4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 23, 1996
U S WEST, Inc.
(Exact name of registrant as specified in its charter)
A Delaware Corporation Commission File IRS Employer Identification
(State of incorporation) Number 1-8611 No. 84-0926774
7800 East Orchard Road, Englewood, Colorado 80111
(Address of principal executive offices, including Zip Code)
Telephone Number (303) 793-6500
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On October 23, 1996, U S WEST Communications Group released its third quarter
earnings results. In addition, U S WEST Media Group released its third
quarter earnings results on October 25, 1996. The releases and financial
statements are attached hereto as Exhibits.
Item 7. Exhibits
Exhibit Description
4A Purchase Agreement, dated as of October 24, 1996, by and among U S WEST
Financing II, U S WEST, Inc., and U S WEST Capital Funding, Inc. with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner and Smith Incorporated and each of
the Underwriters named therein.
4B Amended and Restated Declaration of Trust of U S WEST Financing II,
dated as of October 24, 1996, by and among, U S WEST, Inc. and the Trustees
named therein.
4C Third Supplemental Indenture, dated as of October 24, 1996, by and
among U S WEST Capital Funding, Inc., U S WEST, Inc. and Norwest Bank
Minnesota, National Association, as Trustee.
4D Preferred Securities Guarantee Agreement, dated as of October 29, 1996,
by U S WEST, Inc. and The First National Bank of Chicago, National
Association, as Trustee for the benefit of the Holders.
27 Financial Data Schedule.
99A Press Release issued October 23, 1996 concerning the earnings results
of U S WEST Communications Group for the third quarter of 1996.
99A.1 Unaudited Combined Statements of Income of U S WEST Communications
Group for the quarters ended September 30, 1995 and 1996, filed in connection
with the Press Release dated October 23, 1996.
99A.2 Unaudited Earnings Normalization Schedule of U S WEST Communications
Group for the quarters ended September 30, 1995 and 1996, filed in connection
with the Press Release dated October 23, 1996.
99A.3 Unaudited Selected Combined Group Data of U S WEST Communications
Group for the quarters ended September 30, 1995 and 1996, filed in connection
with the Press Release dated October 23, 1996.
99A.4 Unaudited Combined Balance Sheets of U S WEST Communications Group
for the quarter ended September 30, 1996 and year ended December 31, 1995,
filed in connection with the Press Release dated October 23, 1996.
99A.5 Unaudited Combined Statements of Cash Flows of U S WEST
Communications Group for the nine-months periods ended September 30, 1995 and
1996, filed in connection with the Press Release dated October 23, 1996.
99A.6 Unaudited Statements of Income of U S WEST Communications, Inc. for
the nine-months periods ended September 30, 1995 and 1996, filed in connection
with the Press Release dated October 23, 1996.
99B Press Release issued October 25, 1996 concerning the earnings results
of U S WEST Media Group for the third quarter of 1996.
99B.1 Unaudited Combined Statements of Income of U S WEST Media Group for
the quarters and nine-months periods ended September 30, 1995 and 1996, filed
in connection with the Press Release dated October 25, 1996.
99B.2 Unaudited Selected Combined Group Data of U S WEST Media Group for
the quarters and nine-months periods ended September 30, 1995 and 1996, filed
in connection with the Press Release dated October 25, 1996.
99B.3 Unaudited Combined Balance Sheets of U S WEST Media Group for the
quarter ended September 30, 1996, and the year ended December 31, 1995, filed
in connection with the Press Release dated October 25, 1996.
99B.4 Unaudited Combined Statements of Cash Flows of U S WEST Media Group
for the nine-months periods ended September 30, 1995 and 1996, filed in
connection with the Press Release dated October 25, 1996.
99B.5 Unaudited Selected Proportionate Data of U S WEST Media Group for
the quarters and nine-months periods ended September 30, 1995 and 1996, filed
in connection with the Press Release dated October 25, 1996.
99C.1 Unaudited Consolidated Statements of Income of U S WEST, Inc. for
the quarters and nine-months periods ended September 30, 1995 and 1996.
99C.2 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for the
quarter ended September 30, 1996 and the year ended December 31, 1995.
99C.3 Unaudited Consolidated Statements of Cash Flows of U S WEST, Inc.
for the nine-months periods ended September 30, 1995 and 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U S WEST, Inc.
/s/ STEPHEN E. BRILZ
By:___________________________
Stephen E. Brilz
Assistant Secretary
Dated: October 28, 1996
(..continued)
EXHIBIT 4A
U S WEST FINANCING II
(a Delaware business trust)
19,200,000 Preferred Securities
8 % Trust Originated Preferred Securities ("TOPrS" SM)
(Liquidation Amount of $25 Per Preferred Security)
PURCHASE AGREEMENT
Dated: October 24, 1996
___________________
SM "Trust Originated Preferred Securities" and "TOPrS" are
service marks of Merrill Lynch & Co., Inc.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
SCHEDULES
Schedule A - List of Underwriters Sch A 1
Schedule B - Pricing Information Sch B-1
EXHIBITS
Exhibit A - Form of Opinion of Weil, Gotshal & Manges LLP A-1
Exhibit B - Form of Opinion of Stephen E. Brilz, Esq. B-1
Exhibit C - Form of Opinion of Morris, Nichols, Arsht & Tunnell C-1
Exhibit D - Form of Opinion of Pepper, Hamilton & Scheetz D-1
</TABLE>
<PAGE>
U S WEST FINANCING II
(a Delaware business trust)
19,200,000 Preferred Securities
8 % Trust Originated Preferred Securities ("TOPrS" SM)
(Liquidation Amount of $25 Per Preferred Security)
PURCHASE AGREEMENT
October 24, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Dean Witter Reynolds Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Smith Barney Inc.
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
U S WEST FINANCING II (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Sections 3801
et seq.), U S WEST, Inc., a Delaware corporation (the "Guarantor"), and U
S WEST Capital Funding, Inc., a Colorado corporation ("Capital Funding" and,
together with the Trust and the Guarantor, the "Offerors") confirm their
agreement (the ___________________
SM "Trust Originated Preferred Securities" and "TOPrS" are service
marks of Merrill Lynch & Co., Inc.
<PAGE>
"Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch and Dean Witter Reynolds Inc., A.G. Edwards &
Sons, Inc., PaineWebber Incorporated, Prudential Securities Incorporated and
Smith Barney Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Trust and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of 8 % Trust Originated Preferred Securities (liquidation
amount of $25 per preferred security) of the Trust (the "Preferred
Securities") set forth in said Schedule A. The Preferred Securities to be
purchased by the Underwriters are hereinafter called the "Designated
Securities." The Preferred Securities will be guaranteed by the Guarantor
with respect to distributions and payments upon liquidation, redemption and
otherwise (the "Preferred Securities Guarantee") pursuant to the Preferred
Securities Guarantee Agreement (the "Preferred Securities Guarantee
Agreement"), dated as of October 29, 1996, between the Guarantor and The First
National Bank of Chicago, as Trustee, and entitled to the benefits of certain
backup undertakings described in the Prospectus (as defined herein) with
respect to Capital Funding's agreement pursuant to the Supplemental Indenture
(as defined herein) to pay all expenses relating to administration of the
Trust and the Guarantor's guarantee pursuant to the Supplemental Indenture of
that undertaking (the "Undertakings"). The Preferred Securities and the
related Preferred Securities Guarantees are referred to herein as the
"Securities".
The Offerors understand that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered. The entire proceeds from the
sale of the Securities will be combined with the entire proceeds from the sale
by the Trust to the Guarantor of its common securities (the "Common
Securities") guaranteed by the Guarantor, to the extent set forth in the
Prospectus, with respect to distributions and payments upon liquidation, and
redemption (the "Common Securities Guarantee" and together with the Preferred
Securities Guarantee and the Debt Guarantee (as defined herein), the
"Guarantees") pursuant to the Common Securities Guarantee Agreement (the
"Common Securities Guarantee Agreement" and, together with the Preferred
Securities Guarantee Agreement, the "Guarantee Agreements"), dated as of
October 29, 1996, between the Guarantor and The First National Bank of
Chicago, as Trustee, and will be used by the Trust to purchase $494,845,375
million aggregate principal amount of Subordinated Deferrable Interest Notes
(the "Subordinated Debt Securities") to be issued by Capital Funding. The
Preferred Securities and the Common Securities will be issued pursuant to the
amended and restated declaration of trust of the Trust, dated as of October
24, 1996 (the "Declaration"), among the Guarantor, as Sponsor, the trustees
named therein (the "Trustees") and the holders from time to time of undivided
beneficial interests in the assets of the Trust. The Subordinated Debt
Securities and the guarantee by the Guarantor of the payment of principal,
premium, if any, and interest on the Subordinated Debt Securities (the "Debt
Guarantee") will be issued pursuant to an indenture, dated as of September 6,
1995, among U S WEST, Inc., a Colorado corporation, Capital Funding and
Norwest Bank, as trustee (the "Debt Trustee"), as supplemented by a Second
Supplemental Indenture, dated as of October 31, 1995, among the Guarantor,
Capital Funding and the Debt Trustee (as so supplemented, the "Base
Indenture"),
<PAGE>
and a supplement to the Base Indenture, dated as of October 24, 1996 (the
"Supplemental Indenture," and together with the Base Indenture and any other
amendments or supplements thereto, the "Indenture"), among the Guarantor,
Capital Funding and the Debt Trustee.
The Offerors have filed with the Securities and Exchange Commission
(the "Commission") a shelf registration statement on Form S-3 (No. 33-57889)
covering the registration of (i) the Preferred Securities, (ii) the Preferred
Securities Guarantee, (iii) the Subordinated Debt Securities and (iv) the Debt
Guarantee under the Securities Act of 1933, as amended (the "1933 Act"), which
permits the delayed or continuous offering of securities pursuant to Rule 415
of the rules and regulations of the Commission under the 1933 Act (the "1933
Act Regulations"). Promptly after execution and delivery of this Agreement,
the Offerors will either (i) prepare and file a prospectus in accordance with
the provisions of Rule 424(b) ("Rule 424(b)") of the 1933 Act Regulations or
(ii) if the Offerors have elected to rely upon Rule 434 ("Rule 434") of the
1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in
accordance with the provisions of Rule 434 and 424(b). The information
included in such Term Sheet that was omitted from such registration statement
at the time it became effective but that is deemed part of such registration
statement at the time it became effective is referred to as "Rule 434
Information." Each prospectus used before such Rule 424(b) prospectus has
been filed and any prospectus that omitted the Rule 434 Information, in each
case that was used after such effectiveness and prior to the execution and
delivery of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto, schedules thereto, if
any, and the documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the 1933 Act, at the time it became effective and including
the Rule 434 Information is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement"
and after such filing the term "Registration Statement" shall include the Rule
462 (b) Registration Statement. The final prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
1933 Act, in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to
the preliminary prospectus dated October 16, 1996 together with the Term Sheet
and all references in this Agreement to the date of the Prospectus shall mean
the date of the Term Sheet. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which
is incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
1. Representations and Warranties. The Offerors jointly and
severally represent and warrant to each Underwriter as of the date hereof
(such date being hereinafter referred to as the "Representation Date") as
follows:
(a) Each of the Registration Statement and any Rule 462(b)
Registration Statement has become effective under the 1933 Act. At the
respective times the Registration Statement became effective and at the
Representation Date, the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto complied and will comply in
all material respects with the requirements of the 1933 Act, the 1933 Act
Regulations, the 1934 Act, the regulations of the Commission under the 1934
Act (the "1934 Act Regulations"), and the Trust Indenture Act of 1939 (the
"1939 Act") and the rules and regulations of the Commission under the 1939 Act
(the "1939 Act Regulations"), and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, if applicable, at the Representation
Date and at the Closing Time referred to in Section 2 hereof, will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or Prospectus made
in reliance upon and in conformity with information furnished to the Offerors
in writing by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement or Prospectus.
(b) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, there has been no material adverse change or any development
involving a prospective material adverse change in the financial condition or
results of operation of the Guarantor and its subsidiaries taken as a whole.
2. Sale and Delivery to Underwriters; Closing.
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Trust agrees to sell to each Underwriter, severally and not jointly, and
each Underwriter, severally and not jointly, agrees to purchase from the
Trust, at the price per security set forth in Schedule B, the number of
Securities set forth in Schedule A opposite the name of such Underwriter, plus
any additional number of
<PAGE>
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(b) Commission. As compensation to the Underwriters for their
commitments hereunder and in view of the fact that the proceeds of the sale of
the Securities will be used to purchase the Subordinated Debt Securities
of Capital Funding, Capital Funding hereby agrees to pay to the
Representatives, for the accounts of the several Underwriters, a commission
per security set forth in Schedule B as compensation to the Underwriters for
their commitments under this Agreement.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022, or
at such other place as shall be agreed upon by the Representatives and the
Offerors, at 10:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section
10), or such other time not later than ten business days after such date as
shall be agreed upon by the Representatives and the Offerors (such time and
date of payment and delivery being herein called "Closing Time").
Payment shall be made to the Trust by wire transfer of immediately
available funds to a bank account designated by the Trust, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood
that each Underwriter has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for,
the Securities which it has agreed to purchase. Merrill Lynch, individually
and not as representative of the Underwriters, may (but shall not be obligated
to) make payment of the purchase price for the Securities to be purchased by
any Underwriter whose funds have not been received by the Closing Time but
such payment shall not relieve such Underwriter from its obligations
hereunder.
At the Closing Time, Capital Funding will pay, or cause to be paid, the
commission payable at such time to the Underwriters under Section 2(b) hereof
by wire transfer of immediately available funds to a bank account designated
by Merrill Lynch.
(d) Denominations; Registration. Certificates for the Securities shall
be in such denominations and registered in such names as the Representatives
may request in writing at least one full business day before the Closing Time.
The certificates for the Securities will be made available for examination
and packaging by the Representatives in The City of New York not later than
10:00 A.M. (Eastern time) on the business day prior to the Closing Time.
3. Covenants of the Offerors. Each of the Offerors jointly and
severally covenants with each Underwriter as follows:
<PAGE>
(a) Compliance with Securities Regulations and Commission Requests.
The Offerors, subject to Section 3(b), will comply with the requirements of
Rule 434, as applicable, and will notify the Representatives immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes. The Offerors will
promptly effect the filings necessary pursuant to Rule 424(b). The Offerors
will make every reasonable effort to prevent the issuance of any stop order
and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(b) Filing of Amendments. The Offerors will give the Representatives
notice of their intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall reasonably object unless the Offerors shall decide that
such document must be filed in accordance with applicable law.
(c) Delivery of Registration Statements. The Offerors will furnish to
the Representatives copies of the Registration Statement, including all
exhibits thereto, the Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as are
reasonably requested. The copies of the Registration Statement, the
Prospectus and all amendments and supplements to such documents furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Continued Compliance with Securities Laws. The Offerors will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the
1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement and in the Prospectus. If
at any time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary to amend the
<PAGE>
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statements of a material fact or omit
to state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary at any such time to
amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Offerors will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or
the Prospectus comply with such requirements, and the Offerors will furnish to
the Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(e) Blue Sky Qualifications. The Offerors will use its best efforts,
in cooperation with the Underwriters, to qualify the Preferred Securities and
Subordinated Debt Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions as the Representatives
may designate; provided, however, that each of the Offerors shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in
which it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject.
(f) Rule 158. The Trust and the Guarantor will make generally
available to their securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated by,
the last paragraph of Section 11(a) of the 1933 Act.
(g) Listing. The Offerors will use their reasonable best efforts to
effect the listing of the Preferred Securities on the New York Stock Exchange;
if the Preferred Securities are exchanged for Subordinated Debt
Securities, Capital Funding will use its reasonable best efforts to effect the
listing of the Subordinated Debt securities on the exchange on which the
Preferred Securities were then listed.
(h) Restriction on Sale of Securities. During a period of 30 days
from the date of the Prospectus, neither the Trust, the Guarantor nor Capital
Funding will, without the prior written consent of Merrill Lynch, directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any Preferred
Securities or any securities convertible into or exercisable or exchangeable
for Preferred Securities or file any registration statement under the 1933 Act
with respect to any of the foregoing. The foregoing sentence shall not apply
to any of the Securities to be sold hereunder.
4. Payment of Expenses. (a) Expenses. Capital Funding will pay
all expenses incident to the performance of each Offeror's obligations under
this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with
the offering, purchase, sale, issuance or delivery of the Securities, (iii)
the preparation, issuance and delivery of the certificates for the Preferred
Securities to the Underwriters, (iv) the fees and disbursements of the
Guarantor's, Capital Funding's and the Trust's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectus and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the filing fees incident to,
and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review, if any, by the National Association of Securities
Dealers, Inc. (the "NASD") of the terms of the sale of the Securities, (ix)
the fees and expenses of the Debt Trustee, including the fees and
disbursements of counsel for the Debt Trustee, in connection with the
Indenture and the Subordinated Debt Securities; (x) the fees and expenses of
the Property Trustee and Delaware Trustee, including the fees and
disbursements of counsel for the Property Trustee and Delaware Trustee, in
connection with the Declaration and the Certificate of Trust; (xi) any fees
charged by securities rating services for rating the Preferred Securities and
the Subordinated Debt Securities, (xii) the fees and expenses incurred in
connection with the listing of the Preferred Securities and, if applicable,
the Subordinated Debt Securities on the New York Stock Exchange, (xiii) the
fees and expenses of any transfer agent or registrar for the Securities, and
(xiv) the cost of qualifying the Preferred Securities with The Depository
Trust Company.
(a) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, Capital Funding shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriters.
5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Offerors contained in Section 1 hereof,
to the performance by the Offerors of their covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission. The Prospectus
shall have been filed with the Commission in accordance with Rule 424(b)
or, if the Offerors have elected to rely upon Rule 434, a Term Sheet shall
have been filed with the Commission in accordance with Rule 424(b).
<PAGE>
(b) Opinion of Counsel. At Closing Time the Representatives shall
have received:
(i) The favorable opinion, dated as of Closing Time, of Weil, Gotshal &
Manges LLP, counsel for the Offerors, in form and substance reasonably
satisfactory to counsel for the Underwriters, substantially in the form set
forth in Exhibit A.
(ii) The favorable opinion, dated as of Closing Time, of Stephen E.
Brilz, Esq., Corporate Counsel for U S WEST, Inc., in form and substance
satisfactory to counsel for the Underwriters, substantially in the form set
forth in Exhibit B.
(iii) The favorable opinion, dated as of Closing Time, of Morris,
Nichols, Arsht & Tunnell, special Delaware counsel for the Trust and the
Guarantor, in form and substance satisfactory to counsel for the Underwriters,
substantially in the form set forth in Exhibit C.
(iv) The favorable opinion, dated as of Closing Time, of the
Pepper, Hamilton & Scheetz, special Delaware counsel for The First National
Bank of Chicago, as Property Trustee and First Chicago Delaware Inc., as
Delaware Trustee under the Declaration, in form and substance satisfactory to
counsel for the Underwriters, substantially in the form of Exhibit D.
(v) The favorable opinion, dated as of Closing Time, of Skadden, Arps,
Slate, Meagher & Flom ("SASM&F"), counsel for the Underwriters, in form and
substance satisfactory to the Underwriters.
In giving its opinion, SASM&F may rely as to certain
matters of Colorado law upon the opinion of Stephen E. Brilz, Corporate
Counsel for U S WEST, Inc., which shall be delivered in accordance with
Section 5(b)(ii) hereto, and as to certain matters relating to The First
National Bank of Chicago under the federal banking laws upon the opinion of
Pepper, Hamilton & Scheetz, special Delaware counsel to the Property Trustee,
which shall be delivered in accordance with Section 5(b)(iv) hereto.
(c) Officers' Certificate. At Closing Time, since the date hereof or
since the respective dates as of which information is given in the Prospectus,
there shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Guarantor and any of its subsidiaries, taken as a whole, which, in the
judgment of the Representatives, materially impairs the investment quality of
the Designated Securities and the Representatives shall have received (i) a
certificate, dated as of the Closing Time, of a Vice President of the
Guarantor, (ii) a certificate, dated as of the Closing Time, of a Vice
President of Capital Funding, and (iii) a certificate, dated as of the Closing
Time, of a Trustee of the Trust, in each case in which such officers shall
state that, to the best of their knowledge after reasonable investigation, the
representations and warranties of the Offerors in this Agreement are true and
correct, that the Offerors have complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Time, that no stop order suspending the effectiveness of the
Registration Statement is in effect and no proceedings for that purpose are
pending or are contemplated by the Commission and that, subsequent to the date
of the most recent financial statements in the Prospectus, there has been no
material adverse change in the financial position or results of operations of
the Guarantor and any of its subsidiaries, taken as a whole, except as set
forth in or contemplated by the Prospectus.
(d) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from each of Coopers &
Lybrand L.L.P. and Arthur Andersen LLP a letter dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect that:
(i) they are independent public accountants with respect to the
Guarantor and its consolidated subsidiaries, including Capital Funding within
the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) in their opinion, the consolidated financial statements and any
supplementary financial information and schedules audited (and, if applicable,
prospective financial statements and/or pro forma financial information
examined) by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act or the
Exchange Act and the related published rules and regulations thereunder; and
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
consolidated interim financial statements, selected financial data, statements
and/or condensed financial statements derived from audited financial
statements of the Guarantor for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been furnished to the
Representatives;
(iii) as to the letter from Arthur Andersen LLP, based upon limited
procedures set forth in detail in such letter, nothing has come to their
attention which causes them to believe that:
(1) the unaudited consolidated financial statements and supporting
schedules of the Guarantor included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations or are not presented
in conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Registration Statement,
(2) the unaudited amounts of revenues, net income and net income per
share set forth under "U S WEST, Inc. Summary Financial Information" in the
Prospectus were not determined on a basis substantially consistent with that
used in determining the corresponding amounts in the audited financial
statements included in the Registration Statement, or
(3) at a specified date not more than five days prior to the date of
this Agreement, there has been any change in the capital stock of the
Guarantor and its subsidiaries, including Capital Funding, or any increase in
the consolidated long-term debt of the Guarantor and its subsidiaries,
including Capital Funding, or any decrease in consolidated net current assets
or net assets as compared with the amounts shown on the date of the most
recent consolidated balance sheet included in or incorporated by reference in
the Registration Statement and the Prospectus (June 30, 1996 balance sheet
included in the Registration Statement) or, during the period from the date of
the most recent consolidated balance sheet included in or incorporated by
reference in the Registration Statement and the Prospectus to a specified date
not more than five days prior to the date of this Agreement, there were any
decreases, as compared with the corresponding period in the preceding year, in
consolidated revenues, net income or net income per share of the Guarantor and
its subsidiaries, including Capital Funding, except in all instances for
changes, increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur; and
(iv) in addition to the examination referred to in their opinions and
the limited procedures referred to in clause (iii) above, they have carried
out certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are included in
the Registration Statement and Prospectus, or incorporated therein by
reference, and which are specified by the Representatives, and have found such
amounts, percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Guarantor and its
subsidiaries, including Capital Funding, identified in such letter.
(e) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from each of Coopers & Lybrand L.L.P. and Arthur Andersen
LLP a letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in their letters furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to Closing Time.
<PAGE>
(f) Maintenance of Rating. At Closing Time, the Preferred Securities
and the Subordinated Debt Securities shall be rated in one of the four highest
rating categories for long term debt ("Investment Grade") by any
nationally recognized statistical rating agency, and the Trust shall have
delivered to the Representatives a letter, dated the Closing Time, from such
nationally recognized statistical rating agency, or other evidence
satisfactory to the Representatives, confirming that the Preferred Securities
and the Subordinated Debt Securities have Investment Grade ratings.
(g) Approval of Listing. At Closing Time, the Preferred Securities
shall have been approved for listing on the New York Stock Exchange, subject
only to official notice of issuance.
(h) Additional Documents. At Closing Time counsel for the
Underwriters shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance
and sale of the Preferred Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Offerors in connection with the issuance and sale of the
Preferred Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the Underwriters.
(i) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representatives by notice to the
Offerors at any time at or prior to Closing Time, and such termination shall
be without liability of any party to any other party except as provided in
Section 4.
6. Indemnification.
(a) Indemnification of Underwriters. The Offerors agree to jointly
and severally indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or
any amendment thereto), including the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
govern-mental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with the
written consent of the Guarantor; and
(iii) against any and all reasonable expense as incurred (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel chosen
by Merrill Lynch), in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Trust, the Guarantor or Capital Funding by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that this indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of
any underwriter from whom the person asserting any such losses, liabilities,
claims, damages or expenses purchased Securities, or any person controlling
such Underwriter, if the Offerors sustain the burden that a copy of the
Prospectus (as then amended or supplemented if the Offerors shall have
furnished any such amendments or supplements thereto), but excluding documents
incorporated or deemed to be incorporated by reference, was not sent or given
by or on behalf of such Underwriter to such person, if such is required by
law, at or prior to the written confirmation of the sale of such Securities to
such person and if the Prospectus (as so amended or supplemented, but
excluding documents incorporated or deemed to be incorporated by reference
therein) would have corrected the defect giving rise to such loss, liability,
claim, damage or expense, it being understood that this proviso shall have no
application if such defect shall have been corrected in a document which is
incorporated or deemed to be incorporated by reference in the Prospectus.
(b) Indemnification of the Trust. The Guarantor and Capital Funding
agree jointly and severally to indemnify the Trust against all loss,
liability, claim, damage and expense whatsoever, as due from the Trust under
Section 6(a) hereunder.
(c) Indemnification of Offerors, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Offerors,
their directors, trustees, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Offerors within the
meaning of Section 15 of the 1933 Act against any and all loss, liability,
claim, damage and
<PAGE>
expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Offerors by such Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have otherwise
than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party). If an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be
liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action other than reasonable costs
of investigation; provided, however, that any indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the indemnified party reasonably
objects to such assumption on the ground that there may be legal defenses
available to it which are different from or in addition to those available to
such indemnifying party in which case, if such indemnified party so notified
the indemnifying party in writing that such indemnified party will employ
separate counsel, the indemnified party shall be entitled to employ separate
counsel at the expense of the indemnifying party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The indemnifying party or parties shall not be
liable under this Agreement with respect to any settlement made by any
indemnified party or parties without prior written consent by the indemnifying
party or parties to such settlement.
7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the
<PAGE>
relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the
<PAGE>
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1933 Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth
opposite their respective names in Schedule A hereto and not joint.
8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or
in certificates of officers or Trustees of the Offerors submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person,
or by or on behalf of the Offerors, and shall survive delivery of the
Preferred Securities to the Underwriters.
9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Offerors, at any time at or prior to Closing Time
(i) if there has been, since the date of this Agreement or since the
respective dates as of which information is given in the Registration
Statement, any material adverse change or any development involving a
prospective material adverse change, in the financial condition or results of
operations of the Guarantor and its subsidiaries, taken as a whole, whether or
not arising in the ordinary course of business, or (ii) if there has
occurred any outbreak of hostilities or material escalation thereof or other
calamity or crisis the effect of which is such as to make it, in the judgment
of the Representatives, impracticable to market the Designated Securities,
(iii) if trading in the Designated Securities has been suspended by the
Commission, or if trading generally on the New York Stock Exchange has been
suspended, limited or restricted or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
said exchange or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either Federal, New
York or Colorado authorities or (iv) if there has been any decrease in the
ratings of any of the debt securities of the Guarantor or Capital Funding or
of the Preferred Securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act) or such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the debt
securities of the Guarantor or Capital Funding or of the Preferred Securities,
except for such decreases or announcements which the Prospectus discloses have
occurred or may occur.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in section 4 hereof.
10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at Closing Time to purchase the Designated
Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the
non-defaulting
<PAGE>
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Designated Securities, each of the non-defaulting Underwriters shall
be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Designated Securities, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Offerors
shall have the right to postpone Closing Time for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under
this Section 10.
11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Robin Mass, Vice
President; notices to the Trust, the Guarantor and Capital Funding shall be
directed to them at 7800 East Orchard Road, Englewood, Colorado 80111,
attention of Stephen E. Brilz, Esq., Corporate Counsel.
12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the Underwriters and the Trust, the Guarantor, and Capital
Funding and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters and the Trust, the Guarantor, and
Capital Funding and their respective successors and the controlling persons
and officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Trust, the Guarantor,
and Capital Funding and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
<PAGE>
13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.
14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Trust a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Trust, the Guarantor, and Capital Funding in
accordance with its terms.
Very truly yours,
U S WEST, INC.
By__________________________________________
Name:
Title:
U S WEST CAPITAL FUNDING, INC.
By__________________________________________
Name:
Title:
U S WEST FINANCING II
By__________________________________________
Name:
Title: Trustee
By__________________________________________
Name:
Title: Trustee
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By__________________________________________
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C>
Name of Underwriter Number of Securities
- ---------------------------------------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated 2,240,000
Dean Witter Reynolds Inc. 2,240,000
A.G. Edwards & Sons, Inc. 2,240,000
PaineWebber Incorporated 2,240,000
Prudential Securities Incorporated 2,240,000
Smith Barney Inc. 2,240,000
Robert W. Baird & Co. Incorporated 180,000
Bear, Stearns & Co. Inc. 180,000
Alex, Brown & Sons Incorporated 180,000
Cowen & Company 180,000
Dain Bosworth Incorporated 180,000
Dillon, Reed & Co, Inc. 180,000
Donaldson, Lufkin & Jenrette Securities Corporation 180,000
EVEREN Securities, Inc. 180,000
The Ohio Company 180,000
Oppenheimer & Co., Inc. 180,000
Piper Jaffray Inc. 180,000
Raymond James & Associates, Inc. 180,000
Tucker Anthony Incorporated 180,000
Wheat, First Securities, Inc. 180,000
Advest, Inc. 90,000
Artemis Capital Group 90,000
J.C. Bradford & Co. 90,000
JW Charles Securities, Inc. 90,000
Craigle Incorporated 90,000
Crowell, Weedon & Co. 90,000
Davenport & Co. of Virginia, Inc. 90,000
D. A. Davidson & Co. Incorporated 90,000
Fahnestock & Co. Inc. 90,000
Gibraltar Securities Co. 90,000
Gruntal & Co., Incorporated 90,000
J.J.B. Hilliard, W. L. Lyons, Inc. 90,000
Interstate/Johnson Lane Corporation 90,000
Janney Montgomery Scott Inc. 90,000
Josephthal Lyon & Ross Incorpoated 90,000
Kennedy, Cabot & Co. 90,000
Legg Mason Wood Walker, Incorporated 90,000
McDonald & Company Securities, Inc. 90,000
McGinn, Smith & Co., Inc. 90,000
Mesirow Financial, Inc. 90,000
Morgan Keegan & Company, Inc. 90,000
David A. Noyes & Company 90,000
Olde Discount Corporation 90,000
Pryor, McClendon, Counts & Co., Inc. 90,000
Ragen MacKenzie Incorporated 90,000
Rauscher Pierce Refsnes, Inc. 90,000
The Robinson-Humphrey Company, Inc. 90,000
Roney & Co., LLC 90,000
Scott & Stringfellow, Inc. 90,000
Muriel Siebert & Co., Inc. 90,000
Stifel, Nicolaus & Company, Incorporated 90,000
Stone & Youngberg 90,000
Sutro & Co. Incorporated 90,000
US Clearing Corp. 90,000
Utendahl Capital Partners, L.P. 90,000
Yamaichi International (America), Inc. 90,000
--------------------
Total 19,200,000
====================
</TABLE>
<PAGE>
SCHEDULE B
U S WEST FINANCING II
19,200,000 Preferred Securities
8 % Trust Originated Preferred Securities ("TOPrS")
(Liquidation Amount of $25 Per Preferred Security)
15. The initial public offering price per security for the Preferred
Securities, determined as provided in said Section 2, shall be $25.00.
16. The purchase price per security for the Preferred Securities to be
paid by the several Underwriters shall be $25.00, being an amount equal
to the initial public offering price set forth above.
17. The commission per Preferred Security to be paid by Capital
Funding to the Underwriters for their commitments hereunder shall be $.7875;
provided, however, that the commission per Preferred Security for sales of
10,000 or more Preferred Securities to a single purchaser shall be $.50.
<PAGE>
Exhibit A
FORM OF OPINION OF WEIL, GOTSHAL & MANGES LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(i)
(a) The Registration Statement is effective under the 1933 Act and, to
the best of their knowledge and information, no stop order suspending the
effectiveness of the Registration Statement has been issued under the 1933 Act
or proceedings therefor initiated or threatened by the Commission.
(b) At the time the Registration Statement became effective and at the
Representation Date, the Registration Statement (other than the
Incorporated Documents, the financial statements and supporting schedules,
included therein and other financial and statistical data included therein and
those parts of the Registration Statement that constitute the Debt Trustee's
and the Property Trustee's respective Statements of Eligibility and
Qualification under the 1939 Act (form T-1), as to which no opinion need be
rendered) complied as to form in all material respects with the requirements
of the 1933 Act, the 1933 Act Regulations, the 1939 Act, and the 1939 Act
Regulations.
(c) The statements in the Prospectus under the captions "Description
of the Preferred Securities", "Description of the Subordinated Debt Securities
and the Debt Guarantee", "Effect of Obligations under the Subordinated
Debt Securities, the Debt Guarantee and the Preferred Securities Guarantee",
in the Prospectus under the captions "Description of the Preferred
Securities", "Description of the Preferred Securities Guarantees", and
"Description of the Subordinated Debt Securities and the Debt Guarantees"
insofar as they constitute summaries of legal matters or documents, have been
reviewed by them and are accurate in all material respects.
(d) The Purchase Agreement has been duly executed and delivered by the
Offerors.
(e) No federal authorization, approval, consent or order of any court
or governmental authority or agency is required in connection with the
issuance and sale of the Common Securities or the offering of the Preferred
Securities, the Subordinated Debt Securities or the Guarantees, except such as
have been obtained under the 1933 Act or the 1933 Act Regulations or the
1934 Act or the 1934 Act Regulations and the qualification of the Declaration
and the Indenture under the 1939 Act.
(f) The Declaration and the Preferred Securities Guarantee have been
duly qualified under the 1939 Act.
(g) Assuming that the Preferred Securities Guarantee Agreement has
been duly authorized by the Guarantor, the Preferred Securities Guarantee
Agreement has been duly executed and delivered by the Guarantor and assuming
due authorization, execution and delivery by First Chicago, constitutes a
valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions.
(h) Assuming that the Indenture has been duly authorized by each of
the Guarantor and Capital Funding and has been duly authorized, executed and
delivered by the Debt Trustee, the Indenture has been duly executed and
delivered by each of the Guarantor and Capital Funding and is a valid and
binding obligation of each of the Guarantor and Capital Funding, enforceable
against each of the Guarantor and Capital Funding in accordance with its
terms, except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions; and the Indenture has been duly qualified under the
1939 Act.
(i) Assuming that the Subordinated Debt Securities have been duly
authorized by Capital Funding, the Subordinated Debt Securities have been duly
executed by Capital Funding, and when authenticated in the manner
provided in the Indenture and delivered against payment therefor as described
in the Prospectus, will constitute valid and binding obligations of Capital
Funding, enforceable against Capital Funding in accordance with their terms,
except to the extent that enforcement thereof may be limited by the Bankruptcy
Exceptions.
(j) Assuming that the Debt Guarantee has been duly authorized by the
Guarantor, the Debt Guarantee has been duly executed by the Guarantor, and
when authenticated in the manner provided in the Indenture and delivered
against payment therefor as described in the Prospectus, constitute a valid
and binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except to the extent that enforcement thereof may
be limited by the Bankruptcy Exceptions.
(k) The Trust will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes.
(l) The Trust is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the 1940 Act.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Offerors,
representatives of the independent public accountants for the Offerors and
with you and your counsel, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed;
such counsel has not independently verified the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus and the limitations inherent in the examination made by such
counsel and the nature and extent of such counsel's participation in such
conferences are such that such counsel is not passing upon, and is unable to
assume, and does not assume, any responsibility for, the accuracy,
completeness or fairness of such statements, except for those made under the
captions "Description of the Preferred Securities", "Description of the
Preferred Securities Guarantees", and "Description of the Subordinated Debt
Securities and the Debt Guarantees"; however, based upon such counsel's
participation in the aforesaid conferences, no facts have come to its
attention which lead it to believe that the Registration Statement, and each
amendment thereto, as of the date of the filing of the annual report on Form
10-K of the Guarantor for the year ended December 31, 1995 with the Commission
(other than the financial statements and the notes thereto, the financial
statements schedules, the other financial and statistical data therein and the
operating data included in the Prospectus Supplement under the caption
"Summary Historical and Pro Forma Financial Data", as to which such counsel
need express no belief and those parts of the Registration Statement that
constitute the Debt Trustee's and the Property Trustee's respective Statements
of Eligibility and Qualification under the 1939 Act (form T-1)), contained any
untrue statements of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further amendments
or supplement or supplement thereto made by the Offerors prior to the Closing
Time (except as aforesaid) includes any untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
that, as of such Closing Time, either the Prospectus or any further amendment
or supplement thereto made by the Offerors prior to such Closing Time (except
as aforesaid) includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
In giving such opinion, Weil, Gotshal & Manges LLP may rely as to
matters governed by the laws of the State of Colorado on an opinion or
opinions of Stephen E. Brilz, Esq., and as to certain matters governed by the
laws of the State of Delaware, on an opinion or opinions of Morris, Nichols,
Arsht & Tunnell, respectively, and as to certain matters relating to The First
National Bank of Chicago under the federal banking laws on an opinion of
Pepper, Hamilton & Scheetz, provided that such opinion or opinions shall be
addressed to the Underwriters, shall be dated as of such date and shall
expressly permit Weil, Gotshal & Manges LLP to rely thereon.\
<PAGE>
Exhibit B
FORM OF OPINION OF STEPHEN E. BRILZ, ESQ.
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(ii)
( The Guarantor has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and Prospectus
and to enter into and perform its obligations under the Purchase Agreement,
the Declaration, the Indenture and each of the Guarantee Agreements and to
purchase, own and hold the Common Securities issued by the Trust.
( Capital Funding has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Colorado
with corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and
Prospectus and to enter into and perform its obligations under the Purchase
Agreement and the Indenture.
( The Declaration has been duly authorized, executed and delivered by
the Guarantor and each of the Regular Trustees.
( The Purchase Agreement, the Guarantee Agreements, the Indenture, the
Subordinated Debt Securities and the Debt Guarantee have been duly authorized,
executed and delivered by the Guarantor.
( The Purchase Agreement, the Indenture, the Subordinated Debt
Securities, and the Debt Guarantee have been duly authorized, executed and
delivered by Capital Funding.
( The execution, delivery and performance of the Purchase Agreement,
the Declaration, the Preferred Securities, the Common Securities, the
Indenture, the Subordinated Debt Securities, the Guarantee Agreements, the
Indenture and the Guarantees and the consummation of the transactions
contemplated herein and therein and compliance by the Offerors with their
respective obligations hereunder and thereunder will not conflict with in any
material matter or result in a material breach or violation of any term or
provision of, or constitute a default under any indenture, mortgage, deed of
trust, loan agreement, or other agreement or instrument known to such counsel
to which the Guarantor, any of U S WEST Communications Group, Inc., U S WEST
Communications Inc., U S WEST New Vector Group, Inc. and Capital Funding (the
"Significant Subsidiaries") or the Trust is a party or by which any of them
may be bound, or to which any of the property or assets of the Guarantor, any
of the Significant Subsidiaries or the Trust is subject, nor will such action
result in any violation of the provisions of the charter or by-laws of the
Guarantor or of Capital Funding or the Declaration or the Certificate of
Trust, or any statute (other than the Act or state securities or Blue Sky
laws) or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Guarantor or any of
its subsidiaries or any of their properties; except any statute, order, rule
or regulation the violation of which would not have a material adverse effect
on the consolidated financial position, shareholders' equity or results of the
Guarantor taken as a whole.
( No state authorization, approval, consent or order of any court or
governmental authority or agency is required in connection with the issuance
and sale of the Common Securities or the offering of the Preferred Securities,
the Subordinated Debt Securities or the Guarantees, except such as have
been obtained under the 1933 Act or the 1933 Act Regulations and the
qualification of the Declaration and the Indenture under the 1939 Act and such
as may be required under state securities law.
( All of the issued and outstanding Common Securities of the Trust are
directly owned by the Guarantor free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
( The Property Trustee is the record holder of Subordinated Debt
Securities and the Debt Guarantee and no security interest, mortgage, pledge,
lien, encumbrance, claim or equity is noted thereon or on the register.
( Each of the documents incorporated by reference in the Registration
Statement or Prospectus at the time they were filed or last amended (other
than the financial statements and related schedules and other financial or
statistical data included or incorporated by reference therein as to which
such counsel need express no opinion), complied as to form in all material
respects with the requirements of the 1933 Act, the 1933 Act Regulations, the
1934 Act, the 1934 Act Regulations, as applicable.
In giving such opinion, Stephen E. Brilz, Esq. may rely as to certain
matters governed by the laws of the State of Delaware or the State of New York
on an opinion or opinions of Morris, Nichols, Arsht & Tunnell and Weil,
Gotshal & Manges LLP, respectively, provided that such opinion or opinions
shall be addressed to the Underwriters, shall be dated as of such date and
shall expressly permit Stephen E. Brilz, Esq. to rely thereon.
<PAGE>
Exhibit C
FORM OF OPINION OF MORRIS, NICHOLS, ARSHT & TUNNELL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(iii)
( The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act; all filings required
under the laws of the State of Delaware with respect to the creation and valid
existence of the Trust as a business trust have been made; under the
Delaware Act and the Declaration, the Trust has the business trust power and
authority to (x) own property and conduct its business, all as described in
the Prospectus, (y) enter into and perform its obligations under the Purchase
Agreement, and (z) issue and perform its obligations under the Preferred
Securities and the Common Securities.
( Assuming the Declaration has been duly authorized, executed and
delivered by the Trustees and the Guarantor, the Declaration is a valid and
binding obligation of the Guarantor and the Trustees, enforceable against the
Guarantor and the Trustees, in accordance with its terms, except as
enforcement thereof may be limited by the (i) bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation, fraudulent conveyance
and other similar laws relating to or affecting the rights and remedies of
creditors generally, (ii) principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law), and (iii)
considerations of public policy or the effect of applicable law relating to
fiduciary duties.
( Under the Delaware Act and the Declaration, the execution and
delivery by the Trust of the Purchase Agreement, and the performance by the
Trust of its obligations thereunder, have been duly authorized by all
necessary business trust action on the part of the Trust; and the Purchase
Agreement has been duly executed by the Trust under the laws of Delaware.
( The Common Securities have been duly authorized by the Declaration
and are validly issued and represent undivided beneficial interests in the
assets of the Trust; and under the Delaware Act and the Declaration, the
issuance of the Common Securities is not subject to preemptive rights.
( The Preferred Securities have been duly authorized by the Declaration
and, when delivered to and paid for pursuant to this Agreement, will be
validly issued, and (subject to the qualifications set forth herein) fully
paid and non-assessable undivided beneficial interests in the assets of the
Trust; the holders of the Preferred Securities, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; and under the Delaware Act and the
Declaration, the issuance of the Preferred Securities is not subject to
preemptive rights. Such counsel may note that the Preferred Security holders
may be obligated, pursuant to the Declaration, to (i) provide indemnity and/or
security in connection
<PAGE>
with and pay taxes or governmental charges arising from transfers of Preferred
Security Certificates and the issuance of replacement Preferred Security
Certificates, and (ii) provide security and indemnity in connection with
requests of or directions to the Property Trustee to exercise its rights and
powers under the Declaration.
( The issuance and sale by the Trust of the Preferred Securities and
Common Securities; the execution, delivery and performance by the Trust of the
Purchase Agreement; the consummation of the transactions contemplated
herein; and compliance by the Trust with its obligations hereunder will not
violate any of the provisions of the Certificate of Trust or the Declaration,
or any applicable Delaware law or administrative regulation.
( Assuming that the Trust derives no income from or in connection with
sources within the State of Delaware and has no assets, activities (other than
having a Delaware Trustee as required by the Delaware Act and the filing
of documents with the Delaware Secretary of State) or employees in the State
of Delaware, no authorization, approval, consent or order of any Delaware
court or governmental authority or agency is required to be obtained by the
Trust solely in connection with the issuance and sale of the Common Securities
and the Preferred Securities or the purchase by the Trust of the Subordinated
Debt Securities and the Guarantees except such as have been obtained and such
as may be required by state securities laws.
<PAGE>
Exhibit D
FORM OF OPINION OF PEPPER, HAMILTON & SCHEETZ
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(iv)
( The First National Bank of Chicago ("FNBC") is a national banking
association with trust powers, duly organized, validly existing and in good
standing under the laws of the United States, with all necessary power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of the Declaration and the Preferred Securities
Guarantee.
( First Chicago Delaware Inc. ("FCD") is a Delaware corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with full power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of the Declaration.
( The execution, delivery and performance by each of FNBC and FCD of
the Declaration, and the execution, delivery and performance by FNBC, in its
capacity as the Guarantee Trustee, of the Preferred Securities Guarantee, have
been duly authorized by all necessary corporate action on the part of
FNBC and FCD, respectively, in the case of the Declaration, and by FNBC, in
the case of the Preferred Securities Guarantee. The Declaration and the
Preferred Securities Guarantee, when duly executed and delivered by FNBC and
FCD, respectively, in the case of the Declaration, and by FNBC, in its
capacity as the Guarantee Trustee, in the case of the Preferred Securities
Guarantee, will constitute the legal, valid and binding obligation of FNBC and
FCD, in the case of the Declaration, and by FNBC, in the case of the Preferred
Securities Guarantee, enforceable against FNBC and FCD in the case of the
Declaration, and by FNBC, in its capacity as the Guarantee Trustee, in the
case of the Preferred Securities Guarantee, in accordance with their terms.
To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened against or affecting FNBC
or FCD before any court, arbitrator, administrative agency or other
governmental authority which, if adversely decided, would materially and
adversely affect either of FNBC or FCD's ability to carry out the transactions
contemplated in the Declaration or, in the case of FNBC, in its capacity as
the Guarantee Trustee, in the Preferred Securities Guarantee.
( The execution, delivery and performance by each of FNBC and FCD of
the Declaration, and the execution, delivery and performance by FNBC, in its
capacity as the Guarantee Trustee, of the Preferred Securities Guarantee, do
not conflict with, or constitute a breach of, the articles of association or
the certificate of incorporation, as the case may be, or bylaws.
<PAGE>
( No consent, approval or authorization of, or registration with or
notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by each of FNBC and FCD of the Declaration,
or by FNBC, in its capacity as the Guarantee Trustee, of the Preferred
Securities Guarantee.
In giving such opinion, Pepper, Hamilton & Scheetz may rely as to
matters governed by the laws of the State of Colorado on an opinion of Stephen
E. Brilz, Esq. provided that such opinion shall be addressed to the
Underwriters, shall be dated as of such date and shall expressly permit
Pepper, Hamilton & Scheetz to rely thereon.
(..continued)
EXHIBIT 4B
___________________________________
AMENDED AND RESTATED DECLARATION
OF TRUST
U S WEST FINANCING II
Dated as of October 24, 1996
____________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
<CAPTION>
<S> <C> <C>
SECTION 1.1 Definitions 2
ARTICLE II
TRUST INDENTURE ACT
<CAPTION>
<S> <C> <C>
SECTION 2.1 Trust Indenture Act; Application 9
SECTION 2.2 Lists of Holders of Securities 10
SECTION 2.3 Reports by the Property Trustee 10
SECTION 2.4 Periodic Reports to Property Trustee 10
SECTION 2.5 Evidence of Compliance with Conditions
Precedent 11
SECTION 2.6 Events of Default; Waiver 11
SECTION 2-7 Event of Default; Notice 13
ARTICLE III
ORGANIZATION
<CAPTION>
<S> <C> <C>
SECTION 3.1 Name 14
SECTION 3.2 Office 14
SECTION 3.3 Purpose 14
SECTION 3.4 Authority 15
SECTION 3.5 Title to Property of the Trust 15
SECTION 3.6 Powers and Duties of the Regular Trustees 15
SECTION 3.7 Prohibition of actions by the Trust and the
Trustees 19
SECTION 3.8 Powers and Duties of the Property Trustee 21
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee 23
SECTION 3.10 Certain Rights of Property Trustee 26
SECTION 3.11 Delaware Trustee 30
SECTION 3.12 Execution of Documents 30
SECTION 3.13 Not Responsible for Recitals or Issuance of
Securities 30
SECTION 3.14 Duration of Trust. 30
SECTION 3.15 Mergers 31
ARTICLE IV
SPONSOR
<CAPTION>
<S> <C> <C>
SECTION 4.1 Sponsor's Purchase of Common Securities 33
SECTION 4.2 Responsibilities of the Sponsor. 34
ARTICLE V
TRUSTEES
<CAPTION>
<S> <C> <C>
SECTION 5.1 Number of Trustees 34
SECTION 5.2 Delaware Trustee 35
SECTION 5.3 Property Trustee; Eligibility 35
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally 37
SECTION 5.5 Initial Trustees 37
SECTION 5.6 Appointment, Removal and Resignation of Trustees 38
SECTION 5.7 Vacancies among Trustees 40
SECTION 5.8 Effect of Vacancies 40
SECTION 5.9 Meetings 40
SECTION 5.10 Delegation of Power 41
RTICLE VI
DISTRIBUTIONS
<CAPTION>
<S> <C> <C>
SECTION 6.1 Distributions 41
ARTICLE VII
ISSUANCE OF SECURITIES
<CAPTION>
<S> <C> <C>
SECTION 7.1 General Provisions Regarding Securities 42
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
<CAPTION>
<S> <C> <C>
SECTION 8.1 Dissolution and Termination of Trust 43
ARTICLE IX
TRANSFER OF INTERESTS
<CAPTION>
<S> <C> <C>
SECTION 9.1 Transfer of Securities 45
SECTION 9.2 Transfer of Certificates 45
SECTION 9.3 Deemed Security Holders 46
SECTION 9.4 Book Entry Interests 46
SECTION 9.5 Notices to Clearing Agency 47
SECTION 9.6 Appointment of Successor Clearing Agency 47
SECTION 9.7 Definitive Preferred Security Certificates. 47
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. 48
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
<CAPTION>
<S> <C> <C>
SECTION 10.1 Liability 49
SECTION 10.2 Exculpation 50
SECTION 10.3 Fiduciary Duty 50
SECTION 10.4 Indemnification 52
SECTION 10.5 Outside Businesses 52
ARTICLE XI
ACCOUNTING
<CAPTION>
<S> <C> <C>
SECTION 11.1 Fiscal Year 53
SECTION 11.2 Certain Accounting Matters 53
SECTION 11.3 Banking 54
SECTION 11.4 Withholding 55
ARTICLE XII
AMENDMENTS AND MEETINGS
<CAPTION>
<S> <C> <C>
SECTION 12.1 Amendments 55
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written consent. 57
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
<CAPTION>
<S> <C> <C>
SECTION 13.1 Representations and Warranties of Property
Trustee. 60
ARTICLE XIV
MISCELLANEOUS
<CAPTION>
<S> <C> <C> <C>
SECTION 14.1 Notices 62
SECTION 14.2 Governing Law 63
SECTION 14.3 Intention of the Parties 63
SECTION 14.4 Headings 63
SECTION 14.5 Successors and Assigns 63
SECTION 14.6 Partial Enforceability 63
SECTION 14.7 Counterparts 64
</TABLE>
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
<S> <C>
Section of Trust Indenture
Act of 1939, as amended Section of Declaration
- -------------------------- ----------------------
<CAPTION>
<C> <S>
310(a) 5.3(a)
310(b) 5.3(c)
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(f) Inapplicable
315(a) 3.9(b)
315(b) 2.8
315(c) 3.9(a)
315(d) 3.9(a)
316(a) Exhibit A, 2.6
316(c) 3.6(e)
_______________
<FN>
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or provisions.
</FN>
</TABLE>
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
U S WEST FINANCING II
October 24, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of October 24, 1996 by the undersigned trustees (together with
all other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), U S WEST,
Inc., a Delaware corporation, as trust sponsor (the "Sponsor"), and by the
holders, from time to time, of undivided beneficial interests in the Trust to
be issued pursuant to this Declaration;
WHEREAS, certain of the Trustees and the Sponsor established a trust (the
"Trust") under the Delaware Business Trust Act pursuant to a Declaration of
Trust, dated as of March 1, 1995 (the "Original Declaration") and a
Certificate of Trust filed with the Secretary of State of Delaware on March 1,
1995, for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Debentures of the Debenture Issuer
and the Debenture Guarantee of the Sponsor endorsed thereon;
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Amended and Restated Declaration of Trust as modified, supplemented or
amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Exhibits are to Articles and Sections of and Exhibits to this Declaration
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration;
and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Sections 3801 et seq., as it may be amended from time
to time.
"Certificate" means a Common Security Certificate or a Preferred
Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Preferred Securities and in whose name or in the name of a
nominee of that organization, shall be registered a Global Certificate and
which shall undertake to effect book entry transfers and pledges of the
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means October 29, 1996.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Security" has the meaning specified in Section 7.1.
"Common Securities Guarantee" means the guarantee agreement to be
dated as of October 29, 1996 of the Sponsor in respect of the Common
Securities.
"Common Security Certificate" means a definitive certificate in
fully registered form representing a Common Security substantially in the form
of Annex II to Exhibit A.
"Covered Person" means:
(a) any officer, director, shareholder, partner, member,
representative, employee or agent of:
(i) the Trust; or
(ii) the Trust's Affiliates; and
(b) any Holder of Securities.
"Debenture Guarantee" means the guarantee by the Sponsor of the
Debentures endorsed thereon.
"Debenture Issuer" means U S WEST Capital Funding, Inc., a
Colorado corporation.
"Debenture Trustee" means Norwest Bank Minnesota, National
Association, as trustee under the Indenture until a successor is appointed
thereunder and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by the
Debenture Issuer under the Indenture to be held by the Property Trustee
pursuant to Section 3.6(c), a specimen certificate for such series of
Debentures being Exhibit B.
"Delaware Trustee" has the meaning set forth in Section 5.2.
<PAGE>
"Definitive Preferred Security Certificates" has the meaning set
forth in Section 9.4.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"DTC" means the Depository Trust Company, the initial Clearing
Agency.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor legislation.
"Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) has occurred and is continuing in
respect of the Debentures.
"Global Certificate" has the meaning set forth in Section 9.4.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means
(a) any Trustee;
(b) any Affiliate of any Trustee;
(c) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or
(d) any employee or agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of September 6, 1995
among the Debenture Issuer, U S WEST, Inc., a Colorado corporation, as
guarantor, and Norwest Bank Minnesota, National Association, as trustee, as
supplemented by a Second Supplemental Indenture dated as of October 31, 1995
among the Debenture Issuer, the Sponsor, as guarantor, and Norwest Bank
Minnesota, National Association, as trustee, and any indenture supplemental
thereto pursuant to which the Debentures and the Debenture Guarantee are to be
issued.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time or any successor legislation.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means, except
as provided in the terms of the Preferred Securities and by the Trust
Indenture Act, Holder(s) of Securities voting together as a single class or,
as the context may require, Holder(s) of Preferred Securities or Common
Securities voting separately as a class, who vote Securities of a relevant
class and the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
the Securities voted by such Holders represents more than 50% of the above
stated liquidation amount of all Securities of such class.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
1. a statement that each officer signing the Certificate has read the
covenant or condition and the definition relating thereto;
2. a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
3. a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
4. a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities Guarantee" means the guarantee agreement to
be dated as of October 29, 1996 of the Sponsor in respect of the Preferred
Securities.
"Preferred Security" has the meaning specified in Section 7.1.
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a certificate representing
a Preferred Security substantially in the form of Annex I to Exhibit A.
"Pricing Agreement" means the pricing agreement between the Trust,
the Debenture Issuer, and the underwriters designated by the Regular Trustees
with respect to the offer and sale of the Preferred Securities.
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in Section
3.8(c).
"Purchase Agreement" means the Purchase Agreement for the offering
and sale of Preferred Securities in the form of Exhibit C.
"Quorum" means a majority of the Regular Trustees or if there are
only two Regular Trustees, both of them.
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Responsible Officer" means, with respect to the Property Trustee,
the chairman of the board of directors, the president, any vice-president, any
assistant vice-president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer or assistant trust
officer or any other officer of the Property Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"66-2/3% in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities and by the Trust Indenture
Act, Holder(s) of Securities voting together as a single class or, as the
context may require, Holder(s) of Preferred Securities or Common Securities,
voting separately as a class, who vote Securities of a relevant class and the
aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions, to the date upon which the voting percentages are determined)
of the Securities voted by such Holders represents 66-2/3% of the above-stated
liquidation amount of all Securities of such class.
"Special Event" has the meaning set forth in the terms of the
Securities.
"Sponsor" means U S WEST, Inc., a Delaware corporation or any
permitted successor thereof under the Indenture, in its capacity as sponsor of
the Trust.
<PAGE>
"Successor Property Trustee" means a successor Trustee possessing
the qualifications to act as Property Trustee under Section 5.3(a).
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities and by the Trust Indenture
Act, Holder(s) of Securities voting together as a single class or, as the
context may require, Holder(s) of Preferred Securities or Common Securities,
voting separately as a class, who vote Securities of a relevant class and the
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of the Securities
voted by such Holders represents 10% of the above stated liquidation amount of
all Securities of such class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees
shall refer to such Person or Persons solely in their capacity as trustees
hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to
the extent applicable, be governed by such provisions;
(b) the Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act;
(c) if and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control; and
(d) the application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor, the Debenture Issuer and the Regular
Trustees on behalf of the Trust shall provide the Property Trustee (i) within
14 days after each record date for payment of Distributions, a list, in such
form as the Property Trustee may reasonably require, of the names and
addresses of the Holders of the Securities ("List of Holders") as of such
record date, provided that none of the Sponsor, the Debenture Issuer or
the Regular Trustees on behalf of the Trust shall be obligated to provide such
List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Sponsor, the
Debenture Issuer and the Regular Trustees on behalf of the Trust, and (ii) at
any other time, within 30 days of receipt by the Trust of a written request
for a List of Holders as of a date no more than 14 days before such List of
Holders is given to the Property Trustee. The Property Trustee shall
preserve, in as current a form as is reasonably practicable, all information
contained in Lists of Holders given to it or which it receives in its capacity
as Paying Agent (if acting in such capacity) provided that the Property
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders; and
(b) the Property Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee
Within 60 days after May 15 of each year, the Property Trustee shall
provide to the Holders of the Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee
shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee
Each of the Sponsor, the Debenture Issuer, and the Regular Trustees
on behalf of the Trust shall provide to the Property Trustee such documents,
reports and information as required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture
Act.
Section 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration which relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences provided that if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default under
the Declaration shall also not be waivable; or
(ii) requires the consent or vote of the holders of greater than a
majority in principal amount of the Debentures affected thereby (a "Super
Majority") to be waived, the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default
with respect to the Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred Securities of an Event of
Default with respect to the Preferred Securities shall also be deemed to
constitute a waiver by the Holders of the Common Securities of any such Event
of Default with respect to the Common Securities for all purposes of this
Declaration without any further act, vote or consent of the Holders of the
Common Securities.
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders
of the Common Securities are deemed to have waived such Event of Default under
the Declaration as provided below in the proviso to this Section 2.6(b), the
Event of Default under the Declaration shall also be not waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have waived
such Event of Default under the Declaration as provided below in the proviso
to this Section 2.6(b), the Event of Default under the Declaration may only be
waived by the vote of the Holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding,
provided that, each Holder of Common Securities will be deemed to
have waived any Event of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated and until such
Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders
of the Preferred Securities and only the Holders of the Preferred Securities
will have the right to direct the Property Trustee in accordance with the
terms of the Securities. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such default shall cease to exist and any Event
of Default with respect to the Common Securities arising therefrom shall be
deemed to have been cured for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default
with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of any Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities known to the Property Trustee, unless such defaults have been cured
before the giving of such notice (the term "defaults" for the purposes of this
Section 2.7(a) being hereby defined to be an Event of Default as defined in
the Indenture, not including any periods of grace provided for therein and
irrespective of the giving of any notice provided therein); provided,
that, except for a default in the payment of principal of (or premium, if
any) or interest on any of the Debentures or in the payment of any sinking
fund installment established for the Debentures, the Property Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers, of the Property Trustee in good faith determine that the withholding
of such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of
any default except:
(i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the
Indenture; or
(ii) any default as to which the Property Trustee shall have
received written notice or a Responsible Officer charged with the
administration of the Declaration shall have obtained written notice of.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "U S WEST Financing II", as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is 7800 East
Orchard Road, Englewood, Colorado 80111. On ten Business Days written notice
to the Holders of Securities, the Regular Trustees may designate another
principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures and the Debenture Guarantee, and (b) except as otherwise limited
herein, to engage in only those other activities necessary, or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a grantor trust.
It is the intention of all of the parties hereto that the Trust created
hereunder constitutes a "grantor trust" for federal income tax purposes under
the code, and all parties hereto, and the Holders of the Preferred Securities
by the purchase of the Preferred Securities will be deemed to, agree to treat
the Trust with such characterization. The provisions of this Agreement shall
be interpreted consistently with such characterization.
SECTION 3.4. Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee in accordance with its powers shall constitute the act of and
serve to bind the Trust. In dealing with the Trustees acting on behalf of the
Trust, no person shall be required to inquire into the authority of the
Trustees to bind the Trust. Persons dealing with the Trust are entitled to
rely conclusively on the power and authority of the Trustees as set forth in
this Declaration.
Section 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures,
the Debenture Guarantee and the Property Trustee Account or as otherwise
provided in this Declaration, legal title to all assets of the Trust shall be
vested in the Trust. The Holders shall not have legal title to any part of
the assets of the Trust, but shall have an undivided beneficial interest in
the assets of the Trust.
Section 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power and authority
and duty to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common Securities
in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more
than one series of Common Securities, and, provided further, there shall
be no interests in the Trust other than the Securities and the issuance of
Securities shall be limited to a one-time, simultaneous issuance of both
Preferred Securities and Common Securities on the Closing Date;
(b) in connection with the issue and sale of the Preferred Securities,
at the direction of the Sponsor, to:
(i) execute and file with the Securities and Exchange Commission
(the "Commission") the registration statement on Form S-3 prepared by the
Sponsor in relation to the Preferred Securities, including any amendments
thereto prepared by the Sponsor;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor as necessary in order to qualify or
register all or part of the Preferred Securities in any State in which the
Sponsor has determined to qualify or register such Preferred Securities for
sale;
(iii) execute and file an application prepared by the Sponsor to
the New York Stock Exchange or any other national stock exchange or the Nasdaq
National Market for listing upon notice of issuance of any Preferred
Securities;
(iv) execute and file with the Commission a registration statement
on Form 8-A prepared by the Sponsor relating to the registration of the
Preferred Securities under Section 12(b) of the Exchange Act, including any
amendments thereto prepared by the Sponsor; and
(v) execute and enter into the Purchase Agreement providing for the
sale of the Preferred Securities;
(c) to acquire the Debentures and the Debenture Guarantee with the
proceeds of the sale of the Preferred Securities and the Common Securities;
provided, however, that the Regular Trustees shall cause legal title to
the Debentures and the Debenture Guarantee to be owned by and held of record
in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Common Securities;
(d) to give the Debenture Issuer, the Sponsor and the Property Trustee
prompt written notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of 316(c) of the Trust Indenture Act and with respect to
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(f), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate to the Property Trustee required by Section
314(a)(4) of the Trust Indenture Act which certificate may be executed by any
Regular Trustee;
(k) to incur expenses which are necessary or incidental to carrying out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of its election to defer
payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Securities or
to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6 including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal income
tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for United
States federal income tax purposes,
provided that such action does not adversely affect the interests of
Holders; and
(q) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust.
The Regular Trustees must exercise the powers set forth in this
Section 3.6 in a manner which is consistent with the purposes, functions and
characterization for federal income tax purposes of the Trust set out in
Section 3.3 and the Regular Trustees shall not take any action which is
inconsistent with the purposes, functions and characterization for federal
income tax purposes of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of
the powers or the authority of the Property Trustee set forth in Section 3.8.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees
(a) Notwithstanding any provision herein to the contrary, the Trust
shall not, and the Trustees (including the Property Trustee) shall cause the
Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Securities
pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;
or
(vii) other than as expressly provided in this Declaration and
Exhibit A hereto, (A) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under Section 6.06 of
the Indenture, (C) exercise any right to rescind or annul any declaration that
the principal of all the Debentures shall be due and payable or (D) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, unless the Trust shall have received an
opinion of counsel to the effect that such modification will not cause more
than an insubstantial risk that for United States federal income tax purposes
the Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures and the Debenture Guarantee shall
be owned by and held of record in the name of the Property Trustee in trust
for the benefit of the Holders of the Securities. The right, title and
interest of the Property Trustee to the Debentures and the Debenture Guarantee
shall vest automatically in each Person who may hereafter be appointed as
Property Trustee as set forth in Section 5.6. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered;
(b) the Property Trustee shall not transfer its right, title and
interest in the Debentures and the Debenture Guarantee to the Regular Trustees
or to the Delaware Trustee (if the Property Trustee does not also act as
Delaware Trustee);
(c) the Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank
account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of the
Debentures and Debenture Guarantee held by the Property Trustee, deposit such
funds into the Property Trustee Account and make payments to the Holders of
the Preferred Securities and the Common Securities from the Property Trustee
Account in accordance with Section 6.1. Funds in the Property Trustee Account
shall be held uninvested until disbursed in accordance with this Declaration.
The Property Trustee Account shall be an account which is maintained with a
banking institution the rating on whose long term unsecured indebtedness is at
least equal to the rating assigned to the Preferred Securities by a
"nationally recognized statistical rating organization", as that term is
defined for purposes of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Preferred Securities and the
Common Securities to the extent the Debentures are redeemed or mature; and
(iii) upon notice of distribution issued by the Regular Trustees in
accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures and the Debenture
Guarantee to Holders of Securities upon the Sponsor's election to dissolve the
Trust in accordance with Section 8.1(a)(v);
(d) the Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms
of the Securities;
(e) the Property Trustee shall take any Legal Action which arises out of
or in connection with an Event of Default or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
(f) no resignation of the Property Trustee shall be effective unless
either:
(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of Securities pursuant to the terms
of the Securities; or
(ii) a Successor Property Trustee has been appointed and accepted
that appointment in accordance with Section 5.6;
(g) the Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures and the Debenture
Guarantee under the Indenture and, if an Event of Default occurs and is
continuing, the Property Trustee shall, for the benefit of Holders of the
Securities, enforce its rights as holder of the Debentures and the Debenture
Guarantee subject to the rights of the Holders pursuant to the terms of such
Securities;
(h) the Property Trustee may authorize one or more Persons (each, a
"Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to the Preferred Securities and
any such Paying Agent shall comply with 317(b) of the Trust Indenture Act.
Any Paying Agent may be removed by the Property Trustee at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any
time by the Property Trustee; and
(i) subject to this Section 3.8, the Property Trustee shall have none of
the powers or the authority of the Regular Trustees set forth in Section
3.6;
The Property Trustee must exercise the powers set forth in this
Section 3.8 in a manner which is consistent with the purposes, functions and
characterization for federal income tax purposes of the Trust set forth in
Section 3.3 and the Property Trustee shall not take any action which is
inconsistent with the purposes, functions and characterization for federal
income tax purposes of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property
Trustee
(a) The Property Trustee, before the occurrence of any Event of Default
and after the curing or waiver of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration in Sections 2.2, 2.3, 2.7, 3.8, 3.9, 3.10 and 6.1
and in the terms of the Securities, and no implied covenants shall be read
into this Declaration against the Property Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.6), the Property Trustee shall exercise such of the rights and powers vested
in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(b) no provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration in Sections
2.2, 2.3, 2.7, 3.8, 3.9, 3.10 and 6.1 and in the terms of the Securities, and
the Property Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Declaration, and
no implied covenants or obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property Trustee, the
Property Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Property Trustee, unless it
shall be proved that the Property Trustee was negligent in ascertaining
the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a Majority in liquidation
amount of the Securities at the time outstanding relating to the time, method
and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the Property
Trustee under this Declaration; and
(iv) no provision of this Declaration shall require the Property Trustee
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable ground for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Declaration or adequate indemnity against such risk or
liability is not reasonably assured to it.
SECTION 3.10 Certain Rights of Property Trustee.
(A) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any act of the Sponsor or the Regular Trustees contemplated by this
Declaration shall be sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence
of bad faith on its part and request and rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (or any rerecording, refiling or
registration thereof);
(v) the Property Trustee may consult with counsel and the written advice
or opinion of such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates,
and may include any of its employees. The Property Trustee shall have the
right at any time to seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any Holder, unless such Holder shall have provided to the
Property Trustee adequate security and indemnity which would satisfy a
reasonable person in the position of the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Property Trustee provided,
that, nothing contained in this Section 3.10(a)(vi) shall be taken to
relieve the Property Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Declaration;
(vii) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document, but the Property Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Property Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents hereunder
shall bind the Trust and the Holders of the Securities and the signature of
the Property Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire as to
the authority of the Property Trustee to so act, or as to its compliance
with any of the terms and provisions of this Declaration, both of which shall
be conclusively evidenced by the Property Trustee's or its agent's taking such
action;
(x) whenever in the administration of this Declaration the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Property Trustee (i) may request instructions from the Holders of the
Securities which instructions may only be given by the Holders of the same
proportion in liquidation amount of the Securities as would be entitled to
direct the Property Trustee under the terms of the Securities in respect of
such remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in acting in accordance with such instructions; and
(xi) except as otherwise expressly provided by this Declaration, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property
Trustee shall be construed to be a duty.
SECTION 3.11 Delaware Trustee
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees and the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of 3807 of the Business Trust Act.
SECTION 3.12 Execution of Documents
Unless otherwise determined by the Regular Trustees and except as
otherwise required by the Business Trust Act, a majority of, or if there are
only two, both of the Regular Trustees are authorized to execute on behalf of
the Trust any documents which the Regular Trustees have the power and
authority to execute pursuant to Section 3.6, provided that any listing
application prepared by the Sponsor referred to in Section 3.6(b)(iii) may be
executed by any Regular Trustee.
SECTION 3.13 Not Responsible for Recitals or
Issuance of Securities.
The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Sponsor and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall have existence for 55 years from the Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c);
(b) the Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the Holders of the Securities, the
Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with
or into, or be replaced by a trust organized as such under the laws of any
State; provided, that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
Securities; or
(B) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank with respect to Distributions and payments upon
liquidation, redemption and maturity;
(ii) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity which possesses the same powers and duties as the Property
Trustee as the Holder of the Debentures and the Sponsor expressly acknowledges
such trustee of the Successor Entity as the holder of the Debenture Guarantee;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed;
(iv) such merger, consolidation, amalgamation or replacement does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders' interest in the new
entity);
(vi) such successor entity has a purpose identical to that of the
Trust;
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect
that:
(A) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders' interest in the new
entity); and
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be required to
register as an Investment Company; and
(viii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by the
Preferred Securities Guarantee; and
(c) notwithstanding Section 3.15(b), the Trust shall not
consolidate, amalgamate, merge with or into, or be replaced by any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger or replacement
would cause the Trust or Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date the Sponsor will purchase all the Common
Securities issued by the Trust, at the same time as the Preferred Securities
are sold, in an amount equal to 3% of the capital of the Trust.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred Securities,
the Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
5. to prepare for filing by the Trust with the Commission a registration
statement on Form S-3 in relation to the Preferred Securities, including
any amendments thereto;
6. to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Preferred Securities and to
take any and all such acts, other than actions which must be taken by the
Trust, and advise the Trust of actions it must take, and prepare for execution
and filing any documents to be executed and filed by the Trust, as the
Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States;
7. to prepare for filing by the Trust an application to the New York
Stock Exchange or any other national stock exchange or the Nasdaq National
Market for listing upon notice of issuance of any Preferred Securities;
8. to prepare for filing by the Trust with the Commission a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
9. to negotiate the terms of the Purchase Agreement providing for the
sale of the Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall initially be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders
of the Common Securities; provided, however, that the number of Trustees
shall in no event be less than three (3); provided further that (1) one
Trustee, in the case of a natural person, shall be a person who is a resident
of the State of Delaware or that, if not a natural person, is an entity which
has its principal place of business in the State of Delaware, (2) there shall
be at least two Trustees who are employees or officers of, or are affiliated
with the Sponsor; and (3) one Trustee shall be the Property Trustee for so
long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal
place of business in the State of Delaware and otherwise meets the
requirements of applicable law, provided that if the Property Trustee has its
principal place of business in the State of Delaware and otherwise meets the
requirements of applicable law, then the Property Trustee shall also be the
Delaware Trustee and Section 3.11 shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Commission
to act as an institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published;
(b) if at any time the Property Trustee shall cease to be eligible
to so act under Section 5.3(a), the Property Trustee shall immediately resign
in the manner and with the effect set forth in Section 5.6(c);
(c) if the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of 310(b) of the Trust Indenture Act;
and
(d) the Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first proviso contained in 310(b) of the Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity which shall act through one or more
Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees under this Declaration shall be:
James T. Anderson
7800 East Orchard Road
Englewood, Colorado 80111
Rahn K. Porter
7800 East Orchard Road
Englewood, Colorado 80111
Roger Fox
7800 East Orchard Road
Englewood, Colorado 80111
The initial Delaware Trustee under this Declaration shall be:
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
The initial Property Trustee shall be:
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
Pursuant to Section 5.6(a)(i) hereof, the Sponsor hereby removes
Charles J. Burdick as a Regular Trustee and Michael J. Majchrzak as the
Delaware Trustee, each of whom was appointed as such in the Original
Declaration.
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument executed
by the Sponsor; and
(ii) after the issuance of any Securities by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities; and
(b) (i) the Trustee that acts as Property Trustee shall not be removed
in accordance with Section 5.6(a) until a Successor Property Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Property Trustee and delivered to the Regular Trustees and the
Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor; and
(c) a Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided,
however, that:
(i) no such resignation of the Trustee that acts as the Property Trustee
shall be effective until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such Successor
Property Trustee and delivered to the Trust, the Sponsor and the resigning
Property Trustee; or until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee; and
(d) the Holders of the Common Securities shall use their best efforts to
promptly appoint a Successor Delaware Trustee or Successor Property
Trustee as the case may be if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.6; and
(e) if no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation, the resigning Property Trustee or Delaware Trustee
may petition any court of competent jurisdiction for appointment of a
Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a Successor Property Trustee or Successor Delaware Trustee, as the
case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by a majority of the Regular Trustees
shall be conclusive evidence of the existence of such vacancy. The vacancy
shall be filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of
a Trustee, or any one of them, shall not operate to annul the Trust. Whenever
a vacancy in the number of Regular Trustees shall occur, until such vacancy is
filled by the appointment of a Regular Trustee in accordance with Section 5.6,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.9 Meetings.
Meetings of the Regular Trustees shall be held from time to time
upon the call of any Regular Trustee. Regular meetings of the Regular
Trustees may be held at a time and place fixed by resolution of the Regular
Trustees. Notice of any in-person meetings of the Regular Trustees shall be
hand delivered or otherwise delivered in writing (including by facsimile, with
a hard copy by overnight courier) not less than 48 hours before such meeting.
Notice of any telephonic meetings of the Regular Trustees or any committee
thereof shall be hand delivered or otherwise delivered in writing (including
by facsimile, with a hard copy by overnight courier) not less than 24 hours
before a meeting. Notices shall contain a brief statement of the time, place
and anticipated purposes of the meeting. The presence (whether in person or
by telephone) of a Regular Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Regular Trustee attends a meeting for
the express purpose of objecting to the transaction of any activity on the
ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6 including any registration statement or amendment thereto filed with the
Commission or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust
or the names of the Regular Trustees or otherwise as the Regular Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of the Trust, as set forth herein.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. Distributions shall be
made on the Preferred Securities and the Common Securities in accordance with
the preferences set forth in their respective terms. If and to the extent
that the Debenture Issuer makes a payment of interest (including Additional
Interest (as defined in the Indenture)), premium and principal on the
Debentures (or the Sponsor makes a payment in respect of the Debenture
Guarantee) held by the Property Trustee (the amount of any such payment being
a "Payment Amount"), the Property Trustee shall and is directed, to the extent
funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
10. SECTION 7.1 General Provisions Regarding Securities
(a) The Regular Trustees shall, on behalf of the Trust, issue one class
of preferred securities representing undivided beneficial interests in the
assets of the Trust having such terms as are set forth in Exhibit A and
incorporated herein by reference (the "Preferred Securities"), and one class
of common securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Exhibit A and
incorporated herein by reference (the "Common Securities"). The Trust shall
have no securities or other interests in the assets of the Trust other than
the Preferred Securities and the Common Securities;
(b) the Certificates shall be signed on behalf of the Trust by the
Regular Trustees (or if there are more than two Regular Trustees by any two of
the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and
other minor errors or defects in any such reproduction of any such signature
shall not affect the validity of any Certificate. In case any Regular Trustee
of the Trust who shall have signed any of the Certificates shall cease to be
such Regular Trustee before the Certificate so signed shall be delivered by
the Trust, such Certificate nevertheless may be delivered as though the person
who signed such Certificate had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons who shall at
the actual date of execution of such Security, be the Regular Trustees of the
Trust, although at the date of the execution and delivery of the Declaration
any such person was not such a Regular Trustee. Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Regular Trustees, as evidenced by their execution
thereof, and may have such letters, numbers or other marks of identification
or designation and such legends or endorsements as the Regular Trustees may
deem appropriate, or as may be required to comply with any law or with any
rule or regulation of any stock exchange on which Securities may be listed, or
to conform to usage;
(c) the consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust;
(d) upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable; and
(e) every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and
shall be bound by this Declaration.
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor or the Debenture Issuer;
(ii) upon the filing of a certificate of dissolution or its equivalent
with respect to the Sponsor or the Debenture Issuer, upon the consent (other
than in connection with a dissolution of the Trust pursuant to clause (v) of
this Section 8.1(a)) of the holders of at least 66-2/3% in liquidation amount
of the Securities, voting together as a single class, to file a certificate of
cancellation with respect to the Trust, or the revocation of the charter
of the Sponsor or the Debenture Issuer and the expiration of 90 days after the
date of revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the Sponsor,
the Debenture Issuer or the Trust;
(iv) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securities;
(v) upon the election by the Sponsor, effective upon notice to the
Trust, the Property Trustee and the Delaware Trustee, to dissolve the Trust in
accordance with the terms of the Securities and all of the Debentures and
Debenture Guarantees endorsed thereon shall have been distributed to the
Holders of Securities in exchange for all of the Securities; or
(vi) before the issuance of any Securities, with the consent of all of
the Regular Trustees and the Sponsor; and
(b) as soon as is practicable after the occurrence of an event referred
to in Section 8.1(a) and upon the completion of the winding up of the Trust,
one of the Regular Trustees (each Regular Trustee being hereby authorized to
take such action) shall file a certificate of cancellation with the Secretary
of State of the State of Delaware terminating the Trust; and
(c) the provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void;
(b) subject to this Article IX, Preferred Securities shall be freely
transferable; and
(c) the Sponsor may not transfer the Common Securities.
SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other government charges which may be
imposed in relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by
this Declaration and the documents incorporated by reference herein.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate
shall be registered on the books and records of the Trust as the sole holder
of such Certificate and of the Securities represented by such Certificate for
purposes of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trustees shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Preferred Securities,
the Preferred Securities Certificates, on original issuance, will be issued in
the form of one or more, fully registered, global Preferred Security
Certificates (each a "Global Certificate"), to be delivered to DTC, the
initial Clearing Agency, by, or on behalf of, the Trust. Such Global
Certificates shall initially be registered on the books and records of the
Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security
Beneficial Owner will receive a definitive Preferred Security Certificate
representing such Preferred Security Beneficial Owner's interests in such
Global Certificates, except as provided in Section 9.7. Unless and until
definitive, fully registered Preferred Security Certificates (the "Definitive
Preferred Security Certificates") have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes
or consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificates and shall have no obligation to the
Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict with
any other provisions of this Declaration, the provisions of this Section 9.4
shall control; and
(d) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC
will make book entry transfers among the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants; provided, that solely for the purposes of
determining whether the Holders of the requisite amount of Preferred
Securities have voted on any matter provided for in this Declaration, so long
as Definitive Preferred Securities have not been issued, the Trustees may
conclusively rely on, and shall be protected in relying on, any written
instrument (including a proxy) delivered to the Trustees by the Clearing
Agency setting forth the Preferred Security Beneficial Owners' votes or
assigning the right to vote on any matter to any other Persons either in whole
or in part.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, unless and until Definitive
Preferred Security Certificates shall have been issued to the Preferred
Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall
give all such notices and communications, specified herein to be given to the
Preferred Security Holders, to the Clearing Agency, and shall have no notice
obligations to the Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Preferred Securities.
SECTION 9.7 Definitive Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.6; or
(b) the Regular Trustees elect after consultation with the Sponsor to
terminate the book entry system through the Clearing Agency with respect to
the Preferred Securities,
then:
(c) Definitive Preferred Security Certificates shall be prepared by the
Regular Trustees on behalf of the Trust with respect to such Preferred
Securities; and
11. upon surrender of the Global Certificates by the Clearing Agency,
accompanied by registration instructions, the Regular Trustees shall cause
Definitive Certificates to be delivered to Preferred Security Beneficial
Owners in accordance with the instructions of the Clearing Agency. Neither
the Trustees nor the Trust shall be liable for any delay in delivery of such
instructions and each of them may conclusively rely on and shall be protected
in relying on, such instructions. The Definitive Preferred Security
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements
as the Regular Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Preferred Securities may be
listed, or to conform to usage.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees such security
or indemnity as may be required by them to keep each of them harmless, then in
the absence of notice that such Certificate shall have been acquired by a bona
fide purchaser, any two Regular Trustees on behalf of the Trust shall execute
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like denomination. In connection
with the issuance of any new Certificate under this Section 9.8, the Regular
Trustees may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Debenture Guarantee, the Securities Guarantees and the terms of the
Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Securities which
shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of Securities
any deficit upon dissolution of the Trust or otherwise; and
(b) Pursuant to 3803(a) of the Business Trust Act, the Holders of
the Securities, in their capacity as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, except as otherwise set
forth in Section 3.9) or willful misconduct with respect to such acts or
omissions; and
(b) an Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets
from which Distributions to Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to
the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered
Person for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in
equity (other than duties imposed on the Property Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person;
(b) unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Persons; or
(ii) whenever this Declaration or any other agreement contemplated
herein or therein provide that an Indemnified Person shall act in a manner
that is, or provides terms that are, fair and reasonable to the Trust or any
Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise; and
(c) whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors as
it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors affecting
the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
SECTION 10.4 Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of authority conferred on such Indemnified
Person by this Declaration, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of gross negligence (or, in the case of the
Property Trustee, except as set forth in Section 3.9) or willful misconduct
with respect to such acts or omissions; and
(b) to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.4(a); and
(c) the provisions of this Section 10.4 shall survive the
termination of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Debenture Issuer, the Delaware
Trustee and the Property Trustee may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
similar or dissimilar to the business of the Trust, and the Trust and the
Holders of Securities shall have no rights by virtue of this Declaration in
and to such independent ventures or the income or profits derived therefrom
and the pursuit of any such venture, even if competitive with the business of
the Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Debenture Issuer, the Delaware Trustee, or the Property Trustee
shall be obligated to present any particular investment or other opportunity
to the Trust even if such opportunity is of a character that, if presented to
the Trust, could be taken by the Trust, and any Covered Person, the Sponsor,
the Debenture Issuer, the Delaware Trustee and the Property Trustee shall have
the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any Affiliate of the Sponsor, or may act as depositary for,
trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of
account and the records of the Trust shall be examined by and reported upon,
as of the end of each Fiscal Year, by a firm of independent certified public
accountants selected by the Regular Trustees;
(b) the Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a
balance sheet of the Trust as of the end of such Fiscal Year, and the related
statements of income or loss;
(c) the Regular Trustees shall cause to be duly prepared and delivered
to each of the Holders of Securities, any annual United States federal income
tax information statement, required by the Code, containing such information
with regard to the Securities held by each Holder as is required by the Code
and the Treasury Regulations. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust; and
(d) the Regular Trustees shall cause to be duly prepared and filed with
the appropriate taxing authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed
by the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and
for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures and the Debenture Guarantee held by the
Property Trustee shall be made directly to the Property Trustee Account and no
other funds of the Trust shall be deposited in the Property Trustee Account.
The sole signatories for such accounts shall be designated by the Regular
Trustees; provided, however, that the Property Trustee shall designate the
sole signatories for the Property Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust
shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustee shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that
the Trust is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount
withheld shall be deemed to be a distribution in the amount of the withholding
to the Holder. In the event of any claimed over-withholding, Holders shall be
limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions made, the
Trust may reduce subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may be amended by, and
only by, a written instrument approved and executed by the Regular Trustees
(or, if there are more than two Regular Trustees a majority of the Regular
Trustees); provided, however, that:
(i) no amendment shall be made, and any such purported amendment shall
be void and ineffective, to the extent the result thereof would be to
(A) cause the Trust to fail to be classified for the purposes of United
States federal income taxation as a grantor trust;
(B) educe or otherwise adversely affect the powers of the Property
Trustee; or
(C) cause the Trust to be deemed to be an Investment Company which is
required to be registered under the Investment Company Act;
(ii) t such time after the Trust has issued any Securities which remain
outstanding, any amendment which would adversely affect the rights, privileges
or preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(iii) Section 9.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders of the Securities;
(iv) Article IV shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities; and
(v) the rights of the holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall
not be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities.
(b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that may be
defective or inconsistent with any other provision of this Declaration;
and
(iii) add to the covenants, restrictions or obligations of the Sponsor.
(iv) to ensure the Trust's status as a grantor trust for federal income
tax purposes.
SECTOPM 12.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class
of Securities are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading. The Regular Trustees
shall call a meeting of such class of Holders, if directed to do so by
the Holders of at least 10% in liquidation amount of such class of Securities.
Such direction shall be given by delivering to the Regular Trustees one or
more calls in a writing stating that the signing Holders of Securities wish to
call a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Holders of Securities calling a meeting shall
specify in writing the Security Certificates held by the Holders of Securities
exercising the right to call a meeting and only those specified shall be
counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met; and
(b) except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the Holders of
Securities having a right to vote thereat at least 7 days and not more than 60
days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of Securities is permitted or required under this
Declaration or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading, such vote, consent or approval
may be given at a meeting of the Holders of Securities. Any action that may
be taken at a meeting of the Holders of Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
the Holders of Securities owning not less than the minimum amount of
Securities in liquidation amount that would be necessary to authorize or take
such action at a meeting at which all Holders of Securities having a right to
vote thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders of Securities entitled to vote
who have not consented in writing. The Regular Trustees may specify that any
written ballot submitted to the Security Holder for the purpose of taking any
action without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to act for it by
proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of Securities executing
it. Except as otherwise provided herein, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders of the
Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be conducted by
the Regular Trustees or by such other Person that the Regular Trustees
may designate; and
(iv) unless the Business Trust Act, the Trust Indenture Act, this
Declaration, the terms of the Securities or the listing rules of any stock
exchange on which the Preferred Securities are then listed or trading,
otherwise provides, the Regular Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders of Securities,
including notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders of Securities, waiver of any such
notice, action by consent without a meeting, the establishment of a record
date, quorum requirements, voting in person or by proxy or any other matter
with respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee which acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing under the laws
of the United States, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, the
Declaration;
(b) the execution, delivery and performance by the Property Trustee of
the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and it constitutes a legal, valid and
binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) the execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of the Articles
of Organization or By-laws of the Property Trustee;
(d) no consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the
Declaration;
(e) the Property Trustee, pursuant to the Declaration, shall hold legal
title and a valid ownership interest in the Debentures and the Debenture
Guarantee under the law of its place of incorporation and Delaware law; and
(f) if the Property Trustee also acts as the Delaware Trustee, the
Delaware Trustee under Delaware law is either a natural person who is a
resident of the State of Delaware or if not a natural person, an entity which
maintains its principal place of business in the State of Delaware.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustees which act as initial Delaware Trustee and initial
Property Trustee each represent and warrant, jointly and severally, to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee and each Successor Property Trustee each represent and
warrant, jointly and severally, to the Trust and the Sponsor at the time of
the Successor Delaware Trustee's or Successor Property Trustee's, as the case
may be, acceptance of its appointment as such that;
(a) The Delaware Trustee under Delaware law is either a natural
person who is a resident of the Sate of Delaware or if not a natural person,
an entity which maintains its principal place of business in the State of
Delaware;
(b) the Delaware Trustee satisfies the requirments set forth in Section
5.2 and has the power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration and, if it is
not a natural person, is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization;
(c) the Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and this Declaration. This Declaration under
Delaware law constitutes a legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency and other
similar laws affecting creditors' rights generally and to general principles
of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at
law); and
(d) no consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of this
Declaration.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the Securities):
U S WEST FINANCING II
c/o U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: Treasurer
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Holders of the Securities):
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
(c) if given to the Property Trustee, at the mailing address set forth
below (or such other address as the Property Trustee may give notice of to the
Holders of the Securities):
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Attention: Treasurer
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience
of reference only and do not affect the interpretation of this Declaration or
any provision hereof.
SECTION 14.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
James T. Anderson
as Trustee
__________________________
Rahn K. Porter
as Trustee
__________________________
Roger Fox
as Trustee
__________________________
FIRST CHICAGO DELAWARE INC.
as Trustee
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By:
Name:
Title:
U S WEST, INC.
as Sponsor
By:
Name:
Title:
<PAGE>
EXHIBIT A
TERMS OF SECURITIES
EXHIBIT B
SPECIMEN OF DEBENTURE
EXHIBIT C
PURCHASE AGREEMENT
<PAGE>
<PAGE>
EXHIBIT A
TERMS OF
8 % TRUST ORIGINATED PREFERRED SECURITIES
8 % TRUST ORIGINATED COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of October 24, 1996 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Prospectus referred to below):
1. DESIGNATION AND NUMBER.
(a) Preferred Securities. 19,200,000 Preferred Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of Four Hundred Eighty Million Dollars ($480,000,000), and a liquidation
amount with respect to the assets of the Trust of $25 per Preferred
Security, are hereby designated for the purposes of identification only as "8
% Trust Originated Preferred Securities" (the "Preferred Securities"). The
Preferred Security Certificates evidencing the Preferred Securities shall be
substantially in the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice or to conform to the rules of any stock exchange on which
the Preferred Securities are listed.
(b) Common Securities. 593,815 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of
Fourteen Million Eight Hundred Forty-Five Thousand Three Hundred Seventy-Five
($14,845,375), and a liquidation amount with respect to the assets of the
Trust of $25 per Common Security, are hereby designated for the purposes of
identification only as "8 % Trust Originated Common Securities" (the "Common
Securities"). The Common Security Certificates evidencing the Common
Securities shall be substantially in the form attached hereto as Annex II,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice.
2. DISTRIBUTIONS.
(a) Periodic Distributions payable on each Security will be fixed at a
rate per annum of 8 % (the "Coupon Rate") of the stated liquidation amount of
$25 per Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon at the Coupon Rate (to the
extent permitted by applicable law). The term "Distributions" as used in
these terms includes such periodic cash distributions and any such interest
payable unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures or the Debenture
Guarantee held by the Property Trustee. The amount of Distributions payable
for any period will be computed for any full quarterly Distribution period on
the basis of a 360-day year of twelve 30-day months, and for any period
shorter than a full quarterly Distribution period for which Distributions are
computed, Distributions will be computed on the basis of the actual number of
days elapsed in such a 30-day month.
(b) Distributions on the Securities will be cumulative, will accrue from
October 29, 1996 and will be payable quarterly in arrears, on March 31,
June 30, September 30, and December 31 of each year, commencing on December
31, 1996, except as otherwise described below. The Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures for a period not
exceeding 20 consecutive quarters (each, an "Extension Period") and, as a
consequence of such extension, Distributions will also be deferred. Despite
such deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate during
any such Extension Period. Prior to the termination of any such Extension
Period, the Debenture Issuer may further extend such Extension Period;
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters. Payments
of accrued Distributions will be payable to Holders as they appear on the
books and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. While the Preferred Securities remain in book-entry only form,
the relevant record dates shall be one Business Day prior to the relevant
payment dates which payment dates correspond to the interest payment dates on
the Debentures. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment in respect of the Preferred
Securities will be made as described under the heading "Description of the
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" in the Prospectus Supplement dated October 24, 1996 to the Prospectus
dated October 31, 1995 (together, the "Prospectus") of the Trust included
in the Registration Statement on Form S-3 of the Sponsor, the Debenture
Issuer, the Trust and certain other business trusts. The relevant record
dates for the Common Securities shall be the same record dates as for the
Preferred Securities. If the Preferred Securities shall not continue to
remain in book-entry only form, the relevant record dates for the Preferred
Securities, shall conform to the rules of any securities exchange on which the
securities are listed and, if none, shall be selected by the Regular Trustees,
which dates shall be at least one Business Day but less than 60 Business Days
before the relevant payment dates, which payment dates correspond to the
interest payment dates on the Debentures. Distributions payable on any
Securities that are not punctually paid on any Distribution payment date, as a
result of the Debenture Issuer or the Sponsor having failed to make a payment
under the Debentures or the Debenture Guarantee, as the case may be, will
cease to be payable to the Person in whose name such Securities are registered
on the relevant record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are registered on the
special record date or other specified date determined in accordance with the
Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distribution payable on such date
will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any voluntary or involuntary dissolution, winding-up
or termination of the Trust, the Holders of the Securities on the date of the
dissolution, winding-up or termination as the case may be, will be entitled to
receive out of the assets of the Trust available for distribution to Holders
of Securities, after paying or making reasonable provision to pay all claims
and obligations of the Trust in accordance with Section 3808(e) of the
Business Trust Act, an amount equal to the aggregate of the stated liquidation
amount of $25 per Security plus accrued and unpaid Distributions thereon to
the date of payment (such amount being the "Liquidation Distribution"),
unless, in connection with such dissolution, winding-up or termination,
Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Securities, with an interest rate equal to the
Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to
the accrued and unpaid Distributions on, such Securities, shall be distributed
on a Pro Rata basis to the Holders of the Securities in exchange for such
Securities, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act.
If, upon any such dissolution, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Debentures in whole or in part, whether at
maturity or upon redemption, the proceeds from such repayment or payment
shall be simultaneously applied to redeem Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, at a redemption price of $25 per Security plus an
amount equal to accrued and unpaid Distributions thereon at the date of the
redemption, payable in cash (the "Redemption Price"). Holders will be given
not less than 30 nor more than 60 days notice of such redemption.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities will be redeemed
Pro Rata and the Preferred Securities to be redeemed will be as described in
Paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
defined below, and each a "Special Event") shall occur and be continuing,
the Debenture Issuer shall have the right, upon not less than 30 nor more than
60 days notice, to redeem the Debentures in whole or in part for cash within
90 days following the occurrence of such Special Event, and, following such
redemption, Securities with an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so redeemed shall be redeemed by
the Trust at the Redemption Price on a Pro Rata basis in accordance with
Paragraph 8 hereof. The Common Securities will be redeemed Pro Rata with the
Preferred Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities will have priority over the Common
Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have received an
opinion of a nationally recognized independent tax counsel experienced in such
matters to the effect that on or after the date of the Prospectus Supplement,
as a result of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority therefore or therein,
or (b) any amendment to, or change in, an interpretation or application of any
such laws or regulations by any legislative body, court, governmental agency
or regulatory authority, which amendment or change is enacted, promulgated,
issued or announced or which interpretation or pronouncement is issued or
announced or which action is taken, in each case on or after the date of the
Prospectus Supplement, there is more than an insubstantial risk that (i) the
Trust is or will be within 90 days of the date thereof, subject to United
States federal income tax with respect to interest accrued or received on the
Debentures, (ii) the Trust is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of taxes, duties or other
governmental charges, or (iii) interest payable by the Debenture Issuer to the
Trust on the Debentures is not, or within 90 days of the date thereof will not
be, deductible, in whole or in part, by the Debenture Issuer for United States
federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall
have received an opinion of a nationally recognized independent counsel
experienced in practice under the Investment Company Act that, as a result of
the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), there is a more than an insubstantial risk that the Trust is or will be
considered an Investment Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective on or
after the date of the Prospectus Supplement.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities
for all quarterly Distribution periods terminating on or before the date of
redemption.
(e) In the event that the Sponsor makes the election referred to in
Section 8.1(a)(v) of the Declaration, the Regular Trustees shall dissolve the
Trust and, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act, cause Debentures, held by the Property Trustee, having an aggregate
stated liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid
Distributions on and having the same record date for payment, as the
Securities, to be distributed to the Holders of the Securities in liquidation
of such Holders' interests in the Trust on a Pro Rata basis in accordance with
paragraph 8 hereof. On and from the date fixed by the Regular Trustees for any
distribution of Debentures and dissolution of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) The Depository Trust Company
(the "Depository") or its nominee (or any successor Clearing Agency or its
nominee), as the record Holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Debentures and
the Debenture Guarantee to be delivered upon such distribution and (iii) any
certificates representing Securities, except for certificates representing
Preferred Securities held by the Depository or its nominee (or any successor
Clearing Agency or its nominee), will be deemed to represent beneficial
interests in the Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid
Distributions on such Securities until such certificates are presented to the
Debenture Issuer or its agent for transfer or reissue. If the Debentures are
distributed to Holders of the Securities, pursuant to the terms of the
Indenture, the Debenture Issuer will use its best efforts to have the
Debentures listed on the New York Stock Exchange or on such other exchange as
the Preferred Securities were listed immediately prior to the distribution of
the Debentures.
(f) Redemption or Distribution Procedures.
(i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for the Securities (a "Redemption/Distribution Notice") will
be given by the Trust by mail to each Holder of Securities to be redeemed or
exchanged not fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be the
date fixed for redemption of the Debentures. For purposes of the calculation
of the date of redemption or exchange and the dates on which notices are given
pursuant to this paragraph 4(f)(i), a Redemption/Distribution Notice shall be
deemed to be given on the day such notice is first mailed, by first-class
mail, postage prepaid, to Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the address of each
such Holder appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities are to
be redeemed, the Securities to be redeemed will be redeemed Pro Rata from each
Holder of Securities, it being understood that, in respect of Preferred
Securities registered in the name of and held of record by DTC (or any
successor Clearing Agency) or any other nominee, the distribution of the
proceeds of such redemption will be made to each Clearing Agency Participant
(or person on whose behalf such nominee holds such securities) in accordance
with the procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice which notice may only be issued if the
Debentures are redeemed as set out in this paragraph 4 (which notice will be
irrevocable) then (A) while the Preferred Securities are in book-entry only
form, with respect to the Preferred Securities, by 12:00 noon, New York City
time, on the redemption date, provided that the Debenture Issuer has paid the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will deposit
irrevocably with the Depository (or successor Clearing Agency) funds
sufficient to pay the Redemption Price with respect to the Preferred
Securities and will give the Depository irrevocable instructions and authority
to pay the Redemption Price to the Holders of the Preferred Securities,
and (B) if the Preferred Securities are issued in definitive form, with
respect to the Preferred Securities, and with respect to the Common
Securities, provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Property Trustee will pay the Redemption Price
to the Holders of such Securities by check mailed to the address of the
relevant Holder appearing on the books and records of the Trust on the
redemption date. If a Redemption/Distribution Notice shall have been given
and funds deposited as required, if applicable, then immediately prior to the
close of business on the date of such deposit, or on the redemption date, as
applicable, Distributions will cease to accrue on the Securities so called for
redemption and all rights of Holders of such Securities so called for
redemption will cease, except the right of the Holders of such Securities to
receive the Redemption Price, but without interest on such Redemption Price.
Neither the Regular Trustees nor the Trust shall be required to register or
cause to be registered the transfer of any Securities which have been so
called for redemption. If any date fixed for redemption of Securities is not
a Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Securities is improperly withheld or refused
and not paid either by the Property Trustee or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accrue, from the original redemption date to the
actual date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular
Trustees on behalf of the Trust to (A) in respect of the Preferred Securities,
the Depository or its nominee (or any successor Clearing Agency or its
nominee) if the Global Certificates have been issued or if Definitive
Preferred Security Certificates have been issued, to the Holder thereof, and
(B) in respect of the Common Securities to the Holder thereof.
(v) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), provided the acquiror is
not the Holder of the Common Securities or the obligor under the Indenture,
the Sponsor or any of its subsidiaries may at any time and from time to time
purchase outstanding Preferred Securities by tender, in the open market or by
private agreement.
5. VOTING RIGHTS - PREFERRED SECURITIES.
(a) Except as provided under paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Preferred Securities
will have no voting rights.
(b) Subject to the requirements of the second to last sentence of this
paragraph, the Holders of a Majority in liquidation amount of the Preferred
Securities voting separately as a class may direct the time, method, and place
of conducting any proceeding for any remedy available to the Property
Trustee, or exercising any trust or power conferred upon the Property Trustee
under the Declaration, including (i) directing the time, method, and place of
conducting any proceeding for any remedy available to the Debenture Trustee,
or exercising any trust or power conferred on the Debenture Trustee with
respect to the Debentures, (ii) waiving any past default and its consequences
that is waivable under Section 6.06 of the Indenture, or (iii) exercising any
right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable, provided, however, that where a
consent under the Indenture would require the consent or act of the Holders
greater than a majority in principal amount of Debentures affected thereby (a
"Super Majority"), the Property Trustee may only give such consent or take
such action at the direction of the Holders of at least the proportion in
liquidation amount of the Preferred Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any remedy available to the Property Trustee or the Debenture Trustee as set
forth above, the Property Trustee shall not take any action in accordance with
the directions of the Holders of the Preferred Securities under this paragraph
unless the Property Trustee has obtained an opinion of tax counsel to the
effect that for the purposes of United States federal income tax the Trust
will not be classified as other than a grantor trust on account of such
action. If the Property Trustee fails to enforce its rights under the
Declaration, any Holder of Preferred Securities may institute a legal
proceeding directly against any Person to enforce the Property Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Property Trustee or any other Person.
Any approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Preferred Securities will
be required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Sponsor, or by any entity directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Sponsor shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
6. VOTING RIGHTS - COMMON SECURITIES.
(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance
with Article V of the Declaration, to vote to appoint, remove or replace any
Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after all Events
of Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation
amount of the Common Securities voting separately as a class may direct the
time, method, and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that is waivable under Section 6.06 of the Indenture, or (iii)
exercising any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable, provided, however, that where
a consent or action under the Indenture would require the consent or act of
the Holders of greater than a majority in principal amount of Debentures
affected thereby (a "Super Majority"), the Property Trustee may only give such
consent or take such action at the direction of the Holders of at least the
proportion in liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of the Debentures
outstanding. Pursuant to this paragraph 6(c), the Property Trustee shall not
revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities. Other than with respect to directing the time,
method and place of conducting any remedy available to the Property Trustee or
the Debenture Trustee as set forth above, the Property Trustee shall not take
any action in accordance with the directions of the Holders of the Common
Securities under this paragraph unless the Property Trustee has obtained an
opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action. If the Property Trustee fails to enforce its
rights under the Declaration, any Holder of Common Securities may institute a
legal proceeding directly against any Person to enforce the Property Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Property Trustee or any other Person.
Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the
date by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 12.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than as described
in Section 8.1 of the Declaration, then the Holders of outstanding Securities
as a class, will be entitled to vote on such amendment or proposal (but not on
any other amendment or proposal) and such amendment or proposal shall not be
effective except with the approval of the Holders of at least 66-2/3% in
liquidation amount of the Securities, voting together as a single class;
provided, however, that if any amendment or proposal referred to in clause
(i) above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of 66-2/3% in liquidation amount of such class of
Securities.
(b) In the event the consent of the Property Trustee as the holder of
the Debentures and the Debenture Guarantee is required under the Indenture
with respect to any amendment, modification or termination of the Indenture,
the Debentures or the Debenture Guarantee, the Property Trustee shall request
the direction of the Holders of the Securities with respect to such amendment,
modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in
liquidation amount of the Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require
the consent of the Holders of greater than a majority in aggregate principal
amount of the Debentures (a "Super Majority"), the Property Trustee may only
give such consent at the direction of the Holders of at least the proportion
in liquidation amount of the Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding;
provided, further, that the Property Trustee shall not take any action in
accordance with the directions of the Holders of the Securities under this
paragraph 7(b) unless the Property Trustee has been furnished an opinion of
tax counsel to the effect that for the purposes of United States federal
income tax the Trust will not be classified as other than a grantor trust on
account of such action.
8. PRO RATA.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each
Holder of Securities according to the aggregate liquidation amount of the
Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default under the Indenture has occurred and is
continuing, in which case any funds available to make such payment shall be
paid first to each Holder of the Preferred Securities pro rata according to
the aggregate liquidation amount of Preferred Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Preferred
Securities outstanding, and only after satisfaction of all amounts owed to the
Holders of the Preferred Securities, to each Holder of Common Securities pro
rata according to the aggregate liquidation amount of Common Securities held
by the relevant Holder relative to the aggregate liquidation amount of all
Common Securities outstanding.
9. RANKING.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that where an Event
of Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to
payment of the Holders of the Preferred Securities.
10. LISTING.
The Regular Trustees shall use their best efforts to cause the
Preferred Securities to be listed for quotation on the New York Stock Exchange
Limited.
11. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
12 NO PREEMPTIVE RIGHTS.
The Holders of the Securities shall have no preemptive rights to
subscribe for any additional Securities.
13. MISCELLANEOUS.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Preferred
Securities Guarantee and the Indenture to a Holder without charge on written
request to the Trust at its principal place of business.
<PAGE>
ANNEX I
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT -
This Preferred Security is a Global Certificate within the meaning of the
Declaration hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository.
This Preferred Security is exchangeable for Preferred Securities registered in
the name of a person other than the Depository or its nominee only in the
limited circumstances described in the Declaration and no transfer of this
Preferred Security (other than a transfer of this Preferred Security as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
the Trust or its agent for registration of transfer, exchange or payment, and
any Preferred Security issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of The Depository
Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL
since the registered owner hereof, Cede & Co., has an interest herein.]
Certificate Number Number of Preferred Securities
CUSIP NO. 90338M204
Certificate Evidencing Preferred Securities
of
U S WEST FINANCING II
8 % Trust Originated Preferred Securities.
(liquidation amount $25 per Preferred Security)
U S WEST FINANCING II, a business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of preferred securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8 % Trust
Originated Preferred Securities (liquidation amount $25 per Preferred
Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of October 24, 1996, as the same may be amended from time to time (the
"Declaration") including the designation of the terms of the Preferred
Securities as set forth in Exhibit A to the Declaration. Capitalized terms
used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Preferred
Securities Guarantee to the extent provided therein. The Sponsor will provide
a copy of the Declaration, the Preferred Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this day
of, 199__.
as Trustee
as Trustee
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
_____________________________________________________________________________
_____________________________________________________________________________
_______________
(Insert assignee's social security or tax identification number)
_____________________________________________________________________________
_____________________________________________________________________________
________________________________________________________________________
(Insert address and zip code of assignee) and irrevocably appoints
_____________________________________________________________________________
_____________________________________________________________________________
________ agent
to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred
Security Certificate)
<PAGE>
ANNEX II
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
U S WEST FINANCING II
Common Securities.
(liquidation amount $25 per Common Security)
U S WEST FINANCING II, a business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8 % Trust
Originated Common Securities (liquidation amount $25 per Common Security) (the
"Common Securities"). The Common Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Common Securities represented hereby are issued and
shall in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of October 24, 1996, as the same
may be amended from time to time (the "Declaration") including the designation
of the terms of the Common Securities as set forth in Exhibit A to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits
of the Common Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this day
of, 199.
as Trustee
as Trustee
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:
____________________________________________________________________________
____________________________________________________________________________
_______________
(Insert assignee's social security or tax identification number)
____________________________________________________________________________
____________________________________________________________________________
________________________________________________________________________
(Insert address and zip code of assignee) and irrevocably appoints
____________________________________________________________________________
____________________________________________________________________________
________ agent
to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Common
Security Certificate)
(..continued)
THIRD SUPPLEMENTAL INDENTURE, dated as of October 24, 1996 (the "Third
Supplemental Indenture"), among U S WEST Capital Funding, Inc., a Colorado
corporation (the "Company"), U S WEST, Inc., a Delaware corporation (the
"Guarantor") and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") under the Indenture dated as of September 6, 1995 among the
Company, the Guarantor and the Trustee as supplemented by a Second
Supplemental Indenture dated as of October 31, 1995 among the Company, the
Guarantor and the Trustee (as so supplemented, the "Indenture").
WHEREAS, the Company and the Guarantor executed and delivered the
Indenture to the Trustee to provide for the future issuance of the Company's
unsecured subordinated debt securities guaranteed by the Guarantor, to be
issued from time to time in one or more series as might be determined by the
Company under the Indenture, in an unlimited aggregate principal amount which
may be authenticated and delivered as provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Debt Securities to be
known as its 8 % Subordinated Deferrable Interest Notes due 2036, and the
Guarantor desires to provide for the issuance of a Guarantee of such Debt
Securities (the "Note Guarantee" and, together with the Debt Securities, the
"Notes"), the form and substance of such Notes and the Note Guarantee and the
terms, provisions and conditions thereof to be set forth as provided in the
Indenture and this Third Supplemental Indenture;
WHEREAS, U S WEST Financing II, a Delaware statutory business trust (the
"Trust"), has offered to the public $480,000,000 aggregate liquidation amount
of its 8 % Trust Originated Preferred Securities (the "Preferred Securities"),
representing undivided beneficial interests in the assets of the Trust and
proposes to invest the proceeds from such offering, together with the proceeds
of the issuance and sale by the Trust to the Guarantor of $14,845,375
aggregate liquidation amount of its Common Securities, in $494,845,375
aggregate principal amount of the Notes; and
WHEREAS, the Company and the Guarantor have requested that the Trustee
execute and deliver this Third Supplemental Indenture, and all requirements
necessary to make this Third Supplemental Indenture a valid instrument, in
accordance with its terms, and to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee, the valid obligations of the
Company and to make the Guarantee endorsed thereon when executed by the
Guarantor a valid obligation of the Guarantor, have been performed, and the
execution and delivery of this Third Supplemental Indenture has been duly
authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Notes by the holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Notes and the terms,
provisions and conditions thereof, the Company and the Guarantor covenant and
agree with the Trustee as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 Definition of Terms
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in
this Third Supplemental Indenture;
(b) a term defined anywhere in this Third Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of
this Third Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency (ii) Delaware Trustee; (iii) Property
Trustee; (iv) Preferred Security Certificate; (v) Regular Trustees; and (vi)
Special Event; and
(g) the following terms have the meanings given to them in this Section
1.1(g):
"Communications Stock" means the U S WEST Communications Group
Common Stock, par value $.01 per share, of the Guarantor.
"Declaration" means the Amended and Restated Declaration of Trust of
U S WEST Financing II, a Delaware business trust, dated as of October [ ],
1996.
"Dissolution Event" means that as a result of an election by the
Guarantor, the Trust is to be dissolved in accordance with the Declaration and
the Notes held by the Property Trustee are to be distributed to the holders of
the Trust Securities issued by the Trust pro rata in accordance with the
Declaration.
"Maturity Date" means the date on which the Notes mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Additional Interest, if any.
"Media Stock" means the U S WEST Media Group Common Stock, par value
$.01 per share, of the Guarantor.
"Senior Indebtedness" means with respect to the Company or
Guarantor, (i) the principal, premium, if any, and interest in respect of (A)
indebtedness of such obligor for money borrowed and (B) indebtedness evidenced
by securities, debentures, bonds or other similar instruments issued by such
obligor including, without limitation, in the case of the Guarantor, all
obligations under its Liquid Yield Option Notes due 2011; (ii) all capital
lease obligations of such obligor; (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such obligor for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) of other persons for the payment of
which such obligor is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the type referred to in clauses (i)
through (v) of other persons secured by any lien on any property or asset of
such obligor (whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness that is by its terms subordinated to or
pari passu with the Notes, as the case may be, and (2) any indebtedness
including all other debt securities and guarantees in respect of those debt
securities, initially issued to (y) any other U S WEST Trust or (z) any
trusts, partnerships or any other entities affiliated with the Guarantor which
is a financing vehicle of the Guarantor ("Financing Entity") in connection
with an issuance by such Financing Entity of preferred securities or other
securities which are similar to the Preferred Securities, including, without
limitation, the 7.96% Subordinated Deferrable Interest Notes due 2025 issued
by the Company to U S West Financing I (the "7.96% Notes") and the guarantee
by the Guarantor of the 7.96% Notes (the "7.96% Notes Guarantee").
ARTICLE II
GENERAL TERMS AND CONDITIONS OF
THE NOTES
SECTION 2.1 Designation and Principal Amount
There is hereby authorized:
(a) a series of Debt Securities designated the "8 % Subordinated
Deferrable Interest Notes due 2036", limited in aggregate principal amount to
$494,845,375, which amount shall be as set forth in any written order of the
Company for the authentication and delivery of Notes pursuant to Section 2.4
of the Indenture; and
(b) a Guarantee of such Debt Securities.
SECTION 2.2 Maturity
The Maturity Date will be October 29, 2036.
SECTION 2.3 Form and Payment
Except as provided in Section 2.4, the Notes shall be issued in
fully registered certificated form without interest coupons. Principal and
interest on the Notes issued in certificated form will be payable, the
transfer of such Notes will be registrable and such Notes will be
exchangeable for Notes bearing identical terms and provisions at the office or
agency of the Trustee; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the registered holder at
such address as shall appear in the Security Register. Notwithstanding the
foregoing, so long as the registered holder of any Notes is the Property
Trustee, the payment of the principal of and interest (including Additional
Interest, if any) on such Notes held by the Property Trustee will be made at
such place and to such account as may be designated by the Property Trustee.
SECTION 2.4 Global Note
In connection with a Dissolution Event;
(a) the Notes in certificated form may be presented to the Trustee by
the Property Trustee in exchange for a Global Note in an aggregate principal
amount equal to all Outstanding Notes, to be registered in the name of the
Depository, or its nominee, and delivered by the Trustee to the Depository for
crediting to the accounts of its participants pursuant to the instructions of
the Regular Trustees. The Company upon any such presentation shall execute a
Global Note in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with the Indenture and
this Third Supplemental Indenture. Payments on the Notes issued as a Global
Note will be made to the Depository; and
(b) if any Preferred Securities are held in non book-entry certificated
form, the Notes in certificated form may be presented to the Trustee by the
Property Trustee and any Preferred Security Certificate which represents
Preferred Securities other than Preferred Securities held by the Clearing
Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed
to represent beneficial interests in Notes presented to the Trustee by the
Property Trustee having an aggregate principal amount equal to the aggregate
liquidation amount of the Non Book-Entry Preferred Securities until such
Preferred Security Certificates are presented to the Security Registrar for
transfer or reissuance at which time such Preferred Security Certificates will
be cancelled and a Note registered in the name of the holder of the
Preferred Security Certificate or the transferee of the holder of such
Preferred Security Certificate as the case may be, with an aggregate principal
amount equal to the aggregate liquidation amount of the Preferred Security
Certificate cancelled will be executed by the Company and delivered to the
Trustee for authentication and delivery in accordance with the Indenture and
this Third Supplemental Indenture. On issue of such Notes, Notes with an
equivalent aggregate principal amount that were presented by the Property
Trustee to the Trustee will be deemed to have been cancelled.
SECTION 2.5 Interest
(a) Each Note will bear interest at the rate of 8 % per annum (the
"Coupon Rate") from the original date of issuance until the principal thereof
becomes due and payable, and on any overdue principal and (to the extent that
payment of such interest is enforceable under applicable law) on any overdue
installment of interest at the Coupon Rate, payable (subject to the provisions
of Article Four) quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each, an "Interest Payment Date"), commencing on
December 31, 1996, to the person in whose name such Note or any predecessor
Note is registered, at the close of business on the regular record date for
such interest installment, which, in respect of any Notes of which the
Property Trustee is the registered holder of or a Global Note, shall be the
close of business on the Business Day next preceding that Interest Payment
Date. Notwithstanding the foregoing sentence, if (i) the Preferred Securities
are no longer in book-entry only form or (ii) a Dissolution Event has occurred
and subsequent thereto the Notes are not represented by a Global Note pursuant
to the provisions of Section 2.11(c) of the Indenture, the Company may select
a regular record date for such interest installment which shall be any date at
least one Business Day before an Interest Payment Date.
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest in computed, will be computed
on the basis of the actual number of days elapsed per 30-day month. In the
event that any date on which interest is payable on the Notes is not a
Business Day, then payment of interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(c) If at any time while the Property Trustee is the holder of any
Notes, the Trust or the Property Trustee is required to pay any taxes, duties
assessments or governmental changes of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then,
in any case, the Company will pay as additional interest ("Additional
Interest") on the Notes held by the Property Trustee, such additional amounts
as shall be required so that the net amounts received and retained by the
Trust and the Property Trustee after paying such taxes, duties assessments or
other governmental changes will be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other government changes been imposed.
ARTICLE III
REDEMPTION OF THE NOTES
SECTION 3.1 Special Event Redemption
If a Special Event has occurred and is continuing then,
notwithstanding Section 3.2 but subject to Section 3.3(c), the Company shall
have the right, upon not less than 30 days' nor more than 60 days' notice to
the registered holders of the Notes to redeem the Notes in whole or in part
for cash within 90 days following the occurrence of such Special Event at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption (the
"Redemption Price").
SECTION 3.2 Optional Redemption by Company
Subject to the provisions of Article Three of the Indenture and to
Section 3.3(c), the Company shall have the right to redeem the Notes, in whole
or in part, from time to time, on or after October 29, 2001, at the Redemption
Price. Any redemption pursuant to this paragraph will be made upon not less
than 30 days' nor more than 60 days' notice to the registered holder of the
Notes, at the Redemption Price.
SECTION 3.3 Redemption Procedures
(a) If the Notes are only partially redeemed pursuant to Section 3.1 or
Section 3.2, the Notes will be redeemed pro rata or by any other method
utilized by the Trustee; provided that if at the time of redemption, the
Notes are registered as a Global Note, the Depository shall determine the
principal amount of such Notes held by each Noteholder to be redeemed in
accordance with its procedures.
(b) The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or at such earlier time as the Company
determines and specifies in the notice of redemption, provided the Company
shall deposit with the Trustee an amount sufficient to pay the Redemption
Price by 11:00 a.m. on the date such Redemption Price is to be paid.
(c) If a partial redemption of the Notes would result in the delisting
of the Preferred Securities issued by the Trust from any national securities
exchange or other organization on which the Preferred Securities are then
listed, the Company shall not be permitted to effect such partial redemption
and may only redeem the Notes in whole.
SECTION 3.4 No Sinking Fund
The Notes are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 Extension of Interest Payment Period
Subject to the provisions of Section 7.2, the Company shall have the
right, at any time during the term of the Notes, from time to time to extend
the interest payment period of such Notes for up to 20 consecutive quarters
(the "Extended Interest Payment Period"). To the extent permitted by
applicable law, interest, the payment of which has been deferred because of
the extension of the interest payment period pursuant to this Section 4.1,
will bear interest thereon at the Coupon Rate for each quarter of the Extended
Interest Payment Period. At the end of the Extended Interest Payment Period
the Company shall pay all interest accrued and unpaid on the Notes including
any Additional Interest ("Deferred Interest") which shall be payable to the
holders of the Notes in whose names the Notes are registered in the Security
Register on the first record date after the end of the Extended Interest
Payment Period. Before the termination of any Extended Interest Payment
Period, the Company may further extend such period, provided that such
period together with all such further extensions thereof shall not exceed 20
consecutive quarters. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the Company may
select a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended
Interest Payment Period, except at the end thereof.
SECTION 4.2 Notice of Extension
(a) If the Property Trustee is the only registered holder of the Notes
at the time the Company selects an Extended Interest Payment Period, the
Company shall give written notice to both the Regular Trustees and the
Property Trustee of its selection of such Extended Interest Payment Period one
Business Day before the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities issued by the Trust are payable, or (ii)
the date the Trust is required to give notice of the record date or the date
such Distributions are payable to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only holder of the Notes at the
time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Notes written notice of its selection of such
Extended Interest Payment Period 10 Business Days before the earlier of (i)
the next succeeding Interest Payment Date, or (ii) the date the Company is
required to give notice of the record or payment date of such interest payment
to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Notes.
(c) The quarter in which any notice is given pursuant to paragraphs (a)
or (b) of this Section 4.2 shall be counted as one of the 20 quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.1.
ARTICLE V
EXPENSES AND GUARANTEE
SECTION 5.1 Payment of Expenses
In connection with the offering, sale and issuance of the Notes to the
Property Trustee in connection with the sale of the Trust Securities by the
Trust, the Company shall:
(a) pay for all costs and expenses relating to the offering, sale and
issuance of the Note, including commissions to the underwriters payable
pursuant to the Underwriting Agreement and the Pricing Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 7.06 of the Indenture;
(b) pay for all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including commissions to
the underwriters in connection therewith), the fees and expenses of the
Property Trustee and the Delaware Trustee, the costs and expenses relating to
the operation of the Trust, including without limitation, costs and expenses
of accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and
other telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of Trust assets);
and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
SECTION 5.2 Guarantee of Payment of Expenses
The Guarantor hereby fully and unconditionally guarantees the due
and punctual payment of all amounts that become due and payable by the Company
to any Person pursuant to Section 5.1.
ARTICLE VI
SUBORDINATION
SECTION 6.1 Agreement to Subordinate
The Company and the Guarantor covenant and agree, and each holder of
Notes issued hereunder by holder's acceptance thereof likewise covenants and
agrees, that all Notes shall be issued subject to the provisions of this
Article Six; and each holder of a Note, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment by the Company of the principal of, premium, if any, and
interest on all Notes issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred. The payment
by the Guarantor of any obligation due under the Note Guarantee issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in full of
all Senior Indebtedness of the Guarantor, whether outstanding at the date of
this Indenture or thereafter incurred.
No provision of this Article Six shall prevent the occurrence of any
default or Event of Default hereunder.
SECTION 6.2 Default on Senior Indebtedness
In the event and during the continuation of any default by the
Company or the Guarantor in the payment of principal, premium, interest or any
other payment due on any Senior Indebtedness of the Company or the Guarantor,
as the case may be, or in the event that the maturity of any Senior
Indebtedness of the Company or the Guarantor, as the case may be, has been
accelerated because of a default, then, in either case, no payment shall be
made by the Company with respect to the principal (including redemption and
sinking fund payments) of, or premium, if any, or interest on the Notes,
including payment with respect to any obligation due under the Guarantees.
In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any holder when such payment is prohibited by
the preceding paragraph of this Section 6.2, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their respective representatives, or to the trustee
or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear,
but only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee within 90
days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee
shall be paid to the holders of Senior Indebtedness.
SECTION 6.3 Liquidation; Dissolution; Bankruptcy
Upon any payment by the Company or the Guarantor, or distribution of
assets of the Company or the Guarantor of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding-up
or liquidation or reorganization of the Company or the Guarantor, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior Indebtedness of the Company or
the Guarantor, as the case may be, shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company or the Guarantor, as the case may be, on account of the
principal (and premium, if any) or interest on the Notes; and upon any such
dissolution or winding-up or liquidation or reorganization any payment by the
Company or the Guarantor, or distribution of assets of the Company or the
Guarantor of any kind or character, whether in cash, property or securities,
to which the holders of the Note or the Trustee would be entitled to receive
from the Company or the Guarantor, as the case may be, except for the
provisions of this Article Six, shall be paid by the Company or the Guarantor,
as the case may be, or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
holders of the Notes or by the Trustee under this Indenture if received by
them or it, directly to the holders of Senior Indebtedness of the Company or
the Guarantor, as the case may be (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company or the Guarantor, as the case may be) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, as their respective interests may appear,
to the extent necessary to pay such Senior Indebtedness in full, in money or
money's worth, after giving effect to any concurrent payment or distribution
to or for the holders of such Senior Indebtedness, before any payment or
distribution is made to the holders of Notes or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or the Guarantor of any kind or
character, whether in cash, property or securities, prohibited by the
foregoing, shall be received by the Trustee or the holders of the Notes before
all Senior Indebtedness of the Company or the Guarantor is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, and their respective interests may appear,
as calculated by the Company or the Guarantor, for application to the payment
of all Senior Indebtedness of the Company or the Guarantor, as the case may
be, remaining unpaid to the extent necessary to pay such Senior Indebtedness
in full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
For purposes of this Article Six, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company or
the Guarantor as reorganized or readjusted, or securities of the Company or
the Guarantor or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinated at least
to the extent provided in this Article Six with respect to the Notes to the
payment of all Senior Indebtedness of the Company or the Guarantor, as the
case may be, that may at the time be outstanding, provided that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment, and (ii) the rights of the holders of
such Senior Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment. The consolidation of the Company or
the Guarantor with, or the merger of the Company or the Guarantor into,
another corporation or the liquidation or dissolution of the Company or the
Guarantor following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Ten of the Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of
this Section 6.3 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article Ten of the Indenture. Nothing in Section 6.2 or in this
Section 6.3 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.6 of the Indenture.
SECTION 6.4 Subrogation
Subject to the payment in full of all Senior Indebtedness of the
Company or the Guarantor, the rights of the holders of the Notes shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company or
the Guarantor, as the case may be, applicable to such Senior Indebtedness
until the principal of (and premium, if any) and interest on the Notes shall
be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders for such Senior Indebtedness of any cash,
property or securities to which the holders of the Notes or the Trustee would
be entitled except for the provisions of this Article Six, and no payment over
pursuant to the provisions of this Article Six, to or for the benefit of the
holders of such Senior Indebtedness by holders of the Notes or the Trustee,
shall, as between (i) the Company, its creditors other than holders of Senior
Indebtedness of the Company, and the holders of the Notes or (ii) the
Guarantor, its creditors other than the holders of Senior Indebtedness of the
Guarantor, and the holders of the Notes, be deemed to be a payment by the
Company or the Guarantor, as the case may be, to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article Six are
and are intended solely for the purposes of defining the relative rights of
the holders of the Notes, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article Six or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as between (i) the Company,
its creditors other than the holders of Senior Indebtedness of the Company,
and the holders of the Notes or (ii) the Guarantor, its creditors other than
the holders of Senior Indebtedness of the Guarantor, and the holders of the
Notes, the obligation of the Company or the Guarantor, as the case may be,
which is absolute and unconditional, to pay to the holders of the Notes the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of the Notes
and creditors of the Company or the Guarantor, as the case may be, other than
the holders of Senior Indebtedness of the Company or the Guarantor, as the
case may be, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under the Indenture, subject to the rights, if
any, under this Article Six of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company or the Guarantor, as
the case may be, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company or the
Guarantor referred to in this Article Six, the Trustee, subject to the
provisions of Section 7.1 of the Indenture, and the holders of the Notes,
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the holders of the
Notes, for the purposes of ascertaining the Persons entitled to participate in
such distribution, the holders of Senior Indebtedness and other indebtedness
of the Company or the Guarantor, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Six.
SECTION 6.5 Trustee to Effectuate Subordination
Each holder of Notes by such holder's acceptance thereof authorizes
and directs the Trustee on such holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Six and appoints the Trustee such holder's attorney-in-fact for any
and all such purposes.
SECTION 6.6 Notice by the Company and the Guarantor.
The Company or the Guarantor shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the Company or the
Guarantor that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Notes pursuant to the provisions of this Article
Six. Notwithstanding the provisions of this Article Six or any other
provision of the Indenture and this Third Supplemental Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment of monies to or by the Trustee in respect
of the Notes pursuant to the provisions of this Article Six, unless and until
a Responsible Officer of the Trustee shall have received written notice
thereof at the Principal Office of the Trustee from the Company or the
Guarantor or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Section 7.1 of the Indenture, shall be entitled
in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 6.6 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any) or interest
on any Note), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purposes for which they were received, and shall not be
affected by any notice to the contrary that may be received by it within two
Business Days prior to such date.
The Trustee, subject to the provisions of Section 7.1 of the
Indenture, shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company or the Guarantor, as the case may be (or a trustee on behalf of such
holder) to establish that such notice has been given by a holder of such
Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of such Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Six, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent
to the rights of such Person under this Article Six, and if such evidence is
not furnished the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 6.7 Rights of the Trustee; Holders of Senior Indebtedness
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Six in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any
of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company or
the Guarantor, the Trustee undertakes to perform or to observe only such of
its covenants and obligations as are specifically set forth in this Article
Six, and no implied covenants or obligations with respect to the holders of
such Senior Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Section
7.1 of the Indenture, the Trustee shall not be liable to any holder of such
Senior Indebtedness if it shall pay over or deliver to holders of Notes, the
Company, the Guarantor or any other Person money or assets to which any holder
of such Senior Indebtedness shall be entitled by virtue of this Article Six or
otherwise.
SECTION 6.8 Subordination May Not Be Impaired
No right of any present or future holder of any Senior Indebtedness
of the Company or the Guarantor to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure
to act on the part of the Company or the Guarantor, as the case may be, or by
any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company or the Guarantor, as the case may be, with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company or the Guarantor
may, at any time and from time to time, without the consent of or notice to
the Trustee or the holders of the Notes, without incurring responsibility to
the holders of the Notes and without impairing or releasing the subordination
provided in this Article Six or the obligations hereunder of the holders of
the Notes to the holders of such Senior Indebtedness, do any one or more the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Senior Indebtedness, or otherwise
amend or supplement in any manner such Senior Indebtedness or any instrument
evidencing the same or any agreement under which such Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of such Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company or the Guarantor, as the case may be, and any other Person.
ARTICLE VII
COVENANTS
SECTION 7.1 Listing on Exchanges
If the Notes are to be issued as a Global Note in connection with
the distribution of the Notes to the holders of the Preferred Securities
issued by the Trust upon a Dissolution Event, the Company will use its best
efforts to list such Notes on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.
SECTION 7.2 Limitation on Dividends; Transactions with Affiliates
Section 4.06 of the Indenture is hereby amended and restated in its
entirety as follows:
SECTION 4.06 Limitation on Dividends; Transactions with
Affiliates
If (i) the Company shall have given notice of its election to defer
payments of interest on the Notes by extending the interest payment period as
provided in Section 4.1 of the Third Supplemental Indenture and such period,
or any extension thereof, shall be continuing, (ii) there shall have occurred
any event that would constitute an Event of Default or (iii) the Guarantor
shall be in default with respect to its payment of any obligations under the
Preferred Securities Guarantee or the Common Securities Guarantee, then (a)
the Guarantor and the Company shall not declare or pay any dividend on, make
any distribution with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock, including, in the case of
the Guarantor, the Communications Stock and the Media Stock, and (b) the
Guarantor and the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Guarantor or the Company which rank pari
passu with or junior to such Notes, including the 7.96% Notes and the 7.96%
Notes Guarantee; provided, however, that clause (a) of this Section 4.06
shall not apply to any stock dividends paid by the Guarantor where the
dividend stock is the same stock as that on which the dividend is being paid.
SECTION 7.3 Covenants as to the Trust
Section 4.07 of the Indenture is hereby amended and restated in its
entirety as follows:
SECTION 4.07 Covenants as to the Trust
For so long as the Trust Securities of the Trust remain outstanding,
the Guarantor will (i) directly or indirectly maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
Guarantor under the Indenture may succeed to the Guarantor's ownership of the
Common Securities and (ii) use its reasonable efforts to cause the Trust (a)
to remain a statutory business trust, except in connection with the
distribution of the Notes to the holders of Trust Securities in liquidation of
the Trust, the redemption of all of the Trust Securities or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (b)
to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
ARTICLE VIII
FORM OF NOTE
SECTION 8.1 Form of Note
The Notes, the Note Guarantee and the Trustee's Certificate of
Authentication to be endorsed thereon are to be substantially in the following
forms:
(FORM OF FACE OF NOTE)
[IF THE NOTE IS TO BE A GLOBAL NOTE, INSERT - This Note is a Global
Note within the meaning of the Indenture hereinafter referred to and is
registered in the name of a Depository or a nominee of a Depository. This
Note is exchangeable for Notes registered in the name of a person other than
the Depository or its nominee only in the limited circumstances described in
the Indenture, and no transfer of this Note (other than a transfer of this
Note as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository) may be registered except in limited circumstances.
Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any
payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]
No. __________________ $______________
U S WEST Capital Funding, Inc.
8 % SUBORDINATED DEFERRABLE INTEREST NOTE
DUE 2036
U S WEST CAPITAL FUNDING, INC., a Colorado corporation (the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_______________ or registered assigns, the principal sum of _____________
Dollars on October 29, 2036, and to pay interest on said principal sum from
October 29, 1996 or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears
on March 31, June 30, September 30 and December 31 of each year commencing
December 31, 1996 at the rate of 8 % per annum until the principal hereof
shall have become due and payable, and on any overdue principal and premium,
if any, and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable
on this Note is not a Business Day, then payment of interest payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the
person in whose name this Note (or one or more Predecessor Securities, as
defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment [which shall be the close of
business on the business day next preceding such Interest Payment Date unless
otherwise provided for in the Indenture]. [IF PURSUANT TO THE PROVISIONS OF
SECTION 2.11(C) OF THE INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A
GLOBAL NOTE -- which shall be the close of business on the ____ business day
next preceding such Interest Payment Date.] Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to
the registered holders on such regular record date, and may be paid to the
person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by
the Trustee for the payment of such defaulted interest, notice whereof shall
be given to the registered holders of this series of Notes not less than 10
days prior to such special record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
principal of (and premium, if any) and the interest on this Note shall be
payable at the office or agency of the Trustee maintained for that purpose in
any coin or currency of the United States of America which at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company
by check mailed to the registered holder at such address as shall appear in
the Security Register. Notwithstanding the foregoing, so long as the Holder
of this Note is the Property Trustee, the payment of the principal of (and
premium, if any) and interest on this Note will be made at such place and to
such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Note is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Note is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or
her attorney-in-fact for any and all such purposes. Each Holder hereof, by
his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness, whether now outstanding or hereafter incurred,
and waives reliance by each such Holder upon said provisions.
This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Note are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated _________ ___, 1996
U S WEST CAPITAL FUNDING, INC.
By____________________________
Name:
Title:
SEAL
Attest:
By_____________________
Name:
Title: Secretary
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series of Notes described in the
within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By_______________________
Authorized Signatory
<PAGE>
[FORM OF GUARANTEE]
FOR VALUE RECEIVED, U S WEST, Inc., a Delaware corporation (the
"Guarantor"), hereby unconditionally guarantees to the holder of the Security
upon which this Guarantee is endorsed the due and punctual payment of the
principal of, sinking fund payment, if any, premium, if any, or interest on
said Security, when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise, according to the terms thereof and of
the Indenture referred to therein.
The Guarantor agrees to determine, at least one Business Day prior
to the date upon which a payment of principal of, sinking fund payment, if
any, premium, if any, or interest on said Security is due and payable, whether
the Company has available the funds to make such payment as the same shall
become due and payable. In case of the failure of the Company punctually to
pay any such principal, sinking fund payment, if any, premium, if any, or
interest, the Guarantor hereby agrees to cause any such payment to be made
punctually when and as the same shall become due and payable, whether at
maturity, upon redemption, or otherwise, and as if such payment were made by
the Company.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrevocable, and absolute, irrespective of the validity,
regularity, or enforceability of said Security of said Indenture, the absence
of any action to enforce the same, any waiver or consent by the Holder of said
Security with respect to any provisions thereof, the recovery of any judgment
against the Company or any action to enforce the same, or any other
circumstance which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to said Security or
indebtedness evidenced thereby, and all demands whatsoever and covenants that
this Guarantee will not be discharged except by complete performance of the
obligations contained in said Security and in this Guarantee.
The Guarantor shall be subrogated to all rights of the holder of
said Security against the Company in respect of any amounts paid by the
Guarantor pursuant to the provisions of this Guarantee; provided, however,
that the Guarantor shall not, without the consent of the holders of all of the
Securities then outstanding, be entitled to enforce or to receive any payments
arising out of or based upon such right of subrogation until the principal of
and premium, if any, and interest on all Securities shall have been paid in
full or payment thereof shall have been provided for in accordance with said
Indenture.
Notwithstanding anything to the contrary contained herein, if
following any payment of principal or interest by the Company on the
Securities to the holders of the Securities it is determined by a final
decision of a court of competent jurisdiction that such payment shall be
avoided by a trustee in bankruptcy (including any debtor-in-possession) as a
preference under 11 U.S.C. Section 547 and such payment is paid by such holder
to such trustee in bankruptcy, then and to the extent of such repayment, the
obligations of the Guarantor hereunder shall remain in full force and effect.
The obligations of the Guarantor under this Guarantee are, to the
extent provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior Indebtedness, and this Guarantee is
issued subject to the provisions of the Indenture with respect thereto. Each
Holder of the Security upon which this Guarantee is endorsed, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder of the Security upon which this Guarantee is
endorsed, by his or her acceptance thereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each Holder upon said provisions.
This Guarantee shall not be valid or become obligatory for any
purpose with respect to a Security until the certificate of authentication on
such Security shall have been signed by the Trustee (or the Authentication
Agent).
This Guarantee shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, U S WEST, Inc. has caused this Guarantee to be
executed.
U S WEST, Inc.
[SEAL]
By: By:
Name: Name:
Title: Secretary Title:
<PAGE>
(FORM OF REVERSE OF NOTE)
This Note is one of a duly authorized series of Securities of the
Company (herein sometimes referred to as the "Notes"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an indenture (the "Base Indenture") dated as of September 6, 1995 among the
Company U S WEST Inc., a Colorado corporation, as Guarantor (the "Guarantor")
and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"),
as supplemented by the Second Supplemental Indenture dated as of October 31,
1995 among the Company, the Guarantor and the Trustee and the Third
Supplemental Indenture dated as of October [ ], 1996 among the Company, the
Guarantor and the Trustee (the Base Indenture as so supplemented, the
"Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Notes. By the terms of the Indenture, the
Notes are issuable in series which may vary as to amount, date of maturity,
rate of interest and in other respects as in the Indenture provided. This
series of Notes is limited in aggregate principal amount as specified in said
Third Supplemental Indenture.
Because of the occurrence and continuation of a Special Event, the
Company shall have the right to redeem this Note at the option of the Company,
without premium or penalty, in whole or in part, at the principal amount
together with any interest accrued thereon to the date of such redemption (the
"Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon,
New York time, on the date of such redemption or at such earlier time as the
Company determines. The Company shall have the right to redeem this Note at
the option of the Company, without premium or penalty, in whole or in part at
any time on or after October 29, 2001, at the Redemption Price. Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Redemption Price. If the Notes are only
partially redeemed by the Company, the Notes will be redeemed pro rata or by
lot or by any other method utilized by the Trustee; provided that if, at the
time of redemption, the Notes are registered as a Global Note, the Depository
shall determine the principal amount of such Notes held by each Noteholder to
be redeemed in accordance with its procedures.
In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with
the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the
Notes; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Notes of any series, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without
the consent of the Holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the Holders of which are required to consent to
any such supplemental indenture, without the consent of the Holders of each
Note then outstanding and affected thereby. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount
of the Notes of any series at the time outstanding affected thereby, on behalf
of all of the Holders of the Notes of such series, to waive any past default
in the performance of any of the covenants contained in the Indenture, or
established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium,
if any, or interest on any of the Notes of such series and except as provided
in Section 4.06 of the Base Indenture. Any such consent or waiver by the
registered Holder of this Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such Holder and upon all future Holders
and owners of this Note and of any Note issued in exchange herefor or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any,
and interest on this Note at the time and place and at the rate and in the
money herein prescribed.
The Company shall have the right at any time during the term of the
Notes from time to time to extend the interest payment period of such Notes to
up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the
end of which period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Notes to the
extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the
Company may further extend such Extended Interest Payment Period, provided
that such Extended Interest Payment Period together with all such further
extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extended Interest Payment Period and upon the payment
of all accrued and unpaid interest and any additional amounts then due, the
Company may select a new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable by the registered holder hereof
on the Security Register of the Company, upon surrender of this Note for
registration of transfer at the office or agency of the Company in the borough
of Manhattan, the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or
the Trustee duly executed by the registered holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Note,
the Company, the Trustee, any paying agent and any Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether
or not this Note shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any paying agent nor any Note
Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Company or of any predecessor or successor corporation, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
[The debentures of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.]
[This Global Note is exchangeable for Notes in definitive form only under
certain limited circumstances set forth in the Indenture. Notes of this
series so issued are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof.] As provided in the
Indenture and subject to certain limitations [herein and] therein set forth,
Notes of this series [so issued] are exchangeable for a like aggregate
principal amount of Notes of this series of a different authorized
denomination, as requested by the Holder surrendering the same.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ARTICLE IX
ORIGINAL ISSUE OF NOTES AND GUARANTEES
SECTION 9.1 Original Issue of Notes and Guarantees
Upon execution of this Third Supplemental Indenture, Notes in the
aggregate principal amount of $412,371,150 may be executed by the Company and
Guarantees endorsed thereon executed by the Guarantor. Such Notes and
Guarantees endorsed thereon may be delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Notes to or upon the written order of the Company, signed by its President or
any Vice President and its Secretary or an Assistant Secretary, without any
further action by the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Ratification of Indenture
The Indenture, as supplemented by this Third Supplemental Indenture,
is in all respects ratified and confirmed, and this Third Supplemental
Indenture shall be deemed part of the Indenture in the manner and to the
extent herein and therein provided. The provisions of this Third Supplemental
Indenture shall supersede the provisions of the Indenture to the extent the
Indenture is inconsistent herewith.
SECTION 10.2 Trustee Not Responsible for Recitals
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or
sufficiency of this Third Supplemental Indenture.
SECTION 10.3 Governing Law
This Third Supplemental Indenture and each Note shall be deemed to
be a contract made under the internal laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of said State.
SECTION 10.4 Separability
In case any one or more of the provisions contained in this Third
Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Third
Supplemental Indenture or of the Notes, but Third Supplemental Indenture and
the Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.
SECTION 10.5 Counterparts
This Third Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, on the date or dates indicated in
the acknowledgements and as of the day and year first above written.
U S WEST Capital Funding, Inc.
By:___________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
U S WEST, Inc.
By:
Name:
Title:
Attest:
By:____________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:____________________________
Name:
Title:
<PAGE>
STATE OF )
COUNTY OF ) ss.:
On the day of, 1996, before me personally came to be known, who,
being by me duly sworn, did depose and say that he is the of U S WEST
CAPITAL FUNDING, INC., one of the corporations described in and which executed
the above instrument; that he knows the corporate seal of said corporation;
that the seal affixed to the said instrument is such corporation seal; that it
was so affixed by authority of the Board of Directors of said corporation, and
that he signed his name thereto by like authority.
NOTARY PUBLIC
Commission expires
[seal]
<PAGE>
STATE OF )
COUNTY OF ) SS.:
On the day of, 1996, before me personally came to be known, who,
being by me duly sworn, did depose and say that he is the of U S WEST, INC.,
one of the corporations described in and which executed the above instrument;
that he knows the corporate seal of said corporation; that the seal affixed to
the said instrument is such corporation seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
NOTARY PUBLIC
Commission expires
[seal]
(..continued)
____________________________________
U S WEST, INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
PREFERRED SECURITIES GUARANTEE AGREEMENT
Dated as of October 29, 1996
____________________________________
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee Agreement"),
dated as of October 29, 1996, is executed and delivered by U S WEST, Inc., a
Delaware corporation (the "Guarantor"), and The First National Bank of
Chicago, National Association, as trustee (the "Preferred Guarantee Trustee"),
for the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of U S WEST Financing II, a Delaware
statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of October 24, 1996, among the trustees of the Issuer
named therein, the Guarantor as Sponsor and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof $480,000,000 aggregate stated liquidation amount of
Preferred Securities designated the 8 % Trust Originated Preferred Securities
(the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires to irrevocably and unconditionally to agree,
to the extent set forth in this Guarantee Agreement, to pay to the Holders of
the Preferred Securities the Guarantee Payments (as defined herein) and to
make certain other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee Agreement") in substantially
identical terms to this Guarantee Agreement for the benefit of the holders of
the Common Securities (as defined herein) except that if an Event of Default
(as defined in the Indenture (as defined herein)), has occurred and is
continuing, the rights of holders of the Common Securities to receive
Guarantee Payments under the Common Securities Guarantee are subordinated to
the rights of Holders of Preferred Securities to receive Guarantee Payments
under this Guarantee Agreement.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement
for the benefit of the Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Guarantee Agreement, unless the context otherwise requires:
(a) Capitalized terms used in this Guarantee Agreement but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933 as amended or any successor rule thereunder.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities,
to the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions which are required to be paid on such Preferred Securities to
the extent the Issuer shall have funds available therefore, (ii) the
redemption price, including all accrued and unpaid Distributions to the date
of redemption (the "Redemption Price") to the extent the Issuer has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the
Preferred Securities to the date of payment, to the extent the Issuer shall
have funds available therefor and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
(in either case, the "Liquidation Distribution"). If an Event of Default (as
defined in the Indenture), has occurred and is continuing, the rights of the
holders of the Common Securities to receive Guarantee Payments under the
Common Securities Guarantee Agreement are subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments.
"Guarantor" shall mean U S WEST, Inc., a Delaware corporation or
any permitted successor thereof under the Indenture, in its capacity as
guarantor under this Guarantee Agreement.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Preferred Securities; provided, however,
that in determining whether the holders of the requisite percentage of
Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of September 6, 1995
among U S WEST Capital Funding, Inc., a Colorado corporation (the "Debenture
Issuer"), U S WEST, Inc., a Colorado corporation, as guarantor and Norwest
Bank Minnesota, National Association, as trustee, as supplemented by a Second
Supplemental Indenture dated as of October 31, 1995 among the Debenture
Issuer, the Guarantor, as guarantor and Norwest Bank Minnesota, National
Association, as trustee, and any indenture supplemental thereto pursuant to
which certain subordinated debt securities of the Debenture Issuer (the
"Debentures") and the guarantee of the Guarantor endorsed thereon (the
"Debenture Guarantee") are to be issued to the Property Trustee of the Issuer.
"Majority in liquidation amount of the Preferred Securities"
means, except as provided by the Trust Indenture Act, Holder(s) of Preferred
Securities voting separately as a class, who vote Preferred Securities and the
aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of the Preferred
Securities voted by such Holders represents more than 50% of the above stated
liquidation amount of all Preferred Securities.
"66-2/3% in Liquidation amount of the Preferred Securities" means,
Holders of Preferred Securities voting separately as a class, who vote
Preferred Securities and the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are to be determined) of the Preferred Securities voted by such Holders
represents more than 66-2/3% of the above stated liquidation amount of all
Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee Agreement shall include:
<PAGE>
(a) a statement that each officer signing the Certificate has read the
covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means The First National Bank of
Chicago until a Successor Preferred Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Guarantee
Agreement and thereafter means each such Successor Preferred Guarantee
Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Preferred Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Securities Trustee (i)
within 14 days after January 1 and June 30 of each year, a list, in such form
as the Preferred Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Preferred Securities ("List of Holders") as of
such date, provided that the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee
by the Guarantor, and (ii) at any other time, within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Guarantee
Trustee. The Preferred Guarantee may destroy any List of Holders previously
given to it on receipt of a new List of Holders; and
(b) the Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities such reports
as are required by 313 of the Trust Indenture Act, if any, in the form and
in the manner provided by 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Guarantee Agreement which relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default known to the Preferred Guarantee Trustee, unless such defaults have
been cured before the giving of such notice, provided, that, the Preferred
Guarantee Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers, of the Preferred Guarantee Trustee in
good faith determine that the withholding of such notice is in the interests
of the Holders of the Preferred Securities.
(B) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Preferred Guarantee Trustee shall have received written notice or a
Responsible Officer charged with the administration of the Declaration shall
have obtained written notice of.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Preferred Guarantee
Trustee for the benefit of the Holders of the Preferred Securities and the
Preferred Guarantee Trustee shall not transfer this Guarantee Agreement to any
Person except a Holder of Preferred Securities exercising his or her
rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Preferred Guarantee Trustee. The right, title and
interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered.
(b) If an Event of Default has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit
of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee Agreement, and no implied covenants shall be read into
this Guarantee Agreement against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Guarantee Agreement, and use the
same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs;
(d) no provision of this Guarantee Agreement shall be construed to
relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct,
except that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee Agreement,
and the Preferred Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Guarantee Agreement, and no implied covenants or obligations shall be
read into this Guarantee Agreement against the Preferred Guarantee; and
(B) in the absence of bad faith on the part of the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Preferred Guarantee
Trustee and conforming to the requirements of this Guarantee Agreement; but in
the case of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Declaration;
(ii) the Preferred Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Preferred
Guarantee Trustee, unless it shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Preferred Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in liquidation
amount of the Preferred Securities at the time outstanding relating to the
time, method and place of conducting any proceeding for any remedy available
to the Preferred Trustee, or exercising any trust or power conferred upon the
Preferred Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if it shall have reasonable
ground for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Guarantee Agreement or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(iii) whenever in the administration of this Guarantee Agreement, the
Preferred Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Preferred Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part and request and rely
upon an Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any rerecording,
refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel and the
written advice or opinion of such counsel with respect to legal matters shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance
with such advice or opinion. Such counsel may be counsel to the Guarantor or
any of its Affiliates, and may include any of its employees. The Preferred
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Guarantee Agreement from any court of
competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee Agreement
at the request or direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee adequate security and indemnity
which would satisfy a reasonable person in the position of the Preferred
Guarantee Trustee, against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested
by the Preferred Guarantee Trustee provided, that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Guarantee Agreement;
(vii) the Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Preferred Guarantee Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it
may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or its agents
hereunder shall bind the Holders of the Preferred Securities and the signature
of the Preferred Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action; and no third party shall
be required to inquire as to the authority of the Preferred Guarantee Trustee
to so act, or as to its compliance with any of the terms and provisions of
this Guarantee Agreement, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action; and
(x) whenever in the administration of this Guarantee Agreement the
Preferred Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder the Preferred Guarantee Trustee (i) may request instructions from
the Holders of a Majority in liquidation amount of the Preferred Securities,
(ii) may refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be protected in
acting in accordance with such instructions; and
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Preferred Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or imposed
on it, in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available
to the Preferred Guarantee Trustee shall be construed to be a duty.
(c) No provision of this Guarantee Agreement shall be deemed to empower
the Preferred Guarantee Trustee to vary the investment of any Holder of the
Preferred Securities or to act in a manner inconsistent with the status of the
Issuer as a grantor trust for federal income tax purposes.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the statements
of the Guarantor and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes
no representations as to the validity or sufficiency of this Guarantee
Agreement.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor;
(ii) be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities
and Exchange Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then for the
purposes of this Section 4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published;
(b) if at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c); and
(c) if the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of
Preferred Guarantee Trustee.
(a may be appointed or removed without cause at any time by the
Guarantor;
(b) the Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor;
(c) the Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee; and
(d) if no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon after such notice, if any, as it may deem proper and
prescribe, appoint a Successor Preferred Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Guarantor to the Holders or by causing the Issuer
to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Preferred Securities (other than an
extension of time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Debentures or any extension of the maturity
date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation on the Holders or any other Person to give
notice to, or obtain consent of, the Guarantor with respect to the happening
of any of the foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Guarantee Agreement or exercising any trust or power conferred
upon Preferred Guarantee Trustee under this Guarantee Agreement; and
(b) if the Preferred Guarantee Trustee fails to enforce this Guarantee
Agreement, any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce the Preferred Guarantee
Trustee's rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Issuer, the Preferred Guarantee Trustee or any
other Person.
SECTION 5.5 Guarantee of Payment
This Guarantee Agreement creates a guarantee of payment and not of
collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Issuer in respect of any amounts paid to
such Holders by the Guarantor under this Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Guarantee
Agreement, if, at the time of any such payment, any amounts are due and unpaid
under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities
and that the Guarantor shall be liable as principal and as debtor hereunder to
make Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS;
SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding, (a) the Guarantor
will not (and the Guarantor will cause the Debenture Issuer not to)
declare or pay any dividend on, or make any distributions with respect to, or
redeem, purchase, or make a liquidation payment with respect to, any of its
capital stock, including in the case of the Guarantor, the U S WEST
Communications Group Common Stock, par value $.01 per share, and the U S WEST
Media Group Common Stock, par value $.01 per share, and (b) the Guarantor will
not (and the Guarantor will cause the Debenture Issuer not to) make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) which rank pari passu with
or junior to the Debentures, if at such time (i) there shall have occurred any
Event of Default or (ii) there shall have occurred any Event of Default under
the Declaration; provided, that, clause (a) above does not apply to any
stock dividends paid by the Guarantor where the dividend stock is the same as
that on which the dividend is being paid.
SECTION 6.2 Ranking
This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Guarantor, including the Debenture Guarantee, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered
into by the Guarantor in respect of any preferred or preference stock of any
Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock;
provided, that, this Guarantee Agreement shall be pari passu with the
guarantee issued by the Guarantor in connection with the 7.96% Trust
Originated Preferred Securities of U S WEST Financing I.
<PAGE>
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Guarantee Agreement shall terminate upon full payment of the
Redemption Price of all Preferred Securities, upon the distribution of the
Debentures to the Holder's of all of the Preferred Securities or upon full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Preferred Securities must restore
payment of any sums paid under the Preferred Securities or under this
Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Guarantee
Agreement and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee Agreement or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such
acts or omissions; and
(b) an Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters
the Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Guarantor, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions (as defined in the Declaration) to Holders of
Preferred Securities might properly be paid.
SECTION 8.2 Indemnification
(a) To the fullest extent permitted by applicable law, the Guarantor
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of
any act or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Guarantee Agreement and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this in accordance with this Guarantee
Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of negligence or willful misconduct with respect
to such acts or omissions; and
(b) to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Guarantor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if
it shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes which do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Guarantee Agreement may only be amended with the prior approval of the
Holders of at least 66-2/3% in liquidation amount of the Preferred Securities.
The provisions of Section 12.2 of the Declaration with respect to meetings of
Holders of the Securities apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Guarantee Agreement shall be in writing,
duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Preferred Guarantee Trustee at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago Illinois 60670-0126
(b) if given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
(c) if given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Guarantee Agreement is solely for the benefit of the Holders of the
Preferred Securities and subject to Section 3.1(a) is not separately
transferable from the Preferred Securities.
SECTION 9.5 Governing Law
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
U S WEST, Inc.
By:
Name:
Title:
THE FIRST NATIONAL BANK
OF CHICAGO
as Preferred Guarantee Trustee
By:
Name:
Title:
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
<S> <C>
Section of Trust Indenture Section of
Act of 1939, as amended Guarantee Agreement
- --------------------------- --------------------
310(a) 4.1(a)
310(b) 4.1(c)
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(f) Inapplicable
315(a) 3.1(b)
315(b) 2.7
315(c) 3.1(a)
315(d) 3.1(a)
316(a) 5.4(a), 2.6
<FN>
_______________
* This Cross-Reference Table does not constitute part of the
Preferred Securities Guarantee Agreement and shall not affect the
interpretation of any of its terms or provisions.
</FN>
</TABLE>
U S WEST COMMUNICATIONS GROUP 1996 THIRD QUARTER EARNINGS
PAGE
<PAGE>
U S WEST Communications, Inc.
1801 California Street
Denver, Colorado 80202
[U S WEST Communications logo and registered trademark]
News Release
Release Date: October 23, 1996
Contact: Dave Banks (303) 804-6752
U S WEST COMMUNICATIONS RECORDS ANOTHER QUARTER OF STRONG
GROWTH IN CORE OPERATIONS;
ACCESS LINES AND VOLUMES AT RECORD LEVELS
ENGLEWOOD, Colo. -- U S WEST Communications Group (NYSE:USW) today announced
record quarterly revenues and continued record access line growth -- among
the best in the industry -- as well as strong growth rates in new products and
local services.
These results, tempered by higher -- but moderating -- operating expenses, led
to normalized quarterly net income of $ 282 million, up 2.2 percent over the
same period in 1995. Further adjusting for certain one-time expenses
associated with the company's Omaha video operations, net income would have
grown 6.2 percent.
Third quarter operating highlights include:
- - Earnings per share (EPS) were unchanged from last year at $.59 on a
normalized basis. Further adjusting for the one-time operating costs
associated with the Omaha video operations, EPS would have been $.61, a 3.4
percent increase.
- - Access line growth, among the strongest in the nation, continues to
accelerate in U S WEST Communications 14-state region, increasing 5.1 percent
(excluding the sale of selected rural telephone exchanges) over the past 12
months. This includes 4.0 percent growth in residential lines, growth in
business lines of 7.9 percent, and a growth rate of 31.7 percent in
residential additional lines.
- - A 5.3 percent increase in operating revenues to $2.52 billion from $2.39
billion in the third quarter, 1995. This quarter's revenue performance was
driven by continued strong local service revenue growth of 9.3 percent. It
was also bolstered by strong growth in high-capacity services provided to our
large business customers, one of the most competitive segments of the
industry.
- - Strong revenue growth in new products, such as Caller ID, Voice
Messaging, and data networking services, up nearly 50 percent from the same
period in 1995. Within this category, revenues from CLASS services (which
include Caller ID) were up approximately 90 percent. !NTERPRISE [registered
trademark], the data networking services division of U S WEST Communications,
reported a revenue increase of more than 100 percent compared to the same
period a year ago.
<PAGE>
- - Continued strong penetration of custom calling features such as Call
Waiting, Call Forwarding, and 3-way Calling, driven by innovative marketing of
tailored product bundles.
- - The company intensified its efforts to control costs which led to a
reduction of approximately 1,000 employee positions during the quarter, 500 of
which will leave the company's payroll during the fourth quarter. This
contributed to a productivity increase of 4.6 percent as measured by employees
per 10,000 access lines. That figure now stands at 31.2 versus 32.7 last
year.
Operating expenses were up over the same period in 1995 by 5.1 percent at
$1.94 billion, an improvement over the 1996 second quarter increase of 8.0
percent. Expense increases were driven by:
- - Increased volume due to unprecedented access-line growth -- resulting
from the strong regional economy of the west -- and continuing
service-improvement initiatives. The company had a net gain of 197,000 access
lines in the third quarter, a 25 percent increase compared with third quarter,
1995. A majority of this growth occurred outside the company's five major
metro areas, and more than half of the residential gain was on primary --
versus additional -- lines. While initial costs for provisioning this type of
growth are higher than if a greater percentage were on second lines or in
metro areas, primary line growth spread more evenly across the 14-state
territory is great for the future of the business.
- - Increased costs associated with retail sales and marketing programs,
which are helping drive unprecedented revenue growth and positioning U S WEST
Communications as competitors enter new markets.
"I'm pleased with U S WEST Communications Group's improving service quality
and strong revenue growth," said Richard McCormick, chairman and chief
executive officer of U S WEST, Inc. "Those are critical elements in being fit
for an increasingly competitive marketplace."
Sol Trujillo, president and chief executive officer of U S WEST Communications
Group, said U S WEST Communications' third quarter performance shows the
company's commitment to customers is stronger than ever.
"We have kept our promises to our customers by improving service," Trujillo
said. "That has been our number one priority. At the same time, we're doing
a great job stimulating growth in revenues and new products. That shows our
aggressive marketing efforts are paying off."
"Our challenge now is to flow more of the dollars from these successes in the
core business to the bottom line and generate cash for continued investment in
the business," Trujillo added. "We've begun to see the results of our
initiatives to improve our cost structure, and I'm confident that we'll
continue to improve in the coming quarters. This will translate to improved
shareowner value."
<PAGE>
THIRD QUARTER OPERATING HIGHLIGHTS
Operating highlights for the quarter include:
- - On September 5, U S WEST Communications Group joined many of its
industry counterparts in appealing and asking for a stay of selected portions
of the FCC's August 8 interconnection order. Last week, the Federal 8th
Circuit Court stayed essentially the same parts of the order U S WEST had
requested, pending the outcome of appeals, which are expected sometime in
early 1997.
- - Marked improvement in many service quality measures. For instance,
orders "held" more than 30 days for primary service at the end of September,
1996 were 2,033, less than half of the 4,144 at the end of September, 1995 and
were only 37 percent of the 5,439 at the end of September, 1994. As well, 90
percent of the company's customers now reach a customer service representative
within three rings, compared to only about 70 percent in 1994. The company
achieved this performance despite net new access line gains 43 percent higher
than in 1995. Further, order activity is typically highest during the third
quarter. This usually causes an upward spike in held orders at this time of
year. No such spike occurred in 1996. (An order is "held" when the company
cannot deliver service immediately upon receipt of that order.)
- - Continued to drive increased residential penetration levels of
value-added services: Call Waiting, 39.8 %; Caller ID, 20.1 %; Voice
Messaging, 15.6 %.
- - Continued aggressive deployment of U S WEST Network 21. This
state-of-the-art, fiber-optic, bi-directional SONET ring architecture offers
unprecedented survivability, reliability and flexibility for high-capacity
services. These state-of-the-art rings dwarf in size what alternative access
providers have put in place. Customers in Denver, Phoenix and Seattle are
currently receiving the benefits of this enhanced self-healing network, and
construction is currently underway in other key cities.
- - !NTERPRISE continued to enhance its Frame Relay network, and by
year-end, expects to have 38,000 Frame Relay ports in service. That division
also began implementing FT-1 Frame Relay Service in preparation for entering
the interLATA market. This offering will allow !NTERPRISE to package local
and long distance data services for lower-cost, one-stop shopping. During the
third quarter, !NTERPRISE also successfully introduced Audio Conferencing Dial
Out Services, and began a controlled introduction of its new Managed Data
Services, a suite of services that helps customers build and manage data
internetworks.
U S WEST Communications Group provides telecommunications and high-speed data
services to more than 25 million customers in 14 western and midwestern
states. The company is one of two major groups that make up U S WEST. U S WEST
is in the connections business, helping customers share information,
entertainment and communications services in local markets worldwide. U S
WEST's other major group, U S WEST Media Group (NYSE:UMG), is involved in
domestic and international cable and wireless networks, directory publishing
and interactive multimedia services.
<PAGE>
- -------------------------
[Safe Harbor statement: Some of the information presented in or in
connection with this announcement constitutes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Although the Company believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not differ materially from
its expectations. Factors that could cause actual results to differ from
expectations include: (i) different than anticipated competition from new
entrants into the local exchange and intralata toll markets, (ii) changes in
demand for the Company's products and services, including optional custom
calling features, (iii) different than anticipated employee levels, capital
expenditures, and operating expenses as a result of unusually rapid, in-region
growth, (iv) the gain or loss of significant customers, and (v) regulatory
changes affecting the telecommunications industry, including changes that
could have an impact on the competitive environment in the local exchange
market.]
- - 30 -
Note: This release and the attached tables are available on the internet by
accessing U S WEST's internet site: www.uswest.com.
<PAGE>
Exhibit 99 A1
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF INCOME U S WEST COMMUNICATIONS GROUP
(UNAUDITED)
Quarter Ended Nine Months Ended
September 30, % September 30, %
In millions 1996 1995 Change 1996 1995 Change
- ----------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,208 $1,105 9.3 $3,532 $3,231 9.3
Interstate access 606 594 2.0 1,854 1,774 4.5
Intrastate access 192 186 3.2 571 558 2.3
Long-distance network 272 298 (8.7) 840 891 (5.7)
Other services 237 206 15.0 683 591 15.6
---------------- ----------------
Total operating revenue 2,515 2,389 5.3 7,480 7,045 6.2
---------------- ----------------
OPERATING EXPENSES
Employee-related 900 835 7.8 2,688 2,479 8.4
Other operating 402 404 (0.5) 1,177 1,099 7.1
Taxes other than
income taxes 94 95 (1.1) 291 306 (4.9)
Depreciation & amort 545 513 6.2 1,580 1,514 4.4
---------------- ----------------
Total operating expenses 1,941 1,847 5.1 5,736 5,398 6.3
---------------- ----------------
Income from operations 574 542 5.9 1,744 1,647 5.9
Interest expense 111 108 2.8 332 315 5.4
Gains on sales of rural
telephone exchanges 2 34 (94.1) 51 112 (54.5)
Other expense - net 10 14 (28.6) 22 30 (26.7)
---------------- ----------------
Income before inc taxes,
extd item & cum effect
of chg in acctg princ 455 454 0.2 1,441 1,414 1.9
Income tax provision 169 162 4.3 537 514 4.5
---------------- ----------------
Income before extd
item & cum effect of
chg in acctg princ 286 292 (2.1) 904 900 0.4
Extraordinary item:
Early extinguishment
of debt, net of tax - (5) - - (5) -
---------------- ----------------
Income before cum effect
of chg in acctg princ 286 287 (0.3) 904 895 1.0
Cum effect of chg in
acctg princ, net of tax - - - 34 - -
---------------- ----------------
NET INCOME $286 $287 (0.3) $938 $895 4.8
================ ================
5
<CAPTION>
COMBINED STATEMENTS OF INCOME U S WEST COMMUNICATIONS GROUP
(UNAUDITED)
Quarter Ended Nine Months Ended
In millions, except September 30, % September 30, %
per share amounts 1996 1995 Change 1996 1995 Change
- -------------------------------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Average common shares
outstanding (#1) 478.4 471.2 1.5 476.7 470.1 1.4
================ ================
Earnings per common
share: (1)<F1>
Income before extraordi-
nary item & cumulative
effect of change in
accounting principle $0.60 $0.62 (3.2) $1.90 $1.91 (0.5)
Extraordinary item - (0.01) - - (0.01) -
Cumulative effect of
change in accounting
principle - - - 0.07 - -
---------------- ----------------
Earnings per
common share $0.60 $0.61 (1.6) $1.97 $1.90 3.7
================ ================
<FN>
<F1>
1: Effective November 1, 1995, each share of U S WEST, Inc.
common stock was converted into one share each of U S WEST Communi-
cations Group common stock and U S WEST Media Group common stock.
Earnings per common share for 1995 have been presented on a pro forma
basis to reflect the two classes of stock as if they were outstanding
since January 1, 1995. For periods prior to the recapitalization,
the average common shares outstanding are assumed to be equal to the
average common shares outstanding for U S WEST, Inc.
</FN>
</TABLE>
6
<PAGE>
EXHIBIT 99A2
<TABLE>
<CAPTION>
EARNINGS NORMALIZATION SCHEDULE U S WEST COMMUNICATIONS GROUP
(UNAUDITED)
Quarter Ended Nine Months Ended
In millions, except September 30, % September 30, %
per share amounts 1996 1995 Change 1996 1995 Change
- -------------------------------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
NORMALIZED INCOME:
Reported net income $286 $287 (0.3) $938 $895 4.8
Adjustments to normalize
net income:
Rural exchange sales (1) (21)(95.2) (31) (70)(55.7)
Recapitalization costs - 5 - - 5 -
Extraordinary item - net
of tax - 5 - - 5 -
Cumulative effect of
change in accounting
principle-net of tax - - - (34) - -
Current year impact of
accounting change -
net of tax (3) - - (13) - -
---------------- ----------------
Normalized income $282 $276 2.2 $860 $835 3.0
================ ================
NORMALIZED EARNINGS PER
COMMON SHARE:
Reported net income $0.60 $0.61 (1.6) $1.97 $1.90 3.7
Adjustments to normalize
net income:
Rural exchange sales - (0.04) - (0.06) (0.14)(57.1)
Recapitalization costs - 0.01 - - 0.01 -
Extraordinary item - net
of tax - 0.01 - - 0.01 -
Cumulative effect of
change in accounting
principle-net of tax - - - (0.07) - -
Current year impact of
accounting change -
net of tax (0.01) - - (0.03) - -
---------------- ----------------
Normalized earnings
per common share $0.59 $0.59 - $1.81 $1.78 1.7
================ ================
</TABLE>
7
<PAGE>
EXHIBIT 99A3
<TABLE>
<CAPTION>
SELECTED COMBINED GROUP DATA U S WEST COMMUNICATIONS GROUP
(UNAUDITED)
Dollars in Quarter Ended Nine Months Ended
millions, except September 30, % September 30, %
per share amounts 1996 1995 Change 1996 1995 Change
- ------------------------------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Access lines
(thousands) (1)<F1>:
Business 4,482 4,178 7.3 4,482 4,178 7.3
Consumer 10,771 10,442 3.2 10,771 10,442 3.2
Total access lines 15,253 14,620 4.3 15,253 14,620 4.3
Normalized access
lines 15,369 14,620 5.1 15,369 14,620 5.1
Billed access minutes
of use (millions):
Interstate 12,976 12,027 7.9 38,674 35,501 8.9
Intrastate 2,612 2,404 8.7 7,808 6,988 11.7
Total minutes of use 15,588 14,431 8.0 46,482 42,489 9.4
Employees:
Communications Grp 50,351 50,849 (1.0) 50,351 50,849 (1.0)
Telephone operations 47,568 47,868 (0.6) 47,568 47,868 (0.6)
Dividends per
common share (2)<F2> $0.535 $0.535 - $1.605 $1.605 -
Common shares
outstanding (2)<F2> 479.2 471.7 1.6 479.2 471.7 1.6
Capital expenditures $662 $730 (9.3) $2,008 $1,923 4.4
EBITDA (3)<F3> $1,119 $1,055 6.1 $3,324 $3,161 5.2
EBITDA margin 44.5% 44.2% - 44.4% 44.9% -
Return on equity (4)<F4> 29.7% 36.2% - 32.2% 37.2% -
Debt-to-capital ratio:
Communications Grp 64.0% 66.0%# - 64.0% 66.0%# -
Telephone
operations only 61.9% 63.1%# - 61.9% 63.1%# -
# As of December 31, 1995.
<FN>
<F1>
<F2>
<F3>
<F4>
1: 1995 access lines have been restated to conform to current
year presentation.
2: Effective November 1, 1995, each share of U S WEST, Inc.
common stock was converted into one share each of U S WEST Communi-
cations Group common stock and U S WEST Media Group common stock.
The common shares outstanding and dividends per common share at
September 30, 1995 are presented on a pro forma basis and assumed to
be equal to the common shares outstanding for U S WEST, Inc.
3: Earnings before interest, taxes, depreciation, amortization,
and other (EBITDA). EBITDA also excludes gains on asset sales.
4: Based on income before one time items.
</FN>
</TABLE>
8
<PAGE>
EXHIBIT 99A4
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS U S WEST COMMUNICATIONS GROUP
(UNAUDITED)
September 30, December 31,
In millions 1996 1995
- -------------------------------------- ---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $106 $172
Accounts and notes receivable 1,593 1,617
Inventories and supplies 185 193
Deferred tax asset 231 259
Prepaid and other 67 51
---------------------------
Total current assets 2,182 2,292
---------------------------
Property, plant and equipment - net 13,799 13,529
Other assets 841 764
---------------------------
Total assets $16,822 $16,585
===========================
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $1,115 $1,065
Accounts payable 661 851
Dividends payable 257 254
Other 1,551 1,437
---------------------------
Total current liabilities 3,584 3,607
---------------------------
Long-term debt 5,661 5,689
Postretirement and other postemployment
benefit obligations 2,331 2,351
Deferred taxes, credits and other 1,429 1,462
Communications Group equity 3,817 3,476
---------------------------
Total liabilities and equity $16,822 $16,585
===========================
</TABLE>
9
<PAGE>
EXHIBIT 99A5
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF U S WEST COMMUNICATIONS GROUP
CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
In millions 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $938 $895
Adjustments to net income:
Depreciation and amortization 1,580 1,514
Gains on sales of rural telephone exchanges (51) (112)
Cumulative effect of change in accounting
principle (34) -
Deferred income taxes and amortization
of investment tax credits (11) 121
Changes in operating assets and liabilities:
Restructuring payments (114) (254)
Postretirement medical and life costs,
net of cash fundings (28) (156)
Accounts and notes receivable 24 (204)
Inventories, supplies and other (14) (63)
Accounts payable and accrued liabilities 72 (33)
Other - net (5) (10)
- ---------------------------------------------------------------------
Cash provided by operating activities 2,357 1,698
- ---------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (1,891) (1,703)
Proceeds from sales of rural telephone
exchanges 130 162
Proceeds from (payments on) disposals of
property, plant and equipment (1) (1)
- ---------------------------------------------------------------------
Cash (used for) investing activities (1,762) (1,542)
- ---------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of short-term debt 195 365
Proceeds from issuance of long-term debt 16 499
Repayments of long-term debt (278) (256)
Dividends paid on common stock (703) (694)
Proceeds from issuance of common stock 109 -
Advance to Media Group - (105)
- ---------------------------------------------------------------------
Cash (used for) financing activities (661) (191)
- ---------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Decrease (66) (35)
Beginning balance 172 116
- ---------------------------------------------------------------------
Ending balance $106 $81
=====================================================================
</TABLE>
10
<PAGE>
EXHIBIT 99A6
<TABLE>
<CAPTION>
STATEMENTS OF INCOME U S WEST Communications, Inc.
(UNAUDITED) (Telephone Operations Only)
Quarter Ended Nine Months Ended
September 30, % September 30, %
In millions 1996 1995 Change 1996 1995 Change
- -------------------------------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,208 $1,105 9.3 $3,532 $3,231 9.3
Interstate access 606 594 2.0 1,854 1,774 4.5
Intrastate access 192 186 3.2 571 558 2.3
Long-distance network 272 298 (8.7) 840 891 (5.7)
Other services 178 151 17.9 507 455 11.4
---------------- ----------------
Total operating revenue 2,456 2,334 5.2 7,304 6,909 5.7
---------------- ----------------
OPERATING EXPENSES
Employee-related* 848 780 8.7 2,525 2,277 10.9
Other operating* 386 403 (4.2) 1,148 1,159 (0.9)
Taxes other than
income taxes 92 92 - 284 299 (5.0)
Depreciation & amort 541 507 6.7 1,565 1,499 4.4
---------------- ----------------
Total operating expenses 1,867 1,782 4.8 5,522 5,234 5.5
---------------- ----------------
Income from operations 589 552 6.7 1,782 1,675 6.4
Interest expense 104 98 6.1 308 284 8.5
Gains on sales of rural
telephone exchanges 2 34 (94.1) 51 112 (54.5)
Other expense - net 10 10 - 25 43 (41.9)
---------------- ----------------
Income before inc taxes,
extd item & cum effect
of chg in acctg princ 477 478 (0.2) 1,500 1,460 2.7
Income tax provision 183 173 5.8 574 543 5.7
---------------- ----------------
Income before extd
item & cum effect of
chg in acctg princ 294 305 (3.6) 926 917 1.0
Extraordinary item:
Early extinguishment
of debt, net of tax - (5) - - (5) -
---------------- ----------------
Income before cum effect
of chg in acctg princ 294 300 (2.0) 926 912 1.5
Cum effect of chg in
acctg princ, net of tax - - - 34 - -
---------------- ----------------
NET INCOME $294 $300 (2.0) $960 $912 5.3
================ ================
*Employee-related expenses for the nine months ended September 30,
1996 include the impacts of employee transfers from affiliated
Communications Group companies to U S WEST Communications, Inc.
(USWC) during the first half of 1995. Prior to the transfers,
these affiliate employee costs were billed to USWC and reflected as
affiliate expense, which is included in other operating expenses.
</TABLE>
11
<PAGE>
U S WEST MEDIA GROUP
7800 East Orchard Road
Englewood, Colorado 80111
[U S WEST Media Group logo and registered mark]
News Release
Release Date: October 25, 1996
Contact: Blair Johnson Cathy Fowler
(303) 793-6296 (303) 793-6509
MEDIA GROUP REPORTS THIRD-QUARTER
OPERATING CASH FLOW INCREASE OF 22 PERCENT
ENGLEWOOD, Colo. - U S WEST Media Group (NYSE: UMG) today reported record
third-quarter results, driven by robust growth in its cable, wireless and
directory operations.
For the quarter ending September 30, Media Group reported -- on a
proportionate basis:
- A 22-percent increase in operating cash flow compared with the third
quarter last year -- excluding the effects of a one-time charge of $35 million
to streamline operations at U S WEST Direct and U S WEST International. For
the quarter, operating cash flow was $410 million excluding the charge.
Operating cash flow, which represents earnings before interest, taxes,
depreciation and amortization (EBITDA), is an important measure of operating
performance.
- A 20-percent increase in revenue. During the quarter, Media Group
generated $1.5 billion in revenue.
- A 17-percent increase in customers worldwide. Media Group now serves
6.5 million customers.
Because Media Group participates in numerous joint ventures, the company uses
proportionate accounting to reflect its relative share of operating revenues
and expenses associated with these operations.
"This has been an excellent quarter for Media Group," said Richard McCormick,
U S WEST chairman and chief executive officer. "These results demonstrate our
success in delivering more services to more customers in more markets. And
we'll take another big step next month when Media Group closes its merger with
Continental Cablevision."
Chuck Lillis, U S WEST Media Group president and chief executive officer, said
Media Group's third-quarter performance reflects its commitment to delivering
superior operating results.
"All three of our businesses reported record-level results," Lillis said.
"Our cable subscriber growth in Atlanta is twice the industry average.
Domestic cellular cash flow reached an all-time high. And directory revenue
growth led that industry again.
"The charge we're taking this quarter reflects our continued focus on
streamlining operations to reduce costs," Lillis said. "Within the next year,
we expect to recoup the $35 million through costs savings."
Proportionate operating highlights for the quarter by line of business
include:
- CABLE AND TELEPHONY: Subscriber growth of 6 percent for MediaOne, the
Atlanta cable operation, exceeded the industry average for the seventh
consecutive quarter. MediaOne ended the quarter with 511,000 customers. This
strong subscriber growth produced revenue of $60 million, an 11-percent
increase on a comparable basis to last year. Operating cash flow was $28
million, an 8-percent increase.
Meanwhile, Media Group's investment in Time Warner Entertainment (TWE)
generated operating cash flow of $151 million, a 12-percent increase from
third quarter last year. Media Group's international properties also produced
strong subscriber growth. Those ventures now serve 647,000 subscribers, a
41-percent increase on a comparable basis.
- WIRELESS: For the first time ever, operating cash flow margins in
domestic cellular operations passed the 45-percent mark, driven by subscriber
growth and operational efficiencies. For the quarter, operating cash flow
increased 48 percent, to $113 million. The subscriber base increased 43
percent to 1.7 million customers. International wireless operations also
exhibited strong customer growth. Media Group's international properties now
serve 419,000 wireless customers, a 55-percent increase.
- DIRECTORIES: U S WEST Direct continues its strong revenue growth.
Boosted by a 4-percent increase in revenue per advertiser, U S WEST Direct
reported revenue of $274 million, a 7-percent increase from the same period
last year.
For the quarter, Media Group reported net income of $18 million, or 4 cents
per common share.
U S WEST Media Group is involved in domestic and international cable and
telephony, wireless communications, and directory and information services.
For 1995, U S WEST Media Group reported proportionate revenues of $5.1
billion. Media Group is one of two major groups that make up U S WEST, a
company in the connections business helping customers share information,
entertainment and communications services in local markets worldwide. U S
WEST's other major group, U S WEST Communications, provides telecommunications
services to more than 25 million customers in 14 western and midwestern
states.
Some of the information presented in or in connection with this announcement
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that
its expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that
actual results will not differ materially from its expectations. Factors that
could cause actual results to differ from expectations include: (i) a change
in economic conditions in the various markets served by the Company's
operations that could adversely affect the level of demand for cable,
wireless, directory or other services offered by the Company, (ii) greater
than anticipated competitive activity requiring new pricing for Company
services, (iii) higher than anticipated start-up costs associated with new
business opportunities, (iv) regulatory changes affecting the
telecommunications industry, (v) increases in fraudulent activity with respect
to wireless services, or (vi) delays in the development of anticipated
technologies, or the failure of such technologies to perform according to
expectations.
Note: This release and the attached tables are available on the Internet by
accessing U S WEST's Internet site: www.uswest.com
<PAGE>
KEY SELECTED PROPORTIONATE OPERATING HIGHLIGHTS
BY LINE OF BUSINESS
(ALL CHANGES ARE IN COMPARISON TO 3Q 1995)
CABLE AND TELEPHONY
MEDIAONE
- - 511,000 customers, a 6% increase
- - Revenue of $60 million, an 11% increase on a comparable basis
- - Operating cash flow of $28 million, an 8% increase
INTERNATIONAL
- - 647,000 subscribers, a 41% increase on a comparable basis
- - Revenue of $57 million, a 78% increase
- - Operating cash flow loss of $10 million*, unchanged from a year ago
TIME WARNER ENTERTAINMENT (TWE)
- - A 4% cable subscriber increase
- - Revenue of $693 million, a 17% increase
- - Operating cash flow of $151 million, a 12% increase
WIRELESS
U S WEST CELLULAR
- - 1.7 million customers, a 43% increase
- - Revenue of $286 million, a 29% increase
- - Operating cash flow of $113 million, a 48% increase
- - Operating cash flow, as a percent of net operating revenue, of 45%
INTERNATIONAL
- - 419,000 subscribers, a 55% increase
- - Revenue of $111 million, a 48% increase
- - Operating cash flow of $4 million*, compared to break-even last year
DIRECTORY AND INFORMATION SERVICES
U S WEST DIRECT
- - Revenue of $274 million, a 7% increase
- - Operating cash flow of $137 million*, a 7% increase
INTERNATIONAL
- - Revenue of $54 million, a 93% increase
- - Operating cash flow of $6 million*, compared to a loss of $3 million last
year
U S WEST MEDIA GROUP COMBINED GAAP RESULTS
- - Revenue of $694 million
- - Operating cash flow of $231 million
- - Net income of $18 million
- - Earnings per common share of 4 cents
* Reported proportionate operating cash flow has been normalized to exclude
the effects of charges of $25 million for U S WEST Direct and $10 million for
U S WEST International.
<PAGE>
Exhibit 99B1
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF INCOME U S WEST MEDIA GROUP
(UNAUDITED)
Quarter Ended Nine Months Ended
September 30, % September 30, %
In millions 1996 1995 Change 1996 1995 Change
- ---------------------------------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES
Directory $316 $292 8.2 $908 $856 6.1
Wireless 315 246 28.0 869 676 28.6
Cable 60 56 7.1 176 165 6.7
Other 3 10 (70.0) 12 28 (57.1)
-------------- ----------------
Total revenues $694 $604 14.9 $1,965 $1,725 13.9
-------------- ----------------
EXPENSES
Costs of sales and
other revenues 221 193 14.5 626 539 16.1
Selling, general and
administrative 242 204 18.6 698 634 10.1
Depreciation & amort 79 60 31.7 216 181 19.3
-------------- ----------------
Total 542 457 18.6 1,540 1,354 13.7
-------------- ----------------
Income from
operations 152 147 3.4 425 371 14.6
Interest expense 30 29 3.4 80 89 (10.1)
Equity losses in
unconsol ventures 81 38 - 224 128 75.0
Guaranteed minority
interest expense 12 2 - 36 2 -
Other income
(expense) - net 10 6 66.7 (24) 24 -
-------------- ----------------
Income before income
taxes & extd item 39 84 (53.6) 61 176 (65.3)
Income taxes 21 51 (58.8) 51 103 (50.5)
-------------- ----------------
Income before extd
item 18 33 (45.5) 10 73 (86.3)
Extraordinary item:
Early extinguishment
of debt, net of tax - (4) - - (4) -
-------------- ----------------
NET INCOME 18 29 (37.9) 10 69 (85.5)
Preferred dividends 1 1 - 3 3 -
-------------- ----------------
EARNINGS AVAILABLE FOR
COMMON STOCK $17 $28 (39.3) $7 $66 (89.4)
============== ================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF INCOME U S WEST MEDIA GROUP
(UNAUDITED)
Quarter Ended Nine Months Ended
In millions, except September 30, % September 30, %
per share amounts 1996 1995 Change 1996 1995 Change
- ---------------------------------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Average common
shares
outstanding (1)<F1> 473.9 471.2 0.6 473.5 470.1 0.7
============== ================
Earnings per
common share: (1)<F1>
Income available for
common stock before
extraordinary item $0.04 $0.07 (42.9) $0.01 $0.15 (93.3)
Extraordinary item - (0.01) - - (0.01) -
-------------- ------- -------
Earnings per
common share $0.04 $0.06 (33.3) $0.01 $0.14 (92.9)
============== ================
<FN>
<F1>
1: Effective November 1, 1995, each share of U S WEST, Inc.
common stock was converted into one share each of U S WEST
Communications Group common stock and U S WEST Media Group
common stock. Earnings per common share for 1995 have been
presented on a pro forma basis to reflect the two classes of
stock as if they were outstanding since January 1, 1995. For
periods prior to the recapitalization, the average common shares
outstanding are assumed to be equal to the average common shares
outstanding for U S WEST, Inc.
</FN>
</TABLE>
6
<PAGE>
Exhibit 99B2
<TABLE>
<CAPTION>
SELECTED COMBINED GROUP DATA (UNAUDITED) U S WEST MEDIA GROUP
Dollars in
millions; Quarter Ended Nine Months Ended
statistics in September 30, % September 30, %
thousands 1996 1995 Change 1996 1995 Change
- --------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
U S WEST Direct $274 $257 6.6 $812 $761 6.7
Other directories 42 35 20.0 96 95 1.1
MediaOne 60 56 7.1 176 165 6.7
NewVector:
Service 286 223 28.3 792 616 28.6
Equipment 29 23 26.1 77 60 28.3
---------------- -----------------
Total NewVector 315 246 28.0 869 676 28.6
Other 3 10 (70.0) 12 28 (57.1)
---------------- -----------------
Total revenues $694 $604 14.9 $1,965 $1,725 13.9
EBITDA (1)<F1>
U S WEST Direct $112 $128 (12.5) $382 $384 (0.5)
Other directories 2 (20) - (32) (67) 52.2
MediaOne 28 26 7.7 83 74 12.2
NewVector 127 85 49.4 307 217 41.5
Other (38) (12) - (99) (56) (76.8)
---------------- -----------------
Total EBITDA $231 $207 11.6 $641 $552 16.1
Other Data:
U S WEST Direct (Yellow Pages)
Net Income $66 $75 (12.0) $224 $225 (0.4)
Advertisers 482 473 1.9 482 473 1.9
MediaOne (Atlanta Cable)
Basic subscribers
FCC equivalents 511 482 6.0 511 482 6.0
Homes passed 877 840 4.4 877 840 4.4
U S WEST NewVector (Wireless)
Subscribers
(consolidated) 1,816 1,269 43.1 1,816 1,269 43.1
Proportionate POPs
managed (millions) 20.0 19.5 2.6 20.0 19.5 2.6
<FN>
<F1>
1: Earnings before interest, taxes, depreciation, amortization
and other (EBITDA). EBITDA also excludes equity losses and
guaranteed minority interest expense.
Note: Certain reclassifications have been made to conform to the
current year presentation.
</FN>
</TABLE>
7
<PAGE>
EXHIBIT 99B3
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS U S WEST MEDIA GROUP
(UNAUDITED)
September 30, December 31,
In millions 1996 1995
- --------------------------------------- --------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $54 $20
Accounts and notes receivable 391 287
Deferred directory costs 254 247
Other assets 137 187
--------------------------
Total current assets 836 741
--------------------------
Property, plant and equipment - net 1,428 1,148
Investment in Time Warner Entertainment 2,493 2,483
Intangible assets - net 1,791 1,798
Investment in international ventures 1,371 1,511
Net investment in assets held for sale 404 429
Other assets 530 505
--------------------------
Total assets $8,853 $8,615
==========================
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $613 $836
Accounts payable 247 235
Deferred revenue and customer deposits 85 87
Other payables 419 411
--------------------------
Total current liabilities 1,364 1,569
--------------------------
Long-term debt 1,741 1,265
Deferred taxes, credits and other 632 658
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely Company-
guaranteed debentures 600 600
Preferred stock subject to
mandatory redemption 51 51
Media Group equity 4,574 4,599
Company LESOP guarantee (109) (127)
--------------------------
Total equity 4,465 4,472
--------------------------
Total liabilities and equity $8,853 $8,615
==========================
</TABLE>
8
<PAGE>
EXHIBIT 99B4
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF U S WEST MEDIA GROUP
CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
In millions 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $10 $69
Adjustments to net income:
Depreciation and amortization 216 181
Equity losses in unconsolidated ventures 223 128
Deferred income taxes (57) (28)
Provision for uncollectibles 46 37
Changes in operating assets and liabilities:
Accounts and notes receivable (115) (52)
Deferred directory costs, prepaid and other 5 (18)
Accounts payable and accrued liabilities 45 107
Other - net 47 40
- ---------------------------------------------------------------------
Cash provided by operating activities 420 464
- ---------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (361) (240)
Investment in international ventures (227) (576)
Cash (to) from investment in assets held for sale 176 (108)
Other - net (41) (269)
- ---------------------------------------------------------------------
Cash (used for) investing activities (453) (1,193)
- ---------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuances of short-term debt (8) 323
Repayments of long-term debt (283) (384)
Proceeds from issuance of trust originated
preferred securities - net - 581
Proceeds from issuance of long-term debt 330 -
Proceeds from issuance of common stock 31 104
Preferred dividends paid (3) (3)
Advance from Communications Group - 105
Purchase of treasury stock - (63)
- ---------------------------------------------------------------------
Cash provided by financing activities 67 663
- ---------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Increase (Decrease) 34 (66)
Beginning balance 20 93
- ---------------------------------------------------------------------
Ending balance $54 $27
=====================================================================
Note: Certain reclassifications within the financial statements have
made to conform to the current year presentation.
</TABLE>
9
<PAGE>
EXHIBIT 99B5
<TABLE>
<CAPTION>
SELECTED PROPORTIONATE DATA (UNAUDITED) (1)<F1> U S WEST MEDIA GROUP
Cable and
Telecommunications Wireless
Domestic
Dollars in millions (2)<F2> Int'l Domestic Int'l
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
QTR Ended
September 30, 1996
Revenues $753 $57 $286 $111
EBITDA 176 (16) 106 1
Net income (loss) (18) (51) 46 (28)
Subscribers/advertisers
(thousands) 3,023 647 1,664 419
QTR Ended
September 30, 1995
Revenues $649 $32 $221 $75
EBITDA 156 (10) 76 -
Net income (loss) (11) (23) 24 (16)
Subscribers/advertisers
(thousands) 2,790 599 1,162 271
Nine Months Ended
September 30, 1996
Revenues $2,168 $157 $787 $298
EBITDA 516 (36) 253 1
Net income (loss) (26) (157) 88 (70)
Nine Months Ended
September 30, 1995
Revenues $1,890 $82 $580 $200
EBITDA 431 (34) 188 (25)
Net income (loss) (39) (36) 56 (76)
<FN>
<F1>
(1) Proportionate data reflects the Media Group's relative
ownership interest in revenues and EBITDA for both its
consolidated and equity method entities. Proportionate data is
not required by GAAP or intended to replace the Combined Financial
Statements prepared in accordance with GAAP.
<F2>
(2) Includes the Media Group's 25.51 percent pro-rata priority
and residual equity interests in reported TWE results.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SELECTED PROPORTIONATE DATA (UNAUDITED) (1)<F1> U S WEST MEDIA GROUP
Directory & Corp
Information Services &
Dollars in millions Domestic Int'l Other Total
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
QTR Ended
September 30, 1996
Revenues $276 $54 $3 $1,540
EBITDA 108 5 (5) 375
Net income (loss) 59 3 7 18
Subscribers/advertisers
(thousands) 482 264 - 6,499
QTR Ended
September 30, 1995
Revenues $264 $28 $11 $1,280
EBITDA 108 (3) 10 337
Net income (loss) 65 (6) (4) 29
Subscribers/advertisers
(thousands) 473 254 - 5,549
Nine Months Ended
September 30, 1996
Revenues $826 $131 $9 $4,376
EBITDA 349 5 (30) 1,058
Net income (loss) 193 (9) (9) 10
Nine Months Ended
September 30, 1995
Revenues $784 $72 $27 $3,635
EBITDA 318 (7) 14 885
Net income (loss) 186 (11) (11) 69
<FN>
<F1>
(1) Proportionate data reflects the Media Group's relative
ownership interest in revenues and EBITDA for both its
consolidated and equity method entities. Proportionate data is
not required by GAAP or intended to replace the Combined Financial
Statements prepared in accordance with GAAP.
</FN>
</TABLE>
11
<PAGE>
EXHIBIT 99C1
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF U S WEST, Inc.
INCOME (UNAUDITED)
Quarter Ended Nine Months Ended
September 30, % September 30, %
In millions 1996 1995 Change 1996 1995 Change
- ------------------------------ ------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SALES & OTHER REVENUES $3,179 $2,964 7.3 $9,353 $8,686 7.7
OPERATING EXPENSES
Employee-related 1,105 1,007 9.7 3,246 2,982 8.9
Other operating 623 592 5.2 1,823 1,661 9.8
Taxes other than
income taxes 101 103 (1.9) 319 330 (3.3)
Depreciation & amort 624 573 8.9 1,796 1,695 6.0
---------------- ----------------
Total operating expense 2,453 2,275 7.8 7,184 6,668 7.7
---------------- ----------------
Income from operations 726 689 5.4 2,169 2,018 7.5
Interest expense 140 137 2.2 411 404 1.7
Equity losses in
unconsol ventures 81 38 - 224 128 75.0
Gains on sales of rural
telephone exchanges 2 34 (94.1) 51 112 (54.5)
Guaranteed minority
interest expense 12 2 - 36 2 -
Other expense - net 1 8 (87.5) 47 6 -
---------------- ----------------
Income before inc taxes,
extd item & cum effect
of chg in acctg princ 494 538 (8.2) 1,502 1,590 (5.5)
Income tax provision 190 213 (10.8) 588 617 (4.7)
---------------- ----------------
Income before extd
item, cum effect of
chg in acctg princ 304 325 (6.5) 914 973 (6.1)
Extraordinary item:
Early extinguishment
of debt - net of tax - (9) - - (9) -
---------------- ----------------
Income before cum effect
of chg in acctg princ 304 316 (3.8) 914 964 (5.2)
Cumulative effect of
change in accounting
principle - net of tax - - - 34 - -
---------------- ----------------
NET INCOME 304 316 (3.8) 948 964 (1.7)
Preferred dividends 1 1 - 3 3 -
---------------- ----------------
EARNINGS AVAILABLE FOR
COMMON STOCK $303 $315 (3.8) $945 $961 (1.7)
================ ================
</TABLE>
- 1 -
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF U S WEST, Inc.
INCOME (UNAUDITED)
Quarter Ended Nine Months Ended
In millions, except September 30, % September 30, %
per share amounts 1996 1995 Change 1996 1995 Change
- ------------------------------ ------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMMUNICATIONS GROUP:
Average common shares
outstanding (1)<F1> 478.4 471.2 1.5 476.7 470.1 1.4
================ ================
Earnings per common
share: (1)<F1>
Income before extraordi-
nary item & cumulative
effect of change in
accounting principle $0.60 $0.62 (3.2) $1.90 $1.91 (0.5)
Extraordinary item - (0.01) - - (0.01) -
Cumulative effect of
change in accounting
principle - - - 0.07 - -
---------------- ----------------
Earnings per
common share $0.60 $0.61 (1.6) $1.97 $1.90 3.7
================ ================
MEDIA GROUP:
Average common shares
outstanding (1)<F1> 473.9 471.2 0.6 473.5 470.1 0.7
================ ================
Earnings per common
share: (1)<F1>
Income available for
common stock before
extraordinary item $0.04 $0.07 (42.9) $0.01 $0.15 (93.3)
Extraordinary item - (0.01) - - (0.01) -
---------------- ----------------
Earnings per
common share $0.04 $0.06 (33.3) $0.01 $0.14 (92.9)
================ ================
<FN>
<F1>
1 Effective November 1, 1995, each share of U S WEST, Inc.
common stock was converted into one share each of U S WEST Communi-
cations Group common stock and U S WEST Media Group common stock.
Earnings per common share for 1995 have been presented on a pro
forma basis to reflect the two classes of stock as if they were
outstanding since January 1, 1995. For periods prior to the
recapitalization, the average common shares outstanding
are assumed to be equal to the average common shares outstanding
for U S WEST, Inc.
</FN>
</TABLE>
- 2 -
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF U S WEST, Inc.
INCOME (UNAUDITED)
Dollars in millions, Quarter Ended Nine Months Ended
except per share September 30, % September 30, %
amounts 1996 1995 Change 1996 1995 Change
- ------------------------------ ------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U S WEST, Inc.
Average common shares
outstanding (#1) - 471.2 - - 470.1 -
================ ================
Earnings per common
share: (1)<F1>
Income available for
common stock before
extraordinary item $ - $0.69 - $ - $2.06 -
Extraordinary item - (0.02) - - (0.02) -
---------------- ----------------
Earnings per
common share $ - $0.67 - $ - $2.04 -
================ ================
SELECTED CONSOLIDATED DATA
Capital
expenditures $776 $818 (5.1) $2,337 $2,183 7.1
Debt-to-capital
ratio (2)<F2> 50.6% 50.7%# - 50.6% 50.7%# -
Employees 60,837 61,123 (0.5) 60,837 61,123 (0.5)
EBITDA $1,350 $1,262 7.0 $3,965 $3,713 6.8
EBITDA margin 42.5% 42.6% - 42.4% 42.8% -
<FN>
<F1>
# As of December 31, 1995.
1 Effective November 1, 1995, each share of U S WEST, Inc.
common stock was converted into one share each of U S WEST Communi-
cations Group common stock and U S WEST Media Group common stock.
<F2>
2 Ratio includes preferred securities and other preferred stock
as a component of total capital. Including debt related to the net
investment in assets held for sale, preferred securities and other
preferred stock, the Company's percentage of debt to total capital
was 55.4% at September 30, 1996 and 56.4% at December 31, 1995.
</FN>
</TABLE>
- 3 -
<PAGE>
EXHIBIT 99C2
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST, Inc.
(UNAUDITED)
September 30, December 31,
In millions 1996 1995
- --------------------------------------- --------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $160 $192
Accounts and notes receivable 1,973 1,886
Inventories and supplies 198 227
Deferred tax asset 251 282
Prepaid and other 354 322
-------------------------
Total current assets 2,936 2,909
-------------------------
Property, plant and equipment - net 15,227 14,677
Investment in Time Warner Entertainment 2,493 2,483
Intangible assets - net 1,791 1,798
Investment in international ventures 1,371 1,511
Net investment in assets held for sale 404 429
Prepaid and other assets 1,361 1,264
-------------------------
Total assets $25,583 $25,071
=========================
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt $1,728 $1,901
Accounts payable 831 975
Dividends payable 257 254
Other payables 2,050 1,922
-------------------------
Total current liabilities 4,866 5,052
-------------------------
Long-term debt 7,402 6,954
Postretirement and other post-
employment benefit obligations 2,420 2,433
Deferred taxes, credits and other 1,962 2,033
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely Company-
guaranteed debentures 600 600
Preferred stock subject to
mandatory redemption 51 51
Common shareowners' equity:
Common shares 8,396 8,228
Retained earnings (deficit) 41 (115)
LESOP guarantee (109) (127)
Foreign currency translation
adjustments (46) (38)
-------------------------
Total common shareowners' equity 8,282 7,948
-------------------------
Total liabilities & shareowners'
equity $25,583 $25,071
=========================
</TABLE>
- 4 -
<PAGE>
EXHIBIT 99C3
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF U S WEST, Inc.
CASH FLOWS (UNAUDITED) Nine Months Ended
September 30,
In millions 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $948 $964
Adjustments to net income:
Depreciation and amortization 1,796 1,695
Equity losses in unconsolidated ventures 223 128
Gains on sales of rural telephone exchanges (51) (112)
Cumulative effect of change in accounting
principle (34) -
Deferred income taxes and amortization
of investment tax credits (68) 93
Changes in operating assets and liabilities:
Restructuring payments (126) (268)
Postretirement medical and life costs,
net of cash fundings (20) (86)
Accounts and notes receivable (87) (219)
Inventories, supplies and other (9) (81)
Accounts payable and accrued liabilities 171 88
Other - net 34 21
- ---------------------------------------------------------------------
Cash provided by operating activities 2,777 2,223
- ---------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (2,252) (1,943)
Investment in international ventures (227) (576)
Proceeds from disposals of property,
plant and equipment 129 161
Cash (to) from net investment in assets
held for sale 176 (108)
Other - net (41) (269)
- ---------------------------------------------------------------------
Cash (used for) investing activities (2,215) (2,735)
- ---------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of short-term debt 187 688
Proceeds from issuance of long-term debt 346 499
Repayments of long-term debt (561) (640)
Proceeds from issuance of trust
originated preferred securities - net - 581
Dividends paid on common and preferred stock (706) (697)
Proceeds from issuance of common stock 140 43
Purchases of treasury stock - (63)
- ---------------------------------------------------------------------
Cash (used for) provided by financing activities (594) 411
- ---------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Decrease (32) (101)
Beginning balance 192 209
- ---------------------------------------------------------------------
Ending balance $160 $108
=====================================================================
Note: Certain reclassifications within the financial statements have
been made to conform to the current year presentation.
</TABLE>
- 5 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000732718
<NAME> U S WEST, INC.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 160 160
<SECURITIES> 0 0
<RECEIVABLES> 1,973 1,973
<ALLOWANCES> 0 0
<INVENTORY> 198 198
<CURRENT-ASSETS> 2,936 2,936
<PP&E> 34,265 34,265
<DEPRECIATION> 19,038 19,038
<TOTAL-ASSETS> 25,583 25,583
<CURRENT-LIABILITIES> 4,866 4,866
<BONDS> 7,402 7,402
651 651
0 0
<COMMON> 8,396 8,396
<OTHER-SE> (114) (114)
<TOTAL-LIABILITY-AND-EQUITY> 25,583 25,583
<SALES> 3,179 9,353
<TOTAL-REVENUES> 3,179 9,353
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,453 7,184
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 140 411
<INCOME-PRETAX> 494 1,502
<INCOME-TAX> 190 588
<INCOME-CONTINUING> 304 914
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 34
<NET-INCOME> 304 948
<EPS-PRIMARY> .60 1.97
<EPS-DILUTED> .60 1.97
</TABLE>
