EXHIBIT 2.3
SEPARATION AND DISTRIBUTION AGREEMENT
by and between
AT&T Corp.
and
AT&T Broadband Corp.
dated as of
December 19, 2001
TABLE OF CONTENTS
---------------
Page
----
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions B-1
ARTICLE 2
THE SEPARATION
Section 2.01. Transfer of Assets and Assumption of Liabilities B-16
Section 2.02. Disclaimer of Representations and Warranties B-17
Section 2.03. Other Ancillary Agreements B-18
Section 2.04. Termination of Agreements B-18
Section 2.05. Documents Relating to Transfer of Real Property Interests
and Tangible Property Located Thereon B-19
Section 2.06. Documents Relating to Other Transfers of Assets and
Assumption of Liabilities B-20
Section 2.07. Governmental Approvals and Consents B-20
Section 2.08. Novation of AT&T Broadband Liabilities B-21
Section 2.09. Novation of AT&T Communications Liabilities B-21
Section 2.10. Joint Purchasing Arrangements B-22
Section 2.11. TWE Arrangements B-22
ARTICLE 3
FINANCIAL RESTRUCTURING
Section 3.01. Liability Management B-23
Section 3.02. Repayment of Intracompany Indebtedness B-23
Section 3.03. Note Consents B-23
ARTICLE 4
THE DISTRIBUTION
Section 4.01. The Distribution B-23
Section 4.02. Actions Prior to the Distribution B-24
Section 4.03. Timing of the Distribution B-24
ARTICLE 5
MUTUAL RELEASES; INDEMNIFICATION
Section 5.01. Release of Pre-Closing Claims B-25
Section 5.02. Indemnification by AT&T B-27
Section 5.03. Indemnification by AT&T Broadband B-27
Section 5.04. Indemnification Obligations Net of Insurance Proceeds and
Other Amounts B-28
Section 5.05. Procedures for Indemnification of Third Party Claims B-29
Section 5.06. Additional Matters B-30
Section 5.07. Remedies Cumulative B-30
Section 5.08. Survival of Indemnities B-30
ARTICLE 6
INSURANCE AND CERTAIN OTHER MATTERS
Section 6.01. Insurance Matters B-30
Section 6.02. Certain Post-Distribution Transactions and Related
Matters B-31
Section 6.03. Procedure for Indemnification for Tax Liabilities B-33
Section 6.04. Other Transactions B-35
ARTICLE 7
EXCHANGE OF INFORMATION; CONFIDENTIALITY
Section 7.01. Agreement for Exchange of Information B-36
2
Section 7.02. Ownership of Information B-37
Section 7.03. Compensation for Providing Information B-37
Section 7.04. Record Retention B-37
Section 7.05. Limitation of Liability B-37
Section 7.06. Other Agreements Providing for Exchange of Information B-37
Section 7.07. Production of Witnesses; Records; Cooperation B-37
Section 7.08. Confidentiality B-38
Section 7.09. Protective Arrangements B-39
ARTICLE 8
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
Section 8.01. Further Assurances B-39
ARTICLE 9
TERMINATION
Section 9.01. Termination B-39
Section 9.02. Effect of Termination B-39
ARTICLE 10
DISPUTE RESOLUTION AND ARBITRATION
Section 10.01. Agreement to Arbitrate B-40
Section 10.02. Reasonable Best Efforts to Resolve Disputes; Mediation B-40
Section 10.03. Demand for Arbitration B-40
Section 10.04. Arbitration Panel B-41
Section 10.05. Commencement and Place of Arbitration B-41
Section 10.06. Arbitration Hearings B-41
Section 10.07. Arbitration Decision B-41
Section 10.08. Discovery and Related Matters B-41
Section 10.09. Arbitration Panel's Authority B-41
Section 10.10. Confidentiality B-42
Section 10.11. Certain Additional Matters B-42
Section 10.12. Limited Court Actions B-42
Section 10.13. Continuity of Performance and Remaining Obligations B-43
Section 10.14. Law Governing Arbitration Procedures B-43
Section 10.15. Non-applicability of Article B-43
ARTICLE 11
MISCELLANEOUS
Section 11.01. Counterparts; Entire Agreement; Corporate Power B-43
Section 11.02. Governing Law B-44
Section 11.03. Jurisdiction B-44
Section 11.04. Waiver of Jury Trial B-44
Section 11.05. Assignability B-44
Section 11.06. AT&T Restructuring B-45
Section 11.07. Third Party Beneficiaries B-45
Section 11.08. Notices B-45
Section 11.09. Severability B-46
Section 11.10. Expenses B-46
Section 11.11. Headings B-46
Section 11.12. Waivers of Default B-46
Section 11.13. Specific Performance B-46
Section 11.14. Amendments B-46
Section 11.15. Late Payments B-46
Section 11.16. Interpretation B-47
EXHIBITS
Exhibit A AT&T Communications Financial Statements
Exhibit B Corporate Name Agreement
3
Exhibit C Employee Benefits Agreement
Exhibit D Intellectual Property Agreement
Exhibit E Interim Services and Systems Replication Agreement
Exhibit F Patent Assignment
Exhibit G Tax Sharing Agreement
Exhibit H Trademark and Service ▇▇▇▇ Agreement
Annex I TWE Consideration
4
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of December 19, 2001,
is by and between AT&T Corp., a New York corporation ("AT&T"), and AT&T
Broadband Corp., a Delaware corporation ("AT&T Broadband"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings
assigned to them in Article 1.
WHEREAS, the Board of Directors of AT&T has determined that it is in the
best interests of AT&T and its shareholders to separate AT&T's communications
and broadband businesses into independent businesses and to subsequently merge
AT&T Broadband with a wholly owned subsidiary of AT&T Comcast Corporation, a
Pennsylvania corporation, pursuant to the Merger Agreement (as defined below);
WHEREAS, in furtherance of the foregoing, upon the terms and subject to
the conditions set forth in this Agreement, AT&T will transfer the AT&T
Broadband Assets to AT&T Broadband and its Subsidiaries and cause AT&T
Broadband and its Subsidiaries to assume the AT&T Broadband Liabilities, all as
more fully described in this Agreement and the other Ancillary Agreements;
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, following the Separation, AT&T will distribute all of the AT&T
Broadband Common Stock to shareholders of AT&T and, if the QUIPS Exchange is
completed (as defined below), to Microsoft Corporation, a Washington
corporation, or an affiliate thereof ("Microsoft"), all as more fully described
in this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Separation and Distribution constitute a tax-free reorganization under the
Code; and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation and the Distribution
and certain other agreements that will govern certain matters relating to the
Separation and the Distribution and the relationship of AT&T and AT&T Broadband
and their respective Subsidiaries following the Distribution.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For the purpose of this Agreement the following
terms shall have the following meanings:
"Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"Additional Commercial Agreements" has the meaning set forth in the
definition of Ancillary Agreements.
"Affiliate" of any Person means a Person that controls, is controlled by,
or is under common control with such Person; provided, however, that for
purposes of this Agreement, no member of either the AT&T Broadband Group or the
AT&T Communications Group shall be deemed to be an Affiliate of any member of
the other Group and no employee plan or employee plan trust shall be deemed an
Affiliate of any employer or of any Affiliate of any employer. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
"Agent" means the distribution agent to be appointed by AT&T to distribute
to shareholders of AT&T the shares of AT&T Broadband Common Stock pursuant to
the Distribution.
"Agreement" means this Separation and Distribution Agreement, including
all of the Schedules and Exhibits hereto, as amended from time to time.
"American Ridge" means American Ridge Insurance Company, a Vermont
corporation.
5
"Ancillary Agreements" means (i) this Agreement, the Corporate Name
Agreement, the Tax Sharing Agreement, the Employee Benefits Agreement, the
Intellectual Property Agreement, the Patent Assignment, the Trademark and
Service ▇▇▇▇ Assignment (the agreements referred to in this clause (i), the
"Primary Transaction Agreements"); (ii) those agreements and documents (other
than any Primary Transaction Agreements) listed in Items 1-23 on Schedule
2.4(b)(ii)(A) (as such schedule existed on December 19, 2001) (the agreements
referred to in this clause (ii), as they may be amended as provided in Schedule
2.4(b)(ii)(B) (as such schedule existed on December 19, 2001), the "Primary
Commercial Agreements"); (iii) any agreement, commitment or understanding that
any of the Primary Commercial Agreements (as that term was defined on December
19, 2001) contemplates will be entered into or made after the date hereof;
provided that the relevant Primary Commercial Agreement specifically sets forth
all material terms of such agreement, commitment or understanding (the
agreements, commitments and understandings referred to in this clause (iii) are
referred to herein as the "Additional Commercial Agreements"); and (iv) those
agreements and documents listed in Items 9 through 47 on Schedule 2.4(b)(ii)
(as such schedule exists as of November 18, 2002).
"Applicable Deadline" has the meaning set forth in Section 10.03.
"Arbitration Demand Notice" has the meaning set forth in Section 10.03.
"Arbitration Panel" has the meaning set forth in Section 10.05.
"Assets" means assets, properties and rights (including goodwill), wherever
located (including in the possession of vendors or other third parties or
elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disc, magnetic tape or any
other form;
(b) all apparatus, computers and other electronic data processing
equipment, fixtures, machinery, equipment, furniture, office equipment,
automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles and
other transportation equipment, special and general tools, test devices,
prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(d) all interests in real property of whatever nature, including
easements and rights of way, whether as owner, mortgagee or holder of a
Security Interest in real property, lessor, sublessor, lessee, sublessee
or otherwise, and copies of all related documentation;
(e) all interests in any capital stock or other equity interests of
any Subsidiary or any other Person, all bonds, notes, debentures or other
securities issued by any Subsidiary or any other Person, all loans,
advances or other extensions of credit or capital contributions to any
Subsidiary or any other Person and all other investments in securities of
any Person;
(f) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or services, unfilled
orders for the manufacture and sale of products and other contracts,
agreements or commitments;
(g) all deposits, letters of credit and performance and surety bonds;
(h) all written technical information, data, specifications, research
and development information, engineering drawings, operating and
maintenance manuals, and materials and analyses prepared by consultants
and other third parties;
(i) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications for any of
the foregoing, mask works, trade secrets, inventions, other proprietary
information and licenses from third Persons granting the right to use any
of the foregoing;
(j) all computer applications, programs and other software, including
operating software, network software, firmware, middleware, design
software, design tools, systems documentation and instructions;
(k) all cost information, sales and pricing data, customer prospect
lists, supplier records, customer and supplier lists, records
6
pertaining to customers and customer accounts, customer and vendor data,
correspondence and lists, product literature, artwork, design, development
and manufacturing files, vendor and customer drawings, formulations and
specifications, quality records and reports and other books, records,
studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts and notes
receivable;
(m) all rights under contracts or agreements, all claims or rights
against any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, choices in action or
similar rights, whether accrued or contingent;
(n) all insurance proceeds and rights under insurance policies and
all rights in the nature of insurance, indemnification or contribution;
(o) all licenses (including radio and similar licenses), permits,
approvals and authorizations that have been issued by any Governmental
Authority;
(p) all cash or cash equivalents, bank accounts, lock boxes and other
deposit arrangements;
(q) copies of all documentation related to Insurance Policies; and
(r) interest rate, currency, commodity or other swap, collar, cap or
other hedging or similar agreements or arrangements.
"AT&T" has the meaning set forth in the Preamble.
"AT&T Broadband" has the meaning set forth in the Preamble.
"AT&T Broadband Action" has the meaning set forth in Section 6.02(d).
"AT&T Broadband Assets" means:
(a) except as set forth on Schedule 1.14(a), any Assets reflected in the
AT&T Broadband Balance Sheet, unless disposed of to third parties after the
date thereof (and, in the case of any such Assets disposed of after the date
thereof, the proceeds from such disposal);
(b) any Assets acquired after the date of the AT&T Broadband Balance Sheet
by AT&T or any of its Subsidiaries utilizing AT&T Broadband Assets;
(c) any AT&T Broadband Contracts;
(d) any capital stock or other ownership interests in AT&T Broadband
Entities;
(e) AT&T's interest in Western Range;
(f) any AT&T Broadband Real Property;
(g) any Assets that are expressly contemplated by this Agreement or any
other Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be
retained by or assigned to any member of the AT&T Broadband Group;
(h) any governmental licenses, permits, franchises, approvals,
certificates and other governmental authorizations held in the name of AT&T or
any of its Subsidiaries that are primarily related to the AT&T Broadband
Business (to the extent any of the foregoing would be required to be
transferred pursuant hereto, such items will be AT&T Broadband Assets only to
the extent they are transferable upon the receipt of any relevant Consent),
except for any intrastate telephony licenses, permits, franchises, approvals,
certificates or other governmental authorizations that are used in the AT&T
Communications Business;
(i) the Assets of T-Holdings, UCT Video, UAI and their respective
Subsidiaries to be purchased by AT&T Broadband pursuant to Sections 2.01(f),
(g) and (h), respectively;
7
(j) any Assets underlying any of the monetizations that are AT&T Broadband
Liabilities;
(k) any Assets listed or described on Schedule 1.14(k); and
(l) any Assets that are not AT&T Communications Assets specified in
clauses (a) through (k) of the definition of AT&T Communications Assets and
that are used or held for use primarily in connection with the AT&T Broadband
Business (it being agreed that (i) any Assets owned by AT&T or any of its
controlled Affiliates immediately prior to March 9, 1999 shall be deemed
primarily used or held for use in connection with the AT&T Communications
Business and (ii) Assets that were paid for, built or otherwise directly or
indirectly acquired for consideration (as reflected in current and historic
financial records, including subsidiary ledgers, journals and other financial
books and records) by a Group shall be deemed to be primarily used or held for
use by the Group that most recently so paid for or so built or acquired them).
AT&T Broadband Assets shall not in any event include any (i) Assets reflected
on the AT&T Communications Balance Sheet, except for those Assets specified in
clauses (b), (d), (e), (f), (g), (i), (j) and (k) of the definition of AT&T
Broadband Assets or (ii) Assets that as of the Distribution Date are Leased
Assets (as defined in the Local Network Connectivity Services Agreement).
Subject to the foregoing sentence, in the event that any Asset is included
in both the definition of "AT&T Broadband Asset" and "AT&T Communications
Asset" then (i) if it is specifically referred to in a definition or schedule
or otherwise (including in any of the Ancillary Agreements), it shall be
treated in accordance with such specific reference and (ii) otherwise it shall
be treated as an AT&T Broadband Asset or AT&T Communications Asset based upon
whether it is used or held for use primarily in connection with the AT&T
Broadband Business or primarily in connection with the AT&T Communications
Business; provided that for purposes hereof Assets that were paid for, built or
otherwise directly or indirectly acquired for consideration (as reflected in
current and historic financial records, including subsidiary ledgers, journals
and other financial books and records) by a Group shall be deemed to be
primarily used or held for use by the Group that most recently so paid for or
so built or acquired them.
"AT&T Broadband Balance Sheet" means the balance sheet dated as of
December 31, 2000 included in the AT&T Broadband Financial Statements.
"AT&T Broadband Business" means the business of the AT&T Broadband Group.
"AT&T Broadband Class A Common Stock" has the meaning set forth in the
Merger Agreement.
"AT&T Broadband Common Stock" means the common stock, par value
$0.00000000125 per share, of AT&T Broadband.
"AT&T Broadband Contracts" means the following contracts and agreements to
which AT&T or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries or any of their respective Assets is bound, whether or not in
writing, except for any such contract or agreement that is expressly
contemplated to be assigned to or retained by AT&T or any member of the AT&T
Communications Group pursuant to any provision of this Agreement or any other
Ancillary Agreement:
(a) any contract or agreement entered into in the name of, or
expressly on behalf of, any AT&T Broadband Entity, except to the extent
clearly relating to the AT&T Communications Group and except for any At
Home Contract;
(b) any contract or agreement that relates primarily to the AT&T
Broadband Business other than any At Home Contract;
(c) any rights and obligations of the AT&T Broadband Group under any
At Home Contract;
(d) any note, indenture, contract, agreement, mortgage or other
instrument representing Indebtedness or other Liabilities that are in
either such case AT&T Broadband Liabilities;
(e) any contract or agreement that is expressly contemplated pursuant
to this Agreement or any of the other Ancillary Agreements to be assigned
or transferred to or retained by AT&T Broadband or any member of the AT&T
Broadband Group;
(f) any guarantee, indemnity, representation, warranty or other
Liability of any member of the AT&T Communications Group in respect of any
other AT&T Broadband Contract, any AT&T Broadband Liability or the AT&T
Broadband Business;
(g) any contract or agreement listed or described on Schedule
1.18(g), including in the case of commitment or similar contracts
8
or agreements, contracts or agreements to the extent indicated on such
Schedule;
(h) any letter of credit, surety bond, swap, foreign exchange or
other instrument or contract primarily relating to the AT&T Broadband
Group, together with any letters of credit, surety bonds, swaps, foreign
exchange or other such instruments or contracts that were entered into in
connection with Indebtedness of the AT&T Broadband Group;
(i) all monetizations listed or described on Schedule 1.18(i); and
(j) the ISDA Master Agreement, dated as of April 14, 1999, between
AT&T, AT&T Communications Services International Inc. ("ACSI") and UBS AG
("UBS") (as successor by merger to Swiss Bank Corporation, London Branch)
(the "Master Agreement"), the related Confirmations attached as Schedule 1
to the Assignment and Assumption Agreement to be dated as of November 18,
2002 (the "Assignment Agreement") among AT&T, ACSI and AT&T Broadband, the
Guaranty Agreement, dated as of April 14, 1999, delivered by AT&T pursuant
to the Master Agreement (the "Guaranty," and, together with the Master
Agreement, the Confirmations and the Guaranty, in each case as amended
from time to time), it being understood that the Master Agreement and the
Guaranty are AT&T Broadband Contracts only to the extent relating to the
Confirmations so attached as Schedule 1 notwithstanding anything to the
contrary in the Assignment Agreement or any other related agreement.
With respect to any contract or agreement that relates in material part to both
the AT&T Broadband Group and the AT&T Communications Group, the parties will
cooperate in good faith to apportion the rights and obligations thereunder to
the AT&T Broadband Group and the AT&T Communications Group, and to treat such
contract or agreement as an AT&T Broadband Contract to the extent relating to
the AT&T Broadband Group and an AT&T Communications Contract to the extent
relating to the AT&T Communications Group.
"AT&T Broadband Entities" means AT&T Broadband and each of the AT&T
Broadband Subsidiaries.
"AT&T Broadband Financial Statements" has the meaning set forth in the
Merger Agreement.
"AT&T Broadband Group" means the direct or indirect interest of AT&T
(either itself or through direct or indirect Subsidiaries, or any of their
predecessors or successors) in (a) all of the businesses, Assets and
Liabilities reflected in the AT&T Broadband Financial Statements; (b) the other
Assets and Liabilities (contingent or otherwise) of AT&T and its Subsidiaries
primarily related to businesses, assets and liabilities described in clause (a)
and all net income, net losses, Assets and Liabilities arising in respect
thereof after the date of the AT&T Broadband Financial Statements; (c) all
Assets, Liabilities and businesses acquired after the date of the AT&T
Broadband Financial Statements by the AT&T Broadband Group or utilizing cash or
other Assets referred to in clauses (a) or (b); and (d) any business or
operations that were terminated, divested or discontinued by any AT&T Broadband
Entity, including US West, Inc. and its Subsidiaries (and their respective
predecessors and successors), or that are listed or described on Schedule
1.21(d); and (e) the businesses, Assets and Liabilities listed or described on
Schedule 1.21(e); provided that the AT&T Broadband Group shall not include (x)
any Assets disposed of to any third party or otherwise transferred to any third
party from the AT&T Broadband Group after the date of the AT&T Broadband
Financial Statements (but it shall include any net proceeds thereof) or (y) any
businesses, Liabilities or Assets of, or the capital stock or other ownership
interests in, T-Holdings, UCT Video, UAI and their respective Subsidiaries,
other than the Assets purchased or transferred pursuant to Sections 2.01(f),
(g) and (h) and any Liabilities of T-Holdings, UCT Video, UAI and their
respective Subsidiaries as of the Distribution Date. Notwithstanding the
foregoing, when this Agreement refers to "a member of the AT&T Broadband Group"
or similar language clearly referring to a Person, it means any one of the AT&T
Broadband Entities.
"AT&T Broadband Indemnitees" has the meaning set forth in Section 5.02.
"AT&T Broadband Liabilities" means:
(a) any Liabilities reflected on the AT&T Broadband Balance Sheet, subject
to any discharge of such Liabilities subsequent to the date of the AT&T
Broadband Balance Sheet;
(b) any Liabilities that are expressly contemplated by this Agreement or
any other Ancillary Agreement (or the Schedules hereto or thereto) as
Liabilities to be retained or assumed by AT&T Broadband or any other member of
the AT&T Broadband Group, subject to discharge of such Liabilities subsequent
to the date of the AT&T Broadband Balance Sheet, and all agreements,
obligations and Liabilities of any member of the AT&T Broadband Group under
this Agreement or any of the other Ancillary Agreements;
9
(c) any Liabilities of any AT&T Broadband Entity and any Liabilities as of
the Distribution Date of T-Holdings, UCT Video, UAI or any of their respective
Subsidiaries;
(d) any Liabilities relating to, arising out of or resulting from any AT&T
Broadband Contract, excluding, for the avoidance of doubt, any Liabilities of
any member of the AT&T Communications Group as a party (for the benefit of the
AT&T Communications Group) under any At Home Contract;
(e) any Liabilities incurred after the date of the AT&T Broadband Balance
Sheet by any AT&T Broadband Entity;
(f) except to the extent arising from any breach by any member of the AT&T
Communications Group after the Distribution Date of any covenant or agreement
entered into in connection with the separation, divestiture or termination of
LMC and its Subsidiaries, or as otherwise expressly contemplated by any other
Ancillary Agreement, any Liabilities to the extent arising out of, relating to
or resulting from LMC and its Subsidiaries, any commercial or other agreements
or arrangements primarily relating to the AT&T Broadband Group and involving
LMC or any of its Subsidiaries or the ownership of any securities of any such
entity;
(g) (i) any Liabilities relating to, arising out of, or resulting from any
Actions primarily related to, arising out of or resulting from the AT&T
Broadband Business, including those listed or described on Schedule 1.23(g),
(ii) 50% of the excess of any Liability related to, arising out of or resulting
from any Specified Matter (including any legal or other fees incurred as a
result of, or with respect to, any Specified Matter) over any amount AT&T
receives from AWS in respect thereof, (iii) 50% of any Liability related to,
arising out of or resulting from any At Home Matter (including any legal or
other fees incurred as a result of, or with respect to, any At Home Matter) and
(iv) 50% of any Liability related to, arising out of or resulting from the
Separation or the Distribution or any proposed transaction involving AT&T
Broadband following the Distribution (including any legal or other fees
incurred as a result of, or with respect to, any such Liability and including
any Liability AT&T may have under Section 910 of the NYBCL in connection with
the Distribution) (the transactions specified in clause (iv), the "Specified
Transactions");
(h) any Liabilities, including any employee-related Liabilities and
Environmental Liabilities, primarily relating to, arising out of or resulting
from:
(i) the AT&T Broadband Group, including the operation of the AT&T
Broadband Business, as conducted at any time prior to, on or after the
Distribution Date (including any Liability relating to, arising out of or
resulting from any act or failure to act by any director, officer,
employee, agent or representative (whether or not such act or failure to
act is or was within such Person's authority));
(ii) the operation of any business conducted by any member of the
AT&T Broadband Group at any time after the Distribution Date (including
any Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within such Person's
authority)); or
(iii) any AT&T Broadband Assets (including any AT&T Broadband
Contracts and any AT&T Broadband Real Property);
in any such case whether arising before, on or after the Distribution Date.
(i) any of the monetizations set forth on Schedule 1.23(i);
(j) any Liabilities listed or described on Schedule 1.23(j); and
(k) any Liability arising from or relating to any terminated, divested or
discontinued business (or the termination, divestiture or discontinuation
thereof) of the AT&T Broadband Group.
In the event that any Liability is included in both the definition of "AT&T
Broadband Liability" and "AT&T Communications Liability" then (i) if it is
specifically referred to in a definition or schedule or otherwise (including in
any of the Ancillary Agreements), it shall be treated in accordance with such
specific reference and (ii) otherwise it shall be treated as an AT&T Broadband
Liability or AT&T Communications Liability to the extent it relates to the AT&T
Broadband Business or the AT&T Communications Business, respectively.
"AT&T Broadband Material Adverse Effect" has the meaning set forth in the
Merger Agreement.
10
"AT&T Broadband Merger" has the meaning set forth in the Merger Agreement.
"AT&T Broadband Real Property" means all right, title and interest in real
property, wherever located, held in the name of AT&T Broadband or any AT&T
Broadband Entity; provided that AT&T Broadband Real Property does not include
rights, title or interests (whether fee, leasehold or otherwise) in any AT&T
Communications Real Property.
"AT&T Broadband Subsidiaries" means those entities set forth on Schedule
1.19 and their respective Subsidiaries but excluding T-Holdings, UCT Video and
their respective Subsidiaries.
"AT&T Broadband's Share" has the meaning set forth in Section 6.04(b).
"AT&T Common Stock" means the common stock, par value $1.00 per share, of
AT&T.
"AT&T Communications Action" has the meaning set forth in Section 6.02(d).
"AT&T Communications Assets" means:
(a) any Assets reflected in the AT&T Communications Balance Sheet, unless
disposed of to third parties after the date thereof (and, in the case of any
such Assets disposed of after the date thereof, the proceeds from such
disposal);
(b) any Assets acquired after the date of the AT&T Communications Balance
Sheet by AT&T or any of its Subsidiaries utilizing AT&T Communications Assets;
(c) any AT&T Communications Contracts;
(d) any capital stock or other ownership interests in any member of the
AT&T Communications Group (other than AT&T) (unless disposed of after the date
thereof);
(e) AT&T's interest in Concert and American Ridge;
(f) any AT&T Communications Real Property;
(g) any Assets that are expressly contemplated by this Agreement or any
other Ancillary Agreement (or any Schedule hereto or thereto) to be retained by
or assigned to AT&T or any other member of the AT&T Communications Group;
(h) (i) any governmental licenses, permits, franchises, approvals,
certificates, consents and other governmental authorizations held in the name
of AT&T or any of its Subsidiaries that are primarily related to the AT&T
Communications Business and (ii) any intrastate telephony licenses, permits,
franchises, approvals, certificates or other governmental authorizations that
are used in the AT&T Communications Business (in the case of (i) or (ii), to
the extent any of the foregoing would be required to be transferred pursuant
hereto, such items will be AT&T Communications Assets only to the extent they
are transferable upon receipt of any relevant Consent);
(i) AT&T's shares of AWS;
(j) any Assets listed or described on Schedule 1.28(j);
(k) any Assets that as of the Distribution Date are Leased Assets (as
defined in the Local Network Connectivity Services Agreement); and
(l) any Assets that are not AT&T Broadband Assets specified in clauses (a)
through (k) of the definition of AT&T Broadband Assets and that are used or
held for use primarily in connection with the AT&T Communications Business (it
being agreed that (i) any Assets owned by AT&T or any of its controlled
Affiliates immediately prior to March 9, 1999 shall be deemed primarily used or
held for use in connection with the AT&T Communications Business and (ii)
Assets that were paid for, built or otherwise directly or indirectly acquired
for consideration (as reflected in current and historic financial records,
including subsidiary ledgers, journals and other financial books and records)
by a Group shall be deemed to be primarily used or held for use by the Group
that
11
most recently so paid for or so built or acquired them).
AT&T Communications Assets shall not in any event include any Assets reflected
on the AT&T Broadband Balance Sheet, except for those Assets specified in
clauses (b), (d), (e), (f), (g), (i), (j) and (k) of the definition of AT&T
Communications Assets.
Subject to the foregoing sentence, in the event that any Asset is included in
both the definition of "AT&T Broadband Asset" and "AT&T Communications Asset"
then (i) if it is specifically referred to in a definition or schedule or
otherwise (including in any of the Ancillary Agreements), it shall be treated
in accordance with such specific reference and (ii) otherwise it shall be
treated as an AT&T Broadband Asset or AT&T Communications Asset based upon
whether it is used or held for use primarily in connection with the AT&T
Broadband Business or primarily in connection with the AT&T Communications
Business; provided that for purposes hereof Assets that were paid for, built or
otherwise directly or indirectly, acquired for consideration (as reflected in
current and historic financial records, including subsidiary ledgers, journals
and other financial books and records) by a Group shall be deemed to be
primarily used or held for use by the Group that most recently so paid for or
so built or acquired them.
"AT&T Communications Balance Sheet" means the consolidated balance sheet
dated as of December 31, 2000 included within the AT&T Communications Financial
Statements.
"AT&T Communications Business" means the business of the AT&T
Communications Group.
"AT&T Communications Contracts" means any contract or agreements to which
AT&T or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries or any of their respective Assets is bound, whether or not in
writing, except for any AT&T Broadband Contract, including (a) any contract or
agreement listed on Schedule 1.31(a), (b) any rights and obligations of any
member of the AT&T Communications Group as a party (for the benefit of the AT&T
Communications Group) under any At Home Contract, (c) any letter of credit,
surety bond, swap, foreign exchange or other instrument or contract not
primarily relating to the AT&T Broadband Group, together with any letters of
credit, surety bonds, swaps, foreign exchange or other such instruments or
contracts that were entered into in connection with Indebtedness of the AT&T
Communications Services Group, (d) any note, indenture, contract, agreement,
mortgage or other instrument representing Indebtedness or other Liabilities
that are in either such case AT&T Communications Liabilities, (e) any contract
or agreement that is expressly contemplated pursuant to this Agreement or any
of the other Ancillary Agreements to be assigned or transferred to or retained
by AT&T or any other member of the AT&T Communications Group, (f) any
guarantee, indemnity, representation, warranty or other Liability of any member
of the AT&T Broadband Group in respect of any other AT&T Communications
Contract, any AT&T Communications Liability or the AT&T Communications
Business, and (g) any contract or agreement entered into in the name of, or
expressly on behalf of, any member of the AT&T Communications Group (other than
AT&T), except to the extent clearly relating to the AT&T Broadband Group. With
respect to any contract or agreement that relates in material part to both the
AT&T Broadband Group and the AT&T Communications Group, the parties will
cooperate in good faith to apportion the rights and obligations thereunder to
the AT&T Broadband Group and the AT&T Communications Group, and to treat such
contract or agreement as an AT&T Broadband Contract to the extent relating to
the AT&T Broadband Group and an AT&T Communications Contract to the extent
relating to the AT&T Communications Group.
"AT&T Communications Financial Statements" means the consolidated balance
sheets, income statements, statements of cash flow and other financial
statements of AT&T Communications as of and for the period ending December 31,
2000, attached hereto as Exhibit A.
"AT&T Communications Group" means the direct or indirect interest of AT&T
(either itself or through direct or indirect subsidiaries, or any of their
predecessors or successors) in (a) all businesses (including terminated,
divested or discontinued businesses and operations), Assets and Liabilities
(contingent or otherwise), other than the AT&T Broadband Group, and (b) any
terminated, divested or discontinued businesses not specified in the definition
(or related schedules) of AT&T Broadband Group. Notwithstanding the foregoing,
when this Agreement refers to "a member of the AT&T Communications Group" or
similar language clearly referring to a Person, it means any one of AT&T or its
Subsidiaries other than the AT&T Broadband Entities.
"AT&T Communications Liabilities" means (without duplication):
(a) any Liabilities reflected on the AT&T Communications Balance Sheet,
subject to any discharge of such Liabilities subsequent to the date of the AT&T
Communications Balance Sheet;
(b) any Liabilities that are expressly contemplated by this Agreement or
any other Ancillary Agreement (or the Schedules hereto or thereto) as
Liabilities to be retained or assumed by AT&T or any member of the AT&T
Communications Group, subject
12
to discharge of such Liabilities subsequent to the date of the AT&T
Communications Balance Sheet, and all agreements, obligations and Liabilities
of any member of the AT&T Communications Group under this Agreement or any of
the other Ancillary Agreements;
(c) any Liabilities of any member of the AT&T Communications Group (other
than AT&T), excluding, for the avoidance of doubt, any Liabilities as of the
Distribution Date of T-Holdings, UCT Video, UAI or any of their respective
Subsidiaries and including, for the avoidance of doubt, any Liabilities of
T-Holdings, UCT Video, UAI or any of their respective Subsidiaries arising
after the Distribution Date;
(d) any Liabilities relating to, arising out of or resulting from any AT&T
Communications Contract, excluding, for the avoidance of doubt, any Liabilities
under any At Home Contract except for Liabilities of any member of the AT&T
Communications Group as a party (for the benefit of the AT&T Communications
Group) under any At Home Contract;
(e) any Liabilities incurred after the date of the AT&T Communications
Balance Sheet by any member of the AT&T Communications Group;
(f) any Liabilities relating to, arising out of or resulting from any
Actions except (i) those primarily related to, arising out of or resulting from
the AT&T Broadband Business (including those listed on Schedule 1.23(g)) or as
expressly set forth herein, (ii) 50% of the excess of any Liability related to,
arising out of or resulting from any Specified Matter (including any legal or
other fees incurred as a result of, or with respect to, any Specified Matter)
over any amount AT&T receives from AWS in respect thereof, (iii) 50% of any
Liability related to, arising out of or resulting from any At Home Matter
(including any legal or other fees incurred as a result of, or with respect to,
any At Home Matter) and (iv) 50% of any Liability related to, arising out of or
resulting from the Specified Transactions (including any legal or other fees
incurred as a result of, or with respect to, any such Liability and including
any Liability AT&T may have under Section 910 of the NYBCL in connection with
the Distribution);
(g) any Liabilities, including any employee-related Liabilities and
Environmental Liabilities, primarily relating to, arising out of or resulting
from:
(i) the AT&T Communications Group, including the operation of the
AT&T Communications Business, as conducted at any time prior to, on or
after the Distribution Date (including any Liability relating to, arising
out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority));
(ii) the operation of any business conducted by any member of the
AT&T Communications Group at any time after the Distribution Date
(including any Liability relating to, arising out of or resulting from any
act or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was within
such Person's authority)); or
(iii) any AT&T Communications Assets (including any AT&T
Communications Contracts, any AT&T Communications Real Property and any
Leased Assets (except with respect to any Liabilities of the lessees under
the applicable leases));
in any such case whether arising before, on or after the Distribution Date;
(h) any Liability arising from or relating to any terminated, divested or
discontinued business (or the termination, divestiture or discontinuation
thereof) of the AT&T Communications Group;
(i) any Liability arising from any breach by any member of the AT&T
Communications Group after the Distribution Date of any covenant or agreement
entered into in connection with the separation, divestiture or termination of
LMC and its Subsidiaries; and
(j) any other direct or indirect Liabilities of AT&T or any of its
Subsidiaries that do not otherwise constitute AT&T Broadband Liabilities.
In the event that any Liability is included in both the definition of
"AT&T Broadband Liability" and "AT&T Communications Liability" then (i) if it
is specifically referred to in a definition or schedule or otherwise (including
in any of the Ancillary Agreements), it shall be treated in accordance with
such specific reference and (ii) otherwise it shall be treated as an AT&T
Broadband Liability or AT&T Communications Liability to the extent it relates
to the AT&T Broadband Business or the AT&T
13
Communications Business, respectively.
"AT&T Communications Real Property" means all right, title and interest in
real property, wherever located, of AT&T or any of its Subsidiaries (other than
any AT&T Broadband Entity), including: (a) all land (the "Land") owned by AT&T
or any of its Subsidiaries (other than any AT&T Broadband Entity), including
all buildings, structures and other improvements now or hereafter located
thereon (the "Owned Real Property"), (b) all real property leased, subleased or
otherwise occupied by AT&T or any of its Subsidiaries (other than any AT&T
Broadband Entity) (the "Leased Real Property" and together with the Owned Real
Property, the "Real Property"), (c) all easements, licenses, permits, rights of
way, reservations, privileges and other estates and rights of AT&T or any of
its Subsidiaries (other than any AT&T Broadband Entity) either in gross or
appurtenant pertaining to such Real Property or to any other real property, (d)
all right, title and interest of AT&T or any of its Subsidiaries (other than
any AT&T Broadband Entity) in and to all strips and gores, all alleys adjoining
land, and the land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land to the center line thereof, and all
right, title and interest of AT&T or any of its Subsidiaries (other than any
AT&T Broadband Entity) in and to any award made or to be made in lieu thereof
and in and to any unpaid award for any taking by condemnation or any damages to
the Owned Real Property by reason of any change of grade of any street, road or
avenue, (e) all right, title and interest of AT&T or any of its Subsidiaries
(other than any AT&T Broadband Entity) in and to the airspace above the Owned
Real Property (and the rights to use such airspace) and any transferable
development or similar rights appurtenant to the Owned Real Property by
allocation under applicable laws, by zoning lot merger or otherwise and (f) all
rights, licenses, easements, leases, indefeasible rights of use, title,
attachment rights, authorizations and other rights pertaining to poles,
conduits and cable held by AT&T or any of its Subsidiaries (other than any AT&T
Broadband Entity).
"AT&T Communications' Share" has the meaning set forth in Section 6.04(b).
"AT&T Indemnitees" has the meaning set forth in Section 5.03.
"AT&T Material Adverse Effect" means a material adverse effect on the
financial condition, assets or results of operations of the AT&T Communications
Group, taken as a whole, excluding any such effect resulting from or arising in
connection with (i) changes or conditions generally affecting the industries in
which the AT&T Communications Group operates, (ii) changes in general economic,
regulatory or political conditions, or (iii) the announcement of this Agreement
or of the transactions contemplated hereby.
"AT&T Meeting" has the meaning set forth in Section 4.02(a).
"AT&T Subsidiary Preferred Stock" has the meaning set forth in the Merger
Agreement.
"At Home" means At Home Corporation, a Delaware corporation and/or its
bankruptcy estate, as applicable.
"At Home Contracts" means any contracts or agreements between At Home or
any of its Subsidiaries, on the one hand, and any member of the AT&T
Communications Group (for the benefit of the AT&T Communications Group), on the
other hand.
"At Home Matters" means (i) the currently pending lawsuits styled ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. v. At Home Corporation, et al. (Case No.
418233, Superior Court of California, San Mateo County), and In re: At Home
Corporation Stockholders' Litigation (Master File No. 413094, Superior Court of
California, San Mateo County), and any other shareholder claims or lawsuits or
claims or lawsuits by At Home alleging any breach of fiduciary or contractual
duties by AT&T or any of its Affiliates relating to At Home or its Subsidiaries
prior to the Effective Time, including any such claim or lawsuit against any
officers, directors or employees of AT&T or any of its Subsidiaries whether in
their capacity as a director, officer or employee of At Home or its
Subsidiaries or otherwise, and (ii) any claims or lawsuits by At Home,
creditors of At Home or its Subsidiaries, either previously or subsequently
filed, concerning activities prior to the Effective Time, including any lawsuit
or claim asserting that AT&T or any of its Subsidiaries (other than At Home or
its Subsidiaries) breached contractual or fiduciary obligations to At Home or
its Subsidiaries, received a fraudulent conveyance from At Home or its
Subsidiaries, or is liable for any Liability of At Home or any of its
Subsidiaries, and including any such claim or lawsuit against any officers,
directors or employees of AT&T or any of its Subsidiaries whether in their
capacity as a director, officer or employee of At Home or its Subsidiaries or
otherwise.
"AWS" means AT&T Wireless Services, Inc., a Delaware corporation.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
14
"Code" means the Internal Revenue Code of 1986, as amended.
"Comcast" means Comcast Corporation, a Pennsylvania corporation.
"Commission" means the Securities and Exchange Commission.
"Communications Subsidiary Preferred Stock Exchange" has the meaning set
forth in Section 4.01(e).
"Concert" means Concert B.V.
"Consents" means any consents, waivers or approvals from, or notification
requirements to, any third parties, other than Governmental Approvals.
"CPR" means the Center for Public Resources.
"Corporate Name Agreement" means the Corporate Name Agreement by and
between AT&T and AT&T Comcast Corporation, in the form attached hereto as
Exhibit B, as amended from time to time.
"Delayed Transfer Assets" means any Assets that this Agreement or any
other Ancillary Agreement provides or contemplates are to be transferred after
the Distribution Date, including Assets that require a Consent or Governmental
Approval to transfer, which Consent or Governmental Approval is not obtained on
or prior to the Distribution Date.
"Delayed Transfer Liabilities" means any Liabilities that are expressly
provided in this Agreement to be assumed after the Distribution Date upon the
removal of legal impediments or the receipt of Consents or Governmental
Approvals necessary for the transfer of such Liabilities.
"Dispute Date" has the meaning set forth in Section 6.03(c).
"Distribution" means the distribution by AT&T to the holders of AT&T
Common Stock and, if the QUIPS Exchange is completed, to the holders of the
QUIPS of all of the outstanding shares of AT&T Broadband Common Stock on the
Distribution Date in accordance with Article 4.
"Distribution Date" means the date on which the Distribution occurs.
"Distribution Registration Statement" has the meaning set forth in Section
4.02(b).
"Effective Time" has the meaning set forth in the Merger Agreement.
"Employee Benefits Agreement" means the Employee Benefits Agreement by and
between AT&T and AT&T Broadband, in the form attached hereto as Exhibit C, as
amended from time to time.
"Environmental Law" has the meaning set forth in the Merger Agreement.
"Environmental Liabilities" means all Liabilities relating to, arising out
of or resulting from any Environmental Law or contract or agreement relating to
environmental, health or safety matters (including all removal, remediation or
cleanup costs, investigatory costs, governmental response costs, natural
resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability
and indemnity, contribution or similar obligations) and all costs and expenses
(including allocated costs of in-house counsel and other personnel), interest,
fines, penalties or other monetary sanctions in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Exchange Agreement" has the meaning set forth in the Merger Agreement.
"GAAP" has the meaning set forth in the Merger Agreement.
15
"Governmental Approvals" means any notices, reports or other filings to be
made, or any consents, registrations, approvals, permits or authorizations to
be obtained from, any Governmental Authority.
"Governmental Authority" has the meaning set forth in the Merger
Agreement.
"Group" means the AT&T Broadband Group or the AT&T Communications Group,
as the context requires.
"Indebtedness" means, with respect to any Person, (a) any obligation of
such Person (i) for borrowed money, (ii) evidenced by a note, debenture or
similar instrument (including a purchase money obligation) given in connection
with the acquisition of any property or assets, including securities, (iii) for
the deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, or (iv) under any lease or
similar arrangement that would be required to be accounted for by the lessee as
a capital lease in accordance with GAAP; (b) any guarantee (or keepwell
agreement) by such Person of any indebtedness of others described in the
preceding clause (a); and (c) all obligations to reimburse any bank or other
Person for amounts paid under a letter of credit or similar instrument. For
purposes of clarification, (x) Indebtedness includes, without duplication,
obligations (or guarantees of obligations) related to preferred securities
issued by a wholly owned trust Subsidiary and (y) Indebtedness (in the case of
AT&T Broadband, any AT&T Broadband Entity or any member of the AT&T Broadband
Group) includes the monetizations set forth on Schedule 1.23(i).
"Indemnifying Party" has the meaning set forth in Section 5.04(a).
"Indemnitee" has the meaning set forth in Section 5.04(a).
"Indemnity Payment" has the meaning set forth in Section 5.04(a).
"Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"Insurance Policies" means the insurance policies written by insurance
carriers other than American Ridge or Western Range under which, prior to the
Distribution Date, AT&T and/or AT&T Broadband or one or more of their
Subsidiaries or Affiliates (or their respective officers or directors) are
insured parties, excluding insurance policies funding Benefit Plans (as defined
in the Employee Benefits Agreement) (which are addressed in the Employee
Benefits Agreement).
"Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier other than American
Ridge or Western Range; or
(b) paid by an insurance carrier other than American Ridge or Western
Range on behalf of an insured;
in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
"Intellectual Property Agreement" means the Intellectual Property
Agreement by and between AT&T and AT&T Broadband, in the form attached hereto
as Exhibit D, as amended from time to time.
"IRS" means the U.S. Internal Revenue Service.
"Issuing Party" has the meaning set forth in Section 6.02(c).
"Liabilities" means any and all losses, claims, charges, debts, demands,
Actions, damages, obligations, payments, costs and expenses, bonds, indemnities
and similar obligations, covenants, controversies, promises, omissions,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, inchoate
16
or otherwise, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising
under any law, rule, regulation, Action, threatened or contemplated Action
(including the costs and expenses of demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and
all costs and expenses (including allocated costs of in-house counsel and other
personnel), whatsoever reasonably incurred in investigating, preparing or
defending against any such Actions or threatened or contemplated Actions),
order or consent decree of any Governmental Authority or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, including those arising under this Agreement or any
other Ancillary Agreement (other than the Tax Sharing Agreement) or incurred by
a party hereto or thereto in connection with enforcing its rights to
indemnification hereunder or thereunder, in each case, whether or not recorded
or reflected or required to be recorded or reflected on the books and records
or financial statements of any Person; provided, however, that Liabilities
shall not include any liabilities for (i) Taxes based on, measured by or
calculated with respect to net income or profits or (ii) Non-Income Taxes
covered by Section 3.6 of the Tax Sharing Agreement.
"LMC" means Liberty Media Corporation, a Delaware corporation.
"Local Network Connectivity Services Agreement" means the Local Network
Connectivity Services Agreement dated as of January 1, 2001, as amended,
between AT&T and AT&T Broadband, LLC, a Delaware limited liability company.
"Mergers" has the definition set forth in the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
December 19, 2001 by and among AT&T, Comcast and the other parties referred to
therein.
"Microsoft" has the meaning set forth in the Recitals.
"Microsoft QUIPS Claim" has the meaning set forth in Section 5.02(e).
"New AT&T Subsidiary Preferred Stock" has the meaning set forth in the
Merger Agreement.
"Non-Income Taxes" has the meaning set forth in the Tax Sharing Agreement.
"Notified Action" has the meaning set forth in Section 6.02(c).
"NYBCL" means the Business Corporation Law of the State of New York.
"Other Party" has the meaning set forth in Section 6.02(c).
"Parent Common Stock" has the meaning set forth in the Merger Agreement.
"Patent Assignment" means the Patent Assignment by and between AT&T and
AT&T Broadband, LLC, a Delaware limited liability company, in the form attached
hereto as Exhibit F, as amended from time to time.
"Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any Governmental Authority.
"Primary Commercial Agreements" has the meaning set forth in the
definition of Ancillary Agreements.
"Primary Indemnity Claim" has the meaning set forth in Section 6.04(b).
"Primary Transaction Agreements" has the meaning set forth in the
definition of Ancillary Agreements.
"Prime Rate" means the rate that The Bank of New York (or any successor
thereto or other major money center commercial bank agreed to by the parties
hereto) announces from time to time as its prime lending rate, as in effect
from time to time.
"Proposed Acquisition Transaction" has the meaning set forth in Section
6.02(b).
"Proxy Statement" has the meaning set forth in Section 4.02(a).
17
"QUIPS" has the meaning set forth in the Merger Agreement.
"QUIPS Exchange" has the meaning set forth in the Merger Agreement.
"QUIPS Fair Market Value" has the meaning set forth in the Merger
Agreement.
"QUIPS Transfer" has the meaning set forth in the Merger Agreement.
"Real Property Instruments" has the meaning set forth in Section 2.05(a).
"Record Date" means the close of business on such date as is mutually
agreed upon by the parties.
"Registration Statement Claim" has the meaning set forth in Section
5.02(d).
"Registration Statements" means the Distribution Registration Statement
and all other filings by AT&T, AT&T Broadband or any of their respective
Affiliates with the Commission or any comparable state or foreign body made in
connection with the transactions contemplated by this Agreement or any other
Ancillary Agreement.
"Representation Letter" means the representation letter and any other
materials (including the ruling request and the related supplemental
submissions to the IRS) delivered or deliverable by AT&T and others in
connection with the rendering by tax counsel and the issuance by the IRS of the
Tax Opinions/ Rulings that shall be in form and substance reasonably
satisfactory to AT&T and AT&T Broadband.
"Restructuring Transaction" has the meaning set forth in Section 2.01(h).
"Scheduled Debt" has the meaning set forth in Section 3.01.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, security interest, pledge, lien,
charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
"Separation" means the transfer of the AT&T Broadband Assets to AT&T
Broadband and the assumption by AT&T Broadband of the AT&T Broadband
Liabilities, all as more fully described in this Agreement and the other
Ancillary Agreements.
"Separation-Related Agreement" means any agreement entered into by any of
the parties to this Agreement or any Affiliate or Subsidiary of any of the
parties to this Agreement in connection with the Separation.
"Separation Transactions" has the meaning set forth in the Separation and
Distribution Agreement dated as of June 4, 2001 by and between AT&T and AWS.
"Specified Matter" has the meaning set forth in the Separation and
Distribution Agreement, dated as of June 4, 2001, by and between AT&T and AWS.
"Specified Transactions" has the meaning set forth in clause (g) of the
definition of AT&T Broadband Liabilities.
"Spin-Off Disqualification" means (a) the Separation and Distribution
failing to qualify under the provisions of Sections 355, 361(c) and
368(a)(1)(D) of the Code, or (b) the shares of AT&T Broadband failing to
qualify as "qualified property" for purposes of Section 355(c)(2) or 361(c) of
the Code by reason of Section 355(e) of the Code.
"Split-Off" has the meaning set forth in the Ninth Supplement to the
Inter-Group Agreement dated as of June 14, 2001 by and among AT&T and the
Liberty Media Parties (as defined therein).
"Subsequent Tax Opinion/Ruling" has the meaning set forth in Section
6.02(c).
18
"Subsidiary" has the meaning set forth in the Merger Agreement.
"Subsidiary Preferred Stock Exchange" has the meaning set forth in Section
4.01(d).
"Tax Opinions/Rulings" has the meaning set forth in Section 6.02(b).
"Tax Related Losses" has the meaning set forth in Section 6.02(d).
"Tax Sharing Agreement" means the Tax Sharing Agreement by and between
AT&T and AT&T Broadband, in the form attached hereto as Exhibit G, as amended
from time to time.
"Taxes" has the meaning set forth in the Tax Sharing Agreement.
"Third Party Claim" has the meaning set forth in Section 5.05(a).
"Third Party Tax Claim" has the meaning set forth in Section 6.03(a).
"T-Holdings" means AT&T Broadband T-Holdings, Inc. (f/k/a TCI Telephony
Holdings, Inc.), a Delaware corporation.
"TOPRS" has the meaning set forth in the Merger Agreement.
"Trademark and Service ▇▇▇▇ Agreement" means the Trademark and Service
▇▇▇▇ Agreement by and among AT&T, AT&T Broadband, LLC, a Delaware limited
liability company, and MediaOne Group, Inc., a Delaware corporation, in the
form attached hereto as Exhibit H, as amended from time to time.
"Transaction Disqualification" has the meaning set forth in Section
6.04(a).
"TWE Option" has the meaning set forth in the Merger Agreement.
"UAI" means United Artists Investments, Inc., a Colorado corporation.
"UCT Video" means UCT Video, Inc., a Colorado corporation.
"Underpayment Rate" has the meaning set forth in Section 6.03(c).
"Western Range" means Western Range Insurance Company, a Vermont
corporation.
ARTICLE 2
THE SEPARATION
SECTION 2.01. Transfer of Assets and Assumption of Liabilities. (a)
Subject to Section 4.03, on or prior to the Distribution Date, AT&T will
assign, transfer, convey and deliver to AT&T Broadband, and agrees to cause its
applicable Subsidiaries to assign, transfer, convey and deliver to AT&T
Broadband, and AT&T Broadband will accept from AT&T and its applicable
Subsidiaries, all of AT&T's and its applicable Subsidiaries' respective right,
title and interest in all AT&T Broadband Assets, other than the AT&T Broadband
Assets constituting Delayed Transfer Assets.
(b) Subject to Section 4.03, on or prior to the Distribution Date, AT&T
Broadband will assume and agree faithfully to perform and fulfill all the AT&T
Broadband Liabilities that are not already Liabilities of an AT&T Broadband
Subsidiary, other than the AT&T Broadband Liabilities constituting Delayed
Transfer Liabilities, in accordance with their respective terms. AT&T Broadband
shall be responsible for all AT&T Broadband Liabilities that are not already
Liabilities of an AT&T Broadband Subsidiary, regardless of when or where such
Liabilities arose or arise, or whether the facts on which they are based
occurred prior to, on or subsequent to the date hereof, regardless of where or
against whom such Liabilities are asserted or determined (including any AT&T
Broadband Liabilities arising out of claims made by AT&T's, or AT&T
Broadband's, respective directors, officers, employees, agents, Subsidiaries or
Affiliates against any member of the AT&T Broadband Group or the AT&T
Communications Group) or whether asserted or
19
determined prior to the date hereof, and regardless of whether arising from or
alleged to arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any member of the AT&T Broadband Group or the AT&T
Communications Group or any of their respective directors, officers, employees,
agents, Subsidiaries or Affiliates. For the avoidance of doubt, but subject to
Section 5.03 including the indemnification obligations thereunder with respect
to Liabilities described in clause (g) of the definition of AT&T Broadband
Liabilities, AT&T Broadband is not itself agreeing to assume any Liabilities of
At Home or its Subsidiaries.
(c) Subject to Section 4.03, on or prior to the Distribution Date, AT&T
will assume and agree faithfully to perform and fulfill all the AT&T
Communications Liabilities that are not already Liabilities of AT&T or any of
its Subsidiaries (other than any AT&T Broadband Entity) in accordance with
their respective terms. AT&T shall be responsible for all AT&T Communications
Liabilities that are not already Liabilities of an AT&T Subsidiary (other than
any AT&T Broadband Entity), regardless of when or where such Liabilities arose
or arise, or whether the facts on which they are based occurred prior to, on or
subsequent to the date hereof, regardless of where or against whom such
Liabilities are asserted or determined (including any AT&T Communications
Liabilities arising out of claims made by AT&T's, or AT&T Broadband's,
respective directors, officers, employees, agents, Subsidiaries or Affiliates
against any member of the AT&T Broadband Group or the AT&T Communications
Group) or whether asserted or determined prior to the date hereof, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud or misrepresentation by any member of the
AT&T Broadband Group or the AT&T Communications Group or any of their
respective directors, officers, employees, agents, Subsidiaries or Affiliates.
(d) Each of the parties hereto agrees that the Delayed Transfer Assets
will be assigned, transferred, conveyed and delivered, and the Delayed Transfer
Liabilities will be assumed, in accordance with the terms of the agreements
that provide for such assignment, transfer, conveyance and delivery, or such
assumption, after the date of this Agreement.
(e) In the event that at any time or from time to time (whether prior to
or after the Distribution Date) any party hereto (or any member of such party's
respective Group) shall receive or otherwise possess any Asset that is
allocated to any other Person pursuant to this Agreement or any other Ancillary
Agreement, such party shall promptly transfer, or cause to be transferred, such
Asset to the Person so entitled thereto. Prior to any such transfer, the Person
receiving or possessing such Asset shall hold such Asset in trust for any such
other Person.
(f) Prior to the transactions described in Sections 2.01(a)-(c), (i) AT&T
shall cause T-Holdings to distribute to AT&T Broadband LLC the receivable held
by T-Holdings or the applicable T-Holdings Subsidiary under a Promissory Note
dated June 26, 2001, in the original principal amount of $211,732,820.11 made
by AT&T Broadband Holdings, Inc., and AT&T Broadband LLC shall contribute such
receivable to AT&T Broadband Holdings, Inc., (ii) AT&T shall contribute
$6,110,360 million in cash to AT&T Broadband, (iii) AT&T shall cause T-Holdings
and its Subsidiaries to sell all of their respective Assets that are used or
held for use primarily in the AT&T Broadband Business (disregarding clause (y)
of the proviso included in the definition of AT&T Broadband Group) (other than,
for the avoidance of doubt, any equity interests of any T-Holdings Subsidiary
and any shares of AT&T Subsidiary Preferred Stock or New AT&T Subsidiary
Preferred Stock) to AT&T Broadband for $6,110,360 million in cash and (iv) AT&T
Broadband shall purchase from T-Holdings and its Subsidiaries for $6,110,360
million in cash all of such Assets. Prior to the time that AT&T Broadband LLC
becomes a Subsidiary of AT&T Broadband and the sale and purchase of Assets
contemplated by clauses (iii) and (iv) of the preceding sentence, AT&T shall
cause AT&T Broadband LLC to distribute all of the outstanding shares of
T-Holdings to AT&T.
(g) Prior to the transactions described in Sections 2.01(a)-(c), (i) AT&T
shall cause UCT Video and its Subsidiaries to transfer to AT&T Broadband the
Assets (if any) held by UCT Video and its Subsidiaries that are used or held
for use primarily in the AT&T Broadband Business (disregarding clause (y) of
the proviso included in the definition of AT&T Broadband Group) (other than,
for the avoidance of doubt, any equity interests of any UCT Video Subsidiary
and any shares of AT&T Subsidiary Preferred Stock or New AT&T Subsidiary
Preferred Stock) and (ii) AT&T Broadband shall accept such Assets from UCT
Video and its Subsidiaries. Prior to the time that AT&T Broadband LLC becomes a
Subsidiary of AT&T Broadband, AT&T shall cause AT&T Broadband LLC to distribute
all of the outstanding shares of UCT Video to AT&T.
(h) Prior to the transactions described in Sections 2.01(a)-(c), (i) AT&T
shall cause UAI and its Subsidiaries to transfer to AT&T Broadband the Assets
(if any) held by UAI and its Subsidiaries that are used or held for use
primarily in the AT&T Broadband Business (disregarding clause (y) of the
proviso included in the definition of AT&T Broadband Group) (other than, for
the avoidance of doubt, any equity interests of any UAI Subsidiary and any
shares of AT&T Subsidiary Preferred Stock or New AT&T Subsidiary Preferred
Stock) and (ii) AT&T Broadband shall accept such Assets from UAI and its
Subsidiaries. Prior to the time that AT&T Broadband LLC becomes a Subsidiary of
AT&T Broadband, AT&T shall cause AT&T Broadband LLC to distribute all of the
outstanding shares of UAI to AT&T.
20
(i) The provisions of this Section 2.01 and the definition of AT&T
Broadband Asset do not apply to any intellectual property, including any
Software, Proprietary Information, Materials (as such terms are defined in the
Intellectual Property Agreement), copyrights, inventions, patents, patent
applications, trade secrets and other technology to the extent it is allocated
in the Intellectual Property Agreement, except for transfers made pursuant to
the Patent Assignment.
(j) Anything in this Agreement to the contrary notwithstanding, if either
AT&T or Comcast reasonably believes that the amount of income that would
otherwise be required to be recognized under Treasury Regulations Section
1.1502-13 or 1.1502-19 by reason of the Distribution may be reduced or
eliminated as a result of one or more restructuring transactions consummated
prior to the Distribution, then the parties shall negotiate in good faith to
reach agreement regarding such restructuring transaction. Notwithstanding
anything in the preceding sentence, AT&T shall be permitted to effect, at its
own expense, any restructuring transaction under this paragraph; provided that
(i) Comcast shall be afforded reasonable notice and opportunity to comment upon
plans to effect any such transaction, and (ii) such transaction shall not
result in the failure of any AT&T Broadband Asset that was intended under this
Agreement to be transferred to or held by any member of the AT&T Broadband
Group to be so transferred or held, unless (A) such asset consists of the
capital stock or other ownership interest in an AT&T Broadband Subsidiary the
assets of which will be transferred, on or prior to the Distribution Date, to
another member of the AT&T Broadband Group or (B) Comcast consents to such
transaction, such consent not to be unreasonably withheld; provided, further,
that AT&T shall indemnify Comcast for any increased Tax liability or other
costs to Comcast or any AT&T Broadband Entity resulting from such transactions.
Comcast agrees to reasonably cooperate with AT&T in connection with
transactions described in this paragraph (j).
(k) Neither the making nor the acceptance of any Separation Related
Agreement nor any provisions in any Separation Related Agreement shall enlarge,
restrict or otherwise modify the provisions of this Agreement or the rights and
obligations of the parties hereunder or constitute a waiver or release by any
of the parties to this Agreement of any liabilities, duties or obligations
imposed upon any party by the provisions of this Agreement and any Separation
Related Agreement, the provisions of this Agreement shall govern and control,
notwithstanding anything to the contrary in any Separation Related Agreement
except to the extent the context clearly requires otherwise.
SECTION 2.02. Disclaimer of Representations and Warranties. EXCEPT AS MAY
EXPRESSLY BE SET FORTH HEREIN, IN ANY OTHER ANCILLARY AGREEMENT OR REAL
PROPERTY INSTRUMENT OR IN THE MERGER AGREEMENT, (A) NONE OF AT&T, AT&T
BROADBAND OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY (INCLUDING ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION
THEREWITH) OR THE BUSINESS, ASSETS, CONDITION OR PROSPECTS (FINANCIAL OR
OTHERWISE) OF, OR ANY OTHER MATTER INVOLVING, THE ASSETS, BUSINESSES OR
LIABILITIES OF AT&T, AT&T BROADBAND, THE AT&T COMMUNICATIONS GROUP OR THE AT&T
BROADBAND GROUP; (B) ALL OF THE ASSETS TO BE RETAINED OR TRANSFERRED OR THE
LIABILITIES TO BE RETAINED, ASSUMED OR TRANSFERRED IN ACCORDANCE WITH THIS
AGREEMENT SHALL BE TRANSFERRED OR ASSUMED ON AN "AS IS, WHERE IS BASIS," AND
ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR
OTHERWISE ARE HEREBY EXPRESSLY DISCLAIMED, AND (C) NONE OF AT&T, AT&T BROADBAND
OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO ANY
INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE IN CONNECTION WITH THE
SEPARATION, THE DISTRIBUTION OR THE MERGER OR THE ENTERING INTO OF THIS
AGREEMENT OR THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY. EACH PARTY HERETO AGREES AND ACKNOWLEDGES THAT THE REPRESENTATIONS AND
WARRANTIES IN THE MERGER AGREEMENT SHALL NOT SURVIVE THE EFFECTIVE TIME. AT&T
UNDERSTANDS AND AGREES THAT NO AT&T BROADBAND ENTITY SHALL HAVE ANY LIABILITY
TO AT&T OR ANY OTHER PERSON FOR MONETARY DAMAGES FOR ANY BREACH BY SUCH AT&T
BROADBAND ENTITY PRIOR TO THE EFFECTIVE TIME OF THIS AGREEMENT OR ANY OTHER
ANCILLARY AGREEMENT OR REAL PROPERTY INSTRUMENT.
SECTION 2.03. Other Ancillary Agreements. On or prior to the Distribution
Date, each of AT&T and AT&T Broadband will execute and deliver or cause to be
executed and delivered all Ancillary Agreements to which it or any of its
Subsidiaries is a party. At the request of Comcast or AT&T, on or prior to the
Distribution Date, AT&T and AT&T Broadband will execute and deliver the Interim
Services and Systems Replication Agreement, in the form attached hereto as
Exhibit E. Pursuant to the terms of such agreement, AT&T or AT&T Broadband, as
the case may be, will provide to AT&T Broadband or AT&T, as the case may be,
such mutually agreed services as may be set forth on the schedules to such
Agreement, such schedules to be on terms mutually agreed between Comcast and
AT&T. If AT&T and AT&T Broadband enter into such agreement, such agreement will
be considered an
21
Ancillary Agreement. Except to the extent set forth therein, Article 11 of this
Agreement shall apply to any Ancillary Agreement (other than the Tax Sharing
Agreement).
SECTION 2.04. Termination of Agreements. (a) Except as set forth in
Section 2.04(b), effective as of the Distribution Date, AT&T for itself and
each member of the AT&T Communications Group, on the one hand, and AT&T
Broadband for itself and each member of the AT&T Broadband Group, on the other
hand, hereby terminates any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between or among AT&T and/or any
member of the AT&T Communications Group, on the one hand, and AT&T Broadband
and/or any member of the AT&T Broadband Group, on the other hand, effective as
of the Distribution Date. No such terminated agreement, arrangement, commitment
or understanding (including any provision thereof that purports to survive
termination) shall be of any further force or effect after the Distribution
Date. Each party shall, at the reasonable request of any other party, take, or
cause to be taken, such other actions as may be necessary to effect the
foregoing, including having other members of their respective Groups execute
such additional instruments, if any, as shall be necessary to effect the
foregoing.
(b) The provisions of Section 2.04(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or to any of
the provisions thereof):
(i) (A) this Agreement, the other Primary Transaction Agreements, the
Support Agreement, the Exchange Agreement, the Interim Services and
Systems Replication Agreement dated as of the Closing Date, the Omnibus
Amendment Agreement to Intercompany Telecommunications Agreements dated as
of the Closing Date, and any agreement to which Parent, Comcast or any
Subsidiary of Comcast is a party, (B) each other agreement or instrument
expressly contemplated by any of the agreements set forth in clause (A) to
be entered into by the parties hereto or any of the members of their
respective Groups; provided that all of the material terms of such other
agreement or instrument are set forth in the relevant agreement set forth
in clause (A), and (C) any other agreement or instrument approved by or on
behalf of Comcast and entered into in connection with any of the
agreements set forth in clause (A);
(ii) any agreement, arrangement, commitment or understanding listed
on Schedule 2.04(b)(ii);
(iii) any agreements, arrangements, commitments or understandings
listed or described on Schedule 2.04(b)(iii) to which any Person other
than the parties hereto and their respective wholly owned Affiliates is a
party (it being understood that to the extent that the rights and
obligations of the parties and the members of their respective Groups
under any such agreements, arrangements, commitments or understandings
constitute AT&T Broadband Assets or AT&T Broadband Liabilities, they shall
be assigned pursuant to Section 2.01);
(iv) any intercompany accounts payable or accounts receivable arising
in the ordinary course of business and accrued as of the Distribution Date
that are reflected in the books and records of the parties or otherwise
documented in writing in accordance with past practices (regardless of
whether such intercompany accounts payable or accounts receivable accrued
under an agreement, arrangement, commitment or understanding that
terminated pursuant to Section 2.04(a)); provided that, subject to Section
3.02, AT&T or AT&T Broadband, as the case may be, will pay or cause to be
paid such intercompany accounts payable promptly when due;
(v) except as otherwise provided in the Tax Sharing Agreement, any
written Tax sharing or Tax allocation agreements to which any member of
any Group is a party;
(vi) any agreements, arrangements, commitments or understandings
listed or described on Schedule 2.04(b)(vi) to which any non-wholly owned
Subsidiary or Affiliate of AT&T or AT&T Broadband, as the case may be, is
a party (it being understood that directors' qualifying shares or similar
interests will be disregarded for purposes of determining whether a
Subsidiary is wholly owned); and
(vii) any other agreements, arrangements, commitments or
understandings that any of the agreements listed in clause (i) or (ii)
expressly contemplates will survive the Distribution Date.
SECTION 2.05. Documents Relating to Transfer of Real Property Interests
and Tangible Property Located Thereon. (a) To the extent necessary, in
furtherance of the assignment, transfer and conveyance of AT&T Communications
Real Property and the assumption of the related AT&T Communications Liabilities
pursuant to Section 2.01(a) and 2.01(b), on or prior to the Distribution Date
each of AT&T and AT&T Broadband, or their applicable Subsidiaries, will execute
and deliver such deeds, lease assignments and assumptions, leases, subleases
and sub-subleases as may be necessary to effect the transactions contemplated
by this Agreement,
22
including this Section 2.05 (collectively, the "Real Property Instruments").
Real Property Instruments will be on mutually acceptable terms.
(b) Except as otherwise expressly provided in this Agreement or any other
Ancillary Agreement and except for AT&T Broadband Assets, all leasehold
improvements, fixtures, furniture, office equipment, servers, private branch
exchanges, artwork and other tangible property (other than equipment subject to
capital or operating equipment leases, which will be transferred or retained
based on whether the associated capital or operating equipment lease is or is
not an AT&T Broadband Contract or as otherwise provided herein) located as of
the date hereof on any AT&T Communications Real Property shall be transferred
to a member of the AT&T Communications Group.
(c) Schedule 2.05(c) sets forth a list of AT&T Communications Real
Property currently used in connection with both the AT&T Communications
Business and the AT&T Broadband Business and that following the Distribution
Date will be leased or subleased by members of the AT&T Communications Group to
members of the AT&T Broadband Group, on terms and for the transition period
reflected in Schedule 2.05(c).
(d) Schedule 2.05(d) sets forth a list of AT&T Broadband Real Property
currently used in connection with both the AT&T Communications Business and the
AT&T Broadband Business and that following the Distribution Date will be leased
or subleased by AT&T Broadband or any of the AT&T Broadband Entities to members
of the AT&T Communications Group, on terms and for the transition period
reflected in Schedule 2.05(d).
SECTION 2.06. Documents Relating to Other Transfers of Assets and
Assumption of Liabilities. In furtherance of the assignment, transfer and
conveyance of AT&T Broadband Assets and the assumption of AT&T Broadband
Liabilities pursuant to Sections 2.01(a) and 2.01(b), on or prior to the
Distribution Date, (a) AT&T shall execute and deliver, and shall cause its
Subsidiaries to execute and deliver, such bills of sale, stock powers,
certificates of title, assignments of contracts and other instruments of
transfer, conveyance and assignment as and to the extent necessary to evidence
the transfer, conveyance and assignment of all of AT&T's and its Subsidiaries'
right, title and interest in and to the AT&T Broadband Assets to AT&T Broadband
and (b) AT&T Broadband shall execute and deliver, to AT&T and its respective
Subsidiaries such bills of sale, stock powers, certificates of title,
assumptions of contracts and other instruments of assumption, as and to the
extent necessary to evidence the valid and effective assumption by AT&T
Broadband of the AT&T Broadband Liabilities that are not already Liabilities of
an AT&T Broadband Entity; provided that any instruments executed and delivered
pursuant to this Section 2.06 shall be in form and substance reasonably
satisfactory to Comcast.
SECTION 2.07. Governmental Approvals and Consents. (a) If and to the
extent that the valid, complete and perfected transfer or assignment to AT&T
Broadband of any AT&T Broadband Assets (or from the AT&T Broadband Group of any
AT&T Communications Assets held by any member of such Group) would be a
violation of applicable laws or require any Consent or Governmental Approval in
connection with the Separation or the Distribution, then the transfer or
assignment to or from the AT&T Communications Group, as the case may be, of
such AT&T Broadband Assets or AT&T Communications Assets, respectively, shall
be automatically deemed deferred and any such purported transfer or assignment
shall be null and void until such time as all legal impediments are removed
and/or such Consents or Governmental Approvals have been obtained.
Notwithstanding the foregoing, any such Transferred Asset shall be deemed an
Asset of the transferee AT&T Communications Group or the AT&T Broadband Group,
as applicable, for purposes of determining whether any Liability is a Liability
of the AT&T Communications Group or the AT&T Broadband Group.
(b) If the transfer or assignment of any Asset intended to be transferred
or assigned hereunder is not consummated prior to or at the Distribution Date,
whether as a result of the provisions of Section 2.07(a) or for any other
reason, then the Person retaining such Asset shall thereafter hold such Asset
for the use and benefit, insofar as reasonably possible, of the Person entitled
thereto (at the expense of the Person entitled thereto). In addition, the
Person retaining such Asset shall take such other actions as may be reasonably
requested by the Person to whom such Asset is to be transferred in order to
place such Person, insofar as reasonably possible, in the same position as if
such Asset had been transferred as contemplated hereby and so that all the
benefits and burdens relating to such AT&T Broadband Asset (or such AT&T
Communications Asset, as the case may be), including possession, use, risk of
loss, potential for gain, and dominion, control and command over such Asset,
are to inure from and after the Distribution Date to the AT&T Broadband Group
(or the AT&T Communications Group, as the case may be). To the extent permitted
by law and to the extent otherwise permissible in light of any required Consent
and/or Governmental Approval, the AT&T Broadband Group shall be entitled to,
and shall be responsible for, the management of any AT&T Broadband Asset not
yet transferred to it as a result of this Section 2.07(b) and the parties agree
to use reasonable commercial efforts to cooperate and coordinate with respect
thereto.
(c) If and when the Consents and/or Governmental Approvals, the absence of
which caused the deferral of transfer of any Asset
23
pursuant to Section 2.07(a), are obtained, the transfer of the applicable Asset
shall be effected in accordance with the terms of this Agreement and/or the
other applicable Ancillary Agreement.
(d) The Person retaining an Asset due to the deferral of the transfer of
such Asset shall not be obligated, in connection with the foregoing, to expend
any money unless the necessary funds are advanced by the Person entitled to the
Asset, other than reasonable out-of-pocket expenses, attorneys' fees and
recording or similar fees, all of which shall be promptly reimbursed by the
Person entitled to such Asset.
SECTION 2.08. Novation of AT&T Broadband Liabilities. (a) Each of AT&T and
AT&T Broadband, at the reasonable written request of the other, shall use its
reasonable commercial efforts to obtain, or to cause to be obtained, any
release, consent, substitution, approval or amendment required to novate and
assign all obligations under agreements, leases, licenses and other obligations
or Liabilities of any nature whatsoever that constitute AT&T Broadband
Liabilities, or to obtain in writing the unconditional release of all parties
to such arrangements other than any member of the AT&T Broadband Group, so
that, in any such case, the members of the AT&T Broadband Group will be solely
responsible for such Liabilities; provided, however, that none of AT&T, AT&T
Broadband or any of their respective Subsidiaries shall be obligated to pay any
consideration or surrender, release or modify any rights or remedies therefor
to any third party from whom such releases, consents, approvals, substitutions
and amendments are requested except as specifically set forth in the Merger
Agreement or elsewhere in this Agreement.
(b) If AT&T or AT&T Broadband is unable to obtain, or to cause to be
obtained, any such required release, consent, substitution, approval or
amendment, the applicable member of the AT&T Communications Group shall
continue to be bound by such agreements, leases, licenses and other obligations
and, unless not permitted by law or the terms thereof, AT&T Broadband shall, as
agent or subcontractor for such member of the AT&T Communications Group, pay,
perform and discharge fully all the obligations or other Liabilities of such
member of the AT&T Communications Group thereunder from and after the date
hereof. AT&T Broadband shall indemnify each AT&T Indemnitee and hold it
harmless against any Liabilities arising in connection therewith. AT&T shall
cause each member of the AT&T Communications Group, without further
consideration, to pay and remit, or cause to be paid or remitted, to AT&T
Broadband or the applicable member of the AT&T Broadband Group promptly all
money, rights and other consideration received by it or any member of the AT&T
Communications Group in respect of such performance. If and when any such
release, consent, substitution, approval or amendment shall be obtained or such
agreement, lease, license or other rights or obligations shall otherwise become
assignable or able to be novated, AT&T shall promptly assign, or cause to be
assigned, all its rights, obligations and other Liabilities thereunder or any
rights, obligations or other Liabilities of any member of the AT&T
Communications Group to AT&T Broadband or to another member of the AT&T
Broadband Group without payment of further consideration and AT&T Broadband,
without the payment of any further consideration, shall, or shall cause such
other member of the AT&T Broadband Group to, assume such rights and
obligations. Notwithstanding the foregoing, unless AT&T shall so elect, AT&T
Broadband shall assume all Liabilities of any nature whatsoever that would
constitute AT&T Broadband Liabilities as of the Distribution Date, except for
Liabilities of another member of the AT&T Broadband Group.
SECTION 2.09. Novation of AT&T Communications Liabilities. (a) Each of
AT&T and AT&T Broadband, at the reasonable written request of the other, shall
use its reasonable commercial efforts to obtain, or to cause to be obtained,
any release, consent, substitution, approval or amendment required to novate
and assign all obligations under agreements, leases, licenses and other
obligations or Liabilities of any nature whatsoever that constitute AT&T
Communications Liabilities, or to obtain in writing the unconditional release
of all parties to such arrangements other than any member of the AT&T
Communications Group, so that, in any such case, the members of the AT&T
Communications Group will be solely responsible for such Liabilities; provided,
however, that none of AT&T, AT&T Broadband or any of their respective
Subsidiaries shall be obligated to pay any consideration or surrender, release
or modify any rights or remedies therefor to any third party from whom such
releases, consents, approvals, substitutions and amendments are requested
except as specifically set forth in the Merger Agreement or elsewhere in this
Agreement.
(b) If AT&T or AT&T Broadband is unable to obtain, or to cause to be
obtained, any such required release, consent, approval, substitution or
amendment, the applicable member of the AT&T Broadband Group shall continue to
be bound by such agreements, leases, licenses and other obligations and, unless
not permitted by law or the terms thereof, AT&T shall, as agent or
subcontractor for such member of the AT&T Broadband Group, pay, perform and
discharge fully all the obligations or other Liabilities of such member of the
AT&T Broadband Group thereunder from and after the date hereof. AT&T shall
indemnify each AT&T Broadband Indemnitee and hold each of them harmless against
any Liabilities arising in connection therewith. AT&T Broadband shall cause
each member of the AT&T Broadband Group, without further consideration, to pay
and remit, or cause to be paid or remitted, to AT&T or the applicable member of
the AT&T Communications Group promptly all money, rights and other
consideration received by it or any member of the AT&T Broadband Group in
respect of such performance. If and when any such release, consent,
substitution approval or amendment shall be obtained or such agreement, lease,
license or other rights or obligations shall otherwise become assignable or
24
able to be novated, AT&T Broadband shall promptly assign, or cause to be
assigned, all its rights, obligations and other Liabilities thereunder or any
rights, obligations or other Liabilities of any member of the AT&T Broadband
Group to AT&T or to another member of the AT&T Communications Group without
payment of further consideration and AT&T, without the payment of any further
consideration, shall, or shall cause such other member of the AT&T
Communications Group to, assume such rights and obligations. Notwithstanding
the foregoing, unless AT&T Broadband shall so elect, AT&T shall assume all
Liabilities of any nature whatsoever that would constitute AT&T Communications
Liabilities as of the Distribution Date, except for Liabilities of another
member of the AT&T Communications Group.
SECTION 2.10. Joint Purchasing Arrangements. (a) In the case of existing
purchasing agreements that prior to the Distribution Date provide the AT&T
Broadband Group and the AT&T Communications Group with volume discounts,
subject to applicable law, the parties agree to use their respective reasonable
best efforts so that, to the extent permitted under the terms of such existing
agreements, after the Distribution Date, each Group shall continue to be able
to make purchases and obtain the benefits of the volume discounts. In the case
of any other such contracts, subject to applicable law, the parties will
cooperate reasonably in seeking modifications to such contracts or alternative
or substitute arrangements so that, to the extent practicable after the
Distribution Date, each Group shall continue to be able to make purchases and
obtain the benefits of the volume discounts. Notwithstanding the foregoing, but
subject to the terms of any AT&T Broadband Contract or AT&T Communications
Contract, none of AT&T, AT&T Broadband or their respective Subsidiaries shall
be required to commit to any additional purchases or other obligations, make
any payments or waive any rights in order to effect the foregoing. Each party
hereby agrees to indemnify and hold harmless the other party, and if
applicable, the other party's Subsidiaries, with respect to any losses or
claims arising from such first party's, or such first party's Subsidiaries',
own purchases, commitments or other obligations under any such contracts.
(b) Until December 31, 2003, subject to applicable law, the parties will
use reasonable commercial efforts to cooperate with each other and, as
applicable, with each other's Subsidiaries, to coordinate and combine their
purchases in cases where they purchase common supplies or use the same
supplier, in each case to the extent permitted by law from time to time. It is
the intent of the parties that this coordination and cooperation will be
focused on achieving more favorable pricing and terms for such supplies and
from such suppliers by aggregating the combined purchases of the parties and
their Subsidiaries. Notwithstanding the foregoing, no party shall be obligated
to make, or cause its Subsidiaries to make, any specific purchases or to use
any specific supplier except to the extent (i) it or one of its Subsidiaries
has previously committed to make a specific purchase or to use a specific
supplier, or (ii) subsequent to the date of this Agreement, it or one of its
Subsidiaries makes a commitment for a specific purchase or to use a specific
supplier. Each party will be responsible for its own and its Subsidiaries'
commitments and its own and its Subsidiaries' purchases and other obligations
made under any common or shared contracts with suppliers and will, in respect
of such commitments, purchases or other obligations, indemnify and hold
harmless the other party and the other party's Subsidiaries that use such
contracts.
SECTION 2.11. TWE Arrangements. The parties agree to the terms set forth
in Annex I with respect to the partnership interests in TWE held, as of the
date hereof, by MediaOne TWE Holdings, Inc., an AT&T Broadband Entity, and the
TWE Option held by Media One of Colorado, Inc.
ARTICLE 3
FINANCIAL RESTRUCTURING
SECTION 3.01. Liability Management. The Indebtedness included on the AT&T
Broadband Balance Sheet consists of the Indebtedness to third parties (the
"Scheduled Debt") and Indebtedness to members of the AT&T Communications Group.
Prior to the Distribution Date, the Indebtedness of the AT&T Broadband Group
shall consist only of (i) the Scheduled Debt, Indebtedness to third parties
reflected on the September 30, 2001 balance sheet included in the AT&T
Broadband Financial Statements and the third party Indebtedness identified in
Item 3 of Schedule 6.11 to the Merger Agreement (unless any such Indebtedness
shall have been discharged) (ii) Indebtedness of the members of the AT&T
Broadband Group to members of the AT&T Communications Group and (iii) such
other debt as shall have been approved by the Interim Finance Committee. On the
Distribution Date, the AT&T Broadband Entities may incur additional
Indebtedness to parties (other than to members of the AT&T Communications
Group) in an amount sufficient to (i) pay in full at the Effective Time to AT&T
an amount equal to the Indebtedness owed by any member of the AT&T Broadband
Group to any member of the AT&T Communications Group, (ii) refinance the TOPRS
that may be called for redemption at the Effective Time or shortly thereafter
and (iii) provide appropriate cash reserves to fund the operations of the AT&T
Broadband Entities after the Effective Time. Such Indebtedness shall be
incurred in accordance with Section 9.15 of the Merger Agreement.
SECTION 3.02. Repayment of Intracompany Indebtedness. AT&T Broadband
agrees that it will pay to AT&T, at the Effective Time and in connection with
the transfer of assets and liabilities hereunder to AT&T Broadband, an amount
of cash equal to the (i)
25
excess of the total Indebtedness of all members of the AT&T Broadband Group to
any member of the AT&T Communications Group over (ii) $30 million, and AT&T
agrees to contribute (or cause its subsidiaries to contribute) such total
Indebtedness to the capital of AT&T Broadband. AT&T agrees that it will repay
or cause to repaid at the Effective Time any Indebtedness of any member of the
AT&T Communications Group to any member of the AT&T Broadband Group. AT&T also
agrees that it will repay or cause to be repaid at the Effective Time any
intercompany receivables owed by AT&T or any AT&T Subsidiary (other than any
AT&T Broadband Entity) to Western Range.
SECTION 3.03. Note Consents. Subject to the terms and conditions of the
Merger Agreement, AT&T and AT&T Broadband shall each use its reasonable best
efforts to obtain the irrevocable consent to the transactions contemplated
hereby of the holders of at least a majority in aggregate principal amount of
each series of securities at the time outstanding issued under the Indenture,
dated as of September 7, 1990, between American Telephone & Telegraph Company
and The Bank of New York, as trustee.
ARTICLE 4
THE DISTRIBUTION
SECTION 4.01. The Distribution. (a) Subject to Section 4.03, on or prior
to the Record Date, AT&T will deliver to the Agent for the benefit of holders
of record of AT&T Common Stock on the Record Date, a single stock certificate,
endorsed by AT&T in blank, representing the shares of AT&T Broadband Common
Stock issuable in the Distribution (which, together with the shares to be
issued pursuant to the Exchange Agreement, shall constitute all of the shares
of AT&T Broadband Common Stock outstanding as of the Distribution Date), and
shall cause the transfer agent for the shares of AT&T Common Stock to instruct
the Agent to hold in trust (pending conversion of such shares of AT&T Broadband
Common Stock into shares of Parent Common Stock pursuant to the AT&T Broadband
Merger) the appropriate number of such shares of AT&T Broadband Common Stock
(as set forth in Section 4.01(b)) for each such holder or designated transferee
or transferees of such holder. For avoidance of doubt, AT&T will not be
considered a holder of record of AT&T Common Stock as of the Record Date with
respect to any shares of AT&T Common Stock held in its treasury.
(b) Subject to Section 4.03, each holder of AT&T Common Stock on the
Record Date (or such holder's designated transferee or transferees) will be
entitled to receive in the Distribution a number of shares of AT&T Broadband
Common Stock equal to the number of shares of AT&T Common Stock held by such
holder on the Record Date; provided, that no holder of AT&T Common Stock having
purported to exercise rights pursuant to Section 910 of the NYBCL in respect of
such holder's shares of AT&T Common Stock shall be entitled to receive AT&T
Broadband Common Stock in the Distribution.
(c) AT&T Broadband and AT&T, as the case may be, will provide to the Agent
all share certificates and any information reasonably required in order to
complete the Distribution on the basis specified above.
(d) Immediately prior to the Record Date, each of the AT&T Broadband
Subsidiaries, in exchange (the "Subsidiary Preferred Stock Exchange") for all
of the shares of AT&T Subsidiary Preferred Stock held by such AT&T Broadband
Subsidiary immediately prior to the Subsidiary Preferred Stock Exchange, will
receive from AT&T a number of shares of AT&T Broadband Class A Common Stock
(or, if AT&T and AT&T Broadband agree, shares of another class of AT&T
Broadband stock) that has a value equal to the value of the shares of AT&T
Subsidiary Preferred Stock so exchanged. The shares of AT&T Broadband Class A
Common Stock to be issued pursuant to the preceding sentence shall be on the
terms set forth in Exhibit I. Subject to the preceding sentence, AT&T Broadband
agrees to amend its certificate of incorporation prior to the Subsidiary
Preferred Stock Exchange to create the shares of AT&T Broadband Class A Common
Stock necessary to effect the Subsidiary Preferred Stock Exchange. AT&T
Broadband agrees that it shall not, and shall not permit any AT&T Broadband
Subsidiary to, sell, dispose of or otherwise transfer any of the shares of AT&T
Broadband Class A Common Stock that it receives as a result of the Subsidiary
Preferred Stock Exchange, except upon conversion of such shares pursuant to
Article 4 of the Merger Agreement.
(e) Immediately prior to the Record Date, each of the AT&T Subsidiaries
(other than AT&T Broadband and the AT&T Broadband Subsidiaries), in exchange
(the "Communications Subsidiary Preferred Stock Exchange") for all of the
shares of AT&T Subsidiary Preferred Stock held by such AT&T Subsidiary
immediately prior to the Communications Subsidiary Preferred Stock Exchange,
will receive from AT&T a number of shares of New AT&T Subsidiary Preferred
Stock (or, if AT&T and AT&T Broadband agree, shares of another class of AT&T
stock) that has a value equal to the value of the shares of AT&T Subsidiary
Preferred Stock so exchanged. The shares of New AT&T Subsidiary Preferred Stock
to be issued pursuant to the preceding sentence shall be on the terms set forth
in Exhibit J. Subject to the preceding sentence, AT&T agrees to file a
certificate of designation prior to the Communications Subsidiary Preferred
Stock Exchange to create the shares of New AT&T Subsidiary Preferred Stock
necessary to effect the Communications Subsidiary Preferred Stock Exchange.
26
(f) At the time of the Distribution, AT&T and AT&T Broadband will comply
with their obligations under the Exchange Agreement, including through the
transfer of shares of AT&T Broadband Common Stock from AT&T to Microsoft as
described therein.
(g) If the QUIPS Transfer is to occur, AT&T Broadband and AT&T will effect
the QUIPS Transfer.
(h) Each of AT&T, and AT&T Broadband agrees that in the event that any
holder of shares of AT&T Common Stock purports to exercise any appraisal rights
pursuant to Section 910 of the NYBCL, the parties will cooperate to
appropriately adjust the provisions hereof.
(i) AT&T agrees that it will take all actions necessary to cancel (i) any
shares of AT&T Broadband stock (or any securities exercisable, exchangeable or
convertible therefor) owned or held by it or any of its Subsidiaries
immediately offer the Distribution so that the only outstanding shares of AT&T
Broadband stock are (A) the shares of AT&T Broadband Common Stock distributed
to the holders of AT&T Common Stock in the Distribution, (B) the shares of AT&T
Broadband Common Stock delivered to Microsoft in the QUIPS Exchange, and (C)
the shares of AT&T Broadband Class A Common Stock held by AT&T Broadband
Subsidiaries and (ii) any shares of AT&T Broadband Common Stock issued in
respect of restricted AT&T Common Stock which pursuant to the Employee Benefits
Agreement will be represented by or converted into AT&T restricted stock units
after the Distribution.
SECTION 4.02. Actions Prior to the Distribution. (a) As promptly as
reasonably practicable after the execution of this Agreement, subject to the
provisions of the Merger Agreement, AT&T shall prepare and file with the
Commission a proxy statement (the "Proxy Statement") to be sent to shareholders
of AT&T in connection with their meeting to consider the Distribution (the
"AT&T Meeting"), it being understood that the AT&T Meeting may be combined with
any other meeting of shareholders regarding a possible business combination
involving the AT&T Broadband Group.
(b) As promptly as reasonably practicable after the execution of this
Agreement, subject to the provisions of the Merger Agreement and if required by
applicable law to effect the Distribution, AT&T and AT&T Broadband shall
prepare, and AT&T Broadband shall file with the Commission a registration
statement on Form S-1 or S-4 or any amendment or supplement thereto pursuant to
which shares of AT&T Broadband issuable in the Distribution will be registered
with the Commission (the "Distribution Registration Statement"). If the
Distribution Registration Statement is required by applicable law to be filed
with the Commission to effect the Distribution, AT&T and AT&T Broadband shall
use their reasonable best efforts to cause the Distribution Registration
Statement to become effective under the Exchange Act as soon after such filing
as reasonably practicable and to keep the Distribution Registration Statement
effective as long as is necessary to consummate the Distribution.
(c) AT&T and AT&T Broadband shall take all such actions as are reasonably
necessary or appropriate under the federal or state securities or blue sky laws
of the United States (and any comparable laws under any foreign jurisdiction)
in connection with the Distribution.
SECTION 4.03. Timing of the Distribution. AT&T shall consummate the
Separation and Distribution as soon as practicable (and, in any event, within
five Business Days) after satisfaction (or waiver to the extent permissible) of
all of the conditions to the Separation and the Distribution specified below
(other than conditions that by their nature are to be satisfied at the time of
the Distribution or the Mergers and will in fact be satisfied at such time).
The Separation shall occur on the Distribution Date prior to the Distribution
which shall occur at a time to be mutually agreed on the Distribution Date.
With the consent of Comcast, which consent shall not be unreasonably withheld,
AT&T may effect the Separation and/or the Distribution on different dates or
different times than provided for in the preceding sentence. The obligation of
AT&T to consummate the Separation and the Distribution and the other
transactions contemplated by this Agreement is subject to the satisfaction (or
waiver to the extent permissible) of the following conditions:
(a) If required by applicable law to effect the Distribution, the
Distribution Registration Statement shall have been filed and declared
effective by the Commission, and there shall be no stop-order in effect
with respect thereto;
(b) The actions and filings with regard to material federal or state
securities and blue sky laws of the United States (and any comparable laws
under any foreign jurisdictions) described in Section 4.02(c) shall have
been taken and, where applicable, become effective or been accepted;
(c) Any Governmental Approvals and Consents including those listed on
Schedule 4.03(c) necessary to consummate the
27
Distribution in the manner contemplated by this Agreement shall have been
obtained and be in full force and effect, except for such Governmental
Approvals and Consents the failure of which to obtain would not,
individually or in the aggregate, reasonably be expected to have an AT&T
Broadband Material Adverse Effect or an AT&T Material Adverse Effect;
(d) All conditions to permit the Distribution to qualify as a
tax-free distribution to AT&T, AT&T Broadband and shareholders of AT&T
shall, to the extent applicable as of the time of the Distribution, be
satisfied and there shall be no event or condition that is likely to cause
any of such conditions not to be satisfied as of the time of the
Distribution or thereafter;
(e) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other material legal restraint or prohibition
preventing the consummation of the Separation or the Distribution or any
of the other transactions contemplated by this Agreement or any other
Ancillary Agreement shall be in effect and the Separation and Distribution
shall be in compliance in all material respects with applicable law;
(f) This Agreement shall not have been terminated;
(g) The supplemental private letter ruling or rulings from the IRS or
the opinion described in Section 10.01(j) of the Merger Agreement shall
have been obtained and shall continue in effect;
(h) The Distribution shall have been approved by the affirmative vote
of shareholders holding a majority of the voting power of the issued and
outstanding shares of AT&T Common Stock at the AT&T Meeting; and
(i) The conditions specified in Sections 10.01 and 10.02 (other than
Section 10.01(i)) of the Merger Agreement shall have been satisfied (or
waived to the extent permissible).
The foregoing conditions are for the sole benefit of AT&T and shall not give
rise to or create any duty on the part of AT&T or the Board of Directors of
AT&T to waive or not waive any such condition.
ARTICLE 5
MUTUAL RELEASES; INDEMNIFICATION
SECTION 5.01. Release of Pre-Closing Claims. (a) Except as provided in
Section 5.01(c), effective as of the Distribution Date, AT&T, for itself and
each other wholly owned member of the AT&T Communications Group (other than any
member of the AT&T Broadband Group) and their respective successors and
assigns, and all shareholders, directors, officers, members, agents or
employees of any wholly owned member of the AT&T Communications Group (in each
case, in their respective capacities as such), hereby remises, releases and
forever discharges each of AT&T Broadband and the respective wholly owned
members of the AT&T Broadband Group (other than any member of the AT&T
Communications Group), their respective successors and assigns, and all
shareholders, directors, officers, members, agents or employees of any wholly
owned member of the AT&T Broadband Group (in each case, in their respective
capacities as such), and their respective heirs, executors, administrators,
successors and assigns, from any and all Liabilities whatsoever, whether at law
or in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the Distribution Date, whether or not known as of the
Distribution Date, including in connection with the transactions and all other
activities to implement either the Separation or the Distribution.
(b) Except as provided in Section 5.01(c), effective as of the
Distribution Date, AT&T Broadband, for itself and each other wholly owned
member of the AT&T Broadband Group (other than any member of the AT&T
Communications Group) and their respective successors and assigns, and all
shareholders, directors, officers, members, agents or employees of any wholly
owned member of the AT&T Broadband Group (in each case, in their respective
capacities as such), hereby remises, releases and forever discharges each of
AT&T and the respective wholly owned members of the AT&T Communications Group
(other than any member of the AT&T Broadband Group), their respective
successors and assigns, and all shareholders, directors, officers, members,
agents or employees of any wholly owned member of the AT&T Communications Group
(in each case, in their respective capacities as such), and their respective
heirs, executors, administrators, successors and assigns, from any and all
Liabilities whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation of
law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Distribution
Date, whether or not known as of the Distribution Date, including in
28
connection with the transactions and all other activities to implement either
the Separation or the Distribution.
(c) Nothing contained in Section 5.01(a) or 5.01(b) shall impair any right
of any Person to enforce this Agreement, any other Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified in
Section 2.04(b) or the applicable Schedules thereto not to terminate as of the
Distribution Date, in each case in accordance with its terms. Nothing contained
in Section 5.01(a) or 5.01(b) shall release any Person from:
(i) any Liability provided in or resulting from any agreement among
any members of the AT&T Broadband Group or the AT&T Communications Group
that is specified in Section 2.04(b) or the applicable Schedules thereto
as not to terminate as of the Distribution Date, or any other Liability
specified in such Section 2.04(b) as not to terminate as of the
Distribution Date;
(ii) any Liability, contingent or otherwise, assumed, transferred,
assigned or allocated to the Group of which such Person is a member in
accordance with, or any other Liability of any member of any Group under,
this Agreement or any other Ancillary Agreement;
(iii) any Liability arising from or relating to the sale, lease,
construction, provision, or receipt of goods, property or services
purchased, obtained or used in the ordinary course of business by a member
of one Group from a member of any other Group prior to the Distribution
Date;
(iv) any Liability for payment for goods, services or property
purchased, obtained or used in the ordinary course of business by a member
of one Group from a member of any other Group prior to the Distribution
Date or any related refund claims; or
(v) any Liability the release of which would result in the release of
any Person other than a Person released pursuant to this Section 5.01;
provided that the parties agree not to bring suit or permit any of their
Subsidiaries to bring suit against any Person with respect to any
Liability to the extent that such Person would be released with respect to
such Liability by this Section 5.01 but for the provisions of this clause
(v).
(d) AT&T shall not make, and shall not permit any member of the AT&T
Communications Group to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against AT&T Broadband or any wholly owned member of the AT&T
Broadband Group, or any other Person released pursuant to Section 5.01(a), with
respect to any Liabilities released in respect of such Person pursuant to
Section 5.01(a). AT&T Broadband shall not make, and shall not permit any member
of the AT&T Broadband Group to make, any claim or demand, or commence any
Action asserting any claim or demand, including any claim of contribution or
any indemnification, against AT&T or any wholly owned member of the AT&T
Communications Group, or any other Person released pursuant to Section 5.01(b),
with respect to any Liabilities in respect of such Person released pursuant to
Section 5.01(b).
(e) At any time, at the request of any other party, each party shall cause
each member of its respective Group to execute and deliver releases reflecting
the provisions of this Section 5.01.
SECTION 5.02. Indemnification by AT&T. Except as provided in Section 5.04,
following the Distribution Date, AT&T shall indemnify, defend and hold harmless
AT&T Broadband, each member of the AT&T Broadband Group, AT&T Comcast (but only
in respect of subsections (d) and (e)) and each of their respective directors,
officers and employees, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "AT&T Broadband
Indemnitees"), from and against any and all Liabilities (or in the case of
subsection (d), 50% of any and all Liabilities) of the AT&T Broadband
Indemnitees relating to, arising out of or resulting from any of the following
items (without duplication):
(a) the failure of AT&T or any other member of the AT&T
Communications Group or any other Person to pay, perform or otherwise
promptly discharge any AT&T Communications Liabilities, or AT&T
Communications Contract, in accordance with their respective terms,
whether prior to or after the Distribution Date or the date hereof;
(b) the AT&T Communications Business, any AT&T Communications Asset
or any AT&T Communications Contract (except to the extent such Liabilities
arise out of any breach by AT&T or any of its Subsidiaries prior to the
Distribution Date of any AT&T Communications Contract entered into in
connection with the separation, divestiture or termination of LMC and its
Subsidiaries);
(c) any breach by AT&T or any member of the AT&T Communications Group
of this Agreement or any of the other Ancillary
29
Agreements;
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, with respect to all information contained in any Registration
Statement, except to the extent such information relates to AT&T's
proposal to create a tracking stock with respect to its consumer services
business as contemplated by Section 11.06, AT&T's proposal to authorize a
reverse stock split or any other AT&T 2002 annual meeting proposal other
than the AT&T proposal to approve and adopt the Merger Agreement and the
transactions contemplated by the Merger Agreement or the proposal in
respect of the AT&T Parent Charter Approval (as defined in the Merger
Agreement) (any Action relating to the matters set forth in this Section
5.02(d) or Section 5.03(d), a "Registration Statement Claim"); and
(e) any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
with respect to all information contained in any Registration Statement to
the extent such information relates to AT&T's proposal to create a tracking
stock with respect to its consumer services business as contemplated by
Section 11.06, AT&T's proposal to authorize a reverse stock split or any
other AT&T 2002 annual meeting proposal other than the AT&T proposal to
approve and adopt the Merger Agreement and the transactions contemplated by
the Merger Agreement or the proposal in respect of the AT&T Parent Charter
Approval (as defined in the Merger Agreement).
SECTION 5.03. Indemnification by AT&T Broadband. Except as provided in
Section 5.04, following the Distribution Date, AT&T Broadband shall indemnify,
defend and hold harmless AT&T, each member of the AT&T Communications Group and
each of their respective directors, officers and employees, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "AT&T Indemnitees"), from and against any and all Liabilities (or in the
case of subsection (d), 50% of any and all Liabilities) of the AT&T Indemnitees
relating to, arising out of or resulting from any of the following items
(without duplication):
(a) the failure of AT&T Broadband or any other member of the AT&T
Broadband Group or any other Person to pay, perform or otherwise promptly
discharge any AT&T Broadband Liabilities, or AT&T Broadband Contract, in
accordance with their respective terms, whether prior to or after the
Distribution Date or the date hereof;
(b) the AT&T Broadband Business, any AT&T Broadband Asset or any AT&T
Broadband Contract;
(c) any breach by AT&T Broadband or any member of the AT&T Broadband
Group of this Agreement or any of the other Ancillary Agreements;
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, with respect to all information contained in any Registration
Statement, except to the extent such information relates to AT&T's
proposal to create a tracking stock with respect to its consumer services
business as contemplated by Section 11.06, AT&T's proposal to authorize a
reverse stock split or any other AT&T 2002 annual meeting proposal other
than the AT&T proposal to approve and adopt the Merger Agreement and the
transactions contemplated by the Merger Agreement or the proposal in
respect of the AT&T Parent Charter Approval (as defined in the Merger
Agreement); and
(e) if neither the QUIPS Exchange nor the QUIPS Transfer occurs, any
Liabilities relating to, arising out of or resulting from any Actions
commenced by Microsoft claiming that the transactions contemplated hereby
or by the Merger Agreement violate the terms of the QUIPS; provided that
for purposes hereof, in the event that AT&T is required to repay the QUIPS
as a result of such Action, the indemnified Liability hereunder in respect
of such repayment shall be reduced by the amount of the QUIPS Fair Market
Value plus any accrued interest on the QUIPS since the date as of which
the QUIPS Fair Market Value was determined (any such Action, a "Microsoft
QUIPS Claim").
Notwithstanding the foregoing, AT&T Broadband shall have no obligation to
indemnify, defend and hold harmless any AT&T Indemnitee from and against any
Liabilities arising out of any breach by At Home or any of its Subsidiaries of
any At Home Contract.
SECTION 5.04. Indemnification Obligations Net of Insurance Proceeds and
Other Amounts. (a) The parties intend that any indemnification or reimbursement
obligation pursuant to this Article 5 will be net of Insurance Proceeds that
actually reduce the amount of the Liability. Accordingly, the amount which any
party (an "Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any Insurance
Proceeds theretofore actually recovered by
30
or on behalf of the Indemnitee in reduction of the related Liability. If an
Indemnitee receives a payment (an "Indemnity Payment") required by this
Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds had been received, realized or recovered before the
Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to defend or make payment
in response to any claim shall not be relieved of the responsibility with
respect thereto or, solely by virtue of the indemnification provisions hereof,
have any subrogation rights with respect thereto, it being expressly understood
and agreed that no insurer or any other third party shall be entitled to a
"windfall" (i.e., a benefit it would not be entitled to receive in the absence
of the indemnification provisions) by virtue of the indemnification provisions
hereof.
(c) With respect to all policies of insurance with insurance companies
other than American Ridge and Western Range, the parties agree to act in good
faith and to use their reasonable best efforts to preserve and maximize the
insurance benefits due to be provided thereunder and to cooperate with one
another as necessary to permit each other to access or obtain the benefits
under those policies, provided, however, that nothing in this Section 5.04
shall be construed to prevent any party or any other Person from asserting
claims for insurance benefits or accepting insurance benefits provided by the
policies. The parties agree to exchange information upon reasonable request of
the other party regarding requests that they have made for insurance benefits,
notices of claims, occurrences and circumstances that they have submitted to
the insurance companies or other entities managing the policies, responses they
have received from those insurance companies or entities, including any
payments they have received from the insurance companies and any agreements by
the insurance companies to make payments, and any other information that the
parties may need to determine the status of the insurance policies and the
continued availability of benefits thereunder.
SECTION 5.05. Procedures for Indemnification of Third Party Claims. (a) If
an Indemnitee shall receive notice or otherwise learn of the assertion by a
Person (including any Governmental Authority) who is not a member of the AT&T
Broadband Group or the AT&T Communications Group of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 5.02 or 5.03, or any
other Section of this Agreement or any Ancillary Agreement (except as otherwise
provided therein), such Indemnitee shall give such Indemnifying Party written
notice thereof promptly after becoming aware of such Third Party Claim. Any
such notice shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the failure of any Indemnitee to give notice as
provided in this Section 5.05(a) shall not relieve the related Indemnifying
Party of its obligations under this Article 5, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense (including
allocated costs of in-house counsel and other personnel) and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 5.05(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying
Party will assume responsibility for defending such Third Party Claim, which
election shall specify any reservations or exceptions. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a
Third Party Claim, such Indemnitee shall have the right to employ separate
counsel and to participate in (but not control) the defense, compromise, or
settlement thereof, but the fees and expenses of such counsel shall be the
expense of such Indemnitee, except as set forth in the next sentence. In the
event that the Indemnifying Party has elected to assume the defense of the
Third Party Claim but has specified and continues to assert, any reservations
or exceptions in such notice, then, in any such case, the reasonable fees and
expenses of one separate counsel for all Indemnitees shall be borne by the
Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 5.05(b), such Indemnitee may defend such Third Party
Claim at the cost and expense (including allocated costs of in-house counsel
and other personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense of the
Third Party Claim in accordance with the terms of this Agreement, no Indemnitee
may settle or compromise any Third Party Claim without the consent of the
Indemnifying Party.
(e) No Indemnifying Party shall consent to any settlement of the Third
Party Claim without the consent of the Indemnitee if the effect thereof is to
permit any injunction, declaratory judgment, other order or other nonmonetary
relief to be entered, directly or indirectly, against any Indemnitee.
31
(f) The provisions of Section 5.05 and Section 5.06 shall not apply to
Taxes (which are covered by the Tax Sharing Agreement) or to matters covered by
Sections 6.02 and 6.03.
(g) Notwithstanding anything in this Agreement to the contrary, and
subject to any applicable provision of the AWS separation agreements, if either
party is named in any Action relating to any At Home Matter, Specified Matter,
Specified Transaction or Registration Statement Claim, that party shall be
entitled to assume and control its own defense and to employ its own counsel.
Neither party shall settle any such Action without the consent of the other
party (which consent will not be unreasonably withheld). All legal and other
fees (including allocated cost of in-house counsel and other personnel)
incurred in connection therewith shall be divided 50/50 between AT&T and AT&T
Broadband.
SECTION 5.06. Additional Matters. (a) Any claim on account of a Liability
that does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnitee to the related Indemnifying Party. Such
Indemnifying Party shall have a period of 30 days after the receipt of such
notice within which to respond thereto. If such Indemnifying Party does not
respond within such 30-day period, such Indemnifying Party shall be deemed to
have refused to accept responsibility to make payment. If such Indemnifying
Party does not respond within such 30-day period or rejects such claim in whole
or in part, such Indemnitee shall be free to pursue such remedies as may be
available to such party as contemplated by this Agreement and the other
Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third Party Claim against any claimant
or plaintiff asserting such Third Party Claim or against any other person but
only to the extent related to such payment. Such Indemnitee shall cooperate
with such Indemnifying Party in a reasonable manner, and at the cost and
expense (including allocated costs of in-house counsel and other personnel) of
such Indemnifying Party, in prosecuting any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is not a
named defendant, if either the Indemnitee or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for
the named defendant, if at all practicable. If such substitution or addition
cannot be achieved for any reason or is not requested, the named defendant
shall allow the Indemnifying Party to manage the Action as set forth in this
Section 5.06 and the Indemnifying Party shall fully indemnify the named
defendant against all reasonable costs of defending the Action (including court
costs, sanctions imposed by a court, attorneys' fees, experts' fees and all
other external expenses, and the allocated costs of in-house counsel and other
personnel), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.
SECTION 5.07. Remedies Cumulative. The remedies provided in this Article 5
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
SECTION 5.08. Survival of Indemnities. The rights and obligations of each
of AT&T, AT&T Broadband and their respective Indemnitees under this Article 5
shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
ARTICLE 6
INSURANCE AND CERTAIN OTHER MATTERS
SECTION 6.01. Insurance Matters. (a) The parties intend that both AT&T and
AT&T Broadband and each other member of the AT&T Communications Group and the
AT&T Broadband Group, after the Distribution Date, shall be
successors-in-interest to and retain all rights and interest (whether known,
unknown, contingent or otherwise) that each has as of the Distribution Date
under any Insurance Policy issued to and/or providing coverage to AT&T, as it
existed immediately prior to the Distribution Date, or any of its Subsidiaries
or Affiliates, and any agreements related to such Insurance Policies executed
and delivered prior to the Distribution Date, including any rights or interests
each has, as an insured, named insured, or additional named insured,
Subsidiary, Affiliate, division or department, to avail itself of any benefit
under any such Insurance Policy or any such agreement related to such policy as
in effect prior to the Distribution Date. The provisions of this Agreement are
not intended to relieve any insurer of any Liability under any policy.
Notwithstanding the foregoing, no member of the AT&T Broadband Group or the
AT&T Communications Group shall be deemed to have made any representation or
warranty as to the availability of any Insurance Policy or the rights and
benefits provided thereunder.
32
(b) This Agreement shall not be considered as an attempted assignment (if
such an assignment would be prohibited or would otherwise adversely affect the
rights of the insured parties under such policies) of any rights or interest
under any policy of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of any member of the AT&T Broadband
Group or the AT&T Communications Group in respect of any Insurance Policy or
any other contract or policy of insurance.
(c) Each of AT&T and AT&T Broadband does hereby, for itself and each other
member of the AT&T Communications Group and the AT&T Broadband Group, agree
that, as and to the extent necessary to give effect to Section 6.01(a), it will
assign any chose in action, claim, right or benefit under an Insurance Policy.
(d) AT&T Broadband does hereby, for itself and each other member of the
AT&T Broadband Group, agree that from and after the Distribution Date, AT&T
Broadband and each other member of the AT&T Broadband Group releases any and
all insurance or other claims that it may have against American Ridge and
Subsidiaries of American Ridge, whether known or unknown.
(e) AT&T does hereby, for itself and each other member of the AT&T
Communications Group, agree that (i) no member of the AT&T Broadband Group or
any AT&T Broadband Indemnitee shall have any Liability whatsoever as a result
of the insurance policies and practices of AT&T and its Affiliates as in effect
or undertaken at any time prior to the Distribution Date, including as a result
of the level or scope of any such insurance, the creditworthiness of any
insurance carrier, the terms and conditions of any policy, the adequacy or
timeliness of any notice to any insurance carrier with respect to any claim or
potential claim or otherwise and (ii) from and after the Distribution Date,
AT&T and each other member of the AT&T Communications Group releases any and
all insurance or other claims that it may have against Western Range and
Subsidiaries of Western Range, whether known or unknown.
(f) Each of AT&T and AT&T Broadband does hereby, for itself and each other
member of the AT&T Communications Group and the AT&T Broadband Group, agree
that all duties and obligations under any Insurance Policy, including the
fulfillment of any conditions and the payment of any deductibles, retentions,
co-insurance payment or retrospective premiums, that correspond in any way with
or may be necessary to perfect, preserve or maintain an insuredIs right to
obtain benefits under that Insurance Policy, will be performed by the insured
that is seeking the benefits, subject to the indemnification provisions of
Article 5. In the event members of both Groups have claims under a given
policy, any deductibles, retentions, co-insurance payments, retrospective
premiums, caps, limitations on average and similar items will be appropriately
allocated between such parties based on the recoveries they would have obtained
in the absence of such items.
SECTION 6.02. Certain Post-Distribution Transactions and Related Matters.
(a) Each of AT&T and AT&T Broadband agrees that, until 12 months after the date
of the Distribution, it will (i) maintain its status as a company engaged in
the active conduct of a trade or business and (ii) not engage in any
transaction that would result in it ceasing to be a company engaged in the
active conduct of a trade or business, as defined in Section 355(b) of the
Code.
(b) Each of AT&T and AT&T Broadband further agrees that, until 25 months
after the date of the Distribution, it will not, except as expressly
contemplated by this Agreement or the Merger Agreement, (i) enter into any
Proposed Acquisition Transaction or, to the extent AT&T or AT&T Broadband, as
the case may be, has the right to prohibit any Proposed Acquisition
Transaction, permit any Proposed Acquisition Transaction to occur (whether by
(A) redeeming rights under a shareholders rights plan, (B) finding a tender
offer to be a "permitted offer" under any such plan or otherwise causing any
such plan to be inapplicable or neutralized with respect to any Proposed
Acquisition Transaction, or (C) approving any Proposed Acquisition Transaction,
whether for purposes of any interested shareholder statute, any "fair price" or
other provision of its respective charter or bylaws or otherwise), (ii)
liquidate or partially liquidate, (iii) in a single transaction or series of
related transactions, sell or transfer all or substantially all of the assets
of AT&T or the assets of the AT&T Broadband Group that were transferred to AT&T
Broadband prior to the Distribution, as the case may be, (iv) redeem or
otherwise repurchase (directly or through an Affiliate) any of its stock, (v)
enter into any transaction or series of transactions as a result of which any
Person would acquire, or have the right to acquire, from AT&T or AT&T
Broadband, as the case may be, or one of their respective Affiliates, a number
of shares of stock that would comprise more than 5% of (A) the value of all
outstanding shares of stock of as of the date of such transaction, or in the
case of a series of transactions, the date of the last transaction of such
series, or (B) the voting power of the issued and outstanding shares of stock
as of the date of such transaction, or in the case of a series of transactions,
the date of the last transaction of such series or (vi) take any other action
or actions (including any action or transaction that would be inconsistent with
any representation made in the Tax Opinions/Rulings) that in the aggregate (and
taking into account any other transactions described in this subparagraph (b))
would be reasonably likely to have the effect of causing or permitting one or
more Persons to acquire directly or indirectly stock representing a 50 percent
or greater interest (within the meaning of Section 355(e) of the Code) in AT&T
or AT&T Broadband or otherwise jeopardize the non-recognition of taxable gain
or loss for U.S. federal income tax purposes to AT&T, AT&T Affiliates and
shareholders of AT&T in connection with the Separation and Distribution, unless
prior to taking any such action set forth in the foregoing clauses (i) through
(vi), AT&T (with respect to AT&T
33
Broadband) and AT&T Broadband (with respect to AT&T) has determined, in its
sole and absolute discretion, which discretion shall be exercised in good faith
solely to preserve the tax-free status of the Separation and Distribution, that
such action or actions would not result in a Spin-Off Disqualification.
Anything in the preceding sentence to the contrary notwithstanding, a
transaction described in clauses (i) through (vi) of the preceding sentence
shall not require the determination of the other party in the event that as of
the date immediately preceding such transaction there has not been issued and,
when taken together with the shares to be issued pursuant to the transaction,
there will not be issued, directly or indirectly, pursuant to a Proposed
Acquisition Transaction or otherwise, including as a consequence of the Merger
Agreement, taking into account for such purpose all share transactions which
would be taken into account under Section 355(e) of the Code assuming all such
issuances were considered to be "part of a plan or series of related
transactions" with the Distribution number of shares in excess of 30 percent of
(A) the value of all outstanding shares of stock as of the date of such
transaction, or in the case of a series of transactions, the date of the last
transaction of such series, or (B) the voting power of the issued and
outstanding shares of stock as of the date of such transaction, or in the case
of a series of transactions, the date of the last transaction of such series.
"Proposed Acquisition Transaction" means a transaction or series of
transactions as a result of which AT&T or AT&T Broadband would merge or
consolidate with any other Person or pursuant to which any Person or any group
of related Persons would acquire, or have the right to acquire, directly or
indirectly, from one or more holders of outstanding shares of stock of a number
of shares of stock that would comprise more than 5% of (A) the value of all
outstanding shares of stock as of the date of such transaction, or in the case
of a series of transactions, the date of the last transaction of such series,
or (B) the voting power of the issued and outstanding shares of stock as of the
date of such transaction, or in the case of a series of transactions, the date
of the last transaction of such series. "Tax Opinions/Rulings" means,
collectively, the opinions of tax counsel and the rulings by the IRS
deliverable to AT&T in connection with the transactions contemplated by this
Agreement.
(c) If one party (the "Issuing Party") notifies the other (the "Other
Party") that it desires to take one of the actions described in clauses (i)
through (vi) of Section 6.02(b) (the "Notified Action") and the Other Party
declines to exercise its discretion pursuant to Section 6.02(b) to permit the
Issuing Party to take such Notified Action, the Issuing Party, in its
reasonable discretion, may elect to seek a Subsequent Tax Opinion/Ruling that
would permit the Issuing Party to take the Notified Action, and the Other Party
shall cooperate in connection with such efforts; provided, however, that the
reasonable costs and expenses of obtaining any such Subsequent Tax
Opinion/Ruling shall be borne by the Issuing Party. "Subsequent Tax
Opinion/Ruling" means either (i) an unqualified opinion of counsel jointly
selected by the Issuing Party and the Other Party confirming that, as a
consequence of the consummation of the Notified Action, no income, gain or loss
for U.S. federal income tax purposes will be recognized by AT&T, the
shareholders or former shareholders of AT&T, or any AT&T Affiliate with respect
to the Separation and Distribution or (ii) an IRS private letter ruling to the
same effect that, after reasonable due diligence conducted by the Other Party,
are in form and substance reasonably satisfactory to the Other Party.
(d) Notwithstanding anything to the contrary herein or any provision of
the Tax Sharing Agreement to the contrary, if there is a determination (as
defined in Section 1313 of the Code) that a Spin-Off Disqualification has
occurred, then AT&T Broadband shall indemnify and hold harmless AT&T and each
member of the consolidated group of which AT&T is a member from and against one
half of all Tax Related Losses imposed upon or incurred by AT&T or any member
of its group as a result of the Spin-Off Disqualification; provided, however,
that AT&T Broadband shall indemnify and hold harmless AT&T and each member of
the consolidated group of which AT&T is a member from and against any and all
Tax Related Losses imposed upon or incurred by AT&T or any member of its group
as a result of the Spin-Off Disqualification if such Spin-Off Disqualification
would not have occurred but for an AT&T Broadband Action and; provided,
further, that AT&T Broadband shall have no obligation to indemnify AT&T or any
member of the consolidated group of which AT&T is a member if the Spin-Off
Disqualification would not have occurred but for an AT&T Communications Action.
"AT&T Broadband Action" means (i) any transaction with respect to the stock or
assets of AT&T Broadband that occurs after the Distribution, (ii) AT&T
Broadband's failure to maintain its status as a company engaged in the active
conduct of a trade or business, and (iii) the failure of any representation
made by AT&T Broadband with respect to AT&T Broadband or the AT&T Broadband
Business, and the plans, proposals, intentions and policies of AT&T Broadband
after the Separation and Distribution in connection with a Subsequent Tax
Opinion/ Ruling to be true and correct in all material respects. "AT&T
Communications Action" means (i) any transaction with respect to the stock or
assets of AT&T that occurs after the Distribution, (ii) AT&T's failure to
maintain its status as a company engaged in the active conduct of a trade or
business, and (iii) the failure of any representation made by AT&T with respect
to AT&T or the AT&T Communications Business and the plans, proposals,
intentions and policies of AT&T after the Separation and Distribution in
connection with the Tax Opinions/Rulings or a Subsequent Tax Opinion/Ruling to
be true and correct in all material respects. The delivery of any Subsequent
Tax Opinion/Ruling shall not affect either party's rights and obligations with
respect to indemnification under this Section 6.02(d). "Tax Related Losses"
means (A) all federal, state and local Taxes (including interest and penalties
thereon) imposed pursuant to any settlement, final determination, judgment or
otherwise; (B) all accounting, legal and other professional fees, and court
costs incurred in connection with such taxes; and (C) all costs and expenses
that may result from adverse tax consequences to AT&T (including all costs,
expenses and damages associated with shareholder litigation or controversies)
payable by AT&T or AT&T Affiliates.
34
SECTION 6.03. Procedure for Indemnification for Tax Liabilities. (a) If
AT&T receives notice of the assertion of any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than AT&T or any AT&T Affiliate or AT&T Broadband or
any AT&T Broadband Affiliate that gives rise to a right of indemnification
hereunder (a "Third Party Tax Claim") with respect to which AT&T Broadband may
be obligated under Section 6.02(d) to provide indemnification, AT&T shall give
AT&T Broadband notice thereof (together with a copy of such Third Party Tax
Claim, process or other legal pleading) promptly after becoming aware of such
Third Party Tax Claim; provided, however, that the failure of AT&T to give
notice as provided in this Section shall not relieve AT&T Broadband of its
obligations under Section 6.02(d), except to the extent that AT&T Broadband is
actually prejudiced by such failure to give notice. Such notice shall describe
such Third-Party Tax Claim in reasonable detail.
(b) (i) Notwithstanding any provision to the contrary contained in the Tax
Sharing Agreement, AT&T and AT&T Broadband shall jointly control the defense
of, and cooperate with each other with respect to defending, any Third Party
Tax Claim with respect to which AT&T Broadband may be obligated under Section
6.02(d) to provide indemnification; provided that AT&T Broadband shall forfeit
such joint control right with respect to a particular Third Party Tax Claim if
AT&T Broadband or any AT&T Broadband Affiliate makes any public statement or
filing, or takes any action (including, but not limited to, the filing of any
submission or pleading, or the giving of a deposition or production of
documents, in any administrative or court proceeding) in connection with such
Third Party Tax Claim that is inconsistent in a material respect with any
representation or warranty made by AT&T Broadband in the Agreement, the Tax
Opinions/Rulings, the Representation Letter or a Subsequent Tax Opinion/Ruling
and; provided, further, that AT&T shall forfeit such joint control right with
respect to a particular Third Party Tax Claim if AT&T or any AT&T Affiliate
makes any public statement or filing, or takes any action (including, but not
limited to, the filing of any submission or pleading, or the giving of a
deposition or production of documents, in any administrative or court
proceeding) in connection with such Third Party Tax Claim that is inconsistent
in a material respect with any representation or warranty made by AT&T in the
Agreement, the Tax Opinions/Rulings, the Representation Letter or a Subsequent
Tax Opinion/Ruling.
(ii) AT&T and AT&T Broadband shall exercise their rights to jointly
control the defense of any such Third Party Tax Claim solely for the purpose of
defeating such Third Party Tax Claim and, unless required by applicable law,
neither AT&T nor AT&T Broadband shall make any statements or take any actions
that could reasonably result in the shifting of liability for any Tax Related
Losses arising out of such Third Party Tax Claim from the party making such
statement or taking such action (or any of its Affiliates) to the other party
(or any of its Affiliates).
(iii) Statements made or actions taken by either AT&T or AT&T Broadband in
connection with the defense of any such Third Party Tax Claim shall not
prejudice the rights of such party in any subsequent action or proceeding
between the parties.
(iv) If either AT&T or AT&T Broadband fails to jointly defend any such
Third Party Tax Claim, the other party shall solely defend such Third Party Tax
Claim and the party failing to jointly defend shall use commercially reasonable
efforts to cooperate with the other party in its defense of such Third Party
Tax Claim; provided, however, that neither party may compromise or settle any
such Third Party Tax Claim without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed. All costs
and expenses of either party in connection with, and during the course of, the
joint control of the defense of any such Third Party Tax Claim shall be
initially paid by the party that incurs such costs and expenses. Such costs and
expenses shall be reallocated and reimbursed in accordance with the respective
indemnification obligations of the parties at the conclusion of the defense of
such Third Party Tax Claim.
(c) (i) If there is a determination (as defined in Section 1313 of the
Code) that a Spin-Off Disqualification has occurred, AT&T and AT&T Broadband
shall attempt in good faith to resolve any disagreement with respect to whether
there is an indemnification obligation pursuant to Section 6.02(d). If the
parties cannot agree by the tenth Business Day following the determination (the
"Dispute Date"), then the liability shall initially be determined as follows:
Within 20 days of the Dispute Date, AT&T and AT&T Broadband shall each appoint
one arbitrator. The two arbitrators so appointed shall appoint a third
arbitrator within 30 days of the Dispute Date. If either party shall fail to
appoint an arbitrator within such 20-day period, the arbitration shall be
conducted by the sole arbitrator appointed by the other party. Whether selected
by AT&T, AT&T Broadband or otherwise, each arbitrator selected to resolve such
dispute shall be a tax attorney who is generally recognized in the tax
community as a qualified and competent tax practitioner with experience in the
tax area involved in the issue to be resolved. Such arbitrators shall be
empowered to determine initially whether or not AT&T Broadband is required to
indemnify AT&T pursuant to Section 6.02(d) hereunder. Each of AT&T and AT&T
Broadband shall bear 50% of the aggregate expenses of the arbitrators (or sole
arbitrator). The decision of the arbitrators shall be rendered no later than 90
days from the Dispute Date.
55
(ii) On the tenth Business Day following the determination that there has
been a Spin-Off Disqualification, if AT&T Broadband agrees that it has an
indemnification obligation, AT&T Broadband shall pay in full any amount due and
payable to AT&T pursuant to Section 6.02(d), together with interest calculated
at the Underpayment Rate from the date of the determination that there was a
Spin-Off Disqualification through the date of payment. If AT&T Broadband and
AT&T disagree as to whether an indemnity obligation is due, and the arbitration
process concludes that AT&T Broadband is liable, AT&T Broadband shall pay any
amount that would be due and payable to AT&T if AT&T were entitled to indemnity
pursuant to Section 6.02(d), together with interest on such amount calculated
at the Underpayment Rate from the date of the determination that there was a
Spin-Off Disqualification through the date of the payment. "Underpayment Rate"
shall mean the annual rate of interest described in Section 6621(c) of the Code
for large corporate underpayments of income Tax (or similar provision of state
or local income Tax law, as applicable), as determined from time to time.
(iii) If pursuant to a final nonappealable order of a court of competent
jurisdiction, it is determined that AT&T Broadband is obligated to pay and has
not paid amounts payable to AT&T pursuant to Section 6.02(d) or that amounts
paid by AT&T Broadband to AT&T should not have been paid, AT&T Broadband shall
pay to AT&T the balance due, or AT&T shall repay to the excess amount paid, in
either event within five days of the final determination of liability or
overpayment, together with interest at the Underpayment Rate calculated (A)
from the date of the determination that there was a Spin-Off Disqualification
in the case of a payment to be made by AT&T Broadband or (B) from the date of
payment by AT&T Broadband to AT&T in the case of a repayment to be made by
AT&T. All payments pursuant to this Section 6.03(c) shall be made by wire
transfer to the bank account designated by AT&T or AT&T Broadband, as the case
may be, for such purpose.
SECTION 6.04. Other Transactions. (a) Notwithstanding any provision of the
Tax Sharing Agreement to the contrary, AT&T Broadband shall indemnify and hold
harmless AT&T and each member of the consolidated group of which AT&T is a
member from and against one half of all Tax Related Losses imposed upon or
incurred by AT&T or any member of its group as a result of (i) the Separation
Transactions or the Split-Off failing to qualify as tax-free transactions under
the provisions of Sections 355, 361(c) and 368(a)(1)(D) of the Code, or (ii)
the shares of AWS or LMC failing to qualify as "qualified property" for
purposes of Section 355(c)(2) or 361(c) of the Code by reason of the
application of Section 355(e) of the Code (each such failure, a "Transaction
Disqualification"); provided, however, AT&T Broadband shall indemnify and hold
harmless AT&T and each member of the consolidated group of which AT&T is a
member from and against any and all Tax Related Losses imposed upon or incurred
by AT&T or any member of its group as a result of the Transaction
Disqualification if such Transaction Disqualification would not have occurred
but for an AT&T Broadband Action and; provided, further, that, AT&T Broadband
shall have no obligation to indemnify AT&T or any member of the consolidated
group of which AT&T is a member if the Transaction Disqualification would not
have occurred but for an AT&T Communications Action.
(b) Any indemnity payment required to be made by AT&T Broadband under
Section 6.04(a) as a result of a Transaction Disqualification shall be net of
AT&T Broadband's Share of any indemnification that AT&T is entitled to receive
from AWS or LMC, as the case may be, as a result of such Transaction
Disqualification (a "Primary Indemnity Claim"). AT&T, at AT&T Broadband's
direction and expense, shall use reasonable efforts to pursue and collect AT&T
Broadband's Share of a Primary Indemnity Claim from AWS or LMC, as the case may
be, prior to seeking indemnification from AT&T Broadband for such amount. In
the event that AT&T has not received indemnification with respect to AT&T
Broadband's Share of a Primary Indemnity Claim at least five days prior to the
date on which AT&T is required to make a payment that gives rise to such claim,
AT&T shall be entitled to demand payment of AT&T Broadband's Share of a Primary
Indemnity Claim from AT&T Broadband, provided that AT&T Broadband shall have no
obligation to pay AT&T Broadband's Share of a Primary Indemnity Claim unless
AT&T has (i) provided AT&T Broadband with information in reasonable detail
describing its efforts to pursue and collect such Primary Indemnity Claim and
(ii) afforded AT&T Broadband the opportunity to take reasonable efforts on
behalf of AT&T, at AT&T Broadband's expense, to pursue and collect such Primary
Indemnity Claim. "AT&T Broadband's Share" means (i) 100% in the event the
Transaction Disqualification is attributable to an AT&T Broadband Action or
(ii) 50% otherwise. If AT&T Broadband makes payment to AT&T in respect of an
amount for which AT&T has a Primary Indemnity Claim, AT&T shall assign AT&T
Broadband's Share of such Primary Indemnity Claim to AT&T Broadband and shall
cooperate, at AT&T Broadband's direction and expense, with AT&T Broadband in
prosecuting such claim. If AT&T receives a payment required by Section 6.04(a)
from AT&T Broadband and subsequently receives a payment with respect to a
Primary Indemnity Claim that was not previously taken into account, in whole or
in part, in determining the amount of AT&T Broadband's payment to AT&T, then
AT&T will pay to AT&T Broadband an amount equal to the excess of the payment
made by AT&T Broadband over the amount of the payment that AT&T Broadband would
have been required to make if payment under the Primary Indemnity Claim had
been received by AT&T before payment was made by AT&T Broadband.
(c) If there is a determination (as defined in Section 1313 of the Code)
that a Transaction Disqualification has occurred and the
36
parties cannot agree whether such a Transaction Disqualification would not have
occurred but for an AT&T Communications Action or an AT&T Broadband Action, as
the case may be, the procedures set forth in Section 6.03(c) shall apply.
(d) In the event that, in connection with a Transaction Disqualification
that is attributable to an AT&T Broadband Action, AT&T has any rights against
or obligations to AWS or LMC that are substantially similar to those set forth
in Section 6.03, (i) AT&T shall assign such rights and obligations to AT&T
Broadband, if at all practicable, or (ii) if such assignment cannot be achieved
for any reason, AT&T shall exercise such rights and perform such obligations at
the direction of AT&T Broadband and AT&T Broadband shall indemnify AT&T for all
associated costs. Such costs shall be reallocated and reimbursed in accordance
with the respective indemnification obligations as determined under Section
6.04(c). If a Transaction Disqualification is not attributable to an AT&T
Communications Action or an AT&T Broadband Action, such rights and obligations
shall, to the extent practicable, be exercised and performed jointly and all
associated costs shall be shared equally.
ARTICLE 7
EXCHANGE OF INFORMATION; CONFIDENTIALITY
SECTION 7.01. Agreement for Exchange of Information. (a) Each of AT&T and
AT&T Broadband, on behalf of the AT&T Communications Group and the AT&T
Broadband Group, respectively, agrees to provide, or cause to be provided, to
each other Group, at any time before or after the Distribution Date, as soon as
reasonably practicable after written request therefor, any Information in the
possession or under the control of such respective Group that the requesting
party reasonably needs (i) to comply with reporting, disclosure, filing or
other requirements imposed on the requesting party (including under applicable
securities or Tax laws) by a Governmental Authority having jurisdiction over
the requesting party, (ii) for use in any other judicial, regulatory,
administrative, Tax or other proceeding or in order to satisfy audit,
accounting, claims, regulatory, litigation, Tax or other similar requirements,
or (iii) to comply with its obligations under this Agreement or any other
Ancillary Agreement; provided, however, that in the event that any party
determines that any such provision of Information could be commercially
detrimental, violate any law or agreement, or waive any attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence. AT&T and AT&T Broadband intend that any transfer of Information
that would otherwise be within the attorney-client privilege shall not operate
as a waiver of any potentially applicable privilege.
(b) After the date hereof, each of AT&T and AT&T Broadband shall maintain
in effect adequate systems and controls to the extent necessary to enable the
members of the other Group to satisfy their respective reporting, accounting,
audit and other obligations.
SECTION 7.02. Ownership of Information. Any Information owned by one Group
that is provided to a requesting party pursuant to Section 7.01 shall be deemed
to remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
SECTION 7.03. Compensation for Providing Information. The party requesting
such Information agrees to reimburse the other party for the reasonable costs,
if any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting party. Except as may
be otherwise specifically provided elsewhere in this Agreement or in any other
agreement between the parties, such costs shall be computed in accordance with
the providing party's standard methodology and procedures.
SECTION 7.04. Record Retention. To facilitate the possible exchange of
Information pursuant to this Article 7 and other provisions of this Agreement
after the Distribution Date, the parties agree to use their reasonable best
efforts to retain all Information in their respective possession or control on
the Distribution Date in accordance with their respective record retention
policies. No party will destroy, or permit any of its Subsidiaries to destroy,
any Information that the other party may have the right to obtain pursuant to
this Agreement prior to the third anniversary of the date hereof without first
using its reasonable best efforts to notify the other party of the proposed
destruction and giving the other party the opportunity to take possession of
such information prior to such destruction; provided, however, that in the case
of any Information relating to Taxes or to Environmental Liabilities, such
period shall be extended to the expiration of the applicable statute of
limitations (giving effect to any extensions thereof). Moreover, no party will
destroy, or permit any of its Subsidiaries to destroy, any policies of
insurance (or records related to such insurance policies) without first using
its reasonable best efforts to notify the other party of the proposed
destruction and giving the other party reasonable opportunity to take
possession of such information prior to such destruction, if it is possible
that the other party may be able to obtain coverage under such policies. (The
foregoing includes "occurrence"-based liability policies, which continue to
cover liability for alleged harm during their policy period, even if no claim
is made based on such alleged harm until after the end of the policy period.)
37
SECTION 7.05. Limitation of Liability. No party shall have any liability
to any other party in the event that any Information exchanged or provided
pursuant to this Agreement that is an estimate or forecast, or that 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 7.04.
SECTION 7.06. Other Agreements Providing for Exchange of Information. The
rights and obligations granted under this Article 7 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange
or confidential treatment of Information set forth in any Ancillary Agreement.
SECTION 7.07. Production of Witnesses; Records; Cooperation. (a) After the
Distribution Date, except in the case of an adversarial Action by one party
against the other party (which shall be governed by such discovery rules as may
be applicable thereto), each party hereto shall take all reasonable steps to
make available to the other party, upon written request, the former, current
and future directors, officers, employees, other personnel and agents of its
respective Group (whether as witnesses or otherwise) and any books, records or
other documents within its control or which it otherwise has the ability to
make available, to the extent that any such person (giving consideration to
business demands of such directors, officers, employees, other personnel and
agents) or books, records or other documents may reasonably be required in
connection with any Action (including preparation for such Action) in which the
requesting party may from time to time be involved, regardless of whether such
Action (or preparation for such action) is a matter with respect to which
indemnification may be sought hereunder. The requesting party shall bear all
costs and expenses (including allocated costs of in-house counsel and other
personnel) in connection therewith.
(b) If an Indemnifying Party chooses to defend or to seek to compromise or
settle any Third Party Claim, or if any party chooses or is required to
prosecute, pursue, otherwise evaluate or defend any Action, the other parties
shall cooperate in such defense, settlement or compromise, or such prosecution,
evaluation or pursuit, as the case may be.
(c) Without limiting the foregoing, the parties shall cooperate and
consult to the extent reasonably necessary with respect to any Actions.
(d) Without limiting any provision of this Section 7.07, each of the
parties agrees to cooperate, and to cause each member of its respective Group
to cooperate, with each other in the defense of any infringement or similar
claim with respect to any intellectual property and shall not claim to
acknowledge, or permit any member of its respective Group to claim to
acknowledge, the validity or infringing use of any intellectual property of a
third Person in a manner that would hamper or undermine the defense of such
infringement or similar claim.
(e) The obligation of the parties to make available former, current and
future directors, officers, employees, other personnel and agents pursuant to
this Section 7.07 is intended to be interpreted in a manner so as to facilitate
cooperation and shall include the obligation to make available inventors and
other officers without regard to whether such individual or the employer of
such individual could assert a possible business conflict (subject to the
exception set forth in the first sentence of Section 7.07(a)). Without limiting
the foregoing, each party agrees that (i) neither it nor any member of its
respective Group will take adverse action against any employee of its Group
based on such employee's provision of assistance or information to the other
party pursuant to Section 7.07(a) and (ii) to the extent relevant and
necessary, neither it nor any member of its respective Group will enforce any
confidentiality agreement against an employee of its Group that would otherwise
prevent or hinder such employee from cooperating or providing information to a
requesting party pursuant to Section 7.07(a).
(f) In connection with any matter contemplated by this Section 7.07, the
parties will enter into a mutually acceptable joint defense agreement so as to
maintain to the extent practicable any applicable attorney-client privilege or
work product immunity of either Group.
SECTION 7.08. Confidentiality. (a) Subject to Section 7.09, each of AT&T
and AT&T Broadband, on behalf of itself and its respective Group, agrees to
hold, and to cause its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives to hold, in strict
confidence, with at least the same degree of care that applies to its own
confidential and proprietary information pursuant to policies in effect at the
relevant time, all Information concerning the other Group that is either in its
possession (including Information in its possession prior to any of the date
hereof, or the Distribution Date) or furnished by the other Group or its
respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives at any time pursuant to this Agreement, any
other Ancillary Agreement or otherwise, and shall not use any such Information
other than for such purposes as shall be expressly permitted hereunder or
thereunder, except, in each case, to the extent that such Information has
38
been (i) in the public domain through no fault of such party or such party's
Group or any of their respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives, (ii) later
lawfully acquired from other sources by such party (or such party's Group),
which sources are not themselves bound by a confidentiality obligation, or
(iii) independently generated without reference to any proprietary or
confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be released
or disclosed, any such Information concerning the other Group to any other
Person, except its directors, officers, employees, agents, accountants, counsel
and other advisors and representatives who need to know such Information (who
shall be advised of their obligations hereunder with respect to such
Information), except in compliance with Section 7.09. Without limiting the
foregoing, when any Information is no longer needed for the purposes
contemplated by this Agreement or any other Ancillary Agreement, each party
will promptly after request of the other party either return to the other party
all Information in a tangible form (including all copies thereof and all notes,
extracts or summaries based thereon) or certify to the other party that it has
destroyed such Information (and such copies thereof and such notes, extracts or
summaries based thereon).
SECTION 7.09. Protective Arrangements. In the event that any party or any
of its Subsidiaries either determines on the advice of its counsel that it is
required to disclose any Information concerning the other Group pursuant to
applicable law or receives any demand under lawful process or from any
Governmental Authority to disclose or provide Information concerning the other
Group that is subject to the confidentiality provisions hereof, such party
shall notify the other party of such disclosure at least five days 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, after a court of
competent jurisdiction has had an opportunity to rule on such protective
arrangements, 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 8
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
SECTION 8.01. Further Assurances. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, the other Ancillary
Agreements and the Merger Agreement, but subject to the provisions hereof and
thereof, each of the parties hereto shall use its reasonable best efforts,
prior to, on and after the Distribution Date, 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,
the other Ancillary Agreements and the Merger Agreement.
(b) Without limiting the foregoing, prior to, on and after the
Distribution Date, each party hereto shall cooperate with the other party, and
without any further consideration, to execute and deliver, or use its
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 Authority or any other Person under any permit, license,
agreement, indenture or other instrument (including any Consents or
Governmental Approvals), and to take all such other actions as such party may
reasonably be requested to take by any other party hereto from time to time,
consistent with the terms of this Agreement, the other Ancillary Agreements and
the Merger Agreement, in order to effectuate the provisions and purposes of
this Agreement, the other Ancillary Agreements and the Merger Agreement and the
transfers of the AT&T Broadband Assets and the assignment and assumption of the
AT&T Broadband Liabilities and the other transactions contemplated hereby and
thereby.
(c) On or prior to the Distribution Date, AT&T and AT&T Broadband in their
respective capacities as direct and indirect shareholders of their respective
Subsidiaries, shall each ratify any actions that are reasonably necessary or
desirable to be taken by AT&T and AT&T Broadband or any other Subsidiary of
AT&T, as the case may be, to effectuate the transactions contemplated by this
Agreement.
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated by AT&T prior
to the Distribution Date at any time following termination of the Merger
Agreement in accordance with its terms.
39
SECTION 9.02. Effect of Termination. In the event of any termination of
this Agreement prior to the Distribution Date, no party to this Agreement (or
any of its directors or officers) shall have any Liability or further
obligation to any other party with respect to this Agreement.
ARTICLE 10
DISPUTE RESOLUTION AND ARBITRATION
SECTION 10.01. Agreement to Arbitrate. Except as otherwise specifically
provided in this Agreement (including, without limitation, in Article 6,
concerning Third Party Tax Claims) or in any other Ancillary Agreement, the
procedures set forth in this Article 10 shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or any other Ancillary Agreement, or the transactions contemplated
hereby or thereby (including all actions taken in furtherance of the
transactions contemplated hereby or thereby on or prior to the date hereof), or
the commercial or economic relationship of the parties relating hereto or
thereto, between or among any member of the AT&T Broadband Group, or the AT&T
Communications Group. Each party agrees on behalf of itself and each member of
its respective Group that the procedures set forth in this Article 10 shall be
the sole and exclusive remedy in connection with any dispute, controversy or
claim relating to any of the foregoing matters and irrevocably waives any right
to commence any Action in or before any Governmental Authority, except as
expressly provided in Sections 10.11(c) and 10.12 and except to the extent
provided under the Federal Arbitration Act in the case of judicial review of
arbitration results or awards. Each party on behalf of itself and each member
of its respective Group irrevocably waives any right to any trial by jury with
respect to any claim, controversy or dispute set forth in the first sentence of
this Section 10.01. The parties agree that claims filed pursuant to this
Article 10 may seek direct damages but in no event for such claims shall either
party be liable to the other for any incidental, special, reliance,
consequential or any other indirect damages or losses (including lost profits
or revenues).
SECTION 10.02. Reasonable Best Efforts to Resolve Disputes; Mediation. It
is the intent of the parties to use their respective reasonable best efforts to
negotiate and resolve expeditiously any dispute, controversy or claim between
or among them that may arise from time to time on a mutually acceptable
negotiated basis. The parties may, by mutual consent, retain a mediator to aid
in any attempt to informally negotiate resolution of any dispute, although any
opinion expressed by a mediator shall be strictly advisory and shall not be
binding on the parties, nor shall any opinion expressed by the mediator be
admissible in any arbitration proceedings. Costs of a mediation shall be borne
equally by the parties involved in the matter, except that each party shall be
responsible for its own expenses. Mediation is not a prerequisite to a demand
for arbitration under Section 10.03.
SECTION 10.03. Demand for Arbitration. At any time before the Applicable
Deadline, any party involved in the dispute, controversy or claim may make a
written demand (the "Arbitration Demand Notice") that the dispute be resolved
by binding arbitration, which Arbitration Demand Notice shall be given to the
parties to the dispute, controversy or claim in the manner set forth in Section
11.08. Such Arbitration Demand Notice shall describe in reasonable detail the
facts surrounding such dispute, controversy or claim and the basis of such
party's claim for relief pursuant to this Article. Except as may be expressly
provided in any Ancillary Agreement, any Arbitration Demand Notice must be
asserted within one year after the later of the occurrence of the act or event
giving rise to the underlying claim or the date on which such act or event was,
or should have been, in the exercise of reasonable due diligence, discovered by
the party asserting the claim (as applicable and as it may in a particular case
be specifically extended by the parties in writing, the "Applicable Deadline";
provided that in no event will the Applicable Deadline occur with respect to
any matter before the first anniversary of the Distribution). Any discussions,
negotiations or mediations between the parties pursuant to this Agreement or
otherwise will not toll the Applicable Deadline unless expressly agreed in
writing by the parties. Each of the parties agrees on behalf of itself and each
member of its Group that if an Arbitration Demand Notice with respect to a
dispute, controversy or claim is not given prior to the expiration of the
Applicable Deadline, as between or among the parties and the members of their
Groups, such dispute, controversy or claim will be barred. Subject to Sections
10.11(c) and 10.12, upon delivery of an Arbitration Demand Notice prior to the
Applicable Deadline, the dispute, controversy or claim shall be decided by an
Arbitration Panel in accordance with the rules set forth in this Article 10.
SECTION 10.04. Arbitration Panel. When an Arbitration Demand Notice is
given, the parties involved in the dispute, controversy or claim shall attempt
to select a sole arbitrator satisfactory to all such parties. In the event the
parties are not able jointly to select a sole arbitrator, such parties shall
each appoint an arbitrator within 30 days after delivery of the Arbitration
Demand Notice. Only one arbitrator may be appointed for the AT&T Broadband
Group and the AT&T Communications Group, respectively. In the event that a sole
arbitrator is not selected, the two chosen arbitrators, within 30 days after
the appointment of the later of them to be appointed, will in turn choose a
third arbitrator, and the three arbitrators thus chosen will constitute the
arbitration panel.
40
SECTION 10.05. Commencement and Place of Arbitration. The sole arbitrator
or arbitration panel (as applicable, the "Arbitration Panel") will meet within
30 days of the last appointment to commence the arbitration, which period may
be extended upon the agreement of the arbitrators. The Arbitration Panel will
set a time for the hearing of the matter, which will commence no later than 90
days after the date of the last appointment. The place of any arbitration
hereunder will be as agreed upon by the parties, or, if the parties are unable
to agree, as set by the Arbitration Panel.
SECTION 10.06. Arbitration Hearings. The matter shall be presented to the
Arbitration Panel at a hearing by means of written submissions of memoranda and
verified witness statements, filed simultaneously, and responses, if necessary
in the judgment of the arbitrator or both the parties. If the Arbitration Panel
deems it to be appropriate for a fair resolution of the dispute, live
cross-examination or direct examination may be permitted. The Arbitration Panel
shall actively manage the arbitration with a view to achieving a just, speedy
and cost-effective resolution of the dispute, claim or controversy. The
arbitration hearing will be no longer than 30 full hearing days, unless in the
judgment of the Arbitration Panel the matter is complex and sophisticated and
thereby requires a longer time; provided, however, that such hearing shall in
any event be completed within 180 calendar days. The Arbitration Panel may set
time and other limits on the presentation of each party's case, its memoranda
or other submissions, and may refuse to receive any proffered evidence, that
the Arbitration Panel finds to be cumulative, unnecessary, irrelevant or of low
probative nature. Except as otherwise set forth herein, any arbitration
hereunder will be conducted in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes then prevailing (except that
the arbitration will not be conducted under the auspices of the CPR and the fee
schedule of the CPR will not apply). To the extent that the provisions of this
Agreement and the prevailing rules of the CPR conflict, the provisions of this
Agreement shall govern.
SECTION 10.07. Arbitration Decision. The final decision of the Arbitration
Panel will be rendered in writing to the parties not later than 60 days after
the last hearing date, unless otherwise agreed by the parties in writing. The
decision of the Arbitration Panel will be final and binding on the parties, and
judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the Prime Rate plus 2% per annum.
SECTION 10.08. Discovery and Related Matters. Any party involved in the
applicable dispute may request limited document production from the other party
or parties of specific and expressly relevant documents. Any such discovery
shall be conducted expeditiously, and it is intended that discovery shall be
limited as compared to the provisions of the Federal Rules of Civil Procedure.
Depositions shall not occur except by consent of the parties or by order of the
Arbitration Panel. Disputes concerning the document production or other
discovery will be determined by written agreement of the parties involved in
the applicable dispute or, failing such agreement, will be referred to the
Arbitration Panel for resolution. All discovery requests will be subject to the
proprietary rights and rights of privilege of the parties, and the Arbitration
Panel will adopt procedures to protect such rights and to maintain the
confidential treatment of the arbitration proceedings (except as may be
required by law). Subject to the foregoing, the Arbitration Panel shall have
the power to issue subpoenas to compel the production of documents relevant to
the dispute, controversy or claim.
SECTION 10.09. Arbitration Panel's Authority. The Arbitration Panel shall
have full power and authority to determine issues of arbitrability and to
interpret or construe the applicable provisions of this Agreement or any other
Ancillary Agreement and to fashion appropriate remedies for breaches of this
Agreement (including interim or permanent injunctive relief); provided that the
Arbitration Panel shall not have any right or authority (i) in excess of the
authority a court having jurisdiction over the parties and the controversy or
dispute would have absent these arbitration provisions; (ii) to award
incidental, special, reliance, consequential, or other indirect damages
(including lost profits or revenues); (iii) to award punitive or treble
damages; or (iv) to modify the terms of this Agreement. It is the intention of
the parties that in rendering a decision, the Arbitration Panel give effect to
the applicable provisions of this Agreement and the other Ancillary Agreements
and follow applicable law (it being understood and agreed that this sentence
shall not give rise to a right of judicial review of the arbitrator's award).
SECTION 10.10. Confidentiality. Except as required by law, the parties
agree that the existence and contents of the entire arbitration, including the
award, shall be deemed a compromise of a dispute under Rule 408 of the Federal
Rules of Evidence, shall not be discoverable in any proceeding, shall not be
admissible in any court (except for the enforcement thereof) or arbitration and
shall not bind or collaterally estop either party with respect to any claim or
defense asserted by any third party. Except as required by law, the parties
shall hold, and shall cause their respective officers, directors, employees,
agents and other representatives to hold, the existence, content and result of
the arbitration or any mediation in confidence in accordance with the
provisions of Article 7 and except as may be required in order to enforce any
award. Each of the parties shall request that any mediator or arbitrator comply
with such confidentiality requirement.
SECTION 10.11. Certain Additional Matters. (a) If a party fails or refuses
to appear at and participate in an arbitration hearing after due notice, the
arbitrator may hear and determine the controversy upon evidence produced by the
appearing party.
41
(b) Arbitration costs will be borne equally by each party involved in the
matter, except that each party will be responsible for its own attorneys' fees
and other costs and expenses, including the costs of witnesses selected by such
party.
(c) Prior to the time at which the Arbitration Panel are appointed, any
party may seek one or more temporary restraining orders in a court of competent
jurisdiction if necessary in order to preserve and protect the status quo.
Neither the request for, or grant or denial of, any such temporary restraining
order shall be deemed a waiver of the obligation to arbitrate as set forth
herein and the Arbitration Panel may dissolve, continue or modify any such
order.
(d) In the event that at any time any member of the Arbitration Panel
shall fail to serve as an arbitrator for any reason, the appropriate party or
the two party-selected arbitrators, as the case may be, shall select a new
arbitrator, in accordance with the procedures set forth in Section 10.04. The
extent, if any, to which testimony previously given shall be repeated or may be
relied upon based on the stenographic record (if there is one), shall be
determined by the replacement arbitrator.
SECTION 10.12. Limited Court Actions. (a) Notwithstanding anything herein
to the contrary, in the event that any party reasonably determines the amount
in controversy in any dispute, controversy or claim (or any series of related
disputes, controversies or claims) under this Agreement or any other Ancillary
Agreement is, or is reasonably likely to be, in excess of $100 million and if
such party desires to commence an Action in lieu of complying with the
arbitration provisions of this Article 10, such party shall so state in its
Arbitration Demand Notice. If the other parties to the arbitration disagree
about whether the amount in controversy exceeds $100 million, the Arbitration
Panel selected pursuant to Section 10.04 shall decide the issue. The
Arbitration Panel shall set a date no later than ten days after the date of its
appointment for submissions by the parties with respect to such issue. There
shall be no discovery in connection with such issue. The Arbitration Panel
shall render its decision on such issue within five days of such date so set by
the Arbitration Panel. The parties agree that any statute of limitations
applicable to the dispute, controversy or claim before the Arbitration Panel
shall be tolled during the pendency of the decision described in the
immediately preceding sentence. In the event that the Arbitration Panel
determines that the amount in controversy is or is reasonably likely to be in
excess of $100 million, the provisions of Sections 10.05, 10.06, 10.07, 10.08,
and 10.14 shall not apply, and within 15 days of such decision, any party to
the arbitration may elect in lieu of arbitration, to commence an Action with
respect to such dispute, controversy or claim (or such series of related
disputes, controversies or claims) in any court of competent jurisdiction
returned to in Section 11.03. If the Arbitration Panel does determines that the
amount in controversy is not in excess of $100 million, the provisions of this
Article 10 (including with respect to time periods) shall apply as if no
determinations were sought or made pursuant to this Section 10.12(a).
(b) In the event that an arbitration award in excess of $100 million is
issued in any arbitration proceeding commenced hereunder, any party may, within
60 days after the date of such award, submit the dispute, controversy or claim
(or series of related disputes, controversies or claims) giving rise thereto to
a court of competent jurisdiction, regardless of whether such party or any
other party sought to commence an Action in lieu of proceeding with arbitration
in accordance with Section 10.12(a). In such event, the applicable court may
elect to rely on the record developed in the arbitration or, if it determines
that it would be advisable in connection with the matter, allow the parties to
seek additional discovery or to present additional evidence. Each party shall
be entitled to present arguments to the court with respect to whether any such
additional discovery or evidence shall be permitted and with respect to all
other matters relating to the applicable dispute, controversy or claim (or
series of related disputes, controversies or claims).
SECTION 10.13. Continuity of Performance and Remaining Obligations. Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement and each other Ancillary
Agreement during the course of dispute resolution pursuant to the provisions of
this Article 10 with respect to all matters not subject to such dispute,
controversy or claim.
SECTION 10.14. Law Governing Arbitration Procedures. The interpretation of
the provisions of this Article 10, only insofar as they relate to the agreement
to arbitrate and any procedures pursuant thereto, shall be governed by the
Federal Arbitration Act and other applicable federal law. In all other
respects, the interpretation of this Agreement shall be governed as set forth
in Section 11.02.
SECTION 10.15. Non-applicability of Article. Notwithstanding anything
herein to the contrary, this Article 10 shall not apply to any dispute,
controversy or claim or to any other matter whatsoever arising under Section
6.02 or 6.03, the Tax Sharing Agreement, any other Tax sharing agreement or any
Third Party Tax Claims or to any other matter relating to Taxes. This Article
similarly shall not apply to the extent provided in any other Ancillary
Agreement.
42
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Counterparts; Entire Agreement; Corporate Power. (a) This
Agreement and each other Ancillary Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party.
(b) This Agreement, and the other Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire agreement
between the parties with respect to the subject matter hereof or thereof,
supersede all previous agreements, negotiations, discussions, writings,
understandings, commitments and conversations with respect to such subject
matter and there are no agreements or understandings between the parties other
than those set forth or referred to herein or therein.
(c) AT&T represents on behalf of itself and each of its Subsidiaries
(other than the AT&T Broadband Entities) and AT&T Broadband represents on
behalf of itself and each other AT&T Broadband Entity:
(i) each such Person is a corporation or other entity duly
incorporated or formed, validly existing and in good standing under the
laws of the state of its incorporation or formation, has all corporate or
other similar powers required to carry on its business as currently
conducted and is duly qualified to do business and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified, individually or in the
aggregate, has not had and would not reasonably be expected to have an
AT&T Material Adverse Effect or an AT&T Broadband Material Adverse Effect,
respectively;
(ii) each such Person has the requisite corporate or other power and
authority and has taken all corporate or other similar action necessary in
order to execute, deliver and perform each of this Agreement and each
other Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby; and
(iii) this Agreement and each other Ancillary Agreement to which any
such Person is a party has been duly executed and delivered by such Person
and constitutes a valid and binding agreement of such Person enforceable
in accordance with the terms thereof.
(d) Each party hereto acknowledges that it and each other party hereto is
executing certain of the Ancillary Agreements by facsimile, stamp or mechanical
signature. Each party hereto expressly adopts and confirms each such facsimile,
stamp or mechanical signature made in its respective name as if it were a
manual signature, agrees that it will not assert that any such signature is not
adequate to bind such party to the same extent as if it were signed manually
and agrees that at the reasonable request of any other party hereto at any time
it will as promptly as reasonably practicable cause each such Ancillary
Agreement to be manually executed (any such execution to be as of the date of
the initial date thereof).
SECTION 11.02. Governing Law. This Agreement and, unless expressly
provided therein, each other Ancillary Agreement, shall be governed by and
construed and interpreted in accordance with the laws of the State of New York,
irrespective of the choice of laws principles of the State of New York, as to
all matters, including matters of validity, construction, effect,
enforceability, performance and remedies.
SECTION 11.03. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement, any of the other Ancillary Agreements or
the transactions contemplated hereby or thereby shall be brought in the United
States District Court for the Southern District of New York or any New York
State court sitting in New York City, so long as one of such courts shall have
subject matter jurisdiction over such suit, action or proceeding, and that any
cause of action arising out of this Agreement or out of any of the other
Ancillary Agreements shall be deemed to have arisen from a transaction of
business in the State of New York, and each of the parties hereby irrevocably
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum. Process
in any such suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such court.
Without limiting the foregoing, each party agrees that service of process on
such party as provided in Section 11.06 shall be deemed effective service of
process on such party.
43
SECTION 11.04. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OF THE OTHER ANCILLARY
AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 11.05. Assignability. Except as set forth in any Ancillary
Agreement, this Agreement and each other Ancillary Agreement shall be binding
upon and inure to the benefit of the parties hereto and thereto, respectively,
and their respective successors and assigns; provided, however, that no party
hereto or thereto may assign its respective rights or delegate its respective
obligations under this Agreement or any other Ancillary Agreement without the
express prior written consent of each of the other parties hereto or thereto.
SECTION 11.06. AT&T Restructuring. AT&T and AT&T Broadband recognize that
AT&T is contemplating creating a tracking stock with respect to its consumer
services business. Subject to AT&T's obligations under the Merger Agreement,
including Section 9.06(b) thereof, nothing in this Agreement shall prevent the
creation by AT&T of any tracking stock with respect to such business or
otherwise. In the event of the creation of such a tracking stock, (i)
references in this Agreement to AT&T Common Stock shall be adjusted as
necessary to accommodate the existence of such tracking stock and (ii) AT&T
may, but is not required to, distribute all or a portion of the shares of such
tracking stock in the Distribution. In the event any such tracking stock is
distributed in connection with the Distribution, Article 4 shall be revised to
appropriately account for such distribution. Any adjustment or revision
pursuant to the preceding sentence shall be reasonably satisfactory to Comcast.
SECTION 11.07. Third Party Beneficiaries. Except for Comcast, which prior
to any termination of this Agreement shall be a third party beneficiary of AT&T
Broadband's rights under to this Agreement and each other Ancillary Agreement,
and except for the indemnification rights under this Agreement of any AT&T
Indemnitee or AT&T Broadband Indemnitee in their respective capacities as such,
and except as specifically provided in the Employee Benefits Agreement, (i) the
provisions of this Agreement and each other Ancillary Agreement are solely for
the benefit of the parties and are not intended to confer upon any Person
except the parties any rights or remedies hereunder, and (ii) there are no
third party beneficiaries of this Agreement or any other Ancillary Agreement
and neither this Agreement nor any other Ancillary Agreement shall provide any
third person with any remedy, claim, liability, reimbursement, claim of action
or other right in excess of those existing without reference to this Agreement
or any other Ancillary Agreement.
SECTION 11.08. Notices. All notices or other communications under this
Agreement or any other Ancillary Agreement shall be in writing and shall be
deemed to be duly given when (a) delivered in person or (b) deposited in the
United States mail or private express mail, postage prepaid, addressed as
follows:
If to AT&T, to:
AT&T Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to AT&T Broadband, to:
AT&T Broadband Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
44
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Comcast Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice to the other party, change the address to which such
notices are to be given.
SECTION 11.09. Severability. If any provision of this Agreement or any
other Ancillary Agreement or the application thereof to any Person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof or thereof, or the
application of such provision to Persons or circumstances or in jurisdictions
other than those as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby or thereby, as the case may be, is not
affected in any manner adverse to any party. Upon such determination, the
parties shall negotiate in good faith in an effort to agree upon such a
suitable and equitable provision to effect the original intent of the parties.
SECTION 11.10. Expenses. The provisions of Sections 11.03(a)-(c) of the
Merger Agreement are hereby incorporated by reference.
SECTION 11.11. Headings. The Article, Section and paragraph headings
contained in this Agreement and in the other Ancillary Agreements are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or any other Ancillary Agreement.
SECTION 11.12. Waivers of Default. Waiver by any party of any default by
the other party of any provision of this Agreement or any other Ancillary
Agreement shall not be deemed a waiver by the waiving party of any subsequent
or other default, nor shall it prejudice the rights of the other party.
SECTION 11.13. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement or any other Ancillary Agreement, the party or
parties who are or are to be thereby aggrieved shall have the right to specific
performance and injunctive or other equitable relief of its rights under this
Agreement or such other Ancillary Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Any requirements for the securing or
posting of any bond with such remedy are waived.
SECTION 11.14. Amendments. No provisions of this Agreement or any other
Ancillary Agreement shall be deemed waived, amended, supplemented or modified
by any party, unless such waiver, amendment, supplement or modification is in
writing and signed by the authorized representative of the party against whom
such waiver, amendment, supplement or modification it is sought to be enforced.
SECTION 11.15. Late Payments. Except as expressly provided to the contrary
in this Agreement or in any other Ancillary Agreement, any amount not paid when
due pursuant to this Agreement or any other Ancillary Agreement (and any
amounts billed or
45
otherwise invoiced or demanded and properly payable that are not paid within 30
days of such ▇▇▇▇, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.
SECTION 11.16. Interpretation. Words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires. The terms "hereof,"
"herein," and "herewith" and words of similar import herein (or in any
Ancillary Agreement) shall, unless otherwise stated, be construed to refer to
this Agreement (or the applicable other Ancillary Agreement) taken as a whole
(including all of the Schedules, Exhibits and Appendices hereto and thereto)
and not to any particular provision of this Agreement (or such other Ancillary
Agreement). Article, Section, Exhibit, Schedule and Appendix references are to
the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement
(or the applicable other Ancillary Agreement) unless otherwise specified. The
word "including" and words of similar import when used in this Agreement (or
the applicable other Ancillary Agreement) means "including, without
limitation," unless the context otherwise requires or unless otherwise
specified. The word "or" shall not be exclusive. Unless expressly stated to the
contrary in this Agreement or in any other Ancillary Agreement, all references
to "the date hereof," "the date of this Agreement," "hereby" and "hereupon" and
words of similar import shall all be references to December 19, 2001 (or the
date of which the relevant Ancillary Agreement is first entered into, as the
case may be) regardless of any amendment or restatement hereof (or thereof).
References to a "member" of either Group shall be held to include any
corporation or other Person within the definition of such Group. References to
"legal fees" shall include allocated costs of in-house counsel. The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement, and in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party hereto by virtue of the authorship of any
provisions of this Agreement.
46
IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.
AT&T CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President-- Law and Secretary
AT&T BROADBAND CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President and Assistant
Secretary
47
ANNEX I
The following provisions set forth the parties' understandings with
respect to the disposition of all or any portion of the interest in TWE (the
"TWE Interest") held, as of the date hereof, by MediaOne TWE Holdings, Inc. and
its affiliates at any time or from time to time whether prior to or after the
Closing Date:
(a) The following terms, as used in this Annex I, have the following
meanings:
"Closing Date" has the meaning set forth in the Merger Agreement.
"Contingent Payment" means (i) 50% of the excess, if any, of (A) the
Determined Value over (B) the Threshold Amount, reduced by (ii) an amount equal
to the product of 50% of such excess and the rate set forth in subparagraph (e)
hereof.
"Determined Value" means the Fair Market Value of the TWE Interest or
portion thereof disposed of, as the case may be; provided, however, that if all
or any portion of the TWE Interest is disposed of within the TWE Disposition
Period under Article XIII of the TWE Partnership Agreement or pursuant to one
or more negotiated dispositions or public or private market dispositions, then
the Determined Value with respect to such portion shall be the Proceeds from
such disposition(s).
"Fair Market Value" means with respect to all or any portion of the TWE
Interest, the Proceeds that would be received in a public offering of such
interest (or corresponding equity securities of a corporation into which TWE is
converted or that holds the TWE interest) (after deducting (i) reasonable
expenses, including underwriters' discounts and commissions and (ii) in the
event such offering is an initial public offering, an appropriate initial
public offering discount) based on the then prevailing market conditions.
"Parent" has the meaning set forth in the Merger Agreement.
"Proceeds" means (subject to clause (d) below) (a) if the proceeds are
paid in cash, the amount of the cash actually received;
(b) if the proceeds are paid in securities, assets or rights:
(i) in the case of securities, assets or rights listed on any
established stock exchange or a national market system including the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, Proceeds means the average of
the closing sales price for such item (or the closing bid, if no sales
were reported) reported in the Wall Street Journal for the 20 consecutive
trading day period prior to such date;
(ii) in the case of securities, assets or rights quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted
by a recognized securities dealer but selling prices are not reported,
Proceeds means the average of the means between the high and low asked
prices for the item for the 20 consecutive trading day period prior to
such date; or
(iii) in the absence of an established market for the securities,
assets or rights (including the rights embodied in this Annex I), Proceeds
means the fair value thereof as determined in good faith by a mutually
acceptable investment banking firm.
"Threshold Amount" means at any given time, an amount, which will
initially be $10.2 billion and shall be reduced by the aggregate Proceeds of
previous dispositions of the TWE Interest received from time to time, provided
that from the date the Merger Agreement is entered into, the outstanding
balance of the Threshold Amount from time to time shall bear simple interest at
a rate of 7% per annum and such interest shall be added to the Threshold
Amount.
"TWE Disposition Period" has the meaning set forth in clause (b) of this
Annex I.
(b) If all or any part of the TWE Interest is disposed of by AT&T
Broadband, Parent or their respective successors during the period beginning on
the date the Merger Agreement is signed and ending on the last day of the 54th
month after the Closing Date (the "TWE Disposition Period"), and the Closing
occurs, AT&T Broadband shall pay to AT&T on behalf of the AT&T Communications
Group, an amount equal to the Contingent Payment. Any Contingent Payment shall
be paid in the same proportion of cash, securities, assets and rights as was
received in the disposition and no Contingent Payment shall be made until
amounts equal to the Threshold Amount have been received as Proceeds. For the
avoidance of doubt, the transactions contemplated by the Merger Agreement and
this
48
Agreement shall not be considered a disposition for purposes hereof.
(c) If the TWE Interest has not been fully disposed of within the TWE
Disposition Period, the remaining interest shall be appraised by a mutually
acceptable investment banking firm on the basis of Fair Market Value. To the
extent that the Proceeds that would be received if such remaining interest were
disposed of for Fair Market Value exceeds the Threshold Amount, AT&T Broadband
shall pay to AT&T on behalf of the AT&T Communications Group an amount in cash
equal to 50% of such excess, reduced by an amount equal to the product at 50%
of such excess and the tax rate set forth in subparagraph (e) hereof, and AT&T
Broadband shall have no further obligations under this Annex I. If no payment
is required to be made pursuant to the preceding sentence, AT&T Broadband shall
have no further obligations under this Annex I.
(d) In the event that, before the Closing Date, AT&T (subject to Section
8.01(xii) of the Merger Agreement), or after the Closing Date, Parent, effects
a disposition of the TWE Interest on a Tax deferred basis, the payment to be
made to AT&T (taking into account the present value of the deferred Tax, the
direct and indirect costs of executing the transaction (including the detriment
of any guarantees required to be given) and the risk of the transaction) shall
be determined in good faith by the Board of Directors of AT&T Broadband or
Parent, as applicable.
(e) For purposes of this Annex I, the Tax rate will be assumed to be the
highest combined federal, state and local marginal corporate Tax rate in effect
at the relevant time.
(f) For all Tax purposes (unless required by a change in applicable Tax
law or resolution of a contest conducted in good faith and not settled,
compromised and/or conceded without the other party's consent, which shall not
be unreasonably withheld), the parties hereto agree to treat, and to cause
their respective affiliates to treat any payment hereunder as a distribution by
AT&T Broadband to AT&T, as the case may be, occurring immediately prior to the
Distribution and in connection with the Distribution.
49