DATED 7 MAY 2020 Telefonica O2 Holdings Limited and TELEFÓNICA, S.A. and Liberty Global Europe 2 Limited and Liberty Global PLC and Liberty Global HOLDCO LIMITED CONTRIBUTION AGREEMENT relating to the contribution of shares in Virgin Media Inc. and O2...

means:

(i)         with respect to the Telefonica Target Group, the unaudited draft consolidated financial statements of the Telefonica Target Company prepared in accordance with IFRS as adopted by the European Union and in accordance with the requirements of the Companies ▇▇▇ ▇▇▇▇ for the accounting reference period ended on the Accounts Date, comprising the group statement of comprehensive income, the group and company statement of financial position, the group and company statement of changes in equity, the group and company statement of cash flows and the notes to the financial statements, a copy of which is contained in Telefonica’s Data Room at file 1.2.2.2.9; provided that, for the purposes of paragraph 2.1 of Part B of Schedule 3 (Warranties) only, “Accounts” means the audited consolidated financial statements of the Telefonica Target Company prepared in accordance with IFRS as adopted by the European Union and in accordance with the requirements of the Companies ▇▇▇ ▇▇▇▇ for the accounting reference period ended on 31 December 2018, comprising the group statement of comprehensive income, the group and company statement of financial position, the group and company statement of changes in equity, the group and company statement of cash flows and the notes to the financial statements, a copy of which is available on the date of this Agreement at ▇▇▇▇://▇▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.▇▇; and

(ii)        with respect to the Liberty Global Target Group, the audited consolidated financial statements that include the Liberty Global Target Company prepared in accordance with US GAAP for the accounting reference period ended on the Accounts Date, comprising the consolidated balance sheet, the consolidated statement of operations, the consolidated statement of comprehensive loss, the consolidated statement of owners’ equity, the consolidated statement of cash flows and the notes to the consolidated financial statements, a copy of which is available on the date of this Agreement at ▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;

in relation to a body corporate, means:

(i)        any other body corporate over which that body corporate has Control;

(ii)        any other body corporate which has Control over that body corporate;  or

(iii)       any other body corporate which is under the Control of a third entity that also Controls that body corporate;

means the aggregate amount of all:

(i)        Liberty Global Pre-Completion Disposal Proceeds, up to a maximum aggregate amount of £50,000,000; and

(ii)        Telefonica Pre-Completion Disposal Proceeds, up to a maximum aggregate amount of £50,000,000;

means the aggregate amount of all:

(i)         Liberty Global Pre-Completion Acquisition Costs, up to a maximum aggregate amount of £50,000,000;

(ii)        Telefonica Pre-Completion Acquisition Costs, up to a maximum aggregate amount of £50,000,000; and

(iii)       any costs and expenses that the Sellers agree in writing shall be treated as “Agreed Shared Integration Costs”;

means all information (in whatever form held) including all:

(i)         formulas, designs, specifications, drawings, know-how, manuals and instructions;

(ii)        customer lists, sales, marketing and promotional information;

(iii)       business plans and forecasts;

(iv)       technical or other expertise; and

(v)        all accounting and Tax records, correspondence, orders and enquiries,

in each case relating to any Target Group Company or the business of any Target Group Company;

in relation to a body corporate (being the “Controlled Person”) means being:

(i)         entitled to exercise, or control the exercise (directly or indirectly) of, more than 50% of the voting power at any general meeting of the shareholders, members or partners or other equity holders of the Controlled Person (and including, in the case of a limited partnership, at a meeting of members or partners or other equity holders of its general partner) in respect of all or substantially all matters falling to be decided by resolution or meeting of such persons; or

(ii)       entitled to appoint or remove (directly or indirectly):

(a)     directors on the Controlled Person’s board of directors or other governing body (or, in the case of a limited partnership, on the board or other governing body of its general partner) who are able (in the aggregate) to exercise more than 50% of the voting power at meetings of that board or governing body in respect of all or substantially all matters;

(b)     any managing member of such Controlled Person; and/or

(c)     in the case of a limited partnership, its general partner,

and “Controls” and “Controlled” shall have a corresponding meaning;

means an amount (which may be a positive number or a negative number) equal to the Initial Equalisation Consideration Amount:

(i)         minus the Estimated Liberty Global Net Debt Adjustment;

(ii)        plus the Estimated Telefonica Net Debt Adjustment;

(iii)       minus the Estimated Liberty Global Working Capital Adjustment; and

(iv)       plus the Estimated Telefonica Working Capital Adjustment;

“Fallback Completion Recapitalisation”

means the Standards and Interpretations issued by the International Accounting Standards Board. They comprise:

(i)         International Financial Reporting Standards;

(ii)        International Accounting Standards;

(iii)       IFRIC Interpretations; and

(iv)       SIC Interpretations;

means:

(i)         in relation to the Telefonica Target Group, (a) the CEO of the Telefonica Target Group and (b) any employee of any Telefonica Target Group Company (excluding each Out of Scope Telefonica Target Employee) and any Telefonica In-Scope Target Employee, in each case who reports directly to the CEO and has an annual base salary in excess of £150,000; and

(ii)        in relation to the Liberty Global Target Group, (a) the CEO of the Liberty Global Target Group and (b) any employee of any Liberty Global Target Group Company (excluding each Out of Scope Liberty Global Target Employee) and any In-Scope Liberty Global Target Employee, in each case who reports directly to the CEO and has an annual base salary in excess of £150,000;

means, in relation to the Liberty Global Target Group, (subject, where applicable, to the specific accounting treatments referred to in paragraph 1.2(A) of Part A and Part B of Schedule 10) the aggregate borrowings and indebtedness in the nature of borrowing owed to any banking, financial, acceptance credit, lending or other similar institution or organisation, or any other third party (including former employees), or any member of the Liberty Global Retained Group (which is not an amount or item included in the calculation of the Liberty Global Working Capital), as at the relevant time, comprising each of the line items identified in the column headed “Debt” in Part C of Schedule 11 (Financial adjustments: amounts), together with those items specifically required to be included in Liberty Global Debt by paragraph Error! Reference source not found. of Part B of Schedule 10 (Post-Completion Financial Adjustments), including:

(i)         all outstanding principal and accrued and unpaid interest;

(ii)        all obligations by way of acceptance credits, discounting or similar facilities, loan stocks, bonds, debentures, notes, overdrafts or any other similar arrangements the purpose of which is to raise money;

(iii)       Inter-Company Loan Payables;

(iv)       vendor financing liabilities; and

(v)        any Liberty Global Capex Shortfall,

provided that, for the avoidance of doubt, the following shall be excluded:

(a)      any amounts owed to any member of the Liberty Global Target Group pursuant to any debt buyback or repurchase of Financing Facilities at a discount to par; and

(b)      any amounts owed to any member of the Liberty Global Retained Group under the Liberty Global Intercompany Note; and

(c)      any amount payable by a Liberty Global Target Group Company to the Purchaser;

means:

(i)        if Liberty Global is the Receiving Party, 50% of the Net Proceeds plus the absolute value of the amount of the Estimated Equalisation Consideration; or

(ii)       if Liberty Global is the Paying Party, 50% of the Net Proceeds minus the amount of the Estimated Equalisation Consideration;

means:

(i)        each subsidiary or subsidiary undertaking of the Liberty Global Target Company (excluding each member of the Liberty Global Ireland Group); and

(ii)        Liberty Networks,

basic information concerning each of which is set out in Appendix 1 of the Liberty Global Disclosure Letter;

means:

(i)        with respect to the Telefonica Target Group, the O2 Pension Plan, and where the context requires, the trustees of that plan; or

(ii)        with respect to the Liberty Global Target Group, The National Transcommunications Limited Pension Plan and the ntl 1999 Pension Scheme and where the context requires, the trustees of those schemes;

means:

(i)         with respect to the Telefonica Target Group, the statements contained in the Telefonica’s Data Room in files 1.2.2.2.3 (monthly P&L) and 1.2.2.2.10 (monthly balance sheet); and

(ii)        with respect to the Liberty Global Target Group, the monthly balance sheet and statements of operations and cash flows for the years ended 31 December 2018 and 31 December 2019 contained in Liberty Global’s Data Room in file 4.3.1.26;

means:

(i)        with respect to the Liberty Global Target Group:

(a)      any contract entered into by any Liberty Global Target Group Company, or otherwise forming part of the Liberty Global Transaction Perimeter, calling for payments by any party thereto in excess of £15,000,000 in any one financial year;

(b)      any material contract between any Liberty Global Target Group Company and any of the top 10 business customers of the Liberty Global Target Group by total spend in the financial period ended 31 December 2019;

(c)      the Liberty Global Material Brand Licence Agreements, the Liberty Global Material Content Agreements and the Liberty Global Material MVNO Agreements; and

(d)      any other supplier contract that Liberty Global considers (acting reasonably) is critical to the business of the Liberty Global Target Group taken as a whole; and

(ii)        with respect to the Telefonica Target Group:

(a)      any contract entered into by any Telefonica Target Group Company, or otherwise forming part of the Telefonica Transaction Perimeter, calling for payments by any party thereto in excess of £15,000,000 in any one financial year;

(b)      any material contract between any Telefonica Target Group Company and (i) any of the top 10 business customers of the Telefonica Target Group by total spend in the financial period ended on the Accounts Date or (ii) any mobile virtual network operators;

(c)      the Beacon Agreements, the CTIL Agreements and the Tesco JV Agreements; and

(d)      any other supplier contract that Telefonica considers (acting reasonably) is critical to the business of the Telefonica Target Group taken as a whole,

in each case other than any Financing Facilities and contracts (other than Liberty Global Shared Contracts or Telefonica Shared Contracts, as applicable) between a Seller’s Target Group and that Seller’s Retained Group;

means, in relation to a Target Group, any incident concerning the Network or Systems of that Target Group that:

(i)         has the potential to impact more than 100,000 end user customers at peak times, or multiple high priority business customers;

(ii)        causes material loss or severe degradation of a service or critical management capability; or

(iii)       materially impacts customer satisfaction, reputation, or puts the health and safety of persons at risk;

means:

(i)        in respect of the Liberty Global Target Group:

(a)       ducts;

(b)       passive coaxial and optical fibre cabling; and

(c)       active equipment used to transmit signals over coaxial or optical fibre networks; and

(ii)        in respect of the Telefonica Target Group:

(a)       masts, poles and other communications towers or antenna structures, including shelters;

(b)       active equipment located at radio access network sites, including radio frequency antennas, remote radio units, microwave antennas and base transceiver station equipment;

(c)       passive optical fibre cabling or other transmission lines; and

(d)       active equipment used to transmit signals over networks featuring the components under (ii)(b) and (ii)(c) above,

in each case:

(1)       to the extent located in the United Kingdom; and

(2)       to the extent used by any member of the relevant Target Group in respect of its business of providing electronic communication services, in each case whether owned by any member of that Target Group or leased (or otherwise made available) by a third party, and

(3)       excluding centralised hardware and software used for provisioning, inventory management of the Network or the monitoring or management of Network performance (including second line monitoring that may include network operations centres);

means:

(i)        except in relation to the Post-Completion Equalisation Adjustment Amount:

(a)       if the Estimated Equalisation Consideration is a positive number, Liberty Global; or

(b)       if the Estimated Equalisation Consideration is a negative number, Telefonica; and

(ii)       in relation to the Post-Completion Equalisation Adjustment Amount:

(a)       If the Final Equalisation Consideration is greater than the Estimated Equalisation Consideration, Liberty Global; or

(b)       If the Final Equalisation Consideration is less than the Estimated Equalisation Consideration, Telefonica,

where, for the avoidance of doubt, a smaller negative number is greater than a larger negative number, and vice versa.

means:

(i)        with respect to the Telefonica Target Group, (a) the O2 Pension and (b) any money purchase scheme, as defined in section 181 of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, to which any member of the Telefonica Target Group contributes at the date of this Agreement; or

(ii)       with respect to the Liberty Global Target Group, (a) each of the pension arrangements listed at limb (ii) of the definition of “Major Defined Benefit Pension Schemes”, and (b) any money purchase scheme, as defined in section 181 of the Pension Schemes Act, to which any member of the Liberty Global Target Group contributes at the date of this Agreement;

means:

(i)        except in relation to the Post-Completion Equalisation Adjustment Amount:

(a)       if the Estimated Equalisation Consideration is a positive number, Telefonica; or

(b)       if the Estimated Equalisation Consideration is a negative number, Liberty Global; and

(ii)       in relation to the Post-Completion Equalisation Adjustment Amount:

(a)       if the Final Equalisation Consideration is greater than the Estimated Equalisation Consideration, Telefonica; or

(b)       if the Final Equalisation Consideration is less than the Estimated Equalisation Consideration, Liberty Global,

where, for the avoidance of doubt, a smaller negative number is greater than a larger negative number, and vice versa;

means:

(i)        any works or action limiting, mitigating, remediating, preventing, removing, ameliorating or containing the presence or effect of any Dangerous Substance in or on the Environment; or

(ii)       any investigation, sampling or monitoring in connection with any such works or action;

means:

(i)         in relation to Liberty Global, the Liberty Global Retained Group; and

(ii)        in relation to Telefonica, the Telefonica Retained Group;

means:

(i)         in relation to the Telefonica Target Group, any employee of any Telefonica Target Group Company (excluding each Out of Scope Telefonica Target Employee) and any Telefonica In-Scope Target Employee, in each case with an annual base salary of £150,000 or above, or any director of any Telefonica Target Group Company; and

(ii)       in relation to the Liberty Global Target Group, any employee of any Liberty Global Target Group Company (excluding each Out of Scope Liberty Global Target Employee) and any Liberty Global In-Scope Target Employee, in each case with an annual base salary of £150,000 or above, or any director of any Liberty Global Target Group Company;

means:

(i)         in relation to Liberty Global, the Liberty Global Target Group; and

(ii)        in relation to Telefonica, the Telefonica Target Group;

means, in relation to the Telefonica Target Group, (subject, where applicable, to the specific accounting treatments referred to in paragraph 1.2(A) of Part A and Part B of Schedule 10) the aggregate borrowings and indebtedness in the nature of borrowing owed to any banking, financial, acceptance credit, lending or other similar institution or organisation, or any other third party, or any member of the Telefonica Retained Group (which is not an amount or item included in the calculation of the Telefonica Working Capital), as at the relevant time, comprising each of the line items identified in the column headed “Debt” in Part C of Schedule 11 (Financial adjustments: amounts), together with those items specifically required to be included in Telefonica Debt by paragraph Error! Reference source not found. of Part B of Schedule 10 (Post-Completion Financial Adjustments), including:

(i)         all outstanding principal and accrued and unpaid interest;

(ii)        all obligations by way of acceptance credits, discounting or similar facilities, loan stocks, bonds, debentures, notes, overdrafts or any other similar arrangements the purpose of which is to raise money;

(iii)       Inter-Company Loan Payables;

(iv)       vendor financing liabilities; and

(v)        any Telefonica Capex Shortfall,

provided that, for the avoidance of doubt, any amounts owed to any member of the Telefonica Retained Group under the Telefonica Intercompany Note shall be excluded;

means:

(i)      if Telefonica is the Receiving Party, 50% of the Net Proceeds plus the amount of the Estimated Equalisation Consideration; or

(ii)      if Telefonica is the Paying Party, 50% of the Net Proceeds minus the absolute value of the amount of the Estimated Equalisation Consideration;

means the following properties owned, used or occupied by the Telefonica Target Group for office use and named in Column A of the sheet labelled “Corporate and Switch” of the Telefonica Material Property List:

(i)          Leeds - Arlington Business Centre Office;

(ii)         Slough - ▇▇▇-▇▇▇ ▇▇▇▇ ▇▇▇▇ Office;

(iii)        Uxbridge – Belmont House Office;

(iv)        ▇▇▇▇▇▇▇ ▇▇▇▇▇ Contact Centre Office; and

(v)         London – Prospect House Office;

means:

(i)         within the European Union, any tax imposed by any Member State in conformity with the Directive of the Council of the European Union on the common system of value added tax (2006/112/EC); and

(ii)        outside the European Union, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition;

Telefonica O2 Holdings Limited

For the attention of:
Company Secretary

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Telefónica, S.A.

For the attention of:
General Counsel

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Liberty Global Europe 2 Limited

For the attention of:
Deputy General Counsel

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Liberty Global PLC

For the attention of:
Deputy General Counsel

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Liberty Global Holdco Limited

For the attention of:
Deputy General Counsel

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With a copy to:
General Counsel

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