned by members of the U S WEST Group or members of the New U S WEST Group to third parties prior to the Separation Time. (b) The parties acknowledge that members of the U S WEST Law Department and U S WEST's outside counsel currently represent members of both the U S WEST Group and the New U S WEST Group. Effective as of the Separation Time, each of New U S WEST, on the one hand, and U S WEST, on the other hand, on its own behalf and on behalf of each member of its respective Group, waives any conflict with respect to such common representation before, at or after the Separation Time (other than, in the case of such common representation by U S WEST's outside counsel, with respect to any dispute or Action between a member of the U S WEST Group and a member of the New U S WEST Group). 11.2 NO REPRESENTATIONS OR WARRANTIES. New U S WEST understands and agrees that neither U S WEST nor any other member of the U S WEST Group is, and U S WEST understands and agrees that neither New U S WEST nor any other member of the New U S WEST Group is, in this Agreement or in any other agreement or document, representing or warranting to the other in any way as to such Group's Assets, business or Liabilities or as to any consents or approvals required in connection with the consummation of the transactions contemplated by this Agreement, it being agreed and understood that each member of the Group shall take all of the Assets "AS IS, WHERE IS". Except as set forth in this Agreement and the other Transaction Documents, both parties shall bear the economic and legal risk of the Reorganization, Contribution and Separation that (a) any conveyance of such Group's Assets shall prove to be insufficient, (b) the title of any member of the New U S WEST Group or the U S WEST Group to any of their respective Assets shall be other than good and marketable and free from 77 encumbrances, (c) the title of any member of the New U S WEST Group or the U S WEST Group to the shares of any Subsidiary of such Group shall be other than good and marketable and free from encumbrances or (d) any member of the other Group shall fail to obtain any consents or approvals relating to its business required in connection with the consummation of the transactions contemplated by this Agreement. ARTICLE XII GENERAL PROVISIONS 12.1 MERGER OR CONSOLIDATION. Neither New U S WEST nor U S WEST (in either case, the "TRANSACTION PARTY") shall (a) consolidate with or merge into any Person or permit any Person to consolidate with or merge into the Transaction Party (other than a merger or consolidation in which the Transaction Party is the surviving or continuing corporation) or (b) sell, assign, transfer, lease or otherwise dispose of, in one transaction or a series of related transactions, all or substantially all of the assets of the Transaction Party, unless the resulting, surviving or transferee Person shall expressly assume, by instrument in form and substance reasonably satisfactory to the other party, all of the obligations of the Transaction Party under this Agreement and each of the other Transaction Documents. 12.2 SEPARATION COMMITTEE; DISPUTE RESOLUTION. (a) As of the Separation Time, New U S WEST and U S WEST shall form a committee (the "SEPARATION COMMITTEE") comprised of one representative designated from time to time by the General Counsel of New U S WEST in his sole discretion and one representative designated from time to time by the General Counsel of U S WEST in his sole discretion. Until the tenth anniversary of the Separation Time, the Separation Committee shall be responsible for resolving any and all disputes between any member of the U S WEST Group and any member of the New U S WEST Group arising with respect to any matter, whether based in contract, tort, statute or otherwise (collectively, "DISPUTES"), including any dispute as to (i) whether any Action or other Liability is a New U S WEST Liability, a MediaOne Liability or a Shared Liability, (ii) whether any Asset is a New U S WEST Asset or a MediaOne Asset, (iii) the interpretation of any provision of this Agreement or any other Transaction 78 Document and (iv) such other matters as are contemplated by this Agreement or any other Transaction Document to be resolved by the Separation Committee. In the event of any such Dispute, each of New U S WEST and U S WEST shall have the right to refer in writing such Dispute to the Separation Committee for resolution. The Separation Committee shall be required to render a written decision with respect to any Dispute within 30 days of its receipt of the referral. The decision of the Separation Committee with respect to any Dispute shall be binding on the New U S WEST Group and the U S WEST Group and their respective successors and assigns. In the event that the Separation Committee is unable to reach a unanimous determination as to any Dispute to which it is referred within 30 days of such referral, each of New U S WEST and U S WEST shall have the right to submit such Dispute to arbitration in accordance with the procedures set forth in Section 12.2(b). All out-of-pocket expenses and costs incurred by New U S WEST or U S WEST in connection with the procedures set forth in this Section 12.2(a) shall be borne by the party incurring such expenses and costs. (b) In the event that the Separation Committee is unable to reach a unanimous determination as to any Dispute pursuant to Section 12.2(a), each of New U S WEST and U S WEST shall have the right to submit such Dispute to arbitration in accordance with the procedures set forth in this Section 12.2(b). Until the tenth anniversary of the Separation Time, resolution of any and all such Disputes, including, but not limited to, disputes over arbitrability, shall be exclusively governed by and settled in accordance with the provisions of this Section 12.2(b); PROVIDED, HOWEVER, that nothing contained herein shall preclude either party from seeking or obtaining injunctive relief or equitable or other judicial relief to enforce this Section 12.2(b). U S WEST or New U S WEST (each a "PARTY") may commence proceedings hereunder by delivering a written notice (the "DEMAND") to the other Party providing a reasonable description of the Dispute to the other, and expressly requesting arbitration hereunder. The parties hereby agree to submit all Disputes to arbitration under the terms hereof, which arbitration shall be final, conclusive and binding upon the parties, their successors and assigns. The arbitration shall be conducted in Denver, Colorado by three arbitrators acting by majority vote (the "PANEL"). Of the three arbitrators comprising the Panel, one arbitrator shall be selected by U S WEST, one arbitrator shall be 79 selected by New U S WEST and one arbitrator shall be jointly selected by the arbitrators selected by U S WEST and New U S WEST. If either U S WEST or New U S WEST fail to select an arbitrator within 15 days after delivery of the Demand, the arbitrator which is to be selected by such Party shall be appointed pursuant to the commercial arbitration rules of the American Arbitration Association, as amended from time to time (the "AAA RULES"). If an arbitrator so selected or appointed becomes unable to serve, his or her successors shall be similarly selected or appointed. Notwithstanding the foregoing, at the agreement of the Parties, the Panel shall consist of one arbitrator selected by agreement of the Parties for appropriate Disputes. The arbitration shall be conducted pursuant to the Federal Arbitration Act and such procedures as the Parties may agree, or, in the absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding the foregoing, the Panel, taking into consideration the desires of the Parties for expedited resolution of the Dispute, shall have discretion to order discovery, including, in appropriate circumstances, depositions. All hearings shall be conducted on an expedited schedule, and all proceedings shall be confidential. Either Party may at its expense make a stenographic record thereof, which shall then be shared with the other Party. Hearings with respect to a Dispute shall commence not later than 60 days after selection or appointment of the Panel, and shall not be more than 30 days in length. The Panel shall be required to make a final award within 30 days of the conclusion of the hearings. The award shall be in writing and shall specify the factual and legal basis for the award. The Panel shall apportion all costs and expenses of arbitration, including the Panel's fees and expenses, fees and expenses of experts and reasonable attorneys fees, between the prevailing and non-prevailing Party as the Panel deems fair and reasonable. The Parties agree that monetary damages may be inadequate and that either Party shall be entitled to seek, and that the Panel shall be empowered to enter, equitable and injunctive relief, including preliminary and temporary injunctive relief, in addition to any other appropriate relief or remedy. The Parties consent to the jurisdiction of the Panel to award such relief and to the binding nature of any such relief awarded by the Panel. In no event may the Panel award consequential, exemplary, special or punitive damages, or lost profits, except to the extent such consequential, exemplary, special or punitive damages, or lost profits are actually paid by a Party or a member of 80 that Party's Group to a third party. Any arbitration award shall be binding and enforceable against the Parties and each member of their respective Groups and judgment may be entered thereon in any court of competent jurisdiction. 12.3 SUBSIDIARIES. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on or after the Separation Time. 12.4 EXPENSES. Except as set forth in this Agreement or in the Separation Disclosure Schedule, all out-of-pocket costs with respect to the transfer of the New U S WEST Assets and the transactions contemplated hereby and by the other Transaction Documents shall be borne equally by U S WEST and New U S WEST. 12.5 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of Colorado, without reference to choice of law principles, including matters of construction, validity and performance. 12.6 NOTICES. Notices, requests, permissions, waivers, referrals and all other communications hereunder shall be in writing and shall be deemed to have been duly given if signed by the respective persons giving them (in the case of any corporation the signature shall be by an officer thereof) and delivered by hand or by telecopy or on the date of receipt indicated on the return receipt if mailed (registered or certified, return receipt requested, properly addressed and postage prepaid): If to U S WEST, to: U S WEST, INC. (to be renamed "MEDIAONE GROUP, INC.") 188 Inverness Drive West Englewood, Colorado 80112 Attention: General Counsel Telephone: (303) 858-5800 81 If to New U S WEST, to: USW-C, INC. (to be renamed "U S WEST, INC.") 1801 California Street Denver, Colorado 80202 Attention: General Counsel Telephone: (303) 896-2020 Such names and addresses may be changed by notice given in accordance with this Section 12.6. Copies of all notices, requests, permissions, waivers, referrals and all other communications hereunder shall be given to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Dennis J. Block, Esq. Telephone: (212) 310-8000 Telecopy: (212) 310-8007 12.7 ENTIRE AGREEMENT. This Agreement and the other Transaction Documents, together with all schedules, exhibits, annexes, certificates, instruments and agreements delivered pursuant hereto and thereto, contain the entire understanding of the parties hereto and thereto with respect to the subject matter contained herein and therein, and supersede and cancel all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, respecting such subject matter. 12.8 HEADINGS; REFERENCES. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to "Articles", "Sections" or "Exhibits" shall be deemed to be references to Articles or Sections hereof or Exhibits hereto unless otherwise indicated. All references herein to "Sections" of the Separation Disclosure Schedule shall be deemed to be references to the Separation Disclosure Schedule unless otherwise indicated. 12.9 SCHEDULES. The Separation Disclosure Schedule referenced in this Agreement and attached hereto is incorporated into this Agreement by reference and made a part hereof. U S WEST and New U S WEST agree that the 82 Separation Disclosure Schedule shall be updated immediately prior to the Separation Time. 12.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts and each counterpart shall be deemed to be an original, but all of which shall constitute one and the same original. 12.11 PARTIES IN INTEREST; ASSIGNMENT; SUCCESSORS. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon U S WEST and New U S WEST and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies under or by reason of this Agreement. 12.12 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, each party agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by law, and each party hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. 12.13 AMENDMENT. This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the parties hereto. 12.14 TERMINATION. This Agreement may be terminated and the Separation abandoned at any time prior to the Separation Time by and in the sole discretion of the Board of Directors of U S WEST without the approval of any other party hereto or of U S WEST's stockholders. In the event of such termination, no party hereto or to any other Transaction Document shall have any Liability to any Person by reason of this Agreement or any other Transaction Document, except as otherwise expressly provided herein or therein. 83 IN WITNESS WHEREOF, each of the parties has caused this Separation Agreement to be duly executed on its behalf by its officers thereunto duly authorized, all as of the day and year first above written. U S WEST, INC. (to be renamed MEDIAONE GROUP, INC.) By: /s/ Charles M. Lillis ------------------------------------- Name: Charles M. Lillis Title: Executive Vice President; President and Chief Executive Officer--U S WEST Media Group USW-C, INC. (to be renamed U S WEST, INC.) By: /s/ Solomon D. Trujillo ------------------------------------- Name: Solomon D. Trujillo Title: President and Chief Executive Officer 84 EX-99.2 5 EXHIBIT 99.2 EMPLOYEE MATTERS AGREEMENT TRANSFER, ASSUMPTION AND/OR DIVISION OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS TABLE OF CONTENTS PAGE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. GENERAL PRINCIPLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (a) New U S WEST Liabilities . . . . . . . . . . . . . . . . . . . . . 7 (b) MediaOne Liabilities . . . . . . . . . . . . . . . . . . . . . . . 8 (c) Shared Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8 (d) Class Action Liabilities . . . . . . . . . . . . . . . . . . . . . 9 (e) Appeal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (f) Funded Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 9 (g) Control of litigation. . . . . . . . . . . . . . . . . . . . . . . 9 (h) Election to Assume Liability . . . . . . . . . . . . . . . . . . . 10 3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4. EMPLOYEE SAVINGS PLANS. . . . . . . . . . . . . . . . . . . . . . . . . 12 5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES. . . . . . . . 16 6. OTHER TAX-QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . 24 7. WELFARE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (a) Communications Plans . . . . . . . . . . . . . . . . . . . . . . . 24 (b) Media Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (c) Joint Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 (d) Continuing Treatment . . . . . . . . . . . . . . . . . . . . . . . 27 (e) Continuance of Elections . . . . . . . . . . . . . . . . . . . . . 27 (f) Co-Payments and Maximum Benefits . . . . . . . . . . . . . . . . . 27 (g) Pre-existing conditions. . . . . . . . . . . . . . . . . . . . . . 28 (h) COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (i) Long-Term Disability . . . . . . . . . . . . . . . . . . . . . . . 29 8. VEBA's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 9. INCENTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 33 (a) Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 33 (b) Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . 35 (c) LTIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 i (d) ESTIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 (e) Phantom Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 37 10. OTHER BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 (a) Top-hat plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 39 (b) Employment contracts . . . . . . . . . . . . . . . . . . . . . . . 40 (c) Split-dollar contracts . . . . . . . . . . . . . . . . . . . . . . 40 (d) Ex-Pat Employees . . . . . . . . . . . . . . . . . . . . . . . . . 41 (e) Vail Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 (f) Leaves of Absence. . . . . . . . . . . . . . . . . . . . . . . . . 41 (g) Non-Employee Director Plans. . . . . . . . . . . . . . . . . . . . 42 (h) Non-Employee State Executive Board Plan. . . . . . . . . . . . . . 42 11. PORTABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 12. FURTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 13. COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES . . . . . . 45 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (a) Payment of 1998 Administrative Costs and Expenses. . . . . . . . . 46 (b) Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (1) Information Provided. . . . . . . . . . . . . . . . . . . . . 47 (2) Vendor Contracts. . . . . . . . . . . . . . . . . . . . . . . 47 (c) Beneficiary Designations . . . . . . . . . . . . . . . . . . . . . 48 (d) Effect If Separation Does Not Occur. . . . . . . . . . . . . . . . 48 (e) Provisions of Separation Agreement . . . . . . . . . . . . . . . . 48 (f) U S WEST Benefits Handbook . . . . . . . . . . . . . . . . . . . . 48 ii EMPLOYEE MATTERS AGREEMENT TRANSFER, ASSUMPTION AND/OR DIVISION OF EMPLOYEE BENEFITS PLANS AND EMPLOYEE ARRANGEMENTS 1. DEFINITIONS. (a) All capitalized terms used in this EM Agreement shall have the meanings set forth below or , if not set forth below, the meaning given in the Separation Agreement. "AirTouch Transfers" shall mean Terminated Employees whose employment is transferred to AirTouch Communications, Inc. or any of its affiliates prior to the Separation Time as a result of the merger agreement among Existing U S WEST, certain subsidiaries thereof and AirTouch Communications, Inc. and who either: (i) are eligible for retiree medical coverage or retiree life insurance as of the date of transfer of employment; or (ii) have an account balance in the Media Savings Plan/ESOP immediately after the Separation Time. "Average Value" shall mean the average Market Value of the Communications Stock or Media Stock, as applicable, over the period of 20 Trading Days ending on the fifth Trading Day prior to the date of the Separation Time, rounded to the nearest one-hundred thousandth (or if there shall not be a nearest one-hundred thousandth, to the next highest one-hundred thousandth). "Cable Companies" shall mean MediaOne of Delaware, Inc. (f/k/a Continental Cablevision, Inc.), MediaOne, Inc. and/or MediaOne of Michigan, Inc. (f/k/a Booth Communications), or their predecessors. "COBRA" shall mean the continuation coverage requirements for group health plans under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608. "Communications Employees" shall mean all persons who are Employees of the New U S WEST Group at the Separation Time, including without limitation (1) Employees who worked for Existing U S WEST prior to the Separation Time that are designated as Communications Employees by Existing U S WEST as of the Separation Time, (2) Employees who, prior to the Separation Time, worked for an entity that is a member of the MediaOne Group that are designated as Communications Employees as 1 of the Separation Time, and (3) Employees who, prior to the Separation Time, worked for Dex that are designated as Communications Employees as of the Separation Time. "Communications Employee Arrangements" shall mean all Employee Arrangements sponsored by members of the New U S WEST Group after the Separation Time. "Communications Employee Benefit Plans" shall mean all Employee Benefit Plans sponsored by members of the New U S WEST Group after the Separation Time. "Deferred Benefits" shall mean the entitlement of a Terminated Employee, based solely on the records of the Existing U S WEST Group at the Separation Time, to future benefits under one or more of the Deferred Plans. Except as provided in the definition of Terminated Media Employee and Terminated Inc. Employee, a Terminated Employee who, according to such records, is not entitled to any benefits under the Deferred Plans or who has already received all of such benefits prior to the Separation Time does not have any Deferred Benefits. "Deferred Plans" shall mean the U S WEST Employee Savings Plan/ESOP (except accounts attributable to AirTouch Transfers); the U S WEST Pension Plan (including the disability pensions provided thereunder); retiree medical benefits under any medical plan maintained by the Existing U S WEST Group (but excluding COBRA); and long-term disability benefits under a long-term disability plan maintained by the Existing U S WEST Group. "EBC" shall mean the Employee Benefits Committee of Existing U S WEST as constituted prior to the Separation Time. "EM Agreement" shall mean this Employee Matters Agreement, which is Exhibit A to the Separation Agreement. "Employee" means a person who is an employee of the Existing U S WEST Group at the Separation Time, including an employee who is not actively performing services because such employee is on an approved leave of absence, short-term disability, illness or other similar reasons. Employee shall include: (i) a person who is a former employee of the Existing U S WEST Group; and/or (ii) a person who has been transferred to Time Warner Communications pursuant to the agreement of Existing U S WEST and Time Warner Communications; and/or (iii) a person who is an employee of Time Warner Communications at the Separation Time, 2 including an employee who is not actively performing services because such employee is on an approved leave of absence, short-term disability, illness or other similar reasons. In addition, an individual who is described in either of the preceding sentences (whether he works for the Existing U S WEST Group or Time Warner Communications) immediately prior to the Separation Time who does not report for work to the New U S WEST Group, MediaOne Group or Time Warner Communications (depending upon his applicable assignment) immediately after the Separation Time shall be considered an Employee (for purposes of this EM Agreement only) unless (1) prior to the Separation Time, he notifies the Existing U S WEST Group or Time Warner Communications, as applicable, that he is terminating, effective on or before the Separation Time or (2) prior to the Separation Time, the Existing U S WEST Group or Time Warner Communications, as applicable, notifies him that he is terminated, effective on or before the Separation Time. All Employees shall be either Communications Employees or Media Employees. A former employee who is on lay-off is a Terminated Employee, not an Employee. "Employment Related Liabilities" shall mean all Liabilities, including litigation costs, which relate to an Employee, a Terminated Employee or their respective dependents and beneficiaries, in each case relating to, arising out of or resulting from employment by the Existing U S WEST Group or predecessor prior to the Separation Time, including Liabilities under Employee Benefit Plans and Employee Arrangements. Notwithstanding the preceding sentence, the following Liabilities are not Employment Related Liabilities: (1) any Liability which is specifically addressed in a provision other than Section 2 of this EM Agreement, (2) Liabilities arising under or relating to the severance agreements between Existing U S WEST and members of the Executive Group (which Liabilities are addressed in Schedules 3.4(a) and 3.4(b) of the Separation Agreement) and (3) any other Liability scheduled in the Separation Agreement. "Executive Group" shall mean Richard D. McMormick, Charles P. Russ III, Michael P. Glinsky, Robert W. Gras, and James T. Anderson. "Existing U S WEST" shall mean U S WEST, Inc., a Delaware corporation, prior to the Separation Time. "Existing U S WEST Group" shall mean, prior to the Separation Time, Existing U S WEST and all of its Subsidiaries. "Media Employees" shall mean all persons who are Employees of the MediaOne Group at the Separation Time, including without limitation 3 (1) Employees who worked for Existing U S WEST prior to the Separation Time that are designated as Media Employees by Existing U S WEST as of the Separation Time (including, without limitation, Employees who are employed by Time Warner Communications), (2) Employees who, prior to the Separation Time, worked for an entity that is a member of the New U S WEST Group that are designated as Media Employees as of the Separation Time and (3) Employees who, prior to the Separation Time, worked for MGI that are designated as Media Employees as of the Separation Time. "Media Employee Arrangements" shall mean the Employee Arrangements sponsored by members of the MediaOne Group after the Separation Time. "Media Employee Benefit Plans" shall mean the Employee Benefit Plans sponsored by members of the MediaOne Group after the Separation Time. "MediaOne" shall mean MediaOne Group, Inc., a Delaware corporation, at and after the Separation Time. MediaOne was known as U S WEST, Inc. prior to the Separation Time. "MediaOne Employee Benefits Committee" shall mean, effective on and after the Separation Time, the committee of MediaOne Group, Inc. designated to administer various Media Employee Benefit Plans and Media Employee Arrangements. "MediaOne Group" shall mean, at and after the Separation Time, MediaOne Group, Inc. and all of its Subsidiaries. "New U S WEST Employee Benefits Committee" shall mean, effective on and after the Separation Time, the committee of New U S WEST designated to administer various Communications Employee Benefit Plans and Communications Employee Arrangements. "Non-Employee Directors" shall mean those members of the Board of Directors of the respective corporation who are or were not employees of that entity during their term of office. "Retired Non-Employee Directors" shall mean those Non-Employee Directors who have completed their term on the respective Board of Directors prior to the Separation Time. "Non-Employee Director Plans" shall mean the U S WEST, Inc. Deferred Compensation Plan for Non-Employee Directors and the U S WEST, Inc. Retirement Plan for Non-Employee Directors. 4 "Separation Agreement" shall mean the Separation Agreement, dated as of June 5, 1998, between U S WEST, Inc. and USW-C, Inc. "Terminated Communications Employees" shall mean all persons who are Terminated Employees and who are not Terminated Media Employees or Terminated Inc. Employees. Terminated Communications Employees shall include (1) all Terminated Employees (other than AirTouch Transfers) with Deferred Benefits (unless they were actively employed by one of the Cable Companies on their last day of active employment with the Existing U S WEST Group); (2) all Terminated Employees who were last actively employed before November 1, 1995 (unless they were actively employed by one of the Cable Companies on their last day of active employment with the Existing U S WEST Group) and are not entitled to Deferred Benefits at the Separation Time; and (3) all Terminated Employees who were last actively employed (on or after November 1, 1995 and before the Separation Time) by an entity that is a member of the New U S WEST Group (excluding MGI, but including Dex and its subsidiaries) after the Separation Time and are not entitled to Deferred Benefits at the Separation Time. "Terminated Employee" means a person who formerly was actively employed by the Existing U S WEST Group and who is not an Employee. An individual who is employed by the Existing U S WEST Group immediately prior to the Separation Time who does not report for work to the New U S WEST Group or MediaOne Group (depending upon his applicable assignment) immediately after the Separation Time shall be considered a Terminated Employee if (1) prior to the Separation Time, he notifies Existing U S WEST or its Subsidiaries that he is terminating, effective on or before the Separation Time or (2) prior to the Separation Time, Existing U S WEST or its Subsidiaries notify him that he is terminated, effective on or before the Separation Time. All members of the Executive Group shall be Terminated Employees. Each Terminated Employee shall be either (a) a Terminated Communications Employee, (b) a Terminated Inc. Employee or (c) a Terminated Media Employee, provided that, to the extent set forth in this EM Agreement, a Terminated Employee may be classified differently for different purposes. "Terminated Inc. Employees" shall mean all Terminated Employees who were last actively employed (on or after November 1, 1995 and before the Separation Time) by Existing U S WEST (but not its Subsidiaries) and are not entitled to Deferred Benefits at the Separation Time. If, after the Separation Time, it is determined by a final decision of a court of competent jurisdiction or an agreement of MediaOne and New U S 5 WEST that a Terminated Inc. Employee is entitled to benefits under one or more Deferred Plans (other than as a result of future employment with the MediaOne Group or New U S WEST Group), such Terminated Employee shall be considered to have Deferred Benefits solely with respect to those Deferred Plans that owe him additional benefits (and shall therefore be a Terminated Communications Employee solely with respect to such Deferred Plans). "Terminated Media Employees" shall mean (1) all Terminated Employees (whether or not they have Deferred Benefits) who were actively employed by one of the Cable Companies on their last day of active employment with the Existing U S WEST Group; (2) all Terminated Employees who were last actively employed (on or after November 1, 1995 and before the Separation Time) by an entity that is a member of the MediaOne Group after the Separation Time (unless such last employer was Existing U S WEST) and are not entitled to Deferred Benefits at the Separation Time; (3) all Terminated Employees who were last actively employed (on or after November 1, 1995 and before the Separation Time) by MGI and are not entitled to Deferred Benefits at the Separation Time; and (4) all AirTouch Transfers, regardless of their last day of employment. Notwithstanding the foregoing, if, after the Separation Time, it is determined by a final decision of a court of competent jurisdiction or an agreement of MediaOne and New U S WEST that a Terminated Media Employee described in clause (2) or (3) above is entitled to benefits under one or more Deferred Plans (other than as a result of future employment with the MediaOne Group or New U S WEST Group), such Terminated Employee shall be considered to have Deferred Benefits solely with respect to those Deferred Plans that owe him additional benefits (and shall therefore be a Terminated Communications Employee solely with respect to such Deferred Plans. "Welfare Plan" shall mean an Employee Benefit Plan which is a health benefit, life insurance or other employee welfare benefit plan, within the meaning of Section 3(1) of ERISA, which is maintained by Existing U S WEST, New U S WEST, MediaOne or a Subsidiary of any of them. (b) All determinations under this Section 1 with respect to status as an Employee, Terminated Employee, Media Employee, Communications Employee, Terminated Media Employee, Terminated Inc. Employee or Terminated Communications Employee shall be made as of the Separation Time, unless otherwise specifically set forth in this Section 1. (c) Notwithstanding the foregoing definitions, in the event it is unclear as to whether a Terminated Employee is a Terminated Communications Employee, 6 Terminated Inc. Employee or a Terminated Media Employee, or in the event that a Terminated Employee was last actively employed at a time the individual was on a temporary transfer from one member of the Existing U S WEST Group to another for less than 12 months, MediaOne and New U S WEST shall agree on an equitable classification of such employee or employees (and the assumption of any liability attributable thereto). 2. GENERAL PRINCIPLES. (a) New U S WEST Liabilities. Except as otherwise provided in this EM Agreement, New U S WEST and its Subsidiaries hereby assume and agree to pay, perform, fulfill and discharge: (1) All Employment Related Liabilities (regardless of where such Employment Related Liabilities arose or arise or were or are incurred) to or relating to Communications Employees and Terminated Communications Employees; (2) All Liabilities, including litigation costs, relating to, or arising out of or resulting from the performance of services to the New U S WEST Business (other than MGI) prior to the Separation Time by an independent contractor, leased employee or similar individual or by any person who alleges that he was an employee of the New U S WEST Business (other than MGI) prior to the Separation Time or the dependent or beneficiary of any such independent contractor or alleged employee; (3) All Liabilities, including litigation costs, which relate to a Communications Employee or his dependents and beneficiaries, in each case relating to, arising out of or resulting from employment by the New U S WEST Group on or after the Separation Time (including Liabilities under Communications Employee Benefit Plans and Communications Employee Arrangements); and (4) All Liabilities, including litigation costs, relating to, or arising out of or resulting from the performance of services to the New U S WEST Group on or after the Separation Time by an independent contractor, leased employee or similar individual or by any person who alleges that he was an employee of the New U S WEST Group on or after the Separation Time or the dependent or beneficiary of any such independent contractor or alleged employee. 7 (b) MediaOne Liabilities. Except as otherwise provided in this EM Agreement, MediaOne and its Subsidiaries hereby assume and agree to pay, perform, fulfill and discharge: (1) All Employment Related Liabilities (regardless of where such Employment Related Liabilities arose or arise or were or are incurred) to or relating to Media Employees and Terminated Media Employees; (2) All Liabilities, including litigation costs, relating to, or arising out of or resulting from the performance of services to the MediaOne Business (other than Existing U S WEST) or MGI prior to the Separation Time by an independent contractor, leased employee or similar individual or by any person who alleges that he was an employee of the MediaOne Business (other than Existing U S WEST) or MGI prior to the Separation Time or the dependent or beneficiary of any such independent contractor or alleged employee; (3) All Liabilities, including litigation costs, which relate to a Media Employee or his dependents and beneficiaries, in each case relating to, arising out of or resulting from employment by the MediaOne Group on or after the Separation Time (including Liabilities under Media Employee Benefit Plans or Media Employee Arrangements); and (4) All Liabilities, including litigation costs, relating to, or arising out of or resulting from the performance of services to the MediaOne Group on or after the Separation Time by an independent contractor, leased employee or similar individual or by any person who alleges that he was an employee of the MediaOne Group on or after the Separation Time or the dependent or beneficiary of any such independent contractor or alleged employee. (c) Shared Liabilities. New U S WEST and MediaOne hereby agree to share equally: (1) All Employment Related Liabilities (regardless of where such Employment Related Liabilities arose or arise or were or are incurred) to or relating to Terminated Inc. Employees; and (2) All Liabilities, including litigation costs, relating to, or arising out of or resulting from the performance of services to Existing U S WEST (but not its Subsidiaries) prior to the Separation Time by an independent contractor, leased employee or similar individual or by any person who alleges that he was an employee of Existing U S WEST prior 8 to the Separation Time or the dependent or beneficiary of any such independent contractor or alleged employee. (d) Class Action Liabilities. For purposes of determining whether the New U S WEST Group or Media Group is responsible for Liabilities involving or arising out of actions relating to more than one Employee or Terminated Employee, the portion of Employment Related Liabilities relating to any single Employee or Terminated Employee shall be in proportion to the total number of Employees and Terminated Employees to which the action relates, whether or not all such Employees or Terminated Employees submit claims. (e) Appeal Rights. If either New U S WEST or MediaOne believes that the result arising from the application of the foregoing provisions of this Section 2 will result in an inequitable allocation of liability, it may refer the matter to the Separation Committee and the procedures set forth in Section 12.2 of the Separation Agreement shall apply. Any such referral must be made in writing within sixty days after the referring party becomes aware of the Employment Related Liability to which the referral relates. (f) Funded Benefits. Notwithstanding the foregoing provisions of this Section 2, neither the New U S WEST Group nor the MediaOne Group shall be liable to the extent that any Liability is payable from a trust or insurance contract which funds the benefits under an Employee Benefit Plan or Employee Arrangement maintained by the New U S WEST Group or MediaOne Group after the Separation Date. (g) Control of litigation. Except as set forth in sub-section (h) below, if any litigation is brought by an Employee or Terminated Employee over Liabilities addressed in this EM Agreement, the MediaOne Group shall control the litigation if it is responsible for the Liabilities and the New U S WEST Group shall control the litigation if it is responsible for the Liabilities, irrespective of which party is the defendant, provided that if the party (or its Subsidiaries) entitled to control the litigation is not sued, it shall not control the litigation unless it agrees in writing that it will be responsible for any resulting Liability. In the case of a shared liability described in subsection (c) above or an action described in subsection (d) above, the parties agree to cooperate to jointly control the litigation, unless one of the parties agrees to assume all Liabilities arising out of the litigation. (h) Election to Assume Liability. In the event that any Employee or Terminated Employee makes a claim or commences litigation which, if 9 successful, would result in Liability that is allocated under this EM Agreement (other than under this paragraph (h)) exclusively to either MediaOne or New U S WEST (the "Allocated Liability Party"), but which Liability, if any, arises from alleged actions taken by an Employee or Terminated Employee of the business of the other party (the "Other Party"), then the Allocated Liability Party shall give written notice of such claim or litigation (the "Claim Notice") to the Other Party within thirty days of becoming aware that such claim or litigation involves an Employee or Terminated Employee of the business of the Other Party. The Other Party may then elect, by giving written notice (the "Election Notice") to the Allocated Liability Party within thirty days after receiving the Claim Notice, to take control of the defense of the claim and/or litigation and to assume all Liability, including litigation costs, associated with such claim or litigation (other than a Liability described in subsection (f) above). If the Election Notice is given, the Allocated Liability Party shall cease to have any Liability with respect to the claim or litigation which is the subject of the Election Notice and all such Liability (other than a Liability described in subsection (f) above) shall be assumed by the Other Party. (i) The provisions of this Section 2 are designed solely to allocate Liabilities between the New U S WEST Group and the MediaOne Group. Notwithstanding any provision of this EM Agreement, except to the extent required by the preceding sentence, this EM Agreement shall not impose any Liability relating to an Employee or Terminated Employee on any entity or Subsidiary other than the entity or Subsidiary that incurred the Liability. For example, if a Communications Employee worked solely for one Subsidiary of New U S WEST, that Subsidiary (but not New U S WEST or any other Subsidiary) shall be responsible for any unfunded Liabilities owed to that individual. 3. SPONSORSHIP AND ADMINISTRATION OF EMPLOYEE BENEFIT PLANS AND EMPLOYEE ARRANGEMENTS. (a) At or prior to the Separation Time, all Communications Employee Benefit Plans and Communications Employee Arrangements that are not already sponsored by a member of the New U S WEST Group shall be transferred to and assumed by New U S WEST in accordance with the terms of this EM Agreement. Each of such Communications Employee Benefit Plans and Communications Employee Arrangements is hereby amended (such 10 amendments to be self-effectuating), effective as of the Separation Time, to provide transfer of sponsorship to New U S WEST. In addition, each Communications Employee Benefit Plan and Communications Employee Arrangement is hereby amended (such amendments to be self-effectuating), effective as of the Separation Time, to provide that the Liabilities to be assumed by a corresponding Media Employee Benefit Plan or Media Employee Arrangement shall cease to be Liabilities under such Communications Employee Benefit Plan or Communications Employee Arrangement. New U S WEST, MediaOne and their Subsidiaries shall take all action reasonably appropriate prior to the Separation Time (or as soon as practicable thereafter) to effectuate such assumptions, including amendments of the applicable Employee Benefit Plans and Employee Arrangements where desirable. To the extent that any of the Communications Employee Benefit Plans or Communications Employee Arrangements is administered by the EBC prior to the Separation Time, such plan or arrangement shall be administered by the New U S WEST Employee Benefits Committee on and after the earlier of the Separation Time or the date sponsorship of the applicable plan or arrangement is assumed by New U S WEST. In addition, any functions or responsibilities of the Treasurer of Existing U S WEST with respect to such plans or arrangements prior to the Separation Time shall become duties and responsibilities of either the Investment Committee of New U S WEST or U S WEST Investment Management Company (such duties and responsibilities to be allocated in accordance with the rules set forth in the U S WEST Pension Plan after the Separation Time) on the date set forth in the preceding sentence. (b) To the extent that a Media Employee Benefit Plan or Media Employee Arrangement (or, in the case of any newly adopted Media Employee Benefit Plan or Media Employee Arrangement, the Employee Benefit Plan or Employee Arrangement that is replaced by such newly adopted Media plan or arrangement) is administered by the EBC prior to the Separation Time, such plan or arrangement shall be administered by the MediaOne Employee Benefits Committee on and after the Separation Time. In addition, any functions or responsibilities of the Treasurer of Existing U S WEST with respect to such plans or arrangements prior to the Separation Time shall become duties and responsibilities of the Treasurer of MediaOne (or such other officer or committee as MediaOne or the MediaOne Employee Benefits Committee shall designate) on and after the Separation Time. 11 4. EMPLOYEE SAVINGS PLANS. (a) On or before the Separation Time, sponsorship of the U S WEST Savings Plan/ESOP (consisting of the "U S WEST Savings Plan" and the "U S WEST ESOP") shall be transferred from Existing U S WEST to New U S WEST. Prior to the Separation Time, MediaOne shall establish a new defined contribution plan or plans consisting of a profit-sharing plan and a stock bonus plan which shall be an employee stock ownership plan (the "Media Savings Plan/ESOP", consisting of the "Media Savings Plan" and the "Media ESOP"), effective immediately after the Separation Time, for the benefit of Media Employees and Terminated Media Employees (excluding persons described in clauses (2) or (3) of the definition of Terminated Media Employee) covered by the existing U S WEST Savings Plan/ESOP. The Media Savings Plan/ESOP shall initially contain terms and conditions that are similar to those of the existing U S WEST Savings Plan/ESOP, including without limitation (1) provisions required by Section 411(d)(6) of the Code for account balances to be transferred from the U S WEST Savings Plan/ESOP, and (2) provisions granting credit for past service with the Existing U S WEST Group for purposes of eligibility, vesting, distributions and withdrawals. Each Media Employee and Terminated Media Employee who was a participant in the U S WEST Savings Plan/ESOP as of the Separation Time shall become a participant in the Media Savings Plan/ESOP as of the Separation Time. (b) As soon as reasonably practicable after the Separation Time, New U S WEST shall cause to be transferred from the U S WEST Savings Plan to the Media Savings Plan assets having a fair market value equal to the aggregate value of the account balances in the U S WEST Savings Plan (but not the ESOP), as of the date of the transfer, applicable to Media Employees and Terminated Media Employees, and MediaOne shall cause the Media Savings Plan to accept such transfers and to assume all Savings Plan liabilities relating to Media Employees and Terminated Media Employees (excluding persons described in clauses (2) or (3) of the definition of Terminated Media Employee). All such liabilities shall cease to be liabilities of the U S WEST Savings Plan. Such transfer shall be in (i) shares of MediaOne Common Stock and New U S WEST Common Stock to the extent such shares are allocated in the U S WEST Savings Plan to accounts of Media Employees or Terminated Media Employees, (ii) notes evidencing loans to Media Employees or Terminated Media Employees, and (iii) with the balance in cash or, to the extent that the parties mutually agree, other securities held by the U S WEST Savings Plan. 12 (c) As soon as reasonably practicable after the Separation Time, New U S WEST shall cause to be transferred from the U S WEST ESOP to the Media ESOP assets having a fair market value equal to the aggregate value of the account balances in the U S WEST ESOP (but not the Savings Plan), as of the date of the transfer, applicable to Media Employees and Terminated Media Employees, and MediaOne shall cause the Media ESOP to accept such transfers and to assume all ESOP liabilities relating to Media Employees and Terminated Media Employees (excluding persons described in clauses (2) or (3) of the definition of Terminated Media Employee). All such liabilities shall cease to be liabilities of the U S WEST ESOP. Such transfer shall be in shares of MediaOne Common Stock and of New U S WEST Common Stock. To the greatest extent possible and consistent with fiduciary duties under Sections 404 and 406 of ERISA, the shares of Common Stock shall be transferred so that, immediately following the transfer, the U S WEST ESOP will have at least 60% of its assets invested in New U S WEST Common Stock and the Media ESOP will have at least 60% of its assets invested in MediaOne Common Stock. (d) U S WEST Savings Plan/ESOP shall transfer to the Media Savings Plan/ESOP all qualified domestic relations orders (within the meaning of Section 414(p) of the Code) ("QDROs") held by the U S WEST Savings Plan/ESOP with respect to Media Employees and Terminated Media Employees. New U S WEST shall cause to be transferred from the U S WEST Savings Plan/ESOP assets having a fair market value equal to the aggregate account values relating to such QDROs in accordance with paragraphs (b) and (c) above, and the Media Savings Plan ESOP shall assume all liabilities relating to such QDROs. (e) The U S WEST ESOP will repay all "acquisition loans" (as defined in the U S WEST Savings Plan/ESOP) prior to the Separation Time. If, as of the Separation Time, the U S WEST ESOP holds shares of common stock that have not been allocated to participants' accounts, the U S WEST ESOP will transfer to the Media ESOP unallocated shares of stock having a fair market value equal to (x) the total market value of all unallocated shares held by the U S WEST ESOP as of the Separation Time, multiplied by (y) the aggregate dollar value of the Employing Company Contributions made under the U S WEST ESOP during the first calendar quarter of 1998 as matched allotments to Media Employees and Terminated Media Employees, divided by (z) the aggregate dollar value of the Employing Company Contributions made under the U S WEST ESOP during the first calendar quarter of 1998 as matched allotments to all Employees and Terminated Employees. To the greatest 13 extent possible, the unallocated shares transferred to the Media ESOP pursuant to this paragraph shall be shares of MediaOne Common Stock. (f) If required by law, New U S WEST and MediaOne shall cause to be filed with the IRS all applicable Forms 5310A and any other required forms with the appropriate governmental agency in order for the Media Savings Plan/ESOP to receive a transfer of assets from the U S WEST Savings Plan/ESOP on or following the Separation Time in accordance with paragraphs (b), (c), (d) and (e) above. Within nine months after the Separation Time, MediaOne shall cause to be filed with the IRS a request for a determination that the Media Savings Plan/ESOP is qualified under Section 401(a) of the Code. MediaOne agrees to make all reasonable amendments requested by the IRS to obtain such determination letter. (g) Subject to paragraph (h), and in accordance with applicable law and to the extent consistent with fiduciary duties under Sections 404 and 406 of ERISA, the U S WEST Savings Plan and the U S WEST ESOP will maintain a MediaOne Common Stock Fund for participants who retain such investment of their account balances after the Separation Time. No new investments in the MediaOne Common Stock Fund of the U S WEST Savings Plan or in the MediaOne Common Stock Fund of the U S WEST ESOP will be permitted after the Separation Time. Subject to paragraph (h), and in accordance with applicable law and to the extent consistent with fiduciary duties under Sections 404 and 406 of ERISA, the Media Savings Plan and the Media ESOP will maintain a New U S WEST Common Stock Fund for participants who retain such investment of their account balances after the Separation Time. No new investments in the New U S WEST Common Stock Fund of the Media Savings Plan or in the New U S WEST Common Stock Fund of the Media ESOP will be permitted after the Separation Time. The U S WEST Savings Plan (but not the ESOP) will maintain the MediaOne Common Stock Fund, and the Media Savings Plan (but not the ESOP) will maintain the New U S WEST Common Stock Fund, for at least five years after the Separation Time; as soon as practicable after either plan sponsor decides to eliminate such stock fund, it shall inform the issuer of the stock to be sold so that the issuer may arrange a facility to exercise the right of first refusal described below. When the trustee of the U S WEST Savings Plan intends to sell MediaOne Common Stock because the MediaOne Common Stock Fund will no longer be maintained or the trustee of the Media Savings Plan intends to sell New U S WEST Common Stock because the New U S WEST Common Stock Fund will no longer be maintained, such trustee shall first offer such stock to the issuer prior to offering such stock for sale on the open market. After the close of business, the issuer shall then have the right to purchase such stock at the 14 closing price of the stock on that day. If the issuer does not exercise such right to purchase, the trustee shall be free to sell the stock on the open market the next day, provided that,subject to fiduciary duties under Sections 404 and 406 of ERISA, the trustee shall not sell in any one day more than 20% of the average daily trading volume of the relevant stock. (For this purpose, the average daily trading volume is the arithmetic mean of the reported daily trading volumes of the relevant stock on the New York Stock Exchange (or, if not traded on the New York Stock Exchange, the principal exchange on which the stock is traded) in the two calendar months preceding any such sale.) (h) Within two years after the Separation Time, the U S WEST ESOP (but not the Savings Plan) will dispose of all investment in MediaOne Common Stock and the Media ESOP (but not the Savings Plan) will dispose of all investment in New U S WEST Common Stock (each, a "Non-Employer Common Stock"). Subject to fiduciary duties under Sections 404 and 406 of ERISA, the U S WEST ESOP shall exchange shares of MediaOne Common Stock it holds for shares of New U S WEST Common Stock held by the Media ESOP, and VICE VERSA, at the Common Stocks' relative fair market values. To the extent such exchanges are not practicable for some or all of the Non-Employer Common Stock held by either ESOP, the U S WEST ESOP and the Media ESOP will sell shares of Non-Employer Common Stock. As soon as practicable after either plan sponsor decides to sell such Non-Employer Common Stock, it shall inform the issuer of the stock to be sold so that the issuer may arrange a facility to exercise the right of first refusal described below. When the trustee of the U S WEST ESOP intends to sell MediaOne Common Stock or the trustee of the Media ESOP intends to sell New U S WEST Common Stock (other than because of a sale by, or distribution to, plan participants), such trustee shall first offer such stock to the issuer prior to offering such stock for sale on the open market. After the close of business, the issuer shall then have the right to purchase such stock at the closing price of the stock on that day. If the issuer does not exercise such right to purchase, the trustee shall be free to sell the stock on the open market the next day. Subject to fiduciary duties under Sections 404 and 406 of ERISA, from the Separation Time to and including the second anniversary of the Separation Time, neither the U S WEST ESOP nor the Media ESOP will sell in any one day more than 20% of the average daily trading volume of the relevant Non-Employer Common Stock. (For this purpose, the average daily trading volume is the arithmetic mean of the reported daily trading volumes of the relevant stock on the New York Stock Exchange (or, if not traded on the New York Stock Exchange, the principal 15 exchange on which the stock is traded) in the two calendar months preceding any such sale.) (i) MediaOne and New U S WEST shall take such action as necessary to ensure that participants in the U S WEST Savings Plan/ESOP and the Media Savings Plan/ESOP are notified that a quiet period will occur beginning on or about the Separation Time, during which changes in investment direction with respect to participants' accounts generally will not be permitted. (j) The Media Savings Plan/ESOP and the assets and liabilities with respect thereto shall be considered a Media Employee Benefit Plan. The U S WEST Savings Plan/ESOP and the assets and liabilities with respect thereto shall be considered a Communications Employee Benefit Plan. 16 5. TRANSFER OF U S WEST PENSION PLAN ASSETS AND LIABILITIES. (a) On or prior to the Separation Time, sponsorship of the U S WEST Pension Plan shall be transferred from Existing U S WEST to New U S WEST. Prior to the Separation Time, MediaOne shall establish a defined benefit pension plan (the "Media Pension Plan"), effective immediately after the Separation Time, for the benefit of the Media Employees and Terminated Media Employees (excluding persons described in clauses (2) or (3) of the definition of Terminated Media Employee) covered by the existing U S WEST Pension Plan. The Media Pension Plan shall contain terms and conditions that are substantially similar to those of the existing U S WEST Pension Plan, including credit for past service with the Existing U S WEST Group for eligibility, vesting, early retirement, and, contingent upon the transfer of assets set forth in paragraph (b) below, benefit accrual and compensation earned with the Existing U S WEST Group. Notwithstanding the preceding sentence, the Media Pension Plan shall contain two benefit structures. In general, (1) the benefits for all Media Employees who are employed immediately after the Separation Time and who earned benefits under Articles V-B or V-D of such Pension Plan prior to the Separation Time shall continue in such benefit structure and (2) all other Media Employees, as well as all future employees of the MediaOne Group shall participate in a benefit structure substantially similar to the benefit structure currently contained in the Appendix I of the U S WEST Pension Plan, provided that this EM Agreement does not obligate MediaOne to continue to maintain such benefit formulas for any particular period of time. In addition, the U S WEST Pension Plan currently contains two subsidies relating to service pensions: (i) the early retirement pension under the grandfathered formula in Article V-B (but not the DLS formula in Article V-D) is unreduced (or provides for a lower reduction) for Participants that are service pension eligible and (ii) if a lump sum service pension is elected, a 0% interest rate applies prior to age 65. The Media Pension Plan shall include, for all Media Employees described in clause (2) of the second preceding sentence (but not any future employees of the MediaOne Group or any Terminated Media Employees) whose combined age and service (in each case rounded up to the next integer), as of January 1, 1999, equals or exceeds 55, both of the foregoing subsidies with respect to both the DLS formula set forth in Article 6, and the grandfathered formula in Article 7 of Appendix I, of the Pension Plan; such provisions shall be referred to as the "Service Pension Amendments." Immediately after the Separation Time, all Liabilities under the U S WEST Pension Plan to, or relating to, Media Employees or Terminated Media Employees (excluding persons described in clauses (2) or (3) of the 17 definition of Terminated Media Employee) shall be assumed by the Media Pension Plan and shall cease to be Liabilities of the U S WEST Pension Plans. Such Liabilities shall include all accrued benefits, within the meaning of Section 411(d)(6) of the Code, all ancillary benefits (such as the death benefits set forth in Article VII of the U S WEST Pension Plan and disability benefits set forth in Appendix J thereof) and any other benefits. The Media Pension Plan shall comply with Section 411(d)(6) of the Code with respect to such assumed Liabilities. Each Media Employee and Terminated Media Employee who was a participant in the U S WEST Pension Plan as of the Separation Time shall become a participant in the Media Pension Plan as of the Separation Time. Notwithstanding the foregoing, the following rules shall apply to any Terminated Employee who is not vested in the U S WEST Pension Plan at the Separation Time who returns to employment with either the MediaOne Group or the New U S WEST Group after the Separation Time. To the extent required by law, any such Terminated Employee who becomes entitled to credit, for benefit accrual purposes, for his service with the Old U S WEST Group prior to the Separation Time as a result of returning to employment after the Separation Time, then (1) any benefits attributable to such prior service shall be payable from the Media Pension Plan if the individual returns to employment with the MediaOne Group and (2) any benefits attributable to such prior service shall be payable from the U S WEST Pension Plan if the individual returned to employment with the New U S WEST Group. (b) New U S WEST shall cause a "spin-off" transfer within the meaning of Section 414(1) of the Code, from the U S WEST Pension Plan to the Media Pension Plan in the manner and at the times specified in paragraph (e) below. For purposes of this Section 5, the following definitions shall apply: (1) "Actuaries" refer to the enrolled actuaries for the U S WEST Pension Plan at the Separation Time. (2) "Contingent Amount" equals the difference between the amount that the Final Determination provides that should have been transferred from the U S WEST Pension Plan to the Media Pension Plan in connection with the spinoff and the Media Asset Share. If the difference is positive, that is, the Final Determination provides that additional assets should have been transferred to the Media Pension Plan, the difference shall be referred to as a "Positive Contingent Amount." If the difference is negative, that is, the Final Determination provides that the 18 amount that should have been transferred is less than the Media Asset Share, the difference shall be referred to as a "Negative Contingent Amount." (3) "Final Determination" means a final nonappealable determination by a court, or a final settlement of litigation or a dispute among MediaOne, New U S WEST, the U S WEST Pension Plan and the Media Pension Plan and any other parties to the litigation or dispute, that provides that the amount of assets to be transferred from U S WEST Pension Plan to the Media Pension Plan in connection with the spinoff should be more than or less than the Media Asset Share. (4) "Media Asset Share" shall mean the product of: (i) the fair market value of the assets of the U S WEST Pension Plan as of June 30, 1998, and (ii) the Media Fraction. For this purpose, (i) the value of any publicly traded security and cash shall be determined based on the audited reports of the trustee of the U S WEST Pension Plan and (ii) the value of any other securities or property shall be determined by one or more third parties selected by MediaOne and New U S WEST, based on the most recent appraisal or valuation of the particular security or property adjusted, if necessary, as determined by the third party. (5) "Media Economic PBO" for the U S WEST Pension Plan shall mean the portion of the Total Economic PBO as of June 30, 1998 attributable to the Media Employees and Terminated Media Employees, as calculated by the Actuaries. For this purpose, the U S WEST Pension Plan shall be deemed amended to include the Service Pension Amendments. (6) "Media Fraction" for the U S WEST Pension Plan shall mean (i) the Media Economic PBO, divided by (ii) the Total Economic PBO. (7) "Premium Amount" shall equal the estimated PBGC premiums initially paid to the PBGC by the Media Pension Plan for plan year 1998, without regard to any adjustment required as a result of an audit. (8) "Total Economic PBO" shall be the projected benefit obligation, as defined in SFAS No. 87, of the U S WEST Pension Plan, as calculated by the Actuaries as of June 30, 1998 using the actuarial methods and assumptions set forth in Schedule 1 19 hereto and any others mutually agreeable to the parties. For this purpose, the U S WEST Pension Plan shall be deemed amended to include the Service Pension Amendments. (9) "Transfer Amount" shall equal the Media Asset Share plus the Premium Amount plus the Positive Contingent Amount and minus the Negative Contingent Amount. (c) In order to determine the Media Asset Share, MediaOne and New U S WEST shall determine in good faith the Media Employees, Terminated Media Employees, Communications Employees, Terminated Communications Employees and Terminated Inc. Employees as of June 30, 1998. Such determinations shall be updated as soon as practicable but no later than January 1, 1999, to take into account the reclassification of Employees as of the Separation Time as Media Employees or Communications Employees. (d) If required by law, MediaOne and New U S WEST shall cause to be filed all applicable Forms 5310A and any other required IRS or PBGC forms with the appropriate governmental agency in order for the Media Pension Plan to receive a transfer of assets from the U S WEST Pension Plan on or following the Separation Time, in accordance with paragraph (e) below. Within nine months after the Separation Time, MediaOne shall cause to be filed with the IRS a request for a determination that the Media Pension Plan is qualified under Section 401(a) of the Code. MediaOne agrees to make all reasonable amendments requested by the IRS to obtain such determination letter. (e) New U S WEST shall cause the U S WEST Pension Plan to transfer assets in an amount equal to the Transfer Amount (plus interest to the extent set forth below) to the Media Pension Plan and MediaOne shall cause the Media Pension Plan to accept such assets equal to such Transfer Amount (and interest), as follows: (1) On July 1, 1998, an amount equal to 98% of the Media Asset Share, as estimated by the Actuaries (immediately prior to July 1, 1998) and provided to MediaOne and New U S WEST in writing. Such estimate shall be calculated by assuming the Media Fraction was calculated as of May 31, 1998 and by using the fair market value of the assets, as reported by the trustee of the U S WEST Pension Plan, on May 31, 1998. (2) As soon as practicable after the value of the plan assets as of June 30, 1998 is determined and the Media Asset Share is 20 determined by the Actuaries and provided in writing to MediaOne and New U S WEST (but not later than 30 days after such writing is provided), the excess of the Media Asset Share over the sum of (i) the interim transfer effected under (1) above, and (ii) any benefit payments paid to Terminated Media Employees or Media Employees by the U S WEST Pension Plan after June 30, 1998. (If such amount is a negative number, such amount shall be transferred from the Media Pension Plan to the U S WEST Pension Plan.) (3) In addition, if there is a Final Determination that sets forth a Contingent Amount, New U S WEST, the U S WEST Pension Plan, MediaOne, and the Media Pension Plan agree as follows: (A) If there is a Positive Contingent Amount, as soon as practicable after the Final Determination, the U S WEST Pension Plan shall transfer the assets equal to the Positive Contingent Amount to the Media Pension Plan, and the Media Pension Plan shall accept such transfers; and (B) If there is a Negative Contingent Amount, as soon as practicable after the Final Determination, the Media Pension Plan shall transfer the assets equal to the Negative Contingent Amount to the U S WEST Pension Plan, and the U S WEST Pension Plan shall accept such transfers. (4) As soon as practicable after the Premium Amount is determined and paid by the Media Pension Plan, an amount equal to the Premium Amount. To the extent any of the foregoing amounts set forth in paragraphs (1) through (4) of this subsection (e) are paid after July 1, 1998, such amount shall be increased or decreased by interest from July 1, 1998 to the date of payment (to the extent not paid or previously advanced) at a rate equal to the average monthly rate on the Mellon Trust Short Term Interest Fund (STIF), compounded monthly, in which the U S WEST Pension Plan and the Media Pension Plan hold certain temporary cash funds from time to time (such rate to be provided by the trustee of the plan making the payment), during the period commencing on July 1, 1998 and ending with the date of payment; provided that (i) no interest shall be paid with respect to the Contingent Amount if the Final Determination already 21 provides for an adjustment reflecting interest or plan earnings and (ii) no interest shall be paid with respect to the Premium Amount. With respect to all of the foregoing transfers between the U S WEST Pension Plan and the Media Pension Plan, the specific assets to be transferred shall be cash and other liquid assets, as agreed upon by New U S WEST and MediaOne in good faith so as to not treat the Media Pension Plan and the U S WEST Pension Plan unfairly in any material respect. (f) Notwithstanding subsections (a) through (e) above, the value of assets to be transferred to and liabilities to be assumed by the Media Pension Plan shall be no less than that necessary to satisfy the requirements of Section 414(1) of the Code, as determined by the Actuaries, based on the assumptions used by the PBGC in the case of a termination of a trusteed pension plan. (g) MediaOne, New U S WEST, the U S WEST Pension Plan and the Media Pension Plan (collectively, the "Pension Parties") all agree that, if there is a Final Determination that provides for a Contingent Amount, such Final Determination shall be satisfied to the maximum extent permitted by law by making the transfers among the U S WEST Pension Plan and the Media Pension Plan as set forth above, as opposed to requiring any additional contributions or payments (a "Corporate Liability") from either MediaOne, New U S WEST or any of their Subsidiaries. The Pension Parties agree to cooperate to the maximum extent to ensure that no such Corporate Liability ensues as a result of any Final Determination or claims relating to the allocation of plan assets between the two plans. If any litigation is brought against one of the Pension Parties claiming that the amount of assets transferred from the U S WEST Pension Plan to the Media Pension Plan should have been higher or lower, the other Pension Parties shall, at the request of the Pension Party that was sued, agree to be joined in any such litigation and to use their best efforts to ensure that any potential Contingent Amount be satisfied by plan-to-plan transfers, as opposed to Corporate Liability. In addition, the Pension Parties agree that, to the extent permitted by law, any costs of defending any claims that a Contingent Amount is payable and any Liabilities arising out of such claims shall be borne by the U S WEST Pension Plan and the Media Pension Plan. The following rules shall apply if there is any Corporate Liability for a Contingent Amount or arising out of any claims that a Contingent Amount is payable. Any Corporate Liability that is an out-of-pocket cost of defending any such claims (whether or not the claims result in 22 litigation), such as attorneys or consultant fees (but excluding any fees for plaintiffs' attorneys) and travel expenses, shall be borne equally by New U S WEST and MediaOne; provided that each party shall bear all expenses for salaries and benefits of its employees. Any other Corporate Liability, such as the payment of a Contingent Amount, any direct payments to claimants in lieu of a Contingent Amount or fees for plaintiffs' attorneys, shall be borne by (1) New U S WEST, if the claimants asserted that the amount of plan assets transferred to the Media Pension Plan should have been greater than the amount actually transferred and (2) MediaOne, if the claimants asserted that the amount of plan assets transferred to the Media Pension Plan should have been less than the amount actually transferred. (h) The U S WEST Pension Plan shall transfer to the Media Pension Plan all qualified domestic relations orders (within the meaning of Section 414(p) of the Code) ("QDROs") held by the U S WEST Pension Plan with respect to Media Employees and Terminated Media Employees. (i) Qualified transfers. This subsection (i) applies if a qualified transfer, within the meaning of Code Section 420 (a "Qualified Transfer"), is made within either the U S WEST Pension Plan or the Media Pension Plan during the calendar year in which the Separation Time occurs. (1) If the Internal Revenue Service, a court of competent jurisdiction or the sponsor of the plan in which the Qualified Transfer is made determines that any Terminated Employees who terminated employment during the period commencing twelve months prior to the Qualified Transfer and ending on the Separation Time are entitled to vested pension benefits solely because of the Qualified Transfer, then, notwithstanding any other provision of this EM Agreement, the plan in which the Qualified Transfer is made shall provide such vested pension benefits to such Terminated Employee. (2) If (i) the Internal Revenue Service declines to issue a favorable determination letter with respect to the provisions of either the U S WEST Pension Plan or the Media Pension Plan (the "420 Plan") setting forth the terms of a Qualified Transfer unless Employees or other employees who terminate employment after the Separation Time from the business of the sponsor of the other pension plan (the "Other Plan") are provided vested pension benefits on account of the Qualified Transfer or (ii) a court of competent jurisdiction determines that such Employees or employees are entitled to such benefits on account of the 23 Qualified Transfer, then the Other Plan shall provide such Employees or employees with the required vested pension benefits. In addition, the sponsor of the 420 Plan shall cause the 420 Plan to transfer assets in an amount equal to the Vesting Amount to the Other Plan and the Other Plan shall accept such assets equal to such Vesting Amount as follows. The Vesting Amount shall equal the [excess, if any, of the Media Share (calculated for this purpose on the assumption that all participants in the U S WEST Pension Plan were vested at the Separation Time) over the actual Media Share], as determined by the Actuaries and provided to MediaOne and New U S WEST in writing, increased with interest in accordance with subsection (e) above. (j) The Media Pension Plan and the assets and liabilities with respect thereto shall be considered a Media Employee Benefit Plan. The U S WEST Pension Plan and the assets and liabilities with respect thereto shall be considered a Communications Employee Benefit Plan. 6. OTHER TAX-QUALIFIED PLANS. Any other plan that is qualified under Section 401 of the Code and is not described in Section 4 or 5 above shall be retained by the entity that sponsors it before the Separation Time. 7. WELFARE PLANS. (a) Communications Plans. As of the Separation Time, any Welfare Plan, including all insurance or amounts held in trust and associated therewith to the extent attributable solely to such plan, which exclusively covers Communications Employees, Terminated Communications Employees and/or Terminated Inc. Employees and their eligible spouses and dependents shall be transferred to and assumed by New U S WEST and shall be deemed to be amended to provide for such transfer and assumption. New U S WEST or its Subsidiaries shall assume and pay the Liability with respect thereto (whether accrued or arising before or after the Separation Time). All such plans shall be considered Communications Employee Benefit Plans. (b) Media Plans. As of the Separation Time, any Welfare Plan, including all insurance or amounts held in trust and associated therewith to the extent attributable solely to such plan, which exclusively covers Media Employees and/or Terminated Media Employees and their eligible spouses and dependents shall be retained by the MediaOne Group and, if 24 necessary, are hereby amended to provide for such retention (without the need for any further action). MediaOne or its Subsidiaries shall assume and pay the Liability with respect thereto (whether accrued or arising before or after the Separation Time). All such plans shall be considered Media Employee Benefit Plans. (c) Joint Plans. This subsection (c) addresses the treatment of any Welfare Plan (including, without limitation, any retiree medical plan or retiree life insurance plan) which, as of the Separation Time, covers both: (1) Communications Employees, Terminated Communications Employees and/or Terminated Inc. Employees; and (2) Media Employees and/or Terminated Media Employees (a "Joint Welfare Plan"). (1) As of the Separation Time, each Joint Welfare Plan shall be transferred to and assumed by New U S WEST or one of its Subsidiaries. Each of such Joint Welfare Plans is hereby amended as set forth in Section 3 of this EM Agreement. At and immediately following the Separation Time, New U S WEST or its Subsidiaries shall maintain as a separate plan and assume and pay the Liabilities and expenses (whether accrued or arising before or after the Separation Time) with respect to that portion of the Joint Welfare Plans as relates to obligations to Communications Employees, Terminated Communications Employees and Terminated Inc. Employees; in addition, any such retiree medical plan shall assume any retiree medical Liabilities or expenses of persons described in clauses (2) or (3) of the definition of Terminated Media Employee. This EM Agreement does not obligate New U S WEST to continue to maintain such plans or their terms for any particular period of time. All such plans shall be considered Communications Employee Benefit Plans. (2) As soon as practicable, MediaOne or its Subsidiaries shall establish and maintain one or more separate plans corresponding to each of the Joint Welfare Plans. Such Plans shall be effective as of the Separation Time and shall contain such benefits as desired by MediaOne. However, such plans shall assume and pay the Liabilities and expenses (whether accrued or arising before or after the Separation Time) under the Joint Welfare Plans with respect to Media Employees and Terminated Media Employees, provided that any new Media retiree medical plan shall not assume any retiree medical Liabilities or expenses of persons described in clauses (2) or (3) of the definition of Terminated Media Employee. All Liabilities and expenses assumed by such 25 Media Employee Benefit Plans shall cease to be Liabilities of the Communications Employee Benefit Plans described in the preceding paragraph. The Liabilities of each such Joint Welfare Plan so assumed by MediaOne or its Subsidiaries together with each such separate plan established by MediaOne, shall be considered a Media Employee Benefit Plan. Unless MediaOne or its Subsidiaries adopts a plan with respect to a Joint Welfare Plan prior to the Separation Time, MediaOne is hereby deemed to have adopted (without the requirement of any additional action), effective as of the Separation Time, a separate Media Welfare Plan that is substantially identical in all respects to the Joint Welfare Plan it replaces, provided that this EM Agreement does not obligate MediaOne to continue to maintain such terms for any particular period of time. (3) MediaOne and New U S WEST shall use commercially reasonable efforts to obtain, effective as of the Separation Time, separate coverages or to split the coverages between MediaOne and New U S WEST under the Joint Welfare Plans that provided benefits through Provider Contracts prior to the Separation Time. Such coverage shall be on substantially the same terms and conditions as applied immediately before the Separation Time, or such other terms and conditions as are acceptable to MediaOne and New U S WEST. To the extent practicable, such coverages shall be obtained by entering into a separate contract between MediaOne and the third party. For purposes of this paragraph, the term "Provider Contract" shall mean a contract to provide benefits with an insurance company, health maintenance organization, preferred provider organization or similar provider of benefits, as well as third party administrative services contracts. To the extent such efforts are not successful with respect to any Provider Contract, then New U S WEST shall administer such Provider Contract on an equitable basis for the benefit of both MediaOne and New U S WEST until the expiration of the applicable contract. For any period after the Separation Time when MediaOne is participating in any such Provider Contract administered by New U S WEST, MediaOne shall pay an allocable share of the cost of such contract based upon the actual experience attributable to Media Employees and Terminated Media Employees thereunder, or if actual experience is not readily determinable, based upon the relative headcount of Media Employees and Terminated Media Employees to all individuals covered by such Provider Contract. Such payments shall include interest on any funds advanced by 26 New U S WEST at a rate to be agreed upon in a services agreement to be effective as of the Separation Time. (d) Continuing Treatment. Notwithstanding the foregoing provisions of this Section 7, all treatments which have been precertified or are being provided as of the Separation Time shall be provided without interruption under the appropriate Welfare Plan until such treatment is concluded or discontinued pursuant to applicable plan rules and limitations, but New U S WEST, in the case of a Communications Employee or Terminated Communications Employee, or MediaOne, in the case of a Media Employee or Terminated Media Employee, shall be responsible for all expenses relating to, arising out of or resulting from such on-going treatments after the Separation Time. (e) Continuance of Elections. MediaOne and New U S WEST shall cause the Welfare Plans which they or their Subsidiaries maintain after the Separation Time to recognize and maintain all coverage and contribution elections made by Employees under the Welfare Plans maintained by the Existing U S WEST Group prior to the Separation Time and shall apply such elections under the Welfare Plans maintained by MediaOne and New U S WEST or their Subsidiaries, whichever is applicable, for the remainder of the period or periods for which such elections are by their terms applicable. Neither the transfer or other movement of employment from one member of the Existing U S WEST Group to another member on or before the Separation Time nor the transfer and assignment to the New U S WEST Group or the MediaOne Group in connection with the Reorganization, Contribution and Separation shall constitute or be treated as a "status change" under the Welfare Plans maintained by either Existing U S WEST, New U S WEST, MediaOne or their Subsidiaries. (f) Co-Payments and Maximum Benefits. MediaOne and New U S WEST shall cause the Welfare Plans which they or their Subsidiaries maintain after the Separation Time to recognize and give credit for: (1) All amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to Employees covered by Welfare Plans maintained by the Existing U S WEST Group prior to the Separation Time for the remainder of the year in which the Separation Time occurs; and (2) All benefits paid to Employees under the Welfare Plans maintained by the Existing U S WEST Group prior to the Separation Time for purposes of determining when such persons have reached their lifetime maximum benefits under the Welfare 27 Plans maintained by MediaOne and New U S WEST or their Subsidiaries, whichever is applicable, after the Separation Time. (g) Pre-existing conditions. After the Separation Time, any group health plan maintained by MediaOne and New U S WEST or their Subsidiaries shall be prohibited from making exceptions from the coverage of individuals who were Employees or Terminated Employees prior to the Separation Time and their eligible spouses and dependents for pre-existing conditions except to the extent such exception is applicable under the plan in effect immediately prior to the Separation Time. (h) COBRA. Notwithstanding the foregoing provisions of this Section 7: (1) New U S WEST or its Subsidiaries shall be responsible for providing coverage required under COBRA, including the administration of such coverage, to (A) all Employees and Terminated Employees (and their eligible spouses and dependents) whose entitlement to benefits under COBRA is attributable to a "qualifying event," as defined in COBRA, which occurred before the Separation Time under any group health plan other than a group health plan maintained by the Cable Companies and (B) all Communications Employees, Terminated Communications Employees and Terminated Inc. Employees if such individual's entitlement to benefits under COBRA is attributable to a "qualifying event" which occurs on or after the Separation Time. (2) MediaOne or its Subsidiaries shall be responsible for providing coverage required under COBRA, including the administration of such coverage, to (A) all Employees and Terminated Employees (and their eligible spouses and dependents) whose entitlement to benefits under COBRA is attributable to a "qualifying event," as defined in COBRA, which occurred before the Separation Time under any group health plan maintained by the Cable Companies and (B) all Media Employees and Terminated Media Employees if such individual's entitlement to benefits under COBRA is attributable to a "qualifying event" which occurs on or after the Separation Time. (i) Long-Term Disability. Notwithstanding the foregoing provisions of this Section 7, this subsection (i) applies to long-term disability benefits provided to Terminated Employees other than through the U S WEST Pension Plan ("LTD"). 28 (1) New U S WEST shall be responsible for providing LTD, including the administration of such coverage, to Terminated Communications Employees, Terminated Inc. Employees and Terminated Media Employees who were employed immediately prior to commencing LTD by an employer other than one of the Cable Companies. (2) MediaOne shall be responsible for providing LTD, including the administration of such coverage, to Terminated Media Employees who were employed immediately prior to commencing LTD by one of the Cable Companies. 8. VEBA'S. (a) As of the Separation Time, sponsorship of the U S WEST Benefit Assurance Trust ("BAT"), the U S WEST Management Benefit Assurance Trust ("MBAT") and U S WEST Life Insurance Welfare Trust ("Life Insurance Trust") shall be transferred from Existing U S WEST to New U S WEST. In addition, each of the BAT, MBAT and Life Insurance Trust are hereby amended (such amendments to be self-effectuating), effective as of the Separation Time, to provide that the "Company" (as well as the sponsor, settlor and all other similar terms) under such trusts shall be New U S WEST and that the trust shall be administered by New U S WEST. (b) Sponsorship of the U S WEST VEBA Trust shall be retained by MediaOne or, at its option, transferred to Multimedia. (c) Effective as of the Separation Time, MediaOne shall adopt one or more new voluntary employee benefit associations or modify the U S WEST VEBA Trust (the "Media VEBA") to assume, immediately after the Separation Time, all Liabilities under the MBAT and Life Insurance Trust to, or relating to, Media Employees or Terminated Media Employees (excluding persons described in clauses (2) or (3) of the definition of Terminated Media Employee); all such Liabilities shall cease to be Liabilities of the MBAT and Life Insurance Trust. The Media VEBA shall comply with Code Sections 419, 419A, 501(a) and 501(c)(9). (d) As soon as practicable after the Separation Time, New U S WEST shall cause a transfer of assets from the MBAT and Life Insurance Trust to the Media VEBA in the manner and at the times specified in paragraph (f) 29 below. For purposes of this Section, the following definitions shall apply: (i) "Total Economic APBO" shall be the accumulated postretirement benefit obligation (as defined in SFAS No. 106) of the MBAT and Life Insurance Trust (excluding liabilities for supplemental and dependent life insurance), as calculated by the Actuaries, as of June 30, 1998 using actuarial methods and assumptions set forth in Schedule 2 hereto and any others mutually agreeable to the parties. (ii) "Actuaries" refer to the actuaries for the MBAT and Life Insurance Trust at the Separation Time. (iii) "Media Economic APBO" shall mean the portion of the Total Economic APBO attributable to the Media Employees and Terminated Media Employees, as calculated by the Actuaries. (iv) "Media Fraction" shall mean (1) the Media Economic APBO, divided by (2) the Total Economic APBO. (v) "Media Asset Share" shall mean the product of: (1) the fair market value as of June 30, 1998 and (2) the Media Fraction. For this purpose, (i) the value of any publicly traded security and cash shall be determined based on the audited reports of the trustee of the applicable trust and (ii) the value of any other securities or property shall be determined by one or more third parties selected by MediaOne and New U S WEST, based on the most recent appraisal or valuation of the particular security or property adjusted, if necessary, as determined by the third party. (vi) "Supplemental and Dependent Life Assets" shall mean any assets which are segregated for the purpose of providing supplemental and dependent life insurance. Notwithstanding the above, the Total Economic APBO, the Media Economic APBO and the Media Asset Share shall be determined separately for the MBAT and the Life Insurance 30 Trust. In addition, in order to determine the Media Asset Share, the provisions of Section 5(c) shall apply. (e) Within nine months after the Separation Time, MediaOne shall cause to be filed with the IRS a request for a determination that the Media VEBA is tax-exempt under Section 501(c)(9) of the Code (unless the New VEBA is the existing U S WEST VEBA Trust and New U S WEST agrees no such filing is required). MediaOne agrees to make all reasonable amendments requested by the IRS to obtain such letter. New U S WEST and MediaOne agree to cooperate with each other to fulfill any filing and/or regulatory reporting obligations with respect to such transfers. (f) New U S WEST shall cause the following asset transfers from the MBAT and Life Insurance Trust to the Media VEBA and MediaOne shall cause the Media VEBA to accept such asset transfers: (1) On July 1, 1998, an amount equal to 98% of the Media Asset Share, as estimated by the Actuaries in writing (immediately prior to July 1, 1998) to MediaOne and New U S WEST. Such estimate shall be calculated by assuming the Media Fraction was calculated as of May 31, 1998 and by using the fair market value of the assets, as reported by the trustee of the applicable trust, on May 31, 1998. (2) On July 1, 1998, an amount equal to the Supplemental and Dependent Life Assets multiplied by a fraction, the numerator of which is the amount of premiums paid by Media Employees and Terminated Media Employees for supplemental and dependent life insurance during the last full calendar year prior to the Separation Time and the denominator of which is the total premiums for such coverage paid by all Employees and Terminated Employees during that year. (3) As soon as practicable after the value of the assets as of June 30, 1998 is determined and the Media Asset Share is determined by the Actuaries in writing to MediaOne and New U S WEST (but not later than 30 days after such writing is provided), the excess of the Media Asset Share over the sum of the interim transfer under (1) above and any benefit payments to Terminated Media Employees by the MBAT and Life Insurance Trust after June 30, 1998. (If such amount is a negative number, such amount shall be transferred from the Media VEBA to the MBAT and Life Insurance Trust.) 31 (4) In the event there is any litigation or claims that the amount transferred from the MBAT and Life Insurance Trusts to the Media VEBA should be larger or smaller, the amount transferred shall be adjusted in accordance with all of the provisions set forth in Section 5 of this EM Agreement relating to a Contingent Amount and claims over the amount of the transfer. In addition, the parties agree that, to the extent permitted by law, any costs of defending any such claims and any Liabilities arising out of such claims shall be borne by the MBAT, Life Insurance Trust and the Media VEBA. Any such Liability for a transfer or arising out of any claims that a transfer is payable which cannot be borne by the MBAT, Life Insurance Trust or the Media VEBA shall be borne by New U S WEST or MediaOne in accordance with the last paragraph of Section 5(g) of this EM Agreement. To the extent any of the foregoing amounts is paid after July 1, 1998, such amount shall be increased or decreased by interest from July 1, 1998 to the date of payment (to the extent not paid or previously advanced) at a rate equal to the average monthly rate on the Mellon Trust Short Term Interest Fund (STIF), compounded monthly, in which the MBAT and Life Insurance Trust and the Media VEBA hold certain temporary cash funds from time to time (such rate to be provided by the trustee of the plan making the payment), during the period commencing on July 1, 1998 and ending with the date of payment; provided that no interest shall be paid with respect to the amounts in clause (4) above if the Final Determination already provides for an adjustment reflecting interest or plan earnings. With respect to all of the foregoing transfers and any transfer required by subsection (g) below, the specific assets to be transferred shall be cash and other liquid assets, as agreed upon by New U S WEST and MediaOne in good faith so as to not treat the MBAT, Life Insurance Trust and Media VEBA unfairly in any material respect. (g) As soon as practicable after July 1, 1998, MediaOne shall cause a transfer of assets from the U S WEST VEBA Trust to the MBAT in an amount equal to the balance in the U S WEST VEBA Trust immediately prior to July 1, 1998 (and before any transfers described in paragraph (f) above) multiplied by a fraction, the numerator of which is the amount of contributions made to that trust for calendar year 1998 (up through June 30, 1998) on behalf of the New U S WEST Group and the denominator of which is the total amount of all contributions made to that trust for 32 1998 (up through June 30, 1998), increased by interest on the unpaid amount due from July 1, 1998 to the date of payment at the rate of (8%) per annum. In lieu of these transfers, the parties may agree to offset the amount to be transferred against the transfers required in subsection (f) above. 9. INCENTIVE COMPENSATION. (a) Stock Options. Options to purchase shares of Communications Stock ("Communications Options") and shares of Media Stock ("Media Options") which are unexercised as of the Separation Time and which were issued pursuant to the terms of the Amended U S WEST 1994 Stock Plan, the U S WEST Media Group 1996 Stock Option Plan, the U S WEST Media Group 1997 Stock Option Plan and the U S WEST Communications Group 1997 Stock Option Plan (collectively the "Option Plans") shall be treated as follows: (1) New U S WEST shall assume the U S WEST Communications Group 1997 Stock Option Plan and all obligations under such plan. (2) MediaOne shall retain the U S WEST Media Group 1996 Stock Option Plan and the U S WEST Media Group 1997 Stock Option Plan and all obligations under such plans. (3) MediaOne shall retain the Amended U S WEST 1994 Stock Plan and all obligations with respect to Media Options under such plan. (4) New U S West shall establish a new stock plan to be effective as of the Separation Time and shall assume, under such plan, all obligations with respect to Communications Options issued under the Amended U S WEST 1994 Stock Plan. (5) Unexercised options issued under any of the Option Plans shall continue in effect for their original term subject to paragraph (6) below and the following adjustments to reflect the transactions contemplated by the Separation Agreement. (i) No Media Dividend shall be distributed with respect to any Media Options. However, in accordance with the following sentence, the number of Media Options held by any person shall be converted into a higher number of options to purchase shares of MediaOne Common Stock and the exercise price of each such 33 option shall be decreased. The number of options shall be increased and the exercise price of each share under each option shall be decreased to reflect the Media Dividend in a manner consistent with Accounting Rule EITF 90-9 in order to preserve the economic value of the options. (ii) The Communications Options shall be converted to options to purchase shares of New U S WEST Common Stock on a one for one basis; the exercise price shall not change. (6) Vested options under any of the Option Plans shall be exercised on and after the Separation Time by an Employee by contacting the stock plan administrator for his or her employer or former employer. New U S WEST and MediaOne each agrees to act as agent (the "crossover agent") for the other (the "other company") in the case of an exercise of an option by an Employee of the crossover agent under an Option Plan of the other company. In addition, New U S WEST agrees to act as crossover agent in the case of an exercise of an option by a Terminated Communications Employee or Terminated Inc. Employee under an Option Plan of MediaOne; MediaOne agrees to act as crossover agent in the case to an exercise of an option by a Terminated Media Employee under an Option Plan of New U S WEST. The crossover agent for the other company shall, by itself and/or through its own third-party arrangements (i) effect an option exercise of the applicable shares; (ii) report such exercise to the other company on a timely basis, not to exceed 30 days after the exercise; (iii) collect from the Employee, and remit and/or report to the Employee and/or the appropriate tax authorities, as applicable, all taxes incurred by the crossover agent (as the employing company) resulting from the exercise of an option under the other company's Option Plan, and all taxes required to be withheld from the Employee's proceeds as a result of the exercise of an option under the other company's Option Plan; (iv) deliver the stock to the Employee or pay the Employee the excess of the sales proceeds of the applicable shares over the sum of the exercise price and all taxes required to be withheld from the Employee's proceeds as a result of the exercise; and (v) pay the other company an amount equal to the exercise price of such option on a timely basis, not to exceed 30 days after the exercise. In addition, the other company agrees to honor the separation policies of the crossover agent (or its subsidiaries) in effect at the Separation Time for purposes of determining if a separated Employee is 35 eligible to exercise an option under the other company's Option Plan. Written approval of the other company shall be required before any changes adopted after the Separation Time in the crossover agent's separation policies may apply with respect to the crossover agent's Employees' exercise of options under the other company's Option Plan. (b) Restricted Stock. Communications Stock and Media Stock issued to Employees or Terminated Employees under the Amended U S WEST 1994 Stock Plan which has not become vested under the terms of that plan as of the Separation Time ("Restricted Communications Stock" and "Restricted Media Stock" respectively) shall be treated as follows: (1) Immediately prior to the Separation Time, Media Employees and Terminated Media Employees shall surrender any Restricted Communications Stock they hold and receive Restricted Media Stock in exchange. The number of shares of Restricted Media Stock received by each such individual shall equal the number of shares of Restricted Communications Stock surrendered by such individual multiplied by 1.0645 and further multiplied by the ratio of the Average Value of the Communications Stock to the Average Value of the Media Stock. (2) Immediately prior to the Separation Time, Communications Employees, Terminated Communications Employees and Terminated Inc. Employees shall surrender any Restricted Media Stock they hold as of the Separation Time and receive Restricted Communications Stock in exchange. The number of shares of Restricted Communications Stock received by each such individual shall equal that number of shares of Restricted Media Stock surrendered by such individual multiplied by 1.0645 and further multiplied by the ratio of the Average Value of the Media Stock to the Average Value of the Communications Stock. (3) Following the adjustments in paragraphs (1) and (2) above, MediaOne shall retain the Amended U S WEST 1994 Stock Plan and all obligations under such plan with respect to Media Restricted Stock and shall amend such plan to provide for restricted stock ("Restricted MediaOne Common Stock") after the Separation Time. In order to reflect the transactions contemplated by the Separation Agreement, the Restricted Media Stock shall be subject to the following adjustments. 35 Following the adjustments in paragraphs (1) and (2) above, (i) the Restricted Media Stock shall be converted to Restricted MediaOne Common Stock on a one for one basis and (ii) each share of Restricted Media Stock, including shares described in paragraph (1) above but not those described in paragraph (2) above, shall receive the Media Dividend, provided that such Media Dividend shall be free of all restrictions under the plan. (4) Following the adjustments in paragraphs (1) and (2) above, New U S WEST shall assume, under the new stock plan adopted pursuant to subsection (a)(4) above, all obligations under the Amended U S WEST 1994 Stock Plan with respect to Restricted Communications Stock and shall amend such plan to provide for restricted stock ("Restricted New U S WEST Common Stock") after the Separation Time. In order to reflect the transactions contemplated by the Separation Agreement, following the adjustments in paragraphs (1) and (2) above, the Restricted Communications Stock shall be converted to Restricted New U S WEST Common Stock on a one for one basis. (5) Except for the Media Dividend set forth in paragraph (3) above, each share of Restricted New U S WEST Common Stock and Restricted MediaOne Common Stock outstanding after the application of the foregoing paragraphs of this subsection (b) ("Post-Separation Restricted Stock") shall vest in accordance with the vesting period applicable to the grant of restricted stock to which each share of Post-Separation Restricted Stock is attributable. (c) LTIP. The U S WEST Communications Long-Term Incentive Plan ("LTIP") shall be terminated as of the Separation Time and a new long-term incentive plan (the "Communications LTIP") shall be established by New U S WEST. Awards under the LTIP to Communications Employees shall be assumed by the Communications LTIP and shall continue under their original terms subject to adjustment to reflect the transactions contemplated by the Separation Agreement; MediaOne shall cease to have any Liability with respect to such awards. The measurement period for awards under the LTIP to Media Employees shall terminate as of the Separation Time and the awards shall be calculated and paid out in Restricted MediaOne Group Common Stock as of that time. 36 (d) ESTIP. The U S WEST, Inc. Executive Short Term Incentive Plan ("ESTIP") shall be retained by MediaOne and a new executive incentive plan (the "Communications ESTIP") shall be established by New U S WEST. Awards under the ESTIP to Communications Employees shall be assumed by the Communications ESTIP and shall continue under their original terms subject to adjustment to reflect the transactions contemplated by the Separation Agreement; MediaOne shall cease to have any Liability with respect to such awards. (e) Phantom Stock. The units issued under the Amended U S WEST 1994 Stock Plan or any Top-hat Plan (as defined in Section 10(a)(1)) of Existing U S WEST which are valued in accordance with Communications Stock ("Phantom Communications Stock") and the units issued under the Amended U S WEST 1994 Stock Plan or any Top-hat Plan of Existing U S WEST which are valued in accordance with Media Stock ("Phantom Media Stock") shall be treated as follows: (1) The Phantom Communications Stock of a Media Employee, a Media Director (as defined in Section 10(g) below), or in the case of a Top-hat Plan, a Terminated Media Employee prior to the Separation Time shall be converted into Phantom Media Stock immediately prior to the Separation Time. The number of units of Phantom Media Stock received by each such individual shall equal the number of units of Phantom Communications Stock surrendered by such individual multiplied by the ratio of the Average Value of the Communications Stock to the Average Value of the Media Stock. (2) The Phantom Media Stock of a Communications Employee, Communications Director (as defined in Section 10(g) below) or in the case of a Top-hat Plan, a Terminated Communications Employee or Terminated Inc. Employee prior to the Separation Time shall be converted into Phantom Communications Stock immediately prior to the Separation Time. The number of units of Phantom Communications Stock received by each such individual shall equal the number of units of Phantom Media Stock surrendered by such individual multiplied by the ratio of the Average Value of the Media Stock to the Average Value of the Communications Stock. (3) Following the adjustments in paragraphs (1) and (2) above, MediaOne shall retain the Amended U S WEST 1994 Stock Plan and all obligations under such plan with respect to Phantom Media Stock. MediaOne shall also establish new Top- 37 hat Plans as set forth in Section 10(a)(2). MediaOne shall amend such plans to provide for units which are valued in accordance with MediaOne Common Stock ("Phantom MediaOne Common Stock") after the Separation Time. In order to reflect the transactions contemplated by the Separation Agreement, following the adjustments in paragraphs (1) and (2) above, the Phantom Media Stock, including units described in paragraph (1) above but not those described in paragraph (2) above, shall be converted to Phantom MediaOne Common Stock on the following basis. The number of units of Phantom MediaOne Common Stock credited shall equal the number of units of Phantom Media Stock surrendered by such individual multiplied by the ratio of the Average Value of the Media Stock to the excess of the Average Value of the Media Stock over the product of the Dividend Number multiplied by the Average Value of the Communications Stock. (4) Following the adjustments in paragraphs (1) and (2) above, New U S WEST shall assume, under the new stock plan adopted pursuant to subsection (a)(4) above, all obligations under the Amended U S WEST 1994 Stock Plan with respect to Phantom Communications Stock. New U S WEST shall also retain certain Top-hat Plans as set forth in Section 10(a)(1). New U S WEST shall amend such plans to provide for units which are valued in accordance with New U S WEST Common Stock ("Phantom New U S WEST Common Stock") after the Separation Time. In order to reflect the transactions contemplated by the Separation Agreement, following the adjustments in paragraphs (1) and (2) above, the Phantom Communications Stock shall be converted to Phantom New U S WEST Common Stock on a one for one basis. (5) MediaOne and New U S WEST shall cause all plans referred to in this subsection (e) to be amended, as appropriate, to effect the changes described herein as of the Separation Time. 10. OTHER BENEFITS. (a) Top-hat plans. As of the Separation Time: (1) New U S WEST or a Subsidiary shall assume all plans maintained by the Existing U S WEST Group prior to the Separation Time which are intended to be described in Section 201(2) of ERISA ("Top-hat Plans") and all Liabilities and 38 obligations with respect to Communications Employees, Terminated Communications Employees and Terminated Inc. Employees under such plans. Such Top-hat Plans shall include, without limitation, the U S WEST Nonqualified Pension Plan and the U S WEST Deferred Compensation Plan. All such plans shall be Communications Employee Benefit Plans. The MediaOne Group shall have no Liabilities with respect to such plans. (2) MediaOne or a Subsidiary shall establish new Top-hat Plans corresponding to the Top-hat Plans maintained by the Existing U S WEST Group before the Separation Time and shall assume, under such plans, all Liabilities and obligations with respect to Media Employees and Terminated Media Employees under the Top-hat Plans maintained by the Existing U S WEST Group prior to the Separation Time. All such plans shall be Media Employee Benefit Plans. All such Liabilities and obligations shall cease to be Liabilities or obligations of the Top-hat Plans assumed by New U S WEST pursuant to the preceding paragraph (1). (3) Subject to paragraph (4) below, any trusts maintained by Existing U S WEST or its Subsidiaries for the purpose of providing benefits under a Top-hat Plan (the "Existing U S WEST Rabbi Trusts") shall be transferred to and assumed by New U S WEST. (4) MediaOne or a Subsidiary shall establish prior to the Separation Time one or more trusts (the "MediaOne Rabbi Trusts") for the purpose of providing benefits under its Top-hat Plans which correspond to the Existing U S WEST Rabbi Trusts. As of the Separation Time, Existing U S West shall cause the trustee or trustees of the Existing U S WEST Rabbi Trusts to transfer to the trustee or trustees of the MediaOne Rabbi Trusts any amounts held in the Existing U S WEST Rabbi Trusts attributable to the benefits of Terminated Media Employees. (5) See Section 9(e) for additional rules that apply to Phantom Communications Stock and Phantom Media Stock under the Top-hat Plans. (b) Employment contracts. Except for the severance agreements with members of the Executive Group, all individual employment contracts, including but not limited to severance agreements, retention agreements, 39 change-of-control agreements and letter agreements, entered into by a member of the Existing U S WEST Group and a single Communications Employee or a Terminated Communications Employee shall be retained by, or assigned to and assumed by, as applicable, the New U S WEST Group, provided they do not expire by their own terms as of the Separation Time. The MediaOne Group shall have no Liabilities with respect to such agreements. Any such employment contracts, other than agreements described in paragraph (d) below, entered into by any member of the Existing U S WEST Group and a single Media Employee or a Terminated Media Employee shall be retained by, or assigned to and assumed by, as applicable, the MediaOne Group, provided they do not expire by their own terms as of the Separation Time. The New U S WEST Group shall have no Liabilities with respect to such agreements. Any Liability under such employment contracts, other than the severance agreements with members of the Executive Group, entered into by any member of the Existing U S WEST Group and a single Terminated Inc. Employee shall be borne in accordance with Section 2(c) and (f) of this EM Agreement. (c) Split-dollar contracts. All split-dollar insurance contracts entered into by the Existing U S WEST Group for the benefit of a Communications Employee or a Terminated Communications Employee shall be retained by, or assigned to and assumed by, as applicable, New U S WEST; the MediaOne Group shall have no interest in, or Liabilities with respect to, such contracts. Any such split-dollar insurance contracts entered into by the Existing U S WEST Group for the benefit of a Media Employee or a Terminated Media Employee shall be retained by, or assigned to and assumed by, as applicable, MediaOne; the New U S WEST Group shall have no interest in, or Liabilities with respect to, such contracts. In order to assign and assume any such split dollar life policies, the parties agree to accept any collateral assignments, policy endorsements or such other documentation executed by or on behalf of the applicable employees or terminated employees, or any trustee of any trust to which such policy rights or incidents of ownership under the policies have been assigned, as well as entering into any such agreements as may be necessary to fulfill obligations to any insurance company or insurance agent or broker under the policies to be assigned. (d) Ex-Pat Employees. This sub-section applies to Employees ("Ex-Pat Employees") currently employed by International who have entered into agreements with Existing U S WEST or a Subsidiary which give such Employees re-employment rights with Existing U S WEST or a domestic Subsidiary thereof. If an Ex-Pat Employee notifies Existing U S WEST in writing prior to May 1, 1998 that he wishes to exercise his right to 40 return to domestic employment prior to the Separation Time, the Communications Business will either: (1) re-employ the Ex-Pat Employee in accordance with his re-employment right; or (2) enter into a new agreement with the Ex-Pat Employee terminating his re-employment right. Any costs associated with re-employing the Ex-Pat Employee or terminating his re-employment right in accordance with the prior sentence shall be borne by the Communications Business. If an Ex-Pat Employee does not notify Existing U S WEST in writing prior to May 1, 1998 that he wishes to exercise his right to return to domestic employment prior to the Separation Time, all obligations under the agreement which provides the re-employment right shall be assumed by MediaOne. Any costs associated with assuming the re-employment right of the Ex-Pat Employee in accordance with the prior sentence shall be borne by New U S WEST and/or MediaOne as determined by the parties through good faith negotiations to be completed prior to the Separation Time. (e) Vail Trust. The Theodore N. Vail Memorial Fund shall be transferred to and assumed by New U S WEST as of the Separation Time. (f) Leaves of Absence. Each member of the MediaOne Group and the New U S WEST Group shall honor all terms and conditions of leaves of absence that have been granted to any Employee before the Separation Time, including such leaves that are commenced after the Separation Time, to the extent that such Employees are assigned to that entity. Each such entity shall be solely responsible for administering such leaves of absence and compliance with all applicable laws relating to leaves of absence, including the Family Medical Leave Act. Unless members of the New U S WEST Group or MediaOne Group adopt other policies prior to the Separation Time, each shall be considered to have adopted leave of absence programs, effective as of the Separation Time, which are substantially identical in all material respects to the leave of absence programs in effect at the respective entities at the Separation Time. (g) Non-Employee Director Plans. (1) As of the Separation Time, New U S WEST shall assume the Non-Employee Director Plans and all Liabilities and obligations under such plans with respect to individuals who will be directors of New U S WEST immediately after the Separation Time and Retired Non-Employee Directors (collectively referred to as "Communications Directors"). The MediaOne Group shall have no Liabilities with respect to such agreements. 41 (2) As of the Separation Time, MediaOne shall establish new plans for its non-employee directors ("Media Non-Employee Director Plans") corresponding to the Non-Employee Director Plans maintained by U S WEST before the Separation Time and shall assume, under such plans, all Liabilities and obligations under the Non-Employee Director Plans with respect to individuals who will be directors of MediaOne ("Media Directors") immediately after the Separation Time. All such Liabilities and obligations shall cease to be Liabilities or obligations of the Non-Employee Director Plans assumed by New U S WEST pursuant to paragraph (1) above. The New U S WEST Group shall have no Liabilities with respect to such agreements. (3) MediaOne and New U S WEST shall cause all plans referred to in this sub-section (g) to be amended, as appropriate, to effect the changes described herein as of the Separation Time. (h) Non-Employee State Executive Board Plan. As of the Separation Time, New U S WEST shall assume the U S WEST Communications, Inc. Non-Employee State Executive Board Deferred Compensation Plan (and any predecessor plan) and be solely responsible for all Liabilities thereunder. New U S WEST shall cause such plan to be amended, as appropriate, to effect the changes described herein as of the Separation Time. 11. PORTABILITY. Existing U S WEST and, if necessary after the Separation Time, MediaOne and New U S WEST shall use reasonable best efforts to seek an amendment of the Mandatory Portability Agreement established as of January 1, 1985, as referenced in the U S WEST Pension Plan (the "MPA"), to allow New U S WEST to become a "Tier II Signatory Company" under the MPA with the same rights and obligations as have been granted to AirTouch Communications, Inc. as a Tier II Signatory Company. MediaOne and New U S WEST may mutually agree to additional situations where service credit would be granted for employees transferring between one another (or their Subsidiaries) with associated trust asset transfers after the Separation Time. 42 12. FURTHER AGREEMENTS. (a) From and after the Separation Time, MediaOne shall, and shall cause its Subsidiaries and successors to, provide credit under all Media Employee Arrangements and Media Employee Benefit Plans to Media Employees and Terminated Media Employees for service with the Existing U S WEST Group prior to the Separation Time for purposes of eligibility to participate, vesting and eligibility to retire, and for purposes of calculating any severance benefits, to the same extent such credit was provided under Employee Arrangements and Employee Benefit Plans prior to the Separation Time. (b) From and after the Separation Time, New U S WEST shall, and shall cause its Subsidiaries and successors to, provide credit under all Communications Employee Arrangements and Communications Employee Benefit Plans to Communications Employees, Terminated Communications Employees and Terminated Inc. Employees for service with the Existing U S WEST Group prior to the Separation Time for purposes of eligibility to participate, vesting and eligibility to retire, and for purposes of calculating any severance benefits, to the same extent such credit was provided under Employee Arrangements and Employee Benefit Plans prior to the Separation Time. (c) MediaOne and New U S WEST shall promptly reimburse each other for all valid liability and expenses addressed in this EM Agreement which are paid by the other and that constitutes a liability of MediaOne or New U S WEST, as the case may be, upon presentation of an invoice thereon. In the event that payment in full is not received within 45 days from the date of the invoice, interest shall accrue at the rate of 7% per annum from the date of the invoice. 13. COOPERATION. (a) MediaOne, New U S WEST and their Subsidiaries shall cooperate with each other in carrying out, implementing and defending the terms of this EM Agreement, including cooperating with each other with respect to any claims or litigation challenging the terms of the EM Agreement. (b) Each party shall exchange such information with the other party and their respective agents and vendors (without obtaining releases), as may be reasonably requested by the other party, with respect thereto. MediaOne and New U S WEST and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely 43 access to, and may make copies of, all information relating to the subjects of this EM Agreement in the custody of the other party, to the extent reasonably requested by the other party. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or a union) and such consent is withheld, MediaOne and New U S WEST shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, MediaOne and New U S WEST shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase "reasonable best efforts" as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right of MediaOne and New U S WEST (and their respective Subsidiaries). (c) MediaOne and New U S WEST agree to good faith mutual cooperation in any investigation, inquiry or litigation which jointly involves them or in which either party makes a reasonable request for such cooperation. Each party will make its Employees available on a reasonable basis to give testimony and assistance in connection with any lawsuit, dispute, investigation or proceeding involving the other party and arising out of activities for which the Employee had responsibility prior to the Separation Time. The party requesting such availability (the "Requesting Party") shall reimburse the Employee for all reasonable out-of-pocket travel and other expenses incurred in so cooperating, including without limitation airplane fare, hotel accommodations, meal charges and other similar expenses, as well as reasonable fees and disbursements for independent counsel for the Employee, if the matter requires that the Employee have independent representation. Such expenses will be reimbursed promptly after Employee's submission to the Requesting Party of statements and such reasonable detail as the Requesting Party may require. Any request for cooperation, and the degree of cooperation provided, pursuant to this paragraph will take into account (1) the significance of the matters at issue in the lawsuit, dispute, investigation or proceeding, and (ii) the Employee's other personal and business commitments. In any case in which either MediaOne or New U S WEST becomes aware that one of its Employees is called (except by the other party) as a witness to testify in any discovery or court proceeding relating to the other party, the party employing such individual will notify the other party immediately in order to give the other party a reasonable opportunity to appear and/or assert any privilege to which it may be entitled. 44 14. NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. (a) No provision of this EM Agreement or the Separation Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Employee or Terminated Employee or other future, present or former employee of MediaOne, New U S WEST, or their respective Subsidiaries under any Employee Benefit Plan or Employee Arrangement maintained by any of such entities or otherwise. (b) Without limiting the generality of the foregoing provisions of subsection 14(a) above, except for the severance agreements applicable to the Executive Group, neither (1) the transactions described in the Separation Agreement including without limitation the Reorganization, Contribution and Separation, (2) the termination of the Participating Company status of New U S WEST or a New U S WEST Subsidiary, (3) the transfer of sponsorship of any Employee Benefit Plans or Employee Arrangements to New U S WEST, (4) the transfer of an Employee from one member of the Existing U S WEST Group to another member in connection with or in anticipation of the Reorganization, Contribution or Separation at any time on or before the Separation Time nor (5) the assignment and transfer of an Employee to the New U S WEST Group or MediaOne Group, shall cause any Employee to be deemed to have incurred a termination of employment which entitles such individual to the commencement of benefits under any Employee Benefit Plan or Employee Arrangement maintained by MediaOne, New U S WEST, or their respective Subsidiaries; nor shall any of the events set forth in clauses (1) through (5) of this subsection 14(b) be treated as, or result in, a change in control under any such Employee Benefit Plan or Employee Arrangement. (c) To the extent applicable, each Employee Benefit Plan and Employee Arrangement is hereby amended (without the need for further action) to incorporate the provisions stated in subsection 14(b). (d) Except as expressly provided in this Agreement, nothing in this Agreement shall preclude New U S WEST or MediaOne or their respective Subsidiaries, at any time after the Separation Time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Employee Benefit Plan or Employee Arrangement maintained by such party, any benefit under any such plan or arrangement, or any trust, insurance policy or funding vehicle related to any such plan or arrangement. 45 (e) No provision in this EM Agreement or in the Separation Agreement shall confer upon any person other than the signatories hereto any rights or remedies with respect to the employment, compensation, benefits, or other terms and conditions of employment of any persons. 15. MISCELLANEOUS. (a) Payment of 1998 Administrative Costs and Expenses. Each member of the Existing U S WEST Group shall be responsible for their allocable share of the budgeted costs for benefits in 1998 until the Separation Time, as well as their allocable share of unanticipated expenses incurred prior to the Separation Time. In addition, MediaOne shall pay New U S WEST for all expenses and costs relating to benefits incurred after the Separation Time to the extent that the additional expenses are (i) reasonable and necessary and (ii) incurred as a result of, and for the purpose of, the normal administration of the Media Employee Benefit Plans or Employee Arrangements after the Separation Time. If any expenses are incurred at the request of MediaOne, they shall be the sole responsibility of MediaOne. (b) Audit Rights. (1) Information Provided. Each of MediaOne and New U S WEST, and their duly authorized representatives, shall have the right to conduct audits with respect to all information provided to it by the other party. The party conducting the audit (the "Auditing Party") shall have the sole discretion to determine the procedures and guidelines for conducting audits and the selection of audit representatives under this paragraph (1); provided, that no audits shall be permitted with respect to the allocation or transfer of plan assets and liabilities. The Auditing Party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Separation Agreement, which are incorporated by reference herein. The party being audited shall provide the Auditing Party's representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within five business days after receiving such draft. The Auditing Party's audit rights under this paragraph (1) shall include the right to audit, or participate in an audit facilitated by the party being audited, of any Subsidiaries and Affiliates of the party being audited and of any 46 benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to the extent any such persons are affected by or addressed in this Agreement (collectively, the "Non-parties"). The party being audited shall, upon written request from the Auditing Party, provide an individual (at the Auditing Party's expense) to supervise any audit of a Non-party. The Auditing Party shall be responsible for supplying, at the Auditing Party's expense, additional personnel sufficient to complete the audit in a reasonably timely manner. The responsibility of the party being audited shall be limited to providing, at the Auditing Party's expense, a single individual at each audited site for purposes of facilitating the audit. (2) Vendor Contracts. After the Separation Time, MediaOne and New U S WEST and their duly authorized representatives shall have the right to conduct joint audits with respect to any Provider Contracts that relate to both the MediaOne Welfare Plans and the New U S WEST Welfare Plans. The scope of such audits shall encompass the review of all correspondence, account records, claim forms, cancelled drafts (unless retained by the bank), provider bills, medical records submitted with claims, billing corrections, vendor's internal corrections of previous errors and any other documents or instruments relating to the services performed by the vendor under the applicable vendor contracts. MediaOne and New U S WEST shall agree on the performance standards, audit methodology, auditing policy and quality measures and reporting requirements relating to the audits described in this paragraph (2) and the manner in which costs incurred in connection with such audits will be shared. (c) Beneficiary Designations. All beneficiary designations made under the Employee Benefit Plans or Employee Arrangements prior to the Separation Time shall be transferred to and be in full force and effect under the corresponding new Communications or Media Employee Benefit Plans or Employee Arrangements until such beneficiary designations are replaced or revoked by the individual who made the beneficiary designation. (d) Effect If Separation Does Not Occur. If the Separation does not occur, then all actions and events that are, under this EM Agreement, to be taken or occur effective as of the Separation Time, immediately after the Separation Time, or otherwise contingent upon or in connection with the Separation, shall not be taken or occur. In addition, to the extent actions are taken or events occur prior to the Separation Time in connection with the Reorganization or Contribution or in anticipation of the Separation, then such events or actions shall be reversed or deemed null and void. 47 (e) Provisions of Separation Agreement. The provisions of Articles X - XII of the Separation Agreement shall, to the extent applicable and not inconsistent with this EM Agreement, shall also apply to this EM Agreement. (f) U S WEST Benefits Handbook. Notwithstanding any provision of the Separation Agreement regarding the use of the U S WEST name or otherwise, MediaOne may use and refer to the booklet entitled "Your U S WEST Benefits Handbook" (as in effect at the Separation Time) for the purposes of explaining benefits to its employees. 48 IN WITNESS WHEREOF, each of the parties has caused this EM Agreement to be duly executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written in the Separation Agreement. U S WEST, Inc. By: /s/ Charles M. Lillis ------------------------------------- Name: Charles M. Lillis Title: Executive Vice President; President and Chief Executive Officer--U S WEST Media Group USW-C, Inc. By: /s/ Solomon D. Trujillo ------------------------------------- Name: Solomon D. Trujillo Title: President and Chief Executive Officer U S WEST, Inc., plan sponsor of the: Media Pension Plan Media Savings Plan Media VEBA Other Media Employee Benefit Plans By: /s/ Charles M. Lillis ------------------------------------- Name: Charles M. Lillis Title: Executive Vice President; President and Chief Executive Officer--U S WEST Media Group USW-C, Inc., plan sponsor of the: U S WEST Pension Plan U S WEST Savings Plan MBAT and Life Insurance Trust Other Communications Employee Benefit Plans By: /s/ Solomon D. Trujillo ------------------------------------- Name: Solomon D. Trujillo Title: President and Chief Executive Officer 49 SCHEDULE 1 U S WEST, INC. PENSION SPIN-OFF ASSUMPTIONS ________________________________________________________________________________ ECONOMIC Investment return and discount rate 8.0% GATT lump sum rate 6.5% Salary increase Current U S WEST tables DEMOGRAPHIC Mortality UP 94 Retirement Current U S WEST tables Turnover U S WEST Current U S WEST tables MediaOne Two times current U S WEST management tables MediaOne Group Current U S WEST management table Lump sum take rate DVP: 95% SPE: 70% ASSETS Method Fair market value LIABILITIES Method FAS 87 projected unit credit attribution based on lump sum accrual pattern ________________________________________________________________________________ 50 SCHEDULE 2 U S WEST, INC. RETIREE HEALTH AND LIFE SPIN-OFF ASSUMPTIONS ________________________________________________________________________________ ECONOMIC Investment return and discount rate 8.0% Salary increase Current U S WEST tables DEMOGRAPHIC Mortality UP 94 Retirement Current U S WEST tables Turnover U S WEST Current U S WEST tables MediaOne Group Current U S WEST management table MediaOne Two times current U S WEST management table ASSETS Method FAS 106 projected unit credit attribution. Life benefits limited to $50,000 and exclude dependent and supplemental benefits ________________________________________________________________________________ ANNUAL MEDICAL TREND ANNUAL DENTAL TREND Health care trend rates: 1998 to 2,000 8.0% 1997 to 1998 6.0% 1998 to 1999 5.8 1999 to 2000 5.7 2000 to 2001 5.5 2001 to 2005 7.0 2001 to 2002 5.3 2002 to 2003 5.2 2006 to 2010 6.0 2003 and beyond 5.0 2011 and beyond 5.5 ________________________________________________________________________________ HMOS HMOS DENTAL 1997 per capita costs 55 $2,701 $3,423 $251 60 3,265 4,138 251 65 600 1,709 251 70 600 1,741 251 Percentage electing HMOs 1997 and 1998 50% 1999 and 2000 60 2001 and 2002 70 2003 and 2004 80 2005 and 2006 90 2007 and later 100 51 EX-99.3 6 EXHIBIT 99.3 - ------------------------------------------------------------------------------- TAX SHARING AGREEMENT between U S WEST, INC. (to be renamed MEDIAONE GROUP, INC.) and USW-C, Inc. (to be renamed U S WEST, INC.) Dated as of June 5, 1998 - ------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- ARTICLE I Definitions; Certain Operating Conventions. . . . . . . . . . . . . . . . . . 2 ARTICLE II Allocation and Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE IV Preparation and Filing of Tax Returns, Cooperation and Record Retention. . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE V Refunds, Audits and Adjustments . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE VI Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
TAX SHARING AGREEMENT TAX SHARING AGREEMENT, dated as of June 5, 1998, by and between U S WEST, Inc., a Delaware corporation ("U S WEST") to be renamed MediaOne Group, Inc. and USW-C, Inc., a Delaware corporation and wholly owned subsidiary of U S WEST ("New U S WEST") to be renamed U S WEST, Inc. W I T N E S S E T H WHEREAS, New U S WEST and its subsidiaries are currently members of the U S WEST Consolidated Group (as defined herein); WHEREAS, pursuant to the Separation Agreement entered into between U S WEST and New U S WEST dated June 5, 1998 (the "Separation Agreement"), (a) U S WEST shall effect a restructuring of certain of its assets, liabilities and businesses, as a result of which New U S WEST shall own the Directories Business and the businesses currently attributed to the Communications Group (each as defined in the Separation Agreement) (the "Reorganization") and (b) U S WEST shall distribute all of the outstanding capital stock of New U S WEST to its stockholders (the "Separation"); WHEREAS, the parties intend that for United States federal income tax purposes the Reorganization and the Separation shall qualify as tax-free transactions pursuant to Sections 332, 368(a) and 355 of the Code (as defined herein); WHEREAS, the parties wish to (a) provide for the payment of tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of tax returns and provide for certain other matters relating to taxes and (b) set forth certain covenants and indemnities relating to the preservation of the tax-free status of the Reorganization and the Separation. NOW, THEREFORE, in consideration of the mutual promises and undertakings contained herein and in any other document executed in connection with this Agreement, the parties agree as follows: ARTICLE I DEFINITIONS; CERTAIN OPERATING CONVENTIONS 1.1 For the purposes of this Agreement, the following terms shall have the meanings set forth below: ADJUSTMENTS shall mean any proposed or final change in the Tax Liability of a taxpayer. CODE shall mean the Internal Revenue Code of 1986, as amended. COMBINED RETURN shall mean any combined, unitary, or consolidated State Income Tax return that includes one or more members of the MediaOne Group and one or more members of the New U S WEST Group (as hereinafter defined). COMBINED RETURN TAX SAVINGS shall mean, with respect to a Taxable Year in which one or more Combined Returns were filed or required to be filed in the Communications Group Region, the excess of the State Income Tax that would have been payable to all Tax Authorities in the Communications Group Region if the MediaOne Group had not been included in such Combined Returns for such Taxable Year over the actual State Income Tax paid to such Tax Authorities in respect of such Combined Returns. COMMUNICATIONS GROUP REGION shall mean the 14-state region comprised of the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. CONTRIBUTED MEDIA GROUP SUBSIDIARIES shall mean each of U S WEST Media Group, Inc. and U S WEST Capital Funding, Inc., and each of their respective subsidiaries. CONTRIBUTED SUBSIDIARIES shall mean each of U S WEST Foundation, U S WEST Educational Foundation, U S WEST Investment Management Company, U S WEST SPF, Co., U S WEST Federal Relations, Inc., and U S WEST IP Holdings, Inc., and each of their respective subsidiaries. FEDERAL INCOME TAX shall mean federal Taxes determined on the basis of net income or profits (including, but not limited to, any alternative minimum tax, capital gains and any Tax on items of Tax preferences) but excluding non-income Taxes such as federal payroll and excise Taxes. 2 INDEMNIFYING PARTY shall mean any Person from which an Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement. INDEMNIFIED PARTY shall mean any Person which is seeking indemnification from an Indemnifying Party pursuant to the provisions of this Agreement. IRS shall mean the United States Internal Revenue Service. MEDIAONE GROUP shall mean, individually and collectively, as the case may be, each member of the U S WEST Consolidated Group, other than any member of the New U S WEST Group. NEW U S WEST GROUP shall mean, individually and collectively, as the case may be, New U S WEST and its present and future direct and indirect subsidiaries; PROVIDED, HOWEVER, that on or prior to the Separation Date, none of the Contributed Subsidiaries or the Contributed Media Group Subsidiaries shall be included as a member of the New U S WEST Group. PERSON shall mean and includes any individual, corporation, company, association, partnership, joint venture, limited liability company, joint stock company, trust, unincorporated organization, or other entity. POST-SEPARATION TAXABLE PERIOD shall mean a taxable period that begins after the Separation Date. PRE-SEPARATION TAXABLE PERIOD shall mean a taxable period that ends on or before the Separation Date. PRESENT VALUE BENEFIT shall mean the present value (based on a discount rate equal to the short-term applicable federal rate as determined under Section 1274(d) of the Code at the time of determination, and assuming that the Indemnified Party will be liable for Taxes at all relevant times at the maximum marginal rates) of any income tax benefit. PROCEEDING shall mean any audit or other examination, or any judicial or administrative proceeding, relating to liability for or refunds or Adjustments with respect to Taxes. REFUND shall mean any refund of Taxes, including any reduction in liability for such Taxes by means of a credit, offset or otherwise. 3 RULING REQUEST shall mean the request by U S WEST for an advance letter ruling from the IRS with respect to certain Tax aspects of the Reorganization and the Separation. SEPARATE RETURN shall mean any Tax Return, including any consolidated, combined or unitary Tax Return, filed by either the New U S WEST Group or the MediaOne Group but excluding any Tax Return filed which includes one or more members of both groups. SEPARATION DATE shall mean the date the Separation is effected. STATE INCOME TAX shall mean any state or local jurisdiction Taxes imposed on or measured by gross or net income, value added, net worth or capital stock. State Income Taxes do not include business and occupation taxes, gross receipts taxes, excise, sales or use taxes, real property gains, real or personal property, transfer or similar taxes. STRADDLE PERIOD shall mean a taxable period that includes, but does not end on, the Separation Date. TAX OR TAXES shall mean all taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, gains, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, custom duties, fees, assessments and charges of any kind whatsoever, together with any interest and any penalties, fines, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) and shall include any transferee liability in respect of Taxes. TAX AUTHORITY shall mean the IRS and any other domestic or foreign governmental authority responsible for the administration and collection of Taxes. TAX LIABILITIES shall mean all liabilities for Taxes. TAX RETURNS shall mean all reports, returns, declaration forms and statements filed or required to be filed with respect to Taxes. TAX-TIMING ADJUSTMENT shall mean any Adjustment in one Taxable Year which will result in an offsetting Adjustment or Adjustments (including an Adjustment to the basis of an asset not eligible for depreciation or amortization) in another Taxable Year. 4 TAXABLE YEAR shall mean the year on the basis of which taxable income is computed. TREASURY shall mean the United States Department of the Treasury. U S WEST CONSOLIDATED GROUP shall mean the affiliated group of corporations, within the meaning of Section 1504(a) of the Code, of which U S WEST is the common parent, and any member of such group. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms not otherwise defined in this Agreement shall have the meaning ascribed to them in the Separation Agreement. (b) The words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (c) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. 1.3 TERMINATION OF TAXABLE YEARS. For Federal Income Tax purposes, the Taxable Year of each member of the New U S WEST Group (including the Contributed Subsidiaries and the Contributed Media Group Subsidiaries) shall end as of the close of the Separation Date. New U S WEST and U S WEST shall, unless prohibited by applicable law, take all action necessary or appropriate to close the taxable period of each member of the New U S WEST Group for all Tax purposes as of the close of the Separation Date. ARTICLE II ALLOCATION AND PAYMENT 2.1 ALLOCATION OF TAXES. U S WEST and New U S WEST each agrees, on its own behalf and on behalf of the MediaOne Group and the New U S WEST Group, respectively, to allocate and pay its respective share of Taxes as provided in this Agreement. (a) Except as provided in Section 2.1(e), the Federal Income Tax liability (including Refunds and deficiencies) of the U S WEST Consolidated Group for any Pre-Separation Taxable Period and any Straddle Period shall be allocated between the New U S WEST Group and the MediaOne Group in accordance with Treasury Regulations Sections 5 1.1552-1(a)(3) and 1.1502-33(d)(3). The fixed percentage under Treasury Regulations Section 1.1502-33(d)(3) shall be 100 percent. (b) Except as provided in Section 2.1(e), the State Income Tax liability of the New U S WEST Group and the MediaOne Group for any Pre-Separation Taxable Period and any Straddle Period in any state included in the Communications Group Region in which a Combined Return is or is required to be filed shall be allocated between the New U S WEST Group and the MediaOne Group in proportion to the state taxable income (positive or negative) of each member of each group included in such Combined Return, or, where the basis is other than net income, in proportion to each member's respective Tax base. Each group shall appropriately compensate the other group for any reduction in State Income Tax liability resulting from the other group's having negative state taxable income. (c) Except as provided in Section 2.1(e), the State Income Tax liability of the New U S WEST Group and the MediaOne Group for any Pre-Separation Taxable Period and any Straddle Period in any state not included in the Communications Group Region in which a Combined Return is or is required to be filed shall be allocated between the New U S WEST Group and the MediaOne Group as follows: (i) For the Taxable Years ended December 31, 1996, December 31, 1997 and on the Separation Date, all such State Income Tax liability for each such Taxable Year shall be allocated to the New U S WEST Group to the extent such State Income Tax liability does not exceed the Combined Return Tax Savings actually realized by the New U S WEST Group for each such Taxable Year. Any excess State Income Tax liability shall be allocated 66.6% to the New U S WEST Group and 33.4% to the MediaOne Group. (ii) For Taxable Years ended on or prior to December 31, 1995, all such State Income Tax liability shall be allocated 66.6% to the New U S WEST Group and 33.4% to the MediaOne Group. (iii) Notwithstanding the foregoing, any liability arising solely out of the inclusion of the New U S WEST Group in a Tax Return which was originally filed as a Separate Return by a member of the affiliated group (as defined in Section 1504(a) of the Code) of which Continental Cablevision, Inc. was the common parent corporation for the Taxable Year ended December 31, 1996 shall be allocated 50% to the New U S WEST Group and 50% to the MediaOne Group. (d) Except as provided in Sections 2.1(c)(iii) and 2.1(e), all Tax Liabilities of the New U S WEST Group and the MediaOne Group for any Pre-Separation Taxable 6 Period and any Straddle Period arising out of the filing of a Separate Return shall be allocated to the member to which such Tax Liabilities relate. (e) Any Tax Liability of U S WEST arising out of operations conducted directly by it and any Tax Liability of the Contributed Subsidiaries for any Pre-Separation Taxable Period or any Straddle Period shall be allocated 58% to the New U S WEST Group and 42% to the MediaOne Group. (f) Any Tax Liability arising out of Transaction Costs (as defined in the Separation Agreement) shall be allocated as the underlying costs are allocated pursuant to Section 1.1(l) of the Separation Disclosure Schedule. 2.2 TAX ATTRIBUTES. Tax attributes for Pre-Separation Taxable Periods and any Straddle Period shall be allocated to the New U S WEST Group and the MediaOne Group in accordance with the Code and Treasury Regulations (and any applicable state, local and foreign laws or regulations). U S WEST and New U S WEST shall jointly determine the amounts of such attributes as of the Separation Date, or shall jointly estimate such amounts which are not determinable as of the Separation Date, and hereby agree to compute all Tax Liabilities for Taxable Years ending after the Separation Date consistently with that determination. The principles of this paragraph shall apply with respect to any adjustments to the Tax Liabilities of either the New U S WEST Group or the MediaOne Group resulting from an election made under Treasury Regulation Section 1.1502-76(b)(2)(ii). 2.3 TAX-TIMING ADJUSTMENTS. To the extent that any portion of any Tax Liability (or Tax benefit) allocated under Section 2.1 relates to a Tax-timing Adjustment, that portion of such Tax Liability (or Tax benefit) shall be allocated to the entity that will receive the benefit (or detriment) of that Tax-timing Adjustment. For purposes of this Agreement, the fact that the period or periods in which offsetting Adjustments will arise is unknown or not determinable shall not be taken into account. 2.4 PENALTIES, ADDITIONS TO TAX AND INTEREST. Penalties, additions to Tax and interest on any Tax deficiencies or overpayments will be allocated as the underlying deficiencies or overpayments are allocated under this Agreement. 2.5 PAYMENT OF TAXES. U S WEST and New U S WEST each agrees to pay or cause to be paid their respective shares of Taxes as allocated and provided in this Agreement. (a) For the Taxable Year ended December 31, 1997 and any Straddle Period, New U S WEST shall timely pay to U S WEST an amount equal to the allocable 7 Federal Income Tax liability of the New U S WEST Group determined under Section 2.1(a), (e), and (f), including the New U S WEST Group's share of estimated Federal Income Taxes. U S WEST shall be responsible for the payment to the IRS of the Federal Income Tax liability of the U S WEST Consolidated Group for such Taxable Years. (b) For the Taxable Year ended December 31, 1997 and any Straddle Period, New U S WEST shall timely pay to U S WEST an amount equal to the allocable State Income Tax liability of the New U S WEST Group determined under Sections 2.1(b), (c), (e) and (f), including the New U S WEST Group's share of estimated State Income Taxes. U S WEST shall be responsible for the payment to the applicable Tax Authority of such State Income Tax liabilities. 2.6 CHARACTERIZATION OF PAYMENTS. For all Tax purposes, the New U S WEST Group and the MediaOne Group agree to treat (i) any payment required by this Agreement as either a contribution by U S WEST to New U S WEST or a distribution by New U S WEST to U S WEST, as the case may be, occurring immediately prior to the Separation Date and (ii) any payment of interest or non-federal Taxes by or to a Tax Authority as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise mandated by applicable law. ARTICLE III INDEMNIFICATION 3.1 INDEMNIFICATION BY U S WEST. U S WEST shall pay, and shall indemnify and hold the New U S WEST Group and their respective shareholders, directors, officers, employees, affiliates, agents and successors harmless from and against, without duplication, (i) all Tax Liabilities allocable to the MediaOne Group under Article II, (ii) all Tax Liabilities attributable to Tax Returns required to be filed by the MediaOne Group for any Post-Separation Taxable Period, (iii) all Tax Liabilities incurred by the New U S WEST Group by reason of the breach by U S WEST of any of its covenants hereunder, and (iv) any costs and expenses related to the foregoing (including, without limitation, reasonable attorneys' fees and expenses). 3.2 LIABILITY OF MEDIAONE GROUP FOR UNDERTAKING CERTAIN TRANSACTIONS. Notwithstanding any other provision of this Agreement to the contrary, if, as a result of any event, action, or failure to act wholly or partially within the control of the MediaOne Group (including, without limitation, any event, action, or failure to act that results in a breach of any representation or in the inaccuracy of any statement made to the IRS in connection with, 8 the Ruling Request), or any other event related to the acquisition of U S WEST stock, any Taxes are imposed on the New U S WEST Group with respect to any action taken pursuant to the Separation and the Reorganization, including, without limitation, the transactions that were intended to be tax-free under Sections 332, 355 and 368 of the Code, then U S WEST shall indemnify and hold harmless the New U S WEST Group with respect to any such Taxes on an after-tax basis. 3.3 INDEMNIFICATION BY NEW U S WEST. New U S WEST shall pay, and shall indemnify and hold the MediaOne Group and their respective shareholders, directors, officers, employees, affiliates, agents and successors harmless from and against, without duplication, (i) all Tax Liabilities allocable to the New U S WEST Group under Article II, (ii) all Tax Liabilities attributable to Tax Returns required to be filed by the New U S WEST Group for any Post-Separation Taxable Period, (iii) all Tax Liabilities incurred by the MediaOne Group by reason of the breach by New U S WEST of any of its covenants hereunder and (iv) any costs and expenses related to the foregoing (including, without limitation, reasonable attorneys' fees and expenses). 3.4 LIABILITY OF NEW U S WEST GROUP FOR UNDERTAKING CERTAIN TRANSACTIONS. Notwithstanding any other provision of this Agreement to the contrary, if, as a result of any event, action, or failure to act wholly or partially within the control of the New U S WEST Group (including, without limitation, any event, action or failure to act that results in a breach of any representation or in the inaccuracy of any statement made to the IRS in connection with, the Ruling Request), or any other event related to the acquisition of New U S WEST stock, any Taxes are imposed on the MediaOne Group with respect to any action taken pursuant to the Separation and the Reorganization, including, without limitation, the transactions that were intended to be tax-free under Sections 332, 355 and 368 of the Code, then New U S WEST shall indemnify and hold harmless the MediaOne Group with respect to any such Taxes on an after-tax basis. 3.5 PAYMENT. If the Indemnifying Party is required to indemnify the Indemnified Party pursuant to this Article III, the Indemnified Party shall submit its calculations of the amount required to be paid pursuant to this Article IV (which shall be net of the Present Value Benefit realized or realizable by the Indemnified Party), showing such calculations in sufficient detail so as to permit the Indemnifying Party to understand the calculations. Subject to the following sentence, the Indemnifying Party shall pay to the Indemnified Party, no later than ten (10) business days after the Indemnifying Party receives the Indemnified Party's calculations, the amount that the Indemnifying Party is required to pay the Indemnified Party under this Article III. If the Indemnifying Party disagrees with such calculations, it must notify the Indemnified Party of its disagreement in writing within 9 ten (10) business days of receiving such calculations. Any dispute regarding such calculations shall be resolved in accordance with Section 6.13 of this Agreement. 3.6 TIME LIMITS. Any claim under this Article III with respect to a Tax Liability must be made no later than thirty (30) days after the expiration of the applicable statute of limitations for assessment of such Tax Liability. ARTICLE IV PREPARATION AND FILING OF TAX RETURNS, COOPERATION AND RECORD RETENTION 4.1 FEDERAL TAX RETURNS. New U S WEST and U S WEST hereby agree to cooperate fully with each other to meet filing requirements for the U S WEST Consolidated Group Tax Returns for any Pre-Separation Taxable Period and any Straddle Period. New U S WEST, as agent for the U S WEST Consolidated Group, will be responsible for the filing of such Tax Returns for the Taxable Years ended December 31, 1997 and ending December 31, 1998, and, at the request of U S WEST, shall use its best efforts to file the Tax Return for the Taxable Year ending December 31, 1998 by its original due date. For purposes of this Section 4.1, cooperation includes making available all instructions, workpapers, research, data and notes of any kind required for the completion of the Tax Return, as well as making available personnel to assist in the consolidation effort. Personnel requirements, including the use of third party contractors, will be negotiated and agreed upon between U S WEST and New U S WEST. Interviewing and hiring of third-party contractors will be done jointly, and costs of these contractors will be shared equally. Any software license costs specifically related to a separate entity shall be borne by that entity. Where software license costs are not discernible as separate entity costs, such software license costs will be shared equally. Due dates for information required for the U S WEST Consolidated Group Tax Returns will be negotiated between U S WEST and New U S WEST and good faith efforts will be made to meet those dates. 4.2 COMBINED RETURNS. New U S WEST and U S WEST hereby agree to cooperate fully with each other to meet filing requirements for Combined Returns for any Pre-Separation Taxable Period and any Straddle Period. New U S WEST, as agent for U S WEST, will be responsible for the filing of the Combined Returns for the Taxable Years ended December 31, 1997 and ending December 31, 1998 and, at the request of U S WEST, shall use its best efforts to file any Combined Returns for the Taxable Year ending December 31, 1998 by their original due date. For purposes of this Section 4.2, cooperation includes making available all instructions, workpapers, research, data and notes of any kind required for the completion of the Combined Return, as well as making available personnel to assist in 10 the combination effort. Personnel requirements, including the use of third party contractors, will be negotiated and agreed upon between U S WEST and New U S WEST. Interviewing and hiring of third-party contractors will be done jointly, and costs of these contractors will be shared equally. Any software license costs specifically related to a separate entity shall be borne by that entity. Where software license costs are not discernible as separate entity costs, such software license costs will be shared equally. Due dates for information required for Combined Returns will be negotiated between U S WEST and New U S WEST and good faith efforts will be made to meet those dates. 4.3 SEPARATE RETURNS. Any Separate Return shall be prepared and caused to be filed by the entity required by law to file such Separate Return. 4.4 COOPERATION; MAINTENANCE AND RETENTION OF RECORDS. U S WEST and New U S WEST shall, and shall cause the MediaOne Group and the New U S WEST Group respectively to, provide the requesting party with such assistance and documents as may be reasonably requested by such party in connection with (i) the preparation of any Tax Return, (ii) the conduct of any Proceeding, (iii) any matter relating to Taxes of any member of the U S WEST Consolidated Group, the New U S WEST Group or the MediaOne Group and (iv) any other matter that is a subject of this Agreement. New U S WEST and U S WEST shall retain or cause to be retained all Tax Returns, schedules and workpapers, and all material records or other documents relating thereto, until the expiration of the statute of limitations (including any waivers or extensions thereof) of the Taxable Years to which such Tax Returns and other documents relate or until the expiration of any additional period that any party reasonably requests, in writing, with respect to specific material records or documents. A party intending to destroy any material records or documents shall provide the other party with reasonable advance notice and the opportunity to copy or take possession of such records and documents. The parties hereto will notify each other in writing of any waivers or extensions of the applicable statute of limitations that may affect the period for which the foregoing records or other documents must be retained. ARTICLE V REFUNDS, AUDITS AND ADJUSTMENTS 5.1 REFUNDS OF TAXES. Except as provided in Section 5.2 below, New U S WEST shall be entitled to all Refunds relating to Taxes (plus any interest thereon received with respect thereto from the applicable Tax Authority) for which New U S WEST is or may be liable pursuant to Articles II and III of this Agreement, and U S WEST shall be entitled to all Refunds relating to Taxes (plus any interest thereon received with respect thereto from the applicable Tax Authority) for which U S WEST is or may be liable pursuant to the 11 provisions of Articles II and III of this Agreement. A party receiving a Refund to which another party is entitled pursuant to this Agreement shall pay the amount to which such other party is entitled (plus any interest thereon received with respect thereto from the applicable Tax Authority) within ten (10) days after the receipt of the Refund. 5.2 CARRYBACKS. (a) The carryback of any loss, credit or other Tax attribute in any Post-Separation Taxable Period shall be in accordance with the provisions of the Code and Treasury Regulations (and any applicable state, local or foreign laws or regulations). (b) In the event that the New U S WEST Group realizes any loss, credit or other Tax attribute in any Post-Separation Taxable Period, such group may elect to carry back such loss, credit or Tax attribute to a Pre-Separation Taxable Period. U S WEST shall cooperate with New U S WEST in seeking from the appropriate Tax Authority any Refund that reasonably would result from such carryback. New U S WEST shall be entitled to any Refund (or other Tax benefit) realized by the MediaOne Group (including any interest thereon received from such Tax Authority) attributable to such carryback, within ten (10) business days after such Refund (or other Tax benefit) is received; PROVIDED, HOWEVER, that U S WEST shall be entitled to any Refund (or other Tax benefit) that results from the carryback of a loss, credit or other Tax attribute by the MediaOne Group from a Post-Separation Taxable Period to a Pre-Separation Taxable Period. (c) Except as otherwise provided by applicable law, if the MediaOne Group and the New U S WEST Group both may carry back a loss, credit or other Tax attribute to the same Pre-Separation Taxable Period, any Refund (or other Tax benefit) resulting therefrom shall be allocated between U S WEST and New U S WEST proportionately based on the relative amounts of the Refunds (or other Tax benefits) to which the MediaOne Group and the New U S WEST Group, respectively, would have been entitled had its carrybacks been the only carrybacks to such Taxable Year. (d) To the extent that the amount of a Refund to which a party is entitled under this Section 5.2 is reduced by the applicable Tax Authority as a result of the offset of such amount against a Tax Liability of the other party, as allocated under this Agreement, the party which receives the benefit of such offset shall appropriately compensate the other party within ten (10) days of receipt of such benefit. 5.3 FEDERAL AUDITS AND ADJUSTMENTS. (a) NOTIFICATION OF AUDIT. Each of U S WEST and New U S WEST shall give written notice to the other party of any audit of the U S WEST Consolidated Group Tax Return for any Pre-Separation Taxable Period or Straddle Period within ten (10) business 12 days after receipt of written notification of such audit from the IRS. Such notice shall include a copy of the notification received from the IRS. (b) STATUTE OF LIMITATIONS. Any extension of the statute of limitations for any Pre-Separation Taxable Period or Straddle Period shall be with the mutual agreement of U S WEST and New U S WEST. Any dispute regarding the extension of the statute of limitations shall be resolved in accordance with Section 6.13 of this Agreement. (c) AUDIT ACTIVITY. Each of U S WEST and New U S WEST will coordinate its respective efforts with respect to audits of any Pre-Separation Taxable Period and any Straddle Period and will furnish the other with all necessary workpapers and records to respond to audit inquiries. New U S WEST will be responsible as agent for the U S WEST Consolidated Group for day-to-day contact with IRS agents assigned to such audits. U S WEST will be responsible for responding to audit inquiries regarding issues primarily affecting Tax Liabilities of the MediaOne Group, but will act through New U S WEST, rather than directly contacting the IRS with respect to such matters. (d) NOTIFICATION. New U S WEST will provide timely reports to U S WEST detailing significant activities, information requests, issues raised or resolved, and any other relevant information, such reports to be no less frequent than quarterly. (e) PROPOSED ADJUSTMENTS. New U S WEST shall notify U S WEST of any Adjustment to the U S WEST Consolidated Group Tax Returns within ten (10) business days after receipt of notification of such Adjustment from the IRS. New U S WEST shall include in its notice to U S WEST a copy of the notification received from the IRS. (i) AGREED ISSUES. New U S WEST will not enter into any agreement with the IRS as agent for the U S WEST Consolidated Group with respect to any Adjustment without the written consent of U S WEST, in those cases where the MediaOne Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) attributable to such Adjustment. For purposes of this paragraph, all determinations shall be made separately for each Adjustment. (ii) UNAGREED ISSUES. In the event U S WEST and New U S WEST, as the case may be, do not agree to all Adjustments for a Taxable Year, decisions regarding the procedures and preferred forum for contesting Adjustments on unagreed issues shall be made by whichever of the MediaOne Group or the New U S WEST Group is responsible for more than 50% of the cumulative Tax Liability attributable to such Adjustments. The party making the decision shall consult in good faith with the other party and shall promptly notify the other party of its decision. 13 (iii) CONSENT NOT REQUIRED. Notwithstanding any other provision of this Agreement, if the IRS notifies U S WEST that the IRS will deal directly with the MediaOne Group with respect to its Tax Liability, U S WEST shall have full authority to act for the MediaOne Group and resolve any issue affecting its Tax Liability without the consent of New U S WEST. U S WEST will provide New U S WEST with a timely report summarizing any such audit activity, such report to be no less frequent than quarterly. (f) FEDERAL REFUND CLAIMS. If the New U S WEST Group desires to file a claim for Refund with respect to a Taxable Year for which it was a member of the U S WEST Consolidated Group, it shall prepare and submit to U S WEST the claim for Refund and a statement specifying the date on which the statute of limitations for filing the Refund claim will expire. U S WEST will file the Refund claim prior to the date specified as the last day to claim the Refund if such a filing is commercially reasonable, and will take any other appropriate action at New U S WEST's request necessary to secure the Refund. (g) LITIGATION. Subject to the balance of this Section 5.3(g), U S WEST and New U S WEST jointly shall conduct all Proceedings relating to Adjustments of the MediaOne Group and the U S WEST Group as allocated under this Agreement. U S WEST shall have the ability to control the conduct of such Proceedings with respect to issues relating to an Adjustment for which the MediaOne Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) attributable to such Adjustment. New U S WEST shall have the ability to control the conduct of such Proceedings with respect to issues relating to an Adjustment for which the New U S WEST Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) attributable to such Adjustment. The party with the ability to control the conduct of all or a portion of the Proceedings pursuant to this Section 5.3(g) shall consult in good faith with the other party, which other party shall be entitled to participate in all conferences, meetings, and other matters related to the resolution of such Proceedings. 5.4 AUDITS AND ADJUSTMENTS RELATED TO COMBINED RETURNS. (a) NOTIFICATION OF AUDIT. Each of U S WEST and New U S WEST shall give written notice to the other party of any audit of a Combined Return for any Pre-Separation Taxable Period or Straddle Period within ten (10) business days after receipt of written notification of such audit from a Tax Authority. Such notice shall include a copy of the notification received from the relevant Tax Authority. (b) STATUTE OF LIMITATIONS. Any extension of the statute of limitations for any Pre-Separation Taxable Period or Straddle Period shall be with the mutual agreement of 14 U S WEST and New U S WEST. Any dispute regarding the extension of the statute of limitations shall be resolved in accordance with Section 6.13 of this Agreement. (c) AUDIT ACTIVITY. Each of U S WEST and New U S WEST will coordinate its respective efforts with respect to audits of Combined Returns of any Pre-Separation Taxable Period and any Straddle Period and will furnish the other with all necessary workpapers and records to respond to audit inquiries. New U S WEST will be responsible as agent for any Combined Return for day-to-day contact with state Tax Authorities regarding such audits. U S WEST will be responsible for responding to audit inquiries regarding issues primarily affecting Tax Liabilities of the MediaOne Group, but will act through New U S WEST, rather than directly contacting the appropriate Tax Authorities with respect to such matters. (d) NOTIFICATION. With respect to a Combined Return, New U S WEST will provide timely reports to U S WEST detailing significant activities, information requests, issues raised or resolved, and any other relevant information, such reports to be no less frequent than quarterly. (e) PROPOSED ADJUSTMENTS. New U S WEST shall notify U S WEST of any Adjustment to a Combined Return within ten (10) business days after receipt of notification of such Adjustment from the applicable state Tax Authority. New U S WEST shall include in its notice to U S WEST a copy of the notification received from such Tax Authority. (i) AGREED ISSUES. New U S WEST will not enter into any agreement with a state Tax Authority as agent for U S WEST with respect to any Adjustment in connection with a Combined Return without the written consent of U S WEST in such cases where the MediaOne Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) at issue. For purposes of this paragraph, all determinations shall be made separately for each Adjustment. (ii) UNAGREED ISSUES. In the event U S WEST and New U S WEST, as the case may be, do not agree to all Adjustments with respect to a Combined Return for a Taxable Year, decisions regarding the procedures and preferred forum for contesting Adjustments on unagreed issues shall be made by whichever of the MediaOne Group or the New U S WEST Group is responsible for more than 50% of the cumulative Tax Liability attributable to such Adjustments. The party making the decision shall consult in good faith with the other party and shall promptly notify the other party of its decision. 15 (f) STATE REFUND CLAIMS. If the New U S WEST Group desires to file a claim for Refund with respect to a Taxable Year for which it filed a Combined Return, it shall prepare and submit to U S WEST the claim for Refund and a statement specifying the date on which the statute of limitations for filing the Refund claim will expire. U S WEST will file the Refund claim prior to the date specified if such filing is commercially reasonable and will take any other appropriate action at New U S WEST's request necessary to secure the Refund. (g) STATE TAX LITIGATION. Subject to the balance of this Section 5.4(g), U S WEST and New U S WEST jointly shall conduct all Proceedings relating to Adjustments of the MediaOne Group and the New U S WEST Group allocated under this Agreement in connection with a Combined Return. U S WEST shall have the ability to control the conduct of such Proceedings with respect to issues relating to an Adjustment for which the MediaOne Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) attributable to such Adjustment. New U S WEST shall have the ability to control the conduct of such Proceedings with respect to issues relating to an Adjustment for which the New U S WEST Group would be liable for more than 50% of the proposed Tax Liability (as allocated under this Agreement) attributable to such Adjustment. The party with the ability to control the conduct of all or a portion of the Proceedings pursuant to this Section 5.4(g) shall consult in good faith with the other party, which other party shall be entitled to participate in all conferences, meetings, and other matters related to the resolution of such Proceedings. 5.5 SEPARATE RETURN MATTERS. The New U S WEST Group and the MediaOne Group will be responsible for and manage their respective Separate Return Proceedings. 5.6 PAYMENT OF COSTS. All costs incurred, whether external or internal (such as in-house tax and legal department salaries and other personnel), with respect to a Proceeding shall be borne by the party with respect to which the costs relate. All other costs relating to Tax Returns or Proceedings not otherwise provided for in this Agreement shall be allocated 50% to the New U S WEST Group and 50% to the MediaOne Group. ARTICLE VI MISCELLANEOUS 6.1 COVENANTS RELATING TO RULING REQUEST. (a) U S WEST AND THE MEDIAONE GROUP. (i) U S WEST shall comply and shall cause the MediaOne Group to comply with and otherwise not take any action 16 inconsistent with each representation and statement made to the IRS in connection with the Ruling Request and (ii) until two (2) years after the Separation Date, U S WEST will remain engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. (b) NEW U S WEST AND THE NEW U S WEST GROUP. (i) New U S WEST shall comply and shall cause the New U S WEST Group to comply with and otherwise not take any action inconsistent with each representation and statement made to the IRS in connection with the Ruling Request and (ii) until two (2) years after the Separation Date, New U S WEST will remain engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. 6.2 TERMINATION OF PRIOR TAX SHARING AGREEMENTS. This Agreement shall take effect on the Separation Date and shall replace all other agreements, whether or not written, in respect of any Taxes between or among the MediaOne Group on the one hand and the New U S WEST Group on the other. All such replaced agreements shall be canceled as of the Separation Date to the extent they relate to the New U S WEST Group, and any rights or obligations of the MediaOne Group or the New U S WEST Group existing thereunder thereby shall be fully and finally settled without any payment by any party thereto. 6.3 MERGER OR CONSOLIDATION. Neither New U S WEST nor U S WEST (in either case, the "TRANSACTION PARTY") shall (i) consolidate with or merge into any Person or permit any Person to consolidate with or merge into the Transaction Party (other than a merger or consolidation in which the Transaction Party is the surviving or continuing corporation) or (ii) sell, assign, transfer, lease or otherwise dispose of, in one transaction or a series of related transactions, all or substantially all of the assets of the Transaction Party, unless the resulting, surviving or transferee Person shall expressly assume, by instrument in form and substance reasonably satisfactory to the other party, all of the obligations of the Transaction Party under this Agreement. 6.4 SUBSIDIARIES. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary (as defined in the Separation Agreement) of such party on or after the Separation Date. 6.5 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of Colorado, without reference to choice of law principles, including matters of construction, validity and performance. 17 6.6 AMENDMENT. This Agreement may be amended, modified or supplemented only by a written Agreement signed by all of the parties hereto. 6.7 NOTICES. Notices, requests, permissions, waivers, referrals and all other communications hereunder shall be in writing and shall be deemed to have been duly given if signed by the respective persons giving them (in the case of any corporation, the signature shall be by an officer thereof) and delivered by hand or by telecopy or on the date of receipt indicated on the return receipt if mailed (registered or certified, return receipt requested, properly addressed and postage prepaid): If to U S WEST, to: U S WEST, Inc. (to be renamed "MEDIAONE GROUP, INC.") 188 Inverness Drive West Englewood, Colorado 80112 Attention: Director of Taxes Telephone: 303-858-5800 If to New U S WEST, to: USW-C, Inc. (to be renamed "U S WEST, INC.") 6300 South Syracuse Way Suite 700 North Englewood, Colorado 80111 Attention: Director of Taxes Telephone: 303-850-3900 Such names and addresses may be changed by notice given in accordance with this Section 6.7. 6.8 ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein, and supersedes and cancels all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, respecting such subject matter. 18 6.9 HEADINGS; REFERENCES. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to "Articles" or "Sections" shall be deemed to be references to Articles or Sections hereof unless otherwise indicated. 6.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts and each counterpart shall be deemed to be an original, but all of which shall constitute one and the same original. 6.11 PARTIES IN INTEREST; ASSIGNMENT; SUCCESSOR. Neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon U S WEST and New U S WEST and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies under or by reason of this Agreement. 6.12 CONFIDENTIALITY. Each of New U S WEST and U S WEST shall hold, and each of the New U S WEST Group and the MediaOne Group shall use its reasonable best efforts to hold, in strict confidence all information concerning the other party obtained by it prior to the Separation Date or furnished to it by such other party pursuant to this Agreement pursuant to and in accordance with the terms of Section 10.5 of the Separation Agreement. 6.13 ARBITRATION. Resolution of any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, statute or otherwise, including, but not limited to, disputes over arbitrability and disputes in connection with claims by third parties shall be exclusively governed by and settled in accordance with the provisions of Section 12.2 of the Separation Agreement, provided, however, that nothing contained in Section 12.2 of the Separation Agreement shall preclude either party from seeking or obtaining injunctive relief or equitable or other judicial relief to enforce such Section 12.2, or, pending resolution of Disputes (as defined in the Separation Agreement) under such Section, to preserve the status quo or to enforce an arbitral award rendered pursuant to such Section. 6.14 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, each party agrees that a court of competent jurisdiction may enforce such restriction 19 to the maximum extent permitted by law, and each party hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. 6.16 EFFECTIVE DATE. This Agreement shall become effective only upon the occurrence of the Separation. IN WITNESS WHEREOF, each of the Parties has caused this Tax Sharing Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written above. U S WEST, INC. (to be renamed MEDIAONE GROUP, INC.) By: /s/ Charles M. Lillis ------------------------------------- Name: Charles M. Lillis Title: Executive Vice President USW-C, INC. (to be renamed U S WEST, INC.) By: /s/ Solomon D. Trujillo ------------------------------------- Name: Solomon D. Trujillo Title: President and Chief Executive Officer 20 -----END PRIVACY-ENHANCED MESSAGE-----