<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 1998
REGISTRATION NO. 333-50227
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C> <C>
U S WEST, INC. (to be renamed
"MediaOne Group, Inc.") DELAWARE 4841 84-0926774
MEDIAONE GROUP FUNDING, INC. DELAWARE 4841 APPLIED FOR
MEDIAONE FINANCE TRUST I DELAWARE 4841 APPLIED FOR
MEDIAONE FINANCE TRUST II DELAWARE 4841 APPLIED FOR
(Exact name of Registrant as (State or other Jurisdiction (Primary Standard (I.R.S. Employer
Specified in its Charter) of Industrial Code Number) Identification
Incorporation or Number)
Organization)
</TABLE>
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(303) 793-6500
(Address, including ZIP code, and telephone number, including
area code, of each registrants' principal executive offices)
STEPHEN E. BRILZ, ESQ.
U S WEST, INC.
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(303) 793-6500
(Name, address, including ZIP code, and telephone number, including
area code, of agent for service)
------------------------
COPIES TO:
DENNIS J. BLOCK, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the Offers described herein.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 4, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
OFFER TO EXCHANGE AND CONSENT SOLICITATION
<TABLE>
<S> <C>
U S WEST FINANCING I U S WEST FINANCING II
7.96% TRUST ORIGINATED PREFERRED SECURITIES-SM- 8 1/4% TRUST ORIGINATED PREFERRED SECURITIES-SM-
("TOPRS-SM- ") ("TOPRS-SM- ")
(LIQUIDATION AMOUNT $25 PER SECURITY) (LIQUIDATION AMOUNT $25 PER SECURITY)
(CUSIP 90388D204) (CUSIP 90338M204)
FOR FOR
MEDIAONE FINANCE TRUST I MEDIAONE FINANCE TRUST II
% TRUST ORIGINATED PREFERRED SECURITIES-SM- % TRUST ORIGINATED PREFERRED SECURITIES-SM-
("TOPRS-SM- ") ("TOPRS-SM- ")
(LIQUIDATION AMOUNT $25 PER SECURITY) (LIQUIDATION AMOUNT $25 PER SECURITY)
OR $ . IN CASH OR $ . IN CASH
</TABLE>
EACH OF THE OFFERS AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , , 1998, UNLESS EXTENDED.
U S WEST Capital Funding, Inc. ("Capital Funding") hereby offers holders of
7.96% Trust Originated Preferred Securities (the "Old Series I Preferred
Securities") of U S WEST Financing I (the "Old Series I Trust") the right to
exchange their securities for either (i) an equal amount of % Trust
Originated Preferred Securities (the "New Series I Preferred Securities") of
MediaOne Finance Trust I (the "New Series I Trust") or (ii) $ in cash per
Old Series I Preferred Security. Capital Funding also hereby offers holders of
8 1/4% Trust Originated Preferred Securities (the "Old Series II Preferred
Securities" and, together with the Old Series I Preferred Securities, the "Old
Preferred Securities") of U S WEST Financing II (the "Old Series II Trust") the
right to exchange their securities for either (i) an equal amount of % Trust
Originated Preferred Securities (the "New Series II Preferred Securities" and,
together with the New Series I Preferred Securities, the "New Preferred
Securities") of MediaOne Finance Trust II (the "New Series II Trust") or (ii)
$ in cash per Old Series II Preferred Security. Each of the offers is
referred to herein individually as an "Offer" and collectively as the "Offers."
The Offers are being made in connection with the separation of U S WEST,
Inc. ("U S WEST") into two independent companies (the "Separation"). In the
Separation, U S WEST will distribute to its stockholders all of the capital
stock of a subsidiary holding the businesses of the U S WEST Communications
Group and the domestic directories business of the U S WEST Media Group known as
"Dex" (such subsidiary will be renamed "U S WEST, Inc." and is referred to
herein as "New U S WEST"). Following such distribution, U S WEST will be renamed
"MediaOne Group, Inc." and will continue to conduct the businesses of the U S
WEST Media Group other than Dex (U S WEST after the Separation is sometimes
referred to herein as "MediaOne").
The Old Preferred Securities are currently guaranteed to the extent set
forth in this Prospectus by U S WEST. After the Separation, the New Preferred
Securities will be guaranteed to the extent set forth in this Prospectus solely
by MediaOne, and New U S WEST will have no liability or obligation with respect
to the New Preferred Securities. In addition, after the Separation, Old
Preferred Securities which are not tendered in the Offers will be guaranteed
solely by MediaOne to the extent set forth in this Prospectus and New U S WEST
will have no liability or obligation with respect to such Old Preferred
Securities. In connection with the Offers, U S WEST is asking the holders of
record of Old Preferred Securities as of May 6, 1998 (the "Record Date") to
consent to certain amendments to the terms of the Old Preferred Securities (the
"Consents") to specifically permit the Separation without complying with certain
covenants that might otherwise apply to the Separation, although U S WEST does
not believe that such covenants would require such compliance as a result of the
Separation. The proper tender of Old Preferred Securities by such holders will
constitute the giving of a Consent by such holders with respect to such Old
Preferred Securities. No separate payments will be made for such Consents. The
Offers and the Separation are not conditioned upon the receipt by U S WEST of
the requisite Consents. U S WEST plans to proceed with the Offers and the
Separation whether or not the requisite Consents are received.
Consummation of each Offer is subject to certain conditions, including,
among other things, the satisfaction of certain conditions to the Separation,
including the approval of the Separation by U S WEST's stockholders. See Chapter
3: "The Offers and Consent Solicitation--The Offers--Conditions to the Offers."
U S WEST will pay to a Soliciting Dealer a solicitation fee for each Old
Preferred Security tendered, accepted for payment and paid for pursuant to the
Offers, subject to certain conditions. See "Chapter 8: Certain Other Matters--
Dealer Managers; Soliciting Dealers."
This Prospectus provides you with detailed information about the Separation
and the terms of the Offers and the New Preferred Securities. We urge you to
read this Prospectus carefully.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY YOU IN EVALUATING THE OFFERS AND THE NEW PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE NEW PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NEW PREFERRED SECURITIES TO BE ISSUED
PURSUANT TO THIS PROSPECTUS. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
PASSED UPON THE FAIRNESS OR MERITS OF THE SEPARATION OR THE OFFERS OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DEALER MANAGERS FOR THE OFFERS ARE:
MERRILL LYNCH & CO. LEHMAN BROTHERS
, 1998
- -SM- "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CHAPTER 1: INTRODUCTION.................................................................................... 1
CHAPTER 2: RISK FACTORS.................................................................................... 14
Risk Factors Related to MediaOne......................................................................... 14
Risk Factors Related to the Preferred Securities......................................................... 16
CHAPTER 3: THE OFFERS AND CONSENT SOLICITATION............................................................. 22
The Offers............................................................................................... 22
The Consent Solicitation................................................................................. 30
Listing and Trading of New Preferred Securities and Old Preferred Securities............................. 33
CHAPTER 4: THE SEPARATION.................................................................................. 34
The Separation........................................................................................... 34
The Refinancing.......................................................................................... 37
Treatment of Preferred Stock............................................................................. 39
CHAPTER 5: INFORMATION ABOUT MEDIAONE...................................................................... 40
Business of MediaOne..................................................................................... 40
Management of MediaOne................................................................................... 47
MediaOne Unaudited Pro Forma Condensed Combined Financial Statements..................................... 50
CHAPTER 6: THE NEW PREFERRED SECURITIES.................................................................... 58
The New Trusts........................................................................................... 58
The New Preferred Securities............................................................................. 59
Description of the New Debt Securities and the New Debt Guarantees....................................... 71
Description of the New Preferred Securities Guarantees................................................... 81
Effect of Obligations Under the New Debt Securities, the New Debt Guarantees and the New Preferred
Securities Guarantees.................................................................................. 84
Comparison of Rights of Securityholders.................................................................. 85
CHAPTER 7: CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................................................... 88
Federal Income Tax Consequences of the Offers and the MediaOne Debt Assumption........................... 88
Federal Income Tax Consequences of Owning and Disposing of New Preferred Securities...................... 90
Federal Income Tax Consequences of Owning and Disposing of Old Preferred Securities After the MediaOne
Debt Assumption........................................................................................ 92
CHAPTER 8: CERTAIN OTHER MATTERS........................................................................... 93
Transactions and Arrangements Concerning the Offers...................................................... 93
Fees and Expenses; Transfer Taxes........................................................................ 93
Dealer Managers; Soliciting Dealers...................................................................... 93
Market Price Data........................................................................................ 96
Legal Matters............................................................................................ 97
Experts.................................................................................................. 97
Where You Can Find More Information...................................................................... 97
ANNEXES.................................................................................................... A-1
Annex A--Proposed Amendments............................................................................. A-1
</TABLE>
<PAGE>
GLOSSARY
Set forth below is a list of certain defined terms used in this Prospectus
and the page on which such terms are defined.
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------ ---------
<S> <C>
1940 Act........................................ 62
1992 Cable Act.................................. 46
1995 Recapitalization........................... 12
Additional Interest............................. 76
Agent's Message................................. 27
AirTouch........................................ 6
AirTouch Merger Agreement....................... 45
AirTouch Transaction............................ 6
AirTouch Transaction Adjustments................ 50
A/N............................................. 42
Annual Meeting.................................. 34
Assumed Public Indebtedness..................... 37
ATOP............................................ 27
Bellcore........................................ 11
Beneficial Owner................................ 69
Book-Entry Confirmation......................... 27
Broker non-vote................................. 31
Capital Funding................................. cover
Cash Tender Offers.............................. 9
Change in 1940 Act Law.......................... 62
Charter......................................... 41
Charter Amendments.............................. 35
Chofu........................................... 43
Commission...................................... 24
Common Securities............................... 5
Communications Group............................ 6
Communications Group Region..................... 6
Communications Indebtedness..................... 8
Communications Redemption....................... 35
Communications Stock............................ 6
Consents........................................ cover
Consent Solicitation............................ 30
Consent Supplemental Indenture.................. 30
Continental..................................... 8
Continental Acquisition......................... 11
Continental Indebtedness........................ 8
DBS............................................. 15
Dealer Managers................................. 10
Debt Trustee.................................... 71
Declaration..................................... 58
Declaration Event of Default.................... 65
Delivery Date................................... 1
Dex............................................. cover
Dex Alignment................................... 7
Dex Dividend.................................... 34
Dex Dividend Number............................. 35
Dex Equity Value................................ 35
Dex Indebtedness................................ 7
Dex Value....................................... 35
DGCL............................................ 24
Direct Action................................... 17
Direct Participants............................. 69
Discontinued Operations Adjustments............. 50
Distributions................................... 59
DTC............................................. 2
DTC Participants................................ 27
Eligible Institution............................ 28
Exchange Act.................................... 23
Exchange Agent.................................. 10
<CAPTION>
TERM PAGE
- ------------------------------------------------ ---------
<S> <C>
Expiration Date................................. 1
Expiration Dates................................ 1
Extension Period................................ 18
FCC............................................. 46
Financial Services.............................. 8
General Cable................................... 43
Global Notes.................................... 28
GSM............................................. 43
Guarantee Payments.............................. 82
HFC............................................. 40
Holder.......................................... 22
Home Box Office................................. 44
Indenture Event of Default...................... 65
Indirect Participants........................... 69
Information Agent............................... 10
Investment Company Event........................ 62
ISPs............................................ 15
IXCs............................................ 15
LECs............................................ 15
Liquidation Distribution........................ 64
LMDS............................................ 15
Media Group..................................... 6
Media Stock..................................... 6
MediaOne........................................ cover
MediaOne Common Stock........................... 34
MediaOne Debt Assumption........................ 4
MediaOne Delaware............................... 8
MediaOne Funding................................ 4
MediaOne Group, Inc............................. cover
MediaOne Payment................................ 72
MediaOne Separation Adjustments................. 50
Minimum Distribution Condition.................. 24
Minnesota Sale Agreement........................ 41
Minnesota System................................ 41
MMDS............................................ 15
NASD............................................ 94
New Capital Funding Indebtedness................ 38
New Common Securities........................... 5
New Common Securities Guarantees................ 82
New Debt Guarantees............................. 5
New Debt Securities............................. 5
New Delaware Trustee............................ 58
New Indenture................................... 71
New MediaOne Funding Indebtedness............... 38
New Preferred Guarantee Trustee................. 58
New Preferred Securities........................ cover
New Preferred Securities Guarantees............. 5
New Property Account............................ 58
New Property Trustee............................ 58
New Regular Trustees............................ 58
New Series I Common Securities.................. 4
New Series I Debt Guarantee..................... 5
New Series I Debt Securities.................... 4
New Series I Preferred Securities............... cover
New Series I Preferred Securities Guarantee..... 5
New Series I Trust.............................. cover
New Series II Common Securities................. 5
New Series II Debt Guarantee.................... 5
New Series II Debt Securities................... 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------ ---------
<S> <C>
New Series II Preferred Securities.............. cover
New Series II Preferred Securities Guarantee.... 5
New Series II Trust............................. cover
New Trustees.................................... 58
New Trusts...................................... 7
New U S WEST.................................... cover
New U S WEST Common Stock....................... 7
NewVector....................................... 45
NYSE............................................ 2
Offer........................................... cover
Offers.......................................... cover
OID............................................. 19
Old Common Securities........................... 3
Old Common Stock................................ 12
Old Debt Guarantees............................. 4
Old Debt Securities............................. 4
Old Indenture................................... 3
Old Preferred Securities........................ cover
Old Preferred Securities Guarantees............. 4
Old Series I Common Securities.................. 3
Old Series I Debt Guarantee..................... 3
Old Series I Debt Securities.................... 3
Old Series I Offer.............................. 1
Old Series I Preferred Securities............... cover
Old Series I Preferred Securities Guarantee..... 3
Old Series I Trust.............................. cover
Old Series II Common Securities................. 3
Old Series II Debt Guarantees................... 4
Old Series II Debt Securities................... 4
Old Series II Offer............................. 1
Old Series II Preferred Securities.............. cover
Old Series II Preferred Securities Guarantee.... 4
Old Series II Trust............................. cover
Old Trusts...................................... 7
One 2 One....................................... 43
PCS Holdings.................................... 45
Preferred Securities............................ 5
PrimeCo......................................... 45
PrimeStar....................................... 42
Proposed Amendments............................. 3
Proxy Statement................................. 35
PSE............................................. 36
Record Date..................................... cover
Refinancing..................................... 8
Registration Statement.......................... 97
Reissued Securities............................. 89
Reorganization.................................. 35
<CAPTION>
TERM PAGE
- ------------------------------------------------ ---------
<S> <C>
Requisite Consents.............................. 31
Schedule 13E-4.................................. 98
Securities Act.................................. 93
Senior Indebtedness............................. 73
Separation...................................... cover
Separation Agreement............................ 34
Separation Condition............................ 24
Separation Date................................. 35
Separation Time................................. 34
Series I Expiration Date........................ 1
Series I Scheduled Maturity..................... 75
Series II Expiration Date....................... 1
SFAS............................................ 12
SMATV........................................... 15
Special Event................................... 62
Sponsor......................................... 58
Successor Securities............................ 68
Super-Majority.................................. 66
Tax Event....................................... 62
Tax Opinion..................................... 90
TCI............................................. 41
TCI Exchange.................................... 41
Telecommunications Act.......................... 15
Telewest........................................ 12
Tiers........................................... 40
Time Warner Cable............................... 41
Titus........................................... 43
Trust Act....................................... 59
Trust Indenture Act............................. 58
TWE............................................. 40
TWE-A/N......................................... 42
TWE Japan....................................... 45
TWE Non-competition Restrictions................ 44
TWX............................................. 41
USW-C, Inc...................................... 34
U S WEST........................................ cover
U S WEST Board.................................. 10
U S WEST Communications......................... 8
U S WEST, Inc................................... 7
U S WEST Indebtedness........................... 8
U S WEST Preferred Stock........................ 39
U S WEST Restated Certificate................... 35
U S WEST Series C Preferred Stock............... 39
U S WEST Series D Preferred Stock............... 39
U S WEST Series E Preferred Stock............... 39
Washington Rate Order........................... 11
</TABLE>
<PAGE>
CHAPTER 1: INTRODUCTION
THIS INTRODUCTION HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE OFFERS FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE OFFERS
AND THE SEPARATION, YOU SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS AND THE
DOCUMENTS WE HAVE REFERRED TO YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON
PAGE 97.
<TABLE>
<S> <C>
THE OFFERS
TERMS OF THE OFFERS............. Capital Funding hereby offers to exchange each
outstanding Old Series I Preferred Security for either
(i) a New Series I Preferred Security or (ii) $ in
cash (the "Old Series I Offer"). Capital Funding also
hereby offers to exchange each outstanding Old Series II
Preferred Security for either (i) a New Series II
Preferred Security or (ii) $ in cash (the "Old Series
II Offer"). There are currently 24 million Old Series I
Preferred Securities and 19.2 million Old Series II
Preferred Securities outstanding.
The Old Series I Offer will expire on 5:00 p.m., New
York City time, on , , 1998, unless extended
by Capital Funding in its sole discretion (the "Series I
Expiration Date"). The Old Series II Offer will expire
on 5:00 p.m., New York City time, on , ,
1998, unless extended by Capital Funding in its sole
discretion (the "Series II Expiration Date"). The Series
I Expiration Date and the Series II Expiration Date are
each an "Expiration Date" and together constitute the
"Expiration Dates."
Upon consummation of an Offer, delivery of New Preferred
Securities will occur and cash payments will be made as
promptly as practicable on a settlement date following
the applicable Expiration Date (with respect to each
Offer, the "Delivery Date").
Pursuant to each Offer, holders of Old Preferred
Securities accepted for exchange for New Preferred
Securities or cash will also receive cash equal to the
accrued and unpaid distributions on such Old Preferred
Securities accumulated after April 1, 1998 to but
excluding the applicable Delivery Date, in lieu of such
distributions on Old Preferred Securities accepted for
exchange.
EACH OFFER IS INDEPENDENT FROM THE OTHER OFFER. IN
ADDITION, EACH OFFER IS SUBJECT TO CERTAIN CONDITIONS AS
DESCRIBED HEREIN.
WITHDRAWALS..................... Tenders of Old Preferred Securities pursuant to an Offer
may be withdrawn at any time prior to the applicable
Expiration Date and, unless accepted for exchange by
Capital Funding, may be withdrawn at any time after
, 1998.
CONDITIONS TO THE OFFERS........ Consummation of each Offer is subject to certain
conditions, including, among other things, the
following:
/ / The Separation Condition (as defined herein), which
requires the satisfaction of all conditions to the
</TABLE>
1
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
Separation other than the consummation of the
Offers, including the approval of the Separation by
U S WEST's stockholders and the consummation of the
other components of the Refinancing (as defined
herein).
/ / In order to satisfy New York Stock Exchange
("NYSE") listing requirements with respect to each
series of New Preferred Securities, the Minimum
Distribution Condition (as defined herein), which
requires that there be at least 400 record or
beneficial holders of at least 1,000,000 of such
New Preferred Securities upon consummation of such
Offer.
Except for the Minimum Distribution Condition, the
Offers are not conditioned upon the tender of any
minimum number of Old Preferred Securities.
PROCEDURES FOR TENDERING........ All of the Old Preferred Securities are held in
book-entry form through participants (I.E., a custodian
bank, depositary, broker, trust company or other
nominee) of The Depository Trust Company ("DTC"). A
beneficial owner who wishes to tender Old Preferred
Securities pursuant to an Offer should promptly instruct
the DTC participant through which such beneficial owner
holds its Old Preferred Securities to tender such Old
Preferred Securities on behalf of such beneficial owner
pursuant to the procedures described herein. In order to
provide Consents on behalf of beneficial owners of Old
Preferred Securities not tendering, participants should
complete and sign the applicable Letter of Transmittal
and mail or deliver such Letter of Transmittal to the
Exchange Agent.
EXTENSIONS, AMENDMENTS,
TERMINATION................... Capital Funding expressly reserves the right, as to each
Offer, to (i) terminate such Offer, and not accept for
exchange any Old Preferred Securities tendered in such
Offer upon the failure of any of the conditions to such
Offer, (ii) waive any condition to such Offer (other
than the Separation Condition and the Minimum
Distribution Condition), (iii) extend the Expiration
Date of such Offer and retain all Old Preferred
Securities tendered pursuant to such Offer until the
applicable Expiration Date, subject, however, to all
withdrawal rights of holders, (iv) amend the terms of
such Offer, (v) modify the form of the consideration to
be paid pursuant to such Offer, or (vi) not accept for
exchange the Old Preferred Securities tendered pursuant
to such Offer at any time on or prior to the Expiration
Date for such Offer as a result of an invalid tender,
withdrawal prior to the applicable Expiration Date or
the occurrence of certain other events as set forth
herein. Any amendment applicable to an Offer will apply
to all Old Preferred Securities tendered pursuant to
such Offer.
THE CONSENT SOLICITATION.......... In connection with the Offers, U S WEST and Capital
Funding are soliciting Consents from the holders of
record of the Old Preferred Securities as of the Record
Date to certain
</TABLE>
2
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
proposed amendments (the "Proposed Amendments") to the
Indenture (the "Old Indenture") under which the Old Debt
Securities (as defined herein) were issued, to
specifically permit the Separation without complying
with certain covenants that might otherwise apply to the
Separation, although U S WEST does not believe that such
covenants would require such compliance as a result of
the Separation. The proper tender of Old Preferred
Securities by holders as of the Record Date will
constitute the giving of a Consent by such holders with
respect to such Old Preferred Securities. Holders of Old
Preferred Securities who acquired such Old Preferred
Securities after the Record Date will have the right to
tender their Old Preferred Securities pursuant to the
Offer but will not have the right to provide Consents. A
holder of Old Preferred Securities as of the Record Date
will be permitted to provide such holder's Consent even
if such holder does not tender Old Preferred Securities
pursuant to an Offer. No separate payments will be made
for Consents.
The Offers and the Separation are not conditioned upon
the receipt of requisite Consents with respect to Old
Preferred Securities of any series. U S WEST plans to
proceed with the Separation whether or not the requisite
Consents are received.
THE PREFERRED SECURITIES
THE OLD PREFERRED SECURITIES.... The Old Series I Preferred Securities evidence preferred
undivided beneficial interests in the assets of the Old
Series I Trust. U S WEST owns all the common undivided
beneficial interests in the assets of the Old Series I
Trust (the "Old Series I Common Securities"). The sole
asset of the Old Series I Trust consists of an aggregate
principal amount of 7.96% Subordinated Deferrable
Interest Notes due 2025 (the "Old Series I Debt
Securities") of Capital Funding equal to the aggregate
liquidation amount of the Old Series I Preferred
Securities and the Old Series I Common Securities. The
Old Series I Debt Securities are fully and
unconditionally guaranteed (the "Old Series I Debt
Guarantee") on a subordinated basis as to payment of
principal, premium, if any, and interest by U S WEST.
The payment of distributions out of moneys held by the
Old Series I Trust, and payments on liquidation of the
Old Series I Trust or the redemption of the Old Series I
Preferred Securities are guaranteed by U S WEST to the
extent the Old Series I Trust has funds available
therefor as described herein (the "Old Series I
Preferred Securities Guarantee").
The Old Series II Preferred Securities evidence
preferred undivided beneficial interests in the assets
of the Old Series II Trust. U S WEST owns all the common
undivided beneficial interests in the assets of the Old
Series II Trust (the "Old Series II Common Securities"
and, together with the Old Series I Common Securities,
the "Old Common Securities").
</TABLE>
3
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
The sole asset of the Old Series II Trust consists of an
aggregate principal amount of 8 1/4% Subordinated
Deferrable Interest Notes due 2036 (the "Old Series II
Debt Securities" and, together with the Old Series I
Debt Securities, the "Old Debt Securities") of Capital
Funding equal to the aggregate liquidation amount of the
Old Series II Preferred Securities and the Old Series II
Common Securities. The Old Series II Debt Securities are
fully and unconditionally guaranteed (the "Old Series II
Debt Guarantee" and, together with the Old Series I Debt
Guarantee, the "Old Debt Guarantees") on a subordinated
basis as to payment of principal, premium, if any, and
interest by U S WEST. The payment of distributions out
of moneys held by the Old Series II Trust, and payments
on liquidation of the Old Series II Trust or the
redemption of the Old Series II Preferred Securities are
guaranteed by U S WEST to the extent the Old Series II
Trust has funds available therefor as described herein
(the "Old Series II Preferred Securities Guarantee" and
together, with the Old Series I Preferred Securities
Guarantee, the "Old Preferred Securities Guarantees").
If any of the Old Preferred Securities are not tendered
by holders in the Offers, such Old Preferred Securities
will remain outstanding. In such event, the obligations
of Capital Funding under the Old Debt Securities related
to such Old Preferred Securities will be assumed by
MediaOne (I.E., U S WEST after the Separation) in
connection with the Separation (the "MediaOne Debt
Assumption") and, as a result, the Old Debt Guarantees
will no longer be required, as MediaOne will become the
direct obligor of the Old Debt Securities. In addition,
the Old Preferred Securities Guarantees will be provided
by MediaOne. After the Separation, New U S WEST and
Capital Funding (which will become a subsidiary of New U
S WEST) will have no liability or obligation with
respect to the Old Debt Securities, the Old Debt
Guarantees and the Old Preferred Securities Guarantees.
U S WEST may also determine to defease the Old Debt
Securities in lieu of the assumption described above.
THE NEW PREFERRED SECURITIES.... The New Series I Preferred Securities evidence preferred
undivided beneficial interests in the assets of the New
Series I Trust. MediaOne will own all the common
undivided beneficial interests in the assets of the New
Series I Trust (the "New Series I Common Securities").
The sole asset of the New Series I Trust will consist of
an aggregate principal amount of % Subordinated
Deferrable Interest Notes due 2025 (the "New Series I
Debt Securities") of MediaOne Group Funding, Inc.
("MediaOne Funding") equal to the aggregate liquidation
amount of the New Series I Preferred Securities and the
New Series I Common Securities. The New Series I Debt
Securities will be fully and unconditionally guaranteed
(the "New Series I Debt Guarantee") on a subordinated
basis as to payment of principal, premium, if any, and
interest by
</TABLE>
4
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
MediaOne. The payment of distributions out of moneys
held by the New Series I Trust, and payments on
liquidation of the New Series I Trust or the redemption
of the New Series I Preferred Securities will be
guaranteed by MediaOne to the extent the New Series I
Trust has funds available therefor as described herein
(the "New Series I Preferred Securities Guarantee").
The New Series II Preferred Securities evidence
preferred undivided beneficial interests in the assets
of the New Series II Trust. MediaOne will own all the
common undivided beneficial interests in the assets of
the New Series II Trust (the "New Series II Common
Securities" and, together with the New Series I Common
Securities, the "New Common Securities"). The sole asset
of the New Series II Trust will consist of an aggregate
principal amount of % Subordinated Deferrable Interest
Notes due 2036 (the "New Series II Debt Securities" and,
together with the New Series I Debt Securities, the "New
Debt Securities") of MediaOne Funding equal to the
aggregate liquidation amount of the New Series II
Preferred Securities and the New Series II Common
Securities. The New Series II Debt Securities will be
fully and unconditionally guaranteed (the "New Series II
Debt Guarantee" and, together with the New Series I Debt
Guarantee, the "New Debt Guarantees") on a subordinated
basis as to payment of principal, premium, if any, and
interest by MediaOne. The payment of distributions out
of moneys held by the New Series II Trust, and payments
on liquidation of the New Series II Trust or the
redemption of the New Series II Preferred Securities
will be guaranteed by MediaOne to the extent the New
Series II Trust has funds available therefor as
described herein (the "New Series II Preferred
Securities Guarantee" and, together with the New Series
I Preferred Securities Guarantee, the "New Preferred
Securities Guarantees"). The Old Preferred Securities
and the New Preferred Securities are sometimes referred
to herein as "Preferred Securities" and the Old Common
Securities and the New Common Securities are sometimes
referred to herein as "Common Securities."
The terms of the New Preferred Securities, the New Debt
Securities, the New Debt Guarantees and the New
Preferred Securities Guarantees will be substantially
the same as the terms of the corresponding Old Preferred
Securities, Old Debt Securities, Old Debt Guarantee and
Old Preferred Securities Guarantee, except that (i) the
distribution rate on each series of New Preferred
Securities (and the interest rate on the related New
Debt Securities) will be higher than the distribution
rate on the corresponding series of Old Preferred
Securities (and the interest rate on the related Old
Debt Securities), (ii) the New Debt Securities will be
issued by MediaOne Funding, (iii) certain provisions of
the New Series I
</TABLE>
5
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
Preferred Securities and the New Series I Debt
Securities relating to special distributions and
redemptions will be modified from the terms of the Old
Series I Preferred Securities and the Old Series I Debt
Securities to conform such terms to the terms of the New
Series II Preferred Securities and the New Series II
Debt Securities and (iv) certain enforcement rights of
the holders of New Preferred Securities will be
modified. See "Chapter 6: The New Preferred
Securities--Comparison of Rights of Securityholders."
THE COMPANIES
U S WEST........................ U S WEST is a diversified global communications company
engaged in the telecommunications, broadband
communications, wireless communications and directories
businesses. U S WEST conducts its businesses through two
groups: the U S WEST Communications Group (the
"Communications Group") and the U S WEST Media Group
(the "Media Group").
The Communications Group provides telecommunications
services, including local telephone services and
exchange access services, in a 14-state mountain and
western region of the United States (the "Communications
Group Region"). The Communications Group also provides
other products and services, including high-speed data
and Internet services and wireless communications
services, to customers both inside and outside the
Communications Group Region.
The Media Group is comprised of domestic and
international broadband communications, wireless
communications and directories businesses. The Media
Group's domestic broadband communications business
provides cable, telephony and high-speed data services
to customers under the name "MediaOne" and is the third
largest cable television system operator in the United
States. On April 6, 1998, U S WEST sold the Media
Group's domestic wireless business to AirTouch
Communications, Inc. ("AirTouch") in a tax-efficient
transaction (the "AirTouch Transaction").
U S WEST has two classes of common stock: the U S WEST
Communications Group Common Stock (the "Communications
Stock"), which is intended to reflect separately the
performance of the Communications Group, and the U S
WEST Media Group Common Stock (the "Media Stock"), which
is intended to reflect separately the performance of the
Media Group.
CAPITAL FUNDING................. Capital Funding is a wholly owned subsidiary of U S WEST
and was incorporated under the laws of the State of
Colorado in June 1986. Capital Funding has no
independent operations. Capital Funding's sole purpose
is to provide financing to U S WEST and its affiliates
through the issuance of indebtedness guaranteed by U S
WEST. In the Separation, Capital Funding
</TABLE>
6
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
will become a subsidiary of New U S WEST and thereafter
will provide financing to New U S WEST and its
affiliates through the issuance of indebtedness
guaranteed by New U S WEST. MediaOne will have no
liability or obligation with respect to any such
indebtedness.
MEDIAONE FUNDING................ MediaOne Funding is a wholly owned subsidiary of U S
WEST and was incorporated under the laws of the State of
Delaware in April 1998. In the Separation, MediaOne
Funding will remain as a subsidiary of MediaOne (I.E., U
S WEST after the Separation). MediaOne Funding has no
independent operations. MediaOne Funding's sole purpose
will be to provide financing to MediaOne and its
affiliates through the issuance of indebtedness
guaranteed by MediaOne. New U S WEST will have no
liability or obligation with respect to any such
indebtedness.
THE TRUSTS...................... Each of the Old Series I Trust and the Old Series II
Trust (the "Old Trusts") and the New Series I Trust and
the New Series II Trust (the "New Trusts") is a
statutory business trust formed under Delaware law. The
Old Trusts exist for the exclusive purposes of (i)
issuing Old Preferred Securities and Old Common
Securities, (ii) investing the gross proceeds of the Old
Preferred Securities and the Old Common Securities in
the Old Debt Securities and the Old Debt Guarantee and
(iii) engaging in only those other activities necessary
or incidental thereto. The New Trusts exist for the
exclusive purposes of (i) issuing New Preferred
Securities and New Common Securities, (ii) owning the
New Debt Securities and the New Debt Guarantee and (iii)
engaging in only those other activities necessary or
incidental thereto.
THE SEPARATION.................... In the Separation, U S WEST will be separated into two
independent companies. Upon consummation of the
Separation, the Communications Group will become a
separately traded public company known as "U S WEST,
Inc." and the Media Group will become a separately
traded public company known as "MediaOne Group, Inc." In
addition, the domestic directories business of the Media
Group will be aligned with the Communications Group as
part of the Separation (the "Dex Alignment"). In
connection with the Dex Alignment, holders of Media
Stock will be issued a total of $850 million in value of
shares of common stock of New U S WEST ("New U S WEST
Common Stock"). This amount represents the $4.75 billion
value of Dex net of $3.9 billion of U S WEST debt
currently allocated to the Media Group which will be
refinanced by New U S WEST in connection with the
Separation (the "Dex Indebtedness"). After the
Separation, New U S WEST will own all of the
Communications Group's businesses as well as Dex and
MediaOne will own all of the Media Group's businesses
other than Dex (which will consist primarily of domestic
and
</TABLE>
7
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
international broadband communications businesses and
international wireless communications businesses).
Immediately prior to the Separation, U S WEST will
contribute the businesses of the Communications Group
and Dex to New U S WEST (which is a newly formed
indirect subsidiary of U S WEST). Following such
contribution, (i) U S WEST will redeem each outstanding
share of Communications Stock for one share of New U S
WEST Common Stock and (ii) distribute as a dividend on
each outstanding share of Media Stock a fraction of a
share of New U S WEST Common Stock. Such fractions of a
share of New U S WEST Common Stock are being issued to
holders of Media Stock in connection with the Dex
Alignment. The value of the total number of shares of
New U S WEST Common Stock which will be issued to
holders of Media Stock will equal $850 million.
THE REFINANCING................... As of March 31, 1998, prior to giving effect to the
AirTouch Transaction, U S WEST and its subsidiaries
(including U S WEST's capital assets segment) had
outstanding approximately $16.5 billion of indebtedness.
Such indebtedness consists of approximately $5.5 billion
of indebtedness (the "Communications Indebtedness") of U
S WEST Communications, Inc. ("U S WEST Communications"),
the Communications Group's local telephone company, $2.7
billion of indebtedness (the "Continental Indebtedness")
of MediaOne of Delaware, Inc., the Media Group's
broadband company formerly known as Continental
Cablevision, Inc. ("MediaOne Delaware" or
"Continental"), approximately $200 million of
indebtedness of a member of the capital assets segment
and approximately $8.1 billion of indebtedness issued or
guaranteed by U S WEST (the "U S WEST Indebtedness").
The U S WEST Indebtedness includes approximately $5.2
billion of medium and long-term debt securities of
Capital Funding, $1.08 billion in liquidation amount of
Old Preferred Securities, approximately $1.1 billion of
commercial paper of Capital Funding and an aggregate of
approximately $700 million of indebtedness issued or
guaranteed by U S WEST, including indebtedness of
Financial Services, Inc. ("Financial Services"), a
subsidiary of U S WEST. In connection with the AirTouch
Transaction, U S WEST received $1.35 billion in cash as
a result of the assumption and repayment by AirTouch of
certain indebtedness (the "AirTouch Funds"). A portion
of the AirTouch Funds is being used to repay Capital
Funding's outstanding commercial paper.
The Offers are part of a plan being implemented by U S
WEST to refinance substantially all of the U S WEST
Indebtedness in connection with the Separation (the
"Refinancing"). As part of the Refinancing, Capital
Funding and Financial Services are making offers under
separate cover
</TABLE>
8
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
to purchase for cash (the "Cash Tender Offers")
substantially all of the public medium and long-term
debt securities of Capital Funding and Financial
Services and, in connection therewith, are soliciting
consents to certain amendments to the indentures under
which such securities were issued which are similar to
the Consents being solicited pursuant to this
Prospectus. The Cash Tender Offers are not being made
pursuant to this Prospectus. The Cash Tender Offers,
when commenced, will only be made by means of a separate
Offer to Purchase and Consent Solicitation. The
obligations of Capital Funding or Financial Services, as
the case may be, under any securities not tendered
pursuant to the Cash Tender Offers will be assumed by
MediaOne (i.e., U S WEST after the Separation), although
U S WEST may determine to defease certain of such
securities in lieu of such assumption. After the
Separation, New U S WEST will have no liability or
obligation for any such assumed indebtedness. In
addition, U S WEST will prepay certain other U S WEST
Indebtedness pursuant to the Refinancing.
After the Separation and the related Refinancing, New U
S WEST and its subsidiaries will have approximately $9.9
billion of debt, which will include approximately $5.5
billion of Communications Indebtedness and approximately
$4.4 billion of debt that will be incurred by Capital
Funding (and guaranteed by New U S WEST) to refinance a
portion of the U S WEST Indebtedness repurchased or
repaid as part of the Refinancing (which amount includes
the Dex Indebtedness) and to fund certain costs of the
Separation.
After the Separation and the related Refinancing and
after giving effect to the AirTouch Transaction,
MediaOne and its subsidiaries will have approximately
$5.3 billion of debt and trust preferred securities,
which will include $2.7 billion of Continental
Indebtedness and approximately $2.6 billion of debt and
trust preferred securities issued or guaranteed by
MediaOne, including new debt incurred by MediaOne
Funding (and guaranteed by MediaOne) to refinance a
portion of the U S WEST Indebtedness repurchased or
repaid as part of the Refinancing and to fund certain
costs of the Separation, the New Preferred Securities
issued in the Offers, the Old Preferred Securities not
tendered in the Offers and the U S WEST Indebtedness not
tendered in the Cash Tender Offers. In addition, the
capital assets segment, which will remain with MediaOne,
will have approximately $400 million of indebtedness.
Following the Separation, MediaOne intends to monetize
the AirTouch securities it received in the AirTouch
Transaction and use a portion of the proceeds of such
monetization to reduce its indebtedness.
TAX MATTERS....................... The exchange of Old Preferred Securities for cash or for
New Preferred Securities will constitute a taxable
transaction to holders who elect to exchange pursuant to
the Offers. In
</TABLE>
9
CHAPTER 1: INTRODUCTION
<PAGE>
<TABLE>
<S> <C>
addition, the MediaOne Debt Assumption constitute a
taxable transaction to holders who do not tender their
Old Preferred Securities in the Offers. See "Chapter 7:
Certain Federal Income Tax Consequences."
BOARD RECOMMENDATION.............. The Board of Directors of U S WEST (the "U S WEST
Board"), the Board of Directors of Capital Funding and
the trustees of the New Trusts and the Old Trusts are
not making any recommendation as to whether or not
holders should tender their Old Preferred Securities in
the Offers or provide Consents.
RISK FACTORS...................... Upon consummation of the Offers and the Separation, the
New Preferred Securities issued in the Offers and any
Old Preferred Securities not tendered pursuant to the
Offers will become obligations of MediaOne. Certain risk
factors relating to MediaOne's business and the
Preferred Securities which should be considered by each
holder of Old Preferred Securities in determining
whether or not such holder should tender Old Preferred
Securities for New Preferred Securities or cash pursuant
to the Offers are addressed in "Chapter 2: Risk
Factors."
DEALER MANAGERS; EXCHANGE AGENT;
INFORMATION AGENT............... U S WEST has retained Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Lehman Brothers Inc. to act as
Dealer Managers for the Offers and the Consent
Solicitation (the "Dealer Managers"). First Chicago
Trust Company of New York will act as Exchange Agent for
the Offers and the Consent Solicitation (the "Exchange
Agent") and Beacon Hill Partners, Inc. will act as
Information Agent for the Offers and the Consent
Solicitation (the "Information Agent"). Representatives
of the Dealer Managers, the Exchange Agent and the
Information Agent can be reached at the telephone
numbers listed on the back cover of this Prospectus.
SOLICITATION FEES................. U S WEST will pay to Soliciting Dealers designated by
the beneficial owner of the Old Preferred Securities
validly tendered and accepted pursuant to the Offers a
solicitation fee of $0.50 per Old Preferred Security
exchanged for New Preferred Securities and $0.375 per
Old Preferred Security tendered for cash (except that in
the case of transactions equal to or exceeding 10,000
Old Preferred Securities of either series, Capital
Funding will pay $0.25 per Old Preferred Security
exchanged for New Preferred Securities or tendered for
cash), in each case subject to certain conditions.
Soliciting Dealers are not entitled to a solicitation
fee for any Old Preferred Securities beneficially owned
by such Soliciting Dealers. See "Chapter 8: Certain
Other Matters--Dealer Managers; Soliciting Dealers."
</TABLE>
10
CHAPTER 1: INTRODUCTION
<PAGE>
U S WEST SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial information for
U S WEST. This information should be read in conjunction with U S WEST's
Consolidated Financial Statements, including the notes thereto, incorporated by
reference herein, See "Chapter 8: Certain Other Matters-- Where You Can Find
More Information."
<TABLE>
<CAPTION>
YEAR ENDED OR AS OF DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues(1)......................................... $ 15,235 $ 12,911 $ 11,746 $ 10,953 $ 10,294
Income before extraordinary items and cumulative
effect of change in accounting principles(2)....................... 700 1,144 1,329 1,426 476
Net income (loss)(3)................................................ 697 1,178 1,317 1,426 (2,806)
BALANCE SHEET INFORMATION:
Total assets........................................................ 39,740 40,855 25,071 23,204 20,680
Total debt(4)....................................................... 14,678 15,351 8,855 7,938 7,199
Mandatorily redeemable preferred stock and Old Preferred
Securities(5)...................................................... 1,180 1,131 651 51 --
Shareowners' equity................................................. 11,324 11,549 7,948 7,382 5,861
OTHER INFORMATION:
Percentage of debt to total capital(4).............................. 54.0% 54.8% 50.7% 51.6% 55.1%
Ratio of earnings to combined fixed charges and preferred stock
dividends(6)....................................................... 2.24 3.29 4.03 4.85 2.38
Capital expenditures(4)............................................. $ 4,174 $ 3,474 $ 3,140 $ 2,820 $ 2,441
Employees........................................................... 67,461 69,286 61,047 61,505 60,778
COMMUNICATIONS GROUP INFORMATION:(2, 3, 7, 8)
Basic earnings per common share..................................... $ 2.43 $ 2.62 $ 2.50
Diluted earnings per common share................................... 2.41 2.58 2.46
Basic average common shares outstanding (thousands)................. 482,751 477,549 470,716
Diluted average common shares outstanding (thousands)............... 491,232 488,591 481,933
Dividends per common share.......................................... $ 2.14 $ 2.14 $ 2.14
Number of common shareowners of record ............................. 672,517 725,560 775,125
MEDIA GROUP INFORMATION:(2, 3, 7, 8)
Basic and diluted earnings (loss) per common share.................. $ (0.88) $ (0.16) $ 0.29
Basic average common shares outstanding (thousands)................. 606,749 491,924 470,549
Diluted average common shares outstanding (thousands)............... 606,749 491,924 471,612
Number of common shareowners of record.............................. 648,077 705,341 770,346
U S WEST INFORMATION:(2, 3, 7, 8)
Basic earnings per common share before extraordinary items and
cumulative effect of change in accounting principle................ $ 3.14 $ 1.13
Basic earnings (loss) per common share.............................. 3.14 (6.69)
Diluted earnings (loss) per common share............................ 3.12 (6.68)
Basic weighted average common shares outstanding (thousands)........ 453,316 419,365
Diluted weighted average common shares outstanding (thousands)...... 463,801 419,776
Dividends per common share.......................................... $ 2.14 $ 2.14
Number of common shareowners of record.............................. 816,099 836,328
</TABLE>
- ------------------------------
(1) 1997 and 1996 sales and other revenues include $2,070 and $252,
respectively, related to the acquisition by U S WEST of Continental (the
"Continental Acquisition"), which was consummated on November 15, 1996.
(2) 1997 income is before an extraordinary item and includes a $152 regulatory
charge ($0.31 per share of Communications Stock) related primarily to the
1997 Washington State Supreme Court ruling that upheld a Washington State
Utilities and Transportation Commission 1996 rate order (the "Washington
Rate Order"), a gain of $32 ($0.07 per share of Communications Stock) on the
sale of U S WEST Communications' interest in Bell Communications Research,
Inc. ("Bellcore") and a gain of $48 ($0.10 per share of Communications
Stock) on the sales of certain rural telephone exchanges. Also included are
net gains of $249 ($0.41 per share of Media Stock) on the sales of domestic
and international investments, and net losses of $356 ($0.59 per share of
Media Stock) related to the Continental Acquisition. 1996 income is before
the cumulative effect of a change in accounting principle and includes a
gain of $36 ($0.08 per share of Communications Stock) on the sales of
certain rural telephone exchanges and the current effect of $15 ($0.03 per
share of Communications Stock)
11
CHAPTER 1: INTRODUCTION
<PAGE>
from adopting Statement of Financial Accounting Standards ("SFAS") No. 121.
Also included are net losses of $71 ($0.15 per share of Media Stock) related
to the Continental Acquisition and a charge of $19 ($0.04 per share of Media
Stock) from the sale of U S WEST's cable television interests in Norway,
Sweden and Hungary. 1995 income is before an extraordinary item and includes
a gain of $95 ($0.20 per share of Media Stock) from the merger of Telewest
Communications plc ("Telewest") with SBC CableComms (UK), a gain of $85
($0.18 per share of Communications Stock) on the sales of certain rural
telephone exchanges and costs of $17 ($0.01 per share of Communications
Stock and $0.02 per share of Media Stock) associated with the 1995
Recapitalization discussed in footnote 7 below. 1994 income includes a gain
of $105 ($0.23 per share) on the partial sale of U S WEST's joint venture
interest in Telewest, a gain of $41 ($0.09 per share) on the sale of U S
WEST's paging operations and a gain of $51 ($0.11 per share) on the sales of
certain rural telephone exchanges. 1993 income is before extraordinary items
and was reduced by a restructuring charge of $610 ($1.46 per share) and a
charge of $54 ($0.13 per share) for the cumulative effect on deferred taxes
of the 1993 federally mandated increase in income tax rates. 1993 income is
from continuing operations.
(3) 1997 net income was reduced by an extraordinary charge of $3 ($0.01 per
share of Communications Stock and no Media Stock impact) for the early
extinguishment of debt. 1996 net income includes a gain of $34 ($0.07 per
share of Communications Stock) for the cumulative effect of the adoption of
SFAS No. 121. 1995 net income was reduced by an extraordinary item of $12
($0.02 per share of Communications Stock and $0.01 per share of Media Stock)
for the early extinguishment of debt. 1993 net income was reduced by
extraordinary charges of $3,123 ($7.45 per share) for the discontinuance of
SFAS No. 71 and $77 ($0.18 per share) for the early extinguishment of debt.
1993 net income also includes a charge of $120 ($0.28 per share) for U S
WEST's decision to discontinue the operations of its capital assets segment.
Discontinued operations provided net income of $38 ($0.09 per share) in
1993.
(4) Debt at December 31, 1997 and 1996 includes debt related to the Continental
Acquisition. Capital expenditures, debt and the percentage of debt to total
capital excludes the capital assets segment, which has been discontinued and
is held for sale. Percentage of debt to total capital includes Old Preferred
Securities and mandatorily redeemable preferred stock as a component of
total capital.
(5) Includes Old Preferred Securities of $1,080 at December 31, 1997 and 1996,
and $600 at December 31, 1995, and preferred stock subject to mandatory
redemption of $100 at December 31, 1997, and $51 at December 31, 1996, 1995
and 1994.
(6) The ratio excludes the capital assets segment, which has been discontinued
and is held for sale. The 1993 ratio is based on earnings from continuing
operations and includes a restructuring charge of $1 billion. Excluding the
restructuring charge, the 1993 ratio of earnings to combined fixed charges
and preferred stock dividends would have been 4.22.
(7) The average common shares of Media Stock outstanding for the year ended
December 31, 1996 include 150,615,000 shares issued in connection with the
Continental Acquisition. Effective November 1, 1995, each share of common
stock of U S WEST ("Old Common Stock") was converted into one share each of
Communications Stock and Media Stock (the "1995 Recapitalization"). Earnings
per common share and dividends per common share for 1995 have been presented
on a pro forma basis to reflect the two classes of stock as if they had been
outstanding since January 1, 1995. For periods prior to the 1995
Recapitalization, the average shares of Communications Stock and Media Stock
outstanding are assumed to equal the average shares of Old Common Stock
outstanding for such periods.
(8) In 1997, U S WEST adopted SFAS No. 128 "Earnings Per Share" which specifies
new computation, presentation and disclosure requirements for earnings per
share to be applied retroactively. SFAS No. 128 requires, among other
things, presentation of basic and diluted earnings per share.
12
CHAPTER 1: INTRODUCTION
<PAGE>
MEDIAONE SELECTED PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma condensed combined financial
information of MediaOne gives effect to the discontinuance of the businesses of
New U S WEST, the refinancing of $3.9 billion of Dex Indebtedness by New U S
WEST, the distribution of all of the New U S WEST Common Stock to U S WEST's
stockholders, transfers of certain assets and liabilities of U S WEST to New U S
WEST and allocations of certain costs and expenses in connection with the
Separation, and the AirTouch Transaction. The selected unaudited pro forma
condensed combined financial information has been derived from, or prepared on a
basis consistent with, the unaudited pro forma condensed combined financial
statements of MediaOne, including the notes thereto, included elsewhere in this
Prospectus. This information is presented for illustrative purposes only and is
not necessarily indicative of the combined results of operations or financial
position that would have occurred if the transactions had occurred at the
beginning of each period presented or on the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of
MediaOne. This information should also be read in conjunction with the unaudited
pro forma condensed combined financial statements of MediaOne, including the
notes thereto, included elsewhere in this Prospectus. See "Chapter 5:
Information About MediaOne--MediaOne Unaudited Pro Forma Condensed Combined
Financial Statements."
<TABLE>
<CAPTION>
YEAR ENDED
OR AS OF
DECEMBER 31, 1997
------------------
<S> <C>
DOLLARS IN
MILLIONS
(EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS INFORMATION:
Sales and other revenues...................................................................... $ 2,419
Loss from continuing operations(1)............................................................ (610)
Loss from continuing operations available for common stock(1)................................. (662)
Basic and diluted loss per share from continuing operations(1)................................ (1.09)
BALANCE SHEET INFORMATION:
Total assets.................................................................................. 24,314
Total debt.................................................................................... 4,039
Mandatorily redeemable preferred stock and Old Preferred Securities........................... 1,180
Total equity.................................................................................. 12,770
Book value per share.......................................................................... 21.01
</TABLE>
- ------------------------
(1) The loss from continuing operations is before extraordinary item.
13
CHAPTER 1: INTRODUCTION
<PAGE>
CHAPTER 2: RISK FACTORS
UPON CONSUMMATION OF THE OFFERS AND THE SEPARATION, THE NEW PREFERRED
SECURITIES ISSUED IN THE OFFERS AND ANY OLD PREFERRED SECURITIES NOT TENDERED
PURSUANT TO THE OFFERS WILL BECOME OBLIGATIONS OF MEDIAONE. THE FOLLOWING
FACTORS RELATING TO MEDIAONE'S BUSINESS AND THE PREFERRED SECURITIES SHOULD BE
CONSIDERED BY EACH HOLDER OF OLD PREFERRED SECURITIES IN DETERMINING WHETHER OR
NOT SUCH HOLDER SHOULD TENDER OLD PREFERRED SECURITIES FOR NEW PREFERRED
SECURITIES OR CASH PURSUANT TO THE OFFERS.
RISK FACTORS RELATING TO MEDIAONE
LOSS OF AVAILABILITY OF NEW U S WEST CASH FLOWS AND ASSETS; LOWER CREDIT RATING
The Old Preferred Securities, through the Old Debt Guarantees and the Old
Preferred Securities Guarantees, are obligations of U S WEST and, as a result,
are supported by the cash flows generated by and the assets of the businesses of
both the Communications Group and the Media Group. The New Preferred Securities,
through the New Debt Guarantees and the New Preferred Securities Guarantees,
will be obligations of MediaOne. In addition, any Old Preferred Securities not
tendered in the Offers will become obligations of MediaOne through the
assumption by MediaOne of the Old Debt Securities. Upon consummation of the
Separation, MediaOne will not have an ownership interest in, or any other
affiliation with, New U S WEST. As a result, MediaOne's obligations, including
the New Preferred Securities and any Old Preferred Securities not tendered in
the Offers, will only be supported by the cash flows generated by and the assets
of the businesses of the Media Group other than Dex and will not be supported by
the cash flows generated by and the assets of the businesses of New U S WEST,
including the cash flows generated by and the assets of U S WEST Communications
and Dex. Following the Separation, New U S WEST will not have any liability or
obligation with respect to the New Preferred Securities, the New Debt
Securities, the New Debt Guarantees, the New Preferred Securities Guarantees,
the Old Preferred Securities, the Old Debt Securities or the Old Preferred
Securities Guarantees.
The rating agencies have not yet finalized what the credit rating of
MediaOne will be following consummation of the Separation. Based upon the
anticipated capitalization of MediaOne, the New Preferred Securities and the Old
Preferred Securities are expected to be rated the same, although, it is expected
that MediaOne's credit rating will be lower than the current credit rating of U
S WEST and that, as a result, the credit rating of the Old Preferred Securities
and New Preferred Securities after the Separation will be lower than the current
credit rating of the Old Preferred Securities. The expected lower credit rating
of MediaOne could have important consequences to the businesses and operations
of MediaOne. Among other things, MediaOne may have borrowing costs that are
higher than the current borrowing costs of U S WEST. MediaOne may also have
reduced access to the commercial paper market and therefore may be required to
borrow from commercial banks to fund its short-term capital requirements. Such
bank indebtedness, as well as MediaOne's public indebtedness, may contain
covenants that could reduce MediaOne's operating flexibility and its ability to
plan for, or react to, changes affecting its business and market conditions. U S
WEST believes that the AirTouch Transaction may improve the credit rating to be
assigned to MediaOne in the Separation.
OPERATING LOSSES
For the year ended December 31, 1997, on a pro forma basis, after giving
effect to the discontinuance of the operations of the businesses of New U S WEST
and the AirTouch Transaction, MediaOne would have had operating losses from
continuing operations of $320 million. See "Chapter 5: Information About
MediaOne--MediaOne Unaudited Pro Forma Condensed Combined Financial Statements."
These losses result from the significant amount of amortization of intangible
assets recognized in connection with the Continental Acquisition and from
depreciation associated with capital expenditures required to upgrade MediaOne's
networks. There can be no assurance that
14
CHAPTER 2: RISK FACTORS
<PAGE>
MediaOne will realize positive operating income from continuing operations in
the foreseeable future. See "Chapter 5: Information About MediaOne."
REGULATION
The businesses of MediaOne are subject to a high degree of regulation at the
federal, state and local levels, as well as in various foreign countries in
connection with certain overseas business activities. These regulations can in
certain circumstances impose significant limitations on operations. In addition,
these regulations are constantly evolving and may change significantly over
time. There can be no assurance that future regulatory changes will not have a
material adverse effect on MediaOne. See "Chapter 5: Information About
MediaOne--Business of MediaOne--Regulation."
COMPETITION
MediaOne's businesses operate in an increasingly competitive environment.
MediaOne's cable television systems compete with other providers of video
programming, including direct broadcast satellite ("DBS") systems, multipoint
multichannel distributions services ("MMDS") systems, local multipoint
distribution services ("LMDS") systems, satellite master antenna television
("SMATV") systems and providers of other new technologies. The cable television
services offered by MediaOne face competition from other communications and
entertainment media, including broadcast television, video tape rentals and live
sporting events. In addition, with the passage of the Telecommunications Act of
1996 (the "Telecommunications Act"), additional competitors are entering into
MediaOne's markets, including local exchange carriers ("LECs") with greater
financial resources than MediaOne, who offer video programming services similar
to those offered by MediaOne. As MediaOne begins to offer additional services
over its networks, including local exchange and data services, MediaOne will
face additional competition from other providers of such services, including
from LECs, interexchange carriers ("IXCs") and internet service providers
("ISPs"). MediaOne's international businesses also typically face significant
competition in their markets. The broadband communications industry is
continually subject to rapid and significant changes in technology. There can be
no assurance that the introduction of any new technology will not result in the
entry of additional competitors into MediaOne's markets, which could reduce
MediaOne's market share. See "Chapter 5: Information About MediaOne--Business of
MediaOne--Competition."
RISKS ASSOCIATED WITH INTERNATIONAL INVESTMENT
The Media Group has made, and MediaOne intends to continue to consider
making, investments in companies located outside of the United States. Such
investments are subject to risks and uncertainties relating to international
investments which may include taxation, nationalization, inflation, currency
fluctuations, increased regulation and approval requirements and governmental
regulation limiting returns to foreign investors. In recent months, investments
in Asia have been subject to an unusually high level of risk, owing to
uncertainty from economic and political conditions.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
Some of the information presented in or in connection with this Prospectus
constitutes "forward-looking statements". Although U S WEST 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) greater than
anticipated competition from new entrants into the cable and wireless
communications markets; (ii) changes in demand for MediaOne's products and
services; (iii) regulatory changes affecting the cable and telecommunications
industries; (iv) changes in economic conditions in the various markets served by
MediaOne's operations, including international markets, that could adversely
affect the level of demand for cable, wireless or other services offered by
MediaOne; (v) greater than anticipated competitive activity requiring new
pricing for services; (vi) higher than anticipated start-up costs associated
with new business opportunities;
15
CHAPTER 2: RISK FACTORS
<PAGE>
(vii) higher than anticipated employee levels, capital expenditures and
operating expenses (such as costs associated with the year 2000 remediation);
(viii) consumer acceptance of broadband services, including telephony and data
services, and wireless services; (ix) increases in fraudulent activity with
respect to broadband and wireless services; or (x) delays in the development of
anticipated technologies, or the failure of such technologies to perform
according to expectations.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
TAX TREATMENT OF ACTIONS IN THE OFFERS
The exchange of Old Preferred Securities for New Preferred Securities or
cash pursuant to the Offers will constitute a taxable transaction to the holder
of such Old Preferred Securities. In addition, the MediaOne Debt Assumption will
constitute a taxable transaction to holders of Old Preferred Securities who do
not tender their Old Preferred Securities pursuant to the Offers. The MediaOne
Debt Assumption may also have other consequences for holders of Old Preferred
Securities. See "Chapter 7: Certain Federal Income Tax Consequences." All
holders of Old Preferred Securities are advised to consult their tax advisors
regarding the United States federal, state and foreign tax consequences of any
such event.
RANKING OF SUBORDINATED OBLIGATIONS
MediaOne's obligations under the New Preferred Securities Guarantees will be
subordinate and junior in right of payment to all liabilities of MediaOne,
including the New Debt Guarantees and the Old Debt Securities, and pari passu
with the most senior preferred stock issued by MediaOne and with the Old
Preferred Securities Guarantees. The obligations of MediaOne Funding under the
New Debt Securities are subordinate and junior in right of payment to all Senior
Indebtedness (as defined herein) of MediaOne Funding, all of which will be fully
and unconditionally guaranteed by MediaOne. The obligations of MediaOne under
the New Debt Guarantees will be subordinate and junior in right of payment to
all present and future Senior Indebtedness of MediaOne and will be effectively
subordinated and junior in right of payment to all present and future
indebtedness of MediaOne's subsidiaries. At December 31, 1997, on a pro forma
basis after giving effect to the discontinuance of the operations of the
businesses of New U S WEST and the AirTouch Transaction, the aggregate amount of
Senior Indebtedness of MediaOne and indebtedness of MediaOne's consolidated
subsidiaries that would have effectively ranked senior to the New Debt
Guarantees would have been approximately $4.0 billion. There are no terms in the
New Preferred Securities, the New Debt Securities, the New Preferred Securities
Guarantee or the New Debt Guarantee that limit the ability of MediaOne and its
subsidiaries to incur additional indebtedness, including indebtedness that ranks
senior to the New Preferred Securities Guarantee and the New Debt Guarantee. See
"Chapter 6: The New Preferred Securities--Description of the New Debt Securities
and the New Debt Guarantees--Subordination" and "--Description of the New
Preferred Securities Guarantees."
RIGHTS UNDER THE NEW PREFERRED SECURITIES GUARANTEES
The New Preferred Securities Guarantee of a New Trust guarantees to the
holders of the New Preferred Securities of such New Trust the payment of (i) any
accrued and unpaid distributions which are required to be paid on the New
Preferred Securities, to the extent such New Trust has funds available therefor,
(ii) the redemption price, including all accrued and unpaid distributions, with
respect to New Preferred Securities called for redemption by such New Trust, to
the extent such New Trust has funds available therefor and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of such New
Trust (other than in connection with the distribution of New Debt Securities to
the holders of such New Preferred Securities or a redemption of all of the New
Preferred Securities of such New Trust), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such New
Preferred Securities to the date of payment, to the extent such New Trust has
funds available therefor and (b) the amount of assets of such New Trust
remaining available for distribution to holders of such New Preferred Securities
in liquidation of such New Trust. The holders
16
CHAPTER 2: RISK FACTORS
<PAGE>
of a majority in liquidation amount of the New Preferred Securities of a New
Trust have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the New Preferred Guarantee Trustee (as
defined herein) of the applicable New Preferred Securities Guarantee or to
direct the exercise of any trust or power conferred upon such New Preferred
Guarantee Trustee under such Preferred Securities Guarantee. Notwithstanding the
foregoing, any holder of such New Preferred Securities may institute a legal
proceeding directly against MediaOne to enforce such New Preferred Guarantee
Trustee's rights under such New Preferred Securities Guarantee, without first
instituting a legal proceeding against such New Trust, such New Preferred
Guarantee Trustee or any other person or entity. If MediaOne Funding were to
default in its obligation to pay amounts payable on the New Debt Securities held
by a New Trust and MediaOne were to default on its obligations under the related
New Debt Guarantee, such New Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the New Preferred Securities
of such New Trust or otherwise, and in such event holders of such New Preferred
Securities would not be able to rely upon the New Preferred Securities Guarantee
of such New Preferred Securities for payment of such amounts. Instead, holders
of such New Preferred Securities would rely on the enforcement (i) by the
applicable New Property Trustee (as defined herein) of its rights as registered
holder of such New Debt Securities against MediaOne Funding pursuant to the
terms of such New Debt Securities and against MediaOne under such New Debt
Guarantee or (ii) by such holder of its right against MediaOne and MediaOne
Funding to enforce payments on such New Debt Securities. See "Chapter 6: The New
Preferred Securities--Description of the New Debt Securities and the New Debt
Guarantees" and "--Description of the New Preferred Securities
Guarantees--Status of the New Preferred Securities Guarantees." The Declaration
(as defined herein) of each New Trust provides that each holder of New Preferred
Securities by acceptance thereof agrees to the provisions of the applicable New
Preferred Securities Guarantee and the New Indenture (as defined herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF NEW PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) with respect to a
series of New Debt Securities occurs and is continuing, then the holders of the
related series of New Preferred Securities would rely on the enforcement by the
applicable New Property Trustee of its rights as a holder of such New Debt
Securities and the related New Debt Guarantee against MediaOne Funding and
MediaOne. In addition, the holders of a majority in aggregate liquidation amount
of the New Preferred Securities of a New Trust will have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the New Property Trustee of such New Trust or to direct the exercise of any
trust or power conferred upon such New Property Trustee under the applicable
Declaration, including the right to direct such New Property Trustee to exercise
the remedies available to it as a holder of such New Debt Securities and New
Debt Guarantee. If such New Property Trustee fails to enforce its rights under
such New Debt Securities or New Debt Guarantee, a holder of the related New
Preferred Securities may institute a legal proceeding directly against MediaOne
Funding or MediaOne to enforce such New Property Trustee's rights under such New
Debt Securities or New Debt Guarantee, as the case may be, without first
instituting any legal proceeding against such New Property Trustee or any other
person or entity, including, in the case of such New Debt Guarantee, against
MediaOne Funding. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing with respect to a New Trust and such
event is attributable to the failure of MediaOne Funding or MediaOne to pay
interest or principal on the New Debt Securities held by such New Trust on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of New Preferred Securities
of such New Trust may institute a proceeding for enforcement of payment to such
holder of the principal of, or interest on, such New Debt Securities having a
principal amount equal to the aggregate liquidation amount of the New Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in such New Debt Securities. The holders of New Preferred
Securities will not be able to exercise directly
17
CHAPTER 2: RISK FACTORS
<PAGE>
any other remedy available to the holders of the New Debt Securities. See
"Chapter 6: The New Preferred Securities--The New Preferred
Securities--Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
MediaOne Funding has the right under the New Indenture to defer payments of
interest on either or both series of New Debt Securities by extending the
interest payment period at any time, and from time to time, on such New Debt
Securities. As a consequence of such an extension, quarterly distributions on
the related New Preferred Securities would be deferred (but despite such
deferral would continue to accrue with interest thereon) by the applicable New
Trust during any such extended interest payment period. Such right to extend the
interest payment period for such New Debt Securities is limited to a period not
exceeding 20 consecutive quarters (an "Extension Period"). In the event that
MediaOne Funding exercises this right to defer payments of interest, then (a)
MediaOne and MediaOne Funding shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation payment
with respect to, any of its capital stock and (b) MediaOne and MediaOne Funding
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
MediaOne or MediaOne Funding which rank pari passu with or junior to such New
Debt Securities and the related New Debt Guarantee, including the other series
of New Debt Securities and the related New Debt Guarantee and any Old Series I
Debt Securities and Old Series II Debt Securities remaining outstanding;
provided, however, that restriction (a) above does not apply to any stock
dividends paid by MediaOne where the dividend stock is the same stock as that on
which the dividend is being paid. Prior to the termination of any such Extension
Period, MediaOne Funding may further extend the interest payment period,
provided that such period, together with all such previous and further
extensions thereof, may not exceed 20 consecutive quarters. Upon the termination
of any Extension Period and the payment of all amounts then due, MediaOne
Funding may select a new Extension Period, subject to the above requirements.
See "Chapter 6: The New Preferred Securities--The New Preferred
Securities--Distributions" and "--Description of the New Debt Securities and the
New Debt Guarantees--Options to Extend Interest Payment Period."
The New Series I Debt Securities, the New Series II Debt Securities, the Old
Series I Debt Securities and the Old Series II Debt Securities are pari passu in
right of payment with each other and the New Series I Debt Guarantee and the New
Series II Debt Guarantee are pari passu in right of payment with each other. As
a result, during an extension period on either series of New Debt Securities,
MediaOne and MediaOne Funding will be prohibited from making payments on the
other series of New Debt Securities and the related New Debt Guarantee, as well
as on the Old Series I Debt Securities and the Old Series II Debt Securities.
MediaOne Funding has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on either series
of New Debt Securities. However, should MediaOne Funding determine to exercise
such right in the future, the market price of the applicable series of New
Preferred Securities is likely to be affected. Moreover, since both series of
New Debt Securities rank pari passu with each other, if MediaOne Funding elects
to extend the interest payment period on one series of New Debt Securities, it
will not be permitted to make payments on the other series. Accordingly, the
market price of the other series of New Preferred Securities is also likely to
be affected in the event that MediaOne Funding determines to exercise such right
in the future. A holder that disposes of its New Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its New Preferred Securities. In addition, as
a result of the existence of MediaOne Funding's right to defer interest
payments, the market price of the New Preferred Securities (which represent an
undivided beneficial interest in the underlying New Debt Securities) may be more
volatile than other securities that do not have such rights.
18
CHAPTER 2: RISK FACTORS
<PAGE>
As a result of MediaOne Funding's right to defer payments of interest, the
New Preferred Securities will be issued with original issue discount ("OID").
See "Chapter 7: Certain Federal Income Tax Consequences--Federal Income Tax
Consequences of Owning New Preferred Securities--Original Issue Discount."
Because the New Preferred Securities will be issued with OID, holders of New
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
the applicable New Trust related to such income if such holder disposes of its
New Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. See "Chapter 7: Certain Federal Income
Tax Consequences-- Federal Income Tax Consequences of Owning New Preferred
Securities--Original Issue Discount."
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event (as defined herein), MediaOne Funding
will have the right to redeem each series of New Debt Securities, in whole or in
part, in which event the applicable New Trust will redeem the New Preferred
Securities and New Common Securities of such New Trust on a pro rata basis to
the same extent as the New Debt Securities are redeemed by MediaOne Funding. See
"Chapter 6: The New Preferred Securities--The New Preferred Securities--Special
Event Redemption."
DISTRIBUTION OF THE NEW DEBT SECURITIES
At any time, MediaOne will have the right to dissolve each New Trust and,
after satisfaction of the liabilities of creditors of such New Trust as provided
by applicable law, cause the New Debt Securities held by such New Trust,
together with the related New Debt Guarantee, to be distributed to the holders
of the New Preferred Securities and New Common Securities of such New Trust in
liquidation of such New Trust. Under current United States federal income tax
law and interpretation, a distribution of the New Debt Securities should not be
a taxable event to the holders of the related New Preferred Securities. Should
there be a change in law or a change in legal interpretation, however, the
distribution could be a taxable event to the holders of such New Preferred
Securities. See "Chapter 7: Certain Federal Income Tax Consequences--Federal
Income Tax Consequences of Owning and Disposing of New Preferred
Securities--Receipt of New Debt Securities Upon Liquidation of a New Trust."
While MediaOne does not currently intend to cause the liquidation of either New
Trust and the distribution of the New Debt Securities held by such New Trust,
there is no restriction on its ability to do so. MediaOne anticipates that it
would consider exercising this right in the event that the expenses associated
with maintaining the New Trusts were substantially greater than currently
expected, such as if there were a Special Event. MediaOne cannot predict the
other circumstances under which this right would be exercised.
There can be no assurance as to the market prices for the New Preferred
Securities of either New Trust or the New Debt Securities that may be
distributed in exchange for such New Preferred Securities if a dissolution or
liquidation of a New Trust were to occur. Accordingly, the New Preferred
Securities or the New Debt Securities that a holder may receive on dissolution
and liquidation of the applicable New Trust, may trade at a discount to the
effective price that the investor paid to purchase the New Preferred Securities
offered hereby pursuant to the Offers. Because holders of New Preferred
Securities will receive New Debt Securities upon the election of MediaOne to
liquidate the applicable New Trust and cause such New Debt Securities to be
distributed to the holders of such New Preferred Securities, prospective
purchasers of New Preferred Securities are also making an investment decision
with regard to the related New Debt Securities and New Debt Guarantee and should
carefully review all the information regarding the New Debt Securities and New
Debt Guarantees contained herein. See "Chapter 6: The New Preferred
Securities--The New Preferred Securities--Distribution of the New Debt
Securities" and "--Description of the New Debt Securities and the New Debt
Guarantees-- General."
19
CHAPTER 2: RISK FACTORS
<PAGE>
LIMITED VOTING RIGHTS
Holders of New Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, trustees of a New Trust, which voting rights are vested
exclusively in the holder of the Common Securities. See "Chapter 6: The New
Preferred Securities--The New Preferred Securities--Voting Rights."
TRADING PRICE OF NEW PREFERRED SECURITIES
The New Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the underlying
New Debt Securities. A holder who disposes of New Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the New Debt Securities through the date of
disposition in income as ordinary income (I.E., OID), and to add such amount to
his adjusted tax basis in his pro rata share of the underlying New Debt
Securities deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all accrued
but unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Chapter 7: Certain Federal
Income Tax Consequences--Federal Income Tax Consequences of Owning and Disposing
of New Preferred Securities--Original Issue Discount" and "--Sale or Redemption
of Certificates."
LACK OF ESTABLISHED TRADING MARKET FOR NEW PREFERRED SECURITIES
Each of the New Series I Preferred Securities and the New Series II
Preferred Securities constitutes a new issue of securities of the applicable New
Trust with no established trading market. While applications will be made to
list each series of the New Preferred Securities on the NYSE, there can be no
assurance that an active market for either series of the New Preferred
Securities will develop or be sustained in the future on such exchange. Although
the Dealer Managers have indicated to U S WEST and each New Trust that they
intend to make a market in the applicable series of the New Preferred Securities
following the applicable Expiration Date, as permitted by applicable laws and
regulations prior to the commencement of trading on the NYSE, they are not
obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, either series of the New Preferred Securities. In order
to satisfy the NYSE listing requirements with respect to each series of the New
Preferred Securities, acceptance of Old Preferred Securities validly tendered in
each Offer is subject to the Minimum Distribution Condition, which condition may
not be waived by Capital Funding or the applicable New Trust. See "Chapter 3:
The Offers and Consent Solicitation--Listing and Trading of New Preferred
Securities and Old Preferred Securities."
EFFECT OF NOT TENDERING OLD PREFERRED SECURITIES
To the extent Old Preferred Securities are not tendered and accepted
pursuant to the Offers, such Old Preferred Securities will remain outstanding.
In such event, the obligations of Capital Funding under the Old Debt Securities
related to such Old Preferred Securities will be assumed by MediaOne (I.E., U S
WEST after the Separation) in connection with the Separation and, as a result,
the Old Debt Guarantees will no longer be required, as MediaOne will become the
direct obligor of the Old Debt Securities. In addition, the Old Preferred
Securities Guarantees will be provided by MediaOne following the Separation.
After the Separation, New U S WEST and Capital Funding will have no liability or
obligation with respect to the Old Debt Securities, the Old Debt Guarantees and
the Old Preferred Securities Guarantees. Accordingly, holders of Old Preferred
Securities who elect not to tender pursuant to the Offers should carefully
consider the information included in this Prospectus relating to MediaOne. See
"--Risk Factors Relating to MediaOne" and "Chapter 5: Information About
MediaOne." Furthermore, because the MediaOne Debt Assumption will constitute a
taxable exchange for United States federal income tax purposes, holders of Old
Preferred Securities who elect not to
20
CHAPTER 2: RISK FACTORS
<PAGE>
tender will recognize taxable income as a result of the Separation. The MediaOne
Debt Assumption may also have other consequences for holders of Old Preferred
Securities. See "Chapter 7: Certain Federal Income Tax Consequences--Federal
Income Tax Consequences of the Offers and the Separation." U S WEST may also
determine to defease the Old Debt Securities in lieu of the assumption described
above.
The terms of the New Preferred Securities, the New Debt Securities, the New
Debt Guarantees and the New Preferred Securities Guarantees will be
substantially the same as the terms of the corresponding Old Preferred
Securities, Old Debt Securities, Old Debt Guarantee and Old Preferred Securities
Guarantee, except that (i) the distribution rate on each series of New Preferred
Securities (and the interest rate on the related New Debt Securities) will be
higher than the distribution rate on the corresponding series of Old Preferred
Securities (and the interest rate on the related Old Debt Securities), (ii) the
New Debt Securities will be issued by MediaOne Funding, (iii) certain provisions
of the New Series I Preferred Securities and the New Series I Debt Securities
relating to special distributions and redemptions will be modified from the
terms of the Old Series I Preferred Securities and the Old Series I Debt
Securities to conform such terms to the terms of the New Series II Preferred
Securities and the New Series II Debt Securities and (iv) certain enforcement
rights of the holders of New Preferred Securities will be modified. Holders of
Old Preferred Securities should carefully consider these differences. See
"Chapter 6: The New Preferred Securities--Comparison of Rights of
Securityholders." Because the terms of the New Preferred Securities will be
substantially the same as the terms of the Old Preferred Securities, the risk
factors included herein relating to the New Preferred Securities similarly apply
with respect to any Old Preferred Securities not tendered.
REDUCED TRADING MARKET FOR OLD PREFERRED SECURITIES FOLLOWING OFFERS
To the extent Old Preferred Securities are tendered and accepted in an
Offer, the liquidity and trading market following consummation of such Offer for
the Old Preferred Securities of each series not tendered and accepted in such
Offer, and the terms upon which such Old Preferred Securities could be sold,
could be adversely affected. In addition, if any Offer is substantially
subscribed, there would be a significant risk that round lot holdings of Old
Preferred Securities outstanding following such Offer would be limited.
FUTURE ACQUISITIONS OF OLD PREFERRED SECURITIES
Following the applicable Expiration Date, and in accordance with and subject
to applicable law, MediaOne Funding may from time to time acquire Old Preferred
Securities of either or both series in the open market, by tender offer,
subsequent exchange offer or otherwise. To the extent that any such acquisition
of Old Preferred Securities causes the number of outstanding Old Preferred
Securities of a series to be less than 100,000, the NYSE may delist such Old
Preferred Securities from the NYSE and the trading market for such outstanding
Old Preferred Securities of such series could be adversely affected. MediaOne
does not believe that there is a reasonable likelihood that the Offers will
cause any such delisting of either series of Old Preferred Securities.
Furthermore, the consummation of each of the Offers is subject to the Minimum
Holders Condition. MediaOne's decision to make any acquisitions of Old Preferred
Securities of either or both series in the future is dependent on many factors,
including market conditions in effect at the time of any contemplated
acquisition. Accordingly, MediaOne cannot predict whether and to what extent it
will acquire any additional Old Preferred Securities and the consideration to be
paid therefor (which consideration may be less than or greater than the cash or
the value of the New Preferred Securities offered in exchange for the Old
Preferred Securities pursuant to the Offers). MediaOne has no present intention
to make any such additional acquisitions of Old Preferred Securities. See
"Chapter 3: The Offers and Consent Solicitation--Listing and Trading of New
Preferred Securities and Old Preferred Securities."
21
CHAPTER 2: RISK FACTORS
<PAGE>
CHAPTER 3: THE OFFERS AND CONSENT SOLICITATION
THE OFFERS
PURPOSE OF THE OFFERS
The Offers are being made in connection with the the Separation and the
Refinancing, and will facilitate the allocation of U S WESTs indebtedness
between New U S WEST and MediaOne in connection with the Separation. See
"Chapter 4: The Separation--The Refinancing."
GENERAL
PARTICIPATION IN AN OFFER IS VOLUNTARY AND HOLDERS OF OLD PREFERRED
SECURITIES SHOULD CAREFULLY CONSIDER WHETHER TO ACCEPT AN OFFER. NONE OF U S
WEST, CAPITAL FUNDING, MEDIAONE FUNDING, THE OLD SERIES I TRUST, THE OLD SERIES
II TRUST, THE NEW SERIES I TRUST, THE NEW SERIES II TRUST NOR ANY OF THEIR
RESPECTIVE BOARDS OF DIRECTORS OR TRUSTEES MAKES ANY RECOMMENDATION TO HOLDERS
AS TO WHETHER TO EXCHANGE OR REFRAIN FROM EXCHANGING THEIR OLD PREFERRED
SECURITIES IN ANY OFFER. HOLDERS OF OLD PREFERRED SECURITIES ARE URGED TO
CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR DECISIONS ON WHAT
ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
Unless the context requires otherwise, the term "Holder" means, with respect
to an Offer, Cede & Co., the nominee of DTC in whose name the Old Preferred
Securities subject to such Offer are registered, or any participant who holds
Old Preferred Securities subject to such Offer through DTC.
In connection with a tender of Old Preferred Securities for cash, Capital
Funding will repurchase the Old Preferred Securities tendered and use such Old
Preferred Securities to satisfy its obligations under a corresponding amount of
Old Debt Securities. In connection with a tender of Old Preferred Securities for
New Preferred Securities, (i) Capital Funding will repurchase the Old Preferred
Securities tendered and use such Old Preferred Securities to satisfy its
obligations under a corresponding amount of Old Debt Securities and (ii) the
Exchange Agent will use the funds which Capital Funding would otherwise pay to
Holders of such Old Preferred Securities to purchase, on behalf of such Holders,
New Preferred Securities from the New Trusts with an aggregate liquidation
amount corresponding to the aggregate liquidation amount of the Old Preferred
Securities tendered and will deliver such New Preferred Securities to such
Holders on the applicable Delivery Date and (iii) each New Trust will use the
funds received upon issuance of the New Preferred Securities to purchase a
corresponding principal amount of New Debt Securities from MediaOne Funding.
References herein to an Offer by Capital Funding refer to the foregoing
transactions.
TERMS OF THE OFFERS
SERIES I OFFER. Upon the terms and subject to the conditions set forth
herein and in the Letter of Transmittal relating to the Old Series I Preferred
Securities, Capital Funding hereby offers to exchange each outstanding Old
Series I Preferred Security for either (i) a New Series I Preferred Security or
(ii) $ in cash. In addition, as part of the Series I Offer, the Holders of
Old Series I Preferred Securities accepted for exchange for New Series I
Preferred Securities or cash will receive cash equal to the accrued and unpaid
distributions on such Old Series I Preferred Securities accumulated after April
1, 1998 to but excluding the applicable Delivery Date, in lieu of such
distributions on Old Series I Preferred Securities accepted for exchange. Upon
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal relating to the Old Series I Preferred Securities, Capital Funding
will accept Old Series I Preferred Securities validly tendered and not withdrawn
prior to the Series I Expiration Date and, unless the Series I Offer has been
withdrawn or terminated, will deliver
22
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
New Series I Preferred Securities or cash, as applicable, in exchange therefor
to tendering Holders of Old Series I Preferred Securities on a Delivery Date as
promptly as practicable following the Series I Expiration Date. Capital Funding
expressly reserves the right, in its sole discretion, to delay acceptance for
exchange of Old Series I Preferred Securities tendered under the Series I Offer
and the delivery of the New Series I Preferred Securities or cash with respect
to the Old Series I Preferred Securities accepted for exchange (subject to Rules
13e-4 and 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which require that Capital Funding consummate the Series I
Offer or return the Old Series I Preferred Securities deposited by or on behalf
of the Holders thereof promptly after the termination or withdrawal of the
Series I Offer), or to amend, withdraw or terminate the Series I Offer, at any
time prior to the Series I Expiration Date for any of the reasons set forth in
"--Conditions to the Offers--and "--Expiration Dates; Extensions; Amendments;
Termination." As of the date of this Prospectus, there are outstanding
24,000,000 Old Series I Preferred Securities.
SERIES II OFFER. Upon the terms and subject to the conditions set forth
herein and in the Letter of Transmittal relating to the Old Series II Preferred
Securities, Capital Funding hereby offers to exchange each outstanding Old
Series II Preferred Security for either (i) a New Series II Preferred Security
or (ii) $ in cash. In addition, as part of the Series II Offer, the Holders
of Old Series II Preferred Securities accepted for exchange for New Series II
Preferred Securities or cash will receive cash equal to the accrued and unpaid
distributions on such Old Series II Preferred Securities accumulated after April
1, 1998 to but excluding the applicable Delivery Date, in lieu of such
distributions on Old Series II Preferred Securities accepted for exchange. Upon
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal relating to the Old Series II Preferred Securities, Capital Funding
will accept Old Series II Preferred Securities validly tendered and not
withdrawn prior to the Series II Expiration Date and, unless the Series II Offer
has been withdrawn or terminated, will deliver New Series II Preferred
Securities or cash, as applicable, in exchange therefor to tendering Holders of
Old Series II Preferred Securities on a Delivery Date as promptly as practicable
following the Series II Expiration Date. Capital Funding expressly reserves the
right, in its sole discretion, to delay acceptance for exchange of Old Series II
Preferred Securities tendered under the Series II Offer and the delivery of the
New Series II Preferred Securities or cash with respect to the Old Series II
Preferred Securities accepted for exchange (subject to Rules 13e-4 and 14e-1
under the Exchange Act, which require that Capital Funding consummate the Series
II Offer or return the Old Series II Preferred Securities deposited by or on
behalf of the Holders thereof promptly after the termination or withdrawal of
the Series II Offer), or to amend, withdraw or terminate the Series II Offer, at
any time prior to the Series II Expiration Date for any of the reasons set forth
in "--Conditions to the Offers--and "--Expiration Dates; Extensions; Amendments;
Termination." As of the date of this Prospectus, there are outstanding
19,200,000 Old Series II Preferred Securities.
In connection with the Offers, U S WEST and Capital Funding are also
soliciting the Consents from the Holders of Old Preferred Securities as of the
Record Date to certain proposed amendments to the Old Indenture. See "--The
Consent Solicitation." The proper tender of Old Preferred Securities by holders
as of the Record Date will constitute the giving of a Consent by such holders
with respect to such Old Preferred Securities. Holders of Old Preferred
Securities who acquire such Old Preferred Securities after the Record Date will
have the right to tender their Old Preferred Securities pursuant to the Offer
but will not have the right to provide Consents. A Holder of Old Preferred
Securities as of the Record Date will be permitted to provide such Holder's
Consent even if such Holder does not tender Old Preferred Securities pursuant to
an Offer. No separate payments will be made for Consents.
EACH OFFER IS INDEPENDENT FROM THE OTHER OFFER. FURTHERMORE, EACH OF THE
OFFERS IS SUBJECT TO CERTAIN CONDITIONS, AS DESCRIBED HEREIN.
Capital Funding shall be deemed to have accepted validly tendered Old
Preferred Securities (or defectively tendered Old Preferred Securities with
respect to which Capital Funding has waived such
23
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
defect) when, as and if Capital Funding has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving Old Preferred Securities from, and
remitting New Preferred Securities or cash to, tendering Holders who are
participating in an Offer. Upon the terms and subject to the conditions of each
Offer, delivery of the New Preferred Securities or cash, as applicable, to
tendering Holders in each Offer will be made as promptly as practicable
following the applicable Expiration Date.
If any tendered Old Preferred Securities are not accepted for exchange
because of an invalid tender with respect to an Offer or the occurrence of
certain other events set forth herein, unless otherwise requested by the Holder
thereof under "--Special Delivery Instructions" in the applicable Letter of
Transmittal, such Old Preferred Securities will be returned, without expense, to
the tendering Holder thereof, as promptly as practicable after the applicable
Expiration Date or the withdrawal or termination of such Offer.
Holders of Old Preferred Securities will not have any appraisal or
dissenters' rights under the Delaware General Corporation Law (the "DGCL") in
connection with either Offer. Capital Funding intends to conduct each Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Securities and Exchange Commission (the "Commission")
thereunder.
CONDITIONS TO THE OFFERS
Notwithstanding any other provisions of an Offer, or any extension of such
Offer, Capital Funding will not be required to deliver New Preferred Securities
or cash in respect of any properly tendered Old Preferred Securities in such
Offer and may terminate such Offer by oral or written notice to the Exchange
Agent and the Holders of the Old Preferred Securities tendered in such Offer,
or, at its option, may modify or otherwise amend such Offer (except that Capital
Funding cannot waive the Separation Condition or the Minimum Distribution
Condition with respect to such Offer) with respect to such Old Preferred
Securities if the conditions in clause (a) or (b) below are not satisfied at or
prior to the applicable Expiration Date or if any of the events specified in
clauses (c) through (e) occurs at or prior to the applicable Expiration Date:
(a) the satisfaction of all conditions to the Separation described under
"Chapter 4: The Separation--The Separation--Conditions to the Separation"
other than the condition requiring the consummation of the Offers (the
"Separation Condition");
(b) tenders by a sufficient number of holders of such Old Preferred
Securities in exchange for New Preferred Securities such that there will be
at least 400 record or beneficial holders of at least 1,000,000 New
Preferred Securities to be issued in exchange for the Old Preferred
Securities tendered in its Offer (the "Minimum Distribution Condition");
(c) any action has been taken or threatened, or any statute, rule,
regulation, judgment, order, stay, decree or injunction has been
promulgated, enacted, entered, enforced or deemed applicable to such Offer,
by or before any court or governmental regulatory or administrative agency
or authority or tribunal, domestic or foreign, which (i) challenges the
making of such Offer, or might directly or indirectly prohibit, prevent,
restrict or delay consummation of such Offer, or otherwise and adversely
affects in any material manner such Offer or (ii) could materially adversely
affect the business, condition (financial or otherwise), income, operations,
properties, assets, liabilities or prospects of U S WEST and its
subsidiaries, taken as a whole, or materially impair the contemplated
benefits of such Offer to U S WEST, including any such action, statute,
rule, regulation, judgment, order, stay, decree or injunction which would
delay the Separation or constitute a Special Event with respect to such New
Trust or the applicable Old Trust if it occurred after the applicable
Expiration Date;
24
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
(d) any event has occurred or is likely to occur affecting the business
or financial affairs of U S WEST or its subsidiaries that would or might
prohibit, prevent, restrict or delay consummation of such Offer or that
will, or is reasonably likely to, materially impair the contemplated
benefits of such Offer or might be material to holders of Old Preferred
Securities in deciding whether to accept such Offer; and
(e) any of the following events shall have occurred (i) any general
suspension of or limitation on trading in securities on the NYSE or in the
over-the-counter market (whether or not mandatory), (ii) any significant
adverse change in the price of the Old Preferred Securities subject to such
Offer or in the United States securities or financial markets, (iii) a
material impairment in the trading market for debt or equity securities on
the NYSE or in the over-the-counter market (whether or not mandatory), (iv)
a declaration of a banking moratorium or any suspension of payments in
respect of banks by federal or state authorities in the United States
(whether or not mandatory), (v) a commencement of a war, armed hostilities
or other national or international crisis directly or indirectly relating to
the United States, (vi) any limitation (whether or not mandatory) by any
governmental authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending institutions in
the United States, or (vii) any significant adverse change in United States
securities or financial markets generally or in the case of any of the
foregoing existing at the time of the commencement of such Offer, a material
acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Capital Funding in
connection with the applicable Offer and, except for the Separation Condition
and the Minimum Distribution Condition may be waived by Capital Funding, in
whole or in part, in its sole discretion. Any determination made by Capital
Funding concerning an event, development or circumstance described or referred
to above will be final and binding on all parties with respect to the applicable
Offer.
EXPIRATION DATES; EXTENSIONS; AMENDMENTS; TERMINATION
Each of the Offers will expire on the applicable Expiration Date, which will
be at 5:00 p.m., New York City time, on 1998, unless and until
Capital Funding shall have extended the period of time during which the Offer
with respect to an Old Preferred Security is open, in which event the term
"Expiration Date" with respect to such Old Preferred Security shall refer to the
latest time and date to which the Offer with respect to such Old Preferred
Security is extended. Capital Funding expressly reserves the right, as to the
applicable Offer, in its sole discretion, subject to applicable law, to (i)
terminate such Offer, and not accept for exchange any Old Preferred Securities
tendered in such Offer and promptly return such Old Preferred Securities upon
the failure of any of the conditions specified above in "--Conditions to the
Offers," (ii) waive any condition to such Offer (other than the Separation
Condition and the Minimum Distribution Condition) and accept all Old Preferred
Securities previously tendered pursuant to such Offer, (iii) extend the
Expiration Date of such Offer and retain all Old Preferred Securities tendered
pursuant to such Offer until the applicable Expiration Date, subject, however,
to all withdrawal rights of holders, described under "--Withdrawal of Tenders,"
(iv) amend the terms of such Offer, (v) modify the form of the consideration to
be paid pursuant to such Offer, or (vi) not accept for exchange the Old
Preferred Securities tendered pursuant to such Offer at any time on or prior to
the Expiration Date for such Offer as a result of an invalid tender, proration,
withdrawal prior to the applicable Expiration Date or the occurrence of certain
other events as set forth herein. Any amendment applicable to an Offer will
apply to all Old Preferred Securities tendered pursuant to such Offer. During
any extension of an Offer, all Old Preferred Securities previously tendered
pursuant to such Offer and not withdrawn will remain subject to such Offer.
If Capital Funding makes a material change in the terms of an Offer, Capital
Funding will extend such Offer. The minimum period for which an Offer must
remain open following material changes in
25
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
the terms of such Offer or the information concerning such Offer, other than a
change in the amount of Old Preferred Securities sought for exchange in such
Offer or an increase or decrease in the consideration offered to holders of Old
Preferred Securities pursuant to such Offer, will depend upon the facts and
circumstances, including the relative materiality of the change or information.
With respect to a decrease in the number of Old Preferred Securities sought in
an Offer or an increase or decrease in the consideration offered to holders of
Old Preferred Securities pursuant to such Offer, if required, such Offer will
remain open for a minimum of ten (10) business days following public
announcement of such change. In the case of any amendment, withdrawal or
termination of an Offer, a public announcement will be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date of such Offer. If Capital Funding withdraws or
terminates an Offer, it will give immediate notice to the Exchange Agent, and
the Old Preferred Securities theretofore tendered pursuant to such Offer will be
returned promptly to the tendering Holders thereof. See "--Withdrawal of
Tenders." In order to satisfy the NYSE listing requirements, acceptance of Old
Preferred Securities validly tendered in each Offer is subject to the Minimum
Distribution Condition, which condition may not be waived.
EFFECT OF NOT TENDERING
To the extent Old Preferred Securities are not tendered and accepted
pursuant to the Offers, such Old Preferred Securities will remain outstanding as
obligations of the applicable Old Trust. In such event, the obligations of
Capital Funding under the Old Debt Securities relating to such Old Preferred
Securities will be assumed by MediaOne in connection with the Separation and, as
a result, the Old Debt Guarantees will no longer be required as MediaOne will
become the direct obligor of the Old Debt Securities. Such assumption is
permitted by the terms of the Old Indenture. In addition, the Old Preferred
Securities Guarantees will continue to be provided by U S WEST (as MediaOne)
following the Separation. After the Separation, New U S WEST and Capital Funding
(which will be a subsidiary of New U S WEST) will have no liability or
obligation with respect to the Old Debt Securities, the Old Debt Guarantees and
the Old Preferred Securities Guarantees. Accordingly, holders of Old Preferred
Securities who elect not to tender pursuant to the Offers will retain preferred
securities of the Old Trusts which will be supported solely by the Old Debt
Securities which, in turn, as obligations of MediaOne, will be supported solely
by the cash flows generated by and the assets of MediaOne. Because the MediaOne
Debt Assumption will constitute a taxable exchange for United States federal
income tax purposes, holders of Old Preferred Securities who elect not to tender
may recognize taxable income as a result thereof. The MediaOne Debt Assumption
may also have other consequences for holders of Old Preferred Securities. See
"Chapter 2: Risk Factors--Risk Factors Relating to MediaOne," "--Risk Factors
Relating to the Preferred Securities--Effect of Not Tendering Old Preferred
Securities," "Chapter 5: Information About MediaOne" and "Chapter 7: Certain
Federal Income Tax Consequences--Federal Income Tax Consequences of Owning and
Disposing of Old Preferred Securities After the MediaOne Debt Assumption." U S
WEST may also determine to defease the Old Debt Securities in lieu of the
assumption described above.
Following the Separation, MediaOne's obligations under the New Preferred
Securities Guarantees and the Old Preferred Securities Guarantees will be
subordinate and junior in right of payment to all liabilities of MediaOne,
including the New Debt Guarantees and the Old Debt Securities, and pari passu
with one another and the most senior preferred stock issued by MediaOne. The
obligations of MediaOne under the New Debt Guarantees and the Old Debt
Securities will be subordinate and junior in right of payment to all present and
future Senior Indebtedness of MediaOne and will be effectively subordinated and
junior in right of payment to all present and future indebtedness of MediaOne's
subsidiaries. See "Chapter 2: Risk Factors--Risk Factors relating to the
Preferred Securities--Ranking of Subordinated Obligations."
26
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
Upon consummation of the Separation, the name of the Old Series I Trust will
be changed to "MediaOne Financing A" and the name of the Old Series II Trust
will be changed to "MediaOne Financing B."
PROCEDURES FOR TENDERING
With respect to an Offer, the tender of Old Preferred Securities by a Holder
thereof pursuant to one of the procedures set forth below will constitute an
agreement between such Holder and Capital Funding in accordance with the terms
and subject to the conditions set forth herein and in the applicable Letter of
Transmittal and the right of Capital Funding to terminate its Offer as described
herein and such Holder's right to withdraw tendered Old Preferred Securities as
described herein.
All of the Old Preferred Securities are held in book-entry form through
participants of DTC (I.E., a custodian bank, depositary, broker, trust company
or other nominee) ("DTC Participants"). Any beneficial owner of Old Preferred
Securities who wishes to tender such Old Preferred Securities in an Offer should
contact the DTC Participant through which such owner holds its Old Preferred
Securities promptly and instruct such DTC Participant to tender on such
beneficial owner's behalf pursuant to the procedures described herein.
BOOK-ENTRY TRANSFER. Pursuant to an authorization given by DTC to the DTC
Participants, each DTC Participant that holds Old Preferred Securities through
DTC must (i) transmit its acceptance through the DTC Automated Tender Offer
Program ("ATOP") (for which the transaction will be eligible), and DTC will then
edit and verify the acceptance, execute a book-entry delivery to the Exchange
Agent's account at DTC and either (A) DTC will send an Agent's Message (as
defined herein) to the Exchange Agent for its acceptance or (B) the DTC
Participant will complete and sign the applicable Letter of Transmittal and mail
or deliver such Letter of Transmittal, and any other documents required by the
Letter of Transmittal, to the Exchange Agent, or (ii) comply with the guaranteed
delivery procedures set forth in this Offer to Purchase. A proper tender of Old
Preferred Securities pursuant to the foregoing procedures by holders as of the
Record Date will also constitute the giving of a Consent by such holders with
respect to such Old Preferred Securities. See "--The Consent
Solicitation--Procedure for Consenting." The Exchange Agent will (promptly after
the date of this Prospectus) establish accounts at DTC for purposes of the
Offers, and any financial institution that is a DTC Participant may make
book-entry delivery of interests in Old Preferred Securities into the Exchange
Agent's account through ATOP. However, although delivery of interests in the Old
Preferred Securities may be effected through book-entry transfer into the
Exchange Agent's account through ATOP, an Agent's Message in connection with
such book-entry transfer or a Letter of Transmittal, and any other required
documents, must be, in any case, transmitted to and received by the Exchange
Agent at its address set forth on the back cover of this Prospectus, or the
guaranteed delivery procedures set forth below must be complied with, in each
case, prior to the applicable Expiration Date. Delivery of documents to DTC does
not constitute delivery to the Exchange Agent. The confirmation of a book-entry
transfer into the Exchange Agent's account at DTC through ATOP as described
above is referred to herein as a "Book-Entry Confirmation." The Exchange Agent
and DTC have confirmed that the Offers and the solicitation of Consents from
holders as of the Record Date are eligible for ATOP. Holders desiring to tender
Old Preferred Securities prior to the applicable Expiration Date should note
that such Holders must allow sufficient time for completion of the ATOP
procedures during the normal business hours of DTC on that date.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants (a) have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and Capital Funding may enforce such agreement against
such DTC Participants
27
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
and (b) if tendering on behalf of holders as of the Record Date, Consent to the
Proposed Amendments as described herein.
All of the Old Preferred Securities currently held through DTC have been
issued in the form of global notes registered in the name of Cede & Co., DTC's
nominee (the "Global Notes"). Upon consummation of the Offers, the aggregate
principal amount of the Global Notes will be reduced to represent the aggregate
principal amount of Old Preferred Securities not tendered and accepted.
GUARANTEED DELIVERY. If a DTC Participant desires to participate in an
Offer and the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if the Exchange Agent has received at one of its
addresses on the back cover hereof prior to the applicable Expiration Date, a
letter, telegram or facsimile transmission from a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"),
including (as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities dealer, municipal securities broker, government
securities dealer or government securities broker; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings institution that is a participant in a Securities
Transfer Association recognized program, setting forth the name and address of
the DTC Participant, the name(s) in which the Old Preferred Securities are held
and stating that the tender is being made thereby and guaranteeing that within
two NYSE trading days after the date of execution of such letter, telegram or
facsimile transmission by the Eligible Institution, the procedure for book-entry
transfer with respect to such Old Preferred Securities will be completed. Unless
the Old Preferred Securities being tendered by the above-described method are
deposited with the Exchange Agent within the time period set forth above in
accordance with DTC's ATOP procedures and an applicable Letter of Transmittal or
an Agent's Message is received, Capital Funding may, at its option, reject the
tender. Copies of the applicable Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent and the Information Agent.
MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Preferred Securities in connection with an Offer will be determined by Capital
Funding, whose determination will be final and binding. Capital Funding reserves
the absolute right to reject any or all tenders not in proper form or the
acceptance for exchange of which may, in the opinion of counsel for Capital
Funding be unlawful. Capital Funding also reserves the absolute right to waive
any defect or irregularity in the tender of any Old Preferred Securities in an
Offer, and the interpretation by Capital Funding of the terms and conditions of
its Offer (including the instructions in the applicable Letter of Transmittal)
will be final and binding. None of Capital Funding, the New Trusts, the Old
Trusts, MediaOne Funding, U S WEST, the Exchange Agent, the Dealer Managers, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Tenders of Old Preferred Securities involving any irregularities will not be
deemed to have been made until such irregularities have been cured or waived.
Old Preferred Securities received by the Exchange Agent in connection with an
Offer that are not validly tendered and as to which the irregularities have not
been cured or waived will be returned by the Exchange Agent to the DTC
Participant who delivered such Old Preferred Securities by crediting an account
maintained at DTC designated by such DTC Participant as promptly as practicable
after the applicable Expiration Date or the withdrawal or termination of the
applicable Offer.
LETTERS OF TRANSMITTAL
Subject to and effective upon the acceptance of Old Preferred Securities
tendered thereby, by executing and delivering a Letter of Transmittal (or
agreeing to the terms of a Letter of Transmittal
28
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
pursuant to an Agent's Message) a tendering Holder (i) irrevocably sells,
assigns and transfers to Capital Funding all right, title and interest in and to
all the Old Preferred Securities tendered thereby, (ii) waives any and all
rights with respect to the Old Preferred Securities (including without
limitation any existing or past defaults and their consequences in respect of
the Old Preferred Securities), (iii) releases and discharges Capital Funding and
the applicable Old Trust from any and all claims such Holder may have now, or
may have in the future arising out of, or related to, the Old Preferred
Securities including without limitation any claims that such Holder is entitled
to receive additional principal or interest payments with respect to the Old
Preferred Securities or to participate in any redemption or defeasance of the
Old Preferred Securities, (iv) represents and warrants as to whether or not the
Old Preferred Securities tendered were owned as of the Record Date and (v)
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of such holder with respect to any such tendered Old
Preferred Securities, with full power of substitution and resubstitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to cause such Old Preferred Securities to be assigned, transferred and
exchanged in the applicable Offer.
THERE IS A SEPARATE LETTER OF TRANSMITTAL FOR EACH OFFER.
WITHDRAWAL OF TENDERS
Tenders of Old Preferred Securities pursuant to an Offer may be withdrawn at
any time prior to the applicable Expiration Date and, unless accepted for
exchange by Capital Funding, may be withdrawn at any time after , 1998.
Beneficial owners desiring to withdraw Old Preferred Securities previously
tendered should contact the DTC Participant through which such owners hold their
Old Preferred Securities. In order to withdraw Old Preferred Securities
previously tendered, a DTC Participant may, prior to the Expiration Date,
withdraw its instruction previously transmitted through ATOP by (i) withdrawing
its acceptance through ATOP, or (ii) delivering to the Exchange Agent by mail,
hand delivery or facsimile transmission notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC Participant, the amount of Old Preferred Securities to which such withdrawal
relates and the signature of the DTC Participant. Withdrawal of a prior
instruction will be effective upon receipt of such notice of withdrawal by the
Exchange Agent. All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
NYSE Medallian Signature Program or the Stock Exchange Medallion Program;
provided, however, that signatures on the notice of withdrawal need not be
guaranteed if the Old Preferred Securities being withdrawn are held for the
account of an Eligible Institution. A withdrawal of an instruction must be
executed by a DTC Participant in the same manner as such DTC Participant's name
appears on its transmission through ATOP to which such withdrawal relates. A DTC
Participant may withdraw a tender only if such withdrawal complies with the
provisions of this Offer to Purchase.
A Holder of Old Preferred Securities as of the Record Date who previously
tendered Old Preferred Securities may not validly revoke a Consent unless such
Holder validly withdraws such Holder's previously tendered Old Preferred
Securities in the manner described herein and, except as described below, the
valid withdrawal by such Holder of Old Preferred Securities will constitute the
concurrent valid revocation of such Holder's Consent. Holders of Old Preferred
Securities as of the Record Date who provide Consents but do not tender Old
Preferred Securities pursuant to an Offer will be permitted to revoke such
Consents in the manner described under "--The Consent Solicitation--Requisite
Consents."
If the requisite Consents are received with respect to any series of Old
Preferred Securities, U S WEST and Capital Funding will as soon as practicable
(but in no event sooner than 20 business days after the mailing of this
Prospectus) execute a supplemental indenture with the trustee under the
29
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
Old Indenture (the "Consent Supplemental Indenture" for each series of Old
Preferred Securities) which will enact the Proposed Amendments. Under the terms
of the Consent Supplemental Indenture, however, the Proposed Amendments will not
take effect unless and until Capital Funding shall have accepted for payment and
paid for all Old Preferred Securities of such series validly tendered pursuant
to the applicable Offer and not withdrawn prior to the applicable Expiration
Date. Once such Consent Supplemental Indenture has been executed, a Consent will
not be permitted to be revoked, and the Consent Supplemental Indenture will bind
all holders from time to time of the Old Preferred Securities of such series
regardless of whether such holders shall have granted or revoked Consents to the
Proposed Amendments.
Withdrawals of tenders of Old Preferred Securities may not be rescinded and
any Old Preferred Securities withdrawn will thereafter be deemed not validly
tendered for purposes of any Offer. Properly withdrawn Old Preferred Securities,
however, may be retendered by following the procedures therefor described
elsewhere herein at any time prior to the applicable Expiration Date. See
"--Procedures for Tendering."
THE CONSENT SOLICITATION
THE SOLICITATION
In connection with the Offers, U S WEST and Capital Funding are also making
a solicitation (the "Consent Solicitation") of Consents from the Holders of each
series of Old Preferred Securities as of the Record Date to the Proposed
Amendments to the Old Indenture. The Consent Solicitation is being made in order
to obtain the Requisite Consents (as defined herein) of the Holders of each
series of Old Preferred Securities as of the Record Date to the Proposed
Amendments. The Proposed Amendments would specifically permit U S WEST to
consummate the Separation without complying with a covenant contained in the Old
Indenture that might otherwise require New U S WEST to assume liability for the
Old Debt Guarantees, although U S WEST does not believe that such covenant would
require such an assumption as a result of the Separation. The proper tender of
Old Preferred Securities by holders as of the Record Date will constitute the
giving of a Consent by such holders with respect to such Old Preferred
Securities. Holders of Old Preferred Securities who acquired such Old Preferred
Securities after the Record Date will have the right to tender their Old
Preferred Securities pursuant to the Offer but will not have the right to
provide Consents. A Holder of Old Preferred Securities as of the Record Date
will be permitted to provide such Holder's Consent even if such Holder does not
tender Old Preferred Securities pursuant to an Offer. NO SEPARATE PAYMENTS WILL
BE MADE FOR CONSENTS.
The Offers are not conditioned upon the receipt of the Requisite Consents
relating to Old Preferred Securities of any series. U S WEST plans to proceed
with the Separation whether or not the Requisite Consents are received, although
the Separation is subject to a number of other conditions unrelated to the
Consent Solicitation. See "--The Proposed Amendments" and "Chapter 4: The
Separation--The Separation--Conditions to the Separation."
REQUISITE CONSENTS
The Old Indenture permits the Proposed Amendments to be adopted with respect
to each series of Old Debt Securities if the registered holders of at least a
majority in aggregate principal amount of such Old Debt Securities have given
Consents. All of the Old Series I Debt Securities are held by the Old Series I
Trust and the property trustee of the Old Series I Trust is the registered
holder of all of the Old Series I Debt Securities. All of the Old Series II Debt
Securities are held by the Old Series II Trust and the property trustee of the
Old Series II Trust is the registered holder of all of the Old Series II Debt
Securities. Under the Declaration of each Old Trust, in the event the consent of
the property trustee of such Old Trust, as the holder of the Old Debt Securities
and Old Debt Guarantee
30
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
held by such Old Trust, is required under the Old Indenture with respect to any
amendment, modification or termination of the Old Indenture, such property
trustee is required to request the direction of the holders of the Old Preferred
Securities and Old Common Securities of such Old Trust with respect to such
amendment, modification or termination and is required to vote with respect to
such amendment, modification or termination as directed by a majority in
liquidation amount of such Old Preferred Securities and Old Common Securities,
voting together as a single class. Each Old Preferred Securities and each Old
Common Security will have one vote per security with respect to any matter to be
acted upon.
Based on the foregoing, the Proposed Amendments will be adopted if the
registered holders as of the Record Date of at least a majority of the Old
Preferred Securities and Old Common Securities of each Old Trust, treated
together as a single class, have given Consents. The requisite Consents
described above for each series of Old Preferred Securities are herein referred
to as the "Requisite Consents" for such series. As of the Record Date, there
were outstanding 24,000,000 Old Series I Preferred Securities, 742,269 Old
Series I Common Securities, 19,200,000 Old Series II Preferred Securities and
593,815 Old Series II Common Securities. Accordingly, the Requisite Consents for
the Old Series I Preferred Securities will require Consents of the Holders of
12,321,135 Old Series I Preferred Securities and Old Series I Common Securities
and the Requisite Consents for the Old Series II Preferred Securities will
require Consents of the Holders of 9,896,908 Old Series II Preferred Securities
and Old Series II Common Securities. U S WEST was the Holder of all of the Old
Series I Common Securities and Old Series II Common Securities as of the Record
Date and intends to provide Consents with respect to all of such Old Common
Securities.
PROCEDURES FOR CONSENTING
All of the Old Preferred Securities are held in book-entry form through DTC
Participants (I.E., a custodian bank, depositary, broker, trust company or other
nominee). The proper tender of Old Preferred Securities by holders as of the
Record Date will constitute the giving of a Consent by such holders with respect
to such Old Preferred Securities. See "--The Offers--Procedures for Tendering."
Any beneficial owner of Old Preferred Securities as of the Record Date who
wishes to provide Consents with respect to such Old Preferred Securities without
tendering such owner's Old Preferred Securities should contact the DTC
Participant through which such beneficial owner holds its Old Preferred
Securities promptly and instruct such DTC Participant to provide Consents on
such beneficial owner's behalf pursuant to the procedures described herein.
As soon as practicable after the date of this Prospectus, DTC will deliver
an Omnibus Proxy with respect to each series of Old Preferred Securities to the
Exchange Agent. The Omnibus Proxy will assign the Consent rights of Cede & Co.,
DTC's nominee that holds the Old Preferred Securites, to the DTC Participants to
whose accounts the Old Preferred Securities are credited on the Record Date. In
order to provide Consents pursuant to an Omnibus Proxy on behalf of beneficial
owners of Old Preferred Securities not tendering, each DTC Participant should
complete and sign the applicable Letter of Transmittal and mail or deliver such
Letter of Transmittal to the Exchange Agent. The failure of a DTC Participant to
deliver a Consent (including a "broker non-vote" resulting from the failure of
such DTC Participant to receive instructions from a beneficial owner of Old
Preferred Securities) will have the effect of a vote against the Proposed
Amendments.
If the Requisite Consents are received with respect to any series of Old
Preferred Securities, U S WEST and Capital Funding will as soon as practicable
(but in no event sooner than 20 business days after the mailing of this
Prospectus) execute a Consent Supplemental Indenture with the trustee under the
Old Indenture which will enact the Proposed Amendments. Under the terms of the
Consent Supplemental Indenture, however, the Proposed Amendments will not take
effect unless and until Capital Funding shall have accepted for payment and paid
for all Old Preferred Securities of such
31
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
series validly tendered pursuant to the applicable Offer and not withdrawn prior
to the applicable Expiration Date. Once such Consent Supplemental Indenture has
been executed, a Consent will not be permitted to be revoked, and the Consent
Supplemental Indenture will bind all holders from time to time of the Old
Preferred Securities of such series regardless of whether such holders shall
have granted or revoked Consents to the Proposed Amendments.
A Holder as of the Record Date who previously tendered Old Preferred
Securities may not validly revoke a Consent unless such Holder validly withdraws
such Holder's previously tendered Old Preferred Securities in the manner
described above under "--The Offers--Withdrawal of Tenders." If such withdrawal
is effected before the applicable Consent Supplemental Indenture is executed,
the valid withdrawal by such Holder of Old Preferred Securities will constitute
the concurrent valid revocation of such Holder's Consent. Consents provided by
Holders as of the Record Date who do not tender Old Preferred Securities
pursuant to an Offer may be revoked by the Holder providing such Consents at any
time before the applicable Consent Supplemental Indenture is executed. Consents
may be revoked by delivering to the Exchange Agent a written notice of
revocation or another form of Consent bearing a date later than the date of the
Consent.
THE PROPOSED AMENDMENTS
The Proposed Amendments would amend the Old Indenture to specifically permit
U S WEST to consummate the Separation without complying with the covenant
relating to mergers, consolidations or sales of assets contained therein that
might otherwise require New U S WEST to assume liability for the Old Debt
Guarantees, although U S WEST does not believe that this covenant would require
such an assumption as a result of the Separation. The text of the Proposed
Amendments is attached as Annex A to this Prospectus. The following statements
are summaries of the substance or general effect of certain provisions of the
Old Indenture and the Proposed Amendments and are qualified in their entirety by
reference to the Old Indenture and Annex A. Unless otherwise defined,
capitalized terms used in the following descriptions of the provisions of the
Old Indenture and the Proposed Amendments are used as defined in the Old
Indenture.
The covenant relating to mergers, consolidations or sales of assets
contained in the Old Indenture provides that in the event of any sale,
conveyance, transfer or other disposition of the property of U S WEST "as an
entirety, or substantially as an entirety" to any other corporation (whether or
not affiliated with U S WEST), the corporation which acquires such property is
required to assume the performance of all obligations of U S WEST under the Old
Debt Guarantees, and the due and punctual performance and observance of all the
covenants and conditions of U S WEST with respect to the Old Debt Securities
under the Old Indenture. The Proposed Amendments would amend the Old Indenture
to specifically provide that the distribution by U S WEST of New U S WEST
pursuant to the terms of the Separation Agreement or any other transaction which
will have substantially the same result is excluded from the provisions of the
foregoing covenant.
Although the purpose of such Proposed Amendments is to allow U S WEST to
consummate the Separation without complying with such covenant that might
otherwise require New U S WEST to assume liability for the Old Debt Guarantees,
U S WEST does not believe that a court of competent jurisdiction would find that
the distribution of New U S WEST to its stockholders in connection with the
Separation would constitute a sale, conveyance, transfer or other disposition of
its property "substantially as an entirety" under New York law, the law
governing the Old Indenture. As a result, U S WEST does not believe that such an
assumption by New U S WEST would be required. Notwithstanding such belief, U S
WEST is soliciting the Consents to resolve any uncertainty by amending the Old
Indenture to explicitly exempt disposition transactions such as the Separation
from such covenant. U S WEST plans to proceed with the Separation regardless of
the number of Old Preferred Securities tendered and whether or not the Requisite
Consents are received, although the
32
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
Separation is subject to a number of other conditions unrelated to the Consent
Solicitation. See "--The Proposed Amendments" and "Chapter 4: The
Separation--The Separation--Conditions to the Separation." To the extent Old
Preferred Securities are not tendered and accepted pursuant to the Offers, such
Old Preferred Securities will remain outstanding. In such event, the obligations
of Capital Funding under the Old Debt Securities relating to such Old Preferred
Securities will be assumed by MediaOne. U S WEST may also determine to defease
the Old Debt Securities in lieu of such assumption. See "--The Offers--Effect of
Not Tendering."
LISTING AND TRADING OF NEW PREFERRED SECURITIES AND OLD PREFERRED SECURITIES
Each of the New Series I Preferred Securities and the New Series II
Preferred Securities constitutes a new issue of securities of the applicable New
Trust with no established trading market. While application will be made to list
each series of the New Preferred Securities on the NYSE, there can be no
assurance that an active market for either series of the New Preferred
Securities will develop or be sustained in the future on such exchange. Although
the Dealer Managers have indicated to each New Trust that they intend to make a
market in its New Preferred Securities following the applicable Expiration Date
as permitted by applicable laws and regulations prior to the commencement of
trading on the NYSE, they are not obligated to do so and may discontinue any
such market-making at any time without notice. Accordingly, no assurance can be
given as to the liquidity of, or trading markets for, either series of the New
Preferred Securities. In order to satisfy the NYSE listing requirements,
acceptance of Old Preferred Securities validly tendered in each Offer is subject
to the Minimum Distribution Condition, which condition may not be waived.
Each of the Old Series I Preferred Securities and the Old Series II
Preferred Securities are listed on the NYSE. Following each applicable
Expiration Date, and in accordance with and subject to applicable law, MediaOne
may from time to time acquire Old Preferred Securities of the series tendered in
the applicable Offer in the open market, by tender offer, subsequent exchange
offer or otherwise. To the extent that any such acquisition of Old Preferred
Securities causes the number of outstanding Old Preferred Securities of either
series to be less than 100,000, the NYSE may delist such series of Old Preferred
Securities from the NYSE and the trading market for the outstanding Old
Preferred Securities of such series could be adversely affected. A decision by
MediaOne to make such acquisitions is dependent on many factors, including
market conditions in effect at the time of any contemplated acquisition.
Accordingly, MediaOne cannot predict whether and to what extent it may acquire
any additional Old Preferred Securities and the consideration to be paid
therefor. In addition, if an Offer is substantially subscribed, there would be a
significant risk that round lot holdings of Old Preferred Securities outstanding
following such Offer would be limited. See "Risk Factors--Risk Factors Relating
to the Preferred Securities--Lack of Established Trading Market for New
Preferred Securities" and "--Reduced Trading Market for Old Preferred Securities
Following Offers."
33
CHAPTER 3: THE OFFERS AND
CONSENT SOLICITATION
<PAGE>
CHAPTER 4: THE SEPARATION
THE SEPARATION
Pursuant to the Separation, the Communications Group and the Media Group
will become independent public companies. As part of the Separation, Dex--the
domestic directories business of the Media Group--will be aligned with the
Communications Group. The Separation will be implemented pursuant to the terms
of a Separation Agreement (the "Separation Agreement") to be entered into
between U S WEST and New U S WEST. The Separation Agreement sets forth the terms
of the Separation and certain other post-Separation arrangements and agreements
between New U S WEST and MediaOne. Certain material provisions of the Separation
Agreement are summarized herein. A copy of the Separation Agreement is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
This summary is qualified in its entirety by reference to the full and complete
text of the Separation Agreement. Further information about the Separation is
contained in the Proxy Statement of U S WEST (the "Proxy Statement") distributed
to U S WEST's stockholders in connection with the 1998 Annual Meeting of U S
WEST's stockholders to be held on June 4, 1998 (the "Annual Meeting"). At the
Annual Meeting, U S WEST will ask its stockholders to consider and approve the
Separation. See "Chapter 8: Certain Other Matters--Where You Can Find More
Information."
THE COMMUNICATIONS REDEMPTION AND DEX DIVIDEND
In order to effect the Separation, pursuant to the Separation Agreement and
subject to the terms and conditions thereof, (i) U S WEST will redeem each
issued and outstanding share of Communications Stock (other than shares of
Communications Stock held as treasury stock by U S WEST) for one share of New U
S WEST Common Stock (the "Communications Redemption") and (ii) distribute as a
dividend (the "Dex Dividend") on each outstanding share of Media Stock (other
than shares of Media Stock held as treasury stock by U S WEST) a fraction of a
share of New U S WEST Common Stock equal to the Dex Dividend Number (which will
be determined in the manner described below under "--The Dex Alignment"). As
only whole shares of New U S WEST Common Stock will be issued, cash in lieu of
fractional shares of New U S WEST Common Stock will be issued to holders of
Media Stock pursuant to the Dex Dividend.
The Separation will become effective at such time after the satisfaction or
waiver of all of the conditions set forth in the Separation Agreement as
determined by the U S WEST Board (the "Separation Time"). See "--Conditions to
the Separation." The date on which the Separation Time occurs (the "Separation
Date") will also be fixed by the U S WEST Board as (i) the date on which the
Communications Stock will be redeemed pursuant to the Communications Redemption,
(ii) the record date for determining the holders of Media Stock entitled to
receive the Dex Dividend and (iii) the date as of which the Dex Dividend will be
paid to holders of Media Stock. From and after the Separation Time, each
outstanding share of Media Stock will remain outstanding and will thereafter
represent one share of Common Stock of MediaOne ("MediaOne Common Stock"). Each
share of Communications Stock held as treasury stock by U S WEST will be
cancelled. Each share of Media Stock held as treasury stock by U S WEST will
remain outstanding as one share of MediaOne Common Stock held as treasury stock
by MediaOne. The Dex Dividend will not be issued with respect to shares of Media
Stock held as treasury stock by U S WEST.
As a result of the Separation, New U S WEST (which is currently an indirect
wholly owned subsidiary of U S WEST named "USW-C, Inc.") will become an
independent public company comprising the current businesses of the
Communications Group and Dex and will be renamed "U S WEST, Inc." Following the
Separation, U S WEST will continue as an independent public company comprised of
the current businesses of the Media Group other than Dex and will be renamed
"MediaOne Group, Inc."
34
CHAPTER 4: THE SEPARATION
<PAGE>
THE DEX ALIGNMENT
As part of the Separation, the directories business of Dex will be aligned
with New U S WEST. The U S WEST Board, in consultation with U S WEST's
management and its financial advisors, has determined that the fair value of Dex
is $4.75 billion (the "Dex Value"). The business of Dex is currently attributed
to the Media Group and, as a result, the value of this business is intended to
be reflected in the Media Stock. In connection with the Dex Alignment, U S WEST
will issue to holders of Media Stock an aggregate of $850 million in value (the
"Dex Equity Value") of shares of New U S WEST Common Stock pursuant to the Dex
Dividend. The Dex Equity Value equals the Dex Value net of the $3.9 billion of
Dex Indebtedness currently allocated to the Media Group that will be refinanced
by New U S WEST in connection with the Separation. For a description of the
manner in which the Dex Indebtedness will be refinanced by New U S WEST, see
"--The Refinancing."
The fraction of a share of New U S WEST Common Stock which will be
distributed per share of Media Stock pursuant to the Dex Dividend (the "Dex
Dividend Number") will equal the quotient of (i) the Dex Equity Value (I.E.,
$850 million) divided by (ii) the product of (x) the number of shares of Media
Stock outstanding immediately prior to the Separation Time (other than shares of
Media Stock held as treasury stock by U S WEST) multiplied by (y) the average
market value of the Communications Stock over the period of 20 trading days
ending on the fifth trading day prior to the Separation Date.
THE REORGANIZATION
Prior to the Separation, U S WEST will effect certain internal stock and
asset transfers, intercompany debt assumptions and other restructurings,
mergers, contributions and assumptions, the purpose and effect of which will be
to separate Dex from the other businesses of the Media Group and to contribute
to New U S WEST all of the assets and liabilities of U S WEST relating to the
businesses of the Communications Group and Dex, as well as certain other assets
and liabilities of U S WEST (the "Reorganization"). As part of the
Reorganization, Capital Funding will become a subsidiary of New U S WEST and
will continue as New U S WEST's financing subsidiary. In addition, substantially
all of the outstanding U S WEST Indebtedness will be refinanced pursuant to the
Refinancing. See "--The Refinancing."
Prior to the Reorganization, U S WEST will cause New U S WEST to amend and
restate its Certificate of Incorporation to, among other things, authorize two
billion shares of New U S WEST Common Stock. Following such amendment and
restatement and as part of the Reorganization, New U S WEST will issue to U S
WEST a number of shares of New U S WEST Common Stock equal to the sum of (i) the
number of shares of Communications Stock that will be issued and outstanding
immediately prior to the Separation Time plus (ii) the aggregate number of
shares of New U S WEST Common Stock to be issued to holders of Media Stock
pursuant to the Dex Dividend. Such shares of New U S WEST Common Stock will then
be distributed by U S WEST to holders of Communications Stock and Media Stock
pursuant to the Separation.
CHARTER AMENDMENTS
In order to consummate the Separation, the Restated Certificate of
Incorporation of U S WEST (the "U S WEST Restated Certificate") will be amended
prior to the Separation Time to, among other things, (i) prior to the
consummation of the Separation, (a) permit the Communications Redemption and the
Dex Dividend and (b) change the name of U S WEST to "MediaOne Group, Inc." and
(ii) following consummation of the Separation, (a) delete all references in the
U S WEST Restated Certificate to the Communications Stock (which will no longer
be outstanding as a result of the Communications Redemption) and (b) amend
certain terms of the Media Stock set forth in the U S WEST Restated Certificate
(collectively, the "Charter Amendments").
35
CHAPTER 4: THE SEPARATION
<PAGE>
Pursuant to the DGCL and the U S WEST Restated Certificate, the Charter
Amendments are required to be approved and adopted by (i) the holders of a
majority of the voting power of the outstanding shares of Communications Stock
and Media Stock, voting as a single class, (ii) the holders of a majority of the
outstanding shares of Communications Stock, voting as a separate class, and
(iii) the holders of a majority of the outstanding shares of Media Stock, voting
as a separate class. Consummation of the Separation is conditioned upon the
approval and adoption of the Charter Amendments by U S WEST's stockholders and
the effectiveness of the Charter Amendments. See "--Conditions to the
Separation." Approval of the Charter Amendments by U S WEST's stockholders will
be sought at the Annual Meeting.
CONDITIONS TO THE SEPARATION
Consummation of the Separation is subject to the fulfillment of each of the
following conditions: (i) the consummation of all of the transactions
contemplated by the Separation Agreement to be performed on or prior to the
consummation of the Separation, including the Reorganization and the Refinancing
(including the Offers and the Cash Tender Offers); (ii) a Registration Statement
of New U S WEST on Form S-4 under the Securities Act registering the shares of
New U S WEST Common Stock to be distributed in the Separation having been
declared effective by the Commission; (iii) a Registration Statement of New U S
WEST on Form 8-A under the Exchange Act registering the New U S WEST Common
Stock under the Exchange Act having become effective; (iv) an amendment to U S
WEST's Registration Statement on Form 8-B under the Exchange Act amending
certain terms of the Media Stock having become effective; (v) the Separation and
the Charter Amendments having been approved and adopted by the stockholders of U
S WEST and the Charter Amendments having been filed with the Secretary of State
of the State of Delaware in accordance with the DGCL; (vi) the New U S WEST
Common Stock having been approved for listing on the NYSE and the Pacific Stock
Exchange (the "PSE"), subject to official notice of issuance; (vii) there not
being issued any order, injunction or decree by any governmental authority that
remains in effect preventing the consummation of the Separation; (viii) all
consents of, approvals of, notices to and filings with any governmental
authority or any other person necessary to consummate the Reorganization or the
Separation having been obtained and being in full force and effect; (ix) U S
WEST having provided the NYSE and the PSE with prior written notice of the
Separation Date as required by the Exchange Act and the rules and regulations of
the NYSE and the PSE; (x) the ruling received by U S WEST as to the tax-free
treatment of certain aspects of the Separation and the Reorganization being in
full force and effect at the Separation Time; and (xi) the execution by U S WEST
and New U S WEST (or their applicable subsidiaries) of certain agreements
contemplated by the Separation Agreement.
Subject to applicable laws, any of the conditions to the Separation may be
waived at any time prior to the Separation Time for any reason, in the sole
discretion of the U S WEST Board. In addition, even if all of the above
conditions are satisfied, the Separation Agreement may be amended or terminated,
and the Reorganization, the Refinancing (including the Offers and the Cash
Tender Offers) and the Separation may be abandoned, at any time prior to the
Separation Time for any reason, in the sole discretion of the U S WEST Board.
As of the date of this Prospectus, all material conditions to the
Separation, other than conditions requiring deliveries or actions by U S WEST
prior to the Separation Time (including the consummation of the Refinancing) and
the condition requiring approval of the Separation and the Charter Amendments by
U S WEST's stockholders have been satisfied. Approval of the Separation and the
Charter Amendments is being sought at the Annual Meeting. It is anticipated that
the Offers and the Cash Tender Offers will be consummated shortly after the
Annual Meeting and that the Separation will be consummated as soon as
practicable thereafter.
36
CHAPTER 4: THE SEPARATION
<PAGE>
THE REFINANCING
As of March 31, 1998, prior to giving effect to the AirTouch Transaction, U
S WEST and its subsidiaries (including U S WEST's capital assets segment) had
outstanding approximately $16.5 billion of indebtedness, which is comprised of
$1.9 billion of short-term debt, $13.1 billion of medium and long-term
securities, $1.08 billion of Old Preferred Securities and $400 million of
indebtedness of U S WEST's capital assets segment. Such indebtedness consists of
approximately $5.5 billion of Communications Indebtedness, $2.7 billion of
Continental Indebtedness, approximately $200 million of indebtedness of a member
of the capital assets segment and approximately $8.1 billion of U S WEST
Indebtedness. The U S WEST Indebtedness includes approximately $5.2 billion of
medium and long-term debt securities of Capital Funding, $1.08 billion of Old
Preferred Securities, approximately $1.1 billion of commercial paper of Capital
Funding and an aggregate of approximately $700 million of indebtedness issued or
guaranteed by U S WEST, including indebtedness of Financial Services. Of the U S
WEST Indebtedness, approximately $7.8 billion has historically been allocated to
and is reflected on the balance sheet of the Media Group (including the Dex
Indebtedness) and approximately $300 million has historically been allocated to
and is reflected on the balance sheet of the Communications Group. All of the
$300 million of U S WEST Indebtedness allocated to the Communications Group is
indebtedness of Capital Funding. In connection with the AirTouch Transaction, U
S WEST received $1.35 billion of AirTouch funds as a result of the assumption
and repayment by AirTouch of certain indebtedness. A portion of the Airtouch
funds is being used to repay Capital Funding's outstanding commercial paper.
Following the Separation, all of the Communications Indebtedness will
continue to be obligations of U S WEST Communications, which will be a
subsidiary of New U S WEST, and all of the Continental Indebtedness will
continue to be obligations of Continental, which will be a subsidiary of
MediaOne, subject to the rights of holders of certain private notes included in
the Continental Indebtedness to require repayment of such notes following
consummation of the Separation.
The Offers are being made as part of the Refinancing, pursuant to which U S
WEST intends to refinance substantially all of the $8.1 billion of U S WEST
Indebtedness. The other major component of the Refinancing is the Cash Tender
Offers, pursuant to which Capital Funding and Financial Services are making
offers under separate cover to purchase for cash all of the public medium and
long-term debt securities of Capital Funding and Financial Services and, in
connection therewith, are soliciting consents to certain amendments to the
indentures under which such securities were issued which are similar to the
Consents being solicited pursuant to this Prospectus. The Cash Tender Offers are
not being made pursuant to this Prospectus. The Cash Tender Offers, when
commenced, will only be made by means of a separate Offer to Purchase and
Consent Solicitation. The obligations of Capital Funding or Financial Services,
as the case may be, under any securities not tendered pursuant to the Cash
Tender Offers will be assumed by MediaOne (the "Assumed Public Indebtedness"),
provided that U S WEST may determine to defease a portion of such indebtedness
in lieu of such assumption. Such assumptions are permitted by the terms of the
indenture under which such indebtedness was issued. After the Separation, New U
S WEST will have no liability or obligation for any of the Assumed Public
Indebtedness. In addition, U S WEST will prepay certain other U S WEST
Indebtedness as part of the Refinancing.
The Separation is not conditioned upon the refinancing by New U S WEST and
MediaOne of any minimum amount of U S WEST Indebtedness pursuant to the Offers
and the Cash Tender Offers. If New U S WEST and MediaOne are unable to refinance
a portion of the U S WEST Indebtedness pursuant to the Offers or the Cash Tender
Offers, such indebtedness either will be retained by MediaOne or defeased as
described above. Any decision as to whether to retain or defease any U S WEST
Indebtedness not refinanced would depend upon the amount and type of such
indebtedness.
37
CHAPTER 4: THE SEPARATION
<PAGE>
In order to fund the cash required to (i) repay all Old Preferred Securities
tendered for cash and accepted pursuant to the Offers, (ii) repay all
indebtedness of Capital Funding and Financial Services tendered and accepted
pursuant to the Cash Tender Offers, (iii) repay all Other U S WEST Indebtedness
which U S WEST prepays as part of the Refinancing, (iv) defease any indebtedness
not tendered pursuant to the Cash Tender Offers and any Old Debt Securities
relating to Old Preferred Securities not tendered pursuant to the Offers which U
S WEST elects to defease and (v) fund the costs and expenses of the Separation,
Capital Funding will incur approximately $4.4 billion of new indebtedness (the
"New Capital Funding Indebtedness"), and MediaOne Funding will incur an amount
of new indebtedness (the "New MediaOne Funding Indebtedness") approximately
equal to the difference between (a) $2.6 billion and (b) the sum of (1) the
aggregate liquidation amount of New Preferred Securities issued in the Offers,
(2) the aggregate liquidation amount of the Old Preferred Securities not
tendered pursuant to the Offers and not defeased, (3) the aggregate principal
amount of the Assumed Public Indebtedness not defeased and (4) the aggregate
principal amount of other U S WEST Indebtedness retained by MediaOne as part of
the Separation. In addition, U S WEST will use a portion of the AirTouch Funds
to fund such repayments. Capital Funding will become a subsidiary of New U S
WEST as part of the Reorganization and, upon consummation of the Separation, all
of the New Capital Funding Indebtedness will be guaranteed by New U S WEST and
MediaOne will have no liability or obligation with respect thereto. MediaOne
Funding will remain as a subsidiary of MediaOne in connection with the
Separation and, upon consummation of the Separation, all of the New MediaOne
Funding Indebtedness will be guaranteed by MediaOne and New U S WEST will have
no liability or obligation with respect thereto. The $4.4 billion of New Capital
Funding Indebtedness represents an amount equal to the $300 million of U S WEST
Indebtedness currently allocated to the Communications Group, the Dex
Indebtedness and debt which will be incurred by Capital Funding to fund certain
of the costs of the Separation. The $2.6 billion of indebtedness and trust
preferred securities represented by the New MediaOne Funding Indebtedness and
the indebtedness and trust preferred securities described in clauses (1) through
(4) above represent an amount equal to the U S WEST Indebtedness currently
allocated to the Media Group other than the Dex Indebtedness and debt which will
be incurred by MediaOne Funding to fund certain costs of the Separation.
Upon consummation of the Separation and the related Refinancing, New U S
WEST and its subsidiaries will have approximately $9.9 billion of debt, which
will include approximately $5.5 billion of Communications Indebtedness,
approximately $4.4 billion of New Capital Funding Indebtedness. Upon
consummation of the Separation and the related Refinancing, MediaOne and its
subsidiaries will have approximately $5.3 billion of debt and trust preferred
securities, which will include $2.7 billion of Continental Indebtedness, the New
MediaOne Funding Indebtedness, the New Preferred Securities issued in the
Offers, the Old Preferred Securities not tendered pursuant to the Offers and not
defeased, the Assumed Public Indebtedness not defeased and the other U S WEST
Indebtedness retained by MediaOne as part of the Separation. In addition, the
capital assets segment, which will remain with MediaOne, will have approximately
$400 million of indebtedness.
The New Capital Funding Indebtedness will be comprised of commercial paper.
The New MediaOne Funding Indebtedness will be comprised of commercial paper and
commercial bank debt. Following consummation of the Separation, it is expected
that Capital Funding and MediaOne Funding will issue medium and long-term
securities to refinance a portion of the short-term commercial paper and
commercial bank debt incurred by them in connection with the Refinancing. While
the terms of the New Capital Funding Indebtedness and the New MediaOne Funding
Indebtedness (and any indebtedness issued to refinance such indebtedness) have
not yet been finalized, it is expected that such indebtedness will have terms
comparable to the terms of the current U S WEST Indebtedness, except that
MediaOne Funding's bank indebtedness may include certain additional terms and
covenants which are generally included in the bank indebtedness of cable
companies. In addition, all senior bank indebtedness of MediaOne Funding after
the Separation will be guaranteed by Continental and, as a result, will rank
pari passu with Continental's senior indebtedness. To the extent Old Preferred
38
CHAPTER 4: THE SEPARATION
<PAGE>
Securities are tendered for cash pursuant to the Offers, it is anticipated that
MediaOne will issue additional trust preferred securities following the
Separation so that it will have $1.08 billion of trust preferred securities
outstanding thereafter. U S WEST, after consultation with and based upon the
advice of its financial advisors, believes that New U S WEST and MediaOne have
sufficient financing capability to accomplish the refinancings described above.
Following the Separation, MediaOne intends to monetize the AirTouch
securities it received in the AirTouch Transaction and use a portion of the
proceeds of such monetization to reduce MediaOne's indebtedness. See "Chapter 5:
Information About MediaOne--Business of MediaOne--AirTouch Transaction."
TREATMENT OF PREFERRED STOCK
Currently, U S WEST has three series of preferred stock outstanding: Series
C Cumulative Redeemable Preferred Stock ("U S WEST Series C Preferred Stock"),
Series D Convertible Preferred Stock ("U S WEST Series D Preferred Stock") and
Series E Convertible Preferred Stock ("U S WEST Series E Preferred Stock" and,
together with the Series C Preferred Stock and Series D Preferred Stock, the "U
S WEST Preferred Stock"). In connection with the Separation, each class of U S
WEST Preferred Stock will remain outstanding and, following consummation of the
Separation, will represent shares of preferred stock of MediaOne. After the
Separation Time, the U S WEST Series D Preferred Stock and the U S WEST Series E
Preferred Stock will continue to be convertible into shares of Media Stock
(which will thereafter constitute shares of MediaOne Common Stock) pursuant to
the terms thereof. Holders of U S WEST Preferred Stock will not be entitled to
receive the Dex Dividend. In connection with the Separation, the conversion rate
of the U S WEST Series D Preferred Stock will be appropriately adjusted by
MediaOne pursuant to the terms of the U S WEST Series D Preferred Stock to
reflect the fact that holders of U S WEST Series D Preferred Stock will not
receive the Dex Dividend. No such adjustments will be required to the terms of
the U S WEST Series C Preferred Stock or the U S WEST Series E Preferred Stock.
Currently, there are 50,000 shares of U S WEST Series C Preferred Stock
outstanding, 20 million shares of U S WEST Series D Preferred Stock outstanding
and 994,082 shares of U S WEST Series E Preferred Stock outstanding. The U S
WEST Series C Preferred Stock, U S WEST Series D Preferred Stock and U S WEST
Series E Preferred Stock rank junior to the New Debt Guarantees and the Old Debt
Guarantees (or, following the Separation, the Old Debt Securities) and pari
passu with the New Preferred Securities Guarantees and the Old Preferred
Securities Guarantees.
39
CHAPTER 4: THE SEPARATION
<PAGE>
CHAPTER 5: INFORMATION ABOUT MEDIAONE
BUSINESS OF MEDIAONE
GENERAL
MediaOne is a diversified global media and broadband communications company
and the third largest cable television system operator in the United States.
MediaOne has operations and investments in three principal areas: (i) domestic
broadband communications; (ii) international broadband and wireless
communications; and (iii) cable television programming. Among its investments,
MediaOne holds a 25.51% interest in Time Warner Entertainment Company, L.P.
("TWE"), a provider of cable programming, filmed entertainment and broadband
communications services which is the second largest cable television system
operator in the United States.
STRATEGY
Cable and broadband services are at the core of MediaOne's strategy. While
other companies develop software, hardware and global applications for the
networked world, MediaOne will focus on the supply of easy-to-use local
connections to it. It will do so by providing highly clustered customer access
to hybrid fiber-coax ("HFC") broadband networks. MediaOne believes that this
type of access provides the best and most economical platforms for delivery of
video, data, telephony and other broadband services. Management believes that,
relative to other network alternatives, HFC provides a more desirable
combination of speed, interactivity, signal quality and integration of services.
It is also a better platform for providing a combination of services on a
largely variable cost basis. MediaOne is currently upgrading its cable systems.
Once completed, this upgrade will enhance network quality and reliability as
well as provide capacity for added channels, pay-per-view offerings and targeted
advertising. The upgrade will also permit the offering of new services to
subscribers such as high-speed Internet access, telephone and digital video
offerings. These new services could be offered to subscribers on a highly
variable cost basis. By the end of 1998, MediaOne expects that it will have 60
to 70% of its owned or managed cable properties upgraded to offer multiple
services to customers.
BUSINESS
DOMESTIC BROADBAND COMMUNICATIONS
MEDIAONE NETWORKS. MediaOne is the third-largest cable television system
operator in the United States. As of March 31, 1998, MediaOne's cable television
systems passed approximately 8.4 million homes and provided service to
approximately 4.9 million basic cable subscribers. MediaOne's systems are
organized into six operating regions, including large clusters in Atlanta,
Georgia, Eastern Massachusetts, Southern California, Southern Florida, Detroit,
Michigan and Minneapolis/St. Paul, Minnesota. As of December 31, 1997,
approximately 90% of MediaOne's total basic subscribers were located in clusters
with a population greater than 100,000 (after giving effect to announced swaps).
MediaOne believes that its operating scale in key markets generates significant
benefits, including operating efficiencies, and enhances its ability to develop
and deploy new broadband technologies and services.
MediaOne's cable services are marketed under the "MediaOne" brand.
MediaOne's cable systems offer customers various levels (or "tiers") of cable
programming services consisting of broadcast television signals available
off-the-air in any locality, television signals from so-called "super stations"
originating in distant cities (such as WGN), various satellite-delivered
non-broadcast channels (such as CNN, MTV, USA Network, ESPN, the Discovery
Channel and Nickelodeon), displays of information featuring news, weather, stock
and financial market reports and programming originated locally by the systems
(such as public, governmental and educational access channels). MediaOne's
systems also provide premium programming services to their customers for an
extra monthly charge. These premium programming services include HBO, Cinemax,
Showtime, The Movie Channel, Encore and regional sports networks. Customers
generally pay initial connection charges and fixed monthly fees for a tier of
programming services and additional fixed monthly fees for premium programming
services. MediaOne
40
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
also offers pay-per-view programming of movies and special events for an
additional per-program charge.
MediaOne's systems have channel capacity and addressability that are among
the highest in the cable industry. MediaOne's systems are located primarily in
suburban communities adjacent to major metropolitan markets and in mid-sized
cities that generally are densely populated and geographically diverse. MediaOne
believes that its technologically advanced broadband networks and the
demographic profile of its subscriber base, coupled with its effective
marketing, have been essential to its ability to sustain total monthly revenue
per basic subscriber that is among the highest in the cable industry. MediaOne
believes that the geographic diversity of its system clusters reduces its
exposure to economic, competitive or regulatory factors in any particular
region.
MediaOne is upgrading its cable systems to create broadband HFC networks.
These HFC networks will provide increased channel capacity for the delivery of
additional cable programming and facilitate the delivery of additional services,
such as telephony services, enhanced video services, Internet access services
and high-speed data services. MediaOne is selectively upgrading its systems and
expects that it will have 60 to 70% of its systems upgraded by the end of 1998.
MediaOne has already begun to offer additional services over upgraded HFC
networks in certain markets. For example, MediaOne currently offers MediaOne
Express, an Internet access service, over its HFC networks in Los Angeles,
Boston, Detroit, Atlanta, Jacksonville, Richmond and Southern Florida. In late
1997, MediaOne and Time Warner Inc. ("TWX") announced plans to merge the
operations of MediaOne Express and Road Runner, the Internet access service
offered by Time Warner Cable, to create the largest cable-based high-speed
Internet access business in the United States. In addition, MediaOne began
offering telephony services over its HFC networks in the Atlanta, Georgia
metropolitan area in January 1998 and in the Los Angeles, California
metropolitan area in April 1998 and expects to begin offering telephony services
in an additional market in 1998.
To further enhance the clustering of its cable systems, MediaOne has entered
into a letter of intent with Tele-Communications, Inc. ("TCI") to exchange (the
"TCI Exchange") certain cable television systems serving approximately 500,000
subscribers. Consummation of the TCI Exchange is expected to occur in late 1998,
subject to the receipt of certain franchise and other approvals.
In May 1997, MediaOne entered into an agreement (the "Minnesota Sale
Agreement") to sell its cable system (the "Minnesota System") serving the
Minneapolis/St. Paul, Minnesota metropolitan area to Charter Communications,
Inc. ("Charter") for $600 million. As of March 31, 1998, the Minnesota System
served approximately 300,000 subscribers. The Minnesota System was acquired by
MediaOne as part of its acquisition of Continental. Under current FCC
cross-ownership rules, MediaOne is prohibited from owning a cable network and a
telephone network in the same geographic area. Because the Minnesota System is
located in an area where U S WEST Communications owns the telephone network,
MediaOne was mandated by the FCC to sell the Minnesota System in connection with
the Continental acquisition in order to comply with the cross-ownership rules.
As a result of the Separation, U S WEST Communications and MediaOne will be
independent companies and MediaOne will no longer be prohibited by federal law
from owning the Minnesota System. In February 1998, in response to U S WEST's
petition, the FCC granted to U S WEST a waiver which would permit MediaOne to
retain the Minnesota System as long as the Separation is consummated by July 31,
1998. MediaOne had the right to terminate the Minnesota Sale Agreement at any
time upon the payment to Charter of a $30 million termination fee. MediaOne has
terminated the Minnesota Sale Agreement pursuant to such right and otherwise
settled all claims with Charter.
TIME WARNER CABLE. MediaOne owns a 25.51% priority capital and residual
equity interest in TWE. The remaining interests in TWE are owned by TWX. See
"--Time Warner Entertainment." TWE, through Time Warner Cable, its cable
division ("Time Warner Cable"), is the second-largest cable television system
operator in the United States. Time Warner Cable owns or manages cable systems
in 34 states. These systems include 34 clusters of more than 100,000
subscribers, including Time
41
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
Warner Cable of New York City, the largest cluster in the United States. More
than 55% of Time Warner Cable's subscribers are located in Florida, New York,
North Carolina, Ohio and Texas. As of March 31, 1998, Time Warner Cable owned
cable television systems that passed approximately 15.8 million homes and
provided service to approximately 9.9 million basic cable subscribers. Of these
systems, systems passing approximately 8.6 million homes and providing service
to approximately 5.5 million subscribers are owned by the Time Warner
Entertainment-Advance/Newhouse Partnership ("TWE-A/N"), a partnership in which
TWE owns a 65.3% interest, the Advance/Newhouse Partnership owns a 33.3%
interest and TWX owns a 1.4% interest. In addition, Time Warner Cable manages
cable television systems owned by TWX which, as of March 31, 1998, passed
approximately 3.6 million homes and provided service to approximately 2.1
million cable television subscribers. Time Warner Cable's cable services are
marketed under the "Time Warner Cable" brand. Time Warner Cable offers cable
programming services over its networks similar to those offered by MediaOne.
Like MediaOne, Time Warner Cable is upgrading its cable systems to provide
increased channel capacity and to facilitate the delivery of additional
services.
Through the TWE management committee, MediaOne and TWX jointly direct the
businesses and affairs of TWE and TWE-A/N cable systems, subject in certain
cases to regulatory approval. The TWE management committee has full discretion
and final authority with respect to the businesses and affairs of such cable
systems. The TWE management committee consists of six voting members, of which
three members are designated by U S WEST and three members are designated by
TWX. Each voting member of the TWE management committee has one vote. Any action
required or permitted to be taken by the TWE management committee must be
approved by a majority of its members. Determinations of the TWE management
committee are binding upon TWE and the TWE board of representatives.
TWE is also a leading provider of filmed entertainment and cable
programming. For additional information with respect to MediaOne's interest in
TWE, see "--Cable Programming" and "--Time Warner Entertainment."
OTHER BROADBAND INTERESTS. MediaOne owns or holds interests in CLECs which
provide business telephony services. Such interests include an 80% interest in
Continental Fiber Technologies, Inc., which provides business telephony services
in Jacksonville, Florida; a 63% interest in Alternet of Virginia, Inc., which
provides business telephony services in Richmond, Virginia; and a 100% interest
in MediaOne Business Services, Inc., which provides business telephony services
in Atlanta, Georgia. MediaOne leases fiber to these companies for use in their
fiber-optic networks. In addition, MediaOne, through TWE, owns an interest in
Time Warner Telecom, a provider of business telephony services in many of the
principal cities where Time Warner Cable's systems are located. Time Warner
Telecom is owned by TWE, TWE-A/N and TWX, each of whom leases fiber to Time
Warner Telecom for use in its fiber-optic networks.
MediaOne owns an approximate 10% interest in Primestar, Inc. ("PrimeStar"),
a nationwide provider of DBS services. TWE also holds an approximate 24%
interest in PrimeStar. On April 1, 1998, MediaOne, TWE and the other
stockholders of PrimeStar contributed their interests in PrimeStar Partners,
L.P., as well as their PrimeStar subscribers and certain related assets, to
PrimeStar, which is a newly formed company. MediaOne received shares of
PrimeStar and cash and TWE received shares of PrimeStar and realized a reduction
in indebtedness in connection with such contribution. In a related, independent
transaction, PrimeStar has agreed to purchase the satellite assets owned by
American Sky Broadcasting LLC, which is owned by News Corporation and MCI
Communications Corporation, in exchange for a nonvoting interest in PrimeStar.
This transaction, which is subject to various regulatory and other approvals, is
expected to close in 1998.
42
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
INTERNATIONAL BROADBAND AND WIRELESS COMMUNICATIONS
BROADBAND COMMUNICATIONS. MediaOne owns interests in various providers of
broadband communications services in international markets in continental
Europe, the United Kingdom and Asia. As of March 31, 1998, these interests
represented approximately 2 million proportionate homes passed and 900,000
proportionate subscribers.
Among its international broadband interests, MediaOne holds a 26.8% interest
in Telewest, the second-largest provider of combined cable and
telecommunications services in the United Kingdom. Telewest is constructing
broadband networks capable of providing a broad range of video, telephony and
data services. As of December 31, 1997, Telewest had approximately 687,000 cable
subscribers and 1,040,000 telephony lines. TCI also owns a 26.8% interest in
Telewest. MediaOne also holds interests in other providers of cable and
broadband communications services in international markets, including a 94%
interest in Cable Plus, a provider of cable and telephony services in the Czech
Republic; a 50% interest in A2000, a provider of cable television services in
the Netherlands; a 25% interest in Telenet Flanders, a provider of cable and
telephony services over an HFC network in portions of Belgium; a 35% interest in
Aria WEST, a provider of telecommunications services in portions of Indonesia; a
25% interest in Singapore Cablevision Pte Ltd, a joint venture that is
constructing a broadband network in Singapore; and a 25% interest in Titus
Communications Corp. ("Titus") and a 19% interest in Chofu Cable Television
("Chofu"), each of which is constructing cable television systems in Japan. TWX
also holds a 25% interest in Titus and a 19% interest in Chofu.
On April 15, 1998, Telewest and General Cable plc ("General Cable")
announced a proposed merger. In the proposed transaction, each General Cable
share would be exchanged for 1.243 new Telewest shares and 65 pence in cash (or
an aggregate of approximately L409 million in Telewest shares and L240 million
in cash). The cash portion of the purchase price will be raised through a rights
offering to Telewest's existing shareholders, including MediaOne. MediaOne and
certain of Telewest's other principal shareholders have agreed to purchase any
Telewest shares not purchased by Telewest's other shareholders in the rights
offering. There can be no assurance that the proposed transaction will be
consummated.
WIRELESS COMMUNICATIONS. MediaOne owns interests in various providers of
wireless communications services in international markets in continental Europe,
the United Kingdom and Asia. As of March 31, 1998, these interests represented
72.8 million proportionate POPs and approximately 1,123,000 proportionate
subscribers.
Among its international wireless interests, MediaOne owns a 50% interest in
Mercury Personal Communications ("One 2 One"), which provides PCS services in
the United Kingdom under the brand "One 2 One." The remaining 50% of One 2 One
is owned by Cable & Wireless plc. One 2 One was the first PCS service in the
world to commence operations in 1993. As of March 31, 1998, One 2 One's networks
served approximately 1,198,000 subscribers and provided coverage to
approximately 95% of Great Britain's population. MediaOne also holds interests
in various other providers of wireless communications services in international
markets, including a 46.6% interest in Westel 900 and a 49% interest in Westel
Radiotelefon, providers of cellular services in Hungary; 24.5% interests in
Eurotel Praha and Eurotel Bratislava, providers of wireless services in portions
of the Czech and Slovak Republics; a 22.5% interest in Polska Telefonia Cyfrowa,
a provider of Global Systems for Mobile Communications ("GSM") cellular services
in Poland; a 49% interest in U S WEST BPL Cellular Telecommunications, a
provider of GSM cellular services in certain regions of India; a 19% interest in
Binariang, a provider of wireless, wireline, satellite and international gateway
services in Malaysia; and a 66.5% interest in the Russian Telecommunications
Development Corp., a provider of cellular services in certain cities in Russia.
43
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
CABLE PROGRAMMING
MediaOne has made investments in cable programming networks as a means of
generating additional interest among cable television consumers. Among its
investments in providers of cable programming, MediaOne holds a 10.4% interest
in E! Entertainment Television, Inc., a 50% interest in New England Cable News,
a 10.0% interest in PPVN Holding Co., which operates under the brand name
"Viewer's Choice," a 7.5% interest in the Sunshine Network, a provider of sports
programming in Florida, a 9.0% interest in Music Choice, a distributor of audio
programming over cable networks, a 24.1% interest in the Outdoor Life Network
and a 20.7% interest in Speedvision. Internationally, MediaOne holds a 6.7%
interest in Flextech plc, a provider of cable programming in the United Kingdom.
TWE holds extensive interests in cable programming networks. TWE, through
its Home Box Office division ("Home Box Office"), owns and operates HBO and
Cinemax. HBO's programming includes commercial-free, uncut feature motion
pictures, sporting events, special entertainment events and motion pictures
produced by or for HBO. Cinemax offers a broad range of motion pictures,
including classic, family, action-adventure, foreign and recently-released
films. Home Box Office has also entered into a number of international joint
ventures, including HBO Ole in Latin America and a movie-based HBO service in
Asia. Home Box Office also produces television programming and operates TVKO, an
entity that produces boxing matches and other pay-per-view programming. TWE also
holds interests in various other cable programming networks, including a 50%
interest in Comedy Central and a 33.33% interest in Court TV. MediaOne does not
have any rights with respect to the management and operation of TWE's cable
programming businesses. See "--Time Warner Entertainment."
TIME WARNER ENTERTAINMENT
MediaOne owns a 25.51% pro rata priority capital and residual equity
interest in TWE. Subsidiaries of TWX own a 74.49% pro rata priority capital and
residual equity interest in TWE as well as certain senior capital interests in
TWE. TWE is engaged in the cable programming, filmed entertainment and broadband
communications businesses. Subject to the powers of the TWE Management Committee
with respect to Time Warner Cable, and except for approvals required for certain
significant actions, the businesses and affairs of TWE are controlled by TWX.
For a description of the broadband communications and cable programming
operations of TWE, see "--Business-- Domestic Broadband Communications--Time
Warner Cable" and "--Cable Programming."
TWE's filmed entertainment business consists of the production, financing
and distribution of feature motion pictures (including through Warner Bros.),
television series, made-for-television movies, miniseries for television,
first-run syndication programming and animated programming for theatrical and
television exhibition, and the distribution of prerecorded videocassettes and
videodiscs. TWE owns and operates The WB, a national broadcast television
network launched in 1995. TWE's filmed entertainment business is also engaged in
product licensing and the ownership and operation of retail stores, movie
theaters and theme parks, including Warner Bros. Studio Stores. On April 1,
1998, TWE sold its 49% ownership interest in Six Flags theme parks to Premier
Parks Inc.
MediaOne has an option to increase its equity interest in TWE from 25.51% to
31.84% depending upon cable operating performance. The option is exercisable, in
whole or in part, between January 1, 1999 and May 31, 2005 for an aggregate cash
exercise price ranging from $1.25 billion to $1.8 billion, depending upon the
year of exercise. Either MediaOne or TWE may elect that the exercise price for
the option be paid with partnership interests rather than cash.
TWE's limited partnership agreement contains certain non-competition
restrictions (the "TWE Non-Competition Restrictions"), which prohibit each of
the TWE partners, including MediaOne, from competing with TWE in the three
principal lines of business of TWE--cable, filmed entertainment and
programming--as such businesses may evolve, subject to certain agreed upon
exceptions and limited passive investments. The TWE Non-Competition Restrictions
do not prohibit MediaOne from engaging
44
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
in the cable business in an area where TWE is not then engaging in the cable
business, subject to TWE's right of first refusal with respect to such cable
business, or from engaging in the cable business outside of the United States.
In addition, the TWE Non-Competition Restrictions do not prevent MediaOne from
acquiring a foreign cable business that is also engaged in a programming
business if such programming business does not account for more than 20% of the
cable business' revenues. Under the TWE Non-Competition Restrictions, the
acquisition by U S WEST of Continental and its cable systems in the Atlanta,
Georgia metropolitan area required the consent of TWX. The ability of MediaOne
to make acquisitions of additional cable systems may be limited by the TWE Non-
Competition Restrictions.
MediaOne also owns a 12.75% interest in Time Warner Entertainment Japan Inc.
("TWE Japan"). The remaining interests in TWE Japan are owned by TWX, Itochu
Corporation and Toshiba Corporation. TWE Japan was organized to conduct TWE's
businesses in Japan, including video distribution, theatrical film and
television distribution and merchandising businesses, and to expand and develop
new business opportunities.
AIRTOUCH TRANSACTION
On April 6, 1998, MediaOne sold its domestic wireless business to AirTouch
pursuant to the AirTouch Transaction. The AirTouch Transaction was consummated
in accordance with the terms of an Agreement and Plan of Merger, dated as of
January 29, 1998 (the "AirTouch Merger Agreement"), among U S WEST, U S WEST
Media Group, Inc., U S WEST NewVector Group, Inc. ("NewVector"), U S WEST PCS
Holdings, Inc. ("PCS Holdings") and AirTouch. The Media Group's domestic
wireless business was conducted by NewVector, which conducted the Media Group's
domestic cellular business, and by PCS Holdings, which held the Media Group's
interest in PrimeCo Personal Communications, L.P. ("PrimeCo") a provider of PCS
services. Pursuant to the AirTouch Merger Agreement, NewVector and PCS Holdings
merged with and into AirTouch and, as a result, AirTouch acquired the businesses
of NewVector and PCS Holdings.
Pursuant to the AirTouch Transaction, MediaOne received from AirTouch (i)
$1.65 billion in liquidation preference of dividend bearing AirTouch Preferred
Stock and (ii) 59.5 million shares of AirTouch Common Stock. In addition,
AirTouch assumed $1.35 billion of indebtedness of NewVector and PCS Holdings.
Applying the terms of the AirTouch Merger Agreement, this transaction will
result in a gain of approximately $2.3 billion, net of deferred taxes of $1.7
billion. See "--MediaOne Unaudited Pro Forma Condensed Combined Financial
Statements."
Prior to the consummation of the AirTouch Transaction, MediaOne and AirTouch
were parties to a multi-phased joint venture pursuant to which the parties
agreed to combine their domestic cellular businesses. The AirTouch Transaction
was consummated in lieu of such joint venture.
MediaOne intends to take appropriate actions to monetize the shares of
AirTouch Preferred Stock and AirTouch Common Stock which it received in the
AirTouch Transaction. In connection with the AirTouch Transaction, MediaOne and
AirTouch entered into an Investment Agreement, pursuant to which AirTouch has
agreed to provide to MediaOne registration rights with respect to the shares of
AirTouch Preferred Stock and AirTouch Common Stock which it received in the
AirTouch Transaction and to assist MediaOne in the monetization of such shares.
COMPETITION
MediaOne's cable television systems generally compete for viewer attention
with other providers of video programming, including DBS systems, MMDS systems,
LMDS systems, SMATV systems and other cable companies providing services in
areas where MediaOne operates. In addition, certain LECs, including RBOCs, are
beginning to offer video programming in competition with MediaOne's cable
services. In the past, federal cross-ownership restrictions have limited entry
by LECs into the cable
45
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
television business. The Telecommunications Act has eliminated many of these
barriers, thereby enhancing the ability of LECs to provide video programming in
competition with MediaOne. The extent of such competition in any franchise area
is dependent, in part, upon the quality, variety and price of the programming
provided by these services. Many of these competitive services are generally not
subject to the same local government regulation that affects cable television.
The cable television services offered by MediaOne also face competition for
viewers and advertising from other communications and entertainment media,
including off-air television broadcasting services, movie theaters, video tape
rentals and live sporting events. The competition faced by MediaOne's cable
systems may increase in the future with the development and growth of new
technologies.
As MediaOne begins to offer additional services over its HFC networks,
MediaOne will face additional competition. MediaOne's telephony services will
face competition from other providers of local exchange services, including
RBOCs, LECs, IXCs and other providers of local exchange services. The degree of
competition will be dependent upon the state and federal regulations concerning
entry, interconnection requirements and the degree of unbundling of the LECs'
networks. Competition will be based upon price, service quality and breadth of
services offered. The Internet access and high-speed data services offered by
MediaOne compete with other providers of such services, including LECs, IXCs,
ISPs and other on-line service providers.
MediaOne's international broadband and wireless communications businesses
also face competition in their respective markets. Telewest's cable television
services compete with broadcast television stations, DBS services, SMATV systems
and certain narrowband operators in the United Kingdom. Telewest's
telecommunications services compete with domestic telephone companies in the
United Kingdom, such as British Telecommunications plc. One 2 One competes with
two cellular operators and one PCS operator in the United Kingdom. Competition
is based upon price, geographic coverage and the quality of the services
offered.
REGULATION
The products and services of MediaOne are subject to varying degrees of
regulation. Under the Telecommunications Act, the regulation of all but basic
tier cable rates will be discontinued effective March 31, 1999, or earlier if
competition exists. The Telecommunications Act also (i) eliminates certain
cross-ownership restrictions among cable operations, broadcasters and MMDS
operations, (ii) removes barriers to competition with LECs, and (iii) eliminates
restrictions that previously applied to MediaOne relating to long-distance
services.
The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") authorizes the Federal Communications Commission (the "FCC")
to set standards for governmental authorities to regulate the rates for certain
cable television services, except for services offered on a per-channel or
per-program basis, and equipment. Pursuant to authority granted under the 1992
Cable Act, the FCC adopted a series of rate regulations. The FCC also publicly
announced that it would consider "social contracts" as an alternative form of
rate regulation for cable operations. Continental's social contract with the FCC
was adopted by the FCC on August 3, 1995 and amended on August 21, 1996 and July
3, 1997 to include certain systems acquired by Continental. The social contract
is a six-year agreement covering most of Continental's franchises, including
those that were unregulated, and settled Continental's cost of service rate
cases and benchmark cable programming service tier rate cases for the covered
systems. Benchmark basic service tier rate cases in the covered systems are
subject to review by local franchise authorities. As part of the resolution,
Continental agreed to, among other things, invest at least $1.7 billion in
domestic system rebuilds and upgrades through the year 2000 to expand channel
capacity and improve system reliability and picture quality. At December 31,
1997, the investment commitment had been substantially met. Under the social
contract, Continental also reduced its basic service tier rates for most of the
subscribers covered by the social contract. These reductions were offset by a
revenue neutral increase in cable programming service tier rates. The social
contract allows for the funding of system rebuilds and upgrades by increasing
cable programming
46
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
service tier rates annually by one dollar per subscriber from 1997 and 1999 in
most franchises, and from 1996 through 1999 for the systems incorporated under
the 1996 amendment to the social contract. Rate adjustments are also allowed for
inflation and external costs such as programming. The social contract also
provides that, if the laws and regulations applicable to services offered in any
Continental franchise change in a manner that would have a material favorable
financial impact on Continental, MediaOne may petition the FCC to terminate the
social contract.
Cable television systems are also subject to local regulation, typically
imposed through the franchising process. Local officials may be involved in the
initial franchise selection, system design and construction, safety, rate
regulation, customer service standards, billing practices, community-related
programming and services, franchise renewal and imposition of franchise fees.
MediaOne is also subject to various regulations in the foreign countries in
which it has operations. In the United Kingdom, the licensing, construction,
operation, sale and acquisition of cable and wireline and wireless
communications systems are regulated by various government entities, including
the Department of Trade and Industry and the Department of National Heritage.
EMPLOYEES
At March 31, 1998, the businesses of MediaOne had approximately 16,350
employees, none of whom were represented by unions. MediaOne believes that its
relations with its employees are good.
REAL PROPERTY
The properties of MediaOne do not lend themselves to description by
character and location of principal units. At March 31, 1998, the majority of
MediaOne's property was utilized in providing cable television services.
LEGAL PROCEEDINGS
MediaOne is currently subject to claims and proceedings that have arisen in
the ordinary course of business. While complete assurance cannot be given as to
the outcome of any contingent liabilities, in the opinion of MediaOne, any
financial impact to which MediaOne will be subject is not expected to be
material in amount to its financial position or results of operations. In
addition, the businesses in which MediaOne holds an investment, including TWE,
are also subject to claims and proceedings that may be material to such
businesses.
MANAGEMENT OF MEDIAONE
MEDIAONE BOARD OF DIRECTORS
Immediately after the Separation, it is expected that the MediaOne Board
will consist of nine directors. Pursuant to the MediaOne Restated Certificate,
the MediaOne Board will consist of three classes of directors. Each class of
directors will be subject to election by stockholders every three years. In
addition, it is anticipated that the MediaOne Board will adopt a policy that
requires directors to retire at the annual meeting following the director's 72nd
birthday.
It is anticipated that Robert L. Crandall, Grant A. Dove, Allan D. Gilmour,
Pierson M. Grieve, Charles M. Lillis, Charles P. Russ, III, Louis A. Simpson and
John "Jack" Slevin, who are currently members of the U S WEST Board, will remain
in their current positions as members of the MediaOne Board following the
Separation Time and that all other current members of the U S WEST Board will
resign, effective as of the Separation Time and become directors of New U S
WEST. In addition, it is anticipated that, prior to the Separation Time, the U S
WEST Board will elect Kathleen A. Cote to the MediaOne Board, effective as of
the Separation Time, to fill one of the vacancies created by such resignations.
The following is a brief listing of the principal occupations, other major
affiliations and ages of each individual who will serve on the MediaOne Board
following the Separation.
47
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
KATHLEEN A. COTE, President and Chief Executive Officer of Computervision
Corporation, 1996 to 1998, President and Chief Operating Officer of
Computervision Corporation from 1995 to 1996. Vice President of Marketing and
Services from 1994 to 1995. President and General Manager of PrimeService from
1989 to 1994. Vice President of Operations from 1986 to 1989. Employed at Wang
Laboratories in various management roles including Director of Manufacturing
from 1980 to 1986. Employed by MFE Corporation from 1978-1980 as head of
Operations. Employed at CTI-Cryogenics from 1971 to 1978, holding various
positions in Operations and Business Management. Currently Director of
Baynetworks, Inc, and Walden University. Age 48.
ROBERT L. CRANDALL, Chairman of the Board, President and Chief Executive
Officer of AMR Corp. since 1985. Director of Halliburton Company and Sabre Group
Holdings, Inc. Director of U S WEST since 1997. Age 62.
GRANT A. DOVE, Managing Partner of Technology Strategies and Alliances since
1992. Executive Vice President of Texas Instruments from 1982 to 1987. Director
of Cooper Cameron Corporation, Forefront Group, Inc., InterVoice, Inc.,
Mircoelectronics and Computer Technology Corporation, and Netspeed, Inc.
Director and Chairman of Optek Technology, Inc. Director of U S WEST since 1988.
Age 69.
ALLAN D. GILMOUR, retired. Vice Chairman of Ford Motor Co. from 1993 to
1995; Executive Vice President of Ford Motor Co. and President, Ford Automotive
Group, from 1990 to 1993. Director of The Dow Chemical Company, DTE Energy
Company, The Prudential Insurance Company of America, and Whirlpool Corporation.
Director of U S WEST since 1992. Age 63.
PIERSON M. GRIEVE, retired. Chairman of the Board and Chief Executive
Officer of Ecolab, Inc. from 1983 through 1995. Director of Danka Business
Systems PLC, Norwest Corporation, and St. Paul Companies. Director of U S WEST
since 1990. Age 70.
CHARLES M. LILLIS, President and Chief Executive Officer of U S WEST Media
Group since 1995; Executive Vice President of U S WEST since 1987. Director of
Ascent Entertainment Group, Inc., and Supervalu, Inc. Director of U S WEST since
1998. Age 56.
CHARLES P. RUSS, III, Executive Vice President--Law, Public Policy and Human
Resources, General Counsel and Secretary of U S WEST. Executive Vice President,
General Counsel and Secretary of U S WEST since 1992; Executive Vice President
for Human Resources since 1995; and Executive Vice President for Public Policy
since 1997. Director of U S WEST since 1998. Age 53.
LOUIS A. SIMPSON, President and Chief Executive Officer of GEICO Capital
Operations since 1993. Director of Chor, Inc., Pacific American Income Shares,
Inc., Potomac Electric Power Company, and Western Asset Trust, Inc. Director of
U S WEST since 1998. Age 61.
JOHN "JACK" SLEVIN, Chairman of the Board of Comdisco, Inc. since 1996;
President and Chief Executive Officer since 1994; Executive Vice President and
Chief Operating Officer from 1993 to 1994. Director of U S WEST since 1998. Age
61.
COMMITTEES OF THE MEDIAONE BOARD
Following the Separation, the MediaOne Board will establish the standing
committees listed below. No final determination has been made as to the
memberships of any such standing committees.
AUDIT COMMITTEE. The Audit Committee's purpose will be to oversee
MediaOne's accounting and financial reporting policies and practices and to
assist the MediaOne Board in fulfilling its fiduciary and corporate
accountability responsibilities. MediaOne's internal auditors and independent
certified public accountants will periodically meet with the Audit Committee and
will always have unrestricted direct access to the Audit Committee members.
BOARD AFFAIRS COMMITTEE. The Board Affairs Committee will serve as a
nominating committee for the MediaOne Board. The Board Affairs Committee will
also make recommendations regarding
48
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
director compensation and committee structure and composition. The Board Affairs
Committee will oversee corporate governance and will consider candidates for the
MediaOne Board recommended by stockholders.
FINANCE COMMITTEE. The Finance Committee will be responsible for evaluating
MediaOne's growth strategies and financing for MediaOne's operations.
HUMAN RESOURCES AND EXECUTIVE DEVELOPMENT COMMITTEE. The Human Resources
and Executive Development Committee will be responsible for assuring the
appropriateness of the compensation and benefits of the Executive Officers of
MediaOne and its subsidiaries and to provide for the orderly succession of
management.
MEDIAONE EXECUTIVE OFFICERS
Set forth below is information with respect to the current positions of the
individuals who have been selected to serve as executive officers of MediaOne
upon consummation of the Separation. It is anticipated that these individuals
will be elected by the MediaOne Board as of the Separation Time. Unless
otherwise indicated, the positions to be held by each such individual will be
similar to their current positions.
A. GARY AMES, Executive Vice President, and President, MediaOne
International since 1995. Mr. Ames previously served for five and one-half years
as President of U S WEST Communications, and has held a variety of operations,
public policy and other management positions at U S WEST and its predecessors
for over 30 years. Age 53.
ROGER K. CHRISTENSEN, Vice President Group Operations and Strategy of the
Media Group since 1995. Following the Separation, Mr. Christensen will become
Senior Vice President Administration of MediaOne and will be responsible for
human resources, public relations and certain other corporate services. Mr.
Christensen has been a Vice President of U S WEST since 1993, and has held a
variety of finance and other management positions with U S WEST and its
predecessors for over 25 years. Age 49.
FRANK M. EICHLER, Vice President Public Policy and Regulatory Law of the
Media Group since 1997. Following the Separation, Mr. Eichler will become
Executive Vice President, General Counsel and Secretary of MediaOne. Mr. Eichler
has served as a Vice President of U S WEST since 1994, and has held a variety of
positions in the Law Department of U S WEST since 1984. Age 41.
CHARLES M. LILLIS, President and Chief Executive Officer of the Media Group
since 1995. Mr. Lillis previously served as President and Chief Executive
Officer of U S WEST Diversified Group. Mr. Lillis joined U S WEST in 1985 as
Vice President of Strategic Marketing and was named Executive Vice President and
Chief Planning Officer in 1987. Age 56.
JANICE C. PETERS, President of the Media Group's domestic cable operations
since 1997. Ms. Peters previously served as President of the Media Group's
wireless operations. Ms. Peters has been a Vice President of U S WEST since
1992, and has held a variety of marketing and other management positions with U
S WEST and its predecessors for over 25 years. Age 46.
RICHARD A. POST, Vice President and Chief Financial Officer of the Media
Group since 1997. Mr. Post previously served as President of Corporate
Development of the Media Group. Mr. Post has been a Vice President of U S WEST
since 1990, and has held a variety of finance and other management positions
with U S WEST for over ten years. Age 39.
PEARRE A. WILLIAMS, Vice President and President, Multimedia Ventures, since
1997. Mr. Williams previously served as Vice President Business Development for
the Media Group. Mr. Williams has been a Vice President of U S WEST since 1989,
and has held a variety of corporate development and other management positions
with U S WEST for over ten years. Age 43.
49
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statement of operations
of MediaOne for the year ended December 31, 1997 gives effect to (i) the
discontinuance of the businesses of New U S WEST (the "Discontinued Operations
Adjustments"), (ii) the Refinancing (including the refinancing by New U S WEST
of the Dex Indebtedness), the distribution of all of the New U S WEST Common
Stock to U S WEST's stockholders, transfers of certain assets and liabilities of
U S WEST to New U S WEST and allocations of certain costs and expenses in
connection with the Separation (the "MediaOne Separation Adjustments") and (iii)
the AirTouch Transaction (the "AirTouch Transaction Adjustments") as if such
transactions had been consummated as of January 1, 1997. The unaudited pro forma
condensed combined balance sheet as of December 31, 1997 gives effect to the
Discontinued Operations Adjustments, the MediaOne Separation Adjustments and the
AirTouch Transaction Adjustments as if such transactions had been consummated as
of December 31, 1997. The unaudited pro forma condensed combined statements of
operations for the years ended December 31, 1996 and 1995, give effect to the
Discontinued Operations Adjustments but do not give effect to the MediaOne
Separation Adjustments or the AirTouch Transaction Adjustments.
The assets of New U S WEST will be accounted for at the historical book
values at which they were carried by U S WEST prior to the Separation. MediaOne
will account for the distribution of New U S WEST to U S WEST's stockholders at
fair value, and will recognize a gain on the distribution. The historical
results of New U S WEST will be reflected as discontinued operations by
MediaOne.
The pro forma adjustments included herein are based on available information
and certain assumptions that management believes are reasonable and are
described in the accompanying notes. The unaudited pro forma financial
statements do not necessarily represent what MediaOne's financial position or
results of operations would have been had the transactions occurred at such
dates or to project MediaOne's financial position or results of operations at or
for any future date or period. In the opinion of management, all adjustments
necessary to present fairly the unaudited pro forma financial information have
been made. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of U S WEST, including the
notes thereto, incorporated by reference herein. See Chapter 8: Certain Other
Matters: Where You Can Find More Information.
50
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues.......................... $15,235 $(11,388)(A) $3,847 $ 3,847 $ (1,428)(G)
Operating expenses before depreciation and
amortization.................................... 9,009 (6,449)(A) 2,560 2,560 (895)(G)
Depreciation and amortization..................... 3,420 (2,163)(A) 1,257 1,257 (183)(G)
-------- ------------ ------- ------------ ------------- -------------
Total operating expenses........................ 12,429 (8,612) 3,817 3,817 (1,078)
-------- ------------ ------- ------------ ------------- -------------
Operating income (loss) from continuing
operations...................................... 2,806 (2,776) 30 30 (350)(G)
Other income (expense):
Interest expense................................ (1,083 ) 405(A) (678 ) 289(B) (389) 90(G)
Equity losses in unconsolidated ventures........ (909 ) (909 ) (909) 115(G)
Other income (expense)--net..................... 408 (58)(A) 350 (6)(B) 344 132(G)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. 1,222 (2,429) (1,207 ) 283 (924) (13)
(Provision) benefit for income taxes.............. (522 ) 902(A) 380 (87)(C) 293 34(C)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
extraordinary item.............................. 700 (1,527) (827 ) 196 (631) 21
Discontinued operations(A):
Results of operations, net of tax............... 1,524(A) 1,524 (1,524)(D)
Gain on separation.............................. 25,229(D) 25,229
-------- ------------ ------- ------------ ------------- -------------
Income before extraordinary item.................. 700 (3) 697 23,901 24,598 21
Extraordinary item:
Loss on early extinguishment of debt, net of
tax........................................... (3 ) 3(A) (346)(E) (346)
-------- ------------ ------- ------------ ------------- -------------
Net income........................................ 697 -- 697 23,555 24,252 21
Dividends on preferred stock...................... (52 ) (52 ) (52)
-------- ------------ ------- ------------ ------------- -------------
Earnings available for common stock............... $ 645 $ -- $ 645 $ 23,555 $ 24,200 $ 21
-------- ------------ ------- ------------ ------------- -------------
-------- ------------ ------- ------------ ------------- -------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
Sales and other revenues.......................... $ 2,419
Operating expenses before depreciation and
amortization.................................... 1,665
Depreciation and amortization..................... 1,074
-------------
Total operating expenses........................ 2,739
-------------
Operating income (loss) from continuing
operations...................................... (320)
Other income (expense):
Interest expense................................ (299)
Equity losses in unconsolidated ventures........ (794)
Other income (expense)--net..................... 476
-------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. (937)
(Provision) benefit for income taxes.............. 327
-------------
Income (loss) from continuing operations before
extraordinary item.............................. (610)
Discontinued operations(A):
Results of operations, net of tax...............
Gain on separation.............................. 25,229
-------------
Income before extraordinary item.................. 24,619
Extraordinary item:
Loss on early extinguishment of debt, net of
tax........................................... (346)
-------------
Net income........................................ 24,273
Dividends on preferred stock...................... (52)
-------------
Earnings available for common stock............... $ 24,221
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
51
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK........................................... $ 2.43
--------
--------
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK.................................... $ 2.41
--------
--------
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 482.75
--------
--------
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 491.23
--------
--------
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK........................................... $ (0.88 )
--------
--------
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions).......................... 606.75
--------
--------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
MEDIAONE COMMON STOCK:
CONTINUING OPERATIONS........................... $ (1.13)
DISCONTINUED OPERATIONS......................... 41.58(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.57)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 39.88
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 606.75(F)
-------------
-------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK...........................................
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK....................................
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK...........................................
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions)..........................
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
MEDIAONE COMMON STOCK:
CONTINUING OPERATIONS........................... $ (1.09)
DISCONTINUED OPERATIONS......................... 41.58(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.57)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 39.92
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 606.75(F)
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
52
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE
MEDIAONE PRO FORMA
DISCONTINUED PRO FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
----------- --------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets..................... $ 3,399 $ (2,432)(A) $ 967 $ (8)(H) $ 959 $ (223)(G)
Net investment in assets of
discontinued operations(A)....... 4,367(A) 4,367 (3,831)(J)
(536)(D)
----------- --------------- ----------- ------------- ----------- ------
Total current assets............... 3,399 1,935 5,334 (4,375) 959 (223)
----------- --------------- ----------- ------------- ----------- ------
Property, plant and
equipment--net................... 18,580 (14,308)(A) 4,272 (25)(H) 4,247 (1,006)(G)
Investment in Time Warner
Entertainment.................... 2,486 2,486 2,486
Investment in AirTouch
Communications................... 4,413(G)
Net investments in international
ventures......................... 475 475 475
Intangible assets--net............. 12,674 (77)(A) 12,597 12,597 (415)(G)
Net investment in assets held for
sale............................. 419 419 419
Other assets....................... 1,707 (775)(A) 932 (28)(H) 853 (491)(G)
(51)(K)
----------- --------------- ----------- ------------- ----------- ------
Total assets....................... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,278
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
LIABILITIES AND EQUITY
Short-term debt.................... $ 1,430 $ (695)(A) $ 735 $ (23)(H) $ 738 $ 16(G)
26(I)
Total other current liabilities.... 4,885 (3,432)(A) 1,453 (19)(H) 1,434 (332)(G)
Long-term debt..................... 13,248 (5,020)(A) 8,228 (3,831)(J) 4,637 (1,352)(G)
240(K)
Deferred taxes..................... 4,068 (791)(A) 3,277 14(H) 3,291 1,735(G)
Deferred credits and other......... 3,605 (3,287)(A) 318 (33)(H) 285 (88)(G)
Mandatorily redeemable preferred
stock and Old Preferred
Securities....................... 1,180 1,180 1,180
Total equity....................... 11,324 11,324 (25,831)(D) 10,471 2,299(G)
25,229(D)
(346)(E)
121(K)
(26)(I)
----------- --------------- ----------- ------------- ----------- ------
Total liabilities and equity....... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,278
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
<CAPTION>
MEDIAONE
PRO FORMA
-----------
<S> <C>
ASSETS
Current assets..................... $ 736
Net investment in assets of
discontinued operations(A).......
-----------
Total current assets............... 736
-----------
Property, plant and
equipment--net................... 3,241
Investment in Time Warner
Entertainment.................... 2,486
Investment in AirTouch
Communications................... 4,413
Net investments in international
ventures......................... 475
Intangible assets--net............. 12,182
Net investment in assets held for
sale............................. 419
Other assets....................... 362
-----------
Total assets....................... $ 24,314
-----------
-----------
LIABILITIES AND EQUITY
Short-term debt.................... $ 754
Total other current liabilities.... 1,102
Long-term debt..................... 3,285
Deferred taxes..................... 5,026
Deferred credits and other......... 197
Mandatorily redeemable preferred
stock and Old Preferred
Securities....................... 1,180
Total equity....................... 12,770
-----------
Total liabilities and equity....... $ 24,314
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
53
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
DISCONTINUED
U S WEST OPERATIONS
HISTORICAL ADJUSTMENTS(A)
----------- ----------------
<S> <C> <C>
Sales and other revenues................................................................... $ 12,911 $ (11,074)
Operating expenses before depreciation and amortization.................................... 7,512 (6,105)
Depreciation and amortization.............................................................. 2,544 (2,158)
----------- --------
Total operating expenses............................................................... 10,056 (8,263)
----------- --------
Operating income from continuing operations................................................ 2,855 (2,811)
Other income (expense):
Interest expense......................................................................... (612) 448
Equity losses in unconsolidated ventures................................................. (346)
Other income (expense)--net.............................................................. (57) (14)
----------- --------
Income (loss) from continuing operations before income taxes and
cumulative effect of change in accounting principle...................................... 1,840 (2,377)
(Provision) benefit for income taxes....................................................... (696) 876
----------- --------
Income (loss) from continuing operations before cumulative
effect of change in accounting principle................................................. 1,144 (1,501)
Income from discontinued operations(A)..................................................... 1,501
----------- --------
Income (loss) before cumulative effect of change in accounting principle................... $ 1,144 $ --
----------- --------
----------- --------
<CAPTION>
MEDIAONE
PRO FORMA
EXCLUDING
SEPARATION
-----------
<S> <C>
Sales and other revenues................................................................... $ 1,837
Operating expenses before depreciation and amortization.................................... 1,407
Depreciation and amortization.............................................................. 386
-----------
Total operating expenses............................................................... 1,793
-----------
Operating income from continuing operations................................................ 44
Other income (expense):
Interest expense......................................................................... (164)
Equity losses in unconsolidated ventures................................................. (346)
Other income (expense)--net.............................................................. (71)
-----------
Income (loss) from continuing operations before income taxes and
cumulative effect of change in accounting principle...................................... (537)
(Provision) benefit for income taxes....................................................... 180
-----------
Income (loss) from continuing operations before cumulative
effect of change in accounting principle................................................. (357)
Income from discontinued operations(A)..................................................... 1,501
-----------
Income (loss) before cumulative effect of change in accounting principle................... $ 1,144
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
54
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE
DISCONTINUED PRO FORMA
U S WEST OPERATIONS EXCLUDING
HISTORICAL ADJUSTMENTS(A) SEPARATION
----------- --------------- -----------
<S> <C> <C> <C>
Sales and other revenues................................................ $ 11,746 $ (10,416) $ 1,330
Operating expenses before depreciation and amortization................. 6,810 (5,774) 1,036
Depreciation and amortization........................................... 2,291 (2,066) 225
----------- --------------- -----------
Total operating expenses.............................................. 9,101 (7,840) 1,261
----------- --------------- -----------
Operating income from continuing operations............................. 2,645 (2,576) 69
Other income (expense):
Interest expense...................................................... (527) 429 (98)
Equity losses in unconsolidated ventures.............................. (207) (207)
Other income (expense)--net........................................... 243 (101) 142
----------- --------------- -----------
Income (loss) from continuing operations before income taxes and
extraordinary item.................................................... 2,154 (2,248) (94)
(Provision) benefit for income taxes.................................... (825) 817 (8)
----------- --------------- -----------
Income (loss) from continuing operations before extraordinary item...... 1,329 (1,431) (102)
Income from discontinued operations(A).................................. 1,431 1,431
----------- --------------- -----------
Income before extraordinary item........................................ $ 1,329 $ -- $ 1,329
----------- --------------- -----------
----------- --------------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
55
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A) Reflects the removal of the assets, liabilities, revenues and expenses of
the businesses of New U S WEST. All transactions and receivable and payable
balances between New U S WEST and MediaOne that will continue after the
Separation are reflected in such amounts. Also reflects the
reclassification of New U S WEST's results to net investment in and income
from discontinued operations. The measurement date of the Separation, for
discontinued operations accounting purposes, will be the date upon which U
S WEST stockholder approval is received.
(B) Reflects a reduction of historical interest expense of $304 million for the
year ended December 31, 1997 as a result of the Refinancing, including the
refinancing by New U S WEST of the Dex Indebtedness, and an increase in
interest expense of $15 million for financing the costs of the Refinancing
and Separation. Also includes incremental guaranteed minority interest
expense (included in "other income (expense)--net") related to the
refinancing of Old Preferred Securities of $6 million. The interest effects
of the Refinancing were calculated at the anticipated rates MediaOne will
achieve on the Refinancing. The actual interest rates achieved on
Refinancing may vary based on movement in interest rates and the cost of
new debt available to MediaOne. A 1/8 percentage point change in the
assumed Refinancing rates would change annual interest expense by $4.4
million.
(C) Reflects the estimated income tax effects of the pro forma adjustments.
(D) Reflects the distribution of the New U S WEST Common Stock to U S WEST's
stockholders. The distribution will be accounted for as a dividend. Because
the distribution is non pro-rata, as compared with the businesses
previously attributed to U S WEST's two classes of stockholders, it will be
accounted for at fair value. The estimated gain on the distribution
represents the difference between the fair value of New U S WEST (as of
February 20, 1998) and the historical investment in New U S WEST. The
actual gain will be determined upon Separation. Since the distribution is
accounted for at fair value, the related distribution of the net pension
assets and net postretirement and other postemployment obligations are also
accounted for at fair value. The estimated gain on the distribution
includes a net gain of $1,833 million for the distribution of net pension
assets and net postretirement and other postemployment obligations at fair
value. The estimated gain is calculated as follows (dollars in millions):
<TABLE>
<S> <C>
Market capitalization of Communications Group
(485,061,000 shares of Communications Stock
at $51.50 per share)............................................. $ 24,981
Dex Dividend....................................................... 850
---------
Fair value of New U S WEST......................................... 25,831
Investment in New U S WEST......................................... (536)
Separation costs (net of income tax benefits of $24)............... (66)
---------
Gain on distribution............................................... $ 25,229
---------
---------
</TABLE>
(E) Reflects debt extinguishment costs of $346 million (net of income tax
benefits of $231 million) associated with the Refinancing. In addition to
refinancing costs, debt extinguishment costs include the difference between
the market and face value of the U S WEST Indebtedness and a charge for
unamortized debt issuance costs.
(F) As a result of the separation each share of Media Stock will remain
outstanding as one share of MediaOne Common Stock.
56
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
MEDIAONE
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(G) Reflects the consummation of the AirTouch Transaction. MediaOne has
retained the international portion of its wireless business segment. The
pro forma adjustments reflect the following:
- Receipt of 59.5 million shares of AirTouch common stock, representing an
approximate 10 percent ownership interest in AirTouch. This interest will
be accounted for by MediaOne as a marketable equity security.
- Receipt of $1,500 million of AirTouch preferred stock at market value
(liquidation value of $1,650 million).
- Receipt of $92 million in dividends per year on the AirTouch preferred
stock, at an annual rate of 5.14 percent.
- Reduction in debt of $1,350 million and a corresponding reduction of
annual interest expense of $90 million.
- Removal of the consolidated assets, liabilities, revenues and expenses of
MediaOne's domestic cellular operations.
- Removal of MediaOne's equity method investment and related equity losses
associated with its investment in PrimeCo.
- Recognition of a gain on the disposition calculated as follows (in
millions):
<TABLE>
<S> <C>
AirTouch common stock.............................................. $ 2,913
AirTouch preferred stock (at market value)......................... 1,500
Debt reduction..................................................... 1,350
---------
Total proceeds..................................................... 5,763
Net book value of assets sold...................................... (1,686)
Sale related costs................................................. (70)
---------
Gain (before income taxes)......................................... 4,007
Deferred tax expense............................................... (1,735)
---------
Gain (after income taxes).......................................... $ 2,272
---------
---------
</TABLE>
Such gain has been excluded from the unaudited pro forma condensed combined
statement of operations.
(H) Reflects the transfer of assets and liabilities of U S WEST previously
shared by New U S WEST and MediaOne and a corresponding reduction in debt.
(I) Reflects an $18 million contribution to New U S WEST for insurance premiums
paid by New U S WEST to MediaOne in excess of liabilities incurred and a
payment of $8 million primarily related to a lease termination.
(J) Reflects a reduction in MediaOne debt totaling $3.9 billion in conjunction
with the refinancing by New U S WEST of the Dex Indebtedness. $69 million
of Dex debt reduction is included in the Discontinued Operations
Adjustments and the remaining $3,831 million is reflected as a MediaOne
Separation Adjustment.
(K) Reflects incremental borrowing to finance $346 million of debt
extinguishment costs (net of income tax benefits of $231 million) and $66
million of Separation costs (net of income tax benefits of $24 million).
The incremental borrowing is net of a $51 million net reduction in debt
issuance costs and a $121 million reimbursement from New U S WEST for its
share of debt extinguishment costs. Such reimbursement is reflected as a
dividend from New U S WEST to MediaOne. Separation costs include cash
payments under severance agreements of $45 million and financial advisory,
legal, registration fee, printing and mailing costs related to the
Separation. Separation costs also include a one-time payment to terminate
the Minnesota Sale Agreement.
57
CHAPTER 5: INFORMATION ABOUT MEDIAONE
<PAGE>
CHAPTER 6: THE NEW PREFERRED SECURITIES
THE NEW TRUSTS
Each of the New Series I Trust and the New Series II Trust is a statutory
business trust, in each case formed under Delaware law pursuant to (i) a
declaration of trust, dated as of April 9, 1998, executed by MediaOne, as
sponsor (with respect to such New Trust, the "Sponsor"), and the trustees of the
New Trust (with respect to each New Trust, respectively, the "New Trustees") and
(ii) the filing of a certificate of trust with the Delaware Secretary of State
on April 13, 1998. Prior to the consummation of the Offers, each declaration
will be amended and restated in its entirety (with respect to each New Trust, as
so amended and restated, a "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Declaration will be qualified as an indenture under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). Upon issuance by each New Trust
of New Preferred Securities, the purchasers thereof will own all of the issued
and outstanding New Preferred Securities of such New Trust. MediaOne will
acquire all of the New Common Securities of each New Trust, in each case in an
aggregate liquidation amount equal to 3% of the total capital of such New Trust.
Each of the New Trusts exists for the exclusive purposes of (i) issuing New
Preferred Securities and New Common Securities, (ii) investing the gross
proceeds of such New Preferred Securities and such New Common Securities in the
applicable New Debt Securities and New Debt Guarantee and (iii) engaging in only
those other activities necessary or incidental thereto.
Pursuant to each Declaration, the number of New Trustees of each New Trust
will initially be five. Three of such New Trustees (with respect to each Trust,
the "New Regular Trustees") will be persons who are employees or officers of, or
affiliated with, MediaOne. With respect to each New Trust, the fourth trustee
will be a financial institution unaffiliated with MediaOne that will serve as
property trustee under the applicable Declaration and as indenture trustee for
purposes of the Trust Indenture Act (with respect to each New Trust, the "New
Property Trustee"). The fifth trustee will be a financial institution or an
affiliate thereof which maintains a principal place of business or residence in
the State of Delaware (with respect to each New Trust, the "New Delaware
Trustee"). The First National Bank of Chicago will act as the New Property
Trustee for each New Trust and its affiliate will act as the New Delaware
Trustee for each New Trust until removed or replaced by the holder of the New
Common Securities of such New Trust. The First National Bank of Chicago will
also act as indenture trustee under the New Preferred Securities Guarantee of
each New Trust (with respect to each New Trust, the "New Preferred Guarantee
Trustee"). See "--Description of the Preferred Securities Guarantees."
The New Property Trustee of each New Trust will hold title to the New Debt
Securities and New Debt Guarantee purchased by such New Trust for the benefit of
the holders of the New Preferred Securities and New Common Securities of such
New Trust and will have the power to exercise all rights, powers and privileges
under the New Indenture as the holder of such New Debt Securities and New Debt
Guarantee. In addition, the New Property Trustee of each New Trust will maintain
exclusive control of a segregated non-interest bearing bank account (with
respect to each New Trust, the "New Property Account") to hold all payments made
in respect of the New Debt Securities and New Debt Guarantee held by such New
Trust for the benefit of the holders of New Preferred Securities and New Common
Securities of such Trust. The New Property Trustee of each New Trust will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of the New Preferred Securities and New Common Securities of such
New Trust out of funds from the New Property Account of such New Trust. The New
Preferred Guarantee Trustee of each New Trust will hold the applicable New
Preferred Securities Guarantee for the benefit of the holders of the New
Preferred Securities of such New Trust. MediaOne, as the holder of all the New
Common Securities of each New Trust, will have the right to appoint, remove or
replace any New Trustee of such New Trust and to increase or decrease the number
of New Trustees of such New Trust, provided that the number
58
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
of New Trustees shall be at least three, a majority of which shall be New
Regular Trustees and that there always will be an institutional trustee who
satisfies the requirements of the Trust Indenture Act and one trustee which
maintains a principal place of business in the state of Delaware. MediaOne
Funding will pay all fees and expenses related to each New Trust and the
offering of the New Preferred Securities and New Common Securities, the payment
of which will be fully and unconditionally guaranteed by MediaOne. See
"--Description of the New Debt Securities and the New Debt
Guarantee--Miscellaneous."
THE NEW PREFERRED SECURITIES
The New Preferred Securities of each New Trust will be issued pursuant to
the terms of the Declaration relating to such Trust. Each Declaration will be
qualified as an indenture under the Trust Indenture Act. The New Property
Trustee of each Trust, The First National Bank of Chicago, will act as the
indenture trustee for the New Preferred Securities of each New Trust under the
applicable Declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of each series of New Preferred Securities will
include those stated in the applicable Declaration and those made part of such
Declaration by the Trust Indenture Act. The rights of the holders of each series
of New Preferred Securities, including economic rights, rights to information
and voting rights, are as set forth in the applicable Declaration, the Delaware
Business Trust Act (the "Trust Act") and the Trust Indenture Act. The following
summary of the principal terms and provisions of each series of the New
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the applicable Declaration, the form
of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration relating to a New Trust authorizes the New Regular Trustees
of such New Trust to issue on behalf of such New Trust its New Preferred
Securities and New Common Securities, which represent preferred undivided
beneficial interests in the assets of such New Trust. All of the New Common
Securities of each New Trust will be owned by MediaOne. The New Common
Securities of a New Trust rank pari passu, and payments will be made thereon on
a pro rata basis, with the New Preferred Securities of such New Trust, except
that upon the occurrence of a Declaration Event of Default in respect of such
New Trust, the rights of the holders of such New Common Securities to receive
payment of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of such New
Preferred Securities. The Declaration relating to each New Trust does not permit
the issuance by such New Trust of any securities other than its New Preferred
Securities and New Common Securities or the incurrence of any indebtedness by
such New Trust or the acquisition by such New Trust of any assets other than the
New Debt Securities and New Debt Guarantees (and the proceeds thereof). Pursuant
to each Declaration, the New Property Trustee of each New Trust will own the New
Debt Securities and New Debt Guarantee purchased by such New Trust for the
benefit of the holders of the New Preferred Securities and New Common Securities
of such New Trust.
DISTRIBUTIONS
NEW SERIES I PREFERRED SECURITIES. Distributions on the New Series I
Preferred Securities will be fixed at a rate per annum of % of the stated
liquidation amount of $25 per New Series I Preferred Security. Distributions in
arrears for more than one quarter will bear interest thereon at the rate per
annum of % thereof. The term "distributions" as used herein includes any such
interest payable unless otherwise stated. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months.
59
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Distributions on the New Series I Preferred Securities will be cumulative,
will accrue from the applicable Delivery Date, and will be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing the date of issuance when, as and if available for payment by the New
Property Trustee of the New Series I Trust, except as otherwise described below.
NEW SERIES II PREFERRED SECURITIES. Distributions on the New Series II
Preferred Securities will be fixed at a rate per annum of % of the stated
liquidation amount of $25 per New Series II Preferred Security. Distributions in
arrears for more than one quarter will bear interest thereon at the rate per
annum of % thereof. The term "distributions" as used herein includes any such
interest payable unless otherwise stated. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months.
Distributions on the New Series II Preferred Securities will be cumulative,
will accrue from the applicable Delivery Date, and will be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing the date of issuance when, as and if available for payment by the New
Property Trustee of the New Series II Trust, except as otherwise described
below.
MediaOne Funding has the right under the New Indenture as it relates to a
New Trust to defer payments of interest on the New Debt Securities held by such
New Trust by extending the interest payment period from time to time on such New
Debt Securities which, if exercised, would defer quarterly distributions on the
related New Preferred Securities (though such distributions would continue to
accrue with interest since interest would continue to accrue on such New Debt
Securities) during any such Extension Period. Such right to extend the interest
payment period for such New Debt Securities is limited to a period not exceeding
20 consecutive quarters for any particular Extension Period. In the event that
MediaOne Funding exercises this right, then (a) MediaOne and MediaOne Funding
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its capital stock and (b) MediaOne and MediaOne Funding 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 MediaOne or MediaOne
Funding which rank pari passu with or junior to such New Debt Securities and the
related New Debt Guarantee, including the other series of New Debt Securities
and the related New Debt Guarantee and any Old Series I Debt Securities and Old
Series II Debt Securities remaining outstanding; provided, however, that
restriction (a) above does not apply to any stock dividends paid by MediaOne
where the dividend stock is the same stock as that on which the dividend is
being paid. Prior to the termination of any such extension period, MediaOne
Funding may further extend the interest payment period, provided that such
Extension Period together with all such previous and further extensions thereof
may not exceed 20 consecutive quarters. Upon the termination of any Extension
Period and the payment of all amounts then due, MediaOne Funding may select a
new Extension Period, subject to the above requirements. See "--Description of
the new Debt Securities and the New Debt Guarantee--Interest" and "--Option to
Extend Interest Payment Period." If distributions are deferred with respect to
any series of New Preferred Securities, the deferred distributions and accrued
interest thereon shall be paid to holders of record of such New Preferred
Securities as they appear on the books and records of the applicable New Trust
on the record date next following the termination of such Extension Period.
Since the New Series I Debt Securities, the New Series II Debt Securities,
the Old Series I Debt Securities and the Old Series II Debt Securities are pari
passu in right of payment with each other and the New Series I Debt Guarantee
and the New Series II Debt Guarantee are pari passu in right of payment with
each other, during an Extension Period on either series of New Debt Securities,
MediaOne and MediaOne Funding will be prohibited from making payments on the
other series of New Debt Securities and the related New Debt Guarantee, as well
as on the Old Series I Debt Securities and the Old Series II Debt Securities.
60
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Distributions on the New Preferred Securities of a New Trust must be paid on
the dates payable to the extent that such New Trust has funds available for the
payment of such distributions in its New Property Account. Each New Trust's
funds available for distribution to the holders of its New Preferred Securities
will be limited to payments received under the New Debt Securities and New Debt
Guarantee held by such New Trust. See "--Description of the New Debt Securities
and the New Debt Guarantee." The payment of distributions out of moneys held by
each New Trust is guaranteed by MediaOne to the extent set forth under
"--Description of the Preferred Securities Guarantees."
Distributions on the New Preferred Securities of a New Trust will be payable
to the holders thereof as they appear on the books and records of such New Trust
on the relevant record dates, which, as long as the related New Preferred
Securities remain in book-entry only form, will be one business day prior to the
relevant payment dates. Such distributions will be paid through the New Property
Trustee of such New Trust, who will hold amounts received in respect of the New
Debt Securities and New Debt Guarantee held by such New Trust in the New
Property Account of such New Trust for the benefit of the holders of the New
Preferred Securities and New Common Securities of such New Trust. Subject to any
applicable laws and regulations and the provisions of the applicable
Declaration, each such payment will be made as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below. In the event the New
Preferred Securities of a New Trust shall not continue to remain in book-entry
only form, the New Regular Trustees of such New Trust shall have the right to
select relevant record dates which shall be more than one business day prior to
the relevant payment dates. In the event that any date on which distributions
are to be made on the New Preferred Securities of a New Trust is not a business
day, then payment of the distributions 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.
MANDATORY REDEMPTION
NEW SERIES I PREFERRED SECURITIES. The New Series I Debt Securities will
mature on September 30, 2025, unless the maturity date is extended, and may be
redeemed, in whole or in part, at any time on or after September 11, 2000 or at
any time upon the occurrence of a Special Event. Upon the repayment of the New
Series I Debt Securities, whether at maturity or upon redemption, the proceeds
from such repayment or payment shall simultaneously be applied to redeem on a
pro rata basis New Series I Preferred Securities and New Series I Common
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the New Series I Debt Securities so repaid or redeemed at a
redemption price of $25 per New Series I Preferred Security and New Series I
Common Security, plus accrued and unpaid distributions thereon; provided that
holders of New Series I Preferred Securities and New Series I Common Securities
shall be given not less than 30 nor more than 60 days notice of such redemption.
See "--Description of the New Debt Securities and the New Debt Guarantees." In
the event that fewer than all of the outstanding New Series I Preferred
Securities and New Series I Common Securities are to be redeemed, the New Series
I Preferred Securities and New Series I Common Securities will be redeemed pro
rata as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below.
NEW SERIES II PREFERRED SECURITIES. The New Series II Debt Securities will
mature on October 29, 2036 and may be redeemed, in whole or in part, at any time
on or after October 29, 2001 or at any time upon the occurrence of a Special
Event. Upon the repayment of the New Series I Debt Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem on a pro rata basis New Series II Preferred
Securities and New Series II Common Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the New Series II Debt
Securities so repaid or redeemed at a redemption price of $25 per
61
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
New Series II Preferred Security and New Series II Common Security, plus accrued
and unpaid distributions thereon; provided that holders of New Series II
Preferred Securities and New Series II Common Securities shall be given not less
than 30 nor more than 60 days notice of such redemption. See "--Description of
the New Debt Securities and the New Debt Guarantees." In the event that fewer
than all of the outstanding New Series II Preferred Securities and New Series II
Common Securities are to be redeemed, the New Series II Preferred Securities and
New Series II Common Securities will be redeemed pro rata as described under
"--Book-Entry Only Issuance--The Depository Trust Company" below.
SPECIAL EVENT REDEMPTION
SERIES I SPECIAL EVENT. If, at any time, a Tax Event or an Investment
Company Event (each, as defined below, a "Special Event") shall occur and be
continuing, MediaOne Funding will have the right, upon not less than 30 nor more
than 60 days notice, to redeem the New Series I Debt Securities in whole or in
part for cash within 90 days following the occurrence of such Special Event,
and, following such redemption, New Series I Preferred Securities and New Series
I Common Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the New Series I Debt Securities so redeemed shall be
redeemed by the New Series I Trust on a pro rata basis at a redemption price of
$25 per New Series I Preferred Security and New Series I Common Security, plus
accrued and unpaid distributions thereon.
SERIES II SPECIAL EVENT. If, at any time, a Special Event shall occur and
be continuing, MediaOne Funding will have the right, upon not less than 30 nor
more than 60 days notice, to redeem the New Series II Debt Securities in whole
or in part for cash within 90 days following the occurrence of such Special
Event, and, following such redemption, New Series II Preferred Securities and
New Series II Common Securities with an aggregate liquidation amount equal to
the aggregate principal amount of the New Series II Debt Securities so redeemed
shall be redeemed by the New Series II Trust on a pro rata basis at a redemption
price of $25 per New Series II Preferred Security and New Series II Common
Security, plus accrued and unpaid distributions thereon.
"Tax Event" means, with respect to a New Trust, that the New Regular
Trustees of such New Trust shall have received an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that, 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 thereof or therein or
(b) any amendment to, or change in, an interpretation or application of such
laws or regulations, there is more than an insubstantial risk that (i) such New
Trust would be subject to United States federal income tax with respect to
income accrued or received on the New Debt Securities held by such New Trust,
(ii) interest payable when paid to such New Trust on such New Debt Securities
would not be deductible by MediaOne Funding for United States federal income tax
purposes or (iii) such New Trust would be subject to more than a DE MINIMIS
amount of other taxes, duties or other governmental charges, which change or
amendment becomes effective on or after the date of this Prospectus.
"Investment Company Event" means, with respect to a New Trust, that the New
Regular Trustees of such New Trust shall have received an opinion of a
nationally recognized independent counsel to the effect 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 more than an insubstantial risk that such New Trust is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus.
62
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
DISTRIBUTION OF THE NEW DEBT SECURITIES
At any time, MediaOne will have the right to dissolve each New Trust and,
after paying or making reasonable provision to pay all claims and obligations of
such New Trust in accordance with the Trust Act, cause the New Debt Securities,
together with the related New Debt Guarantee, held by such New Trust to be
distributed to the holders of the New Preferred Securities of such New Trust in
liquidation of such New Trust. Under current United States federal income tax
law and interpretation, a distribution of the New Debt Securities of a New Trust
in such circumstances should not be a taxable event to the holders of the New
Preferred Securities of such New Trust. Should there be a change in law or a
change in legal interpretation, however, the distribution could be a taxable
event to the holders of such New Preferred Securities. See "Chapter 8: Certain
Federal Income Tax Consequences-- Federal Income Tax Consequences of Owning and
Disposing of New Preferred Securities-Receipt of New Debt Securities or Cash
Upon Liquidation of a New Trust."
If New Debt Securities held by a New Trust, together with the related New
Debt Guarantee, are distributed to the holders of the New Preferred Securities
of such New Trust, MediaOne Funding will use its best efforts to have such New
Debt Securities listed on the NYSE or on such other exchange as such New
Preferred Securities are then listed.
After the date for any distribution of New Debt Securities held by a New
Trust, together with the related New Debt Guarantee, upon dissolution of such
New Trust, (i) the New Preferred Securities of such New Trust will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of such New Preferred Securities, will receive a registered global
certificate or certificates representing such New Debt Securities and the
related New Debt Guarantee to be delivered upon such distribution and (iii) any
certificates representing such New Preferred Securities not held by the
depositary or its nominee will be deemed to represent such New Debt Securities
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distribution on, such
New Preferred Securities, until such certificates are presented to MediaOne
Funding or its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the New
Preferred Securities or the New Debt Securities that may be distributed in
exchange for the New Preferred Securities if a dissolution and liquidation of a
New Trust were to occur. Accordingly, the New Preferred Securities that an
investor may purchase, or the New Debt Securities that the investor may receive
on dissolution and liquidation of a New Trust, may trade at a discount to the
price that the investor paid to purchase the New Preferred Securities offered
hereby pursuant to the Offers.
REDEMPTION PROCEDURES
A New Trust may not redeem fewer than all of its outstanding New Preferred
Securities unless all accrued and unpaid distributions have been paid on all of
its New Preferred Securities for all quarterly distribution periods terminating
on or prior to the date of redemption.
If a New Trust gives a notice of redemption in respect of its Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that MediaOne Funding has paid to
the New Property Trustee of such New Trust a sufficient amount of cash in
connection with the related redemption or maturity of the New Debt Securities
held by such New Trust, such New Trust will irrevocably deposit with the
depositary funds sufficient to pay the applicable redemption price and will give
the depositary irrevocable instructions and authority to pay the redemption
price to the holders of such New Preferred Securities. See "--Book-Entry Only
Issuance--The Depository Trust Company." If notice of redemption shall have been
given by a New Trust and funds deposited as required, then immediately prior to
the close of business on the date of such deposit, distributions will cease to
accrue on such New Trust's New Preferred Securities and all
63
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
rights of holders of such New Preferred Securities so called for redemption will
cease, except the right of the holders of such New Preferred Securities to
receive the redemption price, but without interest on such redemption price. In
the event that any date fixed for redemption of New Preferred Securities is not
a business day, then payment of the redemption price 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 falls in the next calendar year, such payment will be made on the
immediately preceding business day. In the event that payment of the redemption
price in respect of New Preferred Securities is improperly withheld or refused
and not paid either by the applicable New Trust or by MediaOne pursuant to the
related New Preferred Securities Guarantee, distributions on such New Preferred
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.
In the event that fewer than all of the outstanding New Preferred Securities
of any New Trust are to be redeemed, such New Preferred Securities will be
redeemed pro rata as described under "--Book-Entry Only Issuance--The Depository
Trust Company" below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), MediaOne or its affiliates
may, at any time and from time to time, purchase outstanding New Preferred
Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of a New Trust, the
holders of the New Preferred Securities and New Common Securities of such New
Trust at that time will be entitled to receive out of the assets of such New
Trust, after paying or making reasonable provision to pay all claims and
obligations of such New Trust in accordance with the Trust Act, distributions in
an amount equal to the aggregate of the stated liquidation amount of $25 per New
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (with respect to each New Trust, the "Liquidation Distribution"),
unless, in connection with such dissolution, New Debt Securities in an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the New Preferred
Securities and New Common Securities of such New Trust have been distributed on
a pro rata basis to the holders of New Preferred Securities and New Common
Securities after paying or making reasonable provision to pay all claims and
obligations of the New Trust in accordance with the Trust Act.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because a New Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by such
New Trust on its New Preferred Securities shall be paid on a pro rata basis. The
holders of the New Common Securities of such New Trust will be entitled to
receive distributions upon any such dissolution pro rata with the holders of the
New Preferred Securities of such New Trust, except that if a Declaration Event
of Default has occurred and is continuing, such New Preferred Securities shall
have a preference over such New Common Securities.
Pursuant to the New Series I Declaration, the New Series I Trust shall
dissolve (i) on September 30, 2050, the expiration of the term of the New Series
I Trust, (ii) upon the bankruptcy of MediaOne or MediaOne Funding, (iii) upon
the filing of a certificate of dissolution or its equivalent with respect to
MediaOne or MediaOne Funding, the filing of a certificate of cancellation with
respect to the New Series I Trust after having obtained (other than in
connection with a dissolution of the New Series I Trust pursuant to clause (iv))
the consent of the holders of at least a majority in liquidation amount of the
New Series I Preferred Securities and the New Series I Common Securities, voting
together as a single class, to file such certificate of cancellation, or the
revocation of the charter of MediaOne or MediaOne Funding and the expiration of
90 days after the date of revocation without a
64
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
reinstatement thereof, (iv) upon the distribution of the New Series I Debt
Securities, together with the New Series I Debt Guarantee, (v) upon the
redemption of all of the New Series I Preferred Securities and the New Series I
Common Securities or (vi) upon the entry of a decree of a judicial dissolution
of MediaOne, MediaOne Funding or the New Series I Trust.
Pursuant to the New Series II Declaration, the New Series II Trust shall
dissolve (i) on September 30, 2050, the expiration of the term of the New Series
II Trust, (ii) upon the bankruptcy of MediaOne or MediaOne Funding, (iii) upon
the filing of a certificate of dissolution or its equivalent with respect to
MediaOne or MediaOne Funding, the filing of a certificate of cancellation with
respect to the New Series II Trust after having obtained (other than in
connection with a dissolution of the New Series II Trust pursuant to clause
(iv)) the consent of the holders of at least a majority in liquidation amount of
the New Series II Preferred Securities and the New Series II Common Securities,
voting together as a single class, to file such certificate of cancellation, or
the revocation of the charter of MediaOne or MediaOne Funding and the expiration
of 90 days after the date of revocation without a reinstatement thereof, (iv)
upon the distribution of the New Series II Debt Securities, together with the
New Series II Debt Guarantee, (v) upon the redemption of all of the New Series
II Preferred Securities and the New Series II Common Securities or (vi) upon the
entry of a decree of a judicial dissolution of MediaOne, MediaOne Funding or the
New Series II Trust.
DECLARATION EVENTS OF DEFAULT
An event of default under the New Indenture with respect to a series of New
Debt Securities (each, an "Indenture Event of Default" with respect to such New
Debt Securities) constitutes an event of default under the applicable
Declaration with respect to the New Preferred Securities and the New Common
Securities of the applicable New Trust (each, a "Declaration Event of Default"
with respect to the applicable New Trust), provided that pursuant to each
Declaration, the holder of the New Common Securities of such New Trust will be
deemed to have waived any Declaration Event of Default with respect to such New
Common Securities until all Declaration Events of Default with respect to the
related New Preferred Securities have been cured, waived or otherwise
eliminated. Until such Declaration Events of Default with respect to such New
Preferred Securities have been so cured, waived or otherwise eliminated, the New
Property Trustee of such New Trust will be deemed to be acting solely on behalf
of the holders of its New Preferred Securities and only the holders of the New
Preferred Securities will have the right to direct such New Property Trustee
with respect to certain matters under such Declaration, and therefore under the
New Indenture.
Upon the occurrence of a Declaration Event of Default, the New Property
Trustee of the applicable New Trust, as the sole holder of the New Debt
Securities held by such New Trust, will have the right under the New Indenture
to declare the principal of and interest on such New Debt Securities to be
immediately due and payable.
VOTING RIGHTS
Except as provided below, under the Trust Act, the Trust Indenture Act and
under "--Description of the Preferred Securities Guarantees--Modification of the
Preferred Securities Guarantees; Assignment" and as otherwise required by law
and the applicable Declaration, the holders of the New Preferred Securities will
have no voting rights.
The holders of a majority in aggregate liquidation amount of the New
Preferred Securities of each New Trust have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the New
Property Trustee for such New Trust, or to direct the exercise of any trust or
power conferred upon such New Property Trustee under the applicable Declaration,
including the right to direct such New Property Trustee, as the holder of the
New Debt Securities and New Debt Guarantee held by such New Trust, to (i)
exercise the remedies available under the New Indenture with respect to such New
Debt Securities and New Debt Guarantee, (ii) waive any past Indenture Event of
65
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Default which is waivable under the New Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all such New Debt
Securities shall be due and payable, provided that where a consent under the New
Indenture would require the consent of the holders of more than a majority in
principal amount of such series of New Debt Securities (a "Super-Majority")
affected thereby, only the holders of at least such Super-Majority of the
related New Preferred Securities may direct such New Property Trustee to give
such consent. If such New Property Trustee fails to enforce its rights under
such New Debt Securities or New Debt Guarantee after a record holder of the
related New Preferred Securities has made a written request, such record holder
may institute a legal proceeding directly against MediaOne Funding or MediaOne
to enforce such New Property Trustee's rights under such New Debt Securities or
New Debt Guarantee, as the case may be, without first instituting any legal
proceeding against such New Property Trustee or any other person or entity,
including, in the case of such New Debt Guarantee, against MediaOne Funding.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing with respect to any New Trust and such event is attributable
to the failure of MediaOne Funding or MediaOne to pay interest or principal on
the New Debt Securities held by such New Trust on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of New Preferred Securities of such New Trust may institute
a Direct Action for enforcement of payment to such holder of the principal of,
or interest on, such New Debt Securities having a principal amount equal to the
aggregate liquidation amount of the New Preferred Securities of such holder on
or after the respective due date specified in such New Debt Securities. The New
Property Trustee of each New Trust shall notify all holders of New Preferred
Securities of such New Trust of any notice of default received from the Debt
Trustee (as defined herein) with respect to the New Debt Securities held by such
New Trust. Such notice shall state that such Indenture Event of Default also
constitutes a Declaration Event of Default. Except in the case of directing the
time, method and place of conducting a proceeding for a remedy, such New
Property Trustee shall not take any action described in clauses (i), (ii) or
(iii) above unless such New Property Trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, such New Trust will not
be classified as other than a grantor trust for United States federal income tax
purposes.
In the event the consent of the New Property Trustee of a New Trust, as the
holder of the New Debt Securities and New Debt Guarantee held by such New Trust,
is required under the New Indenture with respect to any amendment, modification
or termination of the New Indenture, such New Property Trustee shall request the
direction of the holders of the New Preferred Securities and New Common
Securities of such New Trust 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 such New
Preferred Securities and New Common Securities, voting together as a single
class, provided that where a consent under the New Indenture would require the
consent of a Super-Majority, such New Property Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of such New Preferred Securities and New Common Securities
which the relevant Super-Majority represents of the aggregate principal amount
of the applicable series of New Debt Securities outstanding. Such New Property
Trustee shall not take any such action in accordance with the directions of the
holders of such New Preferred Securities and New Common Securities unless such
New Property Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, such New Trust will not be classified as other than
a grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of New Preferred Securities of
a New Trust may be given at a separate meeting of holders of such New Preferred
Securities convened for such purpose, at a meeting of all of the holders of such
New Preferred Securities and the New Common Securities of such New Trust or
pursuant to written consent. The New Regular Trustees of each New Trust will
cause
66
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
a notice of any meeting at which holders of New Preferred Securities of such New
Trust 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
such New 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 New Preferred Securities will be
required for a New Trust to redeem and cancel its New Preferred Securities or
distribute New Debt Securities held by such New Trust in accordance with the
applicable Declaration.
Notwithstanding that holders of New Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the New
Preferred Securities at such time that are owned by MediaOne or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, MediaOne 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.
The procedures by which holders of New Preferred Securities may exercise
their voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Holders of the New Preferred Securities of a New Trust will have no rights
to appoint or remove the New Trustees of such New Trust, who may be appointed,
removed or replaced solely by MediaOne, as the holder of all the New Common
Securities of such New Trust.
MODIFICATION OF THE DECLARATION
Each Declaration may be amended or modified if approved and executed by a
majority of the New Regular Trustees of the applicable New Trust, provided that
if any proposed amendment provides for, or such New Regular Trustees otherwise
propose to effect, (i) any action that would adversely affect the powers,
preferences or special rights of the New Preferred Securities and New Common
Securities of such New Trust, whether by way of amendment to such Declaration or
otherwise or (ii) the dissolution, winding-up or termination of such New Trust
other than pursuant to the terms of such Declaration, then the holders of such
New Preferred Securities and New Common Securities as a single 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 at least a majority in
liquidation amount of the New Preferred Securities and New Common Securities
affected thereby, provided that if any amendment or proposal referred to in
clause (i) above would adversely affect only the New Preferred Securities or the
New Common Securities of such New Trust, 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 a majority in liquidation
amount of such affected class.
In addition, each Declaration may also be amended without the consent of the
holders of the New Preferred Securities and New Common Securities of the
applicable New Trust to (i) cure any ambiguity; (ii) correct or supplement any
provision in the applicable Declaration that may be defective or inconsistent
with any other provisions of such Declaration; (iii) add to the covenants,
restrictions or obligations of MediaOne, as sponsor of the applicable New Trust;
(iv) conform to any change in Rule 3a-5 under the 1940 Act or written change in
interpretation or application of such rule which amendment does not have a
material adverse effect on the rights, preferences of privileges of the holders
of the New Preferred Securities or New Common Securities of the applicable New
Trust; and (v) ensure the status of the applicable New Trust as a grantor trust
for United States federal income tax purposes.
It shall not be necessary for the consent of the holders of New Preferred
Securities or New Common Securities of the applicable New Trust under the
Declaration of such New Trust to approve the particular form of any proposed
amendment to such Declaration, but it shall be sufficient if such consent shall
approve the substance thereof.
67
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Notwithstanding the foregoing, no amendment or modification may be made to
any Declaration if such amendment or modification would (i) cause the applicable
New Trust to be characterized as other than a grantor trust for purposes of
United States federal income taxation, (ii) reduce or otherwise adversely affect
the powers of the New Property Trustee of such New Trust or (iii) cause such New
Trust to be deemed to be an "investment company" which is required to be
registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Neither New Trust may 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 below. A New Trust may, with the consent of a majority of its New
Regular Trustees and without the consent of the holders of its New Preferred
Securities or New Common Securities, 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 either (x) expressly assumes all of the
obligations of such New Trust under its New Preferred Securities and New Common
Securities or (y) substitutes for its New Preferred Securities other securities
having substantially the same terms as its New Preferred Securities and New
Common Securities (the "Successor Securities") so long as the Successor
Securities rank the same as its New Preferred Securities and New Common
Securities rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) MediaOne Funding expressly acknowledges a trustee
of such successor entity possessing the same powers and duties as the New
Property Trustee of such New Trust as the holder of the New Debt Securities
purchased by such New Trust and MediaOne expressly acknowledges such trustee of
such successor entity as the holder of the New Debt Guarantee purchased by such
New Trust, (iii) its New 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 its
New Preferred Securities are then listed, (iv) such merger, consolidation,
amalgamation or replacement does not cause its New 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 its New Preferred Securities and New Common
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 such New Trust,
(vii) prior to such merger, consolidation, amalgamation or replacement, MediaOne
has received an opinion of a nationally recognized independent counsel to such
New 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 its New Preferred Securities and
New Common 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 such New Trust nor such successor entity will be required
to register as an investment company under the 1940 Act and (viii) MediaOne
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the applicable New Preferred
Securities Guarantee and the guarantee of the New Common Securities of such New
Trust. Notwithstanding the foregoing, a New Trust shall not, except with the
consent of holders of 100% in liquidation amount of its New Preferred Securities
and New Common Securities, 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 such New Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
68
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
BOOK-ENTRY ONLY ISSUANCE; THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for New Preferred Securities. The New
Preferred Securities will be issued only as fully registered securities
registered in the name of Cede & Co., DTC's nominee. For each series of New
Preferred Securities, one or more fully registered global New Preferred
Securities certificates will be issued, representing in the aggregate the total
number of New Preferred Securities of such series, and will be deposited with
DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Preferred Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its Participants deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of New Preferred Securities within the DTC system must be made by
or through Direct Participants, which will receive a credit for the New
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each New Preferred Security (a "beneficial owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial owners
will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the beneficial owners
purchased New Preferred Securities. Transfers of ownership interests in the New
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in New Preferred
Securities, except in the event that use of the book-entry system for the New
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the New Preferred Securities
deposited by Participants with DTC are registered in the name of DTC's nominee,
Cede & Co. The deposit of New Preferred Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual beneficial owners of the New Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such
New Preferred Securities are credited, which may or may not be the beneficial
owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
69
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Redemption notices shall be sent to Cede & Co. If less than all of the New
Preferred Securities are being redeemed, DTC will reduce pro rata the amount of
the interest of each Direct Participant in the New Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the New Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the New Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the applicable New Trust as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
New Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the New Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to beneficial owners will be governed by
standing instructions and customary practices, as in the case with securities
held for the account of customers in bearer form or registered in "street name,"
and will be the responsibility of such Participant and not of DTC, the
applicable New Trust, MediaOne Funding or MediaOne, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the applicable New Trust,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a beneficial owner in a global New Preferred
Security will not be entitled to receive physical delivery of New Preferred
Securities. Accordingly, each beneficial owner must rely on the procedures of
DTC to exercise any rights under the New Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the
New Preferred Securities at any time by giving reasonable notice to the
applicable New Trust. Under such circumstances, in the event that a successor
securities depository is not obtained, New Preferred Securities certificates are
required to be printed and delivered. Additionally, the New Regular Trustees of
such New Trust (with the consent of MediaOne) may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor depositary) with
respect to the New Preferred Securities of such New Trust. In that event,
certificates for such New Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that MediaOne, MediaOne Funding and the New
Trusts believe to be reliable, but MediaOne, MediaOne Funding and the New Trusts
take no responsibility for the accuracy thereof.
INFORMATION CONCERNING THE NEW PROPERTY TRUSTEES
The New Property Trustee of each New Trust, prior to the occurrence of a
default with respect to the New Preferred Securities and New Common Securities
of such New Trust, undertakes to perform only such duties as are specifically
set forth in the applicable Declaration and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provisions, such New Property Trustee is
under no obligation to exercise any of the powers vested in it by such
Declaration at the request of any holder of New Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The holders of such New Preferred
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct such New Property Trustee to
take any action following a Declaration Event of Default with respect to such
New Trust.
70
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
MediaOne and certain of its affiliates maintain a deposit account and
banking relationship with The First National Bank of Chicago. The First National
Bank of Chicago serves as trustee under the New Preferred Securities Guarantees.
The First National Bank of Chicago also serves as trustee under other indentures
pursuant to which unsecured debt securities of MediaOne and its affiliates are
outstanding.
REGISTRAR AND TRANSFER AGENT
In the event that the New Preferred Securities do not remain in book-entry
only form, the following provisions would apply:
The New Property Trustee of a New Trust will act as paying agent for the New
Preferred Securities of such New Trust and may designate an additional or
substitute paying agent at any time. Registration of transfers of such New
Preferred Securities will be effected without charge by or on behalf of such New
Trust, but upon payment (with the giving of such indemnity as such New Trust or
MediaOne may require) in respect of any tax or other government charges which
may be imposed in relation to it.
A New Trust will not be required to register or cause to be registered the
transfer of its New Preferred Securities after such New Preferred Securities
have been called for redemption.
GOVERNING LAW
Each Declaration and the related New Preferred Securities will be governed
by, and construed in accordance with, the internal laws of the State of
Delaware.
MISCELLANEOUS
The New Regular Trustees of each New Trust are authorized and directed to
operate such New Trust in such a way so that such New Trust will not be deemed
to be an "investment company" required to be registered under the 1940 Act or
characterized for United States federal income tax purposes as other than a
grantor trust. MediaOne Funding is authorized and directed to conduct its
affairs so that the New Debt Securities held by such New Trust will be treated
as indebtedness of MediaOne Funding for United States federal income tax
purposes. In this connection, the New Regular Trustees of each New Trust and
MediaOne Funding are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of such New Trust, the Declaration of
such New Trust or the certificate of incorporation of MediaOne Funding, that
each of such New Regular Trustees and MediaOne Funding determines in their
discretion to be necessary or desirable for such purposes, as long as such
action does not adversely affect the interests of the holders of the New
Preferred Securities of such New Trust.
Holders of New Preferred Securities have no preemptive rights.
DESCRIPTION OF THE NEW DEBT SECURITIES AND NEW DEBT GUARANTEES
Set forth below is a description of the specific terms of each series of New
Debt Securities, which will be deposited in the applicable New Trust as trust
assets. Each series of New Preferred Securities will be issued pursuant to the
Indenture to be entered into among MediaOne Funding, MediaOne and Norwest Bank
Minnesota, National Association, as trustee (the "Debt Trustee"), as
supplemented, in the case of the New Series I Preferred Securities, by a First
Supplemental Indenture and, in the case of the New Series II Preferred
Securities, by a Second Supplemental Indenture (as so supplemented with respect
to the New Series I Debt Securities and the New Series II Debt Securities
pursuant to such First Supplemental Indenture and Second Supplemental Indenture,
respectively, the "New Indenture"). The terms of the New Preferred Securities
include those stated in the New Indenture and those made part of the New
Indenture by reference to the Trust Indenture Act. The Old Preferred Securities
are subject to all such terms, and prospective investors are referred to the New
Indenture and the Trust
71
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Indenture Act for a statement thereof. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the New Indenture, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Certain capitalized terms used herein are defined in the New
Indenture.
The New Indenture provides for the issuance of subordinated debentures,
notes or other evidences of indebtedness by MediaOne Funding in an unlimited
amount from time to time. Each series of New Debt Securities constitutes a
separate series under the New Indenture.
At any time, MediaOne will have the right to liquidate each New Trust and
cause the New Debt Securities, together with the related New Debt Guarantee,
held by such New Trust to be distributed to the holders of New Preferred
Securities and New Common Securities of such New Trust in liquidation of such
New Trust. See "--Description of the New Preferred Securities--Distribution of
the New Debt Securities." If such New Debt Securities, together with the related
New Debt Guarantee, are distributed to the holders of such New Preferred
Securities, MediaOne Funding will use its best efforts to have such New Debt
Securities listed on the NYSE or on such other exchange as such New Preferred
Securities are then listed.
GENERAL
Each series of New Debt Securities will be issued as unsecured debt under
the New Indenture and will be limited in principal amount to the aggregate
liquidation amount of (i) the New Preferred Securities issued by the applicable
New Trust in its Offer and (ii) the amount of proceeds received by such New
Trust from the sale of its New Common Securities to MediaOne (with respect to
each New Trust the "MediaOne Payment").
The New Debt Securities are not subject to a sinking fund provision.
NEW SERIES I DEBT SECURITIES. The entire principal amount of the New Series
I Debt Securities will mature and become due and payable, together with any
accrued and unpaid interest thereon, including Additional Interest (as defined
herein), if any, on September 30, 2025, subject to the election of MediaOne
Funding to extend the scheduled maturity date of the New Series I Debt
Securities to a date not later than September 30, 2044, provided that MediaOne
Funding satisfies certain financial covenants. See "--Option to Extend Maturity
Date of New Series I Debt Securities." The New Series I Debt Securities will be
fully and unconditionally guaranteed on a subordinated basis as to principal,
premium, if any, and interest by MediaOne. See "--New Debt Guarantees."
NEW SERIES II DEBT SECURITIES. The entire principal amount of the New
Series II Debt Securities will mature and become due and payable, together with
any accrued and unpaid interest thereon, including Additional Interest, if any,
on October 29, 2036. The New Series II Debt Securities will be fully and
unconditionally guaranteed on a subordinated basis as to principal, premium, if
any, and interest by MediaOne. See "--New Debt Guarantees."
If New Debt Securities are distributed to holders of the related New
Preferred Securities in liquidation of such holders' interests in the applicable
New Trust, such New Debt Securities will initially be issued as a global
security. As described herein, under certain limited circumstances, New Debt
Securities may be issued in certificated form in exchange for a global security.
See "--Book-Entry and Settlement." In the event New Debt Securities are issued
in certificated form, such New Debt Securities will be in denominations of $25
and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on New Debt Securities issued as a global
security will be made to the depositary for the New Debt Securities. In the
event New Debt Securities are issued in certificated form, principal and
interest will be payable, the transfer of the New Debt Securities will be
registrable and the New Debt Securities will be exchangeable for New Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt
72
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Trustee in New York, New York; provided, that payment of interest may be made at
the option of MediaOne Funding by check mailed to the address of the persons
entitled thereto.
NEW DEBT GUARANTEES
The New Indenture provides that MediaOne will fully and unconditionally
guarantee the due and punctual payment of the principal, premium, if any, and
interest on each series of New Debt Securities when and as the same shall become
due and payable, whether at maturity, upon redemption or otherwise. Since
MediaOne is a holding company, the right of MediaOne and, accordingly, the right
of creditors of MediaOne (including the holders of the New Debt Securities) to
participate in any distribution of the assets of any subsidiaries of MediaOne,
whether upon liquidation, reorganization, or otherwise, is subject to prior
claims of creditors of the subsidiary, except to the extent that claims of
MediaOne itself as a creditor of a subsidiary may be recognized.
SUBORDINATION
The New Indenture provides that the New Debt Securities are subordinated and
junior in right of payment to all Senior Indebtedness of MediaOne Funding and
that the New Debt Guarantees are subordinated and junior in right of payment to
all Senior Indebtedness of MediaOne. No payment of principal of (including
redemption and sinking fund payments), premium, if any, or interest on, the New
Debt Securities and no payment under the New Debt Guarantees may be made if any
Senior Indebtedness of MediaOne Funding or MediaOne, as the case may be, is not
paid when due, any applicable grace period with respect to such default has
ended and such default has not been cured or waived or ceased to exist, or if
the maturity of any Senior Indebtedness of MediaOne Funding or MediaOne, as the
case may be, has been accelerated because of a default. Upon any distribution of
assets of MediaOne Funding or MediaOne to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
premium, if any, and interest due or to become due on, all Senior Indebtedness
of MediaOne Funding or MediaOne, as the case may be, must be paid in full before
the holders of New Debt Securities or the New Debt Guarantees are entitled to
receive or retain any payment. The rights of the holders of the New Debt
Securities and the New Debt Guarantees will be subrogated to the rights of the
holders of Senior Indebtedness of MediaOne Funding or MediaOne, as the case may
be, to receive payments or distributions applicable to Senior Indebtedness until
all amounts owing on the New Debt Securities or the New Debt Guarantees, as the
case may be, are paid in full. In addition, the New Debt Securities and the New
Debt Guarantee will rank at least pari passu with all other subordinated debt
securities and debt guarantees initially issued to other trusts, partnerships or
other entities affiliated with MediaOne in connection with an issuance of
securities similar to the New Preferred Securities.
The term "Senior Indebtedness" means, with respect to MediaOne Funding or
MediaOne, (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; (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) above 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) above 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 New Debt Securities or the New Debt
Guarantees, as the case may be, and (2) any
73
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
subordinated debt securities and debt guarantees initially issued to trusts,
partnerships or other entities affiliated with MediaOne in connection with an
issuance of securities similar to the New Preferred Securities, including, in
the case of MediaOne, the Old Series I Debt Securities and the Old Series II
Debt Securities. Such Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness.
The New Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by MediaOne Funding or MediaOne. The New Indenture also does
not limit the aggregate amount of indebtedness which may be issued by MediaOne's
subsidiaries. At December 31, 1997, on a pro forma basis after giving effect to
the Discontinued Operations Adjustments, the MediaOne Separation Adjustments and
the AirTouch Transaction Adjustments, the aggregate amount of Senior
Indebtedness of MediaOne and indebtedness of MediaOne's consolidated
subsidiaries would have been approximately $ billion.
OPTIONAL REDEMPTION
NEW SERIES I DEBT SECURITIES. MediaOne Funding shall have the right to
redeem the New Series I Debt Securities, in whole or in part, from time to time,
on or after September 11, 2000, or at any time upon the occurrence of a Special
Event as described under "--Description of the New Preferred Securities--Special
Event Redemption or Distribution," upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest, if
any, to the redemption date. If a partial redemption of the New Series I
Preferred Securities resulting from a partial redemption of the New Series I
Debt Securities would result in the delisting of the New Series I Preferred
Securities, MediaOne Funding may only redeem the New Series I Debt Securities in
whole.
NEW SERIES II DEBT SECURITIES. MediaOne Funding shall have the right to
redeem the New Series II Debt Securities, in whole or in part, from time to
time, on or after October 29, 2001, or at any time upon the occurrence of a
Special Event as described under "--Description of the New Preferred
Securities--Special Event Redemption," upon not less than 30 nor more than 60
days' notice, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest, if
any, to the redemption date. If a partial redemption of the New Series II
Preferred Securities resulting from a partial redemption of the New Series II
Debt Securities would result in the delisting of the New Series II Preferred
Securities, MediaOne Funding may only redeem the New Series II Debt Securities
in whole.
INTEREST
NEW SERIES I DEBT SECURITIES. Each New Series I Debt Security shall bear
interest at the rate of % per annum from the applicable Delivery Date,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on the date of issuance, to the person in whose name
such New Series I Debt Security is registered, subject to certain exceptions, at
the close of business on the business day next preceding such interest payment
date. In the event the New Series I Debt Securities shall not continue to remain
in book-entry only form, MediaOne Funding shall have the right to select record
dates which shall be more than one business day prior to the interest payment
date.
NEW SERIES II DEBT SECURITIES. Each New Series II Debt Security shall bear
interest at the rate of % per annum from the applicable Delivery Date,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on the date of issuance, to the person in whose name
such New Series II Debt Security is registered, subject to certain exceptions,
at the close of business on the business day next preceding such interest
payment date. In the event the New Series II Debt Securities shall not continue
to remain in book-entry only form, MediaOne
74
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Funding shall have the right to select record dates which shall be more than one
business day prior to the interest payment date.
The amount of interest payable on either series of New Debt Securities for
any period will be computed on the basis of a 360-day year of twelve 30-day
months. The amount of interest payable for any period shorter than a full
quarterly period 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 any New Debt Securities is not a business day, then payment of the
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.
OPTION TO EXTEND MATURITY DATE OF NEW SERIES I DEBT SECURITIES
The maturity date of the New Series I Debt Securities is September 30, 2025
(the "Series I Scheduled Maturity Date"). MediaOne Funding, however, may, before
the Series I Scheduled Maturity Date, extend such maturity date no more than one
time, for up to an additional 19 years from the Series I Scheduled Maturity
Date, provided that (a) MediaOne Funding is not in bankruptcy or otherwise
insolvent, (b) MediaOne Funding is not in default on any subordinated debt
securities issued to a trust or to any trustee of such trust in connection with
an issuance of trust securities by such trust, (c) MediaOne Funding has made
timely payments on the New Series I Debt Securities for the immediately
preceding 6 quarters without deferrals, (d) the New Series I Trust is not in
arrears on payments of distributions on the New Series I Preferred Securities,
(e) the New Series I Debt Securities are rated Investment Grade by Standard &
Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services,
Duff & Phelps Credit Rating Company or any other nationally recognized
statistical rating organization, and (f) the final maturity of the New Series I
Debt Securities is not later than September 11, 2044. Pursuant to the
Declaration of the New Series I Trust, the New Regular Trustees of the New
Series I Trust are required to give notice of MediaOne Funding's election to
extend the Series I Scheduled Maturity Date to the holders of the New Series I
Preferred Securities.
OPTIONS TO EXTEND INTEREST PAYMENT PERIODS
MediaOne Funding shall have the right at any time, and from time to time,
during the term of a series of New Debt Securities, to defer payments of
interest on such New Debt Securities by extending the interest payment period
for a period not exceeding 20 consecutive quarters, at the end of which
Extension Period MediaOne Funding shall pay all interest then accrued and unpaid
(including any Additional Interest) (together with interest thereon at the rate
specified for such New Debt Securities to the extent permitted by applicable
law); provided, however, that, during any such Extension Period, (a) MediaOne
and MediaOne Funding shall not declare or pay any dividend or, make any
distributions with respect to, or redeem, purchase or make a liquidation payment
with respect to, any of its capital stock and (b) MediaOne and MediaOne Funding
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
MediaOne or MediaOne Funding which rank pari passu with or junior to such New
Debt Securities, including the other series of New Debt Securities and the
related New Debt Guarantee and any Old Series I Debt Securities and Old Series
II Debt Securities remaining outstanding (provided that restriction (a) above
does not apply to any stock dividends paid by MediaOne where the dividend stock
is the same stock as that on which the dividend is being paid). Prior to the
termination of any such Extension Period, MediaOne Funding may further defer
payments of interest on such New Debt Securities by extending the interest
payment period, provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarters.
Upon the termination of any Extension Period and the payment of all amounts then
due, MediaOne Funding may select a new Extension Period, subject to the above
requirements. No interest on such New Debt
75
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Securities during an Extension Period, except at the end thereof, shall be due
and payable. If the applicable New Property Trustee shall be the sole holder of
such New Debt Securities, MediaOne Funding shall give the New Regular Trustees
of the applicable New Trust and such New Property Trustee notice of its
selection of such Extension Period one business day prior to the earlier of (i)
the date distributions on the related New Preferred Securities are payable or
(ii) the date such Regular Trustees are required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of such New
Preferred Securities of the record date or the date such distribution is
payable, but in any event not less than one business day prior to such record
date. Such Regular Trustees shall give notice of MediaOne Funding's selection of
such Extension Period to the holders of such New Preferred Securities. If the
applicable New Property Trustee shall not be the sole holder of such New Debt
Securities, MediaOne Funding shall give the holders of such New Debt Securities
notice of its selection of such Extension Period ten business days prior to the
earlier of (i) the applicable interest payment date or (ii) the date MediaOne
Funding is required to give notice to the NYSE or other applicable
self-regulatory organization or to holders of such New Debt Securities of the
record or payment date of such related interest payment. MediaOne Funding has no
present intention of exercising its rights to defer payments of interest by
extending the interest payment period on the New Debt Securities.
Since the New Series I Debt Securities, the New Series II Debt Securities,
the Old Series I Debt Securities and the Old Series II Debt Securities are pari
passu in right of payment with each other and the New Series I Debt Guarantee
and the New Series II Debt Guarantee are pari passu in right of payment with
each other, during an Extension Period on either series of New Debt Securities,
MediaOne and MediaOne Funding will be prohibited from making payments on the
other series of New Debt Securities and the related New Debt Guarantee, as well
as on the Old Series I Debt Securities and the Old Series II Debt Securities.
ADDITIONAL INTEREST
If at any time a New Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, MediaOne Funding will pay as additional interest ("Additional
Interest") such additional amounts as shall be required so that the net amounts
received and retained by such New Trust after paying any such taxes, duties,
assessments or other governmental charges will be not less than the amounts such
New Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
The New Indenture provides that any one or more of the following described
events which has occurred and is continuing constitutes an "Indenture Event of
Default" with respect to each series of New Debt Securities:
(a) failure for 90 days to pay interest on such New Debt Securities,
including any Additional Interest in respect thereof, when due; provided,
however, that a valid extension of the interest payment period by MediaOne
Funding shall not constitute a default in the payment of interest for this
purpose; or
(b) failure to pay principal or premium, if any, on such New Debt
Securities when due whether at maturity, upon redemption by declaration or
otherwise; provided, however, that a valid extension of the maturity of such
New Debt Securities shall not constitute a default for this purpose; or
(c) failure to observe or perform any other covenant with respect to
such New Debt Securities contained in the New Indenture for 90 days after
written notice to MediaOne Funding
76
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
from the Debt Trustee or the holders of at least 25% in principal amount of
such New Debt Securities outstanding; or
(d) certain events in bankruptcy, insolvency or reorganization of
MediaOne or MediaOne Funding; or
(e) the voluntary or involuntary dissolution, winding-up or termination
of the applicable New Trust, except in connection with the distribution of
such New Debt Securities to the holders of New Preferred Securities and New
Common Securities of such New Trust in liquidation of such New Trust, the
redemption of all of such New Preferred Securities and New Common
Securities, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such New Trust.
The holders of a majority in aggregate outstanding principal amount of a
series of New Debt Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debt Trustee
for that series. The New Indenture provides that if an Indenture Event of
Default shall have occurred and be continuing with respect to a series of New
Debt Securities, the Debt Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of such New Debt Securities may declare
the principal due and payable immediately, but the holders of a majority in
aggregate outstanding principal amount of such series may annul such declaration
and waive the default with respect to such series if the default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any applicable premium has been deposited
with the Debt Trustee.
The holders of a majority in aggregate outstanding principal amount of a
series of New Debt Securities may, on behalf of the holders of all such New Debt
Securities, waive any past default, except (i) a default in the payment of
principal, premium, if any, or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and any applicable premium has been deposited
with the Debt Trustee) or (ii) a default in the covenants described in the first
or second paragraph under "--Certain Covenants."
So long as the applicable New Property Trustee is the holder of the New Debt
Securities held by a New Trust, if an Indenture Event of Default shall occur and
be continuing, such New Property Trustee will have the right to declare the
principal of and the interest on such New Debt Securities (including any
Additional Interest, if any) and any other amounts payable under the New
Indenture to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such New Debt Securities.
With respect to each New Trust, an Indenture Event of Default also
constitutes a Declaration Event of Default. The holders of New Preferred
Securities in certain circumstances have the right to direct the applicable New
Property Trustee to exercise its rights as the holder of the related New Debt
Securities and New Debt Guarantee. See "--Description of the New Preferred
Securities--Declaration Events of Default" and "--Voting Rights." If such New
Property Trustee fails to enforce its rights under such New Debt Securities or
New Debt Guarantee after a record holder of the related New Preferred Securities
has made a written request, such record holder may institute a legal proceeding
directly against MediaOne Funding or MediaOne to enforce such Property Trustee's
rights under such New Debt Securities or New Debt Guarantee, as the case may be,
without first instituting any legal proceeding against such Property Trustee or
any other person or entity, including, in the case of such Debt Guarantee,
against MediaOne Funding. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing with respect to any New Trust and such
event is attributable to the failure of MediaOne Funding or MediaOne to pay
interest or principal on the New Debt Securities held by such New Trust on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), MediaOne Funding and MediaOne acknowledge
that a holder of New Preferred Securities of such New Trust may institute a
Direct Action for enforcement of payment to such holder of the principal of, or
interest on, such New Debt Securities having a principal amount
77
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
equal to the aggregate liquidation amount of the New Preferred Securities of
such holder on or after the respective due date specified in such New Debt
Securities. Notwithstanding any payments made to such holder of New Preferred
Securities by MediaOne Funding or MediaOne in connection with a Direct Action,
MediaOne Funding and MediaOne shall remain obligated to pay the principal of or
interest on such New Debt Securities, and MediaOne Funding and MediaOne shall be
subrogated to the rights of the holder of such New Preferred Securities with
respect to payments on such New Preferred Securities to the extent of any
payments made by MediaOne Funding or MediaOne to such holder in any Direct
Action. Except as provided above and in a related New Preferred Securities
Guarantee, the holders of New Preferred Securities will not be able to exercise
directly any other remedy available to the holders of New Debt Securities.
CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default with respect to a series of New Debt Securities or
(ii) MediaOne shall be in default with respect to its payment of any obligations
under the applicable New Preferred Securities Guarantee or the applicable New
Common Securities Guarantee (as defined herein), then (a) MediaOne and MediaOne
Funding shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock and (b) MediaOne and MediaOne Funding 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 MediaOne or
MediaOne Funding which rank pari passu with or junior to such New Debt
Securities, including the other series of New Debt Securities and the related
New Debt Guarantee, the Old Series I Debt Securities and the Old Series II Debt
Securities; provided, however, that restriction (a) above does not apply to any
stock dividends paid by MediaOne where the dividend stock is the same stock as
that on which the dividend is being paid.
If MediaOne Funding shall have given notice of its election to defer
interest on a series of New Debt Securities by extending the interest payment
period as provided in the New Indenture and such period, or any extension
thereof, shall be continuing, then (a) MediaOne and MediaOne Funding shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock and (b) MediaOne and MediaOne Funding 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 MediaOne or MediaOne Funding
which rank pari passu with or junior to such New Debt Securities, including the
other series of New Debt Securities and the related New Debt Guarantee and any
Old Series I Debt Securities and Old Series II Debt Securities remaining
outstanding; provided, however, that restriction (a) above does not apply to any
stock dividends paid by MediaOne where the dividend stock is the same stock as
that on which the dividend is being paid.
For so long as the New Preferred Securities and New Common Securities of a
New Trust remain outstanding, MediaOne will (i) directly or indirectly maintain
100% ownership of such New Common Securities; provided, however, that any
permitted successor of MediaOne under the New Indenture may succeed to
MediaOne's ownership of the Common Securities and (ii) use its reasonable
efforts to cause such New Trust (a) to remain a statutory business trust, except
in connection with the distribution of the related New Debt Securities to the
holders of such New Preferred Securities and New Common Securities in
liquidation of such New Trust, the redemption of all of such New Preferred
Securities and New Common Securities or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such New Trust, and (b)
to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
78
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
BOOK-ENTRY AND SETTLEMENT
If New Debt Securities are distributed to holders of the New Preferred
Securities of the New Trust holding such New Debt Securities in connection with
the voluntary or involuntary dissolution, winding-up or liquidation of such New
Trust, such Debt Securities will be issued in the form of one or more global
securities registered in the name of the depositary or its nominee. Except under
the limited circumstances described below, New Debt Securities represented by a
global security will not be exchangeable for, and will not otherwise be issuable
as, New Debt Securities in definitive form. Global securities may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a global security.
Except as provided below, owners of beneficial interests in such a global
security will not be entitled to receive physical delivery of New Debt
Securities in definitive form and will not be considered the holders (as defined
in the New Indenture) thereof for any purpose under the New Indenture, and no
global security representing New Debt Securities shall be exchangeable, except
for another global security of like denomination and tenor to be registered in
the name of the depositary or its nominee or to a successor depositary or its
nominee. Accordingly, each beneficial owner must rely on the procedures of the
depositary and, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest, to exercise any rights
of a holder under the New Indenture.
If New Debt Securities are distributed to holders of the New Preferred
Securities of the New Trust holding such New Debt Securities in liquidation of
such holders' interests in such New Trust, DTC will act as securities depositary
for such New Debt Securities. For a description of DTC and the specific terms of
the depository arrangements, see "--Description of the New Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company." As of the
date of this Prospectus, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the New Preferred Securities apply in all material respects to
any debt obligations represented by one or more global securities held by DTC.
MediaOne Funding may appoint a successor to DTC or any successor depositary in
the event DTC or such successor depositary is unable or unwilling to continue as
depositary.
None of MediaOne, MediaOne Funding, the New Trusts, the Debt Trustee, any
paying agent and any other agent of MediaOne, MediaOne Funding or the Debt
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
global security for such New Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
A global security shall be exchangeable for New Debt Securities registered
in the names of persons other than the depositary or its nominee only if (i) the
depositary notifies MediaOne Funding that it is unwilling or unable to continue
as a depositary for such global security and no successor depositary shall have
been appointed, or if at any time the depositary ceases to be a clearing agency
registered under the Exchange Act at a time when the depositary is required to
be so registered to act as such depositary and no successor depositary shall
have been appointed, (ii) MediaOne Funding in its sole discretion determines
that such global security shall be so exchangeable or (iii) there shall have
occurred an Indenture Event of Default with respect to such New Debt Securities.
Any global security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for New Debt Securities registered in such names as the
depositary shall direct. It is expected that such instructions will be
79
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
based upon directions received by the depositary from its Participants with
respect to ownership of beneficial interests in such global security.
MODIFICATION OF THE NEW INDENTURE
The New Indenture contains provisions permitting MediaOne, MediaOne Funding
and the Debt Trustee, with the consent of the holders of not less than a
majority in principal amount of the New Debt Securities of each series which are
affected by the modification, to modify the New Indenture or any supplemental
indenture affecting that series or the rights of the holders of that series of
New Debt Securities; provided, however, that no such modification may, without
the consent of the holder of each outstanding New Debt Security affected
thereby, (i) extend the fixed maturity of New Debt Securities 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 New Debt Security so affected
or (ii) reduce the percentage of New Debt Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each then outstanding New Debt Security affected thereby. In the
event the consent of the New Property Trustee of a New Trust, as the holder of
the New Debt Securities and New Debt Guarantee held by such New Trust, is
required under the New Indenture with respect to any amendment, modification or
termination of the New Indenture, such New Property Trustee shall request the
direction of the holders of the New Preferred Securities and New Common
Securities of such New Trust with respect to such amendment, modification or
termination as described under "--Description of the New Preferred
Securities--Voting Rights."
In addition, MediaOne, MediaOne Funding and the Debt Trustee may execute,
without the consent of any holder of New Debt Securities, any supplemental
indenture for certain other usual purposes including the creation of any new
series of New Debt Securities.
CONSOLIDATION, MERGER AND SALE
Nothing contained in the New Indenture or in any of the New Debt Securities
will prevent any consolidation or merger of MediaOne Funding or MediaOne with or
into any other corporation or corporations (whether or not affiliated with
MediaOne Funding or MediaOne, as the case may be), or successive consolidations
or mergers in which MediaOne Funding or MediaOne, as the case may be, or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property of MediaOne Funding or
MediaOne, as the case may be, or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether or not
affiliated with MediaOne Funding or MediaOne, as the case may be, or its
successor or successors) authorized to acquire and operate the same; provided,
however, that, upon any such consolidation, merger, sale, conveyance, transfer
or other disposition, the due and punctual payment, in the case of MediaOne
Funding, of the principal of and interest on all of the New Debt Securities, and
in the case of MediaOne, the performance of all obligations under the New Debt
Guarantees, and the due and punctual performance and observance of all the
covenants and conditions of the New Indenture with respect to the New Debt
Securities to be kept or performed by MediaOne Funding or MediaOne, as the case
may be, are required to be expressly assumed by supplemental indenture by the
entity formed by such consolidation, or into which MediaOne Funding or MediaOne,
as the case may be, shall have been merged, or by the entity which shall have
acquired such property. The foregoing covenant will not apply to the
distribution of New U S WEST to U S WEST's stockholders pursuant to the
Separation.
DEFEASANCE AND DISCHARGE
Under the terms of the New Indenture, MediaOne and MediaOne Funding will be
discharged from any and all obligations in respect of the New Debt Securities of
any series (except in each case
80
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
for certain obligations to register the transfer or exchange of New Debt
Securities, replace stolen, lost or mutilated New Debt Securities, maintain
paying agencies and hold moneys for payment in trust) if MediaOne Funding
deposits with the Debt Trustee, in trust, moneys or Government Obligations, in
an amount sufficient to pay all the principal of, and interest on, such New Debt
Securities on the dates such payments are due in accordance with the terms of
such New Debt Securities.
GOVERNING LAW
The New Indenture, the New Debt Securities and the New Debt Guarantees will
be governed by, and construed in accordance with, the internal laws of the State
of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties
as are specifically set forth in the New Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Debt Trustee
is under no obligation to exercise any of the powers vested in it by the New
Indenture at the request of any holder of New Debt Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debt Trustee is not required to expand or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debt Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
MediaOne and certain of its affiliates maintain a deposit account and
banking relationship with the Debt Trustee. The Debt Trustee serves as trustee
under other indentures pursuant to which unsecured debt securities of MediaOne
are outstanding.
MISCELLANEOUS
The New Indenture will provide that MediaOne Funding will pay all fees and
expenses related to (i) the offering of the New Preferred Securities, the New
Common Securities and the New Debt Securities, (ii) the organization,
maintenance and dissolution of the New Trusts, (iii) the retention of the New
Trustees and (iv) the enforcement by the New Property Trustee of each New Trust
of the rights of holders of New Preferred Securities of such New Trust. The
payment of such fees and expenses will be fully and unconditionally guaranteed
by MediaOne.
DESCRIPTION OF THE NEW PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the New Preferred
Securities Guarantees which will be executed and delivered by MediaOne for the
benefit of the holders from time to time of New Preferred Securities. Each New
Preferred Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. The First National Bank of Chicago will act as New Preferred
Guarantee Trustee under each New Preferred Securities Guarantee. The terms of
each New Preferred Securities Guarantee will be those set forth in such New
Preferred Securities Guarantee and those made part of such New Preferred
Securities Guarantee by the Trust Indenture Act. The summary does not purport to
be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the New Preferred Securities
Guarantee, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each New Preferred Securities Guarantee will be held by the New Preferred
Guarantee Trustee for the benefit of the holders of the New Preferred Securities
of the applicable New Trust.
81
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
GENERAL
Pursuant to each New Preferred Securities Guarantee, MediaOne will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the New Preferred Securities issued by the applicable
New Trust, the Guarantee Payments (as defined herein) (except to the extent paid
by such New Trust), as and when due, regardless of any defense, right of set-off
or counterclaim which such New Trust may have or assert. The following payments
with respect to New Preferred Securities issued by a New Trust, to the extent
not paid by such New Trust (the "Guarantee Payments"), will be subject to the
New Preferred Securities Guarantee thereon (without duplication): (i) any
accrued and unpaid distributions which are required to be paid on such New
Preferred Securities, to the extent such New Trust shall have funds available
therefor, (ii) the applicable redemption price, to the extent such New Trust has
funds available therefor with respect to any New Preferred Securities called for
redemption by such New Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of such New Trust (other than in
connection with the distribution of New Debt Securities to the holders of New
Preferred Securities or the redemption of all of the New Preferred Securities),
the lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such New Preferred Securities to the date of payment, to
the extent such New Trust has funds available therefor and (b) the amount of
assets of such New Trust remaining available for distribution to holders of such
New Preferred Securities in liquidation of such New Trust. MediaOne's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by MediaOne to the holders of New Preferred Securities or by causing the
applicable New Trust to pay such amounts to such holders.
Each New Preferred Securities Guarantee will be a full and unconditional
guarantee with respect to the New Preferred Securities issued by the applicable
New Trust from the time of issuance of such New Preferred Securities, but will
not apply to any payment of distributions except to the extent such New Trust
shall have funds available therefor. If MediaOne Funding does not make interest
payments on the New Debt Securities held by a New Trust and MediaOne does not
fulfill its obligations under the New Debt Guarantee relating to such New Debt
Securities, such New Trust will not pay distributions on the New Preferred
Securities issued by such New Trust and will not have funds available therefor.
MediaOne has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the New Trusts with respect to the New Common
Securities (the "New Common Securities Guarantees") to the same extent as the
New Preferred Securities Guarantee, except that upon a Declaration Event of
Default, holders of New Preferred Securities shall have priority over holders of
New Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF MEDIAONE
In each New Preferred Securities Guarantee, MediaOne will covenant that, so
long as any New Preferred Securities issued by a New Trust remain outstanding,
if there shall have occurred a Declaration Event of Default with respect to such
New Trust or an event of default under the Preferred Securities Guarantee with
respect to such New Trust, then (a) MediaOne shall not (and shall cause MediaOne
Funding not to) declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock and (b) MediaOne shall not (and shall cause MediaOne
Funding not to) make any payment of interest, principal or premium, if any on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
MediaOne or MediaOne Funding which rank pari passu with or junior to the New
Debt Securities held by such New Trust, including the other series of New Debt
Securities and the related New Debt Guarantee and any Old Series I Debt
Securities and Old Series II Debt Securities remaining outstanding.
82
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
MODIFICATION OF THE NEW PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of the related New Preferred Securities (in which case no vote will
be required), a New Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than a majority in liquidation amount
of the outstanding New Preferred Securities issued by the applicable New Trust.
All guarantees and agreements contained in a New Preferred Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
MediaOne and shall inure to the benefit of the holders of the New Preferred
Securities of the applicable New Trust then outstanding.
TERMINATION
Each New Preferred Securities Guarantee will terminate as to the New
Preferred Securities issued by the applicable New Trust upon full payment of the
redemption price of all New Preferred Securities of such New Trust, upon
distribution of the New Debt Securities held by such New Trust to the holders of
such New Preferred Securities or upon full payment of the amounts payable in
accordance with the Declaration of such New Trust upon liquidation of such New
Trust. Each New Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of New
Preferred Securities issued by the applicable New Trust must restore payment of
any sums paid under such New Preferred Securities or such New Preferred
Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a New Preferred Securities Guarantee will occur
upon the failure of MediaOne to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the New Preferred
Securities relating to each New Preferred Securities Guarantee have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the New Preferred Guarantee Trustee in respect of such New
Preferred Securities Guarantee or to direct the exercise of any trust or power
conferred upon the New Preferred Guarantee Trustee under such New Preferred
Securities Guarantee. Any holder of such New Preferred Securities may institute
a legal proceeding directly against MediaOne to enforce such New Preferred
Guarantee Trustee's rights under such Preferred Securities Guarantee, without
first instituting a legal proceeding against the applicable New Trust, such New
Preferred Guarantee Trustee or any other person or entity.
STATUS OF THE NEW PREFERRED SECURITIES GUARANTEES
Each New Preferred Securities Guarantees will constitute an unsecured
obligation of MediaOne and will rank (i) subordinate and junior in right of
payment to all other liabilities of MediaOne (including the New Debt Guarantees
and the Old New Debt Securities), except those made pari passu or subordinate by
their terms, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by MediaOne and with any guarantee now or hereafter
entered into by U S WEST in respect of any preferred or preference stock of any
affiliate of MediaOne (including the Old Preferred Securities Guarantees) and
(iii) senior to the MediaOne Common Stock. The terms of the New Preferred
Securities provide that each holder of New Preferred Securities issued by a New
Trust by acceptance thereof agrees to the subordination provisions and other
terms of the New Preferred Securities Guarantee relating thereto.
The New Preferred Securities Guarantees will constitute guarantees of
payment and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
83
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
INFORMATION CONCERNING THE NEW PREFERRED GUARANTEE TRUSTEE
The New Preferred Guarantee Trustee with respect to each New Preferred
Securities Guarantee, prior to the occurrence of a default with respect to such
New Preferred Securities Guarantee, undertakes to perform only such duties as
are specifically set forth in such New Preferred Securities Guarantee and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provisions,
such New Preferred Guarantee Trustee is under no obligation to exercise any of
the powers vested in it by a New Preferred Securities Guarantee at the request
of any holder of New Preferred Securities to which such New Preferred Securities
Guarantee relates, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby.
MediaOne and certain of its affiliates maintain a deposit account and
banking relationship with The First National Bank of Chicago. The First National
Bank of Chicago serves as trustee under other indentures pursuant to which
unsecured debt securities of MediaOne and its affiliates are outstanding.
GOVERNING LAW
The New Preferred Securities Guarantees will be governed by and construed in
accordance with the internal laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE NEW DEBT SECURITIES, THE NEW DEBT GUARANTEES AND
THE NEW PREFERRED SECURITIES GUARANTEES
As set forth in the Declaration of each New Trust, the sole purpose of each
New Trust is to issue New Preferred Securities and New Common Securities and
invest the proceeds thereof in New Debt Securities.
As long as payments of interest and other payments are made when due on the
New Debt Securities held by a New Trust, such payments will be sufficient to
cover distributions and payments due on the New Preferred Securities and New
Common Securities of such New Trust primarily because (i) the aggregate
principal amount of such New Debt Securities will be equal to the sum of the
aggregate stated liquidation amount of such New Preferred Securities and New
Common Securities; (ii) the interest rate and interest and other payment dates
on such New Debt Securities will match the distribution rate and distribution
and other payment dates for such New Preferred Securities; (iii) MediaOne
Funding shall pay for all costs and expenses of such New Trust; and (iv) the
Declaration of such New Trust provides that the New Trustees of such New Trust
shall not cause or permit such New Trust to, among other things, engage in any
activity that is not consistent with the purposes of such New Trust. MediaOne
Funding has agreed to pay all of the expenses of the New Trusts and MediaOne has
agreed to guarantee such payment.
Payments of distributions (to the extent funds therefor are available) and
other payments due on each series of New Preferred Securities (to the extent
funds therefor are available) are guaranteed by MediaOne as and to the extent
set forth under "--Description of the New Preferred Securities Guarantees." If
MediaOne Funding does not make interest payments on the New Debt Securities
purchased by a New Trust and MediaOne does not make payments under the related
New Debt Guarantee, such New Trust will not have sufficient funds to pay
distributions on its New Preferred Securities. Each New Preferred Securities
Guarantee is a full and unconditional guarantee from the time of its issuance,
but does not apply to any payment of distributions unless and until the
applicable New Trust has sufficient funds for the payment of such distributions.
If MediaOne Funding fails to make interest or other payments on a series of
New Debt Securities when due (taking account of any Extension Period) and
MediaOne fails to make payments under the related New Debt Guarantee with
respect to such payments due on such New Debt Securities, the Declaration of the
applicable New Trust provides a mechanism whereby the holders of the New
84
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Preferred Securities of such New Trust, using the procedures described in
"--Description of the New Preferred Securities--Voting Rights," may direct the
New Property Trustee of such New Trust to enforce its rights under such New Debt
Securities and New Debt Guarantee, including proceeding directly against
MediaOne to enforce such New Debt Guarantee without first proceeding against
MediaOne Funding under such New Debt Securities. If such New Property Trustee
fails to enforce its rights under such New Debt Securities or New Debt
Guarantee, a holder of such New Preferred Securities may institute a legal
proceeding directly against MediaOne Funding or MediaOne to enforce such
Property Trustee's rights under such New Debt Securities or New Debt Guarantee,
as the case may be, without first instituting any legal proceeding against such
New Property Trustee or any other person or entity, including, in the case of
such New Debt Guarantee, against MediaOne Funding. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing with
respect to any New Trust and such event is attributable to the failure of
MediaOne Funding or MediaOne to pay interest or principal on the New Debt
Securities held by such New Trust on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), a
holder of New Preferred Securities of such New Trust may institute a Direct
Action for enforcement of payment to such holder of the principal of, or
interest on, such New Debt Securities having a principal amount equal to the
aggregate liquidation amount of the New Preferred Securities of such holder on
or after the respective due date specified in such New Debt Securities.
If MediaOne fails to make payments under a New Preferred Securities
Guarantee, such New Preferred Securities Guarantee provides a mechanism whereby
the holders of the related New Preferred Securities may direct the New Preferred
Guarantee Trustee with respect to such New Preferred Securities Guarantee to
enforce its rights thereunder. Any holder of such New Preferred Securities may
institute a legal proceeding directly against MediaOne to enforce such New
Preferred Guarantee Trustee's rights under such New Preferred Securities
Guarantee, without first instituting a legal proceeding against the applicable
New Trust, such New Preferred Guarantee Trustee or any other person or entity.
MediaOne and the New Trusts believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by MediaOne of payments due on the New Preferred Securities.
COMPARISON OF RIGHTS OF SECURITYHOLDERS
In connection with the Offers, holders of Old Preferred Securities will have
the right to exchange their Old Preferred Securities for New Preferred
Securities. The terms of the New Preferred Securities, the New Debt Securities,
the New Debt Guarantees and the New Preferred Securities Guarantees will be
substantially the same as the terms of the corresponding Old Preferred
Securities, Old Debt Securities, Old Debt Guarantee and Old Preferred Securities
Guarantee, except as described below.
DISTRIBUTION AND INTEREST RATE
The distribution rate on the Old Series I Preferred Securities and the
interest rate on the Old Series I Debt Securities is 7.96%. The distribution
rate on the New Series I Preferred Securities and the interest rate on the New
Series I Debt Securities is %. The distribution rate on the Old Series II
Preferred Securities and the interest rate on the Old Series II Debt Securities
is 8 1/4%. The distribution rate on the New Series II Preferred Securities and
the interest rate on the New Series II Debt Securities is %.
OBLIGOR ON DEBT SECURITIES
Capital Funding is the obligor under the Old Debt Securities and the
obligations of Capital Funding under the Old Debt Securities are guaranteed by U
S WEST pursuant to the Old Debt Guarantees. After the Separation, the
obligations of Capital Funding under the Old Debt Securities
85
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
relating to any Old Preferred Securities not tendered will be assumed by
MediaOne (i.e., U S WEST after the Separation) and, as a result, the Old Debt
Guarantees will no longer be required. MediaOne Funding is the obligor under the
New Debt Securities and the obligations of MediaOne Funding are guaranteed by
MediaOne pursuant to the New Debt Guarantees. As a result of the foregoing,
after the Separation, MediaOne will be the ultimate obligor of both the Old Debt
Securities (directly) and the New Debt Securities (through the New Debt
Guarantees). If MediaOne elects to defease the Old Debt Securities, Capital
Funding will remain the obligor thereunder.
RIGHT TO DISTRIBUTE DEBT SECURITIES
Pursuant to the declaration of the Old Series I Trust, U S WEST only has the
right to dissolve the Old Series I Trust and distribute the Old Series I Debt
Securities to the holders of Old Series I Preferred Securities and Old Series I
Common Securities if a Special Event occurs and, in the case of a Tax Event, U S
WEST receives a certain opinion from tax counsel. Pursuant to the declaration of
the Old Series II Trust, U S WEST has the unconditional right at any time to
dissolve the Old Series II Trust and distribute the Old Series II Debt
Securities to holders of Old Series II Preferred Securities and Old Senior II
Common Securities. Pursuant to the Declarations of the New Trusts, MediaOne will
have the same flexibility provided to U S WEST with respect to the Old Series II
Trust and will have the unconditional right at any time to dissolve a New Trust
and distribute the New Debt Securities held by such New Trust to the holders of
New Preferred Securities and New Common Securities of such New Trust. The terms
of the Declaration of the New Series I Trust were modified from the terms of the
declaration of the Old Series I Trust to provide such unconditional distribution
right in order to provide to MediaOne the same flexibility with respect to the
New Series I Trust that it will have with respect to the New Series II Trust.
SPECIAL EVENT REDEMPTION
Pursuant to the declaration of the Old Series I Trust, Capital Funding only
has the right to redeem the Old Series I Debt Securities upon the occurrence of
a Tax Event if U S WEST receives a certain opinion, and does not receive a
certain other opinion, from tax counsel. In addition, U S WEST does not have the
right to redeem the Old Series I Debt Securities upon the occurrence of an
Investment Company Event. Pursuant to the declaration of the Old Series II
Trust, Capital Funding has the unconditional right to redeem the Old Series II
Debt Securities at any time upon the occurrence of a Special Event. Pursuant to
the Declarations of the New Trusts, MediaOne Funding will have the same
flexibility provided to Capital Funding with respect to the Old Series II Debt
Securities and will have the unconditional right to redeem either series of New
Debt Securities upon the occurrence of a Special Event. The terms of the
Declaration of the New Series I Trust were modified from the terms of the
declaration of the Old Series I Trust to provide such unconditional redemption
right in order to provide to MediaOne the same flexibility with respect to the
New Series I Trust that it will have with respect to the New Series II Trust.
DIRECT ACTIONS
Under the terms of the Old Preferred Securities of each Old Trust, before a
record holder may institute a legal proceeding directly against Capital Funding
or U S WEST to enforce any of the rights of the property trustee of such Old
Trust under the Old Debt Securities or Old Debt Guarantee, as the case may be,
held by such Old Trust, such record holder must first make a request to such
property trustee to enforce such right and such property trustee must fail to
enforce such rights. Under the terms of the New Preferred Securities of each New
Trust, if a Declaration Event of Default has occurred and is continuing with
respect to any New Trust and such event is attributable to the failure of
MediaOne Funding or MediaOne to pay interest or principal on the New Debt
Securities held by such New Trust, a holder of New Preferred Securities of such
New Trust has the right to institute a Direct Action for enforcement of payment
to such holder of the principal of, or interest on, New Debt
86
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
Securities having a principal amount equal to the aggregate liquidation amount
of the New Preferred Securities of such holder without first making a request to
the Property Trustee of such New Trust to enforce such right.
Under the terms of each Old Preferred Securities Guarantee, a record holder
is only permitted to institute a legal proceeding directly against U S WEST to
enforce any of the rights of the trustee under such Old Preferred Securities
Guarantee if such trustee fails to enforce such Old Preferred Securities
Guarantee. Under the terms of each New Preferred Securities Guarantee, a record
holder is permitted to institute a legal proceeding directly against MediaOne to
enforce any of the rights of the New Preferred Guarantee Trustee under such New
Preferred Securities Guarantee whether or not such New Preferred Guarantee
Trustee fails to enforce such New Preferred Securities Guarantee.
SPECIAL REGULAR TRUSTEE
Under the declaration of the Old Series I Trust, if the Old Series I Trust
fails to pay distributions in full on the Old Series I Preferred Securities for
6 consecutive quarterly distribution periods or an event of default under such
declaration occurs and is continuing, then the holders of the Old Series I
Preferred Securities, acting as a single class, will be entitled by the majority
vote of such holders to appoint an additional regular trustee of the Old Series
I Trust. The declaration of the Old Series II Trust and the Declarations of the
New Trusts do not provide a similar right to appoint an additional regular
trustee.
CERTAIN VOTING REQUIREMENTS
Under the declaration of each Old Trust, the approval of the holders of
66 2/3% in liquidation amount of the applicable series of Old Preferred
Securities and Old Common Securities is required to modify such declaration.
Similarly, under each Old Preferred Securities Guarantee, the approval of the
holders of 66 2/3% in liquidation amount of the applicable series of Old
Preferred Securities is required to modify such Old Preferred Securities
Guarantee. Under the Declaration of each New Trust, the approval of the holders
of only a majority in liquidation amount of the applicable series of New
Preferred Securities and New Common Securities will be required to modify such
Declaration. Similarly, under each New Preferred Securities Guarantee, the
approval of the holders of only a majority in liquidation amount of the
applicable series of New Preferred Securities will be required to modify such
New Preferred Securities Guarantee. This voting requirement has been modified to
conform the vote required for amendments to the Declarations and the Preferred
Securities Guarantees to the vote required for amendments to the New Indenture.
87
CHAPTER 6: THE NEW PREFERRED SECURITIES
<PAGE>
CHAPTER 7: CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain of the material United States federal
income tax consequences to holders of Old Preferred Securities of the Offers and
the MediaOne Debt Assumption, and the ownership and disposition of New Preferred
Securities and of Old Preferred Securities not tendered in the Offers, insofar
as it constitutes statements of law or legal conclusions, represents the opinion
of Weil, Gotshal & Manges LLP, counsel to U S WEST, and is subject to the
qualifications set forth herein. This discussion applies only to a holder that
is a citizen or resident of the United States, a corporation, partnership or
other entity created or organized under the laws of the United States or any
state thereof or the District of Columbia, an estate, the income of which is
subject to United States federal income taxation regardless of source, or a
trust, with respect to which a court within the United States is able to
exercise primary supervision over its administration and one or more United
States fiduciaries have the authority to control all of its substantial
decisions. This discussion does not address the United States federal income tax
consequences to persons other than such holders.
This discussion is based on the United States federal income tax laws,
regulations and rulings and decisions now in effect, all of which are subject to
change, possibly on a retroactive basis. This discussion assumes that the Old
Debt Securities and New Debt Securities constitute indebtedness for United
States federal income tax purposes. This discussion assumes that holders hold
their Preferred Securities as "capital assets," and does not address the tax
consequences applicable to investors that may be subject to special tax rules
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or persons that hold Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment or as other than a
capital asset. This discussion also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Preferred
Securities. Further, it does not include any description of any alternative
minimum or estate tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities.
THE FOLLOWING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY
NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
OFFERS AND THE MEDIAONE DEBT ASSUMPTION, AND THE OWNERSHIP AND DISPOSITION OF
THE NEW PREFERRED SECURITIES, AND THE OLD PREFERRED SECURITIES NOT TENDERED IN
THE OFFERS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE OFFERS AND THE MEDIAONE DEBT ASSUMPTION
The consummation of the Offers and the MediaOne Debt Assumption will
constitute taxable transactions. As a result, all holders of Old Preferred
Securities will recognize gain or loss pursuant to the Offers and the MediaOne
Debt Assumption equal to the difference between such holders' adjusted tax basis
in the Old Preferred Securities and the amount realized, as described below.
A holder's adjusted tax basis in the Old Preferred Securities generally
would be their initial purchase price, increased by any OID previously
includible in such holder's gross income to the date of disposition (and the
accrual of market discount, if any, if an election to accrue market discount in
income currently was made) and decreased by payments received on the Old
Preferred Securities and any amortized bond premium. Any such gain or loss would
be capital gain or loss (other than cash received with respect to accrued and
unpaid interest, and market discount which has not yet been
88
CHAPTER 7: CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
<PAGE>
included in income, which amounts will be treated as ordinary income) and would
be long-term capital gain or loss if the holder's holding period exceeded one
year. Recently enacted legislation provides that for certain holders (including
individuals), the maximum rate of federal income taxation on net long-term
capital gains is 28% if the holding period was greater than one year but not
more than eighteen months, and 20% if the holding period exceeded eighteen
months.
/ / The amount realized by holders electing to exchange Old Preferred
Securities for cash will equal the amount of cash received in the exchange.
/ / Holders electing to exchange Old Preferred Securities for New Preferred
Securities will be treated for federal income tax purposes as having exchanged
Old Preferred Securities for cash and having purchased, immediately thereafter,
New Preferred Securities with the cash deemed received in such exchange. The
amount realized by such holders will equal the "issue price" of their allocable
share of the underlying New Debt Securities (defined under the Code as the
initial offering price to the public (excluding bond houses and brokers) at
which price a substantial amount of such New Debt Securities were sold). The
issue price of the New Preferred Securities will equal their fair market value
on the Delivery Date, which amount may be greater than their principal amount.
/ / The MediaOne Debt Assumption will constitute a significant modification
of the Old Debt Securities under the applicable Treasury Regulations.
Accordingly, for federal income tax purposes, any Old Preferred Securities not
tendered in the Offers (together with the corresponding Old Debt Securities)
will be deemed to be reissued by MediaOne on the Separation Date (the "Reissued
Securities"), and holders who do not tender in the Offers will have a taxable
exchange as a result thereof. The amount realized by such holders will equal the
issue price of their allocable share of the Reissued Securities. The issue price
of the Reissued Securities will equal their fair market value on the Separation
Date, which amount may be greater than their principal amount.
A holder of Old Preferred Securities having market discount (defined as the
amount by which a holder's basis in a debt obligation immediately after its
acquisition is exceeded by the stated redemption price at maturity of such debt
obligation, subject to a DE MINIMIS exception) would be required to treat as
ordinary income any gain recognized to the extent of the market discount accrued
during the holder's period of ownership, unless the holder elected to include
the market discount in income as it accrued. Any gain in excess of such accrued
market discount will be capital gain. If a tendering holder did not elect to
include any market discount in income as it accrued, any interest deduction such
holder deferred pursuant to the market discount provisions on indebtedness
incurred or maintained to purchase or carry such Old Preferred Securities would
become deductible at the time the Old Preferred Securities were disposed of
pursuant to the Offers. Generally, market discount obligations do not include
any Old Preferred Securities acquired by a holder at their original issue.
Holders of Old Preferred Securities having market discount should consult their
own tax advisors as to the effect to them of the market discount rules on the
Offers and the MediaOne Debt Assumption.
Backup withholding of federal income tax at the rate of 31% may apply to the
amount realized by tendering holders of Old Preferred Securities in connection
with the transactions described herein, unless a holder complies with certain
information reporting procedures or is an exempt recipient. Any amount withheld
pursuant to these backup withholding rules may be allowed as a refund or credit
against a holder's federal income tax.
89
CHAPTER 7: CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF OWNING AND DISPOSING OF NEW PREFERRED
SECURITIES
CLASSIFICATION OF THE NEW TRUSTS
Assuming full compliance with the terms of the New Indenture and the
applicable Declaration (and certain other documents), each of the New Series I
Trust and the New Series II Trust will be classified, for federal income tax
purposes, as a grantor trust and not as an association taxable as a corporation.
In such case, each holder of New Series I Preferred Securities will be treated
for federal income tax purposes as owning an undivided beneficial interest in
the New Series I Debt Securities and each holder of New Series II Preferred
Securities will be treated as owning an undivided beneficial interest in the New
Series II Debt Securities, and each holder of New Preferred Securities will be
required to include in its gross income the items of income realized with
respect to its allocable share of those New Debt Securities.
ORIGINAL ISSUE DISCOUNT
In general, a debt instrument will have OID equal to the excess of its
"stated redemption price at maturity" over its "issue price" (as defined above).
An instrument's "stated redemption price at maturity" is equal to the sum of all
amounts payable as interest and principal on the instrument, excluding only
"qualified stated interest." Treasury Regulations generally provide that stated
interest on a debt instrument is not "qualified stated interest" and therefore
will give rise to OID unless such interest is unconditionally payable in cash or
in property (other than debt instruments of the issuer) at least annually at a
single fixed rate. Interest is considered to be unconditionally payable only if
reasonable legal remedies exist to compel timely payment or the debt instrument
otherwise provides terms and conditions that make the likelihood of late payment
(other than late payment that occurs within a reasonable grace period) or
non-payment a "remote contingency."
The terms of the New Debt Securities provide MediaOne Funding with the
option to defer payments of interest by extending the interest payment period
for a period not exceeding 20 consecutive quarters. Under the terms of the New
Indenture, in the event that MediaOne Funding exercises such option, MediaOne is
restricted from, among other things, paying divdends on the MediaOne Common
Stock. U S WEST currently does not pay dividends on the Media Stock and it is
not expected that MediaOne will pay dividends on the MediaOne Common Stock in
the foreseeable future. Accordingly, the likelihood that MediaOne will elect to
defer payments of interest on the New Debt Securities solely by reason of the
terms of the New Debt Securities is not considered a "remote contingency" under
the applicable Treasury Regulations, and, as a result thereof, none of the
payments on the New Debt Securities will be considered "qualified stated
interest." Accordingly, the New Debt Securities will be issued with OID, and all
of the interest payments on the New Debt Securities will be treated as part of
their stated redemption price at maturity. Holders of debt instruments issued
with OID must include the OID in income on an economic accrual basis before the
receipt of cash attributable to the OID, regardless of their regular method of
tax accounting. The amount of OID that accrues in any month will approximate the
amount of interest that accrues in that month at the stated interest rate. In
the event that MediaOne Funding exercises its option to extend an interest
payment period, holders will continue to accrue OID in an amount which will
approximate the interest payment due at the end of the extended interest payment
period on an economic accrual basis over the length of such Extension Period.
Corporate holders of New Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income earned on the New
Preferred Securities.
To the extent a holder acquires its New Preferred Securities in the
secondary market at a price that is greater or less than the adjusted issue
price of such holder's share of the New Debt Securities,
90
CHAPTER 7: CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
<PAGE>
the holder may be deemed to have acquired its interest in the New Debt
Securities with acquisition premium or with market discount, as the case may be.
A holder who purchases New Preferred Securities at a premium will be permitted
to reduce the amount of OID required to be included in income to reflect the
acquisition premium. Holders who purchase New Preferred Securities at a market
discount will also include the amount of such discount in income, as discussed
above in "Federal Income Tax Consequences of the Offers and the MediaOne Debt
Assumption." Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of New
Preferred Securities.
RECEIPT OF NEW DEBT SECURITIES UPON LIQUIDATION OF A NEW TRUST
As described in "Chapter 6: The New Preferred Securities--Distribution of
the New Debt Securities," New Series I Debt Securities and New Series II Debt
Securities may be distributed to holders in exchange for, respectively, New
Series I Preferred Securities and New Series II Preferred Securities and in
liquidation of, respectively, the New Series I Trust and the New Series II
Trust. Under current law, such a distribution would be treated as a non-taxable
event to each holder and each holder would receive an aggregate tax basis in the
New Debt Securities equal to such holder's aggregate tax basis in its New
Preferred Securities. A holder's holding period in the New Debt Securities so
received in liquidation of a New Trust would include the period for which the
New Preferred Securities were held by such holder.
SALE OR REDEMPTION OF CERTIFICATES
A holder that sells New Preferred Securities (or whose Certificates are
redeemed for cash) will recognize gain or loss equal to the difference between
its adjusted tax basis in the securities and the amount realized on the sale
(other than with respect to accrued and unpaid interest and market discount
which has not yet been included in income, which will be treated as ordinary
income). A holder's adjusted tax basis in the New Preferred Securities generally
will be its initial issue price, increased by any OID previously includible in
such holder's gross income to the date of disposition (and the accrual of market
discount, if any, if an election to accrue market discount in income currently
is made) and decreased by payments received on the New Preferred Securities and
any amortized bond premium. Any such gain or loss would be capital gain or loss,
and would be long-term capital gain or loss if the holder's holding period
exceeded one year. Recently enacted legislation provides that for certain
holders (including individuals), the maximum rate of federal income taxation on
net long-term capital gains is 28% if the holding period was greater than one
year but not more than eighteen months, and 20% if the holding period exceeded
eighteen months.
The New Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
New Debt Securities. A holder who disposes of his New Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the New Debt Securities through the date
of disposition in income as ordinary income, and to add such amount to his
adjusted tax basis in his pro rata share of the underlying New Debt Securities
deemed disposed of. To the extent the selling price is less than such holder's
adjusted tax basis (which will include all OID and accrued but unpaid interest),
a holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for federal income
tax purposes.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the New Preferred
Securities will be reported to holders on Forms 1099, which forms are expected
to be mailed to holders of New Preferred Securities by January 31 following each
calendar year.
91
CHAPTER 7: CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
<PAGE>
Each New Trust will be obligated to report annually to Cede & Co., as holder
of record of the New Preferred Securities, the OID related to the New Debt
Securities for that year. The New Trusts currently intend to report such
information on Form 1099 prior to January 31 following each calendar year even
though the New Trusts are not legally required to report to record holders until
April 15 following each calendar year. The Dealer Managers have indicated to the
New Trusts that, to the extent that they hold New Preferred Securities as
nominees for beneficial holders, they currently expect to report to such
beneficial holders on Forms 1099 by January 31 following each calendar year.
Under current law, holders of New Preferred Securities who hold as nominees for
beneficial holders will not have any obligation to report information regarding
the beneficial holders to each New Trust. The New Trusts, moreover, will not
have any obligation to report to beneficial holders who are not also record
holders. Thus, beneficial holders of New Preferred Securities who hold their New
Preferred Securities through the Dealer Managers will receive Forms 1099
reflecting the income on their New Preferred Securities from such nominee
holders rather than the New Trusts.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the New Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's federal income tax, provided the
required information is provided to the Service.
PROPOSED TAX LEGISLATION
Several recent legislative proposals, if enacted into law, generally would
have denied corporate issuers a deduction for interest in respect of certain
debt obligations such as the New Debt Securities. Although such proposals have
not, to date, been enacted, there can be no assurances that similar legislation
enacted in the future will not adversely affect the ability of MediaOne Funding
to deduct the interest payable on the New Debt Securities. As such, while there
is no reason to believe that a Tax Event will occur in the immediate future,
there can be no assurance that a Tax Event will not occur. See "Chapter 6: The
New Preferred Securities--Distribution of the New Debt Securities".
FEDERAL INCOME TAX CONSEQUENCES OF OWNING AND DISPOSING OF OLD PREFERRED
SECURITIES AFTER THE MEDIAONE DEBT ASSUMPTION
As described above under "Federal Income Tax Consequences of the Offers and
the MediaOne Debt Assumption," because the MediaOne Debt Assumption will
constitute a significant modification of the Old Debt Securities for federal
income tax purposes, the Old Preferred Securities will be deemed to have been
reissued on the Separation Date. The federal income tax consequences of the
ownership and disposition of the Reissued Securities should be the same as
discussed above under "Federal Income Tax Consequences of Owning and Disposing
of New Preferred Securities."
92
CHAPTER 7: CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
<PAGE>
CHAPTER 8: CERTAIN OTHER MATTERS
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OFFERS
Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with either Offer between U S
WEST, Capital Funding or MediaOne Funding or any of their directors or executive
officers or the New Trusts or the Old Trusts or their trustees and any person
with respect to any securities of U S WEST, Capital Funding, MediaOne Funding, a
New Trust or an Old Trust, including the New Preferred Securities, the New Debt
Securities, the New Debt Guarantees, the New Preferred Securities Guarantees,
the Old Preferred Securities, the Old Debt Securities, the Old Debt Guarantees
and the Old Preferred Securities Guarantee.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of Old Preferred Securities in each Offer
will be borne by Capital Funding. For information regarding compensation to be
paid to the Dealer Managers and Soliciting Dealers, see "Dealer Managers;
Soliciting Dealers." The total cash expenditures to be incurred in connection
with the Series I Offer, other than fees payable to the Dealer Managers and
Soliciting Dealers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent, the
Information Agent and the trustees of the Old Series I Trust and the New Series
I Trust, in each case with respect to the Series I Offer, are estimated to be
approximately $ . The total cash expenditures to be incurred in connection
with the Series II Offer, other than fees payable to the Dealer Managers and
Soliciting Dealers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent, the
Information Agent and the trustees of the Old Series I Trust and the Old Series
II Trust, in each case with respect to the Series II Offer, are estimated to be
approximately $ . Capital Funding will pay all transfer taxes, if any,
applicable to the exchange of Old Preferred Securities pursuant to each Offer.
If, however, certificates representing New Preferred Securities or Old Preferred
Securities not tendered or accepted for exchange in an Offer are to be delivered
to, or are to be issued in the name of, any person other than the registered
holder of the Old Preferred Securities tendered or if a transfer tax is imposed
for any reason other than the exchange of Old Preferred Securities pursuant to
such Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted, the amount of such transfer taxes will be billed directly to such
tendering Holder.
DEALER MANAGERS; SOLICITING DEALERS
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc.,
as Dealer Managers for the Offers, have agreed to solicit exchanges of Old
Preferred Securities for New Preferred Securities or cash. The fee payable by
Capital Funding to the Dealer Managers is, in the aggregate, $ per Old
Preferred Security validly tendered and accepted for exchange pursuant to the
Offers plus any amount that the Dealer Managers may be entitled to pursuant to
the next paragraph. Capital Funding will also reimburse the Dealer Managers for
certain reasonable out-of-pocket expenses in connection with the Offers and
Capital Funding will indemnify the Dealer Managers against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). The Dealer Managers engage in transactions with, and from
time to time have performed services for, U S WEST and its subsidiaries. In
addition, the Dealer Managers each acted as underwriter for the issuance of each
series of the Old Preferred Securities.
Capital Funding will pay to Soliciting Dealers designated by the beneficial
owner of the Old Preferred Securities validly tendered and accepted pursuant to
the Offers a solicitation fee of $0.50 per Old Preferred Security exchanged for
New Preferred Securities and $0.375 per Old Preferred Security tendered for cash
(except that in the case of transactions equal to or exceeding 10,000 Old
Preferred
93
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
Securities of either series, Capital Funding will pay $0.25 per Old Preferred
Security exchanged for New Preferred Securities or tendered for cash), in each
case subject to certain conditions. In cases where no Soliciting Dealer is
designated, the Dealer Managers will be paid one hundred percent (100%) of the
applicable solicitation fee. As used in this Prospectus, "Soliciting Dealer"
includes (i) any broker or dealer in securities, including each Dealer Manager
in its capacity as a broker or dealer, who is a member of any national
securities exchange or of the National Association of Securities Dealers, Inc.
(the "NASD"), (ii) any foreign broker or dealer not eligible for membership in
the NASD who agrees to conform to the NASD's Rules of Fair Practice in
soliciting tenders outside the United States to the same extent as though it
were an NASD member, or (iii) any bank or trust company, any one of whom has
solicited and obtained a tender pursuant to the Offers.
Soliciting Dealers will include any of the organizations described in
clauses (i), (ii) and (iii) above even when the activities of such organizations
in connection with an Offer consist solely of forwarding to clients materials
relating to such Offer, including this Prospectus and the applicable Letter of
Transmittal, and tendering Old Preferred Securities as directed by beneficial
owners thereof; provided that under no circumstances shall any fee be paid to
Soliciting Dealers more than once with respect to any Old Preferred Security. No
Soliciting Dealer is required to make any recommendation to holders of Old
Preferred Securities as to whether to tender or refrain from tendering in an
Offer. No assumption is made, in making payment to any Soliciting Dealer, that
its activities in connection with an Offer included any activities other than
those described above, and for all purposes noted in all materials relating to
an Offer, the term "solicit" shall be deemed to mean no more than processing Old
Preferred Securities tendered or forwarding to customers materials regarding the
Offers.
In order to receive a solicitation fee, the Soliciting Dealer must return a
Notice of Solicited Tenders (included in the materials provided to brokers and
dealers) to the Exchange Agent within two trading days after the applicable
Expiration Date. No solicitation fee shall be payable to a Soliciting Dealer in
respect of shares of Old Preferred Securities (i) beneficially owned by such
Soliciting Dealer or (ii) registered in the name of such Soliciting Dealer
unless such Old Preferred Securities are being held by such Soliciting Dealer as
nominee and such Old Preferred Securities are being tendered for the benefit of
one or more beneficial owners identified on the accompanying Letter of
Transmittal or the Notice of Solicited Tenders.
No fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is
required for any reason to transfer any portion of such fee to a tendering
Holder (other than itself). No broker, dealer, bank, trust company or fiduciary
shall be deemed to be the agent of U S WEST, Capital Funding, MediaOne Funding,
a New Trust, an Old Trust, the New Trustees, the Trustees of the Old Trusts, the
Exchange Agent, the Information Agent or the Dealer Managers for purposes of the
Offers.
Other than as described above, Capital Funding will not pay any solicitation
fees to any broker, dealer, bank, trust company or other person for any Old
Preferred Securities exchanged in connection with the Offers. Capital Funding
will reimburse such persons for customary handling and mailing expenses incurred
in connection with the Offers.
Additional solicitations may be made by telephone, in person or otherwise by
officers and regular employees of U S WEST and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
EXCHANGE AGENT AND INFORMATION AGENT
First Chicago Trust Company of New York has been appointed as Exchange Agent
for each of the Offers.
Beacon Hill Partners, Inc. has been retained as the Information Agent to
assist in connection with each of the Offers. Questions and requests for
assistance regarding the Offers, requests for additional
94
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
copies of this Prospectus, the Letters of Transmittal and requests for Notices
of Guaranteed Delivery may be directed to the Information Agent.
In connection with each Offer, Capital Funding will pay the Exchange Agent
and Information Agent reasonable and customary fees for their services and will
reimburse them for all their reasonable out-of-pocket expenses in connection
therewith.
95
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
MARKET PRICE DATA
The Old Series I Preferred Securities are listed and traded on the NYSE
under the symbol "USWPrA" and the Old Series II Preferred Securities are listed
and traded on the NYSE under the symbol "USWPrB." The following table sets forth
the high and low sales prices on the NYSE Composite Tape of the Old Series I
Preferred Securities and the Old Series II Preferred Securities for the periods
indicated. The Old Series II Preferred Securities were not listed and traded
prior to October 28, 1996.
<TABLE>
<CAPTION>
HIGH SALES LOW SALES
PRICE PRICE
----------- -----------
<S> <C> <C>
OLD SERIES I PREFERRED SECURITIES
1996
First Quarter..................................................... 26.63 24.88
Second Quarter.................................................... 25.50 24.13
Third Quarter..................................................... 30.75 24.13
Fourth Quarter.................................................... 25.55 24.06
1997
First Quarter..................................................... 25.50 24.38
Second Quarter.................................................... 25.38 24.13
Third Quarter..................................................... 25.94 24.75
Fourth Quarter.................................................... 26.80 24.81
1998
First Quarter..................................................... 26.25 25.19
Second Quarter (through April 30, 1998)........................... 26.00 25.44
OLD SERIES II PREFERRED SECURITIES
1996
Fourth Quarter.................................................... 25.63 24.25
1997
First Quarter..................................................... 25.63 24.81
Second Quarter.................................................... 25.75 24.63
Third Quarter..................................................... 26.25 25.25
Fourth Quarter.................................................... 26.31 25.13
1998
First Quarter..................................................... 26.69 25.63
Second Quarter (through April 30, 1998)........................... 26.56 25.81
</TABLE>
On October 24, 1997, the trading day prior to the announcement of the
Separation, the closing sales prices of the Old Series I Preferred Securities
and the Old Series II Preferred Securities, as reported on the NYSE Composite
Tape, were $25.25 and $25.75, respectively. On April 30, 1998, the closing sales
prices of the Old Series I Preferred Securities and the Old Series II Preferred
Securities, as reported on the NYSE Composite Tape, were $26.00 and $26.44,
respectively. HOLDERS OF OLD PREFERRED SECURITIES ARE URGED TO OBTAIN CURRENT
TRADING PRICE INFORMATION WITH RESPECT TO THE OLD PREFERRED SECURITIES.
96
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New
Preferred Securities will be passed upon on behalf of the New Trusts by Morris,
Nichols, Arsht & Tunnell, Wilmington, Delaware, special Delaware counsel to the
New Trusts. The validity of the New Debt Securities, the New Preferred
Securities Guarantee, the New Debt Guarantee and certain matters relating
thereto will be passed upon on behalf of U S WEST and MediaOne Funding by Weil,
Gotshal & Manges LLP, New York, New York and on behalf of the Dealer Managers by
Brown & Wood LLP, New York, New York. Certain United States federal income
taxation matters will be passed upon for U S WEST, MediaOne Funding, Capital
Funding, the New Trusts and the Old Trusts by Weil, Gotshal & Manges LLP.
EXPERTS
The consolidated financial statements and the consolidated financial
statement schedule of U S WEST as of December 31, 1997 and for the two years
ended December 31, 1997 included in U S WEST's Annual Report on Form 10-K for
the year ended December 31, 1997, as amended by Form 10-K/A filed April 13,
1998, have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their reports with respect thereto, and are incorporated herein
by reference in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated financial statements and the consolidated financial
statement schedule of U S WEST for the year ended December 31, 1995 included in
U S WEST's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended by Form 10-K/A filed April 13, 1998, are incorporated herein by
reference in reliance on the reports of Coopers & Lybrand L.L.P., independent
public accountants, given on the authority of that firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
U S WEST is subject to the informational requirements of the Exchange Act
and in accordance therewith file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
concerning U S WEST can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Office at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also can be obtained, at prescribed rates, from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a site on the Internet's World Wide Web at
http://www.sec.gov. that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including U S WEST. The Old Preferred Securities are listed and
traded on the NYSE and the Communications Stock and Media Stock are listed and
traded on the NYSE and the PSE and such reports, proxy statements and other
information concerning U S WEST may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and at the offices of the PSE,
115 Sansome Street, 2nd Floor, San Francisco, California 94104. Following the
Separation, U S WEST (as MediaOne) will continue to be subject to the
informational requirements of the Exchange Act.
U S WEST, MediaOne Funding and the New Trusts have filed with the Commission
a registration statement on Form S-4 (such registration statement, together with
all amendments, is referred to herein as the "Registration Statement") under the
Securities Act covering the securities offered pursuant to the Offers. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement, which is
available for inspection and copying as set forth above. Statements contained in
this Prospectus or in any document incorporated by reference in this Prospectus
as to the contents of any
97
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, or such other
document, each such statement being qualified in all respects by such reference.
This Prospectus constitutes a part of an Issuer Tender Offer Statement on
Schedule 13E-4 (the "Schedule 13E-4") filed with the Commission by Capital
Funding, the New Trusts and the Old Trusts pursuant to Section 13(e) of the
Exchange Act and the rules and regulations promulgated thereunder. The Schedule
13E-4 and all exhibits thereto are incorporated in this Prospectus by reference.
No separate financial statements of MediaOne Funding or any of the New
Trusts have been included herein. U S WEST does not consider that such financial
statements would be material to holders of the New Preferred Securities because:
(i) all of the voting securities of MediaOne Funding and each New Trust are
owned, directly or indirectly, by U S WEST, a reporting company under the
Exchange Act, (ii) neither MediaOne Funding nor either New Trust has any
independent operations but exists for the sole purpose of issuing, in the case
of MediaOne Funding, debt securities guaranteed by U S WEST, and, in the case of
the New Trusts, securities representing undivided beneficial interests in the
assets of the New Trusts and investing the proceeds thereof in New Debt
Securities guaranteed by U S WEST, and (iii) the obligations of MediaOne Funding
under the New Debt Securities are fully and unconditionally guaranteed by U S
WEST, and the obligations of U S WEST described herein to provide certain
indemnities in respect of, and be responsible for, certain costs, expenses,
debts and liabilities of each New Trust under the New Indenture and pursuant to
the applicable Declaration, the New Preferred Securities Guarantees issued by U
S WEST with respect to the New Preferred Securities of such New Trust, the New
Debt Securities purchased by such New Trust and the New Indenture, taken
together, constitute a full and unconditional guarantee of payments due on the
New Preferred Securities of such New Trust. See "Chapter 6: The Preferred
Securities--Description of the New Debt Securities and the NewDebt Guarantees"
and "--Description of the New Preferred Securities Guarantees." MediaOne Funding
and the New Trusts are not currently subject to the informational requirements
of the Exchange Act. MediaOne Funding and the New Trusts will become subject to
such requirements upon the effectiveness of the Registration Statement, although
MediaOne Funding and each New Trust intends to seek and expects to receive
exemptions therefrom.
The following documents, which have been filed by U S WEST (File No. 1-8611)
with the Commission under the Exchange Act, are incorporated herein by
reference:
(a) U S WEST's Annual Report on Form 10-K for the year ended December
31, 1997 (as amended by Form 10-K/A filed on April 13, 1998).
(b) U S WEST's Current Reports on Form 8-K dated January 29, 1998,
February 17, 1998, March 25, 1998 (as amended by Form 8-K/A filed on April
13, 1998) and April 17, 1998.
All documents filed with the Commission by U S WEST pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of this offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date any such document is
filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part hereof.
98
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED WITHOUT CHARGE TO EACH
PERSON TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN
ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF ANY OR ALL OF THE
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO U S WEST, INC., INVESTOR
RELATIONS, 7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111 (TELEPHONE NUMBER
(303) 793-6500). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY
REQUEST SHOULD BE MADE BEFORE , 1998.
99
CHAPTER 8: CERTAIN OTHER MATTERS
<PAGE>
ANNEX A
THE PROPOSED AMENDMENTS
The covenant in the Old Indenture relating to consolidations, mergers and
sales of all or substantially all of the assets of U S WEST (the "Guarantor")
and Capital Funding (the "Company") reads as follows:
SECTION 10.01 Company or Guarantor May Consolidate, Etc.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company or the Guarantor with
or into any other corporation or corporations (whether or not affiliated
with the Company or the Guarantor, as the case may be), or successive
consolidations or mergers in which the Company or the Guarantor, as the
case may be, or its successor or successors shall be a party or parties,
or shall prevent any sale, conveyance, transfer or other disposition or
the property or the Company or the Guarantor, as the case may be, or its
successor or successors as an entirely, or substantially as an entirely,
to any other corporation (whether or not affiliated with the Company or
the Guarantor, as the case may be, or its successor or successors)
authorized to acquire and operate the same; PROVIDED, HOWEVER, the
Company and the Guarantor hereby covenant and agree that, upon any such
consolidation, merger, sale, conveyance, transfer or other disposition,
the due and punctual payment, in the case of the Company, of the
principal of (premium, if any) and interest on all of the Debt Securities
of all series in accordance with the terms of each series, according to
their tenor or, in the case of the Guarantor, the performance of all
obligations under the Guarantees, and the due and punctual performance
and observance of all the covenants and conditions of this Indenture with
respect to each series or established with respect to such series
pursuant to Section 2.01 to be kept or performed by the Company or the
Guarantor, as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the
Trust Indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee
executed and delivered to the Trustee by the entity formed by such
consolidation, or into which the Company or the Guarantor, as the case
may be, shall have been merged, or by the entity which shall have
acquired such property.
The Proposed AMENDMENTS would insert the following new paragraph at the end
of the foregoing covenant:
Notwithstanding anything to the contrary contained in this Indenture,
nothing contained in this Section 10.01 or in this Indenture or in any of
the Securities shall (i) prevent, or place any restrictions or conditions
upon, the distribution by the Guarantor to its stockholders of all of the
capital stock of USW-C, Inc., a Delaware corporation ("New U S WEST"),
pursuant to the Separation Agreement, dated as of , 1998,
between the Guarantor and New U S WEST, or any other transaction which
will have substantially the same result or (ii) require the assumption by
New U S WEST of the performance of all obligations under the Guarantees
or of any obligation or covenant of the Guarantor under the Indenture in
connection therewith.
A-1
<PAGE>
THE EXCHANGE AGENT FOR THE OFFERS IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
IF BY MAIL: IF BY HAND: IF BY OVERNIGHT
DELIVERY:
First Chicago Trust Company First Chicago Trust Company First Chicago
of New York of New York Trust Company
Tenders & Exchanges Tenders & Exchanges of New York
Suite 4660 c/o The Depository Trust Tenders &
P.O. Box 2569 Company Exchanges
Jersey City, New Jersey 55 Water Street, DTC TAD Suite 4680
07303-2569 Vietnam Veterans Memorial 14 Wall Street,
Plaza 8th Floor
New York, New York 10041 New York, New
York
10005
IF BY FACSIMILE
TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS
ONLY)
(201) 222-4720
or
(201) 222-4721
FACSIMILE CONFIRMATION
NUMBER:
(201) 222-4707
</TABLE>
THE INFORMATION AGENT FOR THE OFFERS IS:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
Banks and Brokers Call Collect: (212) 843-8500
All Others Call Toll-Free: (800) 787-3120
Any questions or requests for assistance or additional copies of this
Prospectus or the Letters of Transmittal or for copies of the Notices of
Guaranteed Delivery may be directed to the Information Agent at its telephone
number and location set forth above. You may also contact the Dealer Managers or
your broker, dealer, commercial bank or trust company or other nominee for
assistance concerning the Offers.
THE DEALER MANAGERS FOR THE OFFERS ARE:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281
(888) ML4-TNDR (toll-free)
(888) 654-8637
LEHMAN BROTHERS
3 World Financial Center
200 Vesey Street
New York, New York 10285
(800) 438-3242 (toll-free)
(212) 528-7581
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits the
board of directors of each of U S WEST and MediaOne Funding to indemnify any
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding in which
such person is made a party by reason of his being or having been a director,
officer, employee or agent of U S WEST or MediaOne Funding, as the case may be,
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Securities Act"). The
statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
The Certificate of Incorporation and Bylaws of each of U S WEST and MediaOne
Funding provides for indemnification of its directors and officers to the
fullest extent permitted by law.
As permitted by section 102 of the DGCL, the Certificate of Incorporation of
each of U S WEST and MediaOne Funding eliminates a person's liability to U S
WEST or MediaOne Funding, as the case may be, or its stockholders for monetary
damages for breach of fiduciary duty as a director, including without limitation
for serving on a committee of the board of directors of U S WEST or MediaOne
Funding; provided, however, that the foregoing does not eliminate or limit
liability (i) for any breach of the director's duty of loyalty to U S WEST or
MediaOne Funding or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
The Declaration of each of New Trust provides that no New Regular Trustee,
affiliate of any New Regular Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agents of any New Regular
Trustee, or any employee or agent of such New Trust or its affiliates (each an
"Indemnified Person") shall be liable, responsible or accountable in damages or
otherwise to such New Trust or any employee or agent of the trust or its
affiliates 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 such New Trust and in a manner such Indemnified Person reasonably believed to
be within the scope of the authority conferred on such Indemnified Person by
such 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 willful misconduct with respect to such acts or
omission.
The Declaration of each New Trust also provides that to the fullest extent
permitted by applicable law, U S WEST 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 such New Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by such 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 willful misconduct with respect to such act or omissions. The
Declaration of each New Trust further provides that, 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 U S WEST prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by of an
undertaking by or on behalf of the
II-1
<PAGE>
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified for the underlying cause of
action as authorized by such Declaration.
The directors and officers of U S WEST, MediaOne Funding and the New Regular
Trustees of each New Trust are covered by insurance policies indemnifying
against certain liabilities, including certain liabilities arising under the
Securities Act, which might be incurred by them in such capacities and against
which they cannot be indemnified by U S WEST, MediaOne Funding and the New
Trusts.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibits identified in parentheses below are on file with the Securities and
Exchange Commission and are incorporated herein by reference to such previous
filings. All other exhibits are provided as part of this electronic
transmission.
<TABLE>
<C> <C> <S>
(2-A) -- Form of Separation Agreement between U S WEST, Inc. (to be renamed MediaOne
Group, Inc.) and USW-C, Inc. (to be renamed "U S WEST, Inc") (incorporated
by reference to Exhibit 2-A to Registration Statement on Form S-4 of USW-C,
Inc., File No. 333-45765)
(3-A) -- Restated Certificate of Incorporation of U S WEST, Inc. (to be renamed
"MediaOne Group, Inc.") (incorporated by reference to Annex A-2 to
Prospectus included in Registration Statement on Form S-4 of USW-C, Inc.,
File No. 333-45765)
3-B -- Certificate of Incorporation of MediaOne Group Funding, Inc.
3-C -- Bylaws of U S WEST, Inc. (to be renamed "MediaOne Group, Inc.")
3-D -- Bylaws of MediaOne Group Funding, Inc.
3-E -- Certificate of Trust of MediaOne Finance Trust I
3-F -- Certificate of Trust of MediaOne Finance Trust II
4-A -- Form of Amended and Restated Declaration of Trust of MediaOne Finance Trust
I
4-B -- Form of Amended and Restated Declaration of Trust of MediaOne Finance Trust
II
4-C -- Form of Indenture among MediaOne Group Funding, Inc., U S WEST, Inc. (to be
renamed "MediaOne Group, Inc.") and Norwest Bank Minnesota, National
Association, as Trustee.
4-D -- Form of First Supplemental Indenture with respect to the Debt Securities to
be issued to MediaOne Finance Trust I
4-E -- Form of Second Supplemental Indenture with respect to the Debt Securities to
be issued to MediaOne Finance Trust II
4-F -- Form of Preferred Security of MediaOne Finance Trust I (included in Exhibit
4-A)
4-G -- Form of Preferred Security of MediaOne Finance Trust II (included in Exhibit
4-B)
4-H -- Form of Debt Security and Debt Guarantee to be issued to MediaOne Finance
Trust I (included in Exhibit 4-D)
4-I -- Form of Debt Security and Debt Guarantee to be issued to MediaOne Finance
Trust II (included in Exhibit 4-E)
4-J -- Form of Preferred Securities Guarantee for MediaOne Finance Trust I
4-K -- Form of Preferred Securities Guarantee for MediaOne Finance Trust II
5-A -- Opinion of Morris, Nichols, Arsht & Tunnell
5-B -- Opinion of Weil, Gotshal & Manges LLP
8-A -- Tax Opinion of Weil, Gotshal & Manges LLP
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <C> <S>
(12-A) -- Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends (incorporated by
reference to Exhibit 12 to U S WEST's Annual Report on Form 10-K for the
year ended December 31, 1997 (as amended by form 10-K/A filed on April 13,
1998), File No. 1-8611)
*23-A -- Consent of Arthur Andersen LLP
*23-B -- Consent of Coopers & Lybrand L.L.P.
23-C -- Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5-A)
23-D -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5-B and 8-A)
*24-A -- Powers of Attorney
25-A -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of Norwest Bank Minnesota, National Association, as Trustee under the
Indenture
25-B -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of The First National Bank of Chicago, as Property Trustee under the
Declaration of Trust of MediaOne Finance Trust I
25-C -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of The First National Bank of Chicago, as Trustee under the Preferred
Securities Guarantee for MediaOne Finance Trust I
25-D -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of The First National Bank of Chicago, as Property Trustee under the
Declaration of Trust of MediaOne Finance Trust II
25-E -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of The First National Bank of Chicago, as Trustee under the Preferred
Securities Guarantee for MediaOne Finance Trust II
99-A -- Form of Letter of Transmittal and Consent
99-B -- Form of Notice of Guaranteed Delivery
99-C -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
other Nominees
99-D -- Form of Letter to Clients
99-E -- Question and Answer Pamphlet
99-F -- Tombstone Advertisement
</TABLE>
- ------------------------
* Previously filed.
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement;
(iii) to include any material information with respect to the Offers not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement;
II-3
<PAGE>
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrants pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's Annual Report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(7) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrants have been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the respective Registrant of
expenses incurred or paid by a director, officer or controlling person of such
Registrant in the successful defense of any action, suit or proceeding) is
asserted against such Registrant by such director, officer or controlling person
in connection with the securities being registered, such Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, U S
WEST, Inc. (to be renamed "MediaOne Group, Inc.") certifies that it has
reasonable grounds to believe that it meets all the requirements for filing on
Form S-4 and has duly caused this Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Englewood, State of Colorado, on the 4th day of May, 1998.
<TABLE>
<S> <C> <C>
U S WEST, INC.
(to be renamed "MediaOne Group, Inc.")
By: /s/ STEPHEN E. BRILZ
-----------------------------------------
Stephen E. Brilz
Assistant Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:
Richard D. McCormick* President and Chief Executive Officer
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
Executive Vice President and Chief Financial
Michael P. Glinsky* Officer
DIRECTORS:
Robert L. Crandall*
Grant A. Dove*
Allan D. Gilmour*
Pierson M. Grieve*
George J. Harad*
Allen F. Jacobson*
Charles M. Lillis*
Richard D. McCormick*
Marilyn Carlson Nelson*
Frank Popoff*
Charles P. Russ, III*
Louis A. Simpson*
John "Jack" Slevin*
Solomon D. Trujillo*
Jerry O. Williams*
*By /s/ STEPHEN E. BRILZ
--------------------------------------
Stephen E. Brilz
Assistant Secretary
</TABLE>
Dated: May 4, 1998
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
MediaOne Group Funding, Inc. certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and has duly caused
this Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Englewood, State of
Colorado, on the 4th day of May, 1998.
MEDIAONE GROUP FUNDING, INC.
By /s/ STEPHEN E. BRILZ
--------------------------------------
Stephen E. Brilz
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:
Contance P. Campbell* President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
Vice President and Chief
Rahn K. Porter* Financial Officer
DIRECTORS:
Constance P. Campbell*
*By /s/ STEPHEN E. BRILZ
--------------------------------------
Stephen E. Brilz
Secretary
</TABLE>
Dated: May 4, 1998
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, each
of the undersigned Registrants certifies that it has reasonable grounds to
believe that it meets all the requirements for filing on Form S-4 and has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Englewood,
State of Colorado, on the 4th day of May, 1998.
MEDIAONE FINANCE TRUST I
By /s/ CONSTANCE P. CAMPBELL
--------------------------------------
Constance P. Campbell, Trustee
By /s/ RHAN K. PORTER
--------------------------------------
Rhan K. Porter, Trustee
MEDIAONE FINANCE TRUST II
By /s/ CONSTANCE P. CAMPBELL
--------------------------------------
Constance P. Campbell, Trustee
By /s/ RHAN K. PORTER
--------------------------------------
Rhan K. Porter, Trustee
II-7
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MEDIAONE GROUP FUNDING, INC.
The undersigned natural person of the age of eighteen years or more,
acting as incorporator of a corporation under the Delaware General Corporation
Law, as amended, adopts the following Certificate of Incorporation:
ARTICLE ONE. The name of the corporation is MediaOne Group Funding, Inc.
(the "Corporation").
ARTICLE TWO. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law, as from time to time amended; PROVIDED, HOWEVER, that
the Corporation shall not engage in any act or activity which could violate the
Modification of Final Judgment entered August 24, 1982, in UNITED STATES V.
WESTERN ELECTRIC, ET AL., Case No. 82-0192, United States District Court,
District of Columbia, as amended, modified, supplemented or interpreted by a
court of competent jurisdiction from time to time.
ARTICLE THREE. The aggregate number of shares of stock which the
Corporation shall have authority to issue is One Thousand (1,000) shares of
common stock with $.01 par value.
ARTICLE FOUR. The address of the Corporation's initial registered office
in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801.
The name of the Corporation's initial registered agent at such address is The
Corporation Trust Company.
ARTICLE FIVE. The provisions as to the management of the business and the
conduct of the affairs of the Corporation shall be set forth in the Bylaws of
the Corporation or as approved by the Board of Directors of the Corporation
from time to time, and the same shall be in furtherance of and not in
limitation or exclusion of the powers conferred by the law.
ARTICLE SIX. A director of the Corporation shall not be personally liable
either to the Corporation or to any stockholder for monetary damages for breach
of fiduciary duty as a director, except (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, or (ii) for acts or
omission which are not in good faith or which involve intentional misconduct or
knowing violation of the law, or (iii) for any matter in respect of which such
director shall be liable under Section 174 of Title 8 of the Delaware General
Corporation Law or any amendment thereto or successor provision thereto, or
(iv) for any transaction from which the director shall have derived an improper
personal benefit. Neither amendment nor repeal of this paragraph nor the
adoption of any provision of the Certificate of Incorporation inconsistent with
this paragraph shall eliminate or reduce the effect of this paragraph in
respect of any matter occurring, or any cause of action, suit or claim that,
but for this paragraph, would accrue or arise, prior to such amendment, repeal
or adoption of an inconsistent provision.
<PAGE>
ARTICLE SEVEN. The Corporation shall indemnify, to the full extent
permitted by Section 145 of the Delaware General Corporation Law, as amended
from time to time, all persons whom it may indemnify pursuant thereto.
ARTICLE EIGHT. In furtherance and not in limitation of the powers
conferred by the Delaware General Corporation Law, the Board of Directors of
the Corporation is expressly authorized and empowered to adopt, amend and
repeal the Bylaws of the Corporation. Election of Director need not be by
written ballot.
ARTICLE NINE. The name and address of the incorporator is Stephen E.
Brilz, 7800 East Orchard Road, Englewood, Colorado 80111.
IN WITNESS WHEREOF, I have executed these Certificate of Incorporation
this 24th day of May, 1995.
------------------------------
Stephen E. Brilz
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
Before me, _______________________, a Notary Public in and for said County
and State, personally appeared Stephen E. Brilz, who acknowledged before me
that he signed the foregoing Certificate of Incorporation as the incorporator
and that the facts contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 9th day of
April, 1998.
------------------------------
Notary Public
My Commission Expires: March 16, 1999
<PAGE>
EXHIBIT 3-C
BYLAWS
OF
MEDIAONE GROUP, INC.
(formerly U S WEST, INC.)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of MEDIAONE GROUP, INC.
(formerly U S WEST, Inc.) (the "Corporation") in the State of Delaware shall be
at 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801
and its registered agent at such address shall be The Corporation Trust Company,
or such other office or agent as the Board of Directors of the Corporation (the
"Board") shall from time to time select.
SECTION 2. Other Offices. The Corporation may also have an office or
offices, and keep the books and records of the Corporation, except as may
otherwise be required by law, at such other place or places, either within or
without the State of Delaware, as the Board may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meeting. All meetings of the stockholders of the
Corporation shall be held at the office of the Corporation or at such other
places, within or without the State of Delaware, as may from time to time be
fixed by the Board.
SECTION 2. Annual Meetings. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the first Friday of June in
each year, at an hour to be named in the notice of the meeting, unless such day
should fall on a legal holiday in the State of Colorado, in which event the
meeting shall be held on the next succeeding business day that is not a legal
holiday, or on such date and at such hour as shall from time to time be fixed by
the Board. Any previously scheduled annual meeting of the stockholders may be
postponed by action of
<PAGE>
the Board taken prior to the time previously scheduled for such annual meeting
of stockholders.
SECTION 3. Special Meetings. Except as otherwise required by law or the
Certificate of Incorporation of the Corporation (the "Certificate"), special
meetings of the stockholders for any purpose or purposes may be called by the
Chairman of the Board or a majority of the entire Board. Only such business as
is specified in the notice of any special meeting of the stockholders shall come
before such meeting.
SECTION 4. Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of the stockholders, whether annual or special, shall be
given, either by personal delivery or by mail, not less than 10 nor more than 60
days before the date of the meeting to each stockholder of record entitled to
notice of the meeting. If mailed, such notice shall be deemed given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date and hour of the
meeting, and the purpose or purposes for which the meeting is called. Notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy without protesting, prior to
or at the commencement of the meeting, the lack of proper notice to such
stockholder, or who shall sign a written waiver of notice thereof, whether
before or after such meeting. Notice of adjournment of a meeting of stockholders
need not be given if the time and place to which it is adjourned are announced
at such meeting, unless the adjournment is for more than 30 days or, after
adjournment, a new record date is fixed for the adjourned meeting.
SECTION 5. Quorum. Except as otherwise provided by law or by the
Certificate, the holders of a majority of the votes entitled to be cast by the
stockholders entitled to vote generally, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders; provided, however, that in the case of any vote to be taken by
classes, the holders of a majority of the votes entitled to be cast by the
stockholders of a particular class shall constitute a quorum for the transaction
of business by such class.
SECTION 6. Adjournments. The chairman of the meeting or the holders of a
majority of the votes entitled to be cast by the stockholders who are present in
person or by proxy may adjourn the meeting from time to time whether or not a
quorum is present.
2
<PAGE>
In the event that a quorum does not exist with respect to any vote to be taken
by a particular class, the chairman of the meeting or the holders of a majority
of the votes entitled to be cast by the stockholders of such class who are
present in person or by proxy may adjourn the meeting with respect to the
vote(s) to be taken by such class. At such adjourned meeting at which a quorum
may be present, any business may be transacted which might have been transacted
at the meeting as originally called.
SECTION 7. Order of Business. (a) At each meeting of the stockholders, the
Chairman of the Board or, in the absence of the Chairman of the Board, such
person as shall be selected by the Board shall act as chairman of the meeting.
The order of business at each such meeting shall be as determined by the
chairman of the meeting. The chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof, and the opening
and closing of the voting polls.
(b) At any annual meeting of stockholders, only such business shall be
conducted as shall have been brought before the annual meeting (i) by or at the
direction of the chairman of the meeting, (ii) pursuant to the notice provided
for in Section 4 of this Article II or (iii) by any stockholder who is a holder
of record at the time of the giving of such notice provided for in this Section
7, who is entitled to vote at the meeting and who complies with the procedures
set forth in this Section 7.
(c) For business properly to be brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation (the "Secretary"). To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 90 days prior
to the date of an annual meeting of stockholders. To be in proper written form,
a stockholder's notice to the Secretary shall set forth in writing as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address of the stockholder proposing such business and all persons or
entities acting in concert with the stockholder; (iii) the class and number of
shares
3
<PAGE>
of the Corporation which are beneficially owned by the stockholder and all
persons or entities acting in concert with such stockholder; and (iv) any
material interest of the stockholder in such business. The foregoing notice
requirements shall be deemed satisfied by a stockholder if the stockholder has
notified the Corporation of his or her intention to present a proposal at an
annual meeting and such stockholder's proposal has been included in a proxy
statement that has been prepared by management of the Corporation to solicit
proxies for such annual meeting; provided, however, that if such stockholder
does not appear or send a qualified representative to present such proposal at
such annual meeting, the Corporation need not present such proposal for a vote
at such meeting, notwithstanding that proxies in respect of such vote may have
been received by the Corporation. Notwithstanding anything in the bylaws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 7. The chairman of an
annual meeting shall, if the facts warrant, determine that business was not
properly brought before the annual meeting in accordance with the provisions of
this Section 7 and, if the chairman should so determine, the chairman shall so
declare to the annual meeting and any such business not properly brought before
the annual meeting shall not be transacted.
SECTION 8. List of Stockholders. It shall be the duty of the Secretary or
other officer who has charge of the stock ledger to prepare and make, at least
10 days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote thereat, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares registered in
such stockholder's name. Such list shall be produced and kept available at the
times and places required by law.
SECTION 9. Voting. (a) Except as otherwise provided by law or by the
Certificate, each stockholder of record of any class or series of capital stock
of the Corporation shall be entitled at each meeting of stockholders to such
number of votes for each share of such stock as may be fixed in the Certificate
or in the resolution or resolutions adopted by the Board providing for the
issuance of such stock, registered in such stockholder's name on the books of
the Corporation:
(1) on the date fixed pursuant to Section 6 of Article VII of these
bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting; or
4
<PAGE>
(2) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice of such
meeting is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held.
(b) Each stockholder entitled to vote at any meeting of stockholders may
authorize not in excess of three persons to act for such stockholder by proxy.
Any such proxy shall be delivered to the secretary of such meeting at or prior
to the time designated for holding such meeting. No such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
(c) At each meeting of the stockholders, all corporate actions to be taken
by vote of the stockholders (except as otherwise required by law and except as
otherwise provided in the Certificate or these bylaws) shall be authorized by a
majority of the votes cast by the stockholders entitled to vote thereon who are
present in person or represented by proxy, and where a separate vote by class is
required, a majority of the votes cast by the stockholders of such class who are
present in person or represented by proxy shall be the act of such class.
(d) Unless required by law or determined by the chair- man of the meeting
to be advisable, the vote on any matter, including the election of directors,
need not be by written ballot. In the case of a vote by written ballot, each
ballot shall be signed by the stockholder voting, or by such stockholder's
proxy.
SECTION 10. Inspectors. The chairman of the meeting shall appoint one or
more inspectors to act at any meeting of stockholders. Such inspectors shall
perform such duties as shall be specified by the chairman of the meeting.
Inspectors need not be stockholders. No director or nominee for the office of
director shall be appointed such inspector.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board, which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law or by the
5
<PAGE>
Certificate directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualification and Election. (a) Except as otherwise
fixed by or pursuant to the provisions of Article V of the Certificate relating
to the rights of the holders of any class or series of stock having preference
over the common stock of the corporation as to dividends or upon liquidation,
the number of directors of the Corporation shall be determined from time to time
by the Board by the affirmative vote of directors constituting at least a
majority of the entire Board; provided that the number thereof may not be less
than six nor more than seventeen.
(b) The directors, other than those who may be elected by the holders of
shares of any class or series of stock having a preference over the common stock
of the Corporation as to dividends or upon liquidation pursuant to the terms of
Article V of the Certificate or any resolution or resolutions providing for the
issuance of such stock adopted by the Board, shall be classified, with respect
to the time for which they severally hold office, into three classes as nearly
equal in number as possible, with each class to hold office until its successors
are elected and qualified. Subject to the rights of the holders of any class or
series of stock having a preference over the common stock of the Corporation as
to dividends or upon liquidation, at each such annual meeting of the
stockholders, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
(c) Each director shall be at least 21 years of age. Directors need not be
stockholders of the Corporation.
(d) In any election of directors held at a meeting of stockholders, the
persons receiving a plurality of the votes cast by the stockholders entitled to
vote thereon at such meeting who are present or represented by proxy, up to the
number of directors to be elected in such election, shall be deemed elected.
SECTION 3. Notification of Nomination. Subject to the rights of the holders
of any class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of directors may be
made by the Board or by any stockholder who is a stockholder of record at the
time of giving of the notice of nomination provided for in this Section 3 of
this Article III and who is entitled to vote for
6
<PAGE>
the election of directors. Any stockholder of record entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if timely written notice of such stockholder's intent to make
such nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) with respect to an election to be held at an annual meeting of
stockholders, not less than 60 days prior to the date of such annual meeting and
(ii) with respect to an election to be held at a special meeting of stockholders
for the election of directors, not less than 15 days following the public
announcement of the date of such special meeting. Each such notice shall set
forth: (a) the name and address of the stockholder who intends to make the
nomination, of all persons or entities acting in concert with the stockholder,
and of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or entities acting in concert with the stockholder (naming such
person or entities) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by the stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be nominated, by the
Board; (e) the class and number of shares of the Corporation that are
beneficially owned by the stockholder and all persons or entities acting in
concert with the stockholder; and (f) the consent of each nominee to being named
in a proxy statement as nominee and to serve as a director of the Corporation if
so elected. The chairman of the meeting may refuse to acknowledge the nomination
of any person not made after compliance with the foregoing procedure. Only such
persons who are nominated in accordance with the procedures set forth in this
Section 3 of this Article III shall be eligible to serve as directors of the
Corporation.
SECTION 4. Quorum and Manner of Acting. Except as otherwise provided by
law, the Certificate or these bylaws, a majority of the entire Board shall
constitute a quorum for the transaction of business at any meeting of the Board,
and, except as so provided, the vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. The
chairman of the meeting or a majority of the directors
7
<PAGE>
present may adjourn the meeting to another time and place whether or not a
quorum is present. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 5. Place of Meeting. The Board may hold its meetings at such place
or places within or without the State of Delaware as the Board may from time to
time determine or as shall be specified or fixed in the respective notice or
waivers of notice thereof.
SECTION 6. Regular Meetings. Regular meetings of the Board shall be held at
such times and places as the Chairman of the Board or the Board shall from time
to time by resolution determine. If any day fixed for a regular meeting shall be
a legal holiday under the laws of the place where the meeting is to be held, the
meeting which would otherwise be held on that day shall be held at the same hour
on the next succeeding business day.
SECTION 7. Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board or by a majority of the directors.
SECTION 8. Notice of Meetings. Notice of regular meetings of the Board or
of any adjourned meeting thereof need not be given. Notice of each special
meeting of the Board shall be given by overnight delivery service or mailed to
each director, in either case addressed to such director at such director's
residence or usual place of business, at least two days before the day on which
the meeting is to be held or shall be sent to such director at such place by
telegraph or telecopy or be given personally or by telephone, not later than the
day before the meeting is to be held, but notice need not be given to any
director who shall, either before or after the meeting, submit a signed waiver
of such notice or who shall attend such meeting without protesting, prior to or
at its commencement, the lack of notice to such director. Every such notice
shall state the time and place but need not state the purpose of the meeting.
SECTION 9. Rules and Regulations. The Board may adopt such rules and
regulations not inconsistent with the provisions of law, the Certificate or
these bylaws for the conduct of its meetings and management of the affairs of
the Corporation as the Board may deem proper.
SECTION 10. Participation in Meeting by Means of Communication Equipment.
Any one or more members of the Board or
8
<PAGE>
any committee thereof may participate in any meeting of the Board or of any such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
SECTION 11. Action without Meeting. Any action required or permitted to be
taken at any meeting of the Board or any committee thereof may be taken without
a meeting if all of the members of the Board or of any such committee consent
thereto in writing and the writing or writings are filed with the minutes or
proceedings of the Board or of such committee.
SECTION 12. Resignations. Any director of the Corporation may at any time
resign by giving written notice to the Board, the Chairman of the Board, the
President or the Secretary. Such resignation shall take effect at the time
specified therein or, if the time be not specified therein, upon receipt
thereof; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 13. Removal of Directors. Directors may be removed only as provided
in Section 5 of Article VI of the Certificate.
SECTION 14. Vacancies. Subject to the rights of the holders of any class or
series of stock having a preference over the common stock of the Corporation as
to dividends or upon liquidation, any vacancies on the Board resulting from
death, resignation, removal or other cause shall only be filled by the Board by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board, or by a sole remaining director,
and newly created directorships resulting from any increase in the number of
directors shall be filled by the Board, or if not so filled, by the stockholders
at the next annual meeting thereof or at a special meeting called for that
purpose in accordance with Section 3 of Article II of these bylaws. Any director
elected in accordance with the preceding sentence of this Section 14 of this
Article III shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
SECTION 15. Compensation. Each director, in consideration of such person
serving as a director, shall be entitled to receive from the Corporation such
amount per annum and
9
<PAGE>
such fees for attendance at meetings of the Board or of committees of the Board,
or both, as the Board shall from time to time determine. In addition, each
director shall be entitled to receive from the Corporation reimbursement for the
reasonable expenses incurred by such person in connection with the performance
of such person's duties as a director. Nothing contained in this Section 15 of
this Article III shall preclude any director from serving the Corporation or any
of its subsidiaries in any other capacity and receiving proper compensation
therefor.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. Establishment of Committees of the Board of Directors; Election
of Members of Committees of the Board of Directors; Functions of Committees of
the Board of Directors. The Board may, in accordance with and subject to the
General Corporation Law of the State of Delaware, from time to time establish
committees of the Board to exercise such powers and authorities of the Board,
and to perform such other functions, as the Board may from time to time
determine.
SECTION 2. Procedure; Meetings; Quorum. Regular meetings of committees of
the Board, of which no notice shall be necessary, may be held at such times and
places as shall be fixed by resolution adopted by a majority of the members
thereof. Special meetings of any committee of the Board shall be called at the
request of a majority of the members thereof. Notice of each special meeting of
any committee of the Board shall be given by overnight delivery service or
mailed to each member, in either case addressed to such member at such member's
residence or normal place of business, at least two days before the day on which
the meeting is to be held or shall be sent to such members at such place by
telegraph or telecopy or be given personally or by telephone, not later than the
day before the meeting is to be held, but notice need not be given to any member
who shall, either before or after the meeting, submit a signed waiver of such
notice or who shall attend such meeting without protesting, prior to it or at
its commencement, the lack of such notice to such member. Any special meeting of
any committee of the Board shall be a legal meeting without any notice thereof
having been given, if all the members thereof shall be present thereat. Notice
of any adjourned meeting of any committee of the Board need not be given. Any
committee of the Board may adopt such rules and regulations not
10
<PAGE>
inconsistent with the provisions of law, the Certificate or these bylaws for the
conduct of its meetings as such committee of the Board may deem proper. A
majority of the members of any committee of the Board shall constitute a quorum
for the transaction of business at any meeting, and the vote of a majority of
the members thereof present at any meeting at which a quorum is present shall be
the act of such committee. Each committee of the Board shall keep written
minutes of its proceedings and shall report on such proceedings to the Board.
ARTICLE V
OFFICERS
SECTION 1. Number; Term of Office. The officers of the Corporation shall be
such officers, which may include a Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer, General Counsel and one or more
Vice Presidents (including, without limitation, Assistant, Executive and Senior
Vice Presidents) and a Treasurer, Secretary and Controller and such other
officers or agents with such titles and such duties as the Board may from time
to time determine, each to have such authority, functions or duties as provided
in these bylaws or as the Board may from time to time determine, and each to
hold office for such term as may be prescribed by the Board and until such
person's successor shall have been chosen and shall qualify, or until such
person's death or resignation, or until such person's removal in the manner
hereinafter provided. One person may hold the offices and perform the duties of
any two or more of said officers; provided, however, that no officer shall
execute, acknowledge or verify any instrument in more than one capacity if such
instrument is required by law, the Certificate or these bylaws to be executed,
acknowledged or verified by two or more officers. The Board may from time to
time authorize any officer to appoint and remove any such other officers and
agents and to prescribe their powers and duties. The Board may require any
officer or agent to give security for the faithful performance of such person's
duties.
SECTION 2. Removal. Any officer may be removed, either with or without
cause, by the Board at any meeting thereof or, except in the case of any officer
elected by the Board, by any superior officer upon whom such power may be
conferred by the Board.
SECTION 3. Resignation. Any officer may resign at any time by giving notice
to the Board, the Chairman of the Board or
11
<PAGE>
the Secretary. Any such resignation shall take effect at the date of receipt of
such notice or at any later date specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term in the manner prescribed in these bylaws for election to such
office.
SECTION 5. Chairman of the Board; Powers and Duties. The Chairman of the
Board shall be the chief executive officer of the Corporation. Subject to the
control of the Board, the Chairman of the Board shall supervise and direct
generally all the business and affairs of the Corporation. The Chairman of the
Board shall preside at all meetings of the stockholders and the Board. Any
document may be signed by the Chairman of the Board or any other person who may
be thereunto authorized by the Board or the Chairman of the Board. The Chairman
of the Board may appoint such assistant officers as are deemed necessary.
SECTION 6. President, Executive Vice Presidents, Senior Vice Presidents and
Vice Presidents; Powers and Duties. The President shall be the chief operating
officer of the Corporation. The President and each Executive Vice President,
each Senior Vice President, and each Vice President shall have such powers and
perform such duties as may be assigned by the Board of Directors or the Chairman
of the Board. In case of the absence or disability of the Chairman of the Board
or a vacancy in the office, the President, an Executive Vice President, a Senior
Vice President, or a Vice President designated by the Chairman of the Board or
the Board shall exercise all the powers and perform all the duties of the
Chairman of the Board.
SECTION 7. Secretary and Assistant Secretaries; Powers and Duties. The
Secretary shall attend all meetings of the stockholders and the Board and shall
keep the minutes for such meetings in one or more books provided for that
purpose. The Secretary shall be custodian of the corporate records, except those
required to be in the custody of the Treasurer or the Controller, shall keep the
seal of the Corporation, and shall execute and affix the seal of the Corporation
to all documents duly authorized for execution under seal on behalf of the
Corporation, and shall perform all of the duties incident to the office of
Secretary, as well as such other duties as may be assigned by the Chairman of
the Board or the Board.
12
<PAGE>
The Assistant Secretaries shall perform such of the Secretary's duties as
the Secretary shall from time to time direct. In case of the absence or
disability of the Secretary or a vacancy in the office, an Assistant Secretary
designated by the Chairman of the Board or by the Secretary, if the office is
not vacant, shall perform the duties of the Secretary.
SECTION 8. Chief Financial Officer; Powers and Duties. The Chief Financial
Officer shall be responsible for maintaining the financial integrity of the
Corporation, shall prepare the financial plans for the Corporation, and shall
monitor the financial performance of the Corporation and its subsidiaries, as
well as performing such other duties as may be assigned by the Chairman of the
Board or the Board.
SECTION 9. Treasurer and Assistant Treasurers; Powers and Duties. The
Treasurer shall have care and custody of the funds and securities of the
Corporation, shall deposit such funds in the name and to the credit of the
Corporation with such depositories as the Treasurer shall approve, shall
disburse the funds of the Corporation for proper expenses and dividends, and as
may be ordered by the Board, taking proper vouchers for such disbursements. The
Treasurer shall perform all of the duties incident to the office of Treasurer,
as well as such other duties as may be assigned by the Chairman of the Board or
the Board.
The Assistant Treasurers shall perform such of the Treasurer's duties as
the Treasurer shall from time to time direct. In case of the absence or
disability of the Treasurer or a vacancy in the office, an Assistant Treasurer
designated by the Chairman of the Board or by the Treasurer, if the office is
not vacant, shall perform the duties of the Treasurer.
SECTION 10. General Counsel; Powers and Duties. The General Counsel shall
be a licensed attorney at law and shall be the chief legal officer of the
Corporation. The General Counsel shall have such power and exercise such
authority and provide such counsel to the Corporation as deemed necessary or
desirable to enforce the rights and protect the property and integrity of the
Corporation, shall also have the power, authority, and responsibility for
securing for the Corporation all legal advice, service, and counseling, and
shall perform all of the duties incident to the office of General Counsel, as
well as such other duties as may be assigned by the Chairman of the Board or the
Board.
SECTION 11. Controller and Assistant Controllers; Powers and Duties. The
Controller shall be the chief accounting
13
<PAGE>
officer of the Corporation and shall keep and maintain in good and lawful order
all accounts required by law and shall have sole control over, and ultimate
responsibility for, the accounts and accounting methods of the Corporation and
the compliance of the Corporation with all systems of accounts and accounting
regulations prescribed by law. The Controller shall audit, to such extent and at
such times as may be required by law or as the Controller may think necessary,
all accounts and records of corporate funds or property, by whomsoever kept, and
for such purposes shall have access to all such accounts and records. The
Controller shall make and sign all necessary and proper accounting statements
and financial reports of the Corporation, and shall perform all of the duties
incident to the office of Controller, as well as such other duties as may be
assigned by the Chairman of the Board or the Board.
The Assistant Controllers shall perform such of the Controller's duties as
the Controller shall from time to time direct. In case of the absence or
disability of the Controller or a vacancy in the office, an Assistant Controller
designated by the Chairman of the Board or the Controller, if the office is not
vacant, shall perform the duties of the Controller.
SECTION 12. Salaries. The salaries of all officers of the Corporation shall
be fixed by or in the manner provided by the Board. If authorized by a
resolution of the Board, the salary of any officer other than the Chairman of
the Board may be fixed by the Chairman of the Board or a Committee of the Board.
No officer shall be disqualified from receiving a salary by reason of also being
a director of the Corporation.
ARTICLE VI
INDEMNIFICATION
SECTION 1. Scope of Indemnification. (a) The Corporation shall indemnify an
indemnified representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party or
otherwise, by reason of the fact that such person is or was serving in an
indemnified capacity, except to the extent that any such indemnification against
a particular liability is expressly prohibited by applicable law or where a
judgment or other final adjudication adverse to the indemnified representative
establishes, or where the Corporation determines, that his or her acts or
omissions (i) were in breach of such person's duty of loyalty to the Corporation
or its stockholders, (ii) were not in
14
<PAGE>
good faith or involved intentional misconduct or a knowing violation of law, or
(iii) resulted in receipt by such person of an improper personal benefit. The
rights granted by this Article shall not be deemed exclusive of any other rights
to which those seeking indemnification, contribution, or advancement of expenses
may be entitled under any statute, certificate of incorporation, agreement,
contract of insurance, vote of stockholders or disinterested directors, or
otherwise. The rights of indemnification and advancement of expenses provided by
or granted pursuant to this Article shall continue as to a person who has ceased
to be an indemnified representative in respect of matters arising prior to such
time and shall inure to the benefit of the heirs, executors, administrators and
personal representatives of such a person.
(b) If an indemnified representative is not entitled to indemnification
with respect to a portion of any liabilities to which such person may be
subject, the Corporation shall nonetheless indemnify such indemnified
representative to the maximum extent for the remaining portion of the
liabilities.
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the indemnified representative is not entitled
to indemnification.
(d) To the extent permitted by law, the payment of indemnification provided
for by this Article, including the advancement of expenses pursuant to Section 2
of this Article VI, with respect to proceedings other than those brought by or
in the right of the Corporation, shall be subject to the conditions that the
indemnified representative shall give the Corporation prompt notice of any
proceeding, that the Corporation shall have complete charge of the defense of
such proceeding and the right to select counsel for the indemnified
representative, and that the indemnified representative shall assist and
cooperate fully in all matters respecting the proceeding and its defense or
settlement. The Corporation may waive any or all of the conditions set forth in
the preceding sentence. Any such waiver shall be applicable only to the specific
payment for which the waiver is made and shall not in any way obligate the
Corporation to grant such waiver at any future time. In the event of a conflict
of interest between the indemnified representative and the Corporation that
would disqualify the Corporation's counsel from representing the indemnified
representative under the rules of professional conduct applicable to attorneys,
it shall be the policy of the Corporation to waive any or all of the foregoing
conditions subject to such
15
<PAGE>
limitations or conditions as the Corporation shall deem to be reasonable in
the circumstances.
(e) For purposes of this Article:
(1) "indemnified capacity" means any and all past, present, or future
services by an indemnified representative in one or more capacities as a
director, officer, employee, or agent of the Corporation or, at the request of
the Corporation, as a director, officer, employee, agent, fiduciary, or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan, or other entity or enterprise; any indemnified representative serving an
affiliate of the Corporation in any capacity shall be deemed to be doing so at
the request of the Corporation;
(2) an "affiliate of the Corporation" means an entity that directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Corporation;
(3) "indemnified representative" means any and all directors, officers, and
employees of the Corporation and any other person designated as an indemnified
representative by the Board;
(4) "liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damage, excise tax assessed with respect to an employee
benefit plan, or cost or expense of any nature (including, without limitation,
expert witness fees, costs of investigation, litigation and appeal costs,
attorneys' fees, and disbursements); and
(5) "proceeding" means any threatened, pending, or completed action, suit,
appeal, or other proceeding of any nature, whether civil, criminal,
administrative, or investigative, whether formal or informal, whether external
or internal to the Corporation, and whether brought by or in the right of the
Corporation, a class of its security holders or otherwise.
SECTION 2. Advancing Expenses. All reasonable expenses incurred in good
faith by an indemnified representative in advance of the final disposition of a
proceeding described in Section 1 of this Article VI shall be advanced to the
indemnified representative by the Corporation. Before making any such advance
payment of expenses, the Corporation shall receive an undertaking by or on
behalf of the indemnified representative to repay such amount if it shall
ultimately be determined that such indemnified
16
<PAGE>
representative is not entitled to be indemnified by the Corporation pursuant to
this Article VI. No advance shall be made by the Corporation if a determination
is reasonably and promptly made by a majority vote of disinterested directors,
even if the disinterested directors constitute less than a quorum, or (if such a
quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs) by independent legal counsel in a written opinion, that,
based upon the facts known to the Board or counsel at the time such
determination is made, the indemnified representative has acted in such a manner
as to permit or require the denial of indemnification pursuant to the provisions
of Section 1 of this Article VI.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Share Ownership. (a) Holders of shares of stock of each class of
the Corporation shall be recorded on the books of the Corporation and ownership
of such stock shall be evidenced by a certificate or other form as shall be
approved by the Board. Certificates representing shares of stock of each class
shall be signed by, or in the name of, the Corporation by the Chairman of the
Board or the President, any Vice President and by the Secretary or any Assistant
Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and
sealed with the seal of the Corporation, which may be a facsimile thereof. Any
or all such signatures may be facsimiles if countersigned by a transfer agent or
registrar. Although any officer, transfer agent or registrar whose manual or
facsimile signature is affixed to such a certificate ceases to be such officer,
transfer agent or registrar before such certificate has been issued, it may
nevertheless be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still such at the date of its issue.
(b) The stock ledger and blank share certificates shall be kept by the
Secretary or by a transfer agent or by a registrar or by any other officer or
agent designated by the Board.
SECTION 2. Transfer of Shares. Transfers of shares of stock of each class
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by such holder's attorney thereunto authorized by a power of
attorney duly executed and filed with the Secretary or a transfer agent for such
stock, if any, and on surrender of the certificate or certificates, if any, for
such shares properly endorsed or
17
<PAGE>
accompanied by a duly executed stock transfer power (or by proper evidence of
succession, assignment or authority to transfer) and the payment of any taxes
thereon; provided, however, that the Corporation shall be entitled to recognize
and enforce any lawful restriction on transfer. The person in whose name shares
are registered on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation; provided, however, that whenever
any transfer of shares shall be made for collateral security and not absolutely,
and written notice thereof shall be given to the Secretary or to such transfer
agent, such fact shall be stated in the entry of the transfer. No transfer of
shares shall be valid as against the Corporation, its stockholders and creditors
for any purpose, except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until it shall have been entered in
the stock records of the Corporation by an entry showing from and to whom
transferred.
SECTION 3. Registered Stockholders and Addresses of Stockholders. (a) The
Corporation shall be entitled to recognize the exclusive right of a person
registered on its records as the owner of shares of stock to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments a person registered on its records as the owner of shares of stock,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares of stock on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
(b) Each stockholder shall designate to the Secretary or transfer agent of
the Corporation an address at which notices of meetings and all other corporate
notices may be delivered or mailed to such person, and, if any stockholder shall
fail to designate such address, corporate notices may be delivered to such
person by mail directed to such person at such person's post office address, if
any, as the same appears on the stock record books of the Corporation or at such
person's last known post office address.
SECTION 4. Lost, Destroyed and Mutilated Certificates. The Corporation may
issue to any holder of shares of stock the certificate for which has been lost,
stolen, destroyed or mutilated a new certificate or certificates for shares,
upon the surrender of the mutilated certificate or, in the case of loss, theft
or destruction of the certificate, upon satisfactory proof of such loss, theft
or destruction. The Board, or a committee designated thereby, or the transfer
agents and registrars for the
18
<PAGE>
stock, may, in their discretion, require the owner of the lost, stolen or
destroyed certificate, or such person's legal representative, to give the
Corporation a bond in such sum and with such surety or sureties as they may
direct to indemnify the Corporation and said transfer agents and registrars
against any claim that may be made on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 5. Regulations. The Board may make such additional rules and
regulations as it may deem expedient concerning the issue and transfer of
certificates representing shares of stock of each class of the Corporation and
may make such rules and take such action as it may deem expedient concerning the
issue of certificates in lieu of certificates claimed to have been lost,
destroyed, stolen or mutilated.
SECTION 6. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
or any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. A determination of stockholders entitled to notice of
or to vote at a meeting of the stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
SECTION 7. Transfer Agents and Registrars. The Board may appoint, or
authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars.
ARTICLE VIII
SEAL
The Board shall provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation and the words and figures
of "Corporate Seal Delaware", or such other words or figures as the Board may
approve and adopt. The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in any other manner reproduced.
19
<PAGE>
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall end on the 31st day of December in
each year.
ARTICLE X
AMENDMENTS
Any bylaw may be adopted, repealed, altered or amended by two-thirds of the
entire Board at any meeting thereof. The stockholders of the Corporation shall
have the power to amend, alter or repeal any provision of these bylaws only to
the extent and in the manner provided in the Certificate.
20
<PAGE>
BYLAWS
OF
MEDIAONE GROUP FUNDING, INC.
Adopted as of April 13, 1998
<PAGE>
BYLAWS
of
MEDIAONE GROUP FUNDING, INC.
ARTICLE ONE
OFFICES
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of the State of Delaware.
The corporation may have such other offices, either within or outside of
the State of Delaware, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Delaware General
Corporation Law to be maintained in Delaware may be, but need not be, identical
with the principal office, and the address of the registered office may be
changed from time to time by the board of directors.
ARTICLE TWO
STOCKHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the stockholders shall
be held on the first Thursday in April in each year beginning in 1999, if not a
legal holiday, or, if a legal holiday, then on the next business day following,
at an hour to be named in the notice of the meeting, or at such other date and
time as the board of directors shall determine, for the purpose of electing
directors of the corporation and for the transaction of such other business as
may come before the meeting. If the annual meeting is not held on the day
designated, or at any adjournment thereof, the board of directors shall cause a
meeting in lieu thereof to be held as soon thereafter as is convenient.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called for any purpose. Such meetings may be called by the president or by the
board of directors, and shall be called by the president at the request of
holders of shares representing at least ten percent (10%) of all of the votes
entitled to be cast on any issue proposed to be considered at the meeting.
Section 3. PLACE OF MEETING. The board of directors may designate any
place either within or outside the State of Delaware as the place of meeting
for any annual meeting or for any special meeting. If no designation is made,
or if a special meeting is called other than by the board of directors, the
place of the meeting shall be the principal office of the corporation.
Section 4. NOTICE OF MEETING. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten (10) days nor more
than sixty (60) days before the date
1
<PAGE>
of the meeting, except that, (i) if the authorized shares are to be
increased, at least thirty (30) days' notice shall be given, or (ii) any
other longer notice period as required by the Delaware General Corporation
Law. Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice shall be given personally or by United
States mail (postage prepaid), private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each stockholder of record
entitled to vote at such meeting.
Section 5. RECORD DATE. For the purpose of determining stockholders
entitled to (i) notice of or to vote at any meeting of stockholders or any
adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of stockholders for any
other proper purpose, the board of directors shall fix, in advance, a date as
the record date for the determination of stockholders. Such date shall be not
more than sixty (60) days, and for a meeting of stockholders, not less than
ten (10) days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders is made as
provided in this Section, such determination shall apply to any adjournment
thereof unless the board of directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting.
Notwithstanding the above, the record date for determining the
stockholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation.
Section 6. QUORUM. A majority of the shares entitled to be cast on a
matter by a voting group shall constitute a quorum of that voting group for
action on that matter. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the vote of a
greater proportion or number is required by law or the certificate of
incorporation. If a quorum is not represented at any meeting of the
stockholders, such meeting may be adjourned for a period not to exceed one
hundred twenty (120) days for any one adjournment.
Section 7. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. The proxy appointment
form or similar writing shall be filed with the secretary of the corporation
before or at the time of the meeting. The appointment of a proxy is effective
when received by the corporation and is valid for eleven (11) months unless a
different period is expressly provided in the appointment form or similar
writing.
Section 8. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at any meeting of stockholders may, except as otherwise
required by law or the certificate of incorporation, be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of record of
the issued and outstanding capital stock of the corporation having the votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were presented and voted, and the writing
or writings are filed with the permanent records of the corporation. Prompt
notice of the taking of corporate action without a meeting by less than
unanimous written consent shall be give to those stockholders who have not
consented in writing.
2
<PAGE>
ARTICLE THREE
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of its board of directors, except as otherwise
provided in the Delaware General Corporation Law or the certificate of
incorporation.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The board of directors
shall consist of one (1) or more persons of the age of eighteen years or older
who need not be a stockholder of the corporation or resident of Delaware. A
director of the corporation shall be elected at the annual meeting of the
stockholders and shall serve until the next succeeding annual meeting and
thereafter until his or her successor shall have been elected and qualified or
until his or her earlier resignation or removal.
Section 3. VACANCIES. A vacancy occurring in the board of directors may
be filled by the affirmative vote of a majority of the stockholders or the
board of directors. If the directors remaining in office constitute fewer than
a quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. Whether elected
by the directors or the stockholders, a director shall hold office until the
next annual stockholders' meeting at which directors are elected or until his
or her earlier resignation or removal.
Section 4. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of stockholders and at such other times as shall be fixed by the
board. The board of directors may designate any place, either within or
outside Delaware, as the place of meeting for any regular meeting.
Section 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called at any time by or at the request of the president or any of the
directors. The person or persons authorized to call special meetings of the
board may fix any place, either within or outside Delaware, as the place for
holding any special meeting.
Section 6. NOTICE. Notice need not be given of regular meetings of the
board of directors, nor need notice be given of adjourned meetings. Notice of
special meetings shall be given at least two (2) days prior to the meeting by
written notice either personally delivered or mailed to each director at his
business address, or by notice transmitted by telegraph, telex, electronically
transmitted facsimile or other form of wire or wireless communication. If
mailed, such notice shall be deemed to be given and to be effective on the
earlier of (i) three (3) days after such notice is deposited in the United
States mail (postage prepaid), or (ii) the date shown on the return receipt, if
mailed by registered or certified mail return receipt requested. If notice is
given by telex, electronically transmitted facsimile or other similar form of
wire or wireless communication, such notice shall be deemed to be given and to
be effective when sent.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further,
attendance of the director at a meeting shall constitute a
3
<PAGE>
waiver of notice of that meeting, except when the director attends for the
express purpose of objecting to the transaction of any business at that the
meeting because the meeting was not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice of such
meeting.
Section 7. QUORUM AND VOTING. A majority of the number of directors then
in office shall constitute a quorum for the transaction of business, and the
acts of a majority of directors present at a meeting at which a quorum is
present shall constitute the acts of the board of directors, except that when a
board of one (1) director is authorized under the provisions of this Article
Three, then one (1) director shall constitute a quorum. If, at any meeting of
the board of directors, less than a quorum is present, a majority of those
present may adjourn the meeting from time to time without further notice, for a
period not to exceed sixty (60) days at any one adjournment.
Section 8. COMPENSATION. The directors will not be paid a fee for
attending meetings of the board of directors or meetings of any committee of
the board of directors. The directors shall be entitled to receive from the
corporation reimbursement for expenses as the board of directors may determine
from time to time.
Section 9. COMMITTEES. The board of directors may, by resolution adopted
by a majority of the board in office when the action is taken, designate from
among its members an executive committee and one or more other committees, each
of which, to the extent provided in the resolution, shall have all the
authority of the board of directors; except that no such committee shall have
the authority to (i) declare dividends or distributions, (ii) approve or
propose to stockholders actions or proposals required by the Delaware General
Corporation Law to be approved by stockholders, (iii) fill vacancies on the
board of directors or any committee thereof, (iv) amend the certificate of
incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a plan of
merger not requiring stockholder approval, (vii) reduce earned or capital
surplus, (viii) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors, or
(ix) authorize or approve the issuance or sale of, or any contract to issue or
sell, shares or designate the terms of a series of a class of shares. The
board of directors shall have the power at any time to fill vacancies in, to
change the size or membership of, and to discharge any such committee.
Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the board of directors or a
member of the committee in question with his responsibility to conform to the
standard of care set forth in Article Three, Section 12 of these Bylaws.
Section 10. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such
consent shall have the same force and effect as a unanimous vote of the
directors or committee members and may be stated as such in any document.
Unless the consent specifies a different effective date, action taken under
this Section 10 is effective at the time the last director signs a writing
describing the action taken, unless, before such time, any director has revoked
his consent by a writing signed by the director and received by the president
or the secretary of the corporation.
4
<PAGE>
Section 11. TELEPHONIC MEETINGS. Members of the board of directors or
any committee designated by such board may participate in a meeting of the
board or committee by means of communication by which all persons participating
in the meeting can hear each other during the meeting. Such participation
shall constitute presence at the meeting.
Section 12. STANDARD OF CARE. A member of the board of directors, or a
member of any committee designated by the board of directors, shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the corporation and upon such information, opinions, reports or
statements presented to the corporation by any of the corporation's officers or
employees, or committees of the board of directors, or by any other person as
to matters the member 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 corporation.
ARTICLE FOUR
OFFICERS
Section 1. ENUMERATION OF OFFICES. The corporation shall have as
officers a president, one or more vice presidents, a secretary, and a
treasurer, each of whom shall be elected by the board of directors. The
corporation may also have a chief financial officer and a controller as the
board may elect. The board of directors may appoint one or more assistant
secretaries and assistant treasurers and such other officers or agents as may
be deemed necessary by the board of directors. One person may hold more than
one office. In all cases where the duties of any officer is not prescribed by
the bylaws or by the board of directors, such officer shall follow the orders
and instruction of the president of the corporation.
Section 2. TERM OF OFFICE. The officers of the corporation shall be
elected by the board of directors at each annual meeting of the board held
after each annual meeting of the stockholders or as soon thereafter as may be
convenient. Each officer shall hold office until a successor is elected and
qualified or until such officer's resignation, death or removal.
Section 3. REMOVAL. Any officer may be removed at any time with or
without cause by action of the stockholders, the board of directors or an
officer(s) authorized by the board.
Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal or otherwise may be filled by the board of directors, or
by an officer(s) authorized by the board, for the unexpired portion of the
officer's term.
Section 5. PRESIDENT; POWERS AND DUTIES. Subject to the direction and
supervision of the board of directors, the president shall be the chief
executive officer of the corporation, and shall have general and active control
of its affairs and business and general supervision of its officers, agents and
employees. The president shall preside at all meetings of the stockholders and
the board of directors. Any document may be signed by the president or any
other person who may be thereunto authorized by the president or the board of
directors (said authorization to be in writing and filed with the secretary of
the corporation).
Section 6. VICE PRESIDENTS; POWERS AND DUTIES. Each vice president shall
have such powers and perform such duties as may be assigned by the board of
directors or the president. In
5
<PAGE>
case of the absence or disability of the president, or a vacancy in the
office, a vice president designated by the president or the board of
directors shall exercise all the powers and perform all the duties of the
president.
Section 7. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall
attend all meetings of the stockholders and the board of directors and shall
keep the minutes for such meetings in one or more books provided for that
purpose. The secretary shall be custodian of the corporate records, except
those required to be in the custody of the treasurer or the controller, shall
keep the seal of the corporation and shall execute and affix the seal of the
corporation to all documents duly authorized for execution under seal on behalf
of the corporation, and shall perform all of the duties incidental to the
office of secretary, as well as such other duties as may be assigned by the
president or the board of directors.
The assistant secretaries shall perform such of the secretary's duties as
the secretary shall from time to time direct. In case of the absence or
disability of the secretary, or a vacancy in the office, an assistant secretary
designated by the president or the board of directors, if the office is not
vacant, shall perform the duties of the secretary.
Section 8. TREASURER AND ASSISTANT TREASURERS; POWERS AND DUTIES. The
treasurer shall have care and custody of the funds and securities of the
corporation, shall deposit such funds in the name and to the credit of the
corporation with such depositories as the treasurer shall approve, shall
disburse the funds of the corporation for proper expenses and dividends, and as
may be ordered by the board of directors, taking proper vouchers for such
disbursements. The treasurer shall perform all of the duties incident to the
office of treasurer, as well as such other duties as may be assigned by the
president or the board of directors. In the event there is no chief financial
officer, the treasurer shall perform the duties of chief financial officer. In
the event there is no controller, the treasurer shall also be the principal
accounting officer of the corporation and shall perform the duties incident to
the office of controller.
The assistant treasurers shall perform such of the treasurer's duties as
the treasurer shall from time to time direct. In case of the absence or
disability of the treasurer, or a vacancy in the office, an assistant treasurer
designated by the president or the board of directors, if the office is not
vacant, shall perform the duties of the treasurer.
Section 9. CHIEF FINANCIAL OFFICER; POWERS AND DUTIES. The chief
financial officer shall be responsible for maintaining the financial integrity
of the corporation, shall prepare the financial plans for the corporation and
shall monitor the financial performance of the corporation and its
subsidiaries, as well as performing such other duties as may be assigned by the
president or the board of directors.
Section 10. GENERAL COUNSEL; POWERS AND DUTIES. The general counsel
shall be a licensed attorney at law and shall be the chief legal officer of the
corporation. The general counsel shall have such power and exercise such
authority and provide such counsel to the corporation as deemed necessary or
desirable to enforce the rights and protect the property and integrity of the
corporation, shall also have the power, authority, and responsibility for
securing for the corporation all legal advice, service and counseling, and
shall perform all of the duties incident to the office of general counsel, as
well as such other duties as may be assigned by the president or the board of
directors.
6
<PAGE>
Section 11. CONTROLLER AND ASSISTANT CONTROLLERS; POWERS AND DUTIES. The
controller shall be the chief accounting officer of the corporation and shall
keep and maintain in good and lawful order all accounts required by law and
shall have sole control over, and ultimate responsibility for, the accounts and
accounting methods of the corporation and the compliance of the corporation
with all systems of accounts and accounting regulations prescribed by law. The
controller shall audit, to such extent and at such times as may be required by
law or as the controller may think necessary, all accounts and records of
corporate funds or property, by whomsoever kept, and for such purposes shall
have access to all such accounts and records. The controller shall make and
sign all necessary and proper accounting statements and financial reports of
the corporation, and shall perform all of the duties incident to the office of
controller, as well as such other duties as may be assigned by the president or
the board of directors.
The assistant controllers shall perform such of the controller's duties as
the controller shall from time to time direct. In case of the absence or
disability of the controller, or a vacancy in the office, an assistant
controller designated by the president or the board of directors, if the office
is not vacant, shall perform the duties of the controller.
Section 12. SALARIES. The salaries of all officers of the corporation
shall be fixed by or in the manner provided by the board of directors. If
authorized by a resolution of the board, the salary of any officer other than
the president may be fixed by the president or a committee of the board. No
officer shall be disqualified from receiving a salary by reason of also being a
director of the corporation.
ARTICLE FIVE
STOCK CERTIFICATES
Section 1. ISSUANCE, FORM AND SIGNATURES. The shares of the corporation
shall be represented by certificates in such form and shall contain such
information consistent with law as shall be approved by the board of directors.
Such certificates shall be signed by the president or a vice president and by
the treasurer or an assistant treasurer or by the secretary or an assistant
secretary of the corporation and may be sealed with the seal of the corporation
or a facsimile thereof. Any or all of the signatures upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or an employee of
the corporation. If any officer who has signed or whose facsimile signature
has been placed upon such certificate has ceased to be such officer before the
certificate is issued, it may be issued by the corporation with the same effect
as if such person were such officer at the date of its issue.
Section 2. LOST, STOLEN OR DESTROYED CERTIFICATE. The board of directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the corporation which is claimed to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
such issue of a new certificate, the board of directors, in its discretion, may
require as a condition precedent to issuance that the owner of such lost,
stolen or destroyed certificate or his or her legal representative, advertise
the same in such manner as the board shall require and/or to give the
corporation a bond in such, or other security in such form, as the board may
direct, as indemnity against any claim that may be made against the corporation
with respect to the certificate claimed to have been lost, stolen or destroyed.
7
<PAGE>
ARTICLE SIX
Indemnification of Directors, Officers, and Employees
Section 1. SCOPE OF INDEMNIFICATION.
(a) The corporation shall indemnify an indemnified representative
against any liability incurred in connection with any proceeding in which the
indemnified representative may be involved as a party or otherwise, by reason
of the fact that such person is or was serving in an indemnified capacity,
except to the extent that any such indemnification against a particular
liability is expressly prohibited by applicable law or where a judgment or
other final adjudication adverse to the indemnified representative establishes,
or where the corporation determines, that his or her acts or omissions (i) were
in breach of such person's duty of loyalty to the corporation or its
stockholders, (ii) were not in good faith or involved intentional misconduct or
a knowing violation of law, or (iii) resulted in receipt by such person of an
improper personal benefit. The rights granted by this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification,
contribution, or advancement of expenses may be entitled under any statute,
certificate or articles of incorporation, agreement, contract of insurance,
vote of stockholders or disinterested directors, or otherwise. The rights of
indemnification and advancement of expenses provided by or granted pursuant to
this Article shall continue as to a person who has ceased to be an indemnified
representative in respect of matters arising prior to such time and shall inure
to the benefit of the heirs, executors, administrators, and personal
representatives of such a person.
(b) If an indemnified representative is not entitled to
indemnification with respect to a portion of any liabilities to which such
person may be subject, the corporation shall nonetheless indemnify such
indemnified representative to the maximum extent for the remaining portion of
the liabilities.
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the indemnified representative is not
entitled to indemnification.
(d) To the extent permitted by law, the payment of indemnification
provided for by this Article, including the advancement of expenses pursuant to
Section 2, with respect to proceedings other than those brought by or in the
right of the corporation, shall be subject to the conditions that the
indemnified representative shall give the corporation prompt notice of any
proceeding, that the corporation shall have complete charge of the defense of
such proceeding and the right to select counsel for the indemnified
representative, and that the indemnified representative shall assist and
cooperate fully in all matters respecting the proceeding and its defense or
settlement. The corporation may waive any or all of the conditions set forth
in the preceding sentence. Any such waiver shall be applicable only to the
specific payment for which the waiver is made and shall not in any way obligate
the corporation to grant such waiver at any future time. In the event of a
conflict of interest between the indemnified representative and the corporation
that would disqualify the corporation's counsel from representing the
indemnified representative under the rules of professional conduct applicable
to attorneys, it shall be the policy of the corporation to waive any or all of
the foregoing conditions subject to such limitations or conditions as the
corporation shall deem to be reasonable in the circumstances.
8
<PAGE>
(e) For purposes of this Article:
(1) "indemnified capacity" means any and all past, present, or
future services by an indemnified representative in one or more capacities as a
director, officer, employee, or agent of the corporation or, at the request of
the corporation, as a director, officer, employee, agent, fiduciary, or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan, or other entity or enterprise; any indemnified representative serving an
affiliate of the corporation in any capacity shall be deemed to be doing so at
the request of the corporation; an "affiliate of the corporation" means an
entity that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
corporation;
(2) "indemnified representative" means any and all directors,
officers, and employees of the corporation and any other person designated as
an indemnified representative by the board of directors of the corporation;
(3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, expert witness fees, costs of investigation, litigation and appeal
costs, attorneys' fees, and disbursements); and
(4) "proceeding" means any threatened, pending, or completed
action, suit, appeal, or other proceeding of any nature, whether civil,
criminal, administrative, or investigative, whether formal or informal, whether
external or internal to the corporation, and whether brought by or in the right
of the corporation, a class of its security holders or otherwise.
Section 2. ADVANCING EXPENSES. As provided by the Delaware General
Corporation Law and to the maximum extent permitted by such law, the
corporation shall pay the reasonable expenses incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 1. Before making any such advance payment of expenses,
the corporation shall receive an undertaking by or on behalf of the indemnified
representative to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the corporation pursuant to
this Article. Such undertaking shall be an unlimited, unsecured general
obligation of the indemnified representative and shall be accepted without
reference to the ability of such person to make repayment. No advance shall be
made by the corporation if a determination is reasonably and promptly made by
the board of directors by majority vote of a quorum of disinterested directors,
or (if such a quorum is not obtainable or, even if obtainable, a quorum of
disinterest directors so directs) by independent legal counsel in a written
opinion, that, based upon the facts known to the board or counsel at the time
such determination is made, the indemnified representative has acted in such a
manner as to permit or require the denial of indemnification pursuant to the
provisions of Section 1.
9
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
Section 1. CORPORATE SEAL. The official seal for the corporation shall
be circular in form and shall contain the name of the corporation and the
words, "Corporate Seal" and "Delaware."
Section 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. WAIVER OF NOTICE. When any notice is required to be given to
any stockholder or director of the corporation under the provisions of these
Bylaws or under the provisions of the certificate of incorporation or under the
provisions of the Delaware General Corporation Law, a waiver thereof, in
writing, signed by the person entitled to such notice whether before, at, or
after the time stated therein, shall be equivalent to the giving of such
notice.
Section 4. ADOPTION OR AMENDMENT OF BYLAWS. The board of directors shall
have power, to the maximum extent permitted by the Delaware General Corporation
Law, to make, amend and repeal the bylaws of the corporation at any regular or
special meeting of the board unless the stockholders, in making, amending or
repealing a particular bylaw, expressly provide that the directors may not
amend or repeal such bylaw. The stockholders also shall have the power to
make, amend or repeal the bylaws of the corporation at any annual meeting or at
any special meeting called for that purpose.
Section 5. GENDER. The masculine gender is used in these Bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
Section 6. CONFLICTS. In the event of any irreconcilable conflict
between these Bylaws and either the corporation's certificate of incorporation
or applicable law, the latter shall control.
10
<PAGE>
EXHIBIT 3-E
CERTIFICATE OF TRUST
The undersigned, the trustees of MediaOne Finance Trust I desiring to
form a business trust pursuant to Delaware Business Trust Act, 12 DEL. C. c.
38 hereby certify as follows:
1. The name of the business trust being formed hereby (the "Trust") is
MediaOne Finance Trust I.
2. The name and business address of the trustee of the Trust who is a
resident of the State of Delaware is as follows:
RCSP Inc.
1201 North Market Street
P.O. Box 1347
Wilmington, New Castle County, Delaware 19801
Attention: Siobain Perkins
Dated: April 9, 1998
Constance P. Campbell
as Trustee
/s/ Constance P. Campbell
________________________________
Christine J. Brennet-Morris
as Trustee
/s/ Christine J. Brennet-Morris
________________________________
Rahn K. Porter
as Trustee
/s/ Rahn K. Porter
____________________________
RCSP Inc.
as Trustee
By: Fiona M. Woodyatt
____________________________
Name: Fiona M. Woodyatt
Title: Assistant Secretary
1
<PAGE>
EXHIBIT 3-F
CERTIFICATE OF TRUST
The undersigned, the trustees of MediaOne Finance Trust II desiring to
form a business trust pursuant to Delaware Business Trust Act, 12 DEL. C. c. 38
hereby certify as follows:
1. The name of the business trust being formed hereby (the "Trust") is
MediaOne Finance Trust II.
2. The name and business address of the trustee of the Trust who is a
resident of the State of Delaware is as follows:
RCSP Inc.
1201 North Market Street
P.O. Box 1347
Wilmington, New Castle County, Delaware 19801
Attention: Siobain Perkins
Dated: April 9, 1998
Constance P. Campbell
as Trustee
/s/ Constance P. Campbell
________________________________
Christine J. Brennet-Morris
as Trustee
/s/ Christine J. Brennet-Morris
________________________________
Rahn K. Porter
as Trustee
/s/ Rahn K. Porter
____________________________
RCSP Inc.
as Trustee
By: /s/ Fiona M. Woodyatt
____________________________
Name: Fiona M. Woodyatt
Title: Assistant Secretary
<PAGE>
Exhibit 4(a)
-----------------------------------
-----------------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
MediaOne Finance Trust I
Dated as of May , 1998
-----------------------------------
-----------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.1. Definitions.................................................... 1
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application............................... 7
Section 2.2. Lists of Holders of Securities................................. 7
Section 2.3. Reports by the Property Trustee................................ 7
Section 2.4. Periodic Reports to Property Trustee........................... 8
Section 2.5. Evidence of Compliance with Conditions Precedent............... 8
Section 2.6. Events of Default; Waiver...................................... 8
Section 2.7. Event of Default; Notice....................................... 9
ARTICLE III
ORGANIZATION
Section 3.1. Name...........................................................10
Section 3.2. Office.........................................................10
Section 3.3. Purpose........................................................10
Section 3.4. Authority......................................................10
Section 3.5. Title to Property of the Trust.................................11
Section 3.6. Powers and Duties of the Regular Trustees......................11
Section 3.7. Prohibition of Actions by the Trust and the Trustees...........13
Section 3.8. Powers and Duties of the Property Trustee......................14
Section 3.9. Certain Duties and Responsibilities of the Property Trustee....16
Section 3.10. Certain Rights of Property Trustee.............................17
Section 3.11. Delaware Trustee...............................................19
Section 3.12. Execution of Documents.........................................20
Section 3.13. Not Responsible for Recitals or Issuance of Securities.........20
Section 3.14. Duration of Trust..............................................20
Section 3.15. Mergers........................................................20
ARTICLE IV
SPONSOR
Section 4.1. Sponsor's Purchase of Common Securities........................22
i
<PAGE>
Section 4.2. Responsibilities of the Sponsor................................22
ARTICLE V
TRUSTEES
Section 5.1. Number of Trustees.............................................22
Section 5.2. Delaware Trustee...............................................23
Section 5.3. Property Trustee; Eligibility..................................23
Section 5.4. Qualifications of Regular Trustees and Delaware Trustee
Generally......................................................24
Section 5.5. Initial Trustees...............................................24
Section 5.6. Appointment, Removal and Resignation of Trustees...............25
Section 5.7. Vacancies among Trustees.......................................26
Section 5.8. Effect of Vacancies............................................26
Section 5.9. Meetings.......................................................26
Section 5.10. Delegation of Power............................................27
ARTICLE VI
DISTRIBUTIONS
Section 6.1. Distributions..................................................27
ARTICLE VII
ISSUANCE OF SECURITIES
Section 7.1. General Provisions Regarding Securities........................27
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
Section 8.1. Dissolution and Termination of Trust...........................28
ARTICLE IX
TRANSFER OF INTERESTS
Section 9.1. Transfer of Securities.........................................29
Section 9.2. Transfer of Certificates.......................................29
Section 9.3. Deemed Security Holders........................................30
Section 9.4. Book Entry Interests...........................................30
Section 9.5. Notices to Clearing Agency.....................................31
Section 9.6. Appointment of Successor Clearing Agency.......................31
Section 9.7. Definitive Preferred Security Certificates.....................31
Section 9.8. Mutilated, Destroyed, Lost or Stolen Certificates..............32
</TABLE>
ii
<PAGE>
Article X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTTEES OR OTHERS
<TABLE>
<S> <C> <C>
Section 10.1. Liability.. . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 10.2. Exculpation.. . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 10.3. Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . .33
Section 10.4. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . .34
Section 10.5. Outside Businesses. . . . . . . . . . . . . . . . . . . . . . .34
Article XI
ACCOUNTING
Section 11.1. Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 11.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . .35
Section 11.3. Banking.. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Section 11.4. Withholding.36
Article XII
AMENDMENTS AND MEETINGS
Section 12.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .36
Section 12.2. Meetings of the Holders of Securities; Action by Written
Consent.. . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Article XIII
REPRESENTATIONS OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE
Section 13.1. Representations and Warranties of Property Trustee. . . . . . .39
Section 13.2. Representations and Warranties of Delaware Trustee. . . . . . .40
Article XIV
MISCELLANEOUS
Section 14.1. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Section 14.2. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . .41
Section 14.3. Intention of the Parties. . . . . . . . . . . . . . . . . . . .42
Section 14.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 14.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .42
Section 14.6. Partial Enforceability. . . . . . . . . . . . . . . . . . . . .42
Section 14.7. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 14.8. Of Trust Indenture Act Section of of 1939, as amended
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . .iv
</TABLE>
iii
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
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)
</TABLE>
_______________
* This Cross-Reference Table does not constitute part of the Declaration and
shall not affect the interpretation of any of its terms or provisions.
iv
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MediaOne Finance Trust I
May , 1998
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of May , 1998 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. (to be renamed "MediaOne Group, 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 April 9, 1998 (the "Original Declaration")
and a Certificate of Trust filed with the Secretary of State of Delaware on
April 13, 1998, 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.
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;
1
<PAGE>
(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 .
"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 of the Sponsor in respect of the Common
Securities.
2
<PAGE>
"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.
"DEALER MANAGER AGREEMENT" means the Dealer Manager Agreement for
the offering and sale of Preferred Securities in the form of Exhibit C.
"DEBENTURE GUARANTEE" means the guarantee by the Sponsor of the
Debentures endorsed thereon.
"DEBENTURE ISSUER" means MediaOne Group Funding, Inc., a Delaware
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.
"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.
3
<PAGE>
"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
(i) any Trustee;
(ii) any Affiliate of any Trustee;
(iii) any officers, directors, shareholders, members,
partners, employees, representatives or agents of any
Trustee; or
(iv) any employee or agent of the Trust or its Affiliates.
"INDENTURE" means the Indenture dated as of
among the Debenture Issuer, U S WEST, Inc., a Delaware corporation, as
guarantor, and Norwest Bank Minnesota, National Association, as trustee, as
supplemented by a Second Supplemental Indenture dated as of
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:
(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;
4
<PAGE>
(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.
"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 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.
"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).
"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,
5
<PAGE>
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.
"SPECIAL EVENT" has the meaning set forth in the terms of the
Securities.
"SPONSOR" means U S WEST, Inc., a Delaware corporation (to be
renamed MediaOne Group, Inc.) or any permitted successor thereof under the
Indenture, in its capacity as sponsor of the Trust.
"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.
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;
6
<PAGE>
(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 Sections 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.
7
<PAGE>
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:
(iii) 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
8
<PAGE>
(iv) 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:
(v) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the
Indenture; or
9
<PAGE>
(vi) 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 "MediaOne Finance Trust I", 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 188 Inverness
Drive West, Englewood, Colorado 80112. 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.
10
<PAGE>
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-4 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; enter into and perform, on behalf of the
Trust, the Dealer Manager Agreement providing for the
sale of the Preferred Securities;
11
<PAGE>
(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 Section 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
12
<PAGE>
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;
13
<PAGE>
(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
14
<PAGE>
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 Section 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
15
<PAGE>
(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
16
<PAGE>
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, request and rely upon an
Officers' Certificate which, upon receipt
17
<PAGE>
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
18
<PAGE>
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 Section 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, each of the Regular Trustees is
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.
19
<PAGE>
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
20
<PAGE>
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.
21
<PAGE>
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:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-4 in relation to the Preferred Securities,
including any amendments thereto;
(b) 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;
(c) 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;
(d) 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
(e) to negotiate the terms of the Dealer Manager 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
22
<PAGE>
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;
23
<PAGE>
(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 Section 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 Section 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of Section 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 Section 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:
Constance P. Campbell
188 Inverness Drive West
Englewood, Colorado 80112
Christine J. Brennet-Morris
188 Inverness Drive West
Englewood, Colorado 80112
Rahn K. Porter
188 Inverness Drive West
Englewood, Colorado 80112
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
24
<PAGE>
Pursuant to Section 5.6(a)(i) hereof, the Sponsor hereby removes
RCSP Inc. as the Delaware Trustee, who 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
25
<PAGE>
(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
26
<PAGE>
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
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
27
<PAGE>
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 a
Majority 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;
28
<PAGE>
(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
29
<PAGE>
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
30
<PAGE>
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
(d) 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.
31
<PAGE>
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 Section 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
32
<PAGE>
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:
33
<PAGE>
(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
34
<PAGE>
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
35
<PAGE>
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) reduce 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;
36
<PAGE>
(ii) at 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;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) to ensure the Trust's status as a grantor trust for
federal income tax purposes.
Section 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
37
<PAGE>
(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
38
<PAGE>
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; 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
39
<PAGE>
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 State 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 requirements 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):
40
<PAGE>
MediaOne Finance Trust I
c/o U S WEST, Inc. (to be renamed "MediaOne Group, Inc.")
188 Inverness Drive West
Englewood, Colorado 80112
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. (to be renamed "MediaOne Group, Inc.")
188 Inverness Drive West
Englewood, Colorado 80112
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 AND OBLIGATIONS OF HOLDERS, THE
TRUST, THE SPONSOR AND THE TRUSTEES 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 THE PRINCIPLES OF CONFLICT
OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL
FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE
HOLDERS, THE TRUST, THE SPONSOR, THE TRUSTEES OR THIS DECLARATION ANY
PROVISION OF THE LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE
PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT
WITH THE TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR
AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B)
AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR
EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER
GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF
REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES,
OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND
EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE
PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR
REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR
INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER
STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES
THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND
POWERS OF THE TRUSTEES AS SET FORTH OR REFERENCED IN THIS DECLARATION.
SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
41
<PAGE>
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.
42
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
Constance P. Campbell
as Regular Trustee
- --------------------------
Christine J. Brennet-Morris
as Regular Trustee
- --------------------------
Rahn K. Partes
as Regular Trustee
- --------------------------
FIRST CHICAGO DELAWARE INC.
as Delaware Trustee
By:
--------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
as Property Trustee
By:
--------------------------
Name:
Title:
U S WEST, INC. (to be renamed "MediaOne Group, Inc.")
as Sponsor
By:
--------------------------
Name:
Title:
43
<PAGE>
EXHIBIT A
TERMS OF SECURITIES
44
<PAGE>
EXHIBIT A
TERMS OF
% TRUST ORIGINATED PREFERRED SECURITIES
% TRUST ORIGINATED COMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of , 1998 (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. Preferred Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the Trust
of Dollars ($ ), and a liquidation amount with respect
to the assets of the Trust of $25 per Preferred Security, are hereby
designated for the purposes of identification only as " %Trust Originated
Preferred Securities" (the "Preferred Securities"). The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in
the form attached hereto as Annex I, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or
practice or to conform to the rules of any stock exchange on which the
Preferred Securities are listed.
(b) COMMON SECURITIES. Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of
Dollars ($ ), 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 " % 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 % (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-
<PAGE>
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 , 1998 and will be payable quarterly in arrears, on March 31, June
30, September 30, and December 31 of each year, commencing on , 1998,
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 "Chapter 6: The New
Preferred Securities -- The New Preferred Securities -- Book-Entry Only
Issuance; The Depository Trust Company" in the Prospectus dated ,
1998 (the "Prospectus") of the Trust included in the Registration Statement on
Form S-4 of the Sponsor, the Debenture Issuer, the Trust and a certain other
business trust. 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
2
<PAGE>
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.
3
<PAGE>
(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 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,
4
<PAGE>
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 isted 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.
5
<PAGE>
(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 othr
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.
6
<PAGE>
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.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing with respect to the Preferred Securities and such event is
attributable to the failure of the Debenture Issuer or the Sponsor to pay
interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may institute a
proceeding for enforcement of payment to such holder of the principal of, or
interest on, Debentures having a principal amount equal tothe aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Debentures.
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
7
<PAGE>
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
8
<PAGE>
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. Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing with respect to the Common Securities and such event is
attributable to the failure of the Debenture Issuer or the Sponsor to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a holder of Common Securities may institute a proceeding for enforcement of
payment to such holder of the principal of, or interest on, Debentures having a
principal amount equal to the aggregate liquidation amount of the Common
Securities of such holder on or after the respective due date specified in the
Debentures.
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 a Majority
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
9
<PAGE>
vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of a Majority 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.
10
<PAGE>
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.
11
<PAGE>
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.
12
<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.
----------
Certificate Evidencing Preferred Securities
of
MEDIAONE FINANCE TRUST I
% Trust Originated Preferred Securities.
(liquidation amount $25 per Preferred Security)
13
<PAGE>
MEDIAONE FINANCE TRUST I, 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 % 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, 1998, 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.
14
<PAGE>
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)
15
<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
MEDIAONE FINANCE TRUST I
Common Securities.
(liquidation amount $25 per Common Security)
MEDIAONE FINANCE TRUST I, 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 % 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 , 1998, 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.
16
<PAGE>
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)
17
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
45
<PAGE>
EXHIBIT C
DEALER MANAGER AGREEMENT
46
<PAGE>
EXHIBIT C
FORM OF OPINIONS OF WEIL, GOTSHAL & MANAGES LLP
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(i) The Registration Statement is effective under the Securities Act
and, to the best of such counsel's knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been issued under
the Securities Act or proceedings therefor initiated or threatened by the
Commission.
(ii) At the time the Registration Statement became effective and at the
Settlement Date, the Registration Statement (other than the documents
incorporated by reference, 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 Indenture
Trustee's and the Property Trustee's respective Statements of Eligibility and
Qualification under the Trust Indenture 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 Securities Act, the Exchange Act and the Trust Indenture
Act, and the rules and regulations promulgated thereunder.
(iii) The statements in the Prospectus under the captions "Chapter
6:The New Preferred Securities--The New Preferred Securities," "--Description of
the New Debt Securities and the New Debt Guarantees," "--Description of the New
Preferred Securities Guarantees," and "--Effect of Obligations Under the New
Debt Securities, the New Debt Guarantees and the New Preferred Securities
Guarantee," insofar as they constitute summaries of legal matters or documents,
have been reviewed by such counsel and are accurate in all material respects.
(iv) The section of the Prospectus entitled "Certain Federal Income Tax
Consequences" is accurate in all material respects.
(v) U S WEST is a corporation in good standing, duly incorporated and
validly exiting under the laws of the State of Delaware and is authorized by its
articles or certificate of incorporation to transact the business in which it is
engaged, as set forth in the Prospectus.
(vi) Capital Funding is a corporation in good standing, duly incorporated
and validly exiting under the laws of the State of Colorado and is authorized by
its articles of incorporation to transact the business in which it is engaged,
as set forth in the Prospectus.
C-1
<PAGE>
(vii) MediaOne Funding is a corporation in good standing, duly incorporated
and validly exiting under the laws of its state of incorporation and is
authorized by its articles of incorporation to transact the business in which it
is engaged, as set forth in the Prospectus.
(viii) The execution, delivery and performance of this Agreement by U S
WEST and Capital Funding have been duly authorized by all necessary corporate
action on the part of U S WEST and Capital Funding; and this Agreement has been
duly and validly executed and delivered by each of U S WEST and Capital Funding.
(ix) No federal authorization, approval, consent or order of any court or
governmental authority or agency is required in connection with the execution
and delivery by U S WEST or MediaOne Funding or the issuance of the Common
Securities, the New Preferred Securities, the New Debt Securities or the
Guarantees pursuant to the terms of this Agreement, except such as have been
obtained under the Securities Act and the rules and regulations thereunder, the
Exchange Act and the rules and regulations thereunder, and the qualification of
the Trust Agreement and the Indenture under the Trust Indenture Act.
(x) The Trust Agreements and the New Preferred Securities Guarantees
have been duly qualified under the Trust Indenture Act.
(xi) The New Series I Trust and the New Series II Trust are not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(xii) Assuming that each of the guarantee agreements has been duly
authorized by U S WEST, each of the guarantee agreements has been duly executed
and delivered by U S WEST and assuming due authorization, execution and delivery
by the Indenture Trustee constitutes a valid and binding obligation of U S WEST,
enforceable against U S WEST in accordance with its terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
(xiii) Assuming that the Indenture has been duly authorized by each of U S
WEST and MediaOne Funding and has been duly authorized, executed and delivered
by the Indenture Trustee, the Indenture has been duly executed and delivered by
each of U S WEST and MediaOne Funding and is a valid and binding obligation of
each of U S WEST and MediaOne Funding, enforceable against each of U S WEST and
MediaOne 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 Trust Indenture Act.
C-2
<PAGE>
(xiv) Assuming that the New Series I Debt Securities and New Series II
Debt Securities have been duly authorized by MediaOne Funding, the New Series I
Debt Securities and New Series II Debt Securities have been duly executed by
MediaOne Funding, and when authenticated in the manner provided in the Indenture
and delivered against exchange therefor as described in the Prospectus, will
constitute valid and binding obligations of MediaOne Funding, enforceable
against MediaOne Funding in accordance with their terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
(xv) Assuming that the New Preferred Securities Guarantees have been duly
authorized by U S WEST, the New Preferred Securities Guarantees have been duly
executed by U S WEST, 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 U S WEST, enforceable against U S
WEST in accordance with its terms, except to the extent that enforcement thereof
may be limited by the Bankruptcy Exceptions.
(xvi) The New Series I Trust and the New Series II Trust will not be
classified as a grantor trust for United States federal income tax purposes.
In addition, on each of the Commencement Date and the Settlement Date such
opinion shall state that such counsel has participated in the preparation of the
Offering Materials, including the documents incorporated by reference therein,
and in conferences with officers and other representatives of U S WEST, Capital
Funding, New Series I Trust, New Series II Trust and MediaOne, and
representatives and counsel for the Dealer Managers at which the contents of the
Offering Materials and related matters were discussed and, although such counsel
need not undertake to determine independently nor pass upon or assume any
responsibility, explicitly or implicitly, for the accuracy, completeness or
fairness of the statements contained in the Offering Materials, on the basis of
and subject to the foregoing, no facts have come to the attention of such
counsel to lead such counsel to believe that the Offering Materials (including
the Schedule 13E-4) or any amendment thereto (except for the financial
statements, notes or schedules thereto and other financial and statistical data
included therein or omitted therefrom and except for that part of the
Registration Statement that constitutes the Forms T-1), as of the date of the
Offering Materials and at the Settlement Date, contained or contains an untrue
statement of a material fact or omitted or omits 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
In giving such opinions, Weil, Gotshal & Manges 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, provided that such opinion or opinions shall be addressed
to the Dealer Managers, shall be dated as of such date and shall expressly
permit Weil, Gotshal & Manges to rely thereon.
C-3
<PAGE>
EXHIBIT D
FORM OF OPINION OF STEPHEN E. BRILZ, ESQ.
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(A) U S WEST 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 Offering Materials and to enter into
and perform its obligations under this Agreement, the Trust Agreement, the
Indenture and each of the guarantee agreements and to purchase, own and hold
the Common Securities issued by New Series I Trust and New Series II Trust,
respectively. U S WEST has all requisite corporate power and authority to
make and consummate the Offers in accordance with their terms.
(B) 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 Offering Materials and to
enter into and perform its obligations under this Agreement.
(C) MediaOne Funding has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its state of
incorporation with corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Materials and to enter into and perform its obligations under Indenture and
the Trust Agreements.
(D) The execution, delivery and performance of this Agreement, the
Trust Agreement, the New Preferred Securities, the Common Securities, the
Indenture, the New Debt Securities, the Guarantee Agreements, the Indenture
and the New Preferred Securities Guarantees and the consummation of the
transactions contemplated herein and therein and compliance by U S WEST and
Capital Funding 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 U S WEST, any of U S WEST
Communications Group, Inc., U S WEST Communications Inc. and Capital Funding
(the "Significant Subsidiaries") or the New Series I Trust or New Series II
Trust is a party or by which any of them may be bound, or to which any of the
property or assets of U S West, any of the Significant Subsidiaries or the
New Series I Trust or the New Series II Trust is subject, nor will such
action result in any violation of the provisions of the charter or by-laws of
U S WEST or of Capital Funding or the Trust Agreement or the Certificate of
Trust, or any statute (other than the Securities Act
D-1
<PAGE>
or state securities or Blue Sky laws) or any order, rule or regulation known
to such counsel of any court or Other Agency having jurisdiction over
U S WEST 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 U S WEST taken as a whole.
(E) No state authorization, approval, consent or order of any court or
Other Agency is required in connection with the issuance of the Common
Securities or the exchange of the New Preferred Securities, the New Debt
Securities or the Preferred Securities Guarantees, except such as have been
obtained under the Securities Act or the rules and regulations thereunder,
and the qualification of the Trust Agreements and the Indenture under the
Trust Indenture Act and such as may be required under state securities law.
(F) The Schedule l3E-4 (except for any financial data contained therein
as to which counsel does not express an opinion) complies in all material
respects to the requirements of Section 13(e) of the Exchange Act and the
rules and regulations thereunder.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(G) The Trust Agreements have been duly authorized, executed and
delivered by U S WEST and the Indenture Trustee.
(H) This Agreement, the guarantee agreements, the Indenture, the New
Preferred Securities, the Common Securities, the New Debt Securities and the
New Preferred Securities Guarantees have been duly authorized, executed and
delivered by U S WEST.
(I) This Agreement, the Indenture, the New Preferred Securities, the
Common Securities, the New Debt Securities, and the Preferred Securities
Guarantees have been duly authorized, executed and delivered by MediaOne
Funding.
(J) No state authorization, approval, consent or order of any court or
Other Agency is required in connection with the issuance of the Common
Securities or the exchange of the New Preferred Securities, the New Debt
Securities or the Preferred Securities Guarantees, except such as have been
obtained under the Securities Act or the rules and regulations thereunder,
and the qualification of the Trust Agreements and the Indenture under the
Trust Indenture Act and such as may be required under state securities law.
(K) All of the issued and outstanding Common Securities of the New
Series I Trust and New Series II Trust are directly owned by U S WEST free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
D-2
<PAGE>
(L) The Indenture Trustee is the record holder of New Debt Securities
and the Preferred Securities Guarantees and no security interest, mortgage,
pledge, lien, encumbrance, claim or equity is noted thereon or on the
register.
(M) Each of the documents incorporated by reference in the Offering
Materials 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 Securities Act, the rules and regulations thereunder
and the Exchange Act, the rules and regulations thereunder, as applicable.
In giving such opinions, 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, respectively, provided that such opinion or opinions shall
be addressed to the Dealer Managers, shall be dated as of such date and shall
expressly permit Stephen E. Brilz, Esq. to rely thereon.
D-3
<PAGE>
EXHIBIT E
[TO BE REVISED AFTER DISCUSSIONS WITH MORRIS NICHOLS]
FORM OF OPINION OF MORRIS, NICHOLS, ARSHT & TUNNELL
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(i) Each of New Series I Trust and the New Series II 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 each of New
Series I Trust and the New Series II Trust as a business trust have been
made; under the Delaware Act and the Trust Agreement, each of New Series I
Trust and the New Series II Trust has the business trust power and authority
to own property and conduct its business, all as described in the Offering
Materials, (y) enter into and perform its obligations under this Agreement,
and (z) issue and perform its obligations under the New Preferred Securities
and the Common Securities.
(ii) The issuance and exchange by the New Series I Trust and the New
Series II Trust of the New Preferred Securities and Common Securities; the
execution, delivery and performance by the New Series I Trust and the New
Series II Trust of this Agreement; and the consummation of the transactions
contemplated herein and therein; and compliance by the New Series I Trust and
the New Series II Trust with their obligations hereunder and thereunder will
not violate any of the provisions of the Certificate of Trust or the Trust
Agreement, or any applicable Delaware law or administrative regulation.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(iii) Assuming the Trust Agreement has been duly authorized, executed
and delivered by the Indenture Trustee and U S WEST, the Trust Agreement is a
valid and binding obligation of U S WEST and the Indenture Trustee,
enforceable against U S WEST and the Indenture Trustee, 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, and (ii) principles of equity, including
applicable law relating to fiduciary duties (regardless of whether considered
and applied in a proceeding in equity or at law).
(iv) Under the Delaware Act and the Trust Agreement, the execution and
delivery by New Series I Trust and New Series II Trust of this Agreement, and
the performance by
E-1
<PAGE>
New Series I Trust and New Series II Trust of each of their obligations
thereunder, have been duly authorized by all necessary business trust action
on the part of the Trust; and this Agreement and the Pricing Agreement have
been duly executed and delivered by New Series I Trust and New Series II
Trust, respectively, under the laws of Delaware.
(v) The Common Securities have been duly authorized by the Trust
Agreement and are validly issued and represent undivided beneficial interests
in the assets of the New Series I Trust and New Series II Trust,
respectively; and under the Delaware Act and the Trust Agreement, the
issuance of the Common Securities is not subject to preemptive rights.
(vi) The New Preferred Securities to be exchanged for Old Preferred
Securities have been duly authorized by the Trust Agreements and, when
exchanged for Old Preferred Securities pursuant to the Offers, will be
validly issued, and (subject to the qualifications set forth herein) fully
paid and nonassessable undivided beneficial interests in the assets of New
Series I Trust or New Series II Trust, respectively; the holders of the New
Preferred Securities, as beneficial owners of New Series I Trust or New
Series II Trust, respectively, 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 Trust Agreement, the issuance of the New
Preferred Securities is not subject to preemptive rights. Such counsel may
note that the New Preferred Security holders may be obligated, pursuant to
the Trust Agreement, to (i) provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers of New
Preferred Security Certificates and the issuance of replacement New 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 Trust Agreement.
(vii) Assuming that the New Series I Trust and the New Series II Trust
derive 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 New Series I Trust and the New
Series II Trust solely in connection with the issuance and exchange of the
Common Securities and the New Preferred Securities or the exchange 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.
E-2
<PAGE>
EXHIBIT F
[TO BE REVISED AFTER DISCUSSIONS WITH PEPPER HAMILTON]
FORM OF OPINION OF PEPPER, HAMILTON & SCHEETZ
TO BE DELIVERED ON THE SETTLEMENT DATE:
(i) , a trustee (the "Delaware Trustee") of the New Series I Trust
is a natural person and is a resident of the State of Delaware.
(ii) The Trust Agreement for New Series II Trust has been duly
executed and delivered by each property trustee and the Delaware Trustee, and
constitutes the legal, valid and binding obligation of each property trustee
and the Delaware Trustee, respectively, enforceable against each property
trustee and the Delaware Trustee in accordance with its terms, except as
enforcement thereof may be limited by the Bankruptcy Exceptions.
(iii) , a trustee (the "Delaware Trustee") of the New Series II
Trust is a natural person and is a resident of the State of Delaware.
(iv) The Trust Agreement for New Series II Trust has been duly
executed and delivered by each property trustee and the Delaware Trustee, and
constitutes the legal, valid and binding obligation of each property trustee
and the Delaware Trustee, respectively, enforceable against each property
trustee and the Delaware Trustee in accordance with its terms, except as
enforcement thereof may be limited by the Bankruptcy Exceptions.
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. as to matters concerning The First National Bank of
Chicago under the federal banking laws on an opinion the Law Department of
The First National Bank of Chicago, Norwest Bank Minnesota, N.A., under the
federal banking laws on an opinion the Law Department of Norwest Bank
Minnesota, N.A., respectively, provided that such opinion or opinions shall
be addressed to the Dealers Managers, shall be dated as of such date and
shall expressly permit Pepper, Hamilton & Scheetz to rely thereon.
F-1
<PAGE>
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
P-1
CUSIP NO.
Certificate Evidencing Preferred Securities
of
MEDIAONE FINANCE TRUST I
___% Trust Originated Preferred Securities.
(liquidation amount $25 per Preferred Security)
MEDIAONE FINANCE TRUST I, a business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder")
is the registered owner of preferred securities of the Trust representing
undivided beneficial interests in the assets of the Trust designated the ____%
Trust Originated Preferred Securities (liquidation amount
<PAGE>
$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 ________ __, 1998, 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 extend 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.
2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this ___th
day of __________, 1998.
as Trustee
---------------------------------
as Trustee
---------------------------------
3
<PAGE>
------------------------------
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)
4
<PAGE>
Exhibit 4(b)
----------------------------------------
----------------------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
MediaOne Finance Trust II
Dated as of May , 1998
----------------------------------------
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application. . . . . . . . . . . . . . . . 7
Section 2.2. Lists of Holders of Securities. . . . . . . . . . . . . . . . . 7
Section 2.3. Reports by the Property Trustee.. . . . . . . . . . . . . . . . 7
Section 2.4. Periodic Reports to Property Trustee. . . . . . . . . . . . . . 8
Section 2.5. Evidence of Compliance with Conditions Precedent. . . . . . . . 8
Section 2.6. Events of Default; Waiver.. . . . . . . . . . . . . . . . . . . 8
Section 2.7. Event of Default; Notice. . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
ORGANIZATION
Section 3.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.2. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.3. Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.4. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.5. Title to Property of the Trust. . . . . . . . . . . . . . . . .11
Section 3.6. Powers and Duties of the Regular Trustees.. . . . . . . . . . .11
Section 3.7. Prohibition of Actions by the Trust and the Trustees. . . . . .13
Section 3.8. Powers and Duties of the Property Trustee.. . . . . . . . . . .14
Section 3.9. Certain Duties and Responsibilities of the Property Trustee.. .16
Section 3.10. Certain Rights of Property Trustee. . . . . . . . . . . . . . .17
Section 3.11. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .19
Section 3.12. Execution of Documents. . . . . . . . . . . . . . . . . . . . .20
Section 3.13. Not Responsible for Recitals or Issuance of Securities. . . . .20
Section 3.14. Duration of Trust.. . . . . . . . . . . . . . . . . . . . . . .20
Section 3.15. Mergers.. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE IV
SPONSOR
Section 4.1. Sponsor's Purchase of Common Securities.. . . . . . . . . . . .22
i
<PAGE>
Section 4.2. Responsibilities of the Sponsor.. . . . . . . . . . . . . . . .22
ARTICLE V
TRUSTEES
Section 5.1. Number of Trustees. . . . . . . . . . . . . . . . . . . . . . .22
Section 5.2. Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.3. Property Trustee; Eligibility.. . . . . . . . . . . . . . . . .23
Section 5.4. Qualifications of Regular Trustees and Delaware Trustee
Generally . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Section 5.5. Initial Trustees. . . . . . . . . . . . . . . . . . . . . . . .24
Section 5.6. Appointment, Removal and Resignation of Trustees. . . . . . . .25
Section 5.7. Vacancies among Trustees. . . . . . . . . . . . . . . . . . . .26
Section 5.8. Effect of Vacancies.. . . . . . . . . . . . . . . . . . . . . .26
Section 5.9. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 5.10. Delegation of Power.. . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VI
DISTRIBUTIONS
Section 6.1. Distributions.. . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VII
ISSUANCE OF SECURITIES
Section 7.1. General Provisions Regarding Securities.. . . . . . . . . . . .27
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
Section 8.1. Dissolution and Termination of Trust. . . . . . . . . . . . . .28
ARTICLE IX
TRANSFER OF INTERESTS
Section 9.1. Transfer of Securities. . . . . . . . . . . . . . . . . . . . .29
Section 9.2. Transfer of Certificates. . . . . . . . . . . . . . . . . . . .29
Section 9.3. Deemed Security Holders.. . . . . . . . . . . . . . . . . . . .30
Section 9.4. Book Entry Interests. . . . . . . . . . . . . . . . . . . . . .30
Section 9.5. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . .31
Section 9.6. Appointment of Successor Clearing Agency. . . . . . . . . . . .31
Section 9.7. Definitive Preferred Security Certificates. . . . . . . . . . .31
Section 9.8. Mutilated, Destroyed, Lost or Stolen Certificates.. . . . . . .32
</TABLE>
ii
<PAGE>
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTTEES OR OTHERS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.1. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.3. Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.5. Outside Businesses. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XI
ACCOUNTING
Section 11.1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . 35
Section 11.3. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 11.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII
AMENDMENTS AND MEETINGS
Section 12.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.2. Meetings of the Holders of Securities; Action by Written
Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XIII
REPRESENTATIONS OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE
Section 13.1. Representations and Warranties of Property Trustee. . . . . . 39
Section 13.2. Representations and Warranties of Delaware Trustee. . . . . . 40
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 14.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 14.3. Intention of the Parties. . . . . . . . . . . . . . . . . . . 42
Section 14.4. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 14.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 42
Section 14.6. Partial Enforceability. . . . . . . . . . . . . . . . . . . . 42
Section 14.7. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 14.8. Of Trust Indenture Act Section of of 1939, as amended
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . iv
</TABLE>
iii
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
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)
</TABLE>
- -----------------
* This Cross-Reference Table does not constitute part of the Declaration and
shall not affect the interpretation of any of its terms or provisions.
iv
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
MediaOne Finance Trust II
May , 1998
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of May , 1998 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. (to be renamed "MediaOne Group, 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 April 9, 1998 (the "Original Declaration") and a Certificate
of Trust filed with the Secretary of State of Delaware on April 13, 1998, 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.
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;
<PAGE>
(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 .
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON SECURITY" has the meaning specified in Section 7.1.
2
<PAGE>
"COMMON SECURITIES GUARANTEE" means the guarantee agreement to be
dated as of _______________________ 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.
"DEALER MANAGER AGREEMENT" means the Dealer Manager Agreement for
the offering and sale of Preferred Securities in the form of Exhibit C.
"DEBENTURE GUARANTEE" means the guarantee by the Sponsor of the
Debentures endorsed thereon.
"DEBENTURE ISSUER" means MediaOne Group Funding, Inc., a Delaware
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.
"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.
3
<PAGE>
"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
(i) any Trustee;
(ii) any Affiliate of any Trustee;
(iii) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or
(iv) any employee or agent of the Trust or its Affiliates.
"INDENTURE" means the Indenture dated as of
among the Debenture Issuer, U S WEST, Inc., a Delaware corporation, as
guarantor, and Norwest Bank Minnesota, National Association, as trustee, as
supplemented by a Second Supplemental Indenture dated as of
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:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definition relating thereto;
4
<PAGE>
(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.
"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 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.
"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).
"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
5
<PAGE>
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.
"SPECIAL EVENT" has the meaning set forth in the terms of the
Securities.
"SPONSOR" means U S WEST, Inc., a Delaware corporation (to be
renamed MediaOne Group, Inc.) or any permitted successor thereof under the
Indenture, in its capacity as sponsor of the Trust.
"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.
6
<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 Sections 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.
7
<PAGE>
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:
8
<PAGE>
(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.
9
<PAGE>
(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 "MediaOne Finance Trust 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 188 Inverness
Drive West, Englewood, Colorado 80112. 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
10
<PAGE>
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-4 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
11
<PAGE>
(v) execute; enter into and perform, on behalf of the
Trust, the Dealer Manager 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 Section 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;
12
<PAGE>
(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
13
<PAGE>
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
14
<PAGE>
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;
15
<PAGE>
(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 Section 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
16
<PAGE>
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;
17
<PAGE>
(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, 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
18
<PAGE>
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 Section 3807 of the Business Trust Act.
19
<PAGE>
Section 3.12. EXECUTION OF DOCUMENTS.
Unless otherwise determined by the Regular Trustees and except
as otherwise required by the Business Trust Act, each of the Regular Trustees
is 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.
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
20
<PAGE>
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.
21
<PAGE>
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:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-4 in relation to the Preferred Securities,
including any amendments thereto;
(b) 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;
(c) 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;
(d) 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
(e) to negotiate the terms of the Dealer Manager 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
22
<PAGE>
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;
23
<PAGE>
(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 Section 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 Section 310(b) of the Trust Indenture Act)
shall in all respects comply with the provisions of Section 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 Section 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:
Constance P. Campbell
188 Inverness Drive West
Englewood, Colorado 80112
Christine J. Brennet-Morris
188 Inverness Drive West
Englewood, Colorado 80112
Rahn K. Porter
188 Inverness Drive West
Englewood, Colorado 80112
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
24
<PAGE>
Pursuant to Section 5.6(a)(i) hereof, the Sponsor hereby removes
RCSP Inc. as the Delaware Trustee, who 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
25
<PAGE>
(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
26
<PAGE>
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
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).
27
<PAGE>
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 a Majority 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;
28
<PAGE>
(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
29
<PAGE>
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
30
<PAGE>
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
(d) 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
31
<PAGE>
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 Section 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.
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
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.
35
<PAGE>
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) reduce or otherwise adversely affect the powers of the
Property Trustee; or
36
<PAGE>
(C) cause the Trust to be deemed to be an Investment
Company which is required to be registered under the
Investment Company Act;
(ii) at 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;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) to ensure the Trust's status as a grantor trust for federal
income tax purposes.
Section 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
37
<PAGE>
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
38
<PAGE>
(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; and
39
<PAGE>
(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 State 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 requirements 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):
40
<PAGE>
MediaOne Finance Trust II
c/o U S WEST, Inc. (to be renamed "MediaOne Group, Inc.")
188 Inverness Drive West
Englewood, Colorado 80112
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. (to be renamed "MediaOne Group, Inc.")
188 Inverness Drive West
Englewood, Colorado 80112
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 AND OBLIGATIONS OF HOLDERS, THE
TRUST, THE SPONSOR AND THE TRUSTEES 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 THE PRINCIPLES OF CONFLICT
OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL
FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE
HOLDERS, THE TRUST, THE SPONSOR, THE TRUSTEES OR THIS DECLARATION ANY
PROVISION OF THE LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE
PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT
WITH THE TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR
AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B)
AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR
EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER
GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF
REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES,
OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND
EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE
PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR
REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR
INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER
STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES
THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND
POWERS OF THE TRUSTEES AS SET FORTH OR REFERENCED IN THIS DECLARATION.
SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
41
<PAGE>
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.
42
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
Constance P. Campbell
as Regular Trustee
___________________________
Christine J. Brennet-Morris
as Regular Trustee
___________________________
Rahn K. Partes
as Regular Trustee
___________________________
FIRST CHICAGO DELAWARE INC.
as Delaware Trustee
By: _______________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
as Property Trustee
By: _______________________
Name:
Title:
U S WEST, INC. (to be renamed "MediaOne Group, Inc.")
as Sponsor
By: _______________________
Name:
Title:
43
<PAGE>
EXHIBIT A
TERMS OF SECURITIES
44
<PAGE>
EXHIBIT A
TERMS OF
% TRUST ORIGINATED PREFERRED SECURITIES
% TRUST ORIGINATED COMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of , 1998 (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. Preferred Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of Dollars ($ ), and a liquidation amount with
respect to the assets of the Trust of $25 per Preferred Security, are hereby
designated for the purposes of identification only as " %Trust Originated
Preferred Securities" (the "Preferred Securities"). The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in
the form attached hereto as Annex I, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or
practice or to conform to the rules of any stock exchange on which the
Preferred Securities are listed.
(b) COMMON SECURITIES. Common Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the Trust
of Dollars ($ ), 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 " % 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 % (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-
<PAGE>
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 , 1998 and will be payable quarterly in arrears, on March
31, June 30, September 30, and December 31 of each year, commencing on ,
1998, 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 "Chapter 6: The New
Preferred Securities -- The New Preferred Securities -- Book-Entry Only
Issuance; The Depository Trust Company" in the Prospectus dated __________,
1998 (the "Prospectus") of the Trust included in the Registration Statement
on Form S-4 of the Sponsor, the Debenture Issuer, the Trust and a certain
other business trust. 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
2
<PAGE>
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.
3
<PAGE>
(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 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,
4
<PAGE>
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 isted 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.
5
<PAGE>
(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 othr 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.
6
<PAGE>
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.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing with respect to the Preferred Securities and such event is
attributable to the failure of the Debenture Issuer or the Sponsor to pay
interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder o Preferred Securities may institute a
proceeding for enforcement of payment to such holder of the principal of, or
interest on, Debentures having a principal amount equal to he aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Debentures.
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
7
<PAGE>
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
8
<PAGE>
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. Notwithstanding the foregoing, if an
Event of Default has occurred and is continuing with respect to the Common
Securities and such event is attributable to the failure of the Debenture
Issuer or the Sponsor to pay interest or principal on the Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of Common Securities may
institute a proceeding for enforcement of payment to such holder of the
principal of, or interest on, Debentures having a principal amount equal to
the aggregate liquidation amount of the Common Securities of such holder on
or after the respective due date specified in the Debentures.
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 a Majority
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
9
<PAGE>
vote on such amendment or proposal and such amendment or proposal shall
not be effective except with the approval of a Majority 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.
10
<PAGE>
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.
11
<PAGE>
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.
12
<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.__________
Certificate Evidencing Preferred Securities
of
MEDIAONE FINANCE TRUST II
% Trust Originated Preferred Securities.
(liquidation amount $25 per Preferred Security)
13
<PAGE>
MEDIAONE FINANCE TRUST 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 % 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, ______ 1998, 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.
14
<PAGE>
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)
15
<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
MEDIAONE FINANCE TRUST II
Common Securities.
(liquidation amount $25 per Common Security)
MEDIAONE FINANCE TRUST 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 % 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 , 1998, 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.
16
<PAGE>
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)
17
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
45
<PAGE>
EXHIBIT C
DEALER MANAGER AGREEMENT
46
<PAGE>
EXHIBIT C
FORM OF OPINIONS OF WEIL, GOTSHAL & MANAGES LLP
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(i) The Registration Statement is effective under the Securities Act
and, to the best of such counsel's knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been issued under
the Securities Act or proceedings therefor initiated or threatened by the
Commission.
(ii) At the time the Registration Statement became effective and at the
Settlement Date, the Registration Statement (other than the documents
incorporated by reference, 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 Indenture
Trustee's and the Property Trustee's respective Statements of Eligibility and
Qualification under the Trust Indenture 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 Securities Act, the Exchange Act and the Trust Indenture
Act, and the rules and regulations promulgated thereunder.
(iii) The statements in the Prospectus under the captions "Chapter
6:The New Preferred Securities--The New Preferred Securities," "--Description of
the New Debt Securities and the New Debt Guarantees," "--Description of the New
Preferred Securities Guarantees," and "--Effect of Obligations Under the New
Debt Securities, the New Debt Guarantees and the New Preferred Securities
Guarantee," insofar as they constitute summaries of legal matters or documents,
have been reviewed by such counsel and are accurate in all material respects.
(iv) The section of the Prospectus entitled "Certain Federal Income Tax
Consequences" is accurate in all material respects.
(v) U S WEST is a corporation in good standing, duly incorporated and
validly exiting under the laws of the State of Delaware and is authorized by its
articles or certificate of incorporation to transact the business in which it is
engaged, as set forth in the Prospectus.
(vi) Capital Funding is a corporation in good standing, duly incorporated
and validly exiting under the laws of the State of Colorado and is authorized by
its articles of incorporation to transact the business in which it is engaged,
as set forth in the Prospectus.
C-1
<PAGE>
(vii) MediaOne Funding is a corporation in good standing, duly incorporated
and validly exiting under the laws of its state of incorporation and is
authorized by its articles of incorporation to transact the business in which it
is engaged, as set forth in the Prospectus.
(viii) The execution, delivery and performance of this Agreement by U S
WEST and Capital Funding have been duly authorized by all necessary corporate
action on the part of U S WEST and Capital Funding; and this Agreement has been
duly and validly executed and delivered by each of U S WEST and Capital Funding.
(ix) No federal authorization, approval, consent or order of any court or
governmental authority or agency is required in connection with the execution
and delivery by U S WEST or MediaOne Funding or the issuance of the Common
Securities, the New Preferred Securities, the New Debt Securities or the
Guarantees pursuant to the terms of this Agreement, except such as have been
obtained under the Securities Act and the rules and regulations thereunder, the
Exchange Act and the rules and regulations thereunder, and the qualification of
the Trust Agreement and the Indenture under the Trust Indenture Act.
(x) The Trust Agreements and the New Preferred Securities Guarantees
have been duly qualified under the Trust Indenture Act.
(xi) The New Series I Trust and the New Series II Trust are not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(xii) Assuming that each of the guarantee agreements has been duly
authorized by U S WEST, each of the guarantee agreements has been duly executed
and delivered by U S WEST and assuming due authorization, execution and delivery
by the Indenture Trustee constitutes a valid and binding obligation of U S WEST,
enforceable against U S WEST in accordance with its terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
(xiii) Assuming that the Indenture has been duly authorized by each of U S
WEST and MediaOne Funding and has been duly authorized, executed and delivered
by the Indenture Trustee, the Indenture has been duly executed and delivered by
each of U S WEST and MediaOne Funding and is a valid and binding obligation of
each of U S WEST and MediaOne Funding, enforceable against each of U S WEST and
MediaOne 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 Trust Indenture Act.
C-2
<PAGE>
(xiv) Assuming that the New Series I Debt Securities and New Series II
Debt Securities have been duly authorized by MediaOne Funding, the New Series I
Debt Securities and New Series II Debt Securities have been duly executed by
MediaOne Funding, and when authenticated in the manner provided in the Indenture
and delivered against exchange therefor as described in the Prospectus, will
constitute valid and binding obligations of MediaOne Funding, enforceable
against MediaOne Funding in accordance with their terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
(xv) Assuming that the New Preferred Securities Guarantees have been duly
authorized by U S WEST, the New Preferred Securities Guarantees have been duly
executed by U S WEST, 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 U S WEST, enforceable against U S
WEST in accordance with its terms, except to the extent that enforcement thereof
may be limited by the Bankruptcy Exceptions.
(xvi) The New Series I Trust and the New Series II Trust will not be
classified as a grantor trust for United States federal income tax purposes.
In addition, on each of the Commencement Date and the Settlement Date such
opinion shall state that such counsel has participated in the preparation of the
Offering Materials, including the documents incorporated by reference therein,
and in conferences with officers and other representatives of U S WEST, Capital
Funding, New Series I Trust, New Series II Trust and MediaOne, and
representatives and counsel for the Dealer Managers at which the contents of the
Offering Materials and related matters were discussed and, although such counsel
need not undertake to determine independently nor pass upon or assume any
responsibility, explicitly or implicitly, for the accuracy, completeness or
fairness of the statements contained in the Offering Materials, on the basis of
and subject to the foregoing, no facts have come to the attention of such
counsel to lead such counsel to believe that the Offering Materials (including
the Schedule 13E-4) or any amendment thereto (except for the financial
statements, notes or schedules thereto and other financial and statistical data
included therein or omitted therefrom and except for that part of the
Registration Statement that constitutes the Forms T-1), as of the date of the
Offering Materials and at the Settlement Date, contained or contains an untrue
statement of a material fact or omitted or omits 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
In giving such opinions, Weil, Gotshal & Manges 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, provided that such opinion or opinions shall be addressed
to the Dealer Managers, shall be dated as of such date and shall expressly
permit Weil, Gotshal & Manges to rely thereon.
C-3
<PAGE>
EXHIBIT D
FORM OF OPINION OF STEPHEN E. BRILZ, ESQ.
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(A) U S WEST 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 Offering Materials and to enter into
and perform its obligations under this Agreement, the Trust Agreement, the
Indenture and each of the guarantee agreements and to purchase, own and hold
the Common Securities issued by New Series I Trust and New Series II Trust,
respectively. U S WEST has all requisite corporate power and authority to
make and consummate the Offers in accordance with their terms.
(B) 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 Offering Materials and to
enter into and perform its obligations under this Agreement.
(C) MediaOne Funding has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its state of
incorporation with corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Materials and to enter into and perform its obligations under Indenture and
the Trust Agreements.
(D) The execution, delivery and performance of this Agreement, the
Trust Agreement, the New Preferred Securities, the Common Securities, the
Indenture, the New Debt Securities, the Guarantee Agreements, the Indenture
and the New Preferred Securities Guarantees and the consummation of the
transactions contemplated herein and therein and compliance by U S WEST and
Capital Funding 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 U S WEST, any of U S WEST
Communications Group, Inc., U S WEST Communications Inc. and Capital Funding
(the "Significant Subsidiaries") or the New Series I Trust or New Series II
Trust is a party or by which any of them may be bound, or to which any of the
property or assets of U S West, any of the Significant Subsidiaries or the
New Series I Trust or the New Series II Trust is subject, nor will such
action result in any violation of the provisions of the charter or by-laws of
U S WEST or of Capital Funding or the Trust Agreement or the Certificate of
Trust, or any statute (other than the Securities Act
D-1
<PAGE>
or state securities or Blue Sky laws) or any order, rule or regulation known
to such counsel of any court or Other Agency having jurisdiction over
U S WEST 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 U S WEST taken as a whole.
(E) No state authorization, approval, consent or order of any court or
Other Agency is required in connection with the issuance of the Common
Securities or the exchange of the New Preferred Securities, the New Debt
Securities or the Preferred Securities Guarantees, except such as have been
obtained under the Securities Act or the rules and regulations thereunder,
and the qualification of the Trust Agreements and the Indenture under the
Trust Indenture Act and such as may be required under state securities law.
(F) The Schedule l3E-4 (except for any financial data contained therein
as to which counsel does not express an opinion) complies in all material
respects to the requirements of Section 13(e) of the Exchange Act and the
rules and regulations thereunder.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(G) The Trust Agreements have been duly authorized, executed and
delivered by U S WEST and the Indenture Trustee.
(H) This Agreement, the guarantee agreements, the Indenture, the New
Preferred Securities, the Common Securities, the New Debt Securities and the
New Preferred Securities Guarantees have been duly authorized, executed and
delivered by U S WEST.
(I) This Agreement, the Indenture, the New Preferred Securities, the
Common Securities, the New Debt Securities, and the Preferred Securities
Guarantees have been duly authorized, executed and delivered by MediaOne
Funding.
(J) No state authorization, approval, consent or order of any court or
Other Agency is required in connection with the issuance of the Common
Securities or the exchange of the New Preferred Securities, the New Debt
Securities or the Preferred Securities Guarantees, except such as have been
obtained under the Securities Act or the rules and regulations thereunder,
and the qualification of the Trust Agreements and the Indenture under the
Trust Indenture Act and such as may be required under state securities law.
(K) All of the issued and outstanding Common Securities of the New
Series I Trust and New Series II Trust are directly owned by U S WEST free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
D-2
<PAGE>
(L) The Indenture Trustee is the record holder of New Debt Securities
and the Preferred Securities Guarantees and no security interest, mortgage,
pledge, lien, encumbrance, claim or equity is noted thereon or on the
register.
(M) Each of the documents incorporated by reference in the Offering
Materials 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 Securities Act, the rules and regulations thereunder
and the Exchange Act, the rules and regulations thereunder, as applicable.
In giving such opinions, 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, respectively, provided that such opinion or opinions shall
be addressed to the Dealer Managers, shall be dated as of such date and shall
expressly permit Stephen E. Brilz, Esq. to rely thereon.
D-3
<PAGE>
EXHIBIT E
[TO BE REVISED AFTER DISCUSSIONS WITH MORRIS NICHOLS]
FORM OF OPINION OF MORRIS, NICHOLS, ARSHT & TUNNELL
TO BE DELIVERED ON THE COMMENCEMENT DATE:
(i) Each of New Series I Trust and the New Series II 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 each of New
Series I Trust and the New Series II Trust as a business trust have been
made; under the Delaware Act and the Trust Agreement, each of New Series I
Trust and the New Series II Trust has the business trust power and authority
to own property and conduct its business, all as described in the Offering
Materials, (y) enter into and perform its obligations under this Agreement,
and (z) issue and perform its obligations under the New Preferred Securities
and the Common Securities.
(ii) The issuance and exchange by the New Series I Trust and the New
Series II Trust of the New Preferred Securities and Common Securities; the
execution, delivery and performance by the New Series I Trust and the New
Series II Trust of this Agreement; and the consummation of the transactions
contemplated herein and therein; and compliance by the New Series I Trust and
the New Series II Trust with their obligations hereunder and thereunder will
not violate any of the provisions of the Certificate of Trust or the Trust
Agreement, or any applicable Delaware law or administrative regulation.
TO BE DELIVERED ON THE SETTLEMENT DATE:
(iii) Assuming the Trust Agreement has been duly authorized, executed
and delivered by the Indenture Trustee and U S WEST, the Trust Agreement is a
valid and binding obligation of U S WEST and the Indenture Trustee,
enforceable against U S WEST and the Indenture Trustee, 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, and (ii) principles of equity, including
applicable law relating to fiduciary duties (regardless of whether considered
and applied in a proceeding in equity or at law).
(iv) Under the Delaware Act and the Trust Agreement, the execution and
delivery by New Series I Trust and New Series II Trust of this Agreement, and
the performance by
E-1
<PAGE>
New Series I Trust and New Series II Trust of each of their obligations
thereunder, have been duly authorized by all necessary business trust action
on the part of the Trust; and this Agreement and the Pricing Agreement have
been duly executed and delivered by New Series I Trust and New Series II
Trust, respectively, under the laws of Delaware.
(v) The Common Securities have been duly authorized by the Trust
Agreement and are validly issued and represent undivided beneficial interests
in the assets of the New Series I Trust and New Series II Trust,
respectively; and under the Delaware Act and the Trust Agreement, the
issuance of the Common Securities is not subject to preemptive rights.
(vi) The New Preferred Securities to be exchanged for Old Preferred
Securities have been duly authorized by the Trust Agreements and, when
exchanged for Old Preferred Securities pursuant to the Offers, will be
validly issued, and (subject to the qualifications set forth herein) fully
paid and nonassessable undivided beneficial interests in the assets of New
Series I Trust or New Series II Trust, respectively; the holders of the New
Preferred Securities, as beneficial owners of New Series I Trust or New
Series II Trust, respectively, 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 Trust Agreement, the issuance of the New
Preferred Securities is not subject to preemptive rights. Such counsel may
note that the New Preferred Security holders may be obligated, pursuant to
the Trust Agreement, to (i) provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers of New
Preferred Security Certificates and the issuance of replacement New 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 Trust Agreement.
(vii) Assuming that the New Series I Trust and the New Series II Trust
derive 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 New Series I Trust and the New
Series II Trust solely in connection with the issuance and exchange of the
Common Securities and the New Preferred Securities or the exchange 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.
E-2
<PAGE>
EXHIBIT F
[TO BE REVISED AFTER DISCUSSIONS WITH PEPPER HAMILTON]
FORM OF OPINION OF PEPPER, HAMILTON & SCHEETZ
TO BE DELIVERED ON THE SETTLEMENT DATE:
(i) , a trustee (the "Delaware Trustee") of the New Series I Trust
is a natural person and is a resident of the State of Delaware.
(ii) The Trust Agreement for New Series II Trust has been duly
executed and delivered by each property trustee and the Delaware Trustee, and
constitutes the legal, valid and binding obligation of each property trustee
and the Delaware Trustee, respectively, enforceable against each property
trustee and the Delaware Trustee in accordance with its terms, except as
enforcement thereof may be limited by the Bankruptcy Exceptions.
(iii) , a trustee (the "Delaware Trustee") of the New Series II
Trust is a natural person and is a resident of the State of Delaware.
(iv) The Trust Agreement for New Series II Trust has been duly
executed and delivered by each property trustee and the Delaware Trustee, and
constitutes the legal, valid and binding obligation of each property trustee
and the Delaware Trustee, respectively, enforceable against each property
trustee and the Delaware Trustee in accordance with its terms, except as
enforcement thereof may be limited by the Bankruptcy Exceptions.
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. as to matters concerning The First National Bank of
Chicago under the federal banking laws on an opinion the Law Department of
The First National Bank of Chicago, Norwest Bank Minnesota, N.A., under the
federal banking laws on an opinion the Law Department of Norwest Bank
Minnesota, N.A., respectively, provided that such opinion or opinions shall
be addressed to the Dealers Managers, shall be dated as of such date and
shall expressly permit Pepper, Hamilton & Scheetz to rely thereon.
F-1
<PAGE>
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
P-1
CUSIP NO.
Certificate Evidencing Preferred Securities
of
MEDIAONE FINANCE TRUST II
___% Trust Originated Preferred Securities.
(liquidation amount $25 per Preferred Security)
MEDIAONE FINANCE TRUST II, a business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder")
is the registered owner of preferred securities of the Trust representing
undivided beneficial interests in the assets of the Trust designated the
<PAGE>
____% 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 ________ __, 1998, 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 extend 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.
2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this ___th
day of __________, 1998.
as Trustee
-------------------------------
as Trustee
-------------------------------
3
<PAGE>
------------------------------
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)
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDIAONE GROUP FUNDING, INC.,
Issuer
U S WEST, INC.
(to be renamed "MEDIAONE GROUP, INC.")
Guarantor
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
-----------------------------------
INDENTURE
Dated as of June __, 1998
-----------------------------------
Guaranteed Subordinated Debt Securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE (*)
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- ------------------- -----------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
7.10
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(a)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
5.02(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(b)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02(c)
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a)
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(b)
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(a)
5.04(b)
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04(c)
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.03
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.06
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.06
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
7.02
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
7.01(c)
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
8.04
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
</TABLE>
- -------------------
(*) This Cross-Reference Table does not constitute part of the Indenture and
shall not have any bearing on the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS (*)
<TABLE>
<CAPTION>
Page
------
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions of Terms. . . . . . . . . . . . . . . . . . . . . 1
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debt Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Governmental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"herein", "hereof" and "hereunder. . . . . . . . . . . . . . . . . . . . . . 5
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Officers' Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Preferred Securities Guarantee . . . . . . . . . . . . . . . . . . . . . . . 6
Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Responsible Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
- --------------
* This Table of Contents does not constitute part of the Indenture and shall
not have any bearing upon the interpretation of any of its terms or
provisions.
i
<PAGE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MediaOne Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II.
ISSUE, DESCRIPTION, TERMS, EXECUTION,
REGISTRATION AND EXCHANGE OF SECURITIES
SECTION 2.01. Designation and Terms of Securities . . . . . . . . . . . . 8
SECTION 2.02. Form of Securities and Trustee's Certificate. . . . . . . . 10
SECTION 2.03. Denominations: Provisions for Payment. . . . . . . . . . . 10
SECTION 2.04. Execution and Authentications . . . . . . . . . . . . . . . 13
SECTION 2.05. Registration of Transfer and Exchange . . . . . . . . . . . 14
SECTION 2.06. Temporary Securities. . . . . . . . . . . . . . . . . . . . 15
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities . . . . . . 16
SECTION 2.08. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.09. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 17
SECTION 2.10. Authenticating Agent. . . . . . . . . . . . . . . . . . . . 18
SECTION 2.11. Global Securities . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.12. Unconditional Guarantees. . . . . . . . . . . . . . . . . . 20
SECTION 2.13. Execution of Guarantee. . . . . . . . . . . . . . . . . . . 21
SECTION 2.14. Assumption by Guarantor . . . . . . . . . . . . . . . . . . 22
ARTICLE III.
REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS
SECTION 3.01. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.02. Notice of Redemption. . . . . . . . . . . . . . . . . . . . 23
SECTION 3.03. Payment Upon Redemption . . . . . . . . . . . . . . . . . . 24
SECTION 3.04. Sinking Fund. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.05. Satisfaction of Sinking Fund Payments with Debt Securities. 25
SECTION 3.06. Redemption of Debt Securities for Sinking Fund. . . . . . . 26
ARTICLE IV.
SECTION 4.01. Payment of Principal, Premium and Interest. . . . . . . . . 26
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . 26
SECTION 4.03. Paying Agents . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.04. Appointment to Fill Vacancy in Office of Trustee. . . . . . 28
SECTION 4.05. Compliance with Consolidation Provisions. . . . . . . . . . 28
SECTION 4.06. Limitation on Dividends; Transactions with Affiliates . . . 29
SECTION 4.07. Covenants as to MediaOne Trusts . . . . . . . . . . . . . . 29
ARTICLE V.
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 5.01. Company to Furnish Trustee Names and Addresses of
Securityholders . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.02. Preservation Of Information; Communications With
Securityholders . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.03. Reports by the Guarantor. . . . . . . . . . . . . . . . . . 31
SECTION 5.04. Reports by the Trustee. . . . . . . . . . . . . . . . . . . 31
ARTICLE VI.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.02. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.03. Application of Moneys Collected . . . . . . . . . . . . . . 37
SECTION 6.04. Limitation on Suits . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.05. Rights and Remedies Cumulative; Delay or Omission Not
Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.06. Control by Securityholders. . . . . . . . . . . . . . . . . 39
SECTION 6.07. Undertaking to Pay Costs. . . . . . . . . . . . . . . . . . 39
ARTICLE VII.
CONCERNING THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities of Trustee. . . . . . . 40
SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . . 42
SECTION 7.03. Trustee Not Responsible for Recitals or Issuance or
Securities. . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.04. May Hold Securities . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
SECTION 7.05. Moneys Held in Trust. . . . . . . . . . . . . . . . . . . . 44
SECTION 7.06. Compensation and Reimbursement. . . . . . . . . . . . . . . 44
SECTION 7.07. Reliance on Officers' Certificate . . . . . . . . . . . . . 45
SECTION 7.08. Disqualification; Conflicting Interests . . . . . . . . . . 45
SECTION 7.09. Corporate Trustee Required; Eligibility . . . . . . . . . . 45
SECTION 7.10. Resignation and Removal; Appointment of Successor . . . . . 46
SECTION 7.11. Acceptance of Appointment By Successor. . . . . . . . . . . 48
SECTION 7.12. Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.13. Preferential Collection of Claims Against the Company . . . 50
ARTICLE VIII.
CONCERNING THE SECURITYHOLDERS
SECTION 8.01. Evidence of Action by Securityholders . . . . . . . . . . . 50
SECTION 8.02. Proof of Execution by Securityholders . . . . . . . . . . . 51
SECTION 8.03. Who May be Deemed Owners. . . . . . . . . . . . . . . . . . 51
SECTION 8.04. Certain Securities Owned by Company or Guarantor
Disregarded . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.05. Actions Binding on Future Securityholders.. . . . . . . . . 52
ARTICLE IX.
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without the Consent of
Securityholders . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.02. Supplemental Indentures With Consent of
Securityholders . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.03. Effect of Supplemental Indentures . . . . . . . . . . . . . 55
SECTION 9.04. Securities Affected by Supplemental Indentures. . . . . . . 55
SECTION 9.05. Execution of Supplemental Indentures. . . . . . . . . . . . 55
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
ARTICLE X.
SUCCESSOR CORPORATION
SECTION 10.01. Company or Guarantor May Consolidate, Etc.. . . . . . . . . 56
SECTION 10.02. Successor Corporation Substituted . . . . . . . . . . . . . 57
SECTION 10.03. Evidence of Consolidation, Etc. to Trustee. . . . . . . . . 58
ARTICLE XI.
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture . . . . . . . . . . 58
SECTION 11.02. Discharge of Obligations. . . . . . . . . . . . . . . . . . 59
SECTION 11.03. Deposited Moneys to be Held in Trust. . . . . . . . . . . . 59
SECTION 11.04. Payment of Moneys Held by Paying Agents . . . . . . . . . . 60
SECTION 11.05. Repayment to Company. . . . . . . . . . . . . . . . . . . . 60
ARTICLE XII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 12.01. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.01. Effect on Successors and Assigns. . . . . . . . . . . . . . 61
SECTION 13.02. Actions by Successor. . . . . . . . . . . . . . . . . . . . 61
SECTION 13.03. Surrender of Company Powers . . . . . . . . . . . . . . . . 62
SECTION 13.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 13.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 13.06. Treatment of Debt Securities as Debt. . . . . . . . . . . . 62
SECTION 13.07. Compliance Certificates and Opinions. . . . . . . . . . . . 62
SECTION 13.08. Payments on Business Days . . . . . . . . . . . . . . . . . 63
SECTION 13.09. Conflict with Trust Indenture Act . . . . . . . . . . . . . 63
SECTION 13.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 13.11. Separability. . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 13.12. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 13.13. Acknowledgement of Rights . . . . . . . . . . . . . . . . . 64
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
ARTICLE XIV.
SUBORDINATION OF SECURITIES
SECTION 14.01. Subordination Terms . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
vi
<PAGE>
INDENTURE, dated as of June __, 1998, among MediaOne Group Funding,
Inc., a Delaware corporation (the "Company"), U S WEST, Inc., a Delaware
corporation to be renamed "MediaOne Group, Inc." (the "Guarantor"), and Norwest
Bank Minnesota, National Association, a national banking association, as trustee
(the "Trustee"):
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured subordinated debt securities (hereinafter referred to as
the "Debt Securities"), in an unlimited aggregate principal amount to be issued
from time to time in one or more series as in this Indenture provided, as
registered Debt Securities without coupons, to be authenticated by the
certificate of the Trustee;
WHEREAS, for its lawful corporate purposes, the Guarantor has duly
authorized the execution and delivery of this Indenture and deems it appropriate
from time to time to issue its guarantee of the Securities on the terms herein
provided (the "Guarantees" and, together with the Debt Securities, the
"Securities");
WHEREAS, to provide the terms and conditions upon which the Debt
Securities are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company and the Guarantor, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Securities by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of Securities:
ARTICLE I.
DEFINITIONS
SECTION 1.01. DEFINITIONS OF TERMS.
The terms defined in this Section (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings
<PAGE>
specified in this Section and shall include the plural as well as the singular.
All other terms used in this Indenture that are defined in the Trust Indenture
Act of 1939, as amended, or that are by reference in such Act defined in the
Securities Act of 1933, as amended (except as herein otherwise expressly
provided or unless the context otherwise requires), shall have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act as
in force at the date of the execution of this instrument.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
all or any of the series of Securities appointed with respect to all or any
series of the Securities by the Trustee pursuant to Section 2.10.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
the Guarantor, as the case may be, or any duly authorized committee of such
Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or Guarantor, as the case may
be, to have been duly adopted by the Board of Directors and to be in full force
and effect on the date of such certification.
"Business Day" means, with respect to any series of Securities, any
day other than a day on which Federal or State banking institutions in the
Borough of Manhattan, The City of New York, are authorized or obligated by law,
executive order or regulation to close.
2
<PAGE>
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company or the Guarantor, as the case may be. The Certificate need not
comply with the provisions of Section 13.06.
"Common Securities" means undivided beneficial interests in the assets
of a MediaOne Trust which rank pari passu with Preferred Securities issued by
such MediaOne Trust; PROVIDED, HOWEVER, that upon the occurrence of an Event of
Default, the rights of holders of Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Common Securities Guarantee" means any guarantee that the Guarantor
may enter into with The First National Bank of Chicago or other Persons that
operate directly or indirectly for the benefit of holders of Common Securities
of such MediaOne Trust.
"Company" means MediaOne Group Funding, Inc., a corporation duly
organized and existing under the laws of the State of Delaware, and, subject to
the provisions of Article Ten, shall also include its successors and assigns.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at 6th Street &
Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Services Division, except that whenever a provision herein refers to an office
or agency of the Trustee in the Borough of Manhattan, The City of New York, such
office is located, at the date hereof, at 3 New York Plaza, New York, New York
10004.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Declaration", with respect to a MediaOne Trust, means the Amended and
Restated Declaration of Trust of such MediaOne Trust.
"Debt Securities" means the Debt Securities authenticated and
delivered under this Indenture.
3
<PAGE>
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Depositary" means, with respect to Securities of any series, for
which the Company shall determine that such Securities will be issued as a
Global Security, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or other
applicable statute or regulation, which, in each case, shall be designated by
the Company pursuant to either Section 2.01 or 2.11.
"Event of Default" means, with respect to Securities of a particular
series any event specified in Section 6.01, continued for the period of time, if
any, therein designated.
"Global Security" means, with respect to any series of Securities, a
Security executed by the Company and delivered by the Trustee to the Depositary
or pursuant to the Depositary's instruction, all in accordance with the
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
Governmental Obligation or a specific payment of principal of or interest on any
such Governmental Obligation held by such custodian for the account of the
holder of such depositary receipt; PROVIDED, HOWEVER, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Guarantee" means the agreement of the Guarantor, in the form set
forth in Section 2.12 hereof, to be endorsed on the Debt Securities
authenticated and delivered under this Indenture.
4
<PAGE>
"Guarantor" means U S WEST, Inc., a corporation duly organized and
existing under the laws of the State of Delaware to be renamed "MediaOne Group,
Inc.," and, subject to the provisions of Article Ten, shall also include its
successors and assigns.
"herein", "hereof" and "hereunder", and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date", when used with respect to any installment of
interest on a Debt Security of a particular series, means the date specified in
such Debt Security or in a Board Resolution or in an indenture supplemental
hereto with respect to such series as the fixed date on which an installment of
interest with respect to Debt Securities of that series is due and payable.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant Secretary
of the Company or the Guarantor, as the case may be, that is delivered to the
Trustee in accordance with the terms hereof. Each such certificate shall
include the statements provided for in Section 13.06, if and to the extent
required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company or the Guarantor, as the case
may be, that is delivered to the Trustee in accordance with the terms hereof.
Each such opinion shall include the statements provided for in Section 13.06, if
and to the extent required by the provisions thereof.
"Outstanding", when used with reference to Debt Securities of any
series, means, subject to the provisions of Section 8.04, as of any particular
time, all Debt Securities of that series theretofore authenticated and delivered
by the Trustee under this Indenture, except (a) Debt Securities theretofore
canceled by the Trustee or any paying agent, or delivered to the Trustee or any
paying agent for cancellation or that have previously been canceled; (b) Debt
Securities or portions thereof for the payment or redemption of which moneys or
Governmental Obligations in the necessary amount shall have been
5
<PAGE>
deposited in trust with the Trustee or with any paying agent (other than the
Company) or shall have been set aside and segregated in trust by the Company (if
the Company shall act as its own paying agent); PROVIDED, HOWEVER, that if such
Debt Securities or portions of such Debt Securities are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been given as in
Article Three provided, or provision satisfactory to the Trustee shall have been
made for giving such notice; and (c) Debt Securities in lieu of or in
substitution for which other Debt Securities shall have been authenticated and
delivered pursuant to the terms of Section 2.07.
"Person" means any individual, corporation, partnership,
joint-venture, joint-stock company, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt and guarantee as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 2.07 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Preferred Securities" means undivided beneficial interests in the
assets of a MediaOne Trust which rank pari passu with Common Securities issued
by such MediaOne Trust; PROVIDED, HOWEVER, that upon the occurrence of an Event
of Default, the rights of holders of Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the
Guarantor may enter into with The First National Bank of Chicago or other
Persons that operate directly or indirectly for the benefit of holders of
Preferred Securities of such MediaOne Trust.
"Property Trustee" means the entity performing the functions of the
Property Trustee of a MediaOne Trust under the applicable Declaration of such
MediaOne Trust.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or any
other officer
6
<PAGE>
or assistant officer of the Trustee customarily performing functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
or her knowledge of and familiarity with the particular subject.
"Securities" means any Debt Securities with a Guarantee endorsed
thereon.
"Securityholder", "holder of Securities", "registered holder", or
other similar term, means the Person or Persons in whose name or names a
particular Security shall be registered on the books of the Company kept for
that purpose in accordance with the terms of this Indenture.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries and (iii) any limited partnership of which such Person or
any of its Subsidiaries is a general partner.
"Trustee" means Norwest Bank Minnesota, National Association, and,
subject to the provisions of Article Seven, shall also include its successors
and assigns, and, if at any time there is more than one Person acting in such
capacity hereunder, "Trustee" shall mean each such Person. The term "Trustee"
as used with respect to a particular series of the Securities shall mean the
trustee with respect to that series.
"Trust Indenture Act", means the Trust Indenture, subject to the
provisions of Sections 9.01, 9.02, and 10.01, as in effect at the date of
execution of this instrument.
"Trust Securities" means Common Securities and Preferred Securities.
"MediaOne Trust" means each of MediaOne Finance Trust I, MediaOne
Finance Trust II and MediaOne Finance Trust III, each, a Delaware business
trust.
"Voting Stock", as applied to stock of any Person, means shares,
interests, participations or other equivalents in
7
<PAGE>
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
ARTICLE II.
ISSUE, DESCRIPTION, TERMS, EXECUTION,
REGISTRATION AND EXCHANGE OF SECURITIES
SECTION 2.01. DESIGNATION AND TERMS OF SECURITIES.
(a) The aggregate principal amount of Debt Securities that may be
authenticated and delivered under this Indenture is unlimited. The Debt
Securities may be issued in one or more series up to the aggregate principal
amount of Debt Securities of that series from time to time authorized by or
pursuant to a Board Resolution of the Company or pursuant to one or more
indentures supplemental hereto. Prior to the initial issuance of Debt
Securities of any series, there shall be established in or pursuant to a Board
Resolution of the Company, and set forth in an Officers' Certificate of the
Company, or established in one or more indentures supplemental hereto:
(1) the title of the Debt Security of the series (which shall
distinguish the Debt Securities of the series from all other Debt
Securities);
(2) any limit upon the aggregate principal amount of the Debt
Securities of that series that may be authenticated and delivered under
this Indenture (except for Debt Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Debt
Securities of that series);
(3) the date or dates on which the principal of the Debt Securities
of the series is payable;
(4) the rate or rates at which the Debt Securities of the series
shall bear interest or the manner of calculation of such rate or rates, if
any;
(5) the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable or the manner
of determination of such Interest Payment Dates and the record date for the
deter-
8
<PAGE>
mination of holders to whom interest is payable on any such Interest
Payment Dates;
(6) the right, if any, to extend the interest payment periods and the
duration of such extension;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which, Debt Securities of the series may
be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase Debt
Securities of the series pursuant to any sinking fund or analogous
provisions (including payments made in cash in participation of future
sinking fund obligations) or at the option of a holder thereof and the
period or periods within which, the price or prices at which, and the terms
and conditions upon which, Debt Securities of the series shall be redeemed
or purchased, in whole or in part, pursuant to such obligation;
(9) the subordination terms of the Debt Securities of the series;
(10) the form of the Debt Securities of the series including the form
of the Certificate of Authentication for such series;
(11) if other than denominations of twenty-five U.S. dollars ($25) or
any integral multiple thereof, the denominations in which the Debt
Securities of the series shall be issuable;
(12) any and all other terms with respect to such series (which terms
shall not be inconsistent with the terms of this Indenture) including any
terms which may be required by or advisable under United States laws or
regulations or advisable in connection with the marketing of Debt
Securities of that series; and
(13) whether the Debt Securities are issuable as a Global Security
and, in such case, the identity for the Depositary for such series.
All Debt Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to any such Board Resolution or in any indentures supplemental hereto.
9
<PAGE>
If any of the terms of the series are established by action taken
pursuant to a Board Resolution of the Company, a copy of an appropriate record
of such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate of the Company setting forth the terms of the series.
(b) Prior to the issuance of any of the Guarantees, the exact form
and terms of such Guarantees, which shall comply with the terms of Section 2.12
hereof and contain such additional terms as are permitted by this Indenture,
shall be established by an Officers' Certificate of the Guarantor or in an
indenture supplemental hereto.
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE.
The Securities of any series and the Trustee's certificate of
authentication to be borne by such Securities shall be substantially of the
tenor and purport as set forth in one or more indentures supplemental hereto or
as provided in a Board Resolution of the Company and as set forth in an
Officers' Certificate of the Company and the Guarantor, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Indenture, 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 Securities of that series may be listed, or to conform to
usage.
SECTION 2.03. DENOMINATIONS: PROVISIONS FOR PAYMENT.
The Securities shall be issuable as registered Securities and in the
denominations of twenty-five U.S. dollars ($25) or any integral multiple
thereof, subject to Section 2.01(10). The Securities of a particular series
shall bear interest payable on the dates and at the rate specified with respect
to that series. The principal of and the interest on the Securities of any
series, as well as any premium thereon in case of redemption thereof prior to
maturity, shall be payable in the coin or currency of the United States of
America that at the time is legal tender for public and private debt, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, the City and State of New York. Each Security shall be dated the
date of its authentication. Interest on the Securi-
10
<PAGE>
ties shall be computed on the basis of a 360-day year composed of twelve 30-day
months.
The interest installment on any Security that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Securities of that series shall be paid to the Person in whose name said
Security (or one or more Predecessor Securities) is registered at the close of
business on the regular record date for such interest installment. In the event
that any Security of a particular series or portion thereof is called for
redemption and the redemption date is subsequent to a regular record date with
respect to any Interest Payment Date and prior to such Interest Payment Date,
interest on such Security will be paid upon presentation and surrender of such
Security as provided in Section 3.03.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Security of the same
series (herein called "Defaulted Interest") shall forthwith cease to be payable
to the registered holder on the relevant regular record date by virtue of having
been such holder; and such Defaulted Interest shall be paid by the Company, at
its election, as provided in clause (1) or clause (2) below:
(1) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix
a special record date for the payment of such Defaulted Interest which
shall not be more than 15 nor less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
11
<PAGE>
promptly notify the Company of such special record date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the Security
Register (as hereinafter defined), not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names such Securities (or their respective Predecessor
Securities) are registered on such special record date and shall be no
longer payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on
any Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may
be listed, and upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustees of the proposed
payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Unless otherwise set forth in a Board Resolution of the Company or one
or more indentures supplemental hereto establishing the terms of any series of
Securities pursuant to Section 2.01 hereof, the term "regular record date" as
used in this Section with respect to a series of Securities with respect to any
Interest Payment Date for such series shall mean either the fifteenth day of the
month immediately preceding the month in which an Interest Payment Date
established for such series pursuant to Section 2.01 hereof shall occur, if such
Interest Payment Date is the first day of a month, or the last day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the fifteenth day of a month, whether or not such date is a
Business Day.
Subject to the foregoing provisions of this Section, each Security of
a series delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Security of such series shall carry the rights to interest
accrued and unpaid, and to accrue, that were carried by such other Security.
12
<PAGE>
SECTION 2.04. EXECUTION AND AUTHENTICATIONS.
The Debt Securities shall be signed on behalf of the Company by, and
the Guarantees endorsed thereon shall be signed on behalf of the Guarantor by,
its President, or one of its Vice Presidents, or its Treasurer, or one of its
Assistant Treasurers, or its Secretary, or one of its Assistant Secretaries,
under its corporate seal attested by its Secretary or one of its Assistant
Secretaries. Signatures may be in the form of a manual or facsimile signature.
The Company and the Guarantor may use the facsimile signature of any Person who
shall have been a President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof, notwithstanding the
fact that at the time the Securities shall be authenticated and delivered or
disposed of such Person shall have ceased to be the President or a Vice
President, or the Secretary or an Assistant Secretary, of the Company or the
Guarantor, as the case may be. The seal of the Company and the Guarantor may be
in the form of a facsimile of such seal and may be impressed, affixed, imprinted
or otherwise reproduced on the Securities. The Securities may contain such
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication by the
Trustee.
A Security shall not be valid until authenticated manually by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Security so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company and the Guarantor to the Trustee for authentication, together with a
written order of the Company for the authentication and delivery of such
Securities, signed by its President or any Vice President and its Secretary or
any Assistant Secretary, and the Trustee in accordance with such written order
shall authenticate and deliver such Securities.
In authenticating such Securities and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
13
<PAGE>
The Trustee shall not be required to authenticate such Securities if
the issue of such Securities pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Securities and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.05. REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Securities of any series may be exchanged upon presentation
thereof at the office or agency of the Company designated for such purpose in
the Borough of Manhattan, the City and State of New York, for other Securities
of such series of authorized denominations, and for a like aggregate principal
amount, upon payment of a sum sufficient to cover any tax or other governmental
charge in relation thereto, all as provided in this Section. In respect of any
Securities so surrendered for exchange, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in exchange therefor
the Security or Securities of the same series that the Securityholder making the
exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose in the Borough of Manhattan, the City and
State of New York, or such other location designated by the Company a register
or registers (herein referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall register
the Securities and the transfers of Securities as in this Article provided and
which at all reasonable times shall be open for inspection by the Trustee. The
registrar for the purpose of registering Securities and transfer of Securities
as herein provided shall be appointed as authorized by Board Resolution (the
"Security Registrar").
Upon surrender for transfer of any Security at the office or agency of
the Company designated for such purpose, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in the name of the
transferee or transferees a new Security or Securities of the same series as the
Security presented for a like aggregate principal amount.
All Securities presented or surrendered for exchange or registration
of transfer, as provided in this Section, shall be accompanied (if so required
by the Company or the Security Registrar) by a written instrument or instruments
of transfer, in form satisfactory to the Company or the Security Registrar, duly
14
<PAGE>
executed by the registered holder or by such holder's duly authorized attorney
in writing.
(c) No service charge shall be made for any exchange or registration
of transfer of Securities, or issue of new Securities in case of partial
redemption of any series, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in relation thereto,
other than exchanges pursuant to Section 2.06, the second paragraph of Section
3.03 and Section 9.04 not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Securities during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
less than all the Outstanding Securities of the same series and ending at the
close of business on the day of such mailing, nor (ii) to register the transfer
of or exchange any Securities of any series or portions thereof called for
redemption. The provisions of this Section 2.05 are, with respect to any Global
Security, subject to Section 2.11 hereof.
SECTION 2.06. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the
Company and the Guarantor may execute, and the Trustee shall authenticate and
deliver, temporary Securities (printed, lithographed or typewritten) of any
authorized denomination. Such temporary Securities shall be substantially in
the form of the definitive Securities in lieu of which they are issued, but with
such omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Company. Every temporary Security
of any series shall be executed by the Company and the Guarantor and be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Securities of such series.
Without unnecessary delay the Company and the Guarantor will execute and will
furnish definitive Securities of such series and thereupon any or all temporary
Securities of such series may be surrendered in exchange therefor (without
charge to the holders), at the office or agency of the Company designated for
the purpose in the Borough of Manhattan, the City and State of New York, and the
Trustee shall authenticate and such office or agency shall deliver in exchange
for such temporary Securities an equal aggregate principal amount of definitive
Securities of such series, unless the Company advises the Trustee to the effect
that definitive Securities need not be executed and furnished until
15
<PAGE>
further notice from the Company. Until so exchanged, the temporary Securities
of such series shall be entitled to the same benefits under this Indenture as
definitive Securities of such series authenticated and delivered hereunder.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES.
In case any temporary or definitive Security shall become mutilated or
be destroyed, lost or stolen, the Company and the Guarantor (subject to the next
succeeding sentence) shall execute, and upon the Company's request the Trustee
(subject as aforesaid) shall authenticate and deliver, a new Security of the
same series, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Security, or in lieu of and in substitution for
the Security so destroyed, lost or stolen. In every case the applicant for a
substituted Security shall furnish to the Company, the Guarantor and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft, the applicant shall
also furnish to the Company, the Guarantor and the Trustee evidence to their
satisfaction of the destruction, loss or theft of the applicant's Security and
of the ownership thereof. The Trustee may authenticate any such substituted
Security and deliver the same upon the written request or authorization of any
officer of the Company. Upon the issuance of any substituted Security, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
In case any Security that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Security, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated Security) if the applicant for such
payment shall furnish to the Company, the Guarantor and the Trustee such
security or indemnity as they may require to save them harmless, and, in case of
destruction, loss or theft, evidence to the satisfaction of the Company, the
Guarantor and the Trustee of the destruction, loss or theft of such Security and
of the ownership thereof.
Every replacement Security issued pursuant to the provisions of this
Section shall constitute an additional contractual obligation of the Company or
the Guarantor, as the case may be, whether or not the mutilated, destroyed, lost
or stolen Security shall be found at any time, or be enforceable by anyone, and
shall be entitled to all the benefits of this
16
<PAGE>
Indenture equally and proportionately with any and all other Securities of the
same series duly issued hereunder. All Securities shall be held and owned upon
the express condition that the foregoing provisions are exclusive with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Securities, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.08. CANCELLATION.
All Securities surrendered for the purpose of payment, redemption,
exchange or registration of transfer shall, if surrendered to the Company, the
Guarantor or any paying agent, be delivered to the Trustee for cancellation, or,
if surrendered to the Trustee, shall be cancelled by it, and no Securities shall
be issued in lieu thereof except as expressly required or permitted by any of
the provisions of this Indenture. On request of the Company at the time of such
surrender, the Trustee shall deliver to the Company canceled Securities held by
the Trustee. In the absence of such request the Trustee may dispose of canceled
Securities in accordance with its standard procedures and deliver a certificate
of disposition to the Company. If the Company or the Guarantor shall otherwise
acquire any of the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.09. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give or be construed to give to any Person, other than the parties hereto
and the holders of the Securities (and, with respect to the provisions of
Article Fourteen, the holders of Senior Indebtedness) any legal or equitable
right, remedy or claim under or in respect of this Indenture, or under any
covenant, condition or provision herein contained; all such covenants,
conditions and provisions being for the sole benefit of the parties hereto and
of the holders of the Securities (and, with respect to the provisions of Article
Fourteen, the holders of Senior Indebtedness).
17
<PAGE>
SECTION 2.10. AUTHENTICATING AGENT.
So long as any of the Securities of any series remain Outstanding
there may be an Authenticating Agent for any or all such series of Securities
which the Trustee shall have the right to appoint. Said Authenticating Agent
shall be authorized to act on behalf of the Trustee to authenticate Securities
of such series issued upon exchange, transfer or partial redemption thereof, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. All references in this Indenture to the authentication of
Securities by the Trustee shall be deemed to include authentication by an
Authenticating Agent for such series. Each Authenticating Agent shall be
acceptable to the Company and shall be a corporation that has a combined capital
and surplus, as most recently reported or determined by it, sufficient under the
laws of any jurisdiction under which it is organized or in which it is doing
business to conduct a trust business, and that is otherwise authorized under
such laws to conduct such business and is subject to supervision or examination
by Federal or State authorities. If at any time any Authenticating Agent shall
cease to be eligible in accordance with these provisions, it shall resign
immediately.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its appointment hereunder,
shall become vested with all the rights, powers and duties of its predecessor
hereunder as if originally named as an Authenticating Agent pursuant hereto.
SECTION 2.11. GLOBAL SECURITIES.
(a) If the Company shall establish pursuant to Section 2.01 that the
Securities of a particular series are to be issued as a Global Security, then
the Company shall execute and the Trustee shall, in accordance with Section
2.04, authenticate and deliver, a Global Security that (i) shall represent, and
shall be denominated in an amount equal to the aggregate principal amount of,
all of the Outstanding Securities of such series, (ii) shall be registered in
the name of the Depositary or its nominee, (iii)
18
<PAGE>
shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction and (iv) shall bear a legend substantially to the
following effect: "Except as otherwise provided in Section 2.11 of the
Indenture, this Security may be transferred, in whole but not in part, only to
another nominee of the Depositary or to a successor Depositary or to a nominee
of such successor Depositary."
(b) Notwithstanding the provisions of Section 2.05, the Global
Security of a series may be transferred, in whole but not in part and in the
manner provided in Section 2.05, only to another nominee of the Depositary for
such series, or to a successor Depositary for such series selected or approved
by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary for a series of the Securities
notifies the Company that it is unwilling or unable to continue as Depositary
for such series or if at any time the Depositary for such series shall no longer
be registered or in good standing under the Exchange Act, or other applicable
statute or regulation, and a successor Depositary for such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, as the case may be, this Section 2.11 shall
no longer be applicable to the Securities of such series and the Company will
execute, and subject to Section 2.05, the Trustee will authenticate and deliver
the Securities of such series in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security of such series in exchange for such
Global Security. In addition, the Company may at any time determine that the
Securities of any series shall no longer be represented by a Global Security and
that the provisions of this Section 2.11 shall no longer apply to the Securities
of such series. In such event the Company and the Guarantor will execute and
subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate
evidencing such determination by the Company, will authenticate and deliver the
Securities of such series in definitive registered form without coupons, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security of such series in exchange for such
Global Security. Upon the exchange of the Global Security for such Securities
in definitive registered form without coupons, in authorized denominations, the
Global Security shall be canceled by the Trustee. Such Securities in definitive
registered form issued in exchange for the Global Security pursuant to this
Section 2.11(c) shall be registered in such names and in such authorized
denominations as the Depositary,
19
<PAGE>
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.
SECTION 2.12. UNCONDITIONAL GUARANTEES.
(FORM OF GUARANTEE)
FOR VALUE RECEIVED, 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 or 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
20
<PAGE>
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.
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. (to be renamed "MediaOne Group,
Inc.") has caused this Guarantee to be signed in its corporate name by the
facsimile signature of two of its officers thereunto duly authorized and has
caused a facsimile of its corporate seal to be affixed hereunto or imprinted or
otherwise reproduced hereon.
SECTION 2.13. EXECUTION OF GUARANTEE.
To evidence the Guarantee to the Securityholders specified in Section
2.12, the Guarantor hereby agrees to execute the Guarantees, in substantially
the form above recited, to be endorsed on each Security authenticated and
delivered by the Trustee (or the Authenticating Agent). Each such Guarantee
shall be signed on behalf of the Guarantor as set forth in Section 2.04
21
<PAGE>
prior to the authentication of the Security on which it is endorsed, and the
delivery of such Security by the Trustee (or the Authenticating Agent), after
the authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of the Guarantor.
SECTION 2.14. ASSUMPTION BY GUARANTOR.
(a) The Guarantor may, without the consent of the Securityholders,
assume all of the rights and obligations of the Company hereunder with respect
to a series of Securities and under the Securities of such series if, after
giving effect to such assumption, no Default or Event of Default shall have
occurred and be continuing. Upon such an assumption, the Guarantor shall
execute a supplemental indenture evidencing its assumption of all such rights
and obligations of the Company and the Company shall be released from its
liabilities hereunder and under such Securities as obligor on the Securities of
such series.
(b) The Guarantor shall assume all of the rights and obligations of
the Company hereunder with respect to a series of Securities and under the
Securities of such series if, upon a default by the Company in the due and
punctual payment of the principal, sinking fund payment, if any, premium, if
any, or interest on such Securities, the Guarantor is prevented by any court
order or judicial proceeding from fulfilling its obligations under Section 2.12
with respect to such series of Securities. Such assumption shall result in the
Securities of such series becoming the direct obligations of the Guarantor and
shall be effected without the consent of the holders of the Securities of any
series. Upon such an assumption, the Guarantor shall execute a supplemental
indenture evidencing its assumption of all such rights and obligations of the
Company, and the Company shall be released from its liabilities hereunder and
under such Securities as obligor on the Securities of such series.
ARTICLE III.
REDEMPTION OF DEBT SECURITIES AND SINKING FUND PROVISIONS
SECTION 3.01. REDEMPTION.
The Company may redeem the Debt Securities of any series issued
hereunder on and after the dates and in accordance
22
<PAGE>
with the terms established for such series pursuant to Section 2.01 hereof.
SECTION 3.02. NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to redeem
all or, as the case may be, a portion of the Debt Securities of any series in
accordance with the right reserved so to do, the Company shall, or shall cause
the Trustee to, give notice of such redemption to holders of the Debt Securities
of such series to be redeemed by mailing, first class postage prepaid, a notice
of such redemption not less than 30 days and not more than 90 days before the
date fixed for redemption of that series to such holders at their last addresses
as they shall appear upon the Security Register unless a shorter period is
specified in the Debt Securities to be redeemed. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the registered holder receives the notice. In any case,
failure duly to give such notice to the holder of any Security of any series
designated for redemption in whole or in part, or any defect in the notice,
shall not affect the validity of the proceedings for the redemption of any other
Debt Securities of such series or any other series. In the case of any
redemption of Debt Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Debt Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the redemption price at which Debt Securities of that series are
to be redeemed, and shall state that payment of the redemption price of such
Debt Securities to be redeemed will be made at the office or agency of the
Company in the Borough of Manhattan, the City and State of New York, upon
presentation and surrender of such Debt Securities, that interest accrued to the
date fixed for redemption will be paid as specified in said notice, that from
and after said date interest will cease to accrue and that the redemption is for
a sinking fund, if such is the case. If less than all the Debt Securities of a
series are to be redeemed, the notice to the holders of Debt Securities of that
series to be redeemed in whole or in part shall specify the particular Debt
Securities to be so redeemed. In case any Security is to be redeemed in part
only, the notice that relates to such Security shall state the portion of the
principal amount thereof to be redeemed, and shall state that on and after the
redemption date, upon surrender of such Security, a
23
<PAGE>
new Security or Debt Securities of such series in principal amount equal to the
unredeemed portion thereof and having endorsed thereon a duly executed Guarantee
will be issued.
(b) If less than all the Debt Securities of a series are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in advance
of the date fixed for redemption as to the aggregate principal amount of Debt
Securities of the series to be redeemed, and thereupon the Trustee shall select,
by lot or in such other manner as it shall deem appropriate and fair in its
discretion and that may provide for the selection of a portion or portions
(equal to twenty-five U.S. dollars ($25) or any integral multiple thereof) of
the principal amount of such Debt Securities of a denomination larger than $25,
the Debt Securities to be redeemed and shall thereafter promptly notify the
Company in writing of the numbers of the Debt Securities to be redeemed, in
whole or in part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the Debt
Securities of a particular series for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company or its own name as the Trustee or such paying agent may deem
advisable. In any case in which notice of redemption is to be given by the
Trustee or any such paying agent, the Company shall deliver or cause to be
delivered to, or permit to remain with, the Trustee or such paying agent, as the
case may be, such Security Register, transfer books or other records, or
suitable copies or extracts therefrom, sufficient to enable the Trustee or such
paying agent to give any notice by mail that may be required under the
provisions of this Section.
SECTION 3.03. PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as
above provided, the Debt Securities or portions of Debt Securities of the series
to be redeemed specified in such notice shall become due and payable on the date
and at the place stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption and interest on
such Debt Securities or portions of Debt Securities shall cease to accrue on and
after the date fixed for redemption, unless the Company shall default in the
payment of such redemption price and accrued interest with respect to any such
Security or portion thereof. On presentation and surrender of such Debt
Securities on or after the date fixed for redemption
24
<PAGE>
at the place of payment specified in the notice, said Debt Securities shall be
paid and redeemed at the applicable redemption price for such series, together
with interest accrued thereon to the date fixed for redemption (but if the date
fixed for redemption is an interest payment date, the interest installment
payable on such date shall be payable to the registered holder at the close of
business on the applicable record date pursuant to Section 2.03).
(b) Upon presentation of any Security of such series that is to be
redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Security is presented shall
deliver to the holder thereof, at the expense of the Company, a new Security or
Debt Securities of the same series, having endorsed thereon a duly executed
Guarantee, of authorized denominations in principal amount equal to the
unredeemed portion of the Security so presented.
SECTION 3.04. SINKING FUND.
The provisions of Sections 3.04, 3.05 and 3.06 shall be applicable to
any sinking fund for the retirement of Debt Securities of a series, except as
otherwise specified as contemplated by Section 2.01 for Debt Securities of such
series.
The minimum amount of any sinking fund payment provided for by the
terms of Debt Securities of any series is herein referred to as a "mandatory
sinking fund payment," and any payment in excess of such minimum amount provided
for by the terms of Debt Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of Debt
Securities of any series, the cash amount of any sinking fund payment may be
subject to reduction as provided in Section 3.05. Each sinking fund payment
shall be applied to the redemption of Debt Securities of any series as provided
for by the terms of Debt Securities of such series.
SECTION 3.05. SATISFACTION OF SINKING FUND PAYMENTS WITH DEBT
SECURITIES.
The Company (i) may deliver Outstanding Debt Securities of a series
(other than any Debt Securities previously called for redemption) and (ii) may
apply as a credit Debt Securities of a series that have been redeemed either at
the election of the Company pursuant to the terms of such Debt Securities or
through the application of permitted optional sinking fund payments pursuant to
the terms of such Debt Securities, in each case in satisfaction of all or any
part of any sinking fund payment with
25
<PAGE>
respect to the Debt Securities of such series required to be made pursuant to
the terms of such Debt Securities as provided for by the terms of such series,
PROVIDED that such Debt Securities have not been previously so credited. Such
Debt Securities shall be received and credited for such purpose by the Trustee
at the redemption price specified in such Debt Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 3.06. REDEMPTION OF DEBT SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund payment date for any
series of Debt Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of the series, the portion thereof, if any,
that is to be satisfied by delivering and crediting Debt Securities of that
series pursuant to Section 3.05 and the basis for such credit and will, together
with such Officers' Certificate, deliver to the Trustee any Debt Securities to
be so delivered. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Debt Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 3.02 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 3.02. Such notice having been
duly given, the redemption of such Debt Securities shall be made upon the terms
and in the manner stated in Section 3.03.
ARTICLE IV.
SECTION 4.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company will duly and punctually pay or cause to be paid the
principal of (and premium, if any) and interest on the Debt Securities of that
series at the time and place and in the manner provided herein and established
with respect to such Debt Securities.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
So long as any series of the Securities remain Outstanding, the
Company agrees to maintain an office or agency in the Borough of Manhattan, the
City and State of New York, with
26
<PAGE>
respect to each such series and at such other location or locations as may be
designated as provided in this Section 4.02, where (i) Securities of that series
may be presented for payment, (ii) Securities of that series may be presented as
hereinabove authorized for registration of transfer and exchange, and (iii)
notices and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be given or served, such designation to continue
with respect to such office or agency until the Company shall, by written notice
signed by its President or a Vice President and delivered to the trustee,
designate some other office or agency for such purposes or any of them. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, notices and demands.
SECTION 4.03. PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for all or
any series of the Securities, other than the Trustee, the Company will cause
each such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of (and premium, if any) or interest on the
Securities of that series (whether such sums have been paid to it by the
Company or by any other obligor of such Securities) in trust for the
benefit of the Persons entitled thereto;
(2) that it will give the Trustee notice of any failure by the Company
(or by any other obligor of such Securities) to make any payment of the
principal of (and premium, if any) or interest on the Securities of that
series when the same shall be due and payable;
(3) that it will, at any time during the continuance of any failure
referred to in the preceding paragraph (a)(2) above, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such paying agent; and
(4) that it will perform all other duties of paying agent as set forth
in this Indenture.
27
<PAGE>
(b) If the Company shall act as its own paying agent with respect to
any series of the Securities, it will on or before each due date of the
principal of (and premium, if any) or interest on Securities of that series, set
aside, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay such principal (and premium, if any) or interest
so becoming due on Securities of that series until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of such action, or any failure (by it or any other obligor on
such Securities) to take such action. Whenever the Company shall have one or
more paying agents for any series of Securities, it will, prior to each due date
of the principal of (and premium, if any) or interest on any Securities of that
series, deposit with the paying agent a sum sufficient to pay the principal (an
premium, if any) or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium or interest, and
(unless such paying agent is the Trustee) the Company will promptly notify the
Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i) the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Section 11.05, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for any
other purpose, pay, or direct any paying agent to pay, to the Trustee all sums
held in trust by the Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon which such sums were
held by the Company or such paying agent; and, upon such payment by any paying
agent to the Trustee, such paying agent shall be released from all further
liability with respect to such money.
SECTION 4.04. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 7.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 4.05. COMPLIANCE WITH CONSOLIDATION PROVISIONS.
Neither the Company nor the Guarantor will, while any of the
Securities remain Outstanding, consolidate with, or merge into, or merge into
itself, or sell or convey all or
28
<PAGE>
substantially all of its property to any other company unless the provisions of
Article Ten hereof are complied with.
SECTION 4.06. LIMITATION ON DIVIDENDS; TRANSACTIONS WITH AFFILIATES.
(a) If Securities are issued to a MediaOne Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such MediaOne Trust
and (i) there shall have occurred any event that would constitute an Event of
Default or (ii) U S WEST shall be in default with respect to its payment or any
obligations under the Preferred Securities Guarantee or Common Securities
Guarantee relating to such MediaOne Trust, then (x) the Guarantor and the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, and (y) 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 Securities; PROVIDED,
HOWEVER, that restriction (y) above does 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.
(b) If Securities are issued to a MediaOne Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such MediaOne Trust
and the Company shall have given notice of its election to defer payments of
interest on such Securities by extending the interest payment period as provided
in any Board Resolution or indenture supplemental hereto and such period, or any
extension thereof, shall be continuing, then (i) the Guarantor and the Company
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its capital stock, and (ii) 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 Securities; PROVIDED,
HOWEVER, that restriction (i) above does 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..
29
<PAGE>
SECTION 4.07. COVENANTS AS TO MEDIAONE TRUSTS.
In the event Securities are issued to a MediaOne Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such MediaOne
Trust, for so long as such Trust Securities remain outstanding, the Guarantor
will (i) maintain 100% direct or indirect ownership of the Common Securities of
such MediaOne Trust; 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 such MediaOne
Trust (a) to remain a statutory business trust, except in connection with a
distribution of Securities, the redemption of all of the Trust Securities of
such MediaOne Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such MediaOne Trust, and (b) to otherwise
continue not to be treated as a grantor trust for United States federal income
tax purposes.
ARTICLE V.
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 5.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
SECURITYHOLDERS.
The Company will furnish or cause to be furnished to the Trustee (a)
on a monthly basis on each regular record date (as defined in Section 2.03) a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the holders of each series of Securities as of such regular record
date, PROVIDED that the Company shall not be obligated to furnish or cause to
furnish such list at any time that the list shall not differ in any respect from
the most recent list furnished to the Trustee by the Company and (b) at such
other times as the Trustee may request in writing within 30 days after the
receipt by the Company of any such request, a list of similar form and content
as of a date not more than 15 days prior to the time such list is furnished;
PROVIDED, HOWEVER, that, in either case, no such list need be furnished for any
series for which the Trustee shall be the Security Registrar.
30
<PAGE>
SECTION 5.02. PRESERVATION OF INFORMATION; COMMUNICATIONS WITH
SECURITYHOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Securities contained in the most recent list furnished to it as provided in
Section 5.01 and as to the names and addresses of holders of Securities received
by the Trustee in its capacity as Security Registrar (if acting in such
capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 5.01 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b) of
the Trust Indenture Act with other Securityholders with respect to their rights
under this Indenture or under the Securities.
SECTION 5.03. REPORTS BY THE GUARANTOR.
(a) The Guarantor covenants and agrees to file with the Trustee,
within 15 days after the Guarantor is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Guarantor may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Guarantor is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act, in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) The Guarantor covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Guarantor and the Company with the conditions and
covenants provided for in this Indenture as may be required from time to time by
such rules and regulations.
31
<PAGE>
(c) The Guarantor covenants and agrees to transmit by mail, first
class postage prepaid, or reputable over-night delivery service that provides
for evidence of receipt, to the Securityholders, as their names and addresses
appear upon the Security Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Guarantor pursuant to subsections (a) and (b) of this Section
as may be required by rules and regulations prescribed from time to time by the
Commission.
SECTION 5.04. REPORTS BY THE TRUSTEE.
(a) On or before July 15 in each year in which any of the Securities
are Outstanding, the Trustee shall transmit by mail, first class postage
prepaid, to the Securityholders, as their names and addresses appear upon the
Security Register, a brief report dated as of the preceding May 15, if and to
the extent required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission
to Securityholders, be filed by the Trustee with the Company, with each stock
exchange upon which any Securities are listed (if so listed) and also with the
Commission. The Company agrees to notify the Trustee when any Securities become
listed on any stock exchange.
ARTICLE VI.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT.
(a) Whenever used herein with respect to Securities of a particular
series, "Event of Default" means any one or more of the following events that
has occurred and is continuing:
(1) the Company or the Guarantor defaults in the payment of any
installment of interest upon any of the Securities of that series, as and
when the same shall become due and payable, and continuance of such default
for a period of 90 days; PROVIDED, HOWEVER, that a valid extension of an
interest payment period by the Company in accordance
32
<PAGE>
with the terms of any indenture supplemental hereto, shall not constitute a
default in the payment of interest for this purpose;
(2) the Company or the Guarantor defaults in the payment of the
principal of (or premium, if any, on) any of the Securities of that series
as and when the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment required by any
sinking or analogous fund established with respect to that series;
PROVIDED, HOWEVER, that a valid extension of the maturity of such
Securities in accordance with the terms of any indenture supplemental
hereto shall not constitute a default in the payment of principal or
premium, if any;
(3) the Company or the Guarantor fails to observe or perform any other
of its covenants or agreements with respect to that series contained in
this Indenture or otherwise established with respect to that series of
Securities pursuant to Section 2.01 hereof (other than a covenant or
agreement that has been expressly included in this Indenture solely for the
benefit of one or more series of Securities other than such series) for a
period of 90 days after the date on which written notice of such failure,
requiring the same to be remedied and stating that such notice is a "Notice
of Default" hereunder, shall have been given to the Company by the Trustee,
by registered or certified mail, or to the Company and the Trustee by the
holders of at least 25% in principal amount of the Securities of that
series at the time Outstanding;
(4) the Company or the Guarantor pursuant to or within the meaning of
any Bankruptcy Law (i) commences a voluntary case, (ii) consents to the
entry of an order for relief against it in an involuntary case, (iii)
consents to the appointment of a Custodian of it or for all or
substantially all of its property or (iv) makes a general assignment for
the benefit of its creditors;
(5) a court of competent jurisdiction enters an order under any
Bankruptcy Law that (i) is for relief against the Company or the Guarantor
in an involuntary case, (ii) appoints a Custodian of the Company or the
Guarantor for all or substantially all of their respective property, or
(iii) orders the liquidation of the Company or the Guarantor, and the order
or decree remains unstayed and in effect for 90 days; or
33
<PAGE>
(6) in the event Securities are issued to a MediaOne Trust or a
trustee of such trust in connection with the issuance of Trust Securities
by such MediaOne Trust, such MediaOne Trust shall have voluntarily or
involuntarily dissolved, wound-up its business or otherwise terminated its
existence except in connection with (i) the distribution of Securities to
holders of Trust Securities in liquidation of their interests in such
MediaOne Trust, (ii) the redemption of all of the outstanding Trust
Securities of such MediaOne Trust or (iii) certain mergers, consolidations
or amalgamations, each as permitted by the Declaration of such MediaOne
Trust.
(b) In each and every such case, unless the principal of all the
Securities of that series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Securities of that series then Outstanding hereunder, by notice in writing to
the Company and the Guarantor (and to the Trustee if given by such
Securityholders), may declare the principal of all the Securities of that series
to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, notwithstanding anything
contained in this Indenture or in the Securities of that series or established
with respect to that series pursuant to Section 2.01 to the contrary.
(c) At any time after the principal of the Securities of that series
shall have been so declared due and payable, and before any judgment or decree
for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the holders of a majority in aggregate principal amount of
the Securities of that series then Outstanding hereunder, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company or the Guarantor has paid or deposited with
the Trustee a sum sufficient to pay all matured installments of interest upon
all the Securities of that series and the principal of (and premium, if any, on)
any and all Securities of that series that shall have become due otherwise than
by acceleration (with interest upon such principal and premium, if any, and, to
the extent that such payment is enforceable under applicable law, upon overdue
installments of interest, at the rate per annum expressed in the Securities of
that series to the date of such payment or deposit) and the amount payable to
the Trustee under Section 7.06, and (ii) any and all Events of Default under the
Indenture with respect to such series, other than the nonpayment of principal on
Securities of that series that shall not have become due by their terms, shall
have been remedied or waived as provided in Section 6.06.
34
<PAGE>
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right
with respect to Securities of that series under this Indenture and such
proceedings shall have been discontinued or abandoned because of such rescission
or annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every such case the Company, the Guarantor and the
Trustee shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company and the Trustee
shall continue as though no such proceedings had been taken.
SECTION 6.02. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
(a) The Company and the Guarantor covenant that (1) in case it shall
default in the payment of any installment of interest on any of the Securities
of a series, or any payment required by any sinking or analogous fund
established with respect to that series as and when the same shall have become
due and payable, and such default shall have continued for a period of 90
Business Days, or (2) in case it shall default in the payment of the principal
of (or premium, if any, on) any of the Securities of a series when the same
shall have become due and payable, whether upon maturity of the Securities of a
series or upon redemption or upon declaration or otherwise, then, upon demand of
the Trustee, the Company or the Guarantor will pay to the Trustee, for the
benefit of the holders of the Securities of that series, the whole amount that
then shall have been become due and payable on all such Securities for principal
(and premium, if any) or interest, or both, as the case may be, with interest
upon the overdue principal (and premium, if any) and (to the extent that payment
of such interest is enforceable under applicable law and, if the Securities are
held by a MediaOne Trust or a trustee of such trust, without duplication of any
other amounts paid by the Guarantor or such MediaOne Trust or trustee in respect
thereof) upon overdue installments of interest at the rate per annum expressed
in the Securities of that series; and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, and the
amount payable to the Trustee under Section 7.06.
(b) If the Company or the Guarantor shall fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and
35
<PAGE>
empowered to institute any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company or the Guarantor or other obligor upon the
Securities of that series and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Company or the
Guarantor or other obligor upon the Securities of that series, wherever
situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affected the Company or the Guarantor, or the creditors or property of either,
the Trustee shall have power to intervene in such proceedings and take any
action therein that may be permitted by the court and shall (except as may be
otherwise provided by law) be entitled to file such proofs of claim and other
papers and documents as may be necessary or advisable in order to have the
claims of the Trustee and of the holders of Securities of such series allowed
for the entire amount due and payable by the Company or the Guarantor under the
Indenture at the date of institution of such proceedings and for any additional
amount that may become due and payable by the Company or the Guarantor after
such date, and to collect and receive any moneys or other property payable or
deliverable on any such claim, and to distribute the same after the deduction of
the amount payable to the Trustee under Section 7.06; and any receiver, assignee
or trustee in bankruptcy or reorganization is hereby authorized by each of the
holders of Securities of such series to make such payments to the Trustee, and,
in the event that the Trustee shall consent to the making of such payments
directly to such Securityholders, to pay to the Trustee any amount due it under
Section 7.06.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect to Securities of
that series, may be enforced by the Trustee without the possession of any of
such Securities, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for payment to the Trustee of any
amounts due under Section 7.06, be for the ratable benefit of the holders of the
Securities of such series.
In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights
36
<PAGE>
vested in it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of such rights,
either at law or in equity or in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in the Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities of that series or the rights of any holder thereof or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 6.03. APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article with
respect to a particular series of Securities shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of principal (or premium, if any) or
interest, upon presentation of the Securities of that series, and notation
thereon the payment, if only partially paid, and upon surrender thereof if fully
paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 7.06;
SECOND: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article Fourteen; and
THIRD: To the payment of the amounts then due and unpaid upon
Securities of such series for principal (and premium, if any) and interest,
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively.
SECTION 6.04. LIMITATION ON SUITS.
No holder of any Security of any series shall have any right by virtue
or by availing of any provision of this Indenture
37
<PAGE>
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless (i) such holder previously shall have
given to the Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Securities of such series specifying
such Event of Default, as hereinbefore provided; (ii) the holders of not less
than 25% in aggregate principal amount of the Securities of such series then
Outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as trustee hereunder; (iii) such
holder or holders shall have offered to the Trustee such reasonable indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby; and (iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity, shall have failed to institute any such
action, suit or proceeding and (v) during such 60 day period, the holders of a
majority in principal amount of the Securities of that series do not give the
Trustee a direction inconsistent with the request.
Notwithstanding anything contained herein to the contrary, any other
provisions of this Indenture, the right of any holder of any Security to receive
payment of the principal of (and premium, if any) and interest on such Security,
as therein provided, on or after the respective due dates expressed in such
Security (or in the case of redemption, on the redemption date), or to institute
suit for the enforcement of any such payment on or after such respective dates
or redemption date, shall not be impaired or affected without the consent of
such holder and by accepting a Security hereunder it is expressly understood,
intended and covenanted by the taker and holder of every Security of such series
with every other such taker and holder and the Trustee, that no one or more
holders of Securities of such series shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other of such
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities of series. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
38
<PAGE>
SECTION 6.05. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT
WAIVER.
(a) Except as otherwise provided in Section 2.07, all powers and
remedies given by this Article to the Trustee or to the Securityholders shall,
to the extent permitted by law, be deemed cumulative and not exclusive of any
other powers and remedies available to the Trustee or the holders of the
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such Securities.
(b) No delay or omission of the Trustee or of any holder of any of the
Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or on acquiescence
therein; and, subject to the provisions of Section 6.04, every power and remedy
given by this Article or by law to the Trustee or the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders.
SECTION 6.06. CONTROL BY SECURITYHOLDERS.
The holders of a majority in aggregate principal amount of the
Securities of any series at the time Outstanding, determined in accordance with
Section 8.04, shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee with respect to such series;
PROVIDED, HOWEVER, that such direction shall not be in conflict with any rule of
law or with this Indenture or be unduly prejudicial to the rights of holders of
Securities of any other series at the time Outstanding determined in accordance
with Section 8.04. Subject to the provisions of Section 7.01, the Trustee shall
have the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine that
the proceeding so directed would involve the Trustee in personal liability. The
holders of a majority in aggregate principal amount of the Securities of any
series at the time Outstanding affected thereby, determined in accordance with
Section 8.04, may on behalf of the holders of all of the Securities of such
series waive any past default in the performance of any of the covenants
contained herein or established pursuant to Section 2.01 with respect to such
series and its consequences, except (i) a default in the payment of the
39
<PAGE>
principal of, or premium, if any, or interest on, any of the Securities of that
series as and when the same shall become due by the terms of such Securities
otherwise than by acceleration (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal and any
premium has been deposited with the Trustee (in accordance with Section 6.01(c))
or (ii) a default in the covenants contained in Section 4.06. Upon any such
waiver, the default covered thereby shall be deemed to be cured for all purposes
of this Indenture and the Company, the Trustee and the holders of the Securities
of such series shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
SECTION 6.07. UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Securities
by such holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding more than 10% in aggregate principal amount of the
Outstanding Securities of any series, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security of such series, on or after the
respective due dates expressed in such Security or established pursuant to this
Indenture.
40
<PAGE>
ARTICLE VII.
CONCERNING THE TRUSTEE
SECTION 7.01. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a series and after the curing of all Events of
Default with respect to the Securities of that series that may have occurred,
shall undertake to perform with respect to the Securities of such series such
duties and only such duties as are specifically set forth in this Indenture, and
no implied covenants shall be read into this Indenture against the Trustee. In
case an Event of Default with respect to the Securities of a series has occurred
(that has not been cured or waived), the Trustee shall exercise with respect to
Securities of that series such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default with respect to the
Securities of a series and after the curing or waiving of all such Events of
Default with respect to that series that may have occurred:
(i) the duties and obligations of the Trustee shall with respect
to the Securities of such series be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable with
respect to the Securities of such series except for the performance of such
duties and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may with respect to the Securities of such series 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
Trustee and conforming to the
41
<PAGE>
requirements of this Indenture; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirement of this
Indenture;
(2) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee, was negligent in ascertaining the pertinent
facts;
(3) the 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 principal amount of the Securities of any
series at the time Outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture with respect
to the Securities of that series; and
(4) None of the provisions contained in this Indenture shall require the
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 there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, security or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company or the
Guarantor mentioned herein shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company or the
Guarantor, as the case may be, by the President or any Vice President and
by
42
<PAGE>
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer thereof (unless other evidence in respect thereof is specifically
prescribed herein);
(c) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default with respect to a series of the
Securities (that has not been cured or waived) to exercise with respect to
Securities of that series such of the rights and powers vested in it by
this Indenture, and to use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs;
(e) The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(f) The 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, consent, order, approval,
bond, security, or other papers or documents, unless requested in writing
so to do by the holders of not less than a majority in principal amount of
the Outstanding Securities of the particular series affected thereby
(determined as provided in Section 8.04); PROVIDED, HOWEVER, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the Trustee may
require reasonable indemnity against such costs, expenses or liabilities as
a condition to so proceeding.
43
<PAGE>
The reasonable expense of every such examination shall be paid by the
Company and the Guarantor or, if paid by the Trustee, shall be repaid by
the Company and the Guarantor upon demand; and
(g) The 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 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.
SECTION 7.03. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OR
SECURITIES.
(a) The recitals contained herein and in the Securities shall be
taken as the statements of the Company and the Guarantor, and the Trustee
assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities.
(c) The Trustee shall not be accountable for the use or application
by the Company or the Guarantor of any of the Securities or of the proceeds of
such Securities, or for the use or application of any moneys paid over by the
Trustee in accordance with any provision of this Indenture or established
pursuant to Section 2.01, or for the use or application of any moneys received
by any paying agent other than the Trustee.
SECTION 7.04. MAY HOLD SECURITIES.
The Trustee or any paying agent or Security Registrar, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not Trustee, paying agent or
Security Registrar.
SECTION 7.05. MONEYS HELD IN TRUST.
Subject to the provisions of Section 11.05, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree with the Company and the Guarantor to pay thereon.
44
<PAGE>
SECTION 7.06. COMPENSATION AND REIMBURSEMENT.
(a) The Company and the Guarantor covenant and agree to pay to the
Trustee, and the Trustee shall be entitled to, such reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), as the Company, the Guarantor
and the Trustee may from time to time agree in writing, for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee, and,
except as otherwise expressly provided herein, the Company and the Guarantor
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company and the Guarantor also
covenant to indemnify the Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim of
liability in the premises.
(b) The obligations of the Company and the Guarantor under this
Section to compensate and indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder. Such additional indebtedness shall be secured by a lien
prior to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the holders
of particular Securities.
SECTION 7.07. RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 7.01, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting to take any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee and such certificate, in the absence of negligence or bad faith on the
part of the Trustee,
45
<PAGE>
shall be full warrant to the Trustee for any action taken, suffered or omitted
to be taken by it under the provisions of this Indenture upon the faith thereof.
SECTION 7.08. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
SECTION 7.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee with respect to the Securities
issued hereunder which shall at all times 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 other
Person permitted to act as trustee by the Commission, 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 aforesaid supervising or examining
authority, then for the purposes of this Section, 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. The
Company and the Guarantor may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company or the
Guarantor, serve as Trustee. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 7.10.
SECTION 7.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any time
resign with respect to the Securities of one or more series by giving written
notice thereof to the Company and the Guarantor and by transmitting notice of
resignation by mail, first class postage prepaid, to the Securityholders of such
series, as their names and addresses appear upon the Security Register. Upon
receiving such notice of resignation, the Company
46
<PAGE>
and the Guarantor shall promptly appoint a successor trustee with respect to
Securities of such series by written instrument, in duplicate, executed by order
of the Board of Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and have accepted appointment within 30
days after the mailing of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee with respect to Securities of such series, or any Securityholder of that
series who has been a bona fide holder of a Security or Securities for at least
six months may, subject to the provisions of Section 6.08, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
subsection (a) of Section 7.08 after written request therefor by the
Company or the Guarantor or by any Securityholder who has been a bona fide
holder of a Security or Securities for at least six months; or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.09 and shall fail to resign after written request
therefor by the Company or the Guarantor or by any such Securityholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, the
Company or the Guarantor may remove the Trustee with respect to all
Securities and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or, subject to the provisions of Section 6.08, unless
the Trustee's duty to resign is stayed as provided herein, any
Securityholder who has been a bona fide holder of a Security or Securities
47
<PAGE>
for at least six months may, on behalf of that holder and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities of any series at the time Outstanding may at any time remove the
Trustee with respect to such series by so notifying the Trustee, the Company and
the Guarantor and may appoint a successor Trustee for such series with the
consent of the Company and the Guarantor.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee with respect to the Securities of a series pursuant to any of
the provisions of this Section shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 7.11.
(e) Any successor trustee appointed pursuant to this Section may be
appointed with respect to the Securities of one or more series or all of such
series, and at any time there shall be only one Trustee with respect to the
Securities of any particular series.
SECTION 7.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee with
respect to all Securities, every such successor trustee so appointed shall
execute, acknowledge and deliver to the Company and the Guarantor and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the Guarantor or the successor trustee,
such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor trustee all the rights, powers, and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor trustee with
respect to the Securities of one or more (but not all) series, the Company, the
Guarantor, the retiring
48
<PAGE>
Trustee and each successor trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto wherein each
successor trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor trustee relates, (2) shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust, that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee and that no Trustee shall be responsible for any act or failure to
act on the part of any other Trustee hereunder; and upon the execution and
delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein, such
retiring Trustee shall with respect to the Securities of that or those series to
which the appointment of such successor trustee relates have no further
responsibility for the exercise of rights and powers or for the performance of
the duties and obligations vested in the Trustee under this Indenture, and each
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor trustee relates; but, on request of the Company or
the Guarantor or any successor trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor trustee, to the extent contemplated by
such supplemental indenture, the property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor trustee relates.
(c) Upon request of any such successor trustee, the Company and the
Guarantor shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such rights, powers and
trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
49
<PAGE>
(d) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article.
(e) Upon acceptance of appointment by a successor trustee as provided
in this Section, the Company and the Guarantor shall transmit notice of the
succession of such trustee hereunder by mail, first class postage prepaid, to
the Securityholders, as their names and addresses appear upon the Security
Register. If the Company and the Guarantor fail to transmit such notice within
ten days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be transmitted at the expense of the Company
and the Guarantor.
SECTION 7.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, PROVIDED that such corporation shall be
qualified under the provisions of Section 7.08 and eligible under the provisions
of Section 7.09, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 7.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
50
<PAGE>
ARTICLE VIII.
CONCERNING THE SECURITYHOLDERS
SECTION 8.01. EVIDENCE OF ACTION BY SECURITYHOLDERS.
Whenever in this Indenture it is provided that the holders of a
majority or specified percentage in aggregate principal amount of the Securities
of a particular series may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action the holders
of such majority or specified percentage of that series have joined therein may
be evidenced by any instrument or any number of instruments of similar tenor
executed by such holders of Securities of that series in Person or by agent or
proxy appointed in writing.
If the Company or the Guarantor shall solicit from the Securityholders
of any series any request, demand, authorization, direction, notice, consent,
waiver or other action, the Company or the Guarantor may, at its option, as
evidenced by an Officers' Certificate, fix in advance a record date for such
series for the determination of Securityholders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other action, but
the Company or the Guarantor shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other action may be given before or after the record date,
but only the Securityholders of record at the close of business on the record
date shall be deemed to be Securityholders for the purposes of determining
whether Securityholders of the requisite proportion of Outstanding Securities of
that series have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action, and for that
purpose the Outstanding Securities of that series shall be computed as of the
record date; PROVIDED, HOWEVER, that no such authorization, agreement or consent
by such Securityholders on the record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.
SECTION 8.02. PROOF OF EXECUTION BY SECURITYHOLDERS.
Subject to the provisions of Section 7.01, proof of the execution of
any instrument by a Securityholder (such proof will not require notarization) or
his agent or proxy and proof of the
51
<PAGE>
holding by any Person of any of the Securities shall be sufficient if made in
the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the
Trustee.
(b) The ownership of Securities shall be proved by the Security
Register of such Securities or by a certificate of the Security Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 8.03. WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any
Security, the Company, the Guarantor, the Trustee, any paying agent and any
Security Registrar may deem and treat the Person in whose name such Security
shall be registered upon the books of the Company as the absolute owner of such
Security (whether or not such Security shall be overdue and notwithstanding any
notice of ownership or writing thereon made by anyone other than the Security
Registrar) for the purpose of receiving payment of or on account of the
principal of, premium, if any, and (subject to Section 2.03) interest on such
Security and for all other purposes; and neither the Company nor the Guarantor
nor the Trustee nor any paying agent nor any Security Registrar shall be
affected by any notice to the contrary.
SECTION 8.04. CERTAIN SECURITIES OWNED BY COMPANY OR GUARANTOR
DISREGARDED.
In determining whether the holders of the requisite aggregate
principal amount of Securities of a particular series have concurred in any
direction, consent of waiver under this Indenture, the Securities of that series
that are owned by the Company or the Guarantor or any other obligor on the
Securities of that series or by any Person directly or indirectly controlling or
controlled by or under common control with the Company or the Guarantor or any
other obligor on the Securities of that series shall be disregarded and deemed
not to be Outstanding for the purpose of any such determination, except that for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, consent or waiver, only Securities of such series that the
Trustee actually knows are so owned shall be so disregarded. The Securities so
owned
52
<PAGE>
that have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section, if the pledgee shall establish to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not a Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or the
Guarantor or any such other obligor. In case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
SECTION 8.05. ACTIONS BINDING ON FUTURE SECURITYHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 8.01, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Securities of a
particular series specified in this Indenture in connection with such action,
any holder of a Security of that series that is shown by the evidence to be
included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee, and upon proof of holding as
provided in Section 8.02, revoke such action so far as concerns such Security.
Except as aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security, and of any Security issued in exchange therefor, on
registration of transfer thereof or in place thereof, irrespective of whether or
not any notation in regard thereto is made upon such Security. Any action taken
by the holders of the majority or percentage in aggregate principal amount of
the Securities of a particular series specified in this Indenture in connection
with such action shall be conclusively binding upon the Company, the Guarantor,
the Trustee and the holders of all the Securities of that series.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
SECURITYHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Guarantor and the Trustee may from time to time
and at any time enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as then in effect),
53
<PAGE>
without the consent of the Securityholders, for one or more of the following
purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, in the
Securities of any series or in the Guarantees;
(b) to comply with Article Ten;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to add to the covenants of the Company or the Guarantor for the
benefit of the holders of all or any Series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities, stating that
such covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the Company or
the Guarantor;
(e) to add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Securities, as herein set forth;
(f) to make any change that does not adversely affect the rights of
any Securityholder in any material respect; or
(g) to provide for the issuance of and establish the form and terms
and conditions of the Securities of any series and the Guarantees as provided in
Section 2.01, to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or any series of Securities,
or to add to the rights of the holders of any series of Securities.
The Trustee is hereby authorized to join with the Company and the
Guarantor in the execution of any such supplemental indenture, and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into any such supplemental
indenture that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company, the Guarantor and the Trustee without
the consent of the holders of any of the Securities at the time Outstanding,
notwithstanding any of the provisions of Section 9.02.
54
<PAGE>
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS.
With the consent (evidenced as provided in Section 8.01) of the
holders of not less than a majority in aggregate principal amount of the
Securities of each series affected by such supplemental indenture or indentures
at the time Outstanding, the Company and the Guarantor, when authorized by
Board Resolutions, and the Trustee may from time to time and at any time enter
into an indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner not covered by Section 9.01 the rights of the holders of the
Securities of such series under this Indenture; PROVIDED, HOWEVER, that no such
supplemental indenture shall, without the consent of the holders of each
Security then Outstanding and affected thereby, (i) extend the fixed maturity of
any Securities 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 or (ii) reduce the aforesaid
percentage of Securities, the holders of which are required to consent to any
such supplemental indenture.
It shall not be necessary for the consent of the Securityholders of
any series affected thereby under this Section to approve the particular form of
any proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
SECTION 9.03. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article or of Section 10.01, this Indenture shall, with
respect to such series, be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company, the Guarantor and the holders of Securities of the series affected
thereby shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.
55
<PAGE>
SECTION 9.04. SECURITIES AFFECTED BY SUPPLEMENTAL INDENTURES.
Securities of any series, affected by a supplemental indenture,
authenticated and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article or of Section 10.01, may bear a
notation in form approved by the Company, provided such form meets the
requirements of any exchange upon which such series may be listed, as to any
matter provided for in such series may be listed, as to any matter provided for
in such supplemental indenture. If the Company and the Guarantor shall so
determine, new Securities of that series so modified as to conform, in the
opinion of the Board of Directors of the Company and the Guarantor, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared by the Company and the Guarantor, authenticated by the Trustee and
delivered in exchange for the Securities of that series then Outstanding.
SECTION 9.05. EXECUTION OF SUPPLEMENTAL INDENTURES.
Upon the request of the Company and the Guarantor, accompanied by
their Board Resolutions authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Securityholders required to consent thereto as aforesaid, the Trustee shall join
with the Company and the Guarantor in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion but shall not be obligated to enter into such
supplemental indenture. The Trustee, subject to the provisions of Section 7.01,
may receive an Opinion of Counsel as conclusive evidence that any supplemental
indenture executed pursuant to this Article is authorized or permitted by, and
conforms to, the terms of this Article and that it is proper for the Trustee
under the provisions of this Article to join in the execution thereof; PROVIDED,
HOWEVER, that such Opinion of Counsel need not be provided in connection with
the execution of a supplemental indenture that establishes the terms of a series
of Debt Securities and related Guarantee pursuant to Section 2.01 hereof.
Promptly after the execution by the Company, the Guarantor and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section, the Trustee shall transmit by mail, first class postage prepaid, a
notice, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders of all series affected thereby as their names
56
<PAGE>
and addresses appear upon the Security Register. Any failure of the Trustee to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.
ARTICLE X.
SUCCESSOR CORPORATION
SECTION 10.01. COMPANY OR GUARANTOR MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company or the Guarantor with or into
any other corporation or corporations (whether or not affiliated with the
Company or the Guarantor, as the case may be), or successive consolidations or
mergers in which the Company or the Guarantor, as the case may be, or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property of the Company or the
Guarantor, as the case may be, or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether or not
affiliated with the Company or the Guarantor, as the case may be, or its
successor or successors) authorized to acquire and operate the same; PROVIDED,
HOWEVER, the Company and the Guarantor hereby covenant and agree that, upon any
such consolidation, merger, sale, conveyance, transfer or other disposition, the
due and punctual payment, in the case of the Company, of the principal of
(premium, if any) and interest on all of the Debt Securities of all series in
accordance with the terms of each series, according to their tenor or, in the
case of the Guarantor, the performance of all obligations under the Guarantees,
and the due and punctual performance and observance of all the covenants and
conditions of this Indenture with respect to each series or established with
respect to such series pursuant to Section 2.01 to be kept or performed by the
Company or the Guarantor, as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Company or the Guarantor, as the case may be, shall have been merged,
or by the entity which shall have acquired such property.
Notwithstanding anything to the contrary contained in this Indenture,
the provisions of this Section 10.01 shall not
57
<PAGE>
apply to the distribution by the Guarantor to its stockholders of the capital
stock of USW-C, Inc., a Delaware corporation ("New U S WEST"), pursuant to the
terms of the Separation Agreement, dated as of ______ __, 1998, as amended from
time to time, between the Guarantor and New U S WEST.
SECTION 10.02. SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of, in the case of the Company, the due
and punctual payment of the principal of, premium, if any, and interest on all
of the Debt Securities of all series Outstanding or, in the case of the
Guarantor, the performance of all obligations under the Guarantees, and the due
and punctual performance of all of the covenants and conditions of this
Indenture or established with respect to each series of the Securities pursuant
to Section 2.01 to be performed by the Company or the Guarantor, as the case may
be, with respect to each series, such successor corporation shall succeed to and
be substituted for the Company or the Guarantor, as the case may be, with the
same effect as if it had been named as the Company or the Guarantor, as the case
may be, herein, and thereupon the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture and the Securities.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Securities thereafter to be issued as may be
appropriate.
(c) Nothing contained in this Indenture or in any of the Securities
shall prevent the Company or the Guarantor from merging into itself or acquiring
by purchase or otherwise all or any part of the property of any other Person
(whether or not affiliated with the Company or the Guarantor).
SECTION 10.03. EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 7.01, may receive an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article.
58
<PAGE>
ARTICLE XI.
SATISFACTION AND DISCHARGE
SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company or the Guarantor shall have delivered
to the Trustee for cancellation all Securities of a series theretofore
authenticated (other than any Securities that shall have ben destroyed, lost or
stolen and that shall have been replaced or paid as provided in Section 2.07)
and Securities for whose payment money or Governmental Obligations have
theretofore been deposited in trust or segregated and held in trust by the
Company or the Guarantor (and thereupon repaid to the Company or the Guarantor
or discharged from such trust, as provided in Section 11.05); or (b) all such
Securities of a particular series not theretofore delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company or the Guarantor shall deposit or cause to be
deposited with the Trustee as trust funds the entire amount in moneys or
Governmental Obligations sufficient or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay at
maturity or upon redemption all Securities of that series not theretofore
delivered to the Trustee for cancellation, including principal (and premium, if
any) and interest due or to become due to such date of maturity or date fixed
for redemption, as the case may be, and if the Company or the Guarantor shall
also pay or cause to be paid all other sums payable hereunder with respect to
such series by the Company and the Guarantor; then this Indenture shall
thereupon cease to be of further effect with respect to such series except for
the provisions of Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10, that
shall survive until the date of maturity or redemption date, as the case may be,
and Sections 7.06 and 11.05, that shall survive to such date and thereafter, and
the Trustee, on demand of the Company and the Guarantor and at the cost and
expense of the Company and the Guarantor, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture with respect to
such series.
59
<PAGE>
SECTION 11.02. DISCHARGE OF OBLIGATIONS.
If at any time all such Securities of a particular series not
heretofore delivered to the Trustee for cancellation or that have not become due
and payable as described in Section 11.01 shall have been paid by the Company or
the Guarantor by depositing irrevocably with the Trustee as trust funds moneys
or an amount of Governmental Obligations sufficient to pay at maturity or upon
redemption all such Securities of that series not theretofore delivered to the
Trustee for cancellation, including principal (and premium, if any) and interest
due or to become due to such date of maturity or date fixed for redemption, as
the case may be, and if the Company or the Guarantor shall also pay or cause to
be paid all other sums payable hereunder by the Company and the Guarantor with
respect to such series, then after the date such moneys or Governmental
Obligations, as the case may be, are deposited with the Trustee the obligations
of the Company and the Guarantor under this Indenture with respect to such
series shall cease to be of further effect except for the provisions of Sections
2.03, 2.05, 2.07, 4,01, 4.02, 4,03, 7.06, 7.10 and 11.05 hereof that shall
survive until such Securities shall mature and be paid. Thereafter, Sections
7.06 and 11.05 shall survive.
SECTION 11.03. DEPOSITED MONEYS TO BE HELD IN TRUST.
All moneys or Governmental Obligations deposited with the Trustee
pursuant to Sections 11.01 or 11.02 shall be held in trust and shall be
available for payment as due, either directly or through any paying agent
(including the Company acting as its own paying agent), to the holders of the
particular series of Securities for the payment or redemption of which such
moneys or Governmental Obligations have been deposited with the Trustee.
SECTION 11.04. PAYMENT OF MONEYS HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture
all moneys or Governmental Obligations then held by any paying agent under the
provisions of this Indenture shall, upon demand of the Company or the Guarantor,
be paid to the Trustee and thereupon such paying agent shall be released from
all further liability with respect to such moneys or Governmental Obligations.
SECTION 11.05. REPAYMENT TO COMPANY.
Any moneys or Governmental Obligations deposited with any paying agent
or the Trustee, or then held by the Company or
60
<PAGE>
the Guarantor, as the case may be, in trust for payment of principal of or
premium or interest on the Securities of a particular series that are not
applied but remain unclaimed by the holders of such Securities for at least two
years after the date upon which the principal of (and premium, if any) or
interest on such Securities shall have respectively become due and payable,
shall be repaid to the Company or the Guarantor, as the case may be, on May 31
of each year or (if then held by the Company or the Guarantor) shall be
discharged from such trust; and thereupon the paying agent and the Trustee shall
be released from all further liability with respect to such moneys or
Governmental Obligations, and the holder of any of the Securities entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Company or the Guarantor for the payment thereof.
ARTICLE XII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 12.01. NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Security or Guarantee, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer or director, past, present or future as such, of the
Company or the Guarantor or of any predecessor or successor corporation, either
directly or through the Company or the Guarantor or any such 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; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the incorporators, stockholders,
officers or directors as such, of the Company or the Guarantor or of any
predecessor or successor corporation, or any of them, because of the creation of
the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom; and that any and all such personal liability of every name
and nature, either at common law or in equity or by constitution or statute,
of, and any and all such rights and claims against, every such incorporator,
stockholder, officer or director as such, because of the creation of the
indebtedness
61
<PAGE>
hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom, are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture and the issuance
of such Securities.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.01. EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company or the Guarantor shall bind
their respective successors and assigns, whether so expressed or not.
SECTION 13.02. ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company or the Guarantor shall and may be done and performed with like force and
effect by the corresponding board, committee or officer of any corporation that
shall at the time be the lawful sole successor of the Company or the Guarantor,
as the case may be.
SECTION 13.03. SURRENDER OF COMPANY POWERS.
The Company or the Guarantor by instrument in writing executed by
authority of 2/3 (two-thirds) of its Board of Directors and delivered to the
Trustee may surrender any of the powers reserved to the Company or the
Guarantor, as the case may be, and thereupon such power so surrendered shall
terminate both as to the Company or the Guarantor, as the case may be, and as to
any successor corporation.
SECTION 13.04. NOTICES.
Except as otherwise expressly provided herein any notice or demand
that by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Securities to or on the Company or
the Guarantor may be given or served by being deposited first class postage
prepaid in a post-office letterbox addressed (until another address is filed in
writing by the Company with the Trustee), as follows: c/o U S WEST, Inc. (to be
renamed "MediaOne Group,
62
<PAGE>
Inc."), 188 Inverness Drive West, Englewood, Colorado 80112, Attention:
Treasurer. Any notice, election, request or demand by the Company or any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given or made, for all purposes, if given or made in writing at the Corporate
Trust Office of the Trustee.
SECTION 13.05. GOVERNING LAW.
This Indenture and each Security 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 13.06. TREATMENT OF DEBT SECURITIES AS DEBT.
It is intended that the Debt Securities will be treated as
indebtedness and not as equity for federal income tax purposes. The provisions
of this Indenture shall be interpreted to further this intention.
SECTION 13.07. COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company or the Guarantor to
the Trustee to take any action under any of the provisions of this Indenture,
the Company or the Guarantor, as the case may be, shall furnish to the Trustee
an Officers' Certificate stating that all conditions precedent provided for in
this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of any
such application or demand as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
(b) Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
in this Indenture shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with;
63
<PAGE>
and (4) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been complied with.
SECTION 13.08. PAYMENTS ON BUSINESS DAYS.
Except as provided pursuant to Section 2.01 pursuant to a Board
Resolution, and as set forth in an Officers' Certificate, or established in one
or more indentures supplemental to this Indenture, in any case where the date of
maturity of interest or principal of any Security or the date of redemption of
any Security shall not be a Business Day, then payment of interest or principal
(and premium, if any) may be made on the next succeeding Business Day with the
same force and effect as if made on the nominal date of maturity or redemption,
and no interest shall accrue for the period after such nominal date.
SECTION 13.09. CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 13.10. COUNTERPARTS.
This 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.
SECTION 13.11. SEPARABILITY.
In case any one or more of the provisions contained in this Indenture
or in the Securities of any series 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 Indenture or of
such Securities, but this Indenture and such Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 13.12. ASSIGNMENT.
Each of the Company and the Guarantor will have the right at all times
to assign any of its respective rights or obligations under this Indenture to a
direct or indirect wholly-owned Subsidiary of the Guarantor, PROVIDED that, in
the event of any such assignment, the Company or the Guarantor, as the case
64
<PAGE>
may be, will remain liable for all such obligations. Subject to the foregoing,
the Indenture is binding upon and inures to the benefit of the parties thereto
and their respective successors and assigns. This Indenture may not otherwise
be assigned by the parties thereto.
SECTION 13.13. ACKNOWLEDGEMENT OF RIGHTS.
The Company and the Guarantor acknowledge that, with respect to any
Securities held by a MediaOne Trust or a trustee of such trust, if the Property
Trustee of such Trust fails to enforce its rights under this Indenture as the
holder of the series of Securities held as the assets of such MediaOne Trust,
any holder of Preferred Securities of such MediaOne Trust may, after a period of
30 days has elapsed from such holder's written request to such Property Trustee
to enforce such rights, institute legal proceedings directly against the Company
and the Guarantor to enforce such Property Trustee's rights under this Indenture
without first instituting any legal proceedings against such Property Trustee or
any other person or entity. In addition, the Company and the Guarantor
acknowledge that, notwithstanding the foregoing, if a an event of default under
the Declararion of such MediaOne Trust has occurred and is continuing and such
event is attributable to the failure of the Company or the Guarantor to pay
interest or principal on such Securities on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then any holder of such Preferred Securities may institute a proceeding for
enforcement of payment to such holder of the principal of, or interest on, an
aggregate principal amount of such Securities equal to the aggregate liquidation
amount of the Preferred Securities of such holder on or after the respective due
date specified in such Securities.
ARTICLE XIV.
SUBORDINATION OF SECURITIES
SECTION 14.01. SUBORDINATION TERMS.
The payment by the Company of the principal of, premium, if any, and
interest on any series of Debt Securities issued hereunder shall be subordinated
to the extent set forth in an indenture supplemental hereto relating to such
Debt Securities. The payment by the Guarantor of any obligation due under any
Guarantees issued hereunder shall be subordinated to
65
<PAGE>
the extent set forth in an indenture supplemental hereto relating to such
Guarantees.
66
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
MEDIAONE GROUP FUNDING, INC.
By:
---------------------------------------
Name:
Title:
U S WEST, INC. (to be renamed
"MediaOne Group, Inc.")
By:
---------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:
---------------------------------------
Name:
Title:
<PAGE>
Exhibit 4-D
FIRST SUPPLEMENTAL INDENTURE, dated as of , 1998 (the
"First Supplemental Indenture"), among MediaOne Group Funding, Inc., a
Delaware corporation (the "Company"), U S WEST, Inc. (to be renamed "MediaOne
Group, Inc.), a Delaware corporation (the "Guarantor") and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") under the
Indenture dated as of , 1998 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 % Subordinated Deferrable Interest Notes due
2025, 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 First Supplemental Indenture;
WHEREAS, MediaOne Finance Trust I, a Delaware statutory business
trust (the "Trust"), has offered to the public $ aggregate
liquidation amount of its % 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 $ aggregate liquidation amount of its Common
Securities, in $ aggregate principal amount of the Notes; and
WHEREAS, the Company and the Guarantor have requested that the
Trustee execute and deliver this First Supplemental Indenture, and all
requirements necessary to make this First 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 First 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
<PAGE>
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:
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 First Supplemental Indenture;
(b) a term defined anywhere in this First 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 First 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):
"Declaration" means the Amended and Restated Declaration of Trust
of MediaOne Finance Trust I, a Delaware business trust, dated as of
, 1998.
"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.
"Extended Maturity Date" means, if the Company elects to extend the
Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is after the Scheduled Maturity Date but before September 30,
2044.
2
<PAGE>
"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.
"Scheduled Maturity Date" means September 30, 2025.
"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; (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 MediaOne 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 %
Subordinated Deferrable Interest Notes due 2036 issued by the Company to
MediaOne Finance Trust II (the " % Notes") and the guarantee by the
Guarantor of the % Notes (the " % 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 " %
Subordinated Deferrable Interest Notes due 2025", limited in
3
<PAGE>
aggregate principal amount to $ , 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.
4
<PAGE>
SECTION 2.2 MATURITY
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity Date
beyond the Scheduled Maturity Date in accordance with Section 2.2(b), the
Extended Maturity Date;
(b) the Company may at any time before the day which is 90
days before the Scheduled Maturity Date, elect to extend the Maturity Date
only once to the Extended Maturity Date provided that the following
conditions in this Section 2.2(b) are satisfied both at the date the Company
gives notice in accordance with Section 2.2(c) of its election to extend the
Maturity Date and at the Scheduled Maturity Date:
(i) the Company is not in bankruptcy or otherwise
insolvent;
(ii) the Company is not in default on any Securities issued
to any U S WEST Trust or any trustee of such U S WEST Trust in connection
with the issuance of Trust Securities by such U S WEST Trust;
(iii) the Company has made timely payments on the Debenture
for the immediately preceding six quarters without deferrals;
(iv) the Trust is not in arrears on payments of
Distributions on the Trust Securities issued by it; and
(v) the Notes are rated Investment grade or the equivalent
by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch
Investor Services, Duff & Phelps Credit Rating Company or any other
nationally recognized statistical rating organization; and
(c) if the Company elects to extend the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice to registered
holders of the Notes, the Property Trustee and the Trust of the extension of the
Maturity Date and the Extended Maturity Date at least 90 days before the
Scheduled Maturity Date.
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
5
<PAGE>
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 First 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 First 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.
6
<PAGE>
SECTION 2.5 INTEREST
(a) Each Note will bear interest at the rate of % 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 , 1998, 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
7
<PAGE>
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 September 11, 2000, 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.
8
<PAGE>
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
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.
9
<PAGE>
(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.
10
<PAGE>
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.
11
<PAGE>
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
12
<PAGE>
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.
13
<PAGE>
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.
14
<PAGE>
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 First 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
15
<PAGE>
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.
16
<PAGE>
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 of
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.
17
<PAGE>
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. $
------------------------------- ------------------------------------
MediaOne Group Funding, Inc.
% SUBORDINATED DEFERRABLE INTEREST NOTE
DUE 2025
MEDIAONE GROUP FUNDING, INC., a Delaware 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
September 30, 2025 (or on such later date before September 30, 2044 if the
Company elects to extend the maturity date as further described herein), and
to pay interest on said principal sum from , 1998
18
<PAGE>
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 ,
1998 at the rate of % 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.
19
<PAGE>
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.
20
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated ______________ ___, 1998
MEDIAONE GROUP 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
21
<PAGE>
[FORM OF GUARANTEE]
FOR VALUE RECEIVED, U S WEST, Inc. (to be renamed MediaOne Group,
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
22
<PAGE>
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. (to be renamed MediaOne Group,
Inc.) has caused this Guarantee to be executed.
U S WEST, Inc. (to be renamed
MediaOne Group, Inc.)
[SEAL]
By: By:
------------------------- ---------------------------
Name: Name:
Title: Secretary Title:
23
<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 , 1998
among the Company, U S WEST Inc. (to be renamed MediaOne Group, Inc.), a
Delaware corporation, as Guarantor (the "Guarantor") and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of , 1998 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 First 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 September 11, 2000, 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
24
<PAGE>
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
25
<PAGE>
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
26
<PAGE>
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 First Supplemental Indenture, Notes in the
aggregate principal amount of $ may be executed by the Company
and Note Guarantees endorsed thereon executed by the Guarantor. Such Notes
and Note 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 First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided. The provisions of this First
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 First Supplemental Indenture.
27
<PAGE>
SECTION 10.3 GOVERNING LAW
This First 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 First
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 First
Supplemental Indenture or of the Notes, but this First 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 First 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.
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
MEDIAONE GROUP FUNDING, INC.
By:
-----------------------------------
Name:
Title:
U S WEST, INC. (to be renamed MediaOne Group,
Inc.)
By:
-----------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------
Name:
Title:
29
<PAGE>
(FACE OF NOTE)
No. D-1 $
MediaOne Group Funding, Inc.
% SUBORDINATED DEFERRABLE INTEREST NOTE
DUE 2025
MEDIAONE GROUP FUNDING, INC., a Delaware corporation (the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The
First National Bank of Chicago, as Property Trustee of MediaOne Finance Trust
I, pursuant to that certain Amended and Restated Declaration of Trust dated
as of , or registered assigns, the principal sum of
Dollars on September 30, 2025 (or on such later date before September 30,
2044, if the Company elects to extend the maturity date as further described
herein), and to pay interest on said principal sum from 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 at the rate of % 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. 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
<PAGE>
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 or 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.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: ,
MEDIAONE GROUP FUNDING, INC.
By
---------------------------
Name:
Title:
SEAL
Attest:
By
----------------------
Name:
Title:
3
<PAGE>
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>
(GUARANTEE)
FOR VALUE RECEIVED, U S WEST, Inc. (to be renamed "MediaOne Group,
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
<PAGE>
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. (to be renamed "MediaOne Group,
Inc.") has caused this Guarantee to be executed.
U S WEST, Inc.
[SEAL]
By: By:
------------------------ ---------------------------------
Name: Name:
Title: Title:
6
<PAGE>
(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 among
U S WEST, Inc. (to be renamed "MediaOne Group, Inc."), a Delaware
corporation, as Guarantor (the "Guarantor"), and Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee"), as supplemented by the
First Supplemental Indenture dated as of among the Company, the
Guarantor and the Trustee and the Second Supplemental Indenture dated as of
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 First 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 September 11, 2000 (an "Optional
Redemption"), 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.
<PAGE>
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
8
<PAGE>
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 Notes of this series 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.
9
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of , 1998 (the
"Second Supplemental Indenture"), among MediaOne Group Funding, Inc., a
Delaware corporation (the "Company"), U S WEST, Inc. (to be renamed "MediaOne
Group, Inc.), a Delaware corporation (the "Guarantor") and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") under the
Indenture dated as of , 1998 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 % 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 Second Supplemental Indenture;
WHEREAS, MediaOne Finance Trust II, a Delaware statutory business
trust (the "Trust"), has offered to the public $ aggregate
liquidation amount of its % 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 $ aggregate liquidation amount of its Common
Securities, in $ aggregate principal amount of the Notes; and
WHEREAS, the Company and the Guarantor have requested that the
Trustee execute and deliver this Second Supplemental Indenture, and all
requirements necessary to make this Second 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 Second Supplemental
Indenture has been duly authorized in all respects:
<PAGE>
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:
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 Second Supplemental Indenture;
(b) a term defined anywhere in this Second 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 Second 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):
"Declaration" means the Amended and Restated Declaration of Trust
of MediaOne Finance Trust II, a Delaware business trust, dated as of
, 1998.
"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.
2
<PAGE>
"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; (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 MediaOne 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 %
Subordinated Deferrable Interest Notes due 2025 issued by the Company to
MediaOne Finance Trust I (the " % Notes") and the guarantee by the
Guarantor of the % Notes (the " % 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 " % Subordinated
Deferrable Interest Notes due 2036", limited in aggregate principal amount to
$ , 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.
3
<PAGE>
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 Second 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
4
<PAGE>
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 Second 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 % 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 , 1998, 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.
5
<PAGE>
(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
6
<PAGE>
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
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
7
<PAGE>
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
8
<PAGE>
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.
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
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
12
<PAGE>
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 Second 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
13
<PAGE>
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.
14
<PAGE>
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 of
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.
15
<PAGE>
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.
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. $
-------------------------- --------------------------
16
<PAGE>
MediaOne Group Funding, Inc.
% SUBORDINATED DEFERRABLE INTEREST NOTE
DUE 2036
MEDIAONE GROUP FUNDING, INC., a Delaware 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 , 1998 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 , 1998 at the rate of %
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
17
<PAGE>
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.
18
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated , 1998
-------------- ---
MEDIAONE GROUP 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
19
<PAGE>
[FORM OF GUARANTEE]
FOR VALUE RECEIVED, U S WEST, Inc. (to be renamed MediaOne Group,
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
20
<PAGE>
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. (to be renamed MediaOne Group,
Inc.) has caused this Guarantee to be executed.
U S WEST, Inc. (to be renamed
MediaOne Group, Inc.)
[SEAL]
By:_____________________ By:________________________
Name: Name:
Title: Secretary Title:
21
<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 , 1998
among the Company, U S WEST Inc. (to be renamed MediaOne Group, Inc.), a
Delaware corporation, as Guarantor (the "Guarantor") and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of , 1998 among
the Company, the Guarantor and the Trustee and the Second Supplemental
Indenture dated as of , 1998 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 Second 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
22
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
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 Second Supplemental Indenture, Notes in the
aggregate principal amount of $ may be executed by the Company
and Note Guarantees endorsed thereon executed by the Guarantor. Such Notes
and Note 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 Second Supplemental
Indenture, is in all respects ratified and confirmed, and this Second
Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided. The provisions of this Second
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
25
<PAGE>
as to the validity or sufficiency of this Second Supplemental Indenture.
SECTION 10.3 GOVERNING LAW
This Second 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 Second
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 Second
Supplemental Indenture or of the Notes, but this Second 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 Second 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.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.
MEDIAONE GROUP FUNDING, INC.
By:______________________________
Name:
Title:
U S WEST, INC. (to be renamed MediaOne
Group, Inc.)
By:______________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:______________________________
Name:
Title:
27
<PAGE>
(FACE OF NOTE)
No. D-1 $
MediaOne Group Funding, Inc.
% SUBORDINATED DEFERRABLE INTEREST NOTE
DUE 2036
MEDIAONE GROUP FUNDING, INC., a Delaware corporation (the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The
First National Bank of Chicago, as Property Trustee of MediaOne Finance Trust
II, pursuant to that certain Amended and Restated Declaration of Trust dated
as of , or registered assigns, the principal sum of
Dollars on October 29, 2036, and to pay interest on said principal sum from
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
at the rate of % 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. 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
<PAGE>
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
or 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.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: ,
---------------
MEDIAONE GROUP FUNDING, INC.
By
----------------------------
Name:
Title:
SEAL
Attest:
By
---------------------
Name:
Title:
3
<PAGE>
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>
(GUARANTEE)
FOR VALUE RECEIVED, U S WEST, Inc. (to be renamed "MediaOne Group,
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
<PAGE>
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. (to be renamed "MediaOne Group,
Inc.") has caused this Guarantee to be executed.
U S WEST, Inc.
[SEAL]
By: By:
---------------------------- ----------------------------
Name: Name:
Title: Title:
6
<PAGE>
(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
among U S WEST, Inc. (to be renamed "MediaOne Group, Inc."), a Delaware
corporation, as Guarantor (the "Guarantor"), and Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee"), as supplemented by the
First Supplemental Indenture dated as of among the Company,
the Guarantor and the Trustee and the Second Supplemental Indenture dated as
of 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 Second 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 (an "Optional
Redemption"), 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.
<PAGE>
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
8
<PAGE>
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 Notes of this series 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.
9
<PAGE>
------------------------------------
------------------------------------
U S WEST, INC. (to be renamed "MediaOne Group, Inc.")
AND
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
PREFERRED SECURITIES GUARANTEE AGREEMENT
Dated as of , 1998
------------------------------------
------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- -----------
<S> <C>
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
</TABLE>
_______________
* 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.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee
Agreement"), dated as of , is executed and
delivered by U S WEST, Inc. (to be renamed "MediaOne Group, Inc."), a
Delaware corporation (the "Guarantor"), and The First National Bank of
Chicago, 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 MediaOne Finance Trust I, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of 1998,
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
$ aggregate stated liquidation amount of Preferred Securities
designated the %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.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Guarantee Agreement, unless the context otherwise requires:
<PAGE>
(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
2
<PAGE>
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 ,
1998 among MediaOne Group Funding, Inc., a Delaware corporation (the
"Debenture Issuer"), U S WEST, Inc., a Delaware corporation, as guarantor and
, as trustee, as
supplemented by a Second Supplemental Indenture dated as of ,
1998 among the Debenture Issuer, the Guarantor, as guarantor and
, 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.
3
<PAGE>
"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:
(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.
4
<PAGE>
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 Sections
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 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 Preferred Guarantee Trustee shall also comply with the requirements of
Section 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.
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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) Subject to Section 4.2(b), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor;
12
<PAGE>
(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.
13
<PAGE>
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.
14
<PAGE>
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) notwithstanding the rights of the Preferred Guarantee Trustee
to enforce this Guarantee Agreement under Article III, 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.
15
<PAGE>
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, 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 % Trust
Originated Preferred Securities of MediaOne Finance Trust II.
16
<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
17
<PAGE>
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 a Majority 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
18
<PAGE>
(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. (to be renamed "MediaOne Group, 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.
19
<PAGE>
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. (to be renamed "MediaOne
Group, Inc.")
By:____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
as Preferred Guarantee Trustee
By:____________________________________
Name:
Title:
20
<PAGE>
-----------------------------------
-----------------------------------
U S WEST, INC. (to be renamed "MediaOne Group, Inc.")
AND
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
PREFERRED SECURITIES GUARANTEE AGREEMENT
Dated as of , 1998
-----------------------------------
-----------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ----------
<S> <C>
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
</TABLE>
_______________
* 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.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee
Agreement"), dated as of , is executed and
delivered by U S WEST, Inc. (to be renamed "MediaOne Group, Inc."), a
Delaware corporation (the "Guarantor"), and The First National Bank of
Chicago, 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 MediaOne Finance Trust II, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of 1998, 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 $ aggregate stated
liquidation amount of Preferred Securities designated the %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.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Guarantee Agreement, unless the context otherwise requires:
<PAGE>
(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
2
<PAGE>
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 , 1998
among MediaOne Group Funding, Inc., a Delaware corporation (the "Debenture
Issuer"), U S WEST, Inc., a Delaware corporation, as guarantor and
, as trustee, as supplemented
by a Second Supplemental Indenture dated as of , 1998 among the
Debenture Issuer, the Guarantor, as guarantor and ,
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.
3
<PAGE>
"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:
(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.
4
<PAGE>
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 Sections
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 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 Preferred Guarantee Trustee shall also comply with the requirements of
Section 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.
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor;
12
<PAGE>
(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.
13
<PAGE>
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.
14
<PAGE>
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) notwithstanding the rights of the Preferred Guarantee Trustee
to enforce this Guarantee Agreement under Article III, 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.
15
<PAGE>
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, 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 % Trust
Originated Preferred Securities of MediaOne Finance Trust I.
16
<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
17
<PAGE>
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 a majority 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
18
<PAGE>
(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. (to be renamed "MediaOne Group, 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.
19
<PAGE>
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. (to be renamed "MediaOne
Group, Inc.")
By:____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
as Preferred Guarantee Trustee
By:____________________________________
Name:
Title:
20
<PAGE>
[Letterhead of Morris, Nichols, Arsht & Tunnell]
__, 1998
The MediaOne Trusts
(as defined below)
c/o MediaOne Group, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Re: THE MEDIAONE TRUSTS (AS DEFINED BELOW)
Ladies and Gentlemen:
We have acted as special Delaware counsel to MediaOne Finance Trust I
"MediaOne I"), and MediaOne Finance Trust II ("MediaOne II"), each a Delaware
statutory business trust (collectively referred to herein as the "MediaOne
Trusts" and each individually as a "MediaOne Trust"), in connection with
certain matters relating to the creation of the MediaOne Trusts and the
proposed issuance of Preferred Securities therein to beneficial owners
pursuant to and as described in Registration Statement No. 333-50227 (and the
Prospectus forming a part thereof) on Form S-4 filed with the Securities and
Exchange Commission (the "Commission") on April 15, 1998, as amended by
Pre-Effective Amendment No. 1 thereto (as so amended, the "Registration
Statement"). Capitalized terms used herein and not otherwise herein defined
are used with respect to each MediaOne Trust as defined in the Governing
Instrument (as defined below) of such MediaOne Trust.
In rendering this opinion, we have examined copies of the following
documents in the forms provided to us: the Certificate of Trust of each
MediaOne Trust as filed in the Office of the Secretary of State of Delaware
(the "State Office") on April 13, 1998 (the Certificate of Trust of each
MediaOne Trust is referred to herein as a "Certificate"); the Declaration of
Trust of each MediaOne Trust dated as of April 9, 1998 (the Declaration of
Trust of each MediaOne Trust is referred to herein as an "Original Governing
Instrument"); a draft form of Amended and Restated Declaration of Trust of
each MediaOne Trust dated April 27, 1998 (the draft form of Amended and
Restated Declaration of each MediaOne Trust is referred to herein as a
"Governing Instrument"); the form of Indenture to be entered into among
MediaOne Funding, Inc. ("MO Funding"), U S WEST, Inc. (to be renamed
"MediaOne Group, Inc.") ("MO Group") and Norwest Bank
<PAGE>
The MediaOne Trusts
c/o MediaOne Group, Inc.
____________, 1998
Page 2
Minnesota, National Association, as Trustee ("Norwest") (the "Base
Indenture"); the forms of First Supplemental Indenture and Second
Supplemental Indenture, supplementing the Base Indenture, to be entered into
among MO Funding, MO Group and Norwest, as Trustee; the forms of Preferred
Securities Guarantees to be made by MO Group with respect to each MediaOne
Trust; the forms of Common Securities Guarantee Agreement to be made by
MO Group with respect to each MediaOne Trust; the form of Dealer Manager
Agreement to be entered into between U S WEST Capital Funding, Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman
Brothers Inc. (the "Dealer Manager Agreement"); and the Registration
Statement. In such examinations, we have assumed the genuineness of all
signatures, the conformity to original documents of all documents submitted
to us as drafts or copies or forms of documents to be executed and the legal
capacity of natural persons to complete the execution of documents. We have
further assumed for purposes of this opinion: (i) the due formation,
organization or creation, valid existence and good standing of each of the
MediaOne Trusts and each entity that is a party to any of the documents
reviewed by us under the laws of the jurisdiction of its respective
formation, organization or creation; (ii) the due authorization, execution
and delivery by, or on behalf of, each of the parties thereto of the above
referenced documents with respect to each MediaOne Trust (including, without
limitation, the due authorization, execution and delivery of the Governing
Instrument of each MediaOne Trust and the Dealer Manager Agreement prior to
the first issuance of the Preferred Securities of such MediaOne Trust);
(iii) that each Person that will acquire Preferred Securities of MediaOne I
pursuant to the "Offers" (as defined in the Registration Statement and as
used herein, the "Offers") will validly tender 7.96% Trust Originated
Preferred Securities of U S WEST Financing I in exchange therefor, that such
7.96% Trust Originated Preferred Securities will be duly accepted, and that
such Person will duly receive Preferred Securities of MediaOne I in
consideration thereof, all in accordance with the terms and conditions of the
applicable Governing Instrument, the Registration Statement and the Dealer
Manager Agreement, that each Person that will acquire Preferred Securities of
MediaOne II pursuant to the Offers will validly tender 8 1/4% Trust Originated
Preferred Securities of U S WEST Financing II in exchange therefor, that such
8 1/4% Trust Originated Preferred Securities will be duly accepted, and that
such Person will duly receive Preferred Securities of MediaOne II in
consideration thereof, all in accordance with the terms and conditions of the
applicable Governing Instrument, the Registration Statement and the Dealer
Manager Agreement, and that the Preferred Securities of each MediaOne Trust
are otherwise issued and sold to the Preferred Securities Holders of each
MediaOne Trust in accordance with the terms, conditions, requirements and
procedures set forth in the applicable Governing Instrument, the Registration
Statement and the Dealer Manager Agreement; (iv) that no event has occurred
subsequent to the filing of any Certificate that would cause a dissolution or
liquidation of a MediaOne Trust under the applicable Original Governing
Instrument or the applicable Governing Instrument; (v) that the activities of
each MediaOne Trust have been and will be conducted in accordance with its
Original Governing Instrument or Governing Instrument, as applicable, and the
Delaware Business Trust Act, 12 DEL. C. Sections 3801 ET SEQ. (the "Delaware
Act"); and (vi) that the documents examined by us, or contemplated hereby,
express the entire understanding of the parties thereto with respect to the
subject matter thereof and
<PAGE>
The MediaOne Trusts
c/o MediaOne Group, Inc.
____________, 1998
Page 3
have not been amended, supplemented or otherwise modified, except as herein
referenced. No opinion is expressed with respect to the requirements of, or
compliance with, federal or state securities or blue sky laws. Further, we
express no opinion with respect to the Registration Statement or any other
offering materials relating to the Preferred Securities offered by any
MediaOne Trust and we assume no responsibility for their contents. As to any
fact material to our opinion, other than those assumed, we have relied
without independent investigation on the above referenced documents and on
the accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects
to matters of Delaware law, it is our opinion that, upon issuance pursuant to
the Offers, the Preferred Securities of each MediaOne Trust will constitute
validly issued and, subject to the terms of the applicable Governing
Instrument, fully paid and non-assessable beneficial interests in the assets
of such MediaOne Trust. We note that pursuant to the Governing Instrument,
each MediaOne Trust may withhold amounts otherwise distributable to a Holder
of Securities in such MediaOne Trust and pay over such amounts to the
applicable jurisdictions in accordance with federal, state and local law and
any amounts withheld will be deemed to have been distributed to such Holder
and that, pursuant to the Governing Instrument, the Preferred Security
Holders of each MediaOne Trust may be obligated to make payments or provide
indemnity or security under the circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of our name under the heading
"LEGAL MATTERS" in the Prospectus forming a part thereof. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission thereunder. This
opinion speaks only as of the date hereof and is based on our understandings
and assumptions as to present facts, and our review of the above referenced
documents and the application of Delaware law as the same exist on the date
hereof, and we undertake no obligation to update or supplement this opinion
after the date hereof for the benefit of any person or entity with respect to
any facts or circumstances that may hereafter come to our attention or any
changes in facts or law that may hereafter occur or take effect. This
opinion is intended solely for the benefit of the addressees hereof in
connection with the matters contemplated hereby and may not be relied upon by
any other person or entity or for any other purpose without our prior written
consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
[Weil, Gotshal & Manges letterhead]
May 4, 1998
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We have acted as counsel to U S WEST, Inc., a Delaware corporation to
be renamed "MediaOne Group, Inc." ("U S WEST"), MediaOne Group Funding, Inc., a
Delaware corporation ("MediaOne Funding"), and MediaOne Finance Trust I and
MediaOne Finance Trust II, each a Delaware business trust (the "Trusts"), in
connection with the preparation of the registration statement of U S WEST,
MediaOne Funding and the Trusts on Form S-4 (333-50227) filed with the
Securities and Exchange Commission (the "Commission") on April 15, 1998 and
amended by Amendment No. 1 filed with the Commission on May 4, 1998 (as
amended, the "Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of preferred
securities of the Trusts (the "Preferred Securities") and debt securities of
MediaOne Funding (the "Debt Securities"). The Debt Securities will be fully and
unconditionally guaranteed by U S WEST (the "Debt Guarantees"). The Debt
Guarantees will be issued in accordance with the provisions of an indenture (the
"Indenture") to be executed by U S WEST, MediaOne Funding and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"), the form of which
is being filed as an exhibit to the Registration Statement. The Preferred
Securities will be guaranteed by U S WEST in the manner and to the extent set
forth in a Guarantee Agreement (the "Preferred Securities Guarantees"), the
forms of which are being filed as exhibits to the Registration Statement.
<PAGE>
In so acting, we have reviewed the Registration Statement, including
the prospectus (the "Prospectus") contained therein, and the form of Indenture,
form of Debt Security, form of Debt Guarantee and forms of Preferred Securities
Guarantees being filed with the Commission as exhibits to the Registration
Statement. In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreements,
documents and other instruments, and such certificates or comparable documents
of public officials and of officers and representatives of U S WEST and MediaOne
Funding, and have made such inquiries of such officers and representatives, as
we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of U S WEST and MediaOne Funding.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. U S WEST and MediaOne Funding are corporations duly incorporated
and validly existing under the laws of the State of Delaware.
2. U S WEST has all requisite corporate power and authority to
execute and deliver the Debt Guarantees, the Indenture and the Preferred
Securities Guarantees and to perform its obligations thereunder. MediaOne
Funding has all requisite corporate power and authority to execute and deliver
the Debt Securities and the Indenture and to perform its obligations thereunder.
3. The execution and delivery of the Debt Guarantees, the Indenture
and the Preferred Securities Guarantees by U S WEST have been duly authorized by
all necessary corporate action on the part of U S WEST. The execution and
delivery of the Debt Securities and the Indenture by MediaOne Funding have been
duly authorized by
2
<PAGE>
all necessary corporate action on the part of MediaOne Funding.
4. The Debt Securities, when executed, authenticated, issued and
delivered in the manner contemplated in the Indenture, will constitute legal,
valid and binding obligations of MediaOne Funding, entitled to the benefits of
the Indenture and enforceable against MediaOne Funding in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except to the extent that rights to indemnification thereunder
may be limited by federal or state securities laws or public policy relating
thereto.
5. The Debt Guarantees, when executed, issued and delivered in the
manner contemplated in the Indenture, will constitute legal, valid and binding
obligations of U S WEST, entitled to the benefits of the Indenture and
enforceable against U S WEST in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that rights to indemnification thereunder may be limited by
federal or state securities laws or public policy relating thereto.
6. The Preferred Securities Guarantees, when executed and delivered
by U S WEST, will constitute legal, valid and binding obligations of U S WEST,
enforceable against U S WEST in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
3
<PAGE>
The opinions expressed herein are limited to the laws of the State of
New York and the corporate laws of the State of Delaware and we express no
opinion as to the effect on the matters covered by this letter of the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this opinion under the heading
"Chapter 8: Certain Other Matters - Legal Matters" in the Prospectus, without
admitting that we are "experts" under the Securities Act or the rules and
regulations of the Commission issued thereunder with respect to any part of the
Registration Statement.
Very truly yours,
WEIL, GOTSHAL & MANGES L.L.P.
4
<PAGE>
EXHIBIT 8-A
[Weil, Gotshal & Manges LLP Letterhead]
May 4, 1998
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
We have acted as counsel to U S WEST, Inc., a Delaware corporation
("U S WEST"), U S WEST Capital Funding, Inc. ("Capital Funding"), a Colorado
corporation and a wholly-owned subsidiary of U S WEST, MediaOne Group
Funding, Inc., a Delaware corporation and wholly-owned subsidiary of U S
WEST, U S WEST Financing I, a Delaware business trust, U S WEST Financing II,
a Delaware business trust, MediaOne Finance Trust I, a Delaware business
trust, and MediaOne Finance Trust II, a Delaware business trust, in
connection with the preparation and filing with the Securities and Exchange
Commission (the "Commission") of the Registration Statement on Form S-4, as
amended to the date hereof, filed with the Commission (the "Registration
Statement") under the Securities Act of 1933, as amended, and of the
Prospectus forming a part of the Registration Statement (the "Prospectus")
with respect to Capital Funding's offer (i) to holders of 7.96% Trust
Originated Preferred Securities of U S WEST Financing I to exchange such
securities for Trust Originated Preferred Securities of MediaOne Finance
Trust I or cash and (ii) to holders of 8.25% Trust Originated Preferred
Securities of U S WEST Financing II to exchange such securities for Trust
Originated Preferred Securities of MediaOne Finance Trust II or cash. All
capitalized terms not otherwise defined herein shall have the same meaning
ascribed thereto in the Registration Statement.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Registration Statement, the
Prospectus, the draft of the Amended and Restated Declaration of Trust of
MediaOne Finance Trust I and the draft of the Amended and Restated
Declaration of Trust of MediaOne Finance Trust II (collectively, the
"Declarations"), the draft form of New Preferred Securities and New Common
Securities, and the draft form of the New Indenture, the New Common
Securities Guarantees, the New Debt Guarantees, the New Preferred Securities
Guarantees and the Proposed Amendments (collectively, the "Agreements"). In
addition, we have examined
<PAGE>
May 4, 1998
Page 2
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments, and have
made such inquiries of such officers and representatives of U S WEST, MediaOne
Finance Trust I and MediaOne Finance Trust II as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures to be submitted to us, the authenticity of all documents to be
submitted to us as originals, the conformity to original documents of
documents to be submitted to us as certified or photostatic copies and the
authenticity of the original of such latter documents. We have further
assumed (i) that the Declarations, the Proposed Amendments and the New
Preferred Securities as executed and delivered by the requisite signatories
thereto will conform in substance and form in all material respects to the
draft forms thereof examined by us, (ii) full and timely compliance by all
parties to the Agreements with the terms thereof (without waiver or amendment
of any of the terms thereof) and (iii) that the Agreements will constitute
all the agreements, arrangements and understandings among the parties thereto
with respect to the transactions contemplated therein and to the New
Preferred Securities and any non-tendered Old Preferred Securities and that
the representations and warranties contained therein are true.
The terms of the Agreements and the New Preferred Securities are
incorporated herein by reference.
Based on the foregoing, it is our opinion that the discussion
contained in the Registration Statement, under the caption "Certain Federal
Income Tax Consequences," insofar as it constitutes statements of law or
legal conclusions and except to the extent qualified therein, represents the
material United States federal income tax consequences to the holders of Old
Preferred Securities of the offers and the MediaOne Debt Assumption and the
ownership and disposition of New Preferred Securities and of Old Preferred
Securities not tendered in the Offers.
The foregoing opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder (including proposed Treasury Regulations), published pronouncements
of the Internal Revenue Service, and case law, any of which may be changed at
any time with retroactive effect. We express no opinion as to matters not
specifically covered by the foregoing opinion or as to the effect
<PAGE>
May 4, 1998
Page 3
on the matters covered by this opinion of the laws of any other jurisdiction.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, facts or documents on
which this opinion is based, or an inaccuracy in any of the assumptions,
representations or warranties upon which we have relied in rendering this
opinion.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and to the references to our firm under
the captions "Certain Federal Income Tax Consequences" and "Legal Matters" in
the Prospectus.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
___ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
MEDIAONE GROUP FUNDING, INC.
(Exact name of obligor as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7800 EAST ORCHARD
ENGLEWOOD, COLORADO 80111
(Address of principal executive offices) (Zip code)
-----------------------------
% SUBORDINATED DEBT SECURITIES DUE
(Title of the indenture securities)
- --------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee
now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National Bank
of Minneapolis to Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988 from the
Administrator of National Banks for the Comptroller of
the Currency certifying approval of consolidation and
merger effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with various other
banks under the title of "Norwest Bank Minnesota,
National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration
statement number 333-47427.
<PAGE>
EXHIBIT 6
April 28, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/Jane Y. Schweiger
--------------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 28th day of April 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
------------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)_______
------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
MEDIAONE FINANCE TRUST I
(EXACT NAME OF OBLIGORS AS SPECIFIED IN THEIR TRUST AGREEMENTS)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
PREFERRED SECURITIES OF MEDIAONE FINANCE TRUST I
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.;
Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of
the Federal Reserve System, Washington D.C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the Amended and Restated Declaration of
Trust of MediaOne Finance Trust I, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
4
<PAGE>
EXHIBIT 7
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
------------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount
outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400
------------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . 0081 4,267,336 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A). . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . 1773 5,691,722 2.b.
3. Federal funds sold and securities purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1350 6,339,940 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 25,202,984 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . RCFD 3123 419,121 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . 2125 24,783,863 4.d.
5. Trading assets (from Schedule RD-D). . . . . . . . . . . . . . . . . 3545 6,703,332 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . 2145 743,426 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 7,727 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . 2130 134,959 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . 2155 644,340 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . 2143 268,501 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 2,004,432 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . 2170 58,483,415 12.
</TABLE>
- --------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- --------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . RCON 6631 9,197,227 13.a.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCON 6636 559,619 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II). . . . . . . . . . . . . . RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 332,801 13.b.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2800 4,535,422 14
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . RCON 2840 43,763 15.a
b. Trading Liabilities(from Schedule RC-D) . . . . . . . . . . . RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less . . . . . . . RCFD 2332 1,360,165 16.a
b. With a remaining maturity of than one year through three years A547 576,492 16.b
. c. With a remaining maturity of more than three years . . . . . A548 703,981 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding . . . . RCFD 2920 644,341 18
19. Subordinated notes and debentures (2). . . . . . . . . . . . . . RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . RCFD 2930 1,322,077 20
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus. . . . . . . . . . RCFD 3838 0 23
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) . . . . RCFD 3839 2,999,001 25
26. a. Undivided profits and capital reserves . . . . . . . . . . . . RCFD 3632 1,273,239 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 24,096 26.b.
27. Cumulative foreign currency translation adjustments. . . . . . . RCFD 3284 (1,515) 27
28. Total equity capital (sum of items 23 through 27). . . . . . . . RCFD 3210 4,495,679 28
29. Total liabilities and equity capital (sum of items 21 and 28). . RCFD 3300 58,483,415 29
<CAPTION>
<S><C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external Number
----------
auditors as of any date during 1996 . . . . . . . . . . . . . . . . RCFD 6724 . ... N/A. M.1
----------
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
external submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)______
------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
US WEST, INC.
(TO BE RENAMED "MEDIAONE GROUP, INC.)
(EXACT NAME OF OBLIGORS AS SPECIFIED IN THEIR TRUST AGREEMENTS)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF PREFERRED PREFERRED SECURITIES OF MEDIAONE FINANCE TRUST I
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.;
Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of
the Federal Reserve System, Washington D.C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the guarantee of the Preferred
Securities of MediaOne Finance Trust I, by U S WEST, Inc. (to be renamed
"MediaOne Group Inc."), the undersigned, in accordance with Section 321(b) of
the Trust Indenture Act of 1939, as amended, hereby consents that the reports of
examinations of the undersigned, made by Federal or State authorities authorized
to make such examinations, may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
4
<PAGE>
EXHIBIT 7
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
------------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount
outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400
------------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . 0081 4,267,336 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A). . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . 1773 5,691,722 2.b.
3. Federal funds sold and securities purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1350 6,339,940 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 25,202,984 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . RCFD 3123 419,121 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . 2125 24,783,863 4.d.
5. Trading assets (from Schedule RD-D). . . . . . . . . . . . . . . . . 3545 6,703,332 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . 2145 743,426 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 7,727 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . 2130 134,959 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . 2155 644,340 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . 2143 268,501 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 2,004,432 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . 2170 58,483,415 12.
</TABLE>
- --------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- --------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . RCON 6631 9,197,227 13.a.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCON 6636 559,619 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II). . . . . . . . . . . . . . RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 332,801 13.b.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2800 4,535,422 14
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . RCON 2840 43,763 15.a
b. Trading Liabilities(from Schedule RC-D) . . . . . . . . . . . RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less . . . . . . . RCFD 2332 1,360,165 16.a
b. With a remaining maturity of than one year through three years A547 576,492 16.b
. c. With a remaining maturity of more than three years . . . . . A548 703,981 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding . . . . RCFD 2920 644,341 18
19. Subordinated notes and debentures (2). . . . . . . . . . . . . . RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . RCFD 2930 1,322,077 20
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus. . . . . . . . . . RCFD 3838 0 23
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) . . . . RCFD 3839 2,999,001 25
26. a. Undivided profits and capital reserves . . . . . . . . . . . . RCFD 3632 1,273,239 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 24,096 26.b.
27. Cumulative foreign currency translation adjustments. . . . . . . RCFD 3284 (1,515) 27
28. Total equity capital (sum of items 23 through 27). . . . . . . . RCFD 3210 4,495,679 28
29. Total liabilities and equity capital (sum of items 21 and 28). . RCFD 3300 58,483,415 29
<CAPTION>
<S><C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external Number
----------
auditors as of any date during 1996 . . . . . . . . . . . . . . . . RCFD 6724 . ... N/A. M.1
----------
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
external submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)______
------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
MEDIAONE FINANCE TRUST II
(EXACT NAME OF OBLIGORS AS SPECIFIED IN THEIR TRUST AGREEMENTS)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
PREFERRED SECURITIES OF MEDIAONE FINANCE TRUST II
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.;
Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of
the Federal Reserve System, Washington D.C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the Amended and Restated Declaration of
Trust of MediaOne Finance Trust II, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
4
<PAGE>
EXHIBIT 7
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
------------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount
outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400
------------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . 0081 4,267,336 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A). . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . 1773 5,691,722 2.b.
3. Federal funds sold and securities purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1350 6,339,940 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 25,202,984 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . RCFD 3123 419,121 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . 2125 24,783,863 4.d.
5. Trading assets (from Schedule RD-D). . . . . . . . . . . . . . . . . 3545 6,703,332 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . 2145 743,426 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 7,727 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . 2130 134,959 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . 2155 644,340 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . 2143 268,501 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 2,004,432 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . 2170 58,483,415 12.
</TABLE>
- --------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- --------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . RCON 6631 9,197,227 13.a.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCON 6636 559,619 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II). . . . . . . . . . . . . . RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 332,801 13.b.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2800 4,535,422 14
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . RCON 2840 43,763 15.a
b. Trading Liabilities(from Schedule RC-D) . . . . . . . . . . . RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less . . . . . . . RCFD 2332 1,360,165 16.a
b. With a remaining maturity of than one year through three years A547 576,492 16.b
. c. With a remaining maturity of more than three years . . . . . A548 703,981 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding . . . . RCFD 2920 644,341 18
19. Subordinated notes and debentures (2). . . . . . . . . . . . . . RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . RCFD 2930 1,322,077 20
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus. . . . . . . . . . RCFD 3838 0 23
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) . . . . RCFD 3839 2,999,001 25
26. a. Undivided profits and capital reserves . . . . . . . . . . . . RCFD 3632 1,273,239 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 24,096 26.b.
27. Cumulative foreign currency translation adjustments. . . . . . . RCFD 3284 (1,515) 27
28. Total equity capital (sum of items 23 through 27). . . . . . . . RCFD 3210 4,495,679 28
29. Total liabilities and equity capital (sum of items 21 and 28). . RCFD 3300 58,483,415 29
<CAPTION>
<S><C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external Number
----------
auditors as of any date during 1996 . . . . . . . . . . . . . . . . RCFD 6724 . ... N/A. M.1
----------
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
external submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
US WEST, INC.
(EXACT NAME OF OBLIGORS AS SPECIFIED IN THEIR TRUST AGREEMENTS)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7800 EAST ORCHARD ROAD
ENGLEWOOD, COLORADO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF PREFERRED PREFERRED SECURITIES OF MEDIAONE FINANCE TRUST II
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.;
Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of
the Federal Reserve System, Washington D.C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1998.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the guarantee of the Preferred
Securities of MediaOne Finance Trust II, by U S WEST, Inc. (to be renamed
"MediaOne Group Inc."), the undersigned, in accordance with Section 321(b) of
the Trust Indenture Act of 1939, as amended, hereby consents that the reports of
examinations of the undersigned, made by Federal or State authorities authorized
to make such examinations, may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
FIRST VICE PRESIDENT
4
<PAGE>
EXHIBIT 7
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
------------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount
outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400
------------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . 0081 4,267,336 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A). . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . 1773 5,691,722 2.b.
3. Federal funds sold and securities purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1350 6,339,940 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 25,202,984 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . RCFD 3123 419,121 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . . 2125 24,783,863 4.d.
5. Trading assets (from Schedule RD-D). . . . . . . . . . . . . . . . . 3545 6,703,332 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . 2145 743,426 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 7,727 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . 2130 134,959 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . 2155 644,340 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . 2143 268,501 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 2,004,432 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . 2170 58,483,415 12.
</TABLE>
- --------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/97 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- --------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1). . . . . . . . . . . . . . . . . . RCON 6631 9,197,227 13.a.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCON 6636 559,619 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II). . . . . . . . . . . . . . RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 332,801 13.b.1
(2) Interest-bearing. . . . . . . . . . . . . . . . . . . . . RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2800 4,535,422 14
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . RCON 2840 43,763 15.a
b. Trading Liabilities(from Schedule RC-D) . . . . . . . . . . . RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less . . . . . . . RCFD 2332 1,360,165 16.a
b. With a remaining maturity of than one year through three years A547 576,492 16.b
. c. With a remaining maturity of more than three years . . . . . A548 703,981 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding . . . . RCFD 2920 644,341 18
19. Subordinated notes and debentures (2). . . . . . . . . . . . . . RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . RCFD 2930 1,322,077 20
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus. . . . . . . . . . RCFD 3838 0 23
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) . . . . RCFD 3839 2,999,001 25
26. a. Undivided profits and capital reserves . . . . . . . . . . . . RCFD 3632 1,273,239 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 24,096 26.b.
27. Cumulative foreign currency translation adjustments. . . . . . . RCFD 3284 (1,515) 27
28. Total equity capital (sum of items 23 through 27). . . . . . . . RCFD 3210 4,495,679 28
29. Total liabilities and equity capital (sum of items 21 and 28). . RCFD 3300 58,483,415 29
<CAPTION>
<S><C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external Number
----------
auditors as of any date during 1996 . . . . . . . . . . . . . . . . RCFD 6724 . ... N/A. M.1
----------
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
external submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL AND CONSENT
RELATING TO TENDER OF AND CONSENTS WITH RESPECT TO
U S WEST FINANCING I
7.96% TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPRS-SM-")
(CUSIP 90388D204)
- --------------------------------------------------------------------------------
THE SERIES I OFFER AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , , 1998, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE SERIES I OFFER AND THE SERIES II OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
IF BY MAIL: IF BY HAND: IF BY OVERNIGHT DELIVERY:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o the Depository Trust Suite 4680
P.O. Box 2569 Company 14 Wall Street, 8th Floor
Jersey City, New Jersey 55 Water Street, DTC TAD New York, New York
07303-2569 Vietnam Veterans Memorial Plaza 10005
New York, New York 10041
</TABLE>
IF BY FACSIMILE TRANSMISSION:
(For Eligible Institutions only)
(201) 222-4720
or
(201) 222-4721
FACSIMILE CONFIRMATION NUMBER:
(201) 222-4707
DELIVERY OF THIS LETTER OF TRANSMITTAL AND CONSENT (THE "LETTER OF
TRANSMITTAL") OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED BY BOTH (1) HOLDERS OF OLD SERIES I
PREFERRED SECURITIES WHO ARE TENDERING PURSUANT TO THE OFFER AND (2) HOLDERS OF
OLD SERIES I PREFERRED SECURITIES WHO ARE ONLY CONSENTING TO THE PROPOSED
AMENDMENTS AND NOT TENDERING THEIR SECURITIES.
ANY HOLDER OF OLD SERIES I PREFERRED SECURITIES WHO HAS ANY QUESTIONS AS TO
HOW TO COMPLETE THIS LETTER OF TRANSMITTAL SHOULD CONTACT BEACON HILL PARTNERS,
INC., THE INFORMATION AGENT, AT (800) 787-3120 (TOLL FREE) AND FOR BANKS AND
BROKERS (212) 843-8500.
- ------------------------
-SM- "Trust Originated Preferred Securities and "TOPrS" are services marks of
Merrill Lynch & Co.
<PAGE>
THE INSTRUCTIONS PERTAINING TO THIS LETTER OF TRANSMITTAL, WHICH BEGIN ON
THE FOLLOWING PAGE, SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
AND CONSENT IS COMPLETED.
This Letter of Transmittal relates to the offer by U S WEST Capital Funding,
Inc. ("Capital Funding") to exchange 7.96% Trust Originated Preferred Securities
(the "Old Series I Preferred Securities") of U S WEST Financing I (the "Old
Series I Trust") for either (i) an equal amount of % Trust Originated
Preferred Securities (the "New Series I Preferred Securities") of MediaOne
Finance Trust I or cash (the "Series I Offer"). The Series I Offer is being made
upon the terms and subject to the conditions set forth in the accompanying
Prospectus, dated May , 1998 (as amended or supplemented and including the
documents incorporated therein by reference, the "Prospectus") and this Letter
of Transmittal. Capitalized terms used and not defined herein have the meanings
ascribed to them in the Prospectus.
Unless an Agents Message is utilized, this Letter of Transmittal is to be
completed for tenders of Old Series I Preferred Securities made by book-entry
transfer by participants ("DTC Participants") of the Depository Trust Company
("DTC") into the account of First Chicago Trust Company of New York, as Exchange
Agent (the "Exchange Agent"), at DTC pursuant to the procedures described under
"Chapter 3: The Offers And Consent Solicitation--The Offers--Procedures for
Tendering" in the Prospectus. Holders of Old Series I Preferred Securities who
tender Old Series I Preferred Securities by book-entry transfer are referred to
herein as "Book-Entry holders."
This Letter of Transmittal is also to be completed by DTC Participants
acting on behalf of beneficial owners who have elected not to tender their Old
Series I Preferred Securities pursuant to the Offer but have elected to consent
to the Proposed Amendments (as defined in the Prospectus) pursuant to the
procedures described under "Chapter 3: The Offers And Consent Solicitation--The
Consent Solicitation Procedures for Consenting" in the Prospectus.
HOLDERS OF OLD SERIES I PREFERRED SECURITIES AS OF MAY 6, 1998 (THE "RECORD
DATE") WHO VALIDLY TENDER THEIR OLD SERIES I PREFERRED SECURITIES WILL BE DEEMED
TO HAVE GIVEN THEIR CONSENT WITH RESPECT TO SUCH OLD SERIES I PREFERRED
SECURITIES TO THE PROPOSED AMENDMENTS.
HOLDERS OF OLD SERIES I PREFERRED SECURITIES WHO PURCHASE OR WHOSE PURCHASE
SETTLES OR IS RECORDED AFTER THE CLOSE OF BUSINESS ON THE RECORD DATE WILL HAVE
THE RIGHT TO TENDER THEIR OLD SERIES I PREFERRED SECURITIES IN THE OFFER BUT
WILL NOT HAVE THE RIGHT TO PROVIDE CONSENTS.
HOLDERS OF OLD SERIES I PREFERRED SECURITIES AS OF THE RECORD DATE WILL BE
PERMITTED TO PROVIDE THEIR CONSENTS TO THE PROPOSED AMENDMENTS EVEN IF THEY DO
NOT TENDER THEIR OLD SERIES I PREFERRED SECURITIES.
THIS LETTER OF TRANSMITTAL RELATES ONLY TO THE OLD SERIES I PREFERRED
SECURITIES AND MAY NOT BE USED FOR THE OLD SERIES II PREFERRED SECURITIES.
COPIES OF THE LETTER OF TRANSMITTAL RELATING TO THE OLD SERIES II PREFERRED
SECURITIES MAY BE OBTAINED FROM THE INFORMATION AGENT OR THE EXCHANGE AGENT AT
THEIR RESPECTIVE ADDRESSES OR TELEPHONE NUMBERS SET FORTH ON PAGE 1 HEREOF.
2
<PAGE>
NOTICE OF GUARANTEED DELIVERY
U S WEST FINANCING I
7.96% TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPRS-SM-")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
(CUSIP 90388D204)
This form, or a substantial equivalent, must be used to tender 7.96% Trust
Originated Preferred Securities (the "Old Series I Preferred Securities") of US
WEST Financing I if the procedure for book-entry transfer of Old Series I
Preferred Securities, as described in the Prospectus relating to the Series I
Offer, dated May , 1998 (the "Prospectus"), cannot be completed by the Series
I Expiration Date (as defined in the Prospectus). This form, properly completed
and duly executed, may be delivered by facsimile transmission, hand or overnight
courier to the Exchange Agent.
THE SERIES I OFFER AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , , 1998, UNLESS EXTENDED.
THE EXCHANGE AGENT FOR THE SERIES I OFFER AND THE SERIES II OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
IF BY MAIL: IF BY HAND: IF BY OVERNIGHT DELIVERY:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o The Depository Trust Suite 4680
P.O. Box 2569 Company 14 Wall Street, 8th Floor
Jersey City, New Jersey 55 Water Street, DTC TAD New York, New York
07303-2569 Vietnam Veterans Memorial 10005
Plaza
New York, New York 10041
IF BY FACSIMILE TRANSMISSION:
(For Eligible institutions
only)
(201) 222-4720
or
(201) 222-4721
FACSIMILE CONFIRMATION
NUMBER:
(201) 222-4707
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY RELATES ONLY TO THE OLD SERIES I
PREFERRED SECURITIES AND THE SERIES I OFFER. THIS NOTICE OF GUARANTEED DELIVERY
MAY NOT BE USED FOR OLD SERIES II PREFERRED SECURITIES TENDERED IN CONNECTION
WITH THE SERIES II OFFER. COPIES OF THE NOTICE OF GUARANTEED DELIVERY RELATING
TO THE SERIES II OFFER MAY BE OBTAINED FROM THE EXCHANGE AGENT AT THE ADDRESS OR
TELEPHONE NUMBER SET FORTH ABOVE OR FROM THE INFORMATION AGENT AT THE ADDRESS OR
TELEPHONE NUMBER SET FORTH BELOW.
THE INFORMATION AGENT FOR THE SERIES I OFFER AND THE SERIES II OFFER IS:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
Banks and Brokers Call Collect: (212) 843-8500
All Other Call Toll-free: (800) 787-3120
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to U S WEST Capital Funding, Inc. ("Capital
Funding") upon the terms and subject to the conditions set forth in the
Prospectus and the related Letter of Transmittal and Consent (the "Letter of
Transmittal"), the receipt of which is hereby acknowledged, the number of Old
Series I Preferred Securities set forth below, pursuant to the guaranteed
delivery procedure set forth in the Prospectus and the Letter of Transmittal.
The undersigned understands that the proper tender of Old Series I Preferred
Securities by holders of record as of May 6, 1998 will constitute the giving of
a consent by such holders with respect thereto to the Proposed Amendments
described in the Prospectus.
<TABLE>
<S> <C>
Number of Old Series I Preferred Securities
Tendered:
Address(es):
(ZIP Code)
Name of Area Code and Tel. No.:
Tendering Institution:
Account Number:
Dated: Signature(s):
</TABLE>
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch or agency in the
United States, guarantees (a) that the above named person(s) "own(s)" the Old
Series I Preferred Securities tendered hereby within the meaning of Rule 14e-4
under the Securities Exchange Act of 1934, as amended, (b) that such tender of
Old Series I Preferred Securities complies with Rule 14e-4 and (c) to deliver to
the Exchange Agent Old Series I Preferred Securities confirmation of the
book-entry transfer of the Old Series I Preferred Securities tendered hereby
into the account of the Exchange Agent at The Depository Trust Company, together
with a properly completed and duly executed Letter(s) of Transmittal (or
facsimile(s) thereof), with any required signature guarantees (or an Agent's
Message (as defined in the Prospectus)) and any other required documents within
three New York Stock Exchange trading days after the date of execution of this
Notice.
<TABLE>
<S> <C>
Name of Firm: X
(Authorized Signature)
Address: Name:
Telephone Number: Title:
(Please Type or Print)
Dated:
</TABLE>
3
<PAGE>
OFFER TO EXCHANGE AND CONSENT SOLICITATION
<TABLE>
<S> <C>
U S WEST FINANCING I U S WEST FINANCING II
7.96% TRUST ORIGINATED PREFERRED 8 1/4% TRUST ORIGINATED PREFERRED
SECURITIES-SM- SECURITIES-SM-
("TOPRS-SM-") (CUSIP 90388D204) ("TOPRS-SM-") (CUSIP 90338M204)
FOR FOR
MEDIAONE FINANCE TRUST I MEDIAONE FINANCE TRUST II
. % TRUST ORIGINATED PREFERRED % TRUST ORIGINATED PREFERRED SECURITIES-SM-
SECURITIES-SM- ("TOPRS-SM-")
("TOPRS-SM-") OR $ . IN CASH
OR $ . IN CASH
</TABLE>
EACH OF THE OFFERS AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , , 1998, UNLESS EXTENDED.
May , 1998
To: Brokers, Dealers, Commercial Banks,
Trust Companies and
Other Nominees
We have been appointed by U S WEST Capital Funding, Inc. ("Capital Funding")
to act as Dealer Managers in connection with the offers described below.
Capital Funding is offering to exchange 7.96% Trust Originated Preferred
Securities (the "Old Series I Preferred Securities") of U S WEST Financing I
(the "Old Series I Trust") for an equal amount of % Trust Originated Preferred
Securities (the "New Series I Preferred Securities") of MediaOne Finance Trust I
(the "New Series I Trust") or $ in cash per Old Series I Preferred Security.
Capital Funding is also offering to exchange 8 1/4% Trust Originated Preferred
Securities (the "Old Series II Preferred Securities" and, together with the Old
Series I Preferred Securities, the "Old Preferred Securities") of U S WEST
Financing II (the "Old Series II Trust") for an equal amount of % Trust
Originated Preferred Securities (the "New Series II Preferred Securities") of
MediaOne Finance Trust II (the "New Series II Trust") or $ in cash per Old
Series II Preferred Security. Each of the offers is referred to individually as
on "Offer" and collectively as the "Offers." The Offers are being made upon the
terms and subject to the conditions set forth in a Prospectus, dated May ,
1998 (as amended or supplemented and including all documents incorporated
therein by reference, the "Prospectus"), and the related Letters of Transmittal
and Consent (the "Letters of Transmittal"). The terms of the New Series I
Preferred Securities and the New Series II Preferred Securities are described in
the Prospectus.
In connection with the Offers, U S WEST, Inc. ("U S WEST") and Capital
Funding are soliciting consents (the "Consents") from the holders of record of
Old Preferred Securities as of May 6, 1998 (the "Record Date") to the Proposed
Amendments described in the Prospectus.
- The proper tender by holders of Old Preferred Securities as of the Record
Date will constitute the giving of a Consent by such holders with respect
to such Old Preferred Securities.
- Holders of Old Preferred Securities who acquired such Old Preferred
Securities after the Record Date will have the right to tender their Old
Preferred Securities pursuant to the Offers but will not have the right to
provide Consents.
- A holder of Old Preferred Securities as of the Record Date will be
permitted to provide such holder's Consent even if such holder does not
tender Old Preferred Securities pursuant to an Offer.
- No separate payments will be made for consents.
For your information and for forwarding to your clients, for whom you hold
either or both series of Old Preferred Securities registered in your name or in
the name of your nominee, we are enclosing an appropriate number of sets of the
following documents with respect to either or both Offers, as applicable:
- ------------------------
- -SM- "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
<PAGE>
1. Prospectus;
2. Letter of Transmittal relating to the applicable Offer for your use and for
the information of your clients, for whom you hold Old Preferred Securities
of the applicable series, together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery relating to the applicable Offer, to be used
to accept such Offer if the book-entry transfer of Old Preferred Securities
cannot be completed by the applicable Expiration Date (as defined in the
Prospectus);
4. A form of letter that may be sent to your clients, for whom you hold Old
Preferred Securities, with space provided for obtaining such clients'
instructions and their designation of a Soliciting Dealer with regard to the
applicable Offer;
5. A Question and Answer pamphlet relating to both of the Offers that may be
sent to your clients; and
6. A return envelope addressed to First Chicago Trust Company of New York, the
Exchange Agent.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
Brokers, dealers, commercial banks, trust companies and other nominees
should be aware that the Depository Trust Company has issued a special notice
and established special procedures for tendering Old Preferred Securities
pursuant to the Offers. With respect to each Offer, separate accounts have
been established by the Exchange Agent at the Depository Trust Company ("DTC")
for (i) book-entry delivery of interests in Old Preferred Securities held as
of the Record Date (which will constitute the giving of a Consent with respect
to such interests) and (ii) book-entry delivery of interests in Old Preferred
Securities acquired after the Record Date (which will not constitute the
giving of a Consent with respect to such interests). PLEASE ENSURE THAT
TENDERS ARE MADE TO THE PROPER ACCOUNT. If only a Consent is being provided by
a holder as of the Record Date, you will be required to fill out the form of
Consent included in the applicable Letter of Transmittal and return such
Letter of Transmittal to the Exchange Agent.
Capital Funding will pay Soliciting Dealers designated by the beneficial
owner of the Old Preferred Securities validly tendered and accepted pursuant
to the Offers a solicitation fee of $0.50 per Old Preferred Security exchanged
for New Preferred Securities and $0.375 per Old Preferred Security tendered
for cash (except that in the case of transactions equal to or exceeding 10,000
Old Preferred Securities of either series, Capital Funding will pay $0.25 per
Old Preferred Security exchanged for New Preferred Securities or tendered for
cash), in each case subject to certain conditions. In cases where no
Solicitating Dealer is designated, the Dealer Managers will be paid one
hundred percent (100%) of the applicable solicitation fee. "Solicitating
Dealers" include (i) any broker or dealer in securities, including each Dealer
Manager in its capacity as a broker or dealer, which is a member of any
national securities exchange or of the National Association of Securities
Dealers, Inc. (the "NASD"), (ii) any foreign broker or dealer not eligible for
membership in the NASD which agrees to conform to the NASD's Rules of Fair
Practice in soliciting tenders outside the United States to the same extent as
though it were an NASD member, or (iii) any bank or trust company (each of
which is referred to herein as a "Soliciting Dealer"). No solicitation fee
shall be payable to a Soliciting Dealer with respect to the tender of Old
Preferred Securities by a holder unless the applicable Letter of Transmittal
accompanying such tender designates such Soliciting Dealer as such in the box
captioned "Solicited Tenders." No separate solicitation fee will be paid for
Consents.
Soliciting Dealers will include any of the organizations described in
clauses (i),(ii) and (iii) above even when the activities of such
organizations in connection with either Offer consist solely of forwarding to
clients material relating to such Offer, including the Prospectus and the
related Letter of Transmittal, and tendering Old Preferred Securities as
directed by beneficial owners thereof; provided that under no circumstances
shall any fee bc paid to Soliciting Dealers more than once with respect to any
Old Preferred Security. No Soliciting Dealer is required to make any
recommendation to holders of Old Preferred Securities as to whether to tender
or refrain from tendering in the applicable Offer. No assumption is made, in
making payment to any Soliciting Dealer, that its activities in connection
with an
<PAGE>
Offer included any activities other than those described above, and for all
purposes noted in all materials relating to the Offers, the term "solicit"
shall be deemed to mean no more than processing Old Preferred Securities
tendered or forwarding to customers materials regarding the Offers.
In order to receive a solicitation fee, the Soliciting Dealer must return
a Notice of Solicited Tenders to the Exchange Agent within two business days
after the applicable Expiration Date. Such Notice of Solicited Tenders for the
Old Series I Preferred Securities is attached hereto on page 4, and such
Notice of Solicited Tenders for the Old Series II Preferred Securities is
attached hereto on page 5. No solicitation fee shall be payable to a
Soliciting Dealer in respect of Old Preferred Securities (i) beneficially
owned by such Soliciting Dealer or (ii) registered in the name of such
Soliciting Dealer unless such Old Preferred Securities are held by such
Soliciting Dealer as nominee and such Old Preferred Securities are being
tendered for the benefit of one or more beneficial owners identified on the
applicable Letter of Transmittal or the applicable Notice of Solicited
Tenders. No solicitation fee shall be payable to the Soliciting Dealer with
respect to the tender of Old Preferred Securities by the holder of record, for
the benefit of the beneficial owner, unless the beneficial owner has
designated such Soliciting Dealer.
No solicitation fee shall be payable to a Soliciting Dealer if such
Soliciting Dealer is required for any reason to transfer any portion of such
fee to a tendering holder (other than itself). No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of U S WEST, Capital
Funding, the New Series I Trust, the New Series II Trust, the Old Series I
Trust, the Old Series II Trust, the trustee of any trust, the Exchange Agent,
the Information Agent or the Dealer Managers for purposes of the Offers.
Capital Funding will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers. Capital Funding
will pay all stock transfer taxes applicable to the acceptance of Old
Preferred Securities pursuant to the Offers, in each case, subject to
Instruction 5 of the applicable Letter of Transmittal.
Soliciting Dealers should take care to ensure proper record-keeping to
document their entitlement to any solicitation fee.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Exchange
Agent, in its sole discretion, which determination will be final and binding.
Neither the Exchange Agent nor any other person will be under any duty to give
notification of any defects or irregularities in any Notice of Solicited
Tender or incur any liability for failure to give such notification.
Any inquiries you may have with respect to the Offers should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent at the address and telephone number set forth on the back
cover of the Prospectus.
Very truly yours,
MERRILL LYNCH & CO.
LEHMAN BROTHERS INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
AS THE AGENT OF U S WEST, CAPITAL FUNDING, THE OLD SERIES I TRUST, THE OLD
SERIES II TRUST, THE NEW SERIES I TRUST, THE NEW SERIES II TRUST, THE TRUSTEES
OF ANY TRUST, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE EXCHANGE
AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH EITHER OR BOTH OF THE
OFFERS OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
NOTICE OF SOLICITED TENDERS
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE EXCHANGE AGENT
WITHIN THREE BUSINESS DAYS AFTER THE APPLICABLE EXPIRATION DATE TO THE ADDRESS
SET FORTH ON THE BACK COVER OF THE PROSPECTUS. NOTICES MAY BE DELIVERED BY
FACSIMILE TO THE EXCHANGE AGENT AT (201) 222-4720 (CONFIRM RECEIPT BY
TELEPHONE (201) 222-4707).
ALL QUESTIONS CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE
DIRECTED TO THE INFORMATION AGENT AS FOLLOWS: BEACON HILL PARTNERS, INC., 90
BROAD STREET, NEW YORK, NEW YORK 10004, (800) 787-3120 (TOLL-FREE); BANKS AND
BROKERS CALL COLLECT, (212) 843-8500.
OLD SERIES I PREFERRED SECURITIES
List below the number of Old Series I Preferred Securities whose tender
you have solicited. All Old Series I Preferred Securities beneficially owned
by a beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be directed
to the Exchange Agent. If the space below is inadequate, list the Old Series I
Preferred Securities on a separate signed schedule and affix the list to this
Notice of Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLES
HEADED "TO BE COMPLETED ONLY BY EXCHANGE AGENT."
BENEFICIAL OWNERS OF FEWER THAN 10,000 OLD SERIES I PREFERRED SECURITIES
SOLICITATION FEE $0.50 PER OLD PREFERRED SECURITY TENDERED FOR NEW PREFERRED
SECURITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
DTC PARTICIPANT TENDERED FOR NEW NUMBER OF BENEFICAL
NUMBER VOI TICKET NUMBER PREFERRED SECURITIES OWNER(S) REPRESENTED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SOLICITATION FEE $0.375 PER OLD PREFERRED SECURITY TENDERED FOR CASH
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF BENEFICAL
DTC PARTICIPANT NUMBER OF SECURITIES OWNER(S)
NUMBER VOI TICKET NUMBER TENDERED FOR CASH REPRESENTED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
BENEFICIAL OWNERS OF 10,000 OR MORE OLD SERIES I PREFERRED SECURITIES
SOLICITATION FEE $0.250 PER PREFERRED SECURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DTC PARTICIPANT VOI TICKET NUMBER OF SECURITIES NUMBER OF BENEFICAL NAME OF SOLICITING
NUMBER NUMBER TENDERED OWNER(S) REPRESENTED DEALER
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OLD SERIES II PREFERRED SECURITIES
List below the number of Old Series II Preferred Securities whose tender
you have solicited. All Old Series II Preferred Securities beneficially owned
by a beneficial owner, whether in one account or several, and in however many
capacities must be aggregated for purposes of completing the tables below. Any
questions as to what constitutes beneficial ownership should be directed to
the Exchange Agent. If the space below is inadequate, list the Old Series II
Preferred Securities on a separate signed schedule and affix the list to this
Notice of Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLES
HEADED "TO BE COMPLETED ONLY BY EXCHANGE AGENT."
BENEFICIAL OWNERS OF FEWER THAN 10,000 OLD SERIES II PREFERRED SECURITIES
SOLICITATION FEE $0.50 PER OLD PREFERRED SECURITY TENDERED FOR NEW PREFERRED
SECURITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
DTC PARTICIPANT TENDERED FOR NEW NUMBER OF BENEFICAL
NUMBER VOI TICKET NUMBER PREFERRED SECURITIES OWNER(S) REPRESENTED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SOLICITATION FEE $0.375 PER OLD PREFERRED SECURITY TENDERED FOR CASH
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
DTC PARTICIPANT TENDERED FOR NEW NUMBER OF BENEFICAL
NUMBER VOI TICKET NUMBER PREFERRED SECURITIES OWNER(S) REPRESENTED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
BENEFICIAL OWNERS OF 10,000 OR MORE OLD SERIES II PREFERRED SECURITIES
SOLICITATION FEE $0.250 PER PREFERRED SECURITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DTC PARTICIPANT VOI TICKET NUMBER OF SECURITIES NUMBER OF BENEFICAL NAME OF SOLICITING
NUMBER NUMBER TENDERED OWNER(S) REPRESENTED DEALER
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The undersigned hereby confirms that: (i) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as amended,
and the applicable rules and regulations thereunder, in connection with such
solicitation; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Prospectus (unless the undersigned is
not being compensated for such solicitation); (iii) in soliciting tenders of
Old Preferred Securities, it has used no soliciting materials other than those
furnished by Capital Funding; and (iv) if it is a foreign broker or dealer not
eligible for
<PAGE>
membership in the NASD, it has agreed to conform to the NASD's Rules of Fair
Practice in making solicitations outside the United States to the same extent
as though it were an NASD member.
<TABLE>
<S> <C>
Print Firm Name ------------------ Address ------------------
Authorized Signature ------------------ City, State, Zip Code ------------------
Area Code and Telephone Number ------------------ Attention ------------------
</TABLE>
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE SERIES I OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus, dated May , 1998, and the Letter of Transmittal and Consent
relating to the Old Series I Preferred Securities in connection with the Series
I Offer by Capital Funding to exchange Old Series I Preferred Securities for New
Series I Preferred Securities or cash.
This will instruct you to tender the number of Old Series I Preferred
Securities indicated below held by you for the account of the undersigned, upon
the terms and subject to the conditions set forth in the Prospectus and the
Letter of Transmittal relating to the Old Series I Preferred Securities.
TENDER FOR NEW SERIES I PREFERRED SECURITIES BY HOLDERS AS OF THE RECORD DATE:
/ / By checking this box, all Old Series I Preferred Securities held by you for
our account will be tendered in the Series I Offer for New Series I
Preferred Securities. If fewer than all Old Series I Preferred Securities
are to be tendered, we have checked the box below and indicated the
aggregate number of Old Series I Preferred Securities to be tendered by you.
We understand that since the Old Series I Preferred Securities held by you
for our account were held as of the Record Date, the tender of Old Series I
Preferred Securities will constitute the Consent to the Proposed Amendments.
/ / ___________________ shares*
TENDER FOR CASH BY HOLDERS AS OF THE RECORD DATE:
/ / By checking this box, all Old Series I Preferred Securities held by you for
our account will be tendered in the Series I Offer for cash. If fewer than
all Old Series I Preferred Securities are to be tendered, we have checked
the box below and indicated the aggregate number of Old Series I Preferred
Securities to be tendered by you. We understand that since the Old Series I
Preferred Securities held by you for our account were held as of the Record
Date, the tender of Old Series I Preferred Securities will constitute the
Consent to the Proposed Amendments.
/ / ___________________ shares*
TENDER FOR NEW SERIES I PREFERRED SECURITIES BY HOLDERS WHO ACQUIRED OLD SERIES
I PREFERRED SECURITIES AFTER THE RECORD DATE:
/ / By checking this box, all Old Series I Preferred Securities held by you for
our account, will be tendered in the Series I Offer for New Series I
Preferred Securities. If fewer than all Old Series I Preferred Securities
are to be tendered, we have checked the box below and indicated the
aggregate number of Old Series I Preferred Securities to be tendered by you.
/ / ___________________ shares*
TENDER FOR CASH BY HOLDERS WHO ACQUIRED OLD SERIES I PREFERRED SECURITIES AFTER
THE RECORD DATE:
/ / By checking this box, all Old Series I Preferred Securities held by you for
our account, will be tendered in the Series I Offer for cash. If fewer than
all Old Series I Preferred Securities are to be tendered, we have checked
the box below and indicated the aggregate number of Old Series I Preferred
Securities to be tendered by you.
/ / ___________________ shares*
3
<PAGE>
CONSENT ONLY BY HOLDERS AS OF THE RECORD DATE:
/ / By checking this box, we instruct you to deliver a Consent with respect to
all Old Series I Preferred Securities held by you for our account as of the
Record Date which are not being tendered in the Series I Offer. If Consents
should be provided with respect to fewer than all Old Series I Preferred
Securities not tendered, we have checked the box below and indicated the
aggregate number of Old Series I Preferred Securities as to which Consents
should be provided.
/ / ___________________ shares*
- ------------------------
* Unless otherwise indicated, it will be assumed that all such Old Series I
Preferred Securities are to be tendered or that Consents are to be provided
with respect to all such Old Series I Preferred Securities.
4
<PAGE>
SIGN HERE
SIGNATURE(S): __________________________________________________________________
NAME(S): _______________________________________________________________________
ADDRESS(ES): ___________________________________________________________________
SOCIAL SECURITY OR TAXPAYER ID NO(S).: _________________________________________
DATED: _________________________________________________________________________
(SEE OTHER SIDE)
PLEASE DESIGNATE IN THE BOX BELOW ANY SOLICITING DEALER
WHO SOLICITED YOUR TENDER.
SOLICITED TENDERS
The undersigned represents that the Soliciting Dealer who solicited and obtained
this tender is:
Name of Firm: __________________________________________________________________
(PLEASE PRINT)
Name of Individual Broker
or Financial Consultant: _______________________________________________________
Identification Number (if known): ______________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
SIGN HERE
<TABLE>
<S> <C>
X
X
SIGNATURE(S) PRINT NAME(S) AND ADDRESS(ES) HERE
Dated:
</TABLE>
5
<PAGE>
EXHIBIT 99-E
QUESTIONS AND ANSWERS
REGARDING THE
SERIES I OFFER AND SERIES II OFFER
Q: WHAT IS OCCURRING UNDER THE SEPARATION?
A: Currently, U S WEST conducts its businesses through two groups: the U S WEST
Communications Group (the "Communications Group") and the U S WEST Media
Group (the "Media Group"). In the Separation, U S WEST will be separated
into two independent companies: the Communications Group, which will be
renamed U S WEST, Inc. ("New U S WEST") and the Media Group, which will be
renamed MediaOne Group, Inc. ("MediaOne").
Q: WHAT IS OCCURRING UNDER THE REFINANCING?
A: In connection with the Separation, U S WEST is refinancing substantially all
of its indebtedness (other than obligations of U S WEST Communications, Inc.
and Continental Cablevision) through cash tender offers for certain of the
public medium and long-term debt securities of subsidiaries of U S WEST
which are guaranteed by U S WEST and through the TOPrS exchange offers.
Q: WHO WILL BE THE GUARANTOR OF THE OLD PREFERRED SECURITIES AND NEW PREFERRED
SECURITIES AFTER THE SEPARATION?
A: After the Separation, MediaOne will be the guarantor of the New Preferred
Securities and any Old Preferred Securities not tendered.
Q: WHAT IS THE BUSINESS OF MEDIAONE?
A: MediaOne is a diversified global media and broadband communications company
and the third largest cable television system operator in the United States.
MediaOne has operations and investments in three principal areas: (i)
domestic broadband communications; (ii) international broadband and wireless
communications; and (iii) cable television programming. Among its
investments, MediaOne holds a 25.51% interest in Time Warner Entertainment
Company, L.P. ("TWE"), a provider of cable programming, filmed entertainment
and broadband communications services which is the second largest cable
television system operator in the United States.
Q: WHAT ARE THE TERMS OF THE OFFERS?
A: Capital Funding is offering to exchange each outstanding Old Series I
Preferred Security for either (i) a New Series I Preferred Security or (ii)
$ in cash.
Capital Funding is also offering to exchange each outstanding Old Series II
Preferred Security for either (i) a New Series II Preferred Security or (ii)
$ in cash.
Q: ARE THE TERMS OF THE NEW PREFERRED SECURITIES DIFFERENT FROM THE OLD
PREFERRED SECURITIES?
A: The terms of the New Preferred Securities, the New Debt Securities, the New
Debt Guarantees and the New Preferred Securities Guarantees will be
substantially the same as the terms of the corresponding Old Preferred
Securities, Old Debt Securities, Old Debt Guarantee and Old Preferred
Securities Guarantee, except that (i) the distribution rate on each series
of New Preferred Securities (and the interest rate on the related New Debt
Securities) will be higher than the distribution rate on the corresponding
series of Old Preferred Securities (and the interest rate on the related Old
Debt Securities), (ii) the New Debt Securities will be issued by MediaOne
Funding, (iii) certain provisions of the New Series I Preferred Securities
and the New Series I Debt Securities
<PAGE>
relating to special distributions and redemptions will be modified from the
terms of the Old Series I Preferred Securities and the Old Series I Debt
Securities to conform such terms to the terms of the New Series II Preferred
Securities and the New Series II Debt Securities and (iv) certain
enforcement rights of the holders of New Preferred Securities will be
modified.
Also, U S WEST recommends that each holder read the section entitled
"Comparison of Rights of Securityholders" in the Prospectus (Chapter 6).
Q: WHAT ARE MY ALTERNATIVES?
A: Holders may either exchange their Old Preferred Securities for the New
Preferred Securities or tender their Old Preferred Securities for cash. In
addition, holders may also elect to continue to hold the Old Preferred
Securities, which will be substantially the same as the New Preferred
Securities, but without the benefit of a higher distribution rate.
Q: IF I AM A HOLDER OF RECORD DO I HAVE TO CONSENT IN ORDER TO TENDER?
A: Yes, by tendering either for New Preferred Securities or cash, Holders of
record will be deemed to consent to the proposed amendments.
Q: IF I AM NOT A HOLDER OF RECORD, CAN I TENDER IN THE OFFERS?
A: Yes, although you will not be able to consent to the proposed amendments.
Q: CAN I CONSENT WITHOUT TENDERING?
A: Yes, if you are a holder of record. However, no separate consent fee will be
paid.
Q: ARE THE NEW PREFERRED SECURITIES RATED?
A: The rating agencies have not yet finalized what the credit rating of
MediaOne will be following the consummation of the Separation. Based upon
the anticipated capitalization of MediaOne, the New Preferred Securities and
the Old Preferred Securities after the Separation are expected to be rated
the same, although it is expected that MediaOne's credit rating will be
lower than the current credit rating of U S WEST.
Q: ARE THE NEW PREFERRED SECURITIES GOING TO BE LISTED?
A: Yes, they will be listed on the New York Stock Exchange under the tickers
and .
Q: HOW DO THE DISTRIBUTION RATES ON THE NEW PREFERRED SECURITIES COMPARE TO THE
DISTRIBUTION RATES ON THE OLD PREFERRED SECURITIES?
A: The distribution rate on the Old Series I Preferred Securities is 7.96% and
the distribution rate on the New Series I Preferred Securities is %.
The distribution rate on the Old Series II Preferred Securities is 8.25% and
the distribution rate on the New Series II Preferred Securities is %.
Q: WILL DISTRIBUTIONS ON THE NEW PREFERRED SECURITIES BE PAID ON THE SAME
SCHEDULE AS DISTRIBUTIONS ON THE OLD PREFERRED SECURITIES?
A: Yes.
Q: A DISTRIBUTION ON THE OLD PREFERRED SECURITIES WAS PAID ON MARCH 31, 1998,
AND THE NEXT SCHEDULED DISTRIBUTION DATE IS JUNE 30, 1998. WILL TENDERING
HOLDERS BE COMPENSATED FOR THE AMOUNT OF DISTRIBUTIONS ON OLD PREFERRED
SECURITIES THAT ARE EXCHANGED OR PURCHASED IN THE OFFERS THAT ACCRUE THROUGH
THE DATE OF EXCHANGE OR PURCHASE?
A: Yes. Holders of Old Series I Preferred Securities accepted for exchange for
New Series I Preferred Securities or
-2-
<PAGE>
cash will also receive cash equal to the accrued and unpaid distributions on
such Old Series I Preferred Securities at the rate of 7.96% per annum
accumulated after April 1, 1998 to but excluding the applicable Delivery
Date, in lieu of such distributions on the Old Series I Preferred Securities
accepted for exchange or purchased.
Q: ARE THE REDEMPTION PROVISIONS OF THE NEW PREFERRED SECURITIES DIFFERENT FROM
THE OLD PREFERRED SECURITIES?
A: Generally, the redemption provisions for the New Preferred Securities are
the same as for the Old Preferred Securities, except that the right to
redeem the Old Series I Preferred Securities upon the occurrence of certain
Special Events has been broadened for the New Series I Preferred Securities.
See "Comparison of Rights of Securityholders" in the Prospectus (Chapter 6).
Holders of Old Series II Preferred Securities accepted for exchange for New
Series II Preferred Securities or cash will also receive cash equal to the
accrued and unpaid distributions on such Old Series II Preferred Securities
at the rate of 8.25% per annum accumulated after April 1, 1998 to but
excluding the applicable Delivery Date, in lieu of such distributions on the
Old Series II Preferred Securities accepted for exchange or purchased.
Q: WILL THE EXCHANGE OF OLD PREFERRED SECURITIES FOR NEW PREFERRED SECURITIES
OR CASH CONSTITUTE A TAXABLE EVENT?
A: Yes. The Company recommends that each Holder read the section entitled
"Chapter 7: Certain United States Federal Income Tax Consequences" in the
Prospectus and consult their own tax advisor.
Q: WHAT IS THE TAX TREATMENT FOR OLD PREFERRED SECURITIES TENDERED FOR EXCHANGE
OR CASH IN THE OFFERS?
A: If a Holder exchanges Old Preferred Securities for New Preferred Securities,
gain or loss will be recognized on an amount equal to the difference between
the fair market value of the New Preferred Securities on the Delivery Date
and the Holder's tax basis in the Old Preferred Securities. If a Holder
tenders Old Preferred Securities for cash only, gain or loss will be
recognized on an amount equal to the difference between the cash received
and the Holder's tax basis in the Old Preferred Securities. Except in
limited circumstances, such as with respect to cash received for accrued and
unpaid interest, any gain recognized will be long-term capital gain or loss
if the Old Preferred Securities have been held for more than one year.
Q: WHAT IS THE TAX TREATMENT IF I DO NOT PARTICIPATE IN THE OFFERS?
A: A taxable gain or loss will be recognized on an amount equal to the
difference between the fair market value of the Old Preferred Securities on
the Separation Date and the Holder's tax basis in the Old Preferred
Securities.
Q: WHAT WILL BE THE INITIAL TAX BASIS FOR THE NEW PREFERRED SECURITIES?
A: The initial tax basis of the New Preferred Securities acquired in an Offer
will be equal to the fair market value of the New Preferred Securities on
the Delivery Date.
Q: WHAT WILL BE THE NEW TAX BASIS FOR THE OLD PREFERRED SECURITIES?
A: The fair market value of the Old Preferred Securities on the Separation
Date.
-3-
<PAGE>
Q: HOW DO I PARTICIPATE IN THE OFFERS?
A: If your Old Preferred Securities are held by a custodian bank, depositary,
broker, trust company, or other nominee for your account, you should have
received a package from them as holder of record containing, along with this
Question and Answer sheet, the following:
- Prospectus dated ;
- Letter of Transmittal;
- Notice of Guaranteed Delivery;
- Cover letter or notice with instructions from your custodian bank,
depositary, broker, trust company, or other nominee.
If you decide to participate in the Offers, you must contact your custodian
bank, depositary, broker, trust company, or other nominee to tender your Old
Preferred Securities on your behalf.
Q: ONCE I HAVE TENDERED MY OLD PREFERRED SECURITIES, OR INSTRUCTED MY CUSTODIAN
BANK, DEPOSITARY, BROKER, TRUST COMPANY, OR OTHER NOMINEE TO TENDER THEM ON
MY BEHALF, MAY I WITHDRAW THEM FROM THE OFFERS?
A: Yes, tenders of Old Preferred Securities may be withdrawn at any time prior
to the Expiration Date and, unless accepted for exchange by Capital Funding,
may be withdrawn at any time after . See "Chapter 3: The Offers
and Consent Solicitation-- The Offer--Withdrawal of Tenders", in the
Prospectus.
Q: WHEN DO THE OFFERS EXPIRE?
A: At 5:00 PM, New York City time, on , unless extended by
the Capital Funding. The Capital Funding may also amend or terminate the
Offers as described in the Prospectus.
For additional details,
or if you have any questions,
please call the Information Agent
Beacon Hill Partners, Inc.
(800) 787-3120
-4-
<PAGE>
This announcement is neither an offer to exchange or sell nor a solicitation of
an offer to exchange or buy any of these securities. Each of the Offers (as
defined below) is made only by the Prospectus (as defined below) and the Letters
of Transmittal (as defined below) and no Offer is being made to, nor will
tenders be accepted from or on behalf of, holders of the securities in any
jurisdiction in which the making or acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction. In any
jurisdiction where the securities or blue sky laws require an offer to be made
by a licensed broker or dealer, each Offer is being made on behalf of Capital
Funding by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers
Inc. or one or more other brokers or dealers which are licensed under the laws
of such jurisdiction.
NOTICE OF EXCHANGE OFFERS AND CONSENT SOLICITATION TO HOLDERS OF
$1,080,000,000
IN LIQUIDATION AMOUNT OF PREFERRED SECURITIES
U S WEST FINANCING I U S WEST FINANCING II
7.96% TRUST ORIGINATED PREFERRED 8 1/4% TRUST ORIGINATED PREFERRED
SECURITIES-SM- ("TOPRS-SM-") SECURITIES-SM- ("TOPRS-SM-")
(LIQUIDATION AMOUNT $25 PER SECURITY) (LIQUIDATION AMOUNT $25 PER SECURITY)
(CUSIP 90388D204) (CUSIP 90338M204)
FOR FOR
MEDIAONE FINANCE TRUST I MEDIAONE FINANCE TRUST II
% TRUST ORIGINATED PREFERRED % TRUST ORIGINATED PREFERRED
SECURITIES-SM- ("TOPRS-SM-") SECURITIES-SM- ("TOPRS-SM-")
(LIQUIDATION AMOUNT $25 PER SECURITY) (LIQUIDATION AMOUNT $25 PER SECURITY)
OR $ . IN CASH OR $ . IN CASH
U S WEST Capital Funding, Inc. ("Capital Funding") hereby offers
holders of 7.96% Trust Originated Preferred Securities-SM- ("TOPrS-SM-") (the
"Old Series I Preferred Securities") of U S WEST Financing I (the "Old Series I
Trust") the right to exchange their securities for either (i) an equal amount
of ___% Trust Originated Preferred Securities-SM- ("TOPrS-SM-") (the "New
Series I Preferred Securities") of MediaOne Finance Trust I (the "New
Series I Trust") or (ii) $__.__ in cash per Old Series I Preferred Security.
Capital Funding also hereby offers holders of 8 1/4% Trust Originated Preferred
Securities-SM- ("TOPrS-SM-") (the "Old Series II Preferred Securities" and,
together with the Old Series I Preferred Securities, the "Old Preferred
Securities") of U S WEST Financing II (the "Old Series II Trust" and, together
with the Old Series I Trust, the "Old Trusts") the right to exchange their
securities for either (i) an equal amount of ___% Trust Originated Preferred
Securities-SM- ("TOPrS-SM-") (the "New Series II Preferred Securities" and,
together with the New Series I Preferred Securities, the "New Preferred
Securities") of MediaOne Finance Trust II (the "New Series II Trust" and,
together with the New Series I Trust, the "New Trusts") or (ii) $__.__ in cash
per Old Series II Preferred Security. Each of the offers is referred to
individually as an "Offer" and collectively as the "Offers." The Offers are
being made upon the terms and subject to the conditions set forth in a
Prospectus, dated May __, 1998 (as amended or supplemented and including all
documents incorporated therein by reference, the "Prospectus"), and the related
Letters of Transmittal and Consent (the "Letters of Transmittal").
<PAGE>
- --------------------------------------------------------------------------------
EACH OF THE OFFERS AND RELATED WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ________, _____ __, 1998, UNLESS EXTENDED (EACH SUCH TIME AND
DATE, AS THE SAME MAY BE EXTENDED, AN "EXPIRATION DATE").
- --------------------------------------------------------------------------------
The Offers are being made in connection with the separation of U S
WEST, Inc. ("U S WEST") into two independent companies (the "Separation"). In
the Separation, U S WEST will distribute to its stockholders all of the capital
stock of a subsidiary holding the businesses of the U S WEST Communications
Group and the domestic directories business of the U S WEST Media Group known as
"Dex" (such subsidiary will be renamed "U S WEST, Inc."). Following such
distribution, U S WEST will be renamed "MediaOne Group, Inc." and will continue
to conduct the businesses of the U S WEST Media Group other than Dex. The
Offers are part of a plan being implemented by U S WEST to refinance
substantially all of the indebtedness currently issued or guaranteed by U S WEST
(the "Refinancing"). The Refinancing will facilitate the allocation of U S
WEST's indebtedness between New U S WEST and MediaOne in connection with the
Separation.
In connection with the Offers, U S WEST and Capital Funding are
soliciting consents (the "Consents") from the holders of record of the Old
Preferred Securities as of May 6, 1998 (the "Record Date") to certain proposed
amendments (the "Proposed Amendments") to the Old Indenture (as defined in the
Prospectus) under which the Old Debt Securities (as defined in the Prospectus)
were issued, to specifically permit the Separation without complying with
certain covenants that might otherwise apply to the Separation, although U S
WEST does not believe that such covenants would require such compliance as a
result of the Separation. The proper tender of Old Preferred Securities by
holders as of the Record Date will constitute the giving of a Consent by such
holders with respect to such Old Preferred Securities. Holders of Old Preferred
Securities who acquired such Old Preferred Securities after the Record Date will
have the right to tender their Old Preferred Securities pursuant to the Offers
but will not have the right to provide Consents. A holder of Old Preferred
Securities as of the Record Date will be permitted to provide such holder's
Consent even if such holder does not tender Old Preferred Securities pursuant to
an Offer. No separate payments will be made for Consents.
Pursuant to each Offer, holders of Old Preferred Securities accepted
for exchange for New Preferred Securities or cash will receive cash equal to the
accrued and unpaid distributions on such Old Preferred Securities accumulated
after April 1, 1998 to but excluding the applicable delivery date, in lieu of
such distributions on Old Preferred Securities accepted for exchange.
None of U S WEST, Capital Funding, MediaOne Funding, the Old Trusts,
the New Trusts or any of their respective Boards of Directors or Trustees makes
any recommendation to holders of Old Preferred Securities as to whether to
tender or refrain from tendering in either or both of the Offers. Holders of
Old Preferred Securities are urged to contact their financial and tax advisors
in making their decision on what action to take in light of their own particular
circumstances.
Tenders of Old Preferred Securities pursuant to an Offer may be
withdrawn at any time prior to the applicable Expiration Date and, unless
accepted for exchange by Capital Funding, may be withdrawn at any time after
_______ __, 1998. A Consent with respect to any series of Old Preferred
Securities
2
<PAGE>
may be revoked at any time prior to the receipt by U S WEST and Capital Funding
of the requisite Consents with respect to such series. A holder of Old
Preferred Securities as of the Record Date who previously tendered Old Preferred
Securities may not validly revoke a Consent unless such holder validly withdraws
such holder's previously tendered Old Preferred Securities and, if effected
prior to the receipt by U S WEST and Capital Funding of the requisite Consents
with respect to the applicable series, such withdrawal will constitute the
concurrent valid revocation of such holder's Consent.
EACH OFFER IS INDEPENDENT FROM THE OTHER OFFER. Furthermore, each
offer is subject to certain conditions, as described herein and in the
prospectus.
Consummation of each Offer is conditioned on, among other things,
the satisfaction of certain conditions to the Separation, including the approval
of the Separation by U S WEST's stockholders (the "Separation Condition").
Consummation of each Offer is also conditioned on tenders by a sufficient number
of holders of Old Preferred Securities subject to each Offer such that, as of
the applicable Expiration Date, there shall be at least 400 record or beneficial
owners of at least 1,000,000 New Preferred Securities of each series to be
issued in exchange for the Old Preferred Securities tendered in such Offer (with
respect to each Offer, the "Minimum Distribution Condition"). The Separation
Condition and the Minimum Distribution Condition may not be waived with respect
to either Offer. The Offers and the Separation are not conditioned upon the
receipt of the requisite Consents with respect to Old Preferred Securities of
any series. U S WEST plans to proceed with the Separation whether or not the
requisite Consents are received.
Capital Funding will pay to Soliciting Dealers (as defined in the
Prospectus) designated by the beneficial owner of the Old Preferred Securities
validly tendered and accepted pursuant to the Offers a solicitation fee of $0.50
per Old Preferred Security exchanged for New Preferred Securities and $0.375 per
Old Preferred Security tendered for cash (except that in the case of
transactions equal to or exceeding 10,000 Old Preferred Securities of either
series, Capital Funding will pay $0.25 per Old Preferred Security exchanged for
New Preferred Securities or tendered for cash), in each case subject to certain
conditions. Soliciting Dealers are not entitled to a solicitation fee for any
Old Preferred Securities beneficially owned by such Soliciting Dealers.
The Prospectus and applicable Letter of Transmittal contain
important information which should be read before any action is taken by holders
of Old Preferred Securities with respect to either or both of the Offers.
Tenders may be made in accordance with the procedures set forth in the
Prospectus and the applicable Letter of Transmittal. The information contained
in the Prospectus, the Letters of Transmittal and the other offering documents
is hereby incorporated in this Notice by reference. The information required to
be disclosed by paragraph (d)(1) of Rule 13e-4 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, is contained
in the Prospectus and is incorporated herein by reference.
Any questions or requests for assistance may be directed to the
Information Agent and the Dealer Managers at the addresses and telephone numbers
set forth below. Requests for copies of the Prospectus, the Letters of
Transmittal or the Notices of Guaranteed Delivery may be directed to the
Information Agent and copies will be forwarded promptly at Capital Funding's
expense. Stockholders may also
3
<PAGE>
contact the Dealer Managers and their custodian bank, depositary, broker, trust
company or other nominess for assistance concerning the Offers.
The Information Agent for the Offers Is:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
Banks or Brokers Call Collect: (212) 843-8500
All Others Call Toll Free: (800) 787-3120
The Dealer Managers for the Offers are:
MERRILL LYNCH & CO. LEHMAN BROTHERS
World Financial Center 3 World Financial Center
North Tower 200 Vesey Street
New York, New York 10281 New York, New York 10285
(888) ML4-TNDR (toll-free) (800) 438-3242 (toll-free)
(888) 654-8637 (toll-free) (212) 528-7581
Attn: Susan L. Weinberg Attn: Raymond A. Kahn
- -SM-"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
May __, 1998
4
